Are you concerned about your ability to maintain your current financial position? I am. Sure, I have an emergency fund, a significant cash cushion beyond the emergency fund, and steady income.
But I have taken on risk. My long term investments are invested in the stock market which has proven to be more than a little volatile lately. If I needed to access those funds, a market downturn and early withdrawal fees would be damaging.
My income is constantly at risk; at the office, my employer might decide our entire department can be outsourced. My side business income is almost entirely dependent (directly and indirectly) upon the good graces of a certain search engine to provide income-producing visitors.
Thus, I’m not surprised that 78% of working-class millionaires, individuals with steady jobs to earn a living and a net worth between $1 million and $10 million, are also nervous about maintaining their wealth. The main differences between myself and the “working rich” besides my significantly lower net worth are purchasing habits. Though followers of The Millionaire Next Door might disagree, multi-millionaires are consumers of luxury products. I am not. I’m prone to a few luxury items once in a while, but even when doing so, I look for reasonable deals and I’m not swayed by luxury brands.
21% of working-class millionaires have started to cut back their luxury spending, although they will continue to give to charity and provide the best education for their children.
But few are trading down to Target. They’re just buying fewer expensive items than they used to. Middle-class millionaires won’t stop shopping anytime soon. They’ll still be grabbing the tech gadgets they love so much, like BlackBerrys, iPhones, GPS systems, computer accessories and software. Why? Those products, in addition to exuding status, also serve practical needs. They will also go ahead and get nice things for the home, like that big-screen television set or top-grade appliance. And they won’t pinch pennies on education and health care, things they consider to be of prime importance.
Are you concerned that you won’t be able to retain the level of wealth to which you’ve become accustomed?
The Working Rich Are Nervous [Yahoo Finance/Forbes]
Updated February 6, 2012 and originally published February 27, 2008.