You can tell a lot about how the rich make their money by looking at their taxes — that’s probably why they work so hard to keep people from snooping on their returns.
The IRS gave ordinary people a glimpse into this isolated world in 2015 when it released the results of a study titled “Over the Top: How Tax Returns Show that the Very Rich Are Different from You and Me.”
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It remains the most comprehensive examination of how the wealthy obtain and keep their fortunes. He used estate tax data dating back decades, specifically from Form 706, the United States Estate Tax Return (and Generation Skip Transfer).
If the executor of your estate does not plan to file one on your behalf after your death, you will likely need to continue saving.
The study results revealed seven streams of income that millionaires — and even the wealthiest people with real money — tend to have in common. Are you looking to open a new financial tap in your own life? If you want to get rich, the following seven millionaire income streams are a good place to start.
Capital gains from appreciated assets
Many people face the familiar problem of wanting to buy a giant social media company to assert control of the national dialogue without disrupting their day-to-day cash flow.
Elon Musk faced this same dilemma in August 2022 when he needed cash in case his now infamous Twitter deal went through. He solved the problem by selling about $7 billion of his Tesla stock, which he exercised the option to buy for pennies on the dollar as part of his compensation package.
Although not exactly an income stream, millionaires buy and hold liquid assets that appreciate like stocks because they can convert them to cash whenever they need a boost. capital injection.
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Once Elon Musk sold his shares, they were gone forever unless he decided to buy them back.
Dividend stocks, on the other hand, allow millionaires to have their cake and eat it too, making regular payments to their shareholders without forcing them to sell. As stocks appreciate over time, dividend payments increase. Like the golden goose, dividend stocks are the ultimate passive income stream – and if you ever need a boost, you can also sell the golden goose for a lump sum windfall.
You know interest as the extra money you pay each month to the bank, credit card company, or mortgage lender. It’s their fee for lending you money to buy things you didn’t have the money to buy directly.
For the wealthy, interest payments go the other way. Millionaires typically earn compound interest through non-participating lending vehicles such as high-yield savings accounts, CDs, bonds, and by making loans to investors, businesses, individuals, and organizations, which you can do through peer-to-peer lending.
The landlord class has been running the show since the founding of America – and real estate is still the ticket out of the middle class and into the ranks of the gilded.
According to CNBC, Andrew Carnegie said that 90% of millionaires earn their wealth through real estate — and that same percentage is still widely cited today.
It’s hard to gauge whether 9 out of 10 millionaires actually made their fortunes from home ownership, but the IRS study shows that many millionaires use real estate — rental income in particular — to keep money fresh. in the form of passive income.
Although many corporate executives rank among the richest people in America, millionaires often work for themselves — and according to CNBC, you’ll rarely find them living the Instagram lifestyle of private jets. Many American millionaires have earned their net worth through income from the businesses they started, and they typically work long hours, live frugally, and prioritize saving for long periods of time.
Many American millionaires got rich simply by taking a paycheck and knowing how they spent it. Author Tom Corely – who interviewed 225 millionaires over five years – wrote for CNBC that most millionaires fall into one of four categories. One is made up of highly successful people, like professional athletes and successful actors and musicians – more on them in a moment. The other three are people who work for a living, whom he calls:
Savers-Investors: Regardless of their daily work and income, these people become wealthy by being obsessed with saving, investing, and growing their wealth.
Company climbers: These hard workers are dedicated to climbing the corporate ladder to a high-paying leadership position in a company.
Virtuosos: These top professionals are the best at what they do in high-paying fields like medicine and engineering, and they turn their experience and knowledge into wealth.
Royalties and sales rights
When Forbes analyzed President Trump’s net worth, it found that much of his income came from sales rights, branding and royalties – the right to put the Trump name on a building or a bottle.
Actors and artists of all persuasions earn royalties when their shows are syndicated or when their music is used in movies or commercials.
Millionaires – even those not as wealthy or visible as Hollywood icons, rock stars and Donald Trump – are likely to own the rights to patents, products or similar intellectual property that other people are. willing to pay for the right of use.
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This article originally appeared on GOBankingRates.com: 7 Common Millionaire Income Streams