The letter comes several times a year. Each is different, but they say essentially the same thing:
“Why don’t you write about real people? Why do you write about people who have so much money — people who have it made?”
My defense is pretty simple: In my question-and-answer column, I write for the people who have written to me. Most of the time they are people who have some money and want a second opinion about what they are doing with it. Trust me, I don’t start my day looking for a letter from someone who is particularly wealthy. If anything, it’s more likely the reverse, looking for a letter from someone who faces a decision many others are facing.
The reality is that there are many, many people out there who have $500,000 to $1 million (or more) in financial assets, a valuable home, hefty Social Security benefits and maybe a pension, too. Most are aware of their blessings, but they have the same concerns as people with a lot less money — they want to steward their money as well as possible.
What worries me is the increasing evidence that even modestly well-off people are pretty scarce, and maybe becoming rare. The reason some readers think others are rich is that the financial air gets thin really fast in America. When you don’t have much money, it’s pretty easy to think that others have a bunch of it.
One indicator is my Wealth Scoreboard. Based on data from the Survey of Consumer Finances that is done every three years by the Federal Reserve, it shows that households reach the maximum wealth level at 60 to 69 years old, and that the median net worth of the top 25 percent of households is $712,000. Another way of saying this is that you are in the top 12.5 percent of wealth with a net worth of $712,000.
For most people, a good part of that $712,000 is home equity, not financial assets. This tells us several things. First, it’s clear that the majority of Americans don’t have much in financial assets to make decisions about. Indeed, a research study that I cited twice last year estimates that only 11 percent of American households have the financial assets to create an investment income of $50,000 or more a year.
At least half of all households could create a lifetime income of only $5,000 a year — or less. So when push comes to shove for most people, the financial assets I often write about don’t count for much.
Second, it’s also clear that decisions about where we live, before and after retirement, are really important. Shelter decisions can make, or break, our personal security. Finally, it suggests that the real action for about nine out of 10 Americans is somewhere else — it’s in decisions we make about day-to-day living.
That’s why I’m going to pursue a different theme in some of my columns this year. I call it Investing Without Money.
So I’d like your help. In 1999, I took a motorcycle trip all across the U.S./Mexico border in Texas, New Mexico, Arizona and California to San Diego. I announced the trip as I left Dallas, and readers suggested most of the columns. I loved it. I called it “reader-directed-reporting.” (You can read the columns in the “Borderland” section of my website blog at www.assetbuilder.com.)
Tell me where to go to find people who are creating a good life with a little income, rather than creating a good life by starting with a lot of income. If you’re one of those people, send me a note. I’ll call, maybe visit, tell your story and, just maybe, share some useful wisdom.
I could go on a long rant here about the unrelenting disappointment of the political leadership from both of our utterly worthless political parties. I could also rant about the disappearance of defined-benefit pensions and the move to reduce future Social Security benefits. But I wouldn’t be telling you anything you don’t already know.
The answer isn’t the grand solutions that might come from the Big Dogs and our so-called leaders. The answer is from the small solutions that we create and share.
So, send me an email, and put “Small Solutions” in the subject line.
Questions about personal finance and investments may be sent by email to email@example.com.