Hi Misha, How do you manage to make a decent income from ONLY 20 hubs?

It is true that many people in these categories have high incomes especially celebrities, politicians, business executives, professionals and investors. Successful inventors also often come into large incomes as a result of their inventions. However, income merely reflects one's current spending power and is not necessarily related to wealth which is the ownership of income producing assets.

Wealth is measured not by how much income one has but by subtracting what a person owes (their liabilities) from their financial assets. A wealthy person is one whose net financial assets (financial assets minus liabilities) are large. It is not uncommon to read in the papers one day about the astronomically huge income of some celebrity/politician/business CEO, etc. and then a few years later read another article describing that same person's deep financial woes.

The fact is many of these people with very high incomes are usually spending the money faster than they are earning it. Oh, they have expensive homes and cars, take expensive vacations, make splashy purchases and are in the public eye as much for their spending and consumption patterns as for their professional accomplishments. However, once the income stream from their profession stops they have nothing and even the homes and cars are not of much help as they are mortgaged to the hilt.

As I mentioned in Step 5, in the book "The Millionaire Next Door" by Thomas J. Stanley and William D. Danko, the author's describe the growing number of people who live comfortable middle class lives but who have assets, which have been acquired steadily over time, placing them in the millionaire class.

I actually observed this phenomena many years before while working as a mortgage loan underwriter for a Savings and Loan Association. Every day I would read dozens of loan applications from people with good incomes, often couples with each having an above average income, and a fair amount of assets in the form of cars, boats, homes, etc. However, their financial assets were usually limited to either just enough cash in their checking and savings accounts to cover the minimum down payment (5% of the home price) or less than that with most of the down payment in the form an expected income tax refund or a gift letter, usually from parents, promising to give the borrower(s) the money to make the down payment. My favorite example was the loan application from a 45 year old man who was married with 2 children - he and his wife both worked and had decent incomes and plenty in the way of a couple of new cars, a boat and a few other expensive things.

On the liability side they had a long list of high balance credit cards. The couple was buying their first house thanks to the husband's father who was giving them the down payment with the idea that owning a home would make this fellow and his wife financially responsible! Because of the down payment from the father, we made the loan but I doubt the fellow's financial situation now is any better than it was 25 years ago when I approved his home loan.

However, a little under a third of the applications I received came from couples with children and less than spectacular incomes. They generally had a modest home which they were using to trade up to a better home, along with one or two older model cars and cash and savings amounting to a few thousand dollars. Their liabilities were usually limited to a mortgage that was equal to about half the value of the home and the net proceeds from the sale of their current home would allow them to put down 25% or more on the home they wanted to purchase (25% or more down payment qualified for our lowest interest rate on mortgages).

These people were not rich but they were accumulating assets along with cash savings and few debts which would allow them to weather financial problems in the future and probably eventually retire without having to worry about whether or not they could afford it. So, my point is, if you define "rich" as having considerably more financial assets than liabilities it is not necessarily those with high incomes who will remain rich but rather those who steadily build up savings while living within their incomes. For further proof just read the stories about jack pot lottery winners who win millions and end up broke a few years later.