Here are five lessons we strugglers can “learn” from millionaires, according to Liz Pulliam Weston at MSN Money. How are the rich different than the “rest of us?” Let me enumerate the ways:
1. They give away more. Households with more than $500,000 of investible assets give away 6% of their incomes. I’m not sure this statistic has relevance; if we’re talking about 6% of income, we should consider amount of income rather than net worth.
2. They are much more likely to own businesses. This is widely viewed as a better path to passive income than investing in stocks or real estate.
3. They borrow strategically. The rich still borrow money like us “po’ folk” (ie., not millionaires), but they’re only half as likely to have that debt on credit cards. Instead, their debt is concentrated in mortgages—for primary and secondary (or rental) homes.
4. They don’t blow a lot of money on cars. The average value of cars owned by millionares is higher, but this value as a percentage of total net worth is significantly lower for the rich than for the average.
5. They’re almost always homeowners, and many own investment property, too. 95.8% of the top 10% own homes while the average is 67.7%.
So I’m not sure what we can “learn” from these facts as the article suggestions other than the higher the net worth, the more flexibility one has. There’s only so far you can cut back expenses, but the opportunity to grow income is limited only by the individual (theoretically). Maximize your net income after expenses and save what you can, invest what you can, to allow for more flexibility in the future.
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5:54 pm (reply)
This is meaningless.
1. They give away more. —- So, they’ve got more to give away. Bill Gates could probably give away %50 of his gross income every year without impacting his lifestyle. It doesn’t make him a better person, though he might be, it just means that giving doesn’t cost him anything.
2. They are much more likely to own businesses.—- That’s probably how they got to $500k a year in the first place.
3. They borrow strategically.—- They can afford to pay off the credit card balance every month. They can also afford to buy multiple houses.
4. They don’t blow a lot of money on cars. The average value of cars owned by millionares is higher, but this value as a percentage of total net worth is significantly lower for the rich than for the average.—- Duh. They’re rich so of course the “value as a percentage of total net worth is significantly lower”.
5. They’re almost always homeowners—- Really! If I was rich I wouldn’t own a house I’d rent a one-bedroom apartment. That was sarcasm, BTW.
You take any person and hand them a bunch of money and odds are good that within a short period of time they’ll match all those points. If you want to tell me about what I can learn from the rich tell me about how they got rich in the first place. I bet most of them didn’t match many of those points until after they made their money.
PS. This wasn’t meant as a personal attack. I just chanced across this and had to comment.
10:32 pm (reply)
Awfki-
Spend less, make more money and have an attitude of not giving up, failure means nothing but learning.
2:45 am (reply)
Number two strikes home for me, I can’t wait. :)
1:23 pm (reply)
Awki, another way of looking at it is that these people didn’t let lack of money stop them from going after what they wanted. Bill Gates wasn’t Bill Gates 33 years ago. He was a scrawny kid in a basement building computers. Besides, I doubt very much a person who doesn’t give much to charity at 30,000 dollar will give significantly more at 300,000. The only exception being the truly poor, the homeless, who literally have nothing to give. It’s behavioral science. We are set in our behaviors no matter what our net worth and having more or less money will not change that.
2:15 pm (reply)
Awki, I think we’re on the same page. While the article calls these items “things we can learn from the rich,” the only thing we’re learning is that the rich can do things others will find it harder to do.
1:28 am (reply)
I’m just thrilled to think that $500k in investable assets is considered “rich”. Yippee.
5:09 am (reply)
Liz Pulliam Weston at MSN Money is so TOTALLY WRONG about the rich give away more of their money, there is research out there that says otherwise about 10% of the rich give away their money and some don’t, they hold fundraisers to get money to give away some give away a couple thousand to a million they should give away several million a year. More low income or middle class people give more of the money away then rich people do. One Reason: we know what it is like to struggle and it hurts us to see others struggle. I would like to see a rich person buy one katrina family a house and pay for the taxes and other payments that comes with owing a house until the family can pay on their own. If their giving their money away they are doing a really good job of allocating it to charities who need it.
5:12 am (reply)
Oh Yeah! About the buying a Katrina family a house part with no strings attached or no catches either.
4:40 pm (reply)
Hey Dawn! I earn minimum wage (and have student loan debt). How the heck do you expect me to spend less?????