Can I live on a million dollars

Why a million euros doesn't make you rich

The best way to get rich is as an entrepreneur. But staying rich is also a challenge. Rainer Zitelmann not only explains how to get rich, but also why that is not dishonest.

Vienna. First of all: millionaires are not really rich. This is one of the theses with which Rainer Zitelmann in his book “Get rich and stay rich. Your guide to financial freedom ”. If someone owns a fortune of 800,000 euros and wants to live on their investment income, they have to be content with 2000 euros net per month - provided they receive four percent interest (before taxes), which is currently not easy. According to surveys, however, you are only rich if you are completely independent of state security, can afford anything you want at any time, and can live exclusively on income from assets without having to work.

Almost all rich people work

Being able to afford everything you want at all times is hardly possible with an income of 2,000 euros. The misjudgment that one million euros guarantees a luxury life without work is one reason why many (lottery) millionaires quickly become impoverished again.

Zitelmann allows many studies of wealth to flow into his book, but also draws from his own experience as an entrepreneur and acquaintance of millionaires and billionaires. The book is also an apology for the rich, who, according to Zitelmann, sometimes agree to bashing the rich themselves, for example by saying that they want to “give something back” to society (as if they had taken something away from it).

People who believed that the rich got rich through dishonesty and at the expense of others assumed that business relationships were a zero-sum game - a thesis the author does not believe in. Incidentally, he has little interest in Thomas Piketty's bestseller “Capital in the 21st Century”, which “hits the nerve of the times with its criticism of capitalism and the rich”.

But how do you get rich now? Most likely through entrepreneurship - although self-employment can also lead to poverty, which is why you should try it as a part-time job first. "Rich idlers" are rare. Most of the rich got rich (also) through work. 73 percent of billionaires worldwide got their money through entrepreneurship and work, 22.4 percent through inheritance. You don't have to be highly educated to get rich, you do have to be willing to take risks. The rich take primarily calculated risks: A survey in the USA showed that multi-millionaires play the lottery less often than others.

The fact that the rich get their money mainly through corruption and breaking laws does not apply to the USA or Germany at least. In China or Russia, on the other hand, it is difficult to get rich and strictly follow all laws.

Nevertheless, 52 percent of Germans think that dishonesty will make you rich. However, US millionaires see honesty as a key success factor. Zitelmann does not want to accept the possible objection that millionaires want to see themselves in a positive light: only 20 percent see intelligence as a very important factor for their success, 57 percent see honesty.

"The Geissens" are an exception

Zitelmann quotes from US studies, according to which millionaires rarely appear like the Geissens in the television program of the same name. Three quarters have never spent more than $ 599 on a suit. 94 percent typically don't spend more than $ 40 on a meal in a restaurant.

Finally, in the second part of the book there are tips on staying rich: Zitelmann generally advises real estate, reporting in detail on his own experiences, as well as stocks, although he points out that only a few get rich primarily with stocks. The best way to do this is to rely on ETFs (index funds without fund managers). Because actively managed funds cause high costs and hardly bring any advantages. The fund managers also knew that: only a few invested significant amounts in their own funds.

Furthermore, one should not place too much trust in the bank advisor (especially since the latter rarely advises on real estate, as the bank can hardly earn anything from it). You should only diversify broadly if you think you don't know more than the market. Volatility is not a disadvantage, home bias (being fixated on the home market for stocks) doesn't pay off - unless you have good reasons for it (because you really know the market better than others). The saying “The Trend is your Friend” is only good advice for short-term oriented investors, long-term oriented investors would do better to swim against the current.

("Die Presse", print edition, July 20, 2015)