Secrets of the Wealthy

Secrets of the Wealthy: The Ways and Economics of Millionaires in the U.S.

By Dr. Mark Skousen, Chairman, Investment U
Friday, November 25, 2005: Issue #489

“The rich are different from you and me.” - F. Scott Fitzgerald

“Yes, they have more money.” - Ernest Hemingway

Several years ago, I had a chance to jog with President Clinton on the beaches of San Diego. One of the things we talked about was the need for a reduction in the capital gains tax to encourage investing. Clinton’s support for tax relief for investors was one reason we enjoyed a roaring bull market in the 1990s.

But, I did take the opportunity to object to President Clinton’s attacks on the wealthy during his presidential campaign, wherein he frequently said, “The rich don’t pay their fair share of taxes.” Politicians and the media love to take potshots at the well-to-do. Hollywood producers delight in portraying the rich as big spenders who use drugs, engage in white-collar crime, avoid taxes and dump their companions in favor of trophy wives.

Thomas J. Stanley, former professor of marketing at Georgia State University, shows that the critics of capitalism are dead wrong. Stanley, you may recall, is the author of a bestseller, The Millionaire Next Door. In his more recent book, The Millionaire Mind, he demonstrates that most millionaires are model citizens. We can get an understanding of some of today’s secrets of the wealthy by looking at the results of his survey, which studied more than 1,000 people who earn $1,000,000 a year or more…

Secrets of the Wealthy: What Many Millionaires Have in Common

They live far below their means, and have little or no debt. Most pay off their credit cards every month; 40% have no home mortgage at all.
Many of the wealthy people in Stanley’s survey are frugal; they prepare shopping lists, resole their shoes, and save a lot of money; but they are not misers.
97% are homeowners; they tend to live in fine homes in older neighborhoods. (Only 27% have built their “dream home.”)
92% are married; only 2% are currently divorced. Millionaire couples have less than one-third the divorce rate of non-millionaire couples. The typical couple in the millionaire group has been married for 28 years, and has three children. Nearly 50% of the wives of the super-rich do not work outside the home.
Most are first-generation millionaires who became wealthy as business owners or executives; most did not inherit their wealth.
90% are college graduates, and 52% hold advanced degrees; however, few graduated top of their class - most were “B” students. They learned two lessons from college: discipline and tenacity.
Most live balanced lives; they are not workaholics; 93% listed socializing with family members as their #1 activity; 45% play golf. (Stanley didn’t survey whether they were avid book readers, but I suspect that many are.)
52% attend church at least once a month; 37% consider themselves very religious.
A large percentage of the wealthy persons surveyed in the study share five secret ingredients to success: integrity, discipline, social skills, a supportive spouse, and hard work.
They contribute heavily to charity, church and community activities (64%).
Their #1 worry: Taxes! Their average annual federal tax bill: $300,000. The top one-tenth of 1% of U.S. income earners pays 14.7% of all income taxes collected.
Not one of the wealthy 1,000-plus millionaires had anything nice to say about gambling. OK…on the flip side, his survey also showed that 33% played the lottery at least once during the year.

It’s not a stretch to surmise that the wealthy/upper-income families of this nation are not the ones contributing to crime, welfare, divorce, child abuse and a spendthrift society. But they are paying a lot of taxes and making a lot of contributions to solve these social problems.

Although Stanley did not cover this issue, I’ve also seen studies indicating that higher-income individuals live longer - five to 10 years longer than the average American (76 years), and they enjoy better health, fitness and quality of life.

So on this Thanksgiving, I say, instead of bashing the rich, let’s salute wealth and the many contributions it creates! If indeed the wealthy are such good citizens, as Stanley’s work suggests, our mission should be to make everyone rich by sharing the secrets of what got them there! That’s our goal at Investment U.

Good trading, AEIOU,

Mark

P.S. In compiling my upcoming book The Compleated Autobiography by Benjamin Franklin, I have come across a delightful new account of the First Thanksgiving written by Ben Franklin in 1785. In the spirit of this column, I urge you to read it here.

Today’s Investment U Cribsheet

The 2005 Benny Award Voting Deadline is Fast Approaching! The winner will receive $10,000 to make a charitable donation. Investment U # 486 has all the details on Investment U’s new annual award. Let us know who YOU think deserves to win by responding to editor @ www.investmentu.com before December 1. We’ll announce this year’s winner in February.