The lesson that this era seems to have imparted is that all the hard work that you’ve put forth, is meaningless. What will bring you meaning? Money. Lots of money.

How to Make Money

There are two ways to make money:

1. Wages, salaries, and benefits from an employer
2. Nonwage income, like Social Security payments, retirement account disbursements, capital gains, self employment income, alimony, gambling money, etc.

Most Americans make most of their money from wages. According to the Minneapolis Fed, the median American pulls in $3,000 from nonwage income per year, but about $37k in wages. Part of the problem with wages is that inflation gnaws away at them, and has wiped out all wage gains over the past four months.

But some people make a lot of money in the nonwage income category - the very rich and the older population.

Part of this is logical. As you age, you take in Social Security. As you grow rich, you mostly grow rich from stocks, as John Burn-Murdoch documented, noting that the median household’s net worth has roughly doubled in real terms since the mid-1990s, driven by the surge in stock prices and home prices over that same time frame, while incomes grew only around 30% (which is still pretty good.)

So how do you get rich?

Nonwage income.

• 42% of the nonwage income for the top 1% comes purely from capital gains, from stocks. The second biggest component is S-corp income, which as the Fed researchers note, is “labor in the economic sense.” It’s definitely a form of what we would consider “work.”
• For older households, their nonwage income is a reflection of the work they’ve done through Social Security payments and the retirement accounts they spent careers filling.