The Wealthy – Maybe not Who You Think They Are
Sue often tells me that her father used to say to her, “It’s not how much you’re able to spend; it’s how much you’re able to save.” I’m thinking about that as I watch the race to the finish line…otherwise known as the last minute Christmas shoppers frantically jamming my local mall’s parking lot each night as I drive home. As I watch the mad dash become crazier leading up to December 25th, I wonder how many people are simply making life more difficult for themselves after the holidays are over (bills, bills, and more bills).
It also has intensified some thoughts I’ve been having lately about legacy givers and others with the means to make truly meaningful gifts.
The results of how the wealthy got that way may surprise you.
Most people think they know how the truly rich became well, truly rich. They cite inheritance, an advanced degree, and winning the lottery as leading indicators. According to a book I’ve been reading, The Millionaire Next Door, it’s hard work, diligent savings, and frugal living that do the trick.
The book states that wealth and income are not one and the same. Those who enjoy high incomes are not necessarily growing wealthier due to how much they spend. And when you spend that means you’re consuming rather than accumulating. Those who save, invest, and work for themselves are much more likely to accumulate significant wealth.
The Millionaire Next Door suggests the following characterisitcs of millionaires:
they live below their means
they devote time, time, energy and money to building their wealth
they believe that financial independence is more important than high social status
they receive no ongoing financial support frpom their parents
they raise self-sufficient children
they take advantage of stock market opportunities
they choose the right occupation.
Today, most millionaires don’t reach this status until they reach the age of 50 or so. And, according to the authors, these individuals would never have accumulated their wealth had they lived a high-consumption lifestyle.
In other words, most millionaires are disciplined. They’re more likely to wear Timex watches than Rolexes. They’re much more likely to drive a Mercury rather than a Mercedes, and shop at JC Penney rather than Brooks Brothers. Credit cards? Look in their wallet or purse and you’ll probaly see a Sears card rather than an American Express Platinum.
The majority of these “wealthies” tend to buy and hold on to rather than actively trade securities. They are not risk takers. Almost half made no trades in their stock portfolios in the last year, according to The Millionaire Next Door.
So, remember wealth may not always be where it seems to be. Many who you might consider to be of high income are also high consumers, resulting in minimal accumulated wealth.
From a planned gift point of view, the retired school teacher or mail carrier with $1 million in assets usually makes a better prospect than the physician or lawyer who may own two foreign cars, two homes, two mortgages, and have 2 or more families to support.
Takeaway: Look for prospects “next door” (your existing donors) rather than from lists of persons who drive expensive cars or live in homes with fireplaces in every room or other outward signs of wealth.
How about you? Please share any tricks you’ve been able to pick up on spotting the wealthy in places you wouldn’t automatically think to look.