Interesting facts about millionaires

[disneysteve]

MONEY magazine had a recent cover story about "How to get to $1 million". One feature in that issue was some general stats about America's millionaires. It basically reiterate stuff we always talk about and things that were written about back in The Millionaire Next Door more than 20 years ago.

The things I'm listing are for the group with a net worth of $1 million to $5 million. They also gave stats for the over-$5 million group but I don't think that's as relevant to most people here.

Only 10% spent more than 25K on cars in the past year.
- The most we've ever paid for a car was 26K. My current car was 16K and my wife's was 21K. This is a huge factor in us building the wealth we have.

Only 5% spent more than $5,000 on entertainment in the past year.

Only 4% spent more than $5,000 on jewelry in the past year.

55% of net worth is investment assets.
16% is primary residence.
6% is investment real estate.
2% is privately held businesses.
- I think this is really important to highlight. Many people seem to think that the only way to get rich is to own your own business or build a portfolio of rental properties. The reality is that that is NOT how most people get rich. Most people do it by working hard at their jobs, living below their means, and saving and investing wisely. That's certainly how my wife and I have done it.

Oh, and the median annual income is $125,000. Primary sources of that income are salary from employer (27%), investments (24%), and pension/retirement plans/SS (31%).

[phantom]

Thanks for sharing the numbers! It's nice to see some recent data.

55% of net worth is investment assets.
16% is primary residence.
8% is investment real estate.
2% is privately held businesses.

That's 81%. Where's the other 19%? Cash, cars, and collectables?

[disneysteve]

Thanks for sharing the numbers! It's nice to see some recent data.


That's 81%. Where's the other 19%? Cash, cars, and collectables?

Sorry. I was just summarizing so I didn't include the full list.

55% investable assets
16% primary residence
12% defined contribution accounts
8% insurance, annuities
6% investment real estate (I corrected that number in my original post)
2% privately held businesses

I realize that only adds up to 99% but that's what they printed. I'm assuming that's a rounding issue.

[snafu]

Thanks for the income/spending by current $ 1m - $5m outline. I'd like to know averages for travel, gifting and charity/giving.

I've always found it helpful to use spending percentages to help me understand what is reasonable[rule of thumb] for 'named' spending categories. Car sales staff repetitively ask what you can manage as a monthly payments. The bankers/loan officers and realtors always manipulate clients towards housing that brush against their top eligible category. It always surprised me that mortgages were given for 105% of buying price so buyer could afford their moving costs, utility hook ups etc. Almost understandable since commissions are based on sell price; supervisor's bonus totally dependent on cumulative numbers of their subset.

[disneysteve]

Thanks for the income/spending by current $ 1m - $5m outline. I'd like to know averages for travel, gifting and charity/giving.

The article said that 19% spent more than 10K on travel, so 81% spent under that.
18% spent more than 5K on charity, so 82% spent less.

There wasn't a figure given for gifting.

[Gailete]

MONEY magazine had a recent cover story about "How to get to $1 million". One feature in that issue was some general stats about America's millionaires. It basically reiterate stuff we always talk about and things that were written about back in The Millionaire Next Door more than 20 years ago.

The things I'm listing are for the group with a net worth of $1 million to $5 million. They also gave stats for the over-$5 million group but I don't think that's as relevant to most people here.

Only 10% spent more than 25K on cars in the past year. Check
- The most we've ever paid for a car was 26K. My current car was 16K and my wife's was 21K. This is a huge factor in us building the wealth we have.

Only 5% spent more than $5,000 on entertainment in the past year. Check

Only 4% spent more than $5,000 on jewelry in the past year. Check - haven't spend that much on jewelry in my whole life!

55% of net worth is investment assets.
16% is primary residence.
6% is investment real estate.
2% is privately held businesses.
- I think this is really important to highlight. Many people seem to think that the only way to get rich is to own your own business or build a portfolio of rental properties. The reality is that that is NOT how most people get rich. Most people do it by working hard at their jobs, living below their means, and saving and investing wisely. That's certainly how my wife and I have done it.

Oh, and the median annual income is $125,000. Primary sources of that income are salary from employer (27%), investments (24%), and pension/retirement plans/SS (31%). Currently in the SS/pension/small business

Just starting our taxes so don't know what our annual income was for last year. I do know I have never been anywhere near that kind of annual income. Of course we are no where near a million in assets, but glad to know that we are doing something right! From some surfing I just did, it is hard to find what most Americans have in savings, but finally hit on one number - LESS than $1000. Others in my age bracket, most have less than we do saved. I doubt we will ever hit that magic million mark, but still working on pulling together the most we can.

[myrdale]

I have a friend who is a carpenter. He is currently working on remodeling a home for a very wealthy guy.

My friend told me he was working building in wall shelving for this guys library. I told my friend that prolific reading was one of the traits of extremely successful people.

I then told him that I would bet him lunch that this guy had a biography on Abraham Lincoln, among a couple of others. He refused the bet as he had already seen two of names which I had listed while packing the books into temporary storage.

I am not suggesting that reading about Lincoln will make you successful or rich, but it seems to be one of those common traits.

[TexasHusker]

If you define “rich” as someone with net worth of one $ million, certainly the vast majority of those folks are mutual fund / 401K people. By the world’s standards, that is insanely rich for sure.

But if you define rich as someone worth 10, 20, 30 million or more. they almost certainly didn’t get there via a mutual fund account or buying cheap cars.

I don’t soar with such eagles, but I do have friends and acquaintances who are worth anywhere from $50 million to one fellow who is reportedly now worth over 1 $ billion. He’s an acquaintance.

Everyone in this class is a business founder / owner.

One owns a chain of over 100’convenience stores
One is founder/CEO of group of car dealerships
One founded a pharmacy benefit co. and recently sold out for $800 mil.
One founded a third party administration firm
One is a cardiologist but who got rich off of real estate deals - primarily land deals.
One owns a large insurance and risk mgt group.

A fellow whom I count as my best friend is probably in the $50-60 mil range, who was making $30K a year in 1997. He now works in a large building that bears his last name. He owns serveral businesses that employ probably 200 folks across the country. He drives a Highlander but he could afford anything he wanted. He does own a $2 million lodge in Breckenridge CO and a jet.

I’m dealing with pennies. These guys are dealing with dollars.

[SavingSteve]

Only 10% spent more than 25K on cars in the past year.

Yes but this is 10% of Millionaires not car buyers in the past year, correct? It makes me wonder what percent of car buyers paid more than 25K. This number might be very different.

[Gailete]

If you define “rich” as someone with net worth of one $ million

I guess I define 'rich' very differently than you. If someone has ALL their needs met with plenty left over for wants, if they have at least one or two good friends, family members that love each, and something worthwhile to do daily, then they are rich and need nothing else.

At times I have thought of what I would do it suddenly found myself in the billion range. What would I do with it all? Most likely I would give away a good 95% of it to my church and charitable causes I believe in, holding back enough so that our needs are met and we can hire people to do those things for us that we can't. I've also thought it would be wonderful to be able to pay the costs of running our school district for a year or two, which would allow the community to not to have to pay those taxes for those years, and they could have some catch up, breathing space for awhile in their finances.

I guess I have never aspired to be super rich, I have better things I would like to be doing with my time and it doesn't include trying to evade taxes, buying expensive stuff because I'm 'expected to and the like.

[TexasHusker]

I guess I define 'rich' very differently than you. If someone has ALL their needs met with plenty left over for wants, if they have at least one or two good friends, family members that love each, and something worthwhile to do daily, then they are rich and need nothing else.

At times I have thought of what I would do it suddenly found myself in the billion range. What would I do with it all? Most likely I would give away a good 95% of it to my church and charitable causes I believe in, holding back enough so that our needs are met and we can hire people to do those things for us that we can't. I've also thought it would be wonderful to be able to pay the costs of running our school district for a year or two, which would allow the community to not to have to pay those taxes for those years, and they could have some catch up, breathing space for awhile in their finances.

I guess I have never aspired to be super rich, I have better things I would like to be doing with my time and it doesn't include trying to evade taxes, buying expensive stuff because I'm 'expected to and the like.

I guess I didn’t realize I defined what i think “rich” is in my post. And your judgement and stereotyping of people who have
more than you is offensive. Is that what they teach you at your church?

My point was, rich is a subjective term. A homeless man might consider himself rich with 100 dollars in his pocket.

If your definition of rich is $100K, $500K, or even $1 million, Disney is right - you can get there by pinching pennies and having a 401K plan.

As s side note, EVERYONE who invests in equity mutual funds is a business owner. You own tiny fractions of many companies. Because the ownership is fractured into hundreds of companies, the return is necessarily then single digits, and maybe double some years.

The business owner is often putting the entirety of his energies and wealth into a SINGLE company - his own. If the company is successful, the returns are phenomenal. If the company fails, he’s starting over again.

The super rich almost always took great risk at least one time, if not multiple times, and hit the jackpot at some point.

That said, people that are “super rich” as you put it might or might not be greedy. They might or might not have aspired to be wealthy. Many just wanted to have a successful business to feed their families. My best friend is the most generous person that i know. He’s donated to schools he didn’t attend, churches he doesn’t attend, bankrupt community events that needed cash, a $1 million donation to help our city secure a minor league baseball team, women’s shelters - you name it - and always anonymously.

In his case, he didn’t aspire to be rich, evade taxes, or have nice stuff: He was LAID OFF from his $30K a year job in 1997. He had a junker car. I gave him a lift home several times because the car was broken. He sold his family’s 3BR house after he lost his job to raise cash to try to make it on his own.

[JoeP]

We met with our financial advisor who ran some numbers based on projected costs and what we'll be getting from our retirement funds, and we all came to the conclusion that we may find it difficult to invent ways to spend it all. As it is now, we don't spend a lot on what we consider frivolous items (jewelry, new or expensive/luxury cars, casinos, yearly trips, going out for dinners), and even if all kinds of money was suddenly available, I doubt our spending habits would change all that much. We plan on downsizing and moving to a location with lower COL anyway.

So you know, the 2 biggest easy ways we got to where we are can be boiled down to: low exposure to debt, early start with large pre-tax into retirement accounts.

I know quite a number of people who have the equivalent of an extra mortgage having 2-3 car loans plus all the expenses of cell phone (esp Verizon), cable/satellite, gym, and small recurring expenses.

[TexasHusker]

Duplicate

[disneysteve]

If you define “rich” as someone with net worth of one $ million, certainly the vast majority of those folks are mutual fund / 401K people. By the world’s standards, that is insanely rich for sure.

But if you define rich as someone worth 10, 20, 30 million or more. they almost certainly didn’t get there via a mutual fund account or buying cheap cars.

I think that's generally true, but that's an entirely different topic than what this article was addressing.

A net worth of $5 million, the top range that my stats were about, puts you in the top 2-3% of the population. As noted, the article also gave stats about the over-$5 million crowd but that's not what I was talking about. My point, and MONEY's point, is that "regular" folks can and do join the millionaire's club. I believe the number of millionaire's in the US is currently somewhere around 11 million people. It's a pretty big group. Yes, most of them are in the $1-5 million range. Only a select few are in the range you're talking about.

[disneysteve]

I guess I define 'rich' very differently than you. If someone has ALL their needs met with plenty left over for wants, if they have at least one or two good friends, family members that love each, and something worthwhile to do daily, then they are rich and need nothing else.

Obviously, we're talking about financial wealth here, not spiritual wealth.

At times I have thought of what I would do it suddenly found myself in the billion range. What would I do with it all? Most likely I would give away a good 95% of it to my church and charitable causes I believe in, holding back enough so that our needs are met and we can hire people to do those things for us that we can't.

I think that's exactly what many of the uber-rich do. Philanthropy is definitely a major focus of the rich whether it is supporting existing charities or starting ones of their own, funding the arts, sciences, community groups, education resources, etc. Look how many colleges have buildings or entire departments that carry the name of a big donor, and sometimes the entire school carries their name. Some are household names like Bates or Buffet or Zuckerberg or Rockefeller but many are people you've probably never heard of who hit it big and gave much of it back to help others.

I guess I have never aspired to be super rich, I have better things I would like to be doing with my time and it doesn't include trying to evade taxes, buying expensive stuff because I'm 'expected to and the like.

I don't agree with the stereotyping here. I've often been a victim of that mindset with people thinking I should live a certain way or drive a certain car or wear certain clothes because I'm a doctor so I must be rich. I actually had a patient question why I was driving a Camry and not a luxury vehicle.

The rich are no different than anyone else. There are regular folks who are jerks and stingy with their money and there are wealthy folks who are the nicest, most down to earth, generous people you'd ever want to meet. In fact, I find the people who became wealthy on their own (not inherited) tend to be some of the most grounded and appreciative people around.