• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Evergreen Small Business

Actionable Insights from Small Business CPAs

  • Home
  • Small Business FAQ
  • Monographs
    • Business Planning Workbook
    • Download Your Free Copy of the Thirteen Word Retirement Plan
    • Five Minute Payroll Monograph (2019 Edition)
    • LLC Operating Agreement
    • Maximizing PPP Loan Forgiveness
    • Maximizing Sec. 199A Deductions Monograph
    • Preparing Form 3115 for the Tangible Property Regulations
    • Preparing U.S. Tax Returns for International Taxpayers
    • Real Estate Tax Loopholes & Secrets
    • Red Portfolio Black Portfolio FAQ and Download
    • Sample Corporate Bylaws
    • Setting Low Salaries for S Corporations
    • Small Business Tax Deduction Secrets
    • Small Businesses and the Affordable Care Act (Obamacare)
    • Joining Our Affiliate Program
  • Our Bloggers
  • Free LLC Formation Kits
    • Alabama LLC
    • Alaska LLC
    • Arizona LLC
    • Arkansas LLC
    • California LLC
    • Colorado LLC
    • Connecticut LLC
    • Delaware LLC
    • Florida LLC
    • Georgia LLC
    • Hawaii LLC
    • Idaho LLC
    • Illinois LLC
    • Indiana LLC
    • Iowa LLC
    • Kansas LLC
    • Kentucky LLC
    • Louisiana LLC
    • Maine LLC
    • Maryland LLC
    • Massachusetts LLC
    • Michigan LLC
    • Minnesota LLC
    • Mississippi LLC
    • Missouri LLC
    • Montana LLC
    • Nebraska LLC
    • Nevada LLC
    • New Hampshire LLC
    • New Jersey LLC
    • New Mexico LLC
    • New York LLC
    • North Carolina LLC
    • North Dakota LLC
    • Ohio LLC
    • Oklahoma LLC
    • Oregon LLC
    • Pennsylvania LLC
    • Rhode Island LLC
    • South Carolina LLC
    • South Dakota LLC
    • Tennessee LLC
    • Texas LLC
    • Utah LLC
    • Vermont LLC
    • Virginia LLC
    • Washington LLC
    • West Virginia LLC
    • Wisconsin LLC
    • Wyoming LLC
  • S Corporation Kits
    • Alabama S Corporation
    • Alaska S Corporation
    • Arizona S Corporation
    • Arkansas S Corporation
    • California S Corporation
    • Colorado S Corporation
    • Connecticut S Corporation
    • Delaware S Corporation
    • Florida S Corporation
    • Georgia S Corporation
    • Hawaii S Corporation
    • Idaho S Corporation
    • Illinois S Corporation
    • Indiana S Corporation
    • Iowa S Corporation
    • Kansas S Corporation
    • Kentucky S Corporation
    • Louisiana S Corporation
    • Maine S Corporation
    • Maryland S Corporation
    • Massachusetts S Corporation
    • Michigan S Corporation
    • Minnesota S Corporation
    • Mississippi S Corporation
    • Missouri S Corporation
    • Montana S Corporation
    • Nebraska S Corporation
    • Nevada S Corporation
    • New Hampshire S Corporation
    • New Jersey S Corporation
    • New Mexico S Corporation
    • New York S Corporation
    • North Carolina S Corporation
    • North Dakota S Corporation
    • Ohio S Corporation
    • Oklahoma S Corporation
    • Oregon S Corporation
    • Pennsylvania S Corporation
    • Rhode Island S Corporation
    • South Carolina S Corporation
    • South Dakota S Corporation
    • Tennessee S Corporation
    • Texas S Corporation
    • Utah S Corporation
    • Vermont S Corporation
    • Virginia S Corporation
    • Washington S Corporation
    • West Virgina S Corporation
    • Wisconsin S Corporation
    • Wyoming S Corporation
  • Contact Nelson CPA
You are here: Home / entrepreneurship / Wealth Building Insights from Latest Federal Reserve Study

Wealth Building Insights from Latest Federal Reserve Study

November 1, 2023 By Stephen Nelson CPA

Federal Reserve study suggests two wealth building insightsThe Federal Reserve’s newest Survey of Consumer Finances provides at least a couple of big, actionable, wealth building insights.

Ironically, much (most?) of the news coverage of the survey misses or ignores these insights. So, I want to talk about them here.

Wealth Building Insight #1: A College Degree

A first big insight from the survey: A college degree makes a huge difference to both your and my income and our net worth. I want to quote an actual statement from the survey:

…families in which the reference person had a college degree had twice the median income of those with some college but over three times the median net worth

The reference person by the way is the person in a family who the researchers guess is the primary breadwinner. And a college degree, according to the survey documentation, refers both to a two-year associate’s degree or a four-year bachelor’s degree.

But the big point here:  Obtaining and then selling higher-level skills into the labor market? A gamechanger in terms of both income and wealth building. (I know we all guessed a college degree probably made a difference… but a doubling of income and a tripling a wealth? Wow.)

Wealth Building Insight #2: Small Business Ownership

A second big insight from the survey: Small business ownership on average doubles your net worth—and that’s before counting the value of the business. Again, I want to quote an actual statement from the survey:

The mean net worth of families without a business was about $570,000 in 2022, while the mean net worth—excluding the value of businesses—of families that owned a nonemployer business was nearly $1.1 million.

Note that word “nonemployer” means a business without employees other than the owner. And most businesses are “nonemployer” firms.

But businesses with employees? Those families enjoy even higher mean net worths. Families owning a business employing from two to five employees? They average a net worth of $1.6 million before considering the business. Families owning a business employing more than five employees? They average a net worth of $4.1 million again before considering the business.

Again, I’m not surprised that entrepreneurs enjoy better balance sheets. But I am impressed with the size of difference.

Closing Comments

Two quick comments to close: First, I don’t think it has to matter much where you got your degree. An online degree works fine, for example. (Our small CPA firm has regularly paid for employees to get accounting degrees from online Western Governors University and those students have become good team members. Someone with some college credits can maybe finish their baccalaureate accounting degree in a year for $6,000 to $8,000.)

Second, I think you get a compounding effect if you combine a college degree with small business ownership. In other words, if a college degree triples wealth and a small business doubles wealth? I think someone who both gets a degree and establishes a small business ends up with six times the wealth. (Three times two equals six.). That’s a hunch. I admit it. But people should get synergies from a combination.

Additional Resources

The short summary I’m quoting from for this blog post appears here: 2023 Survey of Consumer Finances.

The actual Survey of Consumer Finances includes a bunch of publications and resources. You can get a list of those here: full list

We’ve talked before here at the blog about how to view college degrees as investments and how to maximize your return: What Lifetime Earnings Data Say About College Majors and Graduate Degrees.

Finally, we’ve also talked here at the blog before about the idea that we all (you, me, your kids, my kids and so on) ought to focus more on our human capital. If the latest Federal Reserve research makes you think the same thing, you might find this earlier blog post interesting: Human Capitalists in the Twenty-First Century

Filed Under: entrepreneurship, personal finance

Primary Sidebar

Welcome

Nelson CPA publishes this blog to help and encourage small business owners. Click here to learn more about our firm.

Need to help clients with their PPP loan forgiveness applications?

Updated for 2019 tax year changes and now available in print from Amazon!!

Maximizing Sec. 199A Deductions

International tax issues?

Preparing US tax returns for international taxpayers

Maximize S corporation tax savings

Setting Low S Corporation Salaries

Free retirement planning help

Picture of Thirteen Word Retirement Plan book

Featured Posts

If you got caught in an ERC scam, take these steps to reduce the damage

If You Got Conned in ERC Scam

You wondered at the time whether it was a scam, right? And now you regularly see news reports about ERC scams. Employee retention credit scams, that … [Read More...] about If You Got Conned in ERC Scam

EV credits make electric vehicles more affordable

How EV Credits Work

Do you plan on purchasing a new vehicle within the next ten years?  If the answer is yes, and good chance it is, you want to know how EV credits … [Read More...] about How EV Credits Work

Bonds matter to portfolios when investors want to minimize downside risks

Why Bonds Matter for Your Portfolio

A couple of times recently, I’ve encountered people who argue you or I should not invest any part of a portfolio in bonds. Or who argue only a small … [Read More...] about Why Bonds Matter for Your Portfolio

Recent Comments

  • Christian Block CPA on How EV Credits Work
  • K Dienhart on How EV Credits Work
  • Washington State Capital Gains Tax Planning • Nelson CPA on The Qualified Family-Owned Small Business Deduction
  • Stephen Nelson CPA on Six Hacks to Simplify Small Business Accounting and Taxes
  • Andrew on Six Hacks to Simplify Small Business Accounting and Taxes

Archives

Copyright © 2023 Stephen L. Nelson, Inc. · News Pro On Genesis Framework · WordPress