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Secret Lives of the Average Rich

If you’ve watched the CNBC TV Show “Secret Lives of the Super Rich” one is left with the impression if you are rich you have a 2,000 piece art collection, a room in your mansion for your rare wine collection and a private jet to whisk you to your horse stables…presumably to see your horse that just won the Triple Crown.

The reality continues to be quite different.

The people profiled on Secret Lives of the Super Rich are not members of the 1% or even the 0.1%. Rather, they fall into the rare category of wealth associated with the top 0.01%. As such, although they make lots of headlines they are so unusual it is difficult, if not foolish, to pattern one’s life after theirs in hopes of “winning the lottery.” They are statistical outliers that are not necessarily meaningful to the general population.

Adding fuel to that fire are the politicians and social activists that criticize the seemingly excessive lifestyles of the Super Rich by stereotyping them as representative of all people with a net worth of a million dollars or more. Although a million bucks is a good chunk of change, it is a far cry from a net worth of $100 million or more.

As such, there should be a delineation of the super-rich versus the “average rich.” They are two completely different planets.

Furthermore, the marketers and advertisers of the world are very smart and sly in luring the average person to spend their hard earned cash. Recognizing this, they gear much of their message to the “aspirational” crowd—those that want to look rich.

As such, the message is “if you want to be rich you must own a certain luxury watch, drive a high-end car or be a wine connoisseur.”

This should be a warning to anyone truly serious about wealth accumulation. These advertisements are not there to help you be successful. They are there to steer your spending habits. Without recognizing this, it is very easy to get sucked into the game. In the process you will load up on lots of “stuff” but have little in the bank. These aspirational ads serve to burn your cash and decrease your savings and investments.

Thomas Stanley’s book “Stop Acting Rich…and Start Living Like A Real Millionaire” adds depth to this discussion.

Dr. Stanley’s research has been groundbreaking as it tells a very different story than what the popular press, politicians or celebrities tell us.

According to Dr. Stanley, 70% of millionaires have never owned a boat or yacht. Most millionaires do not own a vacation home.

Conversely, more than 2/3rds of the people who belong to country clubs are not millionaires and 86% of luxury motor vehicles are driven by non-millionaires.

Dr. Stanley offers that the single largest impediment to becoming wealthy is buying an expensive house in a high-end neighborhood. In examining this, it makes sense. A big house costs more to buy. As such, it diverts assets away from investment opportunities.

Furthermore, the purchase price of the house is merely the entry point. You still have to pay property taxes, insurance, utilities, maintenance and upkeep. All of that redirects assets that could be invested.

On the contrary, the “average” millionaire in the U.S. is a self-made entrepreneur or business owner. They live in middle class neighborhoods preferring to drive a Ford or Toyota.

Although they are competitive by nature, the average millionaire lives well below their means. They recognize how important it is to save for a rainy day. Money does not buy them “stuff”, but instead offers the ability to sleep well at night. It is security.

In thinking through this it is helpful to remember the story and legacy of Ronald Read. The part-time janitor died last year leaving behind an $8 million estate. He was frugal, saved, invested and reinvested. He didn’t live in a big house and didn’t succumb to the sales pitches of aspirational ads.

Statistically, he was clearly a member of the 1%, although his annual income was below “average,” at best.

However, politicians would better serve our nation by championing the Ron Reads of the world as opposed to vilifying them. Ronald Read’s story reinforces that anyone who is disciplined and determined can be in control of their financial destiny. 

Originally published June 16 2015, Victoria Advocate