How Barack Obama Made His Fortune

(Pinterest)Two weeks ago, we looked at how Rep. Paul Ryan, the Republican nominee for Vice president, made all of his money. The answer? Natural resources, land rights, and stocks, all invested in mutual funds and limited partnerships.

We got a lot of requests to do the same thing to Barack Obama, and for him the answer is much easier.

First of all, Obama has released copies of his tax returns, so we're able to produce hard numbers when it comes to what he makes.

Second, his investment strategies are much more coherent than Ryan's. Obama made his fortune from a few sources, and has it invested and stored in a few surprising — but also easy to track — ways.

We got the information from personal finance disclosures and released tax returns hosted by the Center for Responsive Politics.

So, here's a timeline of how Barack Obama went from middle class to a multimillionaire.

While he was an Illinois state senator, both parents in the Obama family were working

(Wikimedia Commons)In his 2004 financial statements, Barack Obama indicated that he had three sources of income. One was an $80,287 salary from the Illinois Senate, where he was a state senator.

The other was a $32,144 salary from the University of Chicago Law School, where Obama taught as a lecturer while he was in the statehouse.

The third was Michelle's salary from the University of Chicago Hospitals, where she was an administrator.

While the picture is fuzzy before 2001, here's where Obama kept the money he made from Dreams From My Father in 1995 and his law career

The Obamas had investments in three different assets in 2004.

First was the Illinois State Senate Pension Fund, which Obama listed as worth something between $50,000 and $100,000.

The other two were investments in funds with Vanguard, the investment management company.

Obama had investments in the Vanguard Wellington Fund, which he evaluated as worth between $100,000 and $200,000. The Wellington Fund consists of around 60 to 70 percent stocks and 30 percent to 40 percent bonds and is essentially a fundamental mutual fund.

The Obamas also had $50,000 to $100,000 invested in the Vanguard Wellesley Fund. This Fund is more bond-heavy than most balanced funds, with exposure to around two-thirds bonds to one-third stocks.

He then scored a huge book deal after the 2004 Democratic National Convention

(Random House)After giving the keynote address at the 2004 convention as a candidate for Senate — The speech, "The Audacity of Hope," was a slam-dunk that propelled Obama's popularity upwards in the years before his presidential campaign — Obama inked a number of book deals with Random House.

This is the real money.

He signed a deal for 2 nonfiction books and one children's book. One nonfiction would be The Audacity of Hope, an extended version of his 2004 speech. The children's book — we believe — became Of Thee I Sing,  with proceeds going to charity.

Here are the terms of the book deals that made Obama phenomenally rich

After January of 2005, Obama will receive a $1.9 million advance on The Audacity of Hope.

For that book, the deal says that he gets 15 percent of the list price for Hardcover copies, 7 percent of the list price for the trade paperback version, then 8 percent of list price for the first 150,000 issues sold of the mass market paperback, then 10 percent of the list price thereafter.

He also gets 10 percent of Audio book sales. He would go on to win a Grammy for his recording, too.

Random House also republished his 1995 book, Dreams From My Father, generating more sales.


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