(MONEY Magazine) – At the moment later this month when, barring a disaster, Bill Clinton gets formally crowned as the Democratic presidential nominee, Madison Square Garden will erupt into the predictable, exuberant, red-white-and-blue spectacle. As you watch the Rhodes scholar candidate presiding benevolently over the noisy party faithful wearing silly hats, you might wonder: What does this middle- aged guy of 45 really know about the ''forgotten middle class'' he so often mentions? What, indeed. MONEY's conclusion is this: Without wife Hillary's $110,000 income as a lawyer and her investing smarts in building a personal portfolio of more than $470,000, the Arkansas governor might know much, much more. That's because his own salary, not counting perks, is a squarely middle-class $35,000 a year. Without question, Hillary Clinton -- who at 44 is educated, successful, confident and outspoken -- typifies women today who are taking charge of family MONEY matters (see MONEY's June cover story). And she has made the family, which includes daughter Chelsea, 12, what they are today: in a word, rich. The Clintons' joint earnings of $223,587 last year catapults the family into the top 1% of U.S. households, and their $697,000 net worth ranks in the highest 3%. In our two-month investigation of the Clintons' finances, MONEY enlisted the help of 15 investment and tax experts to scour the Clintons' federal and state tax returns filed since 1980, their financial disclosure forms and other documents. The Clintons themselves declined to answer any of MONEY's questions about their finances. Campaign staffers did provide some data, however. We, in turn, reviewed the family net worth statement released in late May in making our estimates of the Clintons' current holdings. We also conducted interviews with Hillary's Little Rock investment manager, her mother and family friends. Among the highlights we learned: -- Hillary, whose total earnings have more than tripled in the past 11 years to $179,920 in 1991, accounted for nearly 70% of the $1.6 million that the couple collected in salaries and fees since 1980. As you might guess, beyond her own many skills, being the wife of the governor hasn't hurt her in attracting clients or seats on boards of prominent corporations, including two based in Arkansas. Bill's gubernatorial pay -- fixed by law at $35,000 since 1976 -- relegated him to an also-ran in the family's income derby, as well as the lowest-paid governor in the nation. -- Presumably because she earns most of the family dough and also, perhaps, to eliminate politically embarrassing suggestions of any conflicts of interest, Hillary owns outright roughly two-thirds of their $862,500 in assets. -- When Bill invests -- which isn't often -- he tends to stick with ultrasafe U.S. Treasuries. Comparatively, Hillary comes off as the financial swinger. She has dabbled in adventurous investments ranging from oil drilling partnerships to Standard & Poor's stock-index futures. Moreover, the money manager of the investment partnership she belongs to hedges by engaging in tricky short sales, borrowing shares that he then sells in hopes of being able to buy them back at a lower price. Overall, our financial experts gave Hillary -- and by extension, the Clintons -- high marks. Considering Bill's low pay and lack of family inheritances, their ability to build a $697,000 net worth since getting married in 1975 is impressive. Says Mark Gallagher, a tax partner at Campos & Stratis in Atlanta: ''They are living within their means and managing their money well.'' Moneymaking alone doesn't appear to be at the top of the family agenda and apparently never has been. Two years ago, before the recession, Bill Clinton told the Arkansas media: ''If it was important to us, I think we could be millionaires, because we both were fortunate enough to get a good education, we've stayed healthy, and we both work real hard.'' The details of the Clintons' money: -- Salaries and perks. Set aside Bill's lousy 35 grand and the measly $5,500 he received in honoraria for speaking engagements last year. Arkansas takes care of its governor through perks that would be worth at least $100,000 a year if he had to pay for them. The Clintons live in Little Rock's 11,000- square-foot, three-bedroom brick Governor's mansion -- no money down, no mortgage and no maintenance costs. A $51,000 annual mansion allowance covers utilities, gardening, catering and the like. Bill also has access to a $19,000 < ''public relations fund,'' a quirky alternative to other governors' expense accounts. In addition, the Clintons have a chauffeur-driven $22,000 Lincoln Town Car available round-the-clock, even for pleasure trips. (They also own a paid-off 1986 Oldsmobile Cutlass for personal use and Hillary's 2 1/2-mile commute to work.) And then there are some extra extras, like gratis 50-yard- line seats ($20 each) for Arkansas Razorback football games and free membership in three Little Rock-area country clubs. That last perk, of course, hurt Clinton politically earlier this year when he was photographed at one of the three, a racially exclusive club he belongs to and has frequented since 1979. MONEY also learned that Clinton accepts around $1.4 million worth of admission tickets each year to a top Arkansas tourist attraction, the state- regulated Oaklawn horse racetrack in Hot Springs. He hands out the passes to people who seek them, including state legislators and campaign contributors. The practice dates back to the 1950s in Arkansas, but our calls to seven other major racing states including Maryland, New York and Kentucky found no similar giveaways currently. ''It's a mistake for a public official to accept gratuities,'' said Michael Josephson, an authority on governmental ethics. ''It creates appearances of impropriety. It visibly underlines a relationship between a governor and a racetrack, which is gambling. I'm stunned frankly at the amount. It's a staggering amount.'' Clinton spokesman Betsey Wright said she thinks Clinton considers the free passes ''a great nuisance,'' and added: ''I guess the potential is there for a conflict of interest, but we never let it be a conflict.'' While Bill's earnings have stayed flat, Hillary's soared from $50,579 in 1981 to nearly $180,000 last year. Most of it comes from her 12-year-old partnership in the prestigious Rose Law Firm. Last year she also raked in $5,500 in speaking fees and $64,700 for serving on three boards: the Arkansas- based $44 billion Wal-Mart and $321 million frozen-yogurt chain TCBY, as well as $1.6 billion Lafarge, a Virginia cement maker. In May, citing time constraints, she resigned from those lucrative posts, forgoing about $68,000 worth of future TCBY stock options and tax-deferred compensation at Wal-Mart. But she remains an unpaid director of nine nonprofits, including the Children's Defense Fund, the Children's Television Workshop and Public-Private Ventures, a Philadelphia group that helps teenagers. -- Investments and savings. In addition to earning most of the money, Hillary is also the one making it grow. Says Susan Thomases, a New York City lawyer and a longtime friend of the governor's: ''I think Bill is, at best, totally indifferent toward investing.'' According to his 1991 and 1992 Federal Election Commission financial-disclosure reports, the only assets he owns outright are about $40,000 in the ultraconservative Fidelity U.S. Government Income Fund, $25,000 in Individual Retirement Accounts (the statements don't specify IRA holdings), about $10,000 in a state employees deferred- compensation plan and a Northwestern Mutual life insurance policy that has roughly $7,500 in cash value. Jointly, the Clintons hold some $100,000 in bank accounts, CDs and money funds. The only flier he has taken failed utterly. In 1979, during his first term, he and Hillary put up $68,380 for a half-interest in an Ozark Mountain land development deal. Not only have they apparently lost the entire sum, but they also suffered politically when a front-page New York Times story last March suggested that the venture, known as Whitewater Development, amounted to a conflict of interest. The article noted that the Clintons' Whitewater partner, James McDougal, later became majority owner of a state-regulated savings and loan while Clinton was still governor. Clinton has denied any impropriety, saying that he has held on to the investment because he doubted he could find a buyer for the money-losing venture. Hillary's now famous demeanor -- cool with occasional bursts of heat -- seems to mark her approach to money management as well. ''She has always been careful and wise with her money,'' her mother Dorothy Rodham, 73, told MONEY. ''Her father had a constant theme when Hillary was growing up that everything is too expensive, and you have to save for your retirement.'' Hugh Rodham, an 81-year-old retired textile executive, must be proud of his daughter. Although she is two decades away from retirement age, Hillary has already put aside about $120,000 in her law firm's profit-sharing plan and $150,000 in other retirement accounts, money-market funds and bank certificates. Hillary is sometimes prone to flashy impulses, though. In the early '80s, when tax shelters were the rage, she invested several thousand dollars in oil drilling programs. And in March 1987, she plunged into highly volatile S&P stock-index futures. One day later, after prices moved against her, she closed out at a $2,532 loss. $ Today, Hillary owns three stocks that she chose, including two where she was a director: Wal-Mart (her holdings: roughly $85,000 as of late May), the women's apparel maker Liz Claiborne ($15,000) and TCBY ($1,500). She also owns about $82,000 in tax-free municipal bonds and bond funds, $40,000 in a Fidelity taxable U.S. Government bond fund and another $4,000 or so in the G.T. Pacific Growth international stock fund. The remaining $80,000 of her portfolio is lumped with 49 other investors in a go-go partnership known as ValuePartners I. The private fund is run by Hillary's former stockbroker, Bill Smith, 52, who manages money in Little Rock for about 180 well-heeled clients. Minimum initial investment today: $250,000. According to audited figures, ValuePartners has run up a 17% compound annual return since 1985, compared with only 11% for the NASDAQ index that most closely reflects the smaller companies Smith prefers. Hillary told the Arkansas Gazette in 1990 that she chose Smith because of his conservative investment approach. But if he's conservative, Ronald Reagan is a bleeding-heart liberal. In an interview with MONEY, Smith said: ''Playing it safe with established blue chips won't produce the gains that younger companies can generate.'' As for Smith's short sales, they recently included such household names as Bristol-Myers Squibb, Campbell Soup and Reebok. In late May, his shorts were showing an unrealized 11.5% gain. The Clintons have apparently begun a college savings fund for Chelsea, who will enter eighth grade in a Little Rock public school this fall. She has about $42,000 in a money fund and the bank, plus more than $3,000 of Nynex, Bell Atlantic and Bell South stock. Her mother, a Yale law graduate like Bill, also holds about $35,000 worth of Arkansas college savings bonds, which can be used to pay for college in any state. Although roughly 60% of the couple's assets are in Hillary's name, as noted above, she and Bill own their only real estate holding other than Whitewater jointly: half a share in her parents' $180,000 Little Rock townhouse condominium, bought in 1987. (They use the place, and its swimming pool, as a weekend getaway.) And oh, yes: If the Clintons divorce, Bill would be entitled by state law to divide equally all the assets they accumulated during their marriage, even ones in her name. -- Taxes. Accountants who reviewed the Clintons' tax returns for MONEY described the couple as conservative about taking write-offs. In the past decade, they paid between 20% and 26% of their adjusted gross income in federal income taxes each year, including last year's 22%, or $48,608. But the Clintons and their Little Rock tax preparer, Yoly Redden, could be more careful. Their 1990 return failed to note $11,662 the Clintons had given to 19 charities in addition to the $25,213 listed. Redden filed an amended 1040, and the Clintons got an additional $3,861 refund from the IRS. -- Spending and debt. Clinton associates say Hillary organizes the household budget and pays the bills. And friends and family agree that both Clintons would much rather save a buck than spend it. Still, says Arkansas Times ''Insider'' columnist Max Brantley: ''They dress a heck of a lot better than they used to.'' The garish plaid sports coat and striped pants ensembles that a longhaired Bill wore in his 1979-80 administration have been replaced by conservative Southwick and Corbin designer suits costing $375 to $500 at Mr. Wicks, a Little Rock men's store. Hillary shops at local boutiques, typically spending $250 to $350 for custom-made and off-the-rack suits. The couple rarely eat out, though Bill has a soft spot for the local McDonald's 65 cents hamburgers and 50 cents coffee. He also has an eye for antiques, especially cameo pins. The Clintons generally keep their debts low, limiting credit-card interest payments to under $200 annually. Aside from two 1990 gubernatorial campaign loans totaling $100,700 from a local bank, the couple's only debt is their half of the $129,600, 15-year mortgage on her parents' condo. What would Clinton's election mean to their finances? Not much immediately. His salary would nearly explode sixfold to $200,000. And they'd swap the Governor's mansion, with its five-person staff and $161,000 budget, for the White House, which comes with a staff of 400 and a $35 million annual budget. On the other hand, Hillary would presumably give up her six-figure income to spend time as First Lady trying to help underprivileged children and other causes. If Clinton loses, he will remain governor until 1994 -- perhaps with a higher pay. Arkansas voters will decide in November whether to approve a state constitutional amendment to raise the governor's salary to $60,000 -- a 71% increase -- and do away with the $19,000 p.r. fund. Says New York City financial planner James Awad: ''The Clintons are like an airplane just starting down the runway. They are well on their way toward becoming quite wealthy.''

The Advice The pros who studied the Clintons' finances for MONEY think that the couple's investments should be less haphazard. ''Their portfolio lacks structure,'' says Bethesda, Md. financial planner Mary Malgoire of Malgoire Drucker. ''If they are trying to make their money grow, they should have 50% of their portfolio in stocks, rather than the 35% they have now. And they ought to raise their bondholdings to perhaps 35%, from 20%.'' Lewis Altfest, a New York City financial planner, applauds Hillary's retirement savings but thinks the couple should invest Chelsea's college fund more aggressively. ''I'd tell the Clintons to take the money in low-yielding bank CDs and invest it in Arkansas tax-free muni bonds and a top growth-stock fund.''

BOX:

Bill's investment flier was a flop.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: SHE BRINGS HOME THE BIG MONEY

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: How the Clintons' wealth adds up The Clintons' net worth of nearly $700,000 puts them well up in the top 3% of U.S. households. Roughly two-fifths of their assets are in stocks, bonds and mutual funds -- a fraction financial experts consulted by MONEY described as cautious for a couple in their forties with an adolescent daughter. A conservative 17% is in savings and checking accounts. The couple's debt load is admirably low -- less than 20% of assets.