Who Are The 1%? — dumb money guru (2024)

Introduction

Even if you don’t know a “one percenter” personally, you’ve probably heard the phrases, “the one percenters,” “the wealthy elite,” or “old money” at some point in your life. If you’re not familiar with those phrases, allow me to formally introduce them to you. The 1% refers to the people who are in the highest income bracket in America. These aren’t necessarily the nation’s top earners. Instead, these are the people who have the highest net worth.

Don’t think of doctors, lawyers, or engineers. Think of the people who are majority stakeholders or board members of Wal-Mart, Amazon, or Apple. Think of hedge fund managers and the executive suite of investment banks and Fortune 500 companies. These are the people who rake in millions per year in salary, and a few million more in bonuses. These are the people who own the overwhelming majority of the United States’ wealth. In fact, the top one percent of Americans own more than the bottom 90% of Americans combined!

To highlight the differences between the 1% and the other 99%, let’s take a look at a day in the life of both groups of people. We’ll start with the 99%.

Who are the 99%?

The 99%’s lifestyle is probably pretty similar to yours. They work a job that pays them either an hourly wage or a yearly salary. They work 40 hours a week, and most likely earn under $100,000 per year. If they earn over a hundred thousand dollars a year, they almost definitely earn under $400,000 per year. They either rent an apartment, or have a house that they’re working toward paying off. For most people in the 99%, money (or the lack of money) probably causes them stress. Even if they’re able to pay all of their monthly bills, they still need a good budget, and they have to watch their spending. They don’t own many assets, maybe just a handful of stocks in an IRA or 401(k), in addition to the house that they’re trying hard to pay off. During the week, they spend most of their days working, and then they relax on the weekends.

Income Levels

However, Business Insider pegs the median net worth of an average family in America, at $127,700. Specific ages and income levels are.

• Under 35: $13,900

• Ages 35-44: $91,300

• Ages 45-54: $168,800

• Ages 55-64: $212,500

• Ages 65-74: $266,400

• 75 or older: $259,400

Obviously, exact numbers vary based on factors like race, age, and gender.

Who are the 1%?

The 1% live a totally different lifestyle; one that’s foreign to most of us. For them, money stopped being something that they worried about years ago. They probably have at least $10 million dollars in the bank. This money most likely came from some type of business venture (either theirs or a family member’s). Access to this money has made life incredibly cushy for them. They probably own million dollar houses and or apartments - a few that they bounce around between. They don’t have to work. So they can spend their days at one of their estates. It’s easy for them to gas up a private jet to fly to Spain for the weekend, or maybe just spend a considerable amount of time in a few different locations trying to grow the family fortune.

How They Spend

The 1% own cars that are worth more than many people’s houses. They spend more money on a single watch or handbag than most people in the 99% make in a year. A sizable amount of money like, $250,000 is not a big deal for them. That would be a life changing amount of money for some people! For them, they’d spend that on a whim to buy an Aston Martin luxury sports car. The biggest issue they’d have with making a purchase like that, is probably trying to decide what color they want their new car to have. Many people can only fantasize about earning one million dollars in their lifetimes. But some people in the 1% have achieved this fantasy 100,000 times over.

According to Business Insider, someone with a net worth of $4.4 million qualifies to be in the top 1% of earners. This puts their income at approximately 35 times more than the average American.

Background On The 1%

The phrase “one percenters” first became popularized during the 2011 Occupy (Wall Street) Movement when Gore Vidal used the phrase “We are the 99%,” referring to the common people. The fact that he and his followers were “the 99%,” implied that there was a 1%, who weren’t like them, because of their elite status and immense wealth. Vidal’s platform reflected the opinion that "the 99%" are paying the price for the mistakes of a tiny minority within the upper class. This sentiment was extremely popular in 2011, and it came about almost directly as a result of the 2008-2009 financial crisis.

The 2008 Financial Crisis

During the crisis, major investment firms created risky new financial instruments that hadn’t been offered before. They began selling those products as investments. In a nutshell, banks packaged the debt that people owed on their homes, and sold those packages to investors in bundles. They marketed these products as top-rated investments. The problem was, that the people who owed the debt were at a high risk of defaulting on their loans. Some analysts say these borrowers should never have qualified for a home loan in the first place. So why would financial institutions sell questionable investments to their clients? The sold them to make more money of course! In fact, they earned tons of money in fees from selling these ticking time bombs.

As we all know by now, eventually, people started defaulting on their mortgages, and the value of homes plummeted nationwide. This meant that the financial instruments that banks had sold to investors also plummeted. Investors lost tons of money! The values of some stocks seemed to disappear overnight. It looked a lot like what happened during the Great Depression. The entire system was on the verge of collapse.

Big Bailouts

To avert an all-out disaster, the Federal Reserve injected almost one trillion dollars into the economy, mostly so that major banks would not fail. At the time, these were considered bailouts to companies, that were considered deemed “too big to fail,” meaning these companies were so large and employed so many people, that allowing them to go out of business would’ve been catastrophic for the American economy. While these companies received large bailouts, little help was offered to the average retail stock market investor.

Big Paydays

As a result, millions of retail investors lost their homes. Many more also lost tons of money in what became known as the 2008 stock market crash. If you’re wondering what the repercussions were for the bankers who created the entire crisis by concocting questionable investment products in the first place? Well,

• Richard Fuld (the CEO of Lehman Brothers, the first bank to fail and trigger the crisis), received a salary of $22 million in 2007 - just before the crash.

• Lloyd Blankfein (the CEO of Goldman Sachs at the time) received $70 million in compensation in 2007 - again, just before the crash.

• And Joseph Cassano, (the CEO of AIG at the time and dubbed “The Man Who Crashed The World”) received $34 million in bonuses alone, in 2008, the very year the crash took place.

Conclusion

In short, the people responsible for the crisis made out like bandits, with millions of dollars, while everyday people suffered the consequences. As a result, the 1% became the target and focus of intense anger from the 99%. Some say that resentment will never go away.

References

1. https://money.cnn.com/2017/09/27/news/economy/inequality-record-top-1-percent-wealth/index.html

2. https://www.businessinsider.com/personal-finance/average-american-net-worth#average-net-worth-by-age

3. https://www.businessinsider.com/net-worth-to-be-in-1-percent-top-richest-wealth-2021-2#:~:text=An%20individual%20in%20the%20US,to%20break%20into%20the%201%25.

4. https://en.wikipedia.org/wiki/We_are_the_99%25

5. https://www.thebalance.com/2009-financial-crisis-bailouts-3305539

6. https://www.thebalance.com/2007-financial-crisis-overview-3306138