New millionaires are a curious phenomenon not only here but also in the US. There, this category of millionaires makes up as much as 80%, and only about 20% inherited millions, writes Business Journal.
New American millionaires have become the subject of pragmatic scientific research. An important American principle: if you know someone with money, don't envy or conflict with them, but rather try to earn some yourself, for example, by selling something to the rich person. That is why companies interested in marketing to the wealthiest segments of society pay for detailed studies of millionaires' behavior and habits.
After many years of studying American millionaires, two researchers, Thomas Stanley and William Danko, published the results of their research in 1996. Their book "The Millionaire Next Door" instantly became a bestseller and has remained so for many years. It seems the authors know absolutely everything about the average American millionaire: how old he is, where he works, how many marriages he has had, how often he gives gifts, where he lives and how he vacations, how much he spends on all kinds of goods and services. In principle, most of us (like Americans) have our own image of a millionaire: someone who spends a lot, lives beautifully, and often pulls off all sorts of schemes. But most importantly, all millionaires live some special, isolated life.
However, everything we might think about American millionaires is usually wrong.
Behavior of millionaires
One of the stories cited in the aforementioned edition is metaphorical for the entire book. Its authors, two doctors of science, T. Stanley and W. Danko, received money to conduct a study of millionaires' habits, including interviewing them. The researchers began inviting small groups of millionaires to prestigious halls to discuss their habits and consumer preferences. At these gatherings, guests were fed heartily and even paid $100-250 per meeting for participation!
The first meeting took place in one of the fashionable halls of New York, where a group of nine respondents was invited, each with a personal fortune of at least $10 million. In order not to offend the delicate feelings of the millionaires, a catering company (providing off-site food service) was hired to supply snacks and drinks - naturally, the best collectible wines were chosen!
The first to arrive was the owner of insanely expensive real estate in New York, a first-generation millionaire aged 69. Offered a glass of expensive wine (Bordeaux 1970), he immediately replied: "I only drink scotch and two kinds of beer: free and Budweiser." In any case, by the end of the event, to the organizers' utter amazement, it turned out the luxurious food and exquisite wines remained untouched. The millionaires, meanwhile, gravitated to the simplest foods and drinks. Of course, the expensive delicacies and drinks did not go to waste; they were consumed by the event organizers, who had a taste for treats. But, as the book's authors melancholically note, none of those who appreciated this food were millionaires. Later, such meetings began to serve ordinary sandwiches, coffee, beer, and scotch.
This story illustrates the book's main theme: American millionaires are frugal and undemanding to the point of being anecdotal. They think not about living beautifully, but about living without need throughout their lives.
Conclusion: rich people have no need to show off their wealth. They already know they are rich! Meanwhile, people who don't have big money try hard to look respectable and would very much like to appear successful. However, demonstrative spending on a luxurious life, in turn, reduces the likelihood of accumulating wealth and certainly does not contribute to its growth. As the book's authors recall, in many cases at meetings with millionaires, it was the salaried consultants who wore the most expensive suits, not the invited rich people.
The main habit
According to studies of American millionaires' habits, their main principle is thrift. The statistics in the book show that half of millionaires have never paid more than $399 for a suit, $140 for a pair of shoes, and $235 for a wristwatch. The same statistics reveal in detail the spending structure of American rich people. Specifically, the most frugal of them (about 10%) have never spent more than $195 on a suit, $73 on a pair of shoes, and $47 on a wristwatch. The authors also studied in detail the car fleet at millionaires' disposal. It turned out that 50% of them bought their last car for no more than $24,800 and never bought one for more than $29,000. Meanwhile, 20% of millionaires have never bought a car for more than $20,000. And most of them drive fairly traditional, by no means prestigious cars, while more than a third of millionaires have a persistent penchant for used cars.
The book's authors note that for some reason all these curious statistics do not make headlines and do not reach the press, which adores exotic stories about someone like Don King, the sports manager who bought 110 pairs of shoes in a single shopping trip, spending $64,000. Such stories instantly become public knowledge, yet it turns out that this is by no means the dominant style of behavior!
The image of money-squandering millionaires is nothing more than a marketing ploy designed to make the average person pay for expensive goods, justifying these expenses by a "correct" lifestyle.
By the way, so as not to offend respondents by offering them money due for interviews, researchers suggested they contribute these funds to charitable foundations specified by the millionaires themselves. However, a typical answer was: “My favorite charity is myself!” Finally, the main principle of wealth promoted by most millionaires is this: regardless of the size of earnings, expenses should always be less than income.
Why they are modest
There are relatively many millionaires in the USA. 3.5% of households (families) own personal wealth exceeding $1 million. And, as already noted, more than 80% of them are first-generation millionaires. And yet, why are they modest?
Most new millionaires make their fortunes in the most traditional and not necessarily prestigious industries: cleaning business, office renovation, road work, veterinary medicine, taxi and passenger transportation. Such people do not need to dress expensively or ride in luxury cars. And sometimes it is simply harmful, unless you don't care what your employees think of you. Finally, representatives of truly public professions - athletes or lawyers - constitute a clear minority in this group of wealthy Americans. By the way, people who run their own business independently make up 20% of all working Americans. But among American millionaires, those who work on their own, rolling up their sleeves, are more than two thirds!
It is interesting that first-generation Americans appear to be especially successful. They are not inclined to spend as much on prestigious goods as native Americans. And they think much more about a secure old age. In the USA, 12% of owners of companies included in the list of the 500 most successful enterprises of Inc. magazine (by the way, a publication for small and medium businesses) are first-generation Americans, i.e. born outside the USA (which, incidentally, roughly corresponds to the proportion of new Americans). In addition, the authors of the book found that in millionaire families (and 95% of them are married) spouses, as a rule, are also frugal. As one of them remarked, “I cannot make my wife spend money!”
One of the conclusions: millionaires become heads of families where there is not only a strict family budget, but also strict control of expenses. And two thirds of the surveyed respondents said that when planning their financial future, they “spend a lot of time.”
The portrait of an average millionaire turned out to be like this. He is a 57-year-old man. Married, with three children. About half of millionaires' wives work. The most popular profession is teacher. 97% of families own their own homes with an average value of $320,000 (according to data up to 1996). 20% of American millionaires never attended university, 6% have a doctoral degree, 8% have a law degree, 6% have a medical education.
Seven rules
Here are seven main habits of American millionaires discovered by Thomas Stanley and William Danko as a result of the study: living expenses should not exceed income levels; time, energy and resources should be used effectively to achieve greater wealth; financial independence is more important than demonstrating high social status; people become millionaires without the help of parents; millionaires' children are economically independent from them; millionaires skillfully use opportunities of the market economy; they choose the right types of activity.
Ethnography
An interesting part of the research is devoted to analyzing the composition of millionaires by such a criterion as country of origin. It is clear that in most cases ethnic origin turned out to be mixed, so the answers mainly reduced to self-identification, showing how the millionaires themselves view their origin, rather than actual genealogy. (Incidentally, this is why in the USA almost 20% of families consider themselves to be of German descent and only 10% - from England (without Ireland and Scotland), although all this is nothing more than a tradition passed from generation to generation.)
People from Russia make up only 6% of the total number of American millionaires. But more than 22% of them became millionaires (recall that the average percentage of millionaires in the USA is 3.5, i.e. on average, people from Russia become millionaires six times more often than Americans). This is the highest rate among all ethnic groups in the USA. Of course, many reservations need to be made here, starting with the fact that the data given in the book dates back to 1997. In addition, the ethnic composition of people from Russia is not at all limited to Russians, because Russia is a multinational state, and often it was precisely representatives of minorities who immigrated - Jews or Armenians.
Not to spend, but to invest!
Okay, American millionaires live modestly. But then how do they use their funds? The answer is simple. Instead of spending money on themselves, people who have become millionaires invest money. On average, each year an American millionaire invests about 20% of his income. 79% of millionaires have an account with at least one brokerage firm. At the same time, more than 20% of wealth is tied to shares of their own firms. In total, American millionaires have so much money that they can, without changing their habits, live 12 years without working. However, more than two thirds of them work diligently - from 45 to 55 hours a week.
However, millionaires not only invest money, but of course also receive income from investments. So, the average level of family income in half of cases is $131,000 with total wealth of $1.6 million.
As shown by the research of Stanley and Danko, the most frugal and efficient turn out to be the Scots. Judge for yourself. The income of 60% of millionaire families of Scottish descent is less than $100,000 per year. This is the lowest income level among all ethnic groups of millionaires. But how do Scots become millionaires with such incomes? The thing is that a typical Scottish family with an annual income of $100,000 lives the same way as an average American family with an income of $85,000. However, Scots with a family income of $100,000 invest as much as American families with an income of $150,000. Simply put, it is successful investments that make Scots rich.
Well, never mind. We will learn too.