Much is made about income inequality these days – and for good reason. In America, the gap between the rich and everyone else has widened dramatically over the past 30 years. America’s top 10% percent have, on average, more than nine times as much household income as the bottom 90%, and the top 1% average 40 times more than the bottom 90, according to UC Berkeley. As for the 0.1%...they are in their own galaxy of largesse. The reasons for these disparities have been widely debated and discussed, but the imbalance persists and shows no signs of reversing course. The top 1% earn a lot more and keep a lot more than the bottom 90% by miles, and that’s only been exacerbated by stagnant wage growth and favorable tax laws that abet the wealthy. Wages for the top 1% are more than $690,000 on average, compared to the $34,481 that goes to the bottom 90%, according to the Economic Policy Institute.

Yet, the 1% have a seemingly difficult time keeping their grip at the top. Ben Carlson pointed this out in his must-read blog, citing research from Thomas Hirschl, a sociology professor at Cornell University. The statistics are shocking:

  • More than 50% of Americans find themselves among the top 10% of income earners for at least one year of the working lives.
  • More than 11% of Americans will make it into the top percent of income earners ($332,000 a year in income lands you in that exclusive club).
  • 94% of Americans who reach the top 1% will stay on that plateau for only one year; 99% of them will fall off within a decade.
  • More than 70% of the Forbes 400 (or their heirs) fell off that list between 1982 and 2014.

We have always been under the impression that wealth begets more wealth unless those in possession of it make foolish moves or have a run of bad luck. But, as Carlson points out, there is a huge difference between making lots of money and being rich. Your net worth is the difference between what you own and what you owe. The more wealth you accumulate, the more temptation there is to spend more to, "act rich." Carlson aptly calls this the tug of war between ego and humility. Most of us feed the former and starve the latter, and everything in society and media makes it really easy to do that.

How many times have we already spent the money we may potentially earn or win in a bet or on the lottery?  Very few of us, and I’m not one of them, have the daily discipline or long-term focus to think practically about making our money last so we can live well in our golden and platinum years. P.S. That’s what great financial advisors are for, and why they are worth every penny.

Not everyone can get rich, but for those who do, staying there is, perhaps, the greater challenge. How many really rich people do we all know who don’t act that way or are even more modest and thrifty than the rest of us? Warren Buffett still lives in the same house in Omaha he has owned for decades and drives around in a mid-range Cadillac. He’s the exception most folks point to, but we all know many other wealthy people who love living frugally, tipping modestly and wearing their old clothes even though they can, ‘...Burn down Bergdorf’, as Jay-Z likes to say.

Whether you are in the top 1%, bottom 90, or somewhere in the middle, growing your wealth and maintaining it comes down to these basics that are as timeless as money itself:

Save often. Stay invested and learn to love the magic of compounding.