Bed Bath & Beyond Inc. has signed a deal to sell roughly half its real estate to a private-equity firm and lease back the space in a transaction that will generate

Self-Made Wealthy People: What are the primary reasons you became rich and others you grew up with didn’t?

I have a net worth of nearly $6M and I would guess most of my friends, former co-workers (I’m not self-employed) and neighbors have far less. When I reached a net worth of about $3M, I started to think that I was wealthy relative to my social group. My wife didn’t think so because she assumed everybody around us had more money based on what she observed. Other people usually drove nicer cars, ate at fancier restaurants, lived in similar houses and took similarly exotic vacations. Everyone should have been a multi-millionaire but they weren’t.

I managed our family’s finances and I worked in an area with access to salaries at my Fortune 50 company so I had deeper insight. Here is what I observed about people in my social circle:

  1. They did buy more expensive cars than us but that doesn’t prove anything. Most Americans buy more can they can afford.
  2. They paid full price for their vacations going when and where they had their mind set. We wanted to travel all over the world so we went to where the best deals were offered, and we used miles and points.
  3. My wife and I were top performers and likely earned a little more (10% to 20%) than our peers.
  4. In our affluent neighborhood, most lived in 3 bedroom / 2 bathroom $1M homes but they (like us) have huge mortgages or were renters.
  5. Outside of cars and home, most people have very few assets. We, on the other hand, saved prodigiously and have built a healthy stock and real estate investment portfolio.

Items 1 through 4 probably moved us from $1M to $3M net worth. Item 5 is what moved us to a $6M net worth.

I keep in touch with many of the friends I had in high school. We were not average students but rather honors students who went on to top public universities. Nearly all of us came from immigrant families who viewed education as a path to the American dream. Compared to our home countries and our parents, we are solidly upper middle class working as accountants, engineers, lawyers, doctors, etc. We’ve all achieved the American dream of owning a home, driving nice cars, having two kids and taking international vacations. Most of them will continue the rat race until age 65 because they haven’t figured out or thought about how to escape it.

I, on the other hand, have escaped but continue to maintain the same lifestyle despite my net worth. I no longer have a “real” job but I work 20 to 25 hours per week managing our investments. The rest of my time is spent being a parent to two young kids.

If you’ve made it to middle-class or upper middle-class, congratulations. If you want to get to the next tier, you definitely need to take some calculated risks and change your attitudes toward wealth. Is money to spend, save or invest? Most of my friends and friendly have the earning potential but lack the financial literacy, emotional fortitude and discipline to put their money to work. I wrote about what worked for me in this post Anonymous’s answer to What are the ten most important things about personal finance that someone without a finance background must know?

For a more personal account:

I had a dear friend in high school. We alternated getting top grades in class. The friendly competition brought out the best in us. We graduated the top two from the same lower-middle class high school and attended the same top public university receiving similar technology-related degrees. We both had hard working parents who were morally supportive but practically uninvolved in our education. Our parents were financially inept. Based on observable measures of intelligence and background (grades, SAT scores, education, income, etc.) we had equal potential and shared similar (middle class) aspirations and notions of wealth.

This was the type of friend that I thought would live next door, or we’d start a business together, or we’d try to outdo each other at competing firms. He’s someone who helped mediate fights between my girlfriend (now wife) and me. He’s someone that challenged me intellectually. Sadly, he is now a friend that I see less than once a year.

30 years later, I can’t say who is more content, but I have done much better financially exceeding my own expectations. He leads a comfortable (maybe upper) middle class lifestyle with a stay at home wife, but I can’t help but feel that he missed out on fulfilling his potential. Our different outcomes resulted from different life choices, luck and perhaps wisdom. I didn’t strike it rich all of a sudden, and he never suffered a dramatic setback like a divorce or bankruptcy; however, small, incremental differences resulted in a large financial gap 30 years later.

  1. College was when I first noticed his attraction to gambling–nothing financially devastating–but he spent a little more time playing cards with the boys and a little less time studying. I graduated with honors and he graduated with decent grades.
  2. I sought out and was exposed to career opportunities that expanded my horizons; he chose a career path that was below his intellectual capability. I got a job with a prestigious management consulting firm, and he got a job at our university (maybe a 15% to 20% salary difference) with government pay, benefits and commensurate expectations.
  3. He enjoyed visiting Vegas and it was not uncommon for him to lose a few thousand dollars each trip. I maxed out my 401K.
  4. I was an investor and he was a trader. I bought mutual funds and some individual stocks. He bought penny stocks trying to score it big; he was highly intelligent so I thought maybe he had a system. We both lost a lot of money during the 2000 dot com crash. I probably lost more because I invested more.
  5. I married a woman whom I had dated for a long time. She was my equal in intellect and earning potential. He married someone who brought lunch for him at work because she didn’t work. She enjoyed watching soap operas, discussing celebrity gossip, and owning expensive purchases.
  6. I took time off to earn an MBA while my wife supported me. He did not pursue secondary education.
  7. I took a slow and steady approach to building wealth–education, working hard, saving and investing; he thought of achieving wealth in terms of IPOs, the lottery, flipping houses, day trading, etc.
  8. When I bought a small condo in an affluent part of town, he rented a large condo in a middle class part of town. I then settled in a typical 3 bed/2 bath house in a somewhat affluent neighborhood–a place where real estate would always be in demand. He settled beyond the edge of town where real estate prices fluctuated wildly. He had a new and bigger house which was more important to him than location. I lived closer to jobs and networking opportunities; he commuted an hour to work and back.
  9. My wife and I progressed in our careers and became junior executives at Fortune 50 companies. He remained a senior technical person.
  10. He has owned more than one luxury car; I bought my first new car when I was 22 and each successive car I purchased has been cheaper. There is nothing overtly “wealthy” about my current situation compared to his.

Perhaps most importantly, he seems to have lost connection with society and doesn’t benefit from the collective wisdom of friends, a professional network, maybe even his family (other than his wife and son). I would consider myself more of an introvert than him, but I continue to maintain relationships with friends and colleagues. He has regressed to the point of not answering emails or invitations to get-togethers among our close circle of friends. I host a party of our mutual friends once or twice a year, and he sometimes attends if I personally call him to invite him. Our friends and I have never been invited to his house even though it is newer and larger than mine. I don’t believe he is avoiding me out of shame or jealousy because he treats all his friends the same way.

I take no offense because because he is still my friend, and I accept him for who he is.