Monday, June 15, 2009
Are we truly rich?
I get an email newsletter called Investment University, which is a free publication of The Oxford Club, an investment advisory service. In today’s issue, Investment Director Alexander Green writes about “What It Means to Be Truly Rich.” The part I found particularly interesting described a book that came out a decade ago titled The Millionaire Next Door.
According to Green, the authors spent years studying the lives of “everyday millionaires.” He observes that one out of eight households in the U.S. has a net worth of over a million dollars. Of course that includes bank and investment accounts of everyone in the home, the value of the real estate, automobiles, and any other property held by the occupants.
When you get out a sheet of paper and start writing it all down, you’ll probably find you’re a lot better off than you thought. I just finished that exercise. What I found is that we’re not anywhere close to being a millionaire household. Nor even a half-millionaire family. But we have enough to live comfortably and buy the things we really want and do the things we like to do. It helps that our tastes are simple. For example, we don’t like crowds so had rather watch sports on TV. We enjoy eating out but avoid the more expensive restaurants.
The writers of the millionaire book found seven common traits that distinguished those who successfully built their wealth:
1. They live well below their means.
2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
3. They believe that financial independence is more important than displaying high social status.
4. Their parents did not provide economic outpatient care.
5. Their adult children are economically self-sufficient.
6. They are proficient in targeting market opportunities.
7. They chose the right occupation.
Looking down the list, we were doing fine on the first point until the stock market began its plunge. As for the second, we’re past the wealth-building stage. Preservation of what we have is most important now. We’re right on with number three. And number four.
Regarding number five, we have six children between us, and only one is not self-sufficient. Five out of six ain’t bad. On point number six, I’ve wandered down some dead-end paths on several occasions, but I’m becoming more proficient now.
Finally, for the coup de grace, I’m sure those millionaire households weren’t occupied by mystery novelists. Fortunately, I didn’t really get into mystery writing until after I retired. However, I didn’t choose well enough to achieve millionaire status by that time, either.
Alexander Green concludes the authors “discovered that your net worth is mostly a result of the choices you make.” Since I don’t believe in luck, never having had any, I could have told him that to start with. Anyway, I believe being “truly rich” means knowing how to live life to the fullest with what you have. What’s your take on it?