The 5-15-80 Percent Wealth Rule

In a world of great income inequality, it is important to recognize why some people have a great amount of wealth and some still live paycheck to paycheck. To understand these concepts we simply need to look at the 5, 15, and 80 percent rules. Whichever category you might fall under, one might elevate themselves into a better bracket by utilizing Rule 506(c) offering only available to certain wealthy individuals or individuals with financial acumen.

Among the general population are those who create multi-generational wealth over time. This segment accounts for 5 percent of the population. Generally speaking, this segment’s goal is to create wealth they can pass down to their children. At the same time, statistically, this group tries to instill financial acumen into their progeny so that they also make good decisions with the wealth they inherit.

The middle class accounts for 15 percent of the population. This segment is characterized by moderate wealth, just enough to have a cushion. Many think they are in the middle class, however, to truly be in this 15 percent bracket, one must be able to retire. Unfortunately, while many are comfortable throughout middle age, they may need to work in old age if they do not have a retirement plan. Although this bracket has financial independence for the most part they are unable to leave wealth for their children, or if they can it is an insignificant amount.

The bulk of the general population falls under the 80 percent segment, whereas, they need some type of assistance to get by and even retire. This assistance might come from their government or family members.

In this segment, there is a lack of savings over time leading to financial dependence in retirement rather than financial independence. Obviously, in this segment generational wealth is nonexistent. Financial hardship can come from several circumstances, ranging from socioeconomics oppressing wealth-building or even selfish spending and credit irresponsibility.

Most everyone will agree that they desire to be in the 5 percent bracket or at the very least the 15 percent bracket. However, achieving financial independence requires a concerted effort. Utilizing logical financial decision-making and diligent saving mixed with investments can lead to an individual rising into a higher percentage bracket. Using a private fund investment such as a Rule 506(c) offering can help diversify your portfolio. We have a guide on how to qualify as an accredited investor with a low income. If you would like to verify yourself as an accredited investor, you can use a third-party verification service to receive an accredited investor certificate.

Updated 8/24/2023

Striving for higher brackets requires strategic financial decision-making, disciplined saving, and savvy investing. Private fund investments like Rule 506(c) offerings offer avenues for portfolio diversification. Accredited investor qualification, a requisite for such opportunities, can now be efficiently verified through third-party verification services, facilitating broader access to wealth-building prospects. As the landscape evolves, embracing these mechanisms may pave the way toward a more equitable distribution of financial prosperity.