Apr 02

Charles Dickens’ David Copperfield was first published in 1908*, and this quote is from that book:

Annual income twenty pounds, annual expenditure nineteen nineteen six,
result happiness. Annual income twenty pounds, annual expenditure
twenty pounds ought and six, result misery.

-Wilkins Micawber in Charles Dickens’ novel David Copperfield

I don’t know if Dr Thomas Stanley, author of Stop Acting Rich, is aware of this quote, but after read his latest book, I suspect he’d agree wholeheartedly with the sentiment.

If you are looking for investment advice, this is not the book for you. Dr Stanley does not offer stock tips or advice on retirement planning. He has spent the better part of the last three decades studying the habits and writing about millionaires. His conclusion is that “most people will never earn enough money to become wealthy and to be hyperconsumers at the same time.” Stop Acting Rich offers examples of how the millionaires Dr Stanley observed lived, and teaches us how to make the distinction between the Income Statement Affluent (IA) and the Balance Sheet Affluent (BA). We see how it’s easy for a doctor earning $250,000/yr to live a lifestyle that has every dollar spent and maybe then some, yet a teacher or engineer whose family income may be ‘just’ in the mid-$100K but living beneath their means, managing to save their way to wealth.

Through the book we are shown brand examples, Timex vs Rolex for the choice of watches for instance. Real millionaires tend to not waste their money on the thousand dollar watches, preferring Seiko or Timex. As a fan of statistics and data, I appreciated the depth of analysis showing the correlation between real wealth and living the glittering rich life with no assets to show for it. In fact, it’s often tough to tell just by looks what someone’s balance sheet looks like. Most rich folk do not own vacation homes, boats, or planes. I recall an interview with Warren Buffet, who trades off year to year for the spot of richest man in the US. Mr Buffet was asked about boats, and he said that he had no interest in them, that when you’re Warren Buffet, you get invited on other people’s boats enough that you can avoid the hassle of maintaining one. He said that he was happy to spend time with his friends in his living room watching the 46 inch plasma TV and eating sandwiches. No champagne, no caviar.

A fair amount of writing is given to the discussion of Grey Goose Vodka and how its purchase correlates to glittering rich. Grey Goose buyers tend to drive prestige makes of cars, wear Rolex watches, drink other high end spirits, and spend more dining out. So as I was reading about this, I checked out my pantry (I don’t have a liquor cabinet) and sure enough, Grey Goose. Last I recalled, we had a bottle of Absolut or Smirnoff in there. I asked my wife if someone brought it over and she told me that the last time her sister was over she asked her what her preferred vodka was. Two thoughts came to mind as I heard this. First, for the bottle that will likely last over a year, $15 or $50 won’t ruin our budget. Second, given the details about how there’s little difference in vodka as it’s known for its lack of taste, my dear sister in law fell for the advertising pitch, and my dear wife, trying to make her sister feel welcome in our home, threw away an extra $20 or $30 to do so.

I enjoyed this book as much as I did prior books in Dr Stanley’s Millionaire series. It helped validate my own choices in cars (Toyota, built in the USA, by the way) watches (Timex) and other purchasing decisions that help keep my family on a path toward a stronger balance sheet. If you’d like to understand what the rich really buy, and wear, and where they go to eat, take some time and read this book, you’ll be surprised.

Joe

*Note: One of my faithful readers, Elle, alerted me that the date was 1850. Thanks Elle, I fact check my finance data a bit better than this. I promise.

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Jan 09

I recently read Richistan, by Robert Frank and found it somewhat entertaining, although maybe not too surprising. Back in September when I wrote “You are Rich!” I talked a bit about U.S. income, and followed up with a post, “But the 400 are Really Rich” which focused more on the world’s poor. Now, in Richistan, I learned that the Richistanis are broken out into three Net Worth ranges:

  • $1 million to $10 million – 7.5 million households
  • $10 million to $100 million – more than 2 million households
  • $100 million to $1 billion – thousands of households

Beyond my amazement regarding this concentration of wealth, I was intrigued by some of the anecdotes this book offered. The middle richistanis don’t consider the lower richistanis rich at all, they are merely affluent. Other stories contained detains of the lives of the middle to upper richistanis, and talked about how many people were employed just to run the households of these people, a hundred in some cases. But just like (some of) the anecdotes of “The Millionaire Next Door” I suspect this book doesn’t necessarily reflect ‘typical’, but those whose stories were most interesting.

I was also reminded of the CNBC interview with Warren Buffet during which he was asked if he had a boat. He replied that he did need one, he had enough invitations to go on the boats of others, he didn’t need the hassle a boat brought, the need for a crew, and all the other headaches. This book had no examples such as this, the people interviewed were from the big spending club.

written by Joe \\ tags: , , ,