Which state comes out on top?

While “millionaire” may not hold as much of a title as it did decades ago, seven figures in wealth is a significant achievement that indicates success and stability. The mass affluent, with their robust yet accessible wealth, form a vital economic backbone in the United States, while high net worth individuals (HNWIs) wield greater influence in the markets. Exploring the nuanced characteristics and strategies of these groups can help propel you toward a brighter financial future. HNWIs have more assets than the mass affluent, but represent a smaller portion of the population.

If you’re wondering how to increase or protect your net worth, consider talking to a financial advisor.

Who are the super rich?

The mass affluent have liquid assets between $100,000 and $1 million with an annual household income of more than $75,000. While these individuals have fewer financial resources than high net worth individuals, they make up about 26% of America’s population. They are also the second largest economic subsection of consumers in the country, living an upper-middle-class lifestyle and owning substantial liquid assets (as opposed to illiquid assets such as real estate).

The defining factor of mass affluent individuals is the combination of income and assets. As a result, people who fall into one part of the definition (either income over $75,000 or assets over $100,000) are not massively wealthy.

Who are high net worth individuals?

A High Net Worth Individual (HNWI) is an individual who owns at least $1 million in liquid assets, excluding assets such as a primary residence or collectibles. As definitions of individual wealth in America have grown well above the $1 million mark, HNWIs fall into one of three subgroups:

1. High Net Worth Individuals (HNWIs) have liquid assets between $1 million and $5 million.

2. Very High Net Worth Individuals (VHNWIs) have liquid assets between $5 million and $30 million.

3. Ultra High Net Worth Individuals (UHNWIs) have liquid assets of more than $30 million.

Because of their substantial assets, high-net-worth households often require specialized services from financial advisors and wealth managers, including investment management, tax advice, assistance with trusts and estates, and access to hedge funds and private equity firms.

HNWIs play a crucial role in the economy as they often invest in businesses, real estate and financial markets, which can drive economic growth, create jobs and spur innovation. Also, because of their financial standing, HNWIs often have access to exclusive investment opportunities, private equity deals, and cutting-edge financial products and services that may not be available to the general public.

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Finally, HNWIs typically prioritize multigenerational wealth. They work with estate planners and financial advisors to ensure a smooth transition of assets to heirs or beneficiaries. As a result, they typically set up living trusts and create wills to ensure that their wishes for their wealth are carried out in a detailed manner.

A financial advisor can help you manage the various aspects of a high net worth lifestyle.

Mass tributary vs. High Net Worth Individuals

Here are three key differences between high net worth individuals and HNWIs:

• Liquid assets: Mass affluent individuals have less wealth than HNWIs. Specifically, their wealth ranges from $100,000 to $1 million in liquid assets. Additionally, the super-wealthy, by definition, have an annual income of at least $75,000, while HNWIs do not have an income threshold as part of their classification. In contrast, HNWIs only have liquid assets above $1 million. In addition, HNWIs are breaking into distinct groups as their asset values ​​stretch upward.

• Population size: The mass tributary category comprises approximately 26% of America’s population (a total of 32.3 million households). On the other hand, HNWIs represent 10% of the population (12.1 million households). As a result, the mass affluent make up a larger part of the country’s demographics. HNWIs are a smaller segment, indicating a greater concentration of wealth among fewer households.

• Distinctive features: The two groups also have sets of defining characteristics. For example, 40% of the super-rich are baby boomers. Additionally, they are usually (though not exclusively) white collar and married. In contrast, HNWIs lean toward entrepreneurial activity and have typically built and sold a business in their lifetime.

How to Calculate Your Net Worth

To see which category you fall into, you can calculate your net worth with a simple formula. To do this, you’ll subtract your liabilities (specifically, any substantial debt you have) from your assets. Remember, while the super-wealthy and HNWIs don’t count their primary residence in their net worth calculation, counting your primary residence in your net worth if you’re not in one of these categories helps you see your full financial capacity.

Here is an example: Let’s say your home is worth $500,000 and you have $300,000 left on your mortgage. You have two cars worth a total of $15,000. Additionally, you have $10,000 in your bank account and $50,000 in your retirement account. You also have $20,000 in remaining student debt and $25,000 in car loans.

So your total assets are: $500,000 + $15,000 + $10,000 + $50,000 = $575,0000

And your total debts are: $300,000 + $20,000 + $25,000 = $345,000

Therefore, $575,000 – $345,000 = a net worth of $230,000.

A financial advisor can help you calculate and manage your net worth. Connect with a fiduciary advisor today.

How to increase your net worth

Net worth growth is realistic even if you are not a mass wealthy individual or HNWI. Here are three tried and true strategies to expand your net worth:

Use compound interest

Compound interest is a powerful financial concept that involves earning interest not only on the initial amount of money you invest (or save), but also on the interest that accumulates over time. This way, your money grows at an accelerated rate.

As a result, start investing or saving as soon as possible. The longer your money has to accumulate, the more significant the growth will be over time. Additionally, instead of withdrawing your earnings, reinvest them back into your investments or savings. This tactic increases the compounding effect.

Invest consistently

Successful investing requires you to contribute regularly to your portfolio regardless of market conditions. Remember, the stock market has delivered an average annual return of over 10% over the past 50+ years. So a monthly deposit into your investment account during both economic booms and busts will help you go further than trying to time the market or throwing all your money into a savings account.

Investing in a fund that spreads your capital across different asset classes helps you diversify your portfolio, maximizing opportunities in the market. Finally, it is essential to periodically review your investment strategy and make adjustments based on your financial goals, risk tolerance and market conditions. A financial advisor can help monitor market conditions.

Minimize Debt

Debt minimization involves managing and reducing debt, such as credit card debt, mortgages, and loans. This reduces the interest you pay and frees up more of your income for savings and investments. Specifically, focusing on paying off high-interest debt first will save you money over time. This rule can also apply to deferring investments to prioritize debt. For example, a $10,000 credit card balance with an interest rate of 20% will generate more interest debt than a retirement account that grows at 7% per year.

Conclusion

Understanding the distinctions between mass affluent individuals and HNWIs provides valuable insight into navigating America’s diverse financial landscape. The mass affluent, comprising a significant portion of the population, possess substantial liquid assets between $100,000 and $1 million with an annual household income of more than $75,000. On the other hand, HNWIs have a net worth of over $1 million. On an individual level, calculating net worth by subtracting liabilities from assets provides a clear view of your financial well-being. Implementing the right strategies fosters financial growth, stability and security, paving the way for a more prosperous future.

Tips for the Mass Wealthy and High Net Worth Individuals

• Building wealth can be challenging due to debt issues or a lack of investment knowledge. In addition, retirement planning raises questions about tax obligations, lifestyle choices, and risk preferences. Fortunately, a financial advisor can help you get clarity on these issues and move forward with a personalized financial plan. Finding a financial advisor doesn’t have to be difficult. The free SmartAsset tool matches you with up to three verified financial advisors serving your area, and you can have a free introductory call with your matched advisors to decide which one you think is right for you. If you’re ready to find an advisor who can help reach your financial goals, get started now.

• For a more detailed guide to getting into a higher financial status, here are seven ways to increase your net worth.

• Keep an emergency fund handy in case you face unexpected expenses. An emergency fund should be liquid—in an account that isn’t exposed to significant fluctuations, such as the stock market. The trade-off is that the value of liquid cash can be eroded by inflation. But a high interest account allows you to earn compound interest. Compare savings accounts from these banks.

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