Growing up I lived in a small town. Our town was so small that our high school was actually made up of 6 towns combined. The students were mostly from rural areas. Even with 6 combined towns we had just enough to have a graduating class of less than 400 people. After a visit back to my old hometown and a chance to visit a few old friends, I couldn’t get the thought out of my head. Does anyone in this town have money? This brought me to think about the people I grew up with and their families and my ultimate question: Are my friends parents rich?
What is rich? Does that make my friends parent rich
This is certainly a loaded question. I decided to define rich as the top 1% of net worth in the USA. It’s a good base and one that while a large amount has some simple connections to be considered rich or wealthy. I meet someone with a 10 million dollar net worth and I’m walking away saying that guy or gal is rich.
Let’s stick with that as our baseline as being rich since the argument for a lower number and in some cases, a higher number is an infinite battle with no real winner.
Are My Friends Parents Rich
My childhood gave me a clear picture that my parents were not rich, but what about my friends? I mean are my friends parents rich?
I have known my friend Stephen since I was a small child. We grew up together playing little league baseball where his father was the coach. Stephen may have been my best friend growing up and one could make the argument that he still is to this day.
The first day I came over to my friend’s house the thought that his family was rich surely never crossed my mind. Maybe there were signs and I just missed them.
The house they owned was an older Victorian home with a garage and small-sized yard. The Victorian home itself was filled with antiques and maybe my first clue that my friend’s parents were indeed rich. As a naive kid I just knew that when we played in his house, you had to be immensely careful and not break anything, it meant life or death. At least that’s what my friend told me.
I didn’t see the tell tale signs of a rich household. Sure Lions decorated the front entrance of the driveway, but the roads were not paved with gold. Was I missing something? Should I have asked myself “Are My Friends Parents Rich?”.
Fancy Cars and Cigar Boats
They didn’t have a fancy BMW sitting in the driveway or a cigar boat. In fact, I believe each person had economical vehicles like a used Dodge sedan and a Chevy S-10 pickup truck.
Later however I do recall them buying a large conversion van that was really nice, but again not considered a vehicle driven around by the rich and famous.
The vehicle that does stand out in my mind was an old Roll Royce that we got the privilege to ride in one time. The vehicle was old, but the fact that we were taking it for a joy ride listening to George Thorogood’s “One Shot, One Bourbon, and One Beer” meant this was not only a special occasion but a special vehicle. I’m not sure if the vehicle had a high cash value but I knew it was special.
My friend’s parents were a hard-working combination of blue and white collar workers. His father was a foundry worker and later a traveling salesman. His mother was a store product rep which equates to sales for Nestle, the popular food and beverage company. As a child it was pure joy stopping over for a few bite-size nestle snacks like a Nestle Crunch bar. The simple joys of being a child.
Both parents were college graduates and state school products. I had to ask myself the question “Are my friends parents rich?”. At no point in time did I look at my friend or his family and think these guys are definitely rich. So what happened. How did my friend become successful? Is he rich today?
Lawyer
I would describe Stephen as the classic overachiever. An overachiever who acted in plays. Won prizes for his singing. Played college football. Graduated near the top of his class. He was even accepted to the same school Warren Buffett attended.
Today you can find him practicing law in the state of Virginia. Stephen is married with two kids and even coaches his son’s baseball team.
It would be hard to argue that my friend is not successful today by almost any measurement. He is a college graduate, successful lawyer, family man, and a pillar of his community. He’s a classic overachiever and one who is successful at that.
Is he rich?
As I talked about earlier the definition of rich is certainly relative. For example, to be in the top 1% of people in the USA the net worth required is 10 million dollars. I want to stay away from income as income tends to fluctuate and has a tendency to act like a roller coaster. Income early in life tends to climb, then unexpectedly fall in job loss, job change, or reduced work. Then after riding the roller coaster your income may even come to a complete stop signaling the ride is over.
Not knowing the exact numbers makes this an estimate of net worth rather than a precise calculation. My friend lives in a modest suburban home right outside of a large town. Him and his wife own 2 vehicles, and to my knowledge own no other property.
Income and Net Worth
As a lawyer, it’s safe to say he makes a six-figure salary and based on his overachiever status let’s put him in the top 25% of salaries earned for a lawyer, which amounts to $180,000 per year.
He is in his mid 30’s and has been out of law school and practicing for approximately 10 years. With this salary in mind and a high savings rate of 50% in a positive outcome he has saved $900,000 over the last 10 years. Assuming he invested this with an 8% return, we can expect a total portfolio of over 1.3 million.
Add in his house at approximately $400,000, cars, and an extra $100,000 in miscellaneous items that I may have missed and Stephen is close to a 2 million dollar net worth.
While this financial mark is impressive it does not meet the standards of what I have declared rich. Were Stephen to keep his same salary and savings rate over the next 20+ years, he would eventually make it to a net worth over the 10 million dollar mark.
Do We Need Rich Parents to Get Ahead?
I don’t see any of my friends and old classmates, running a hedge fund, owning a multi-million dollar business, celebrity debutante, or acclaimed movie directors. Did we miss the boat to become rich? What do we need to get there? Who teaches us what we need to do to become wealthy?
Many of my old classmates and friends who have great jobs and professions make a good or even a great salary. I have friends who are doctors, lawyers, nurses, construction workers, and bankers. I know they will do well financially, but are they rich?
Do they have student loans, mortgage debt, are they debt free? What are they doing to become wealthy?
What did your parents tell you to do? Did they show you the path?
Is the Path to Wealth Built with the Helping Hand of Our Parents?
If my friend’s parents would have been an executive rather than a salesman or a CEO instead of store sales rep would Stephen be rich today? Did he need his parents to be driving the newest BMW, living in Malibu, and a portfolio the size of oh I don’t know $6.5 million or what prosecutors found that parents together paid to get their kids into college.
Even better let’s say the portfolio was closer to $25 million, which is the amount currently being produced as the amount to bribe TV actresses, CEOs, and coaches into the top US. Schools.
Wharton, Yale University, and a Helping Hand
If Stephen went to the top business school, funny enough The Wharton School at the University of Pennsylvania, where he was originally accepted. Would he be rich today? Maybe that wouldn’t be enough.
What if he went to the top law school, currently Yale University, would that put him over the edge to be rich? If Stephen’s parents knew how important it was to be in the top law school would they have contributed hundreds of thousands of dollars to get him in?
Do you think his acceptance would encourage him to be the best in his class. Obtain the top ranking in law school. Then be hired by a firm that offers the highest salary? Does this path lead him to the top 1% net worth in America?
Because their is so many questions and what if scenarios my answer will be pure speculation.
I do however think that going to a top business law school would certainly give Stephen an advantage in obtaining a higher salaried position and ultimately a higher net worth.
I cannot however make the jump from having an advantage to becoming wealthy. If Stephen’s parents had helped him get into a top school, his net worth would not be affected to the tune of millions of dollars. Would it give him an advantage to be rich, Yes.
Wealthy Parents Wanted
Growing up I feel like very few friends or classmates had wealthy parents. Some of the professions of people I thought were doing well included: insurance agent, judge, railroad worker, and restaurant owner.
These are the professions that pop in my head that seemed to be doing above average compared to other families in our area. I don’t see a common theme in professions.
Maybe all I needed was a wealthy parent.
My parents have not taught me how to become wealthy. They have taught me many things that I am indebted to them for life. The list would be too long to even mention, but the education of becoming wealthy was not one of them.
My financial goal is to reach financial independence. Reaching financial independence will not put me in the 1% of net worth, but for me it will be enough. I have battled paying off debt. Built my income over time. Grew my wealth through real estate and index fund investing. But I am not rich.
The pursuit of living a better life. The creation of wealth. Trying to figure out what is our next move financially. It’s all a daily balance. In our lives we are influenced by many people, but I believe our own parents have the biggest influence.
This may be a sensitive subject for many of us as it relates to our parents, but I think about how my parents taught me to deal with money, debt, and create wealth. For many of us this has shaped who we are today, whether good or bad. We are ultimately responsible, the person in the mirror, but I would love to hear your story.
Make Sure to Check Out this Follow-up about Wealth