Thesis: A summary of an in-depth study involving the well-off and the wealthy. Basically, the people with the bling are not really secure and will regret it. Live below your means.
Specific Things to Remember:
- Portrait of a millionaire
- 57 year-old male, married with three children. 70% of us earn 80% or more of our household’s income.
- One in five is retired. 2/3rds are self-imployed. 3/4 who are self employed consider ourselves to be entrepreneurs
- Dull-normal business: welding contractors, pest controllers, etc.
- Half of wives don’t work outside the home or have teacher jobs.
- Total taxable income is $131,000 median, average is $247,000.
- Average household net worth of $3.7 million
- Annual realized income is less than 7 % of new worth
- 97% are homeowners, with an average value of $320,000.
- Did not receive inheritance and are first-gen affluent
- Wear inexpensive suits and drive American-made cars.
- Wives are planners and budgeters. Charity begins at home.
- Have a “go-to-Hell fund” – can live without working for 10 years
- Live in a non-affluent neighborhood
- Fairly well educated with advanced degrees
- Only 17% of us or our spouses attended private school, but 55% of our kids do
- Education is imporant and we spend heavily
- Work between 45-50 hours a week
- Invest nearly 20% of income each year
- 20% of wealth is in stocks and mutual funds
- Daughters are financially handicapped compared to sons
- Tightwad
- Wealthy = mulitply age times salary (pretax), divide by ten. This is what your net worth should be.
- How to be wealthy
- Be frugal, frugal, frugal
- Know exactly how much family spends each year on food, clothing, and shelter
- Spend a lot of time planning your financial future
- To build wealth, minimize your realized income (taxable) and maximize your unrealized income (wealth/capital appreciation without cash flow)
- Never purchase a home that requires a mortgage that is more than twice your household’s total annual realized income.
- Car value goes way down after three years on the road
- Select a CPA by recommendation of a professor of accounting, and look for someone that hired out of college and then started their own accounting firm
- Supporting your kids makes them dependent. Set up a trust fund for education and then give them the balance at 30-40 so it doesn’t set a lifestyle.
- Rules for Affluent Parents and Productive Children
- Never tell your children that their parents are wealthy
- No matter how wealthy you are, teach your children discipline and frugality
- Assure that your children won’t realize you’re affluent until after they have established a mature, disciplined, and adult lifestyle and profession
- Minimize discussions of the items that each child and grandchild will inherit or receive as gifts
- Never give cash or other significant gifts to adult children as part of a negotiation strategy
- Stay out of your adult children’s family matters
- Don’t try to compete with your children
- Always remember that your children are individuals
- Emphasize your children’s achievements, no matter how small, not their or your symbols of success
- Tell your children that there are a lot of things more valuable than money