By Alexander Green In my last column, I discussed New York Times columnist Robert Frank’s book Success and Luck and his claim that there is no real meritocracy in this country.
In his view, what best explains the difference between the economically successful and the economically unsuccessful – the so-called “haves” and “have-nots” – is not education, talent, skills, work habits, persistence, ambition, risk-taking, resilience or grit… but luck.
It’s a dispiriting message. It’s also untrue.
In his book, Frank never addresses the work of Dr. Thomas Stanley, the nation’s most widely recognized authority on the habits and behaviors of high net worth individuals.
Stanley died in a car accident in 2015, unfortunately. But you may be familiar with his many books, including The Millionaire Next Door: The Surprising Secrets of America’s Wealthy.
Stanley didn’t write about wealth for rich people. His goal was to learn how ordinary individuals become financially independent and share what he discovered with the rest of us.
In this, he was spectacularly successful. The Millionaire Next Door – a perennial best-seller – has sold more than 3 million copies.
Sadly, what most people – including Mr. Frank – assume about millionaires is dead wrong.
Many think the rich got that way from family connections or a generous inheritance.
Yet Stanley discovered that the vast majority had no special connections. Approximately 85% of them built their own fortunes. And 68% received no inheritance, gifts, estates and/or trusts.
Many believe that millionaires have advanced degrees from prestigious universities. Some do. But while there is a direct correlation between educational attainment and lifetime earnings in this country, the nation’s most highly educated individuals do not have the highest net worth.
Most millionaires have a college education. But many were dropouts or learned a high-paying technical skill that created opportunities for greater compensation down the road.
People typically assume that most millionaires are business owners. (After all, you can’t get rich working for somebody else, right?) Not so. Stanley discovered that 72% of millionaires in this country do not own a business and are not self-employed.
People tend to believe that the middle and lower classes work far longer hours than the rich do. Wrong again. According to the Census Bureau, 75% of households in the top quintile have two workers. Less than 5% do in the bottom quintile. For every hour worked by a poor household, a rich household works five hours. No quintile works more hours than the richest do.
Most people think the wealthy are big spenders. And, of course, the glittering rich – those with a net worth above the eight-figure mark – often are.
But Stanley discovered that the average millionaire in this country doesn’t own a second home, has never owned a boat, is more likely to wear a Timex than a Rolex, would rather drive a Mazda than a Mercedes, and spends very little on prestige brands and luxury items.
What do they spend their money on? Sporting events, concerts, travel, professional trade association activities, and investment and tax advice.
In other words, they value experiences over “more stuff” – and relationships …read more
Source:: Investment You
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