Ever wonder what the profilio of the average person looks like compared to the wealthy? It’s quite different. The wealthy do not have millions of dollars in their bank account, instead, they have assets such as stocks, mutual funds, real estate, and business investments. What does the average person have? Most of their net worth is from their house. Next is vehicles and retirement saving funds. Even though the wealth has similar investments as the average person, the wealthy invest in businesses first. Meaning, the money they get back from investing in businesses is their primary income and asset of wealth. Does this mean you should do the same? Well, yes and no. Once you have cleared your debt with debt consolidation, you can start saving money. The article by visual capitalist explains everything you need to know in great details.

Chart: What Assets Make Up Wealth?

A LOOK AT ASSET DISTRIBUTIONS, BASED ON NET WORTH TIERS

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

A person’s wealth can be made up of many different assets.

Net worth, the measure we use to gauge wealth, is actually the sum of all of a person’s assets after subtracting liabilities (such as loans). Therefore, net worth can be comprised of liquid savings, stocks, mutual funds, bonds, real estate, vehicles, retirement accounts (IRAs, pensions), and many other types of assets.

But how does the composition of net worth differ for a person with $100k in net worth, versus that of a billionaire?

Today’s chart uses data from the Federal Reserve Survey of Consumer Finances from 2016 to find out.

SIMPLIFYING THE DATA

Based on this original work done by Ben Weber of Windfall Data, we’ve since taken the data and tried to clean up the categories to make it more digestible.

For example, residential real estate and non-residential real estate were combined into a single category, and bonds, savings bonds, and certificates of deposit were merged into a single fixed income investment category.

The end result is a net worth composition for each of the six different wealth brackets, which are each grouped based on size. For example, in the $10k bracket, all five-figure net worths ($10k-$99k) are grouped together, and so on.

DIFFERENT MAKEUPS

The composition of wealth ends up varying considerably between lower and higher net worths:

Primary Residence:
This is by far the most important asset class for all net worth tiers up to $1 million.

Vehicle:
For the $10k net worth tier, the value of a vehicle is more than investments such as pensions, IRAs, mutual funds, stocks, etc.

Stocks:
The proportion of directly-held stock increases up the tiers, and billionaires hold a significant portion of wealth in stocks.

Business Interests:
Most multi-millionaires or billionaires are not liquid, and have most of their wealth in business interests.

thumbnail courtesy of visualcapitalist.com

Now you know more the wealthy. What will you do with this knowledge? If you are planning to copy how the rich invest, you should consider somethings first. You do not have the capital to invest in companies yet. You will need to build your wealth first. To do this you will have to increase your salary or create a new budget for increase saving. Once you have saved thousands of dollars, you still may not be ready to invest in a business. Consider the stock market. Yes, it is risky, but the reward is great. Having your money in stocks will increase your investment much faster than if you had it in a saving account. Now that you have lots of liquid cash, now you can invest in businesses. If done correctly, your net worth will grow rapidly in the next few years. Loan Away understands that this process is very simplified and difficult to execute, but this is the method to increase your net worth. If this helped you increase your net worth, be sure to let us know in the comments, our social media, or via email.