<< Back to all Blogs
Login or Create your own free blog
Layout:
Home > Wealth != Consumption
 

Wealth != Consumption

September 3rd, 2006 at 01:59 am

I'm about three-quarters through The Millionaire Next Door.

I am so, so glad I read/am reading this book.

There are so many tidbits that I felt in my *gut* to be true, but either wasn't reflected in "conventional" knowledge, or I didn't have the hard evidence to support. This book not only articulated these gut feelings, but also confirmed many of them with the objective analysis of concrete data and statistics.

Take, for instance, the book's definition of wealth:

"Ask the average American to define the term wealthy. Most would give the same definition found in Webster's. Wealthy to them refers to people who have an abundance of material possessions.

"We define wealthy differently. We do not define wealthy, affluent, or rich in terms of material possessions. Many people who display a high-consumption lifestyle have little or no investments, appreciable assets, income-producing assets, common stocks, bonds, private businesses, oil/gas rights, or timber land. Conversely, those people whom we define as being wealthy get much more pleasure from owning substantial amounts of appreciable assets than from displaying a high-consumption lifestyle." (pp. 11-12, my emphasis.)

If you were to ask me what a "rich" person looked like, I probably would have said a person living in a big house (or several houses!), drives expensive car, and wears name-brand designer clothing. Why? Because that's what you see when the media covers the life of the Rich and Famous.

But from the people that I know in person, this is not true at all. My roommate is the perfect example. He looks rich, but is flat broke.

And he constantly mocks (but in a friendly way so I don't take it personally) my frugal tendencies. For instance, one time, he was ooh-ing and aah-ing over a display of watches. My comment was that the only watches I ever owned were bought from street vendors for $20, but now, I don't even have a watch, since my cellphone shows the time beamed from the cell tower.

His response was something along the lines of: "Well, if you just use watches to tell time, then of course that's what you would do. But for me, a watch is a piece of jewelry. That's why I like fancy watches."

(I guess this explains why I also don't care much for jewelry (although I'll admit that they *are* pretty and sparkly). My ears aren't even pierced, and I don't plan on piercing them. Because then I'll have to get earrings, and why would I want to do that?)

He has the same feelings regarding cars. He considers himself a connoisseur, and is proud to drive a big fancy luxury sports car (it has really good acceleration, don't know if that makes it a sports car?) that he bought new. And when he's on the road, he will always comment on the inferiority of the other cars he sees.

I commented that my car will be a small, fuel-efficient, used car that can hold its own on the highway (hey, not crashing to death is worth something, even to me Wink). His response was: "Aw, come on! What if you need a big car? It's better to have that just in case! But I guess that's fine for you--you just see a car as a method of transportation. You'll be perfectly happy with a Honda Civic. But not me."

So imagine my vindication when I read the following:

"It is unfortunate that some people judge others by their choice in foods, beverages, suits, watches, motor vehicles, and such. To them, superior people have excellent tastes in consumer goods. But it is easier to purchase products that denote superiority than to be actually superior in economic achievement. Allocating time and money in the pursuit of looking superior often has a predictable outcome: inferior economic achievement." (p. 28.)

And:

"Most [millionaires] are frugal. And few could have ever supported a high-consumption lifestyle and become millionaires in the same lifetime." (p. 29.)

I think I prefer the >$10K I have in savings over costly status symbols. I can't even tell what's a status symbol and what's not, actually. But I sleep better at night, knowing that I'm not living paycheck to paycheck with precisely zilch in savings.

Oh, and I don't have to worry about being robbed.

I'll continue to write about this book in segments. It's a little much to discuss all at once. But I'm taking notes, so I'll eventually cover everything.

And just as an amusing aside: under Appendix 3, which is a listing of business/occupations of self-employed millionaires, there is one that caught my eye.

BOVINE SEMEN DISTRIBUTOR.

Sorry, I just had to. *guffaw*

8 Responses to “Wealth != Consumption”

  1. LuxLiving Says:

    Do not guffaw! Nah, never I say shalt thou guffaw!! Big Grin
    Take for instance whitetail deer breeders - the semen straws sometimes sell for many thousands of dollars - for those bloodlines are coveted.

    Guffaw!! At some of the exotic auctions - unborn babies bring in bids of $40,000 - $60,000! UNBORN mind you!! The born bring more.

    Not unusual for a single auction day to bring more than $2 million in animals being bought and sold.

  2. drew1980 Says:

    I'm glad you're enjoying that book! My friends love to needle me about my aggressive money saving habits too.

  3. LuckyRobin Says:

    I loved that book and read it several years ago. It really changed the way I look at things like cars and houses. Yes, I still want nice things, but there is a difference between nice and expensive. I will pay for quality, though.

  4. broken arrow Says:

    Forgive me if I didn't read the whole thing. I just wanted to comment that I've never defined wealth in terms of material possessions. However, I do define it in terms of calculated net worth. Seriously, who in the world comes up with the idea that having a large boat or a SUV with shiney rims equates to wealth? I suppose the same people who are financially misguided to being with?

  5. amberfocus Says:

    LuxLiving: My comment was, of course, was meant with all due respect to the bovine (and other species) semen distributors of the world. Wink
    drew1980: Just never tell your friends how much you have. Wink You can tell them how much is in retirement, since you can't touch that, but never reveal how much is in savings. You'll never get away from them once you do!

    LuckyRobin: Yeah, I've always been a fan of practicality. Of course you want a car that drives good, or clothing that won't fall apart, or a TV that looks decent, but quality is different from status symbol. I'm not willing to concede that Honda Civics are inferior cars to [insert luxury, gas-guzzling sports car here]. And clothes don't need to be designer/name-brand to be "quality". I always thought expensive clothes were terribly impractical. What if you spill something on them?? I'd be so stressed out if I had to wear them because I'll be terrified of ruining them!

    Broken Arrow: Well, the popular media likes to define "wealth" as "owns lots of shiny, expensive goodies". And many people internalize that notion. Now that I've read this book, I now wonder how many people that I think look rich actually truly are rich. I know I look frumpy as hell on the outside, but I wonder if I'm actually better off than they are. It's a refreshing perspective.

  6. baselle Says:

    Broken Arrow - its because bright shiny objects (BSOs) bring wealth to the seller of the BSO, not to the buyer of said BSO. People make money when other people spend money. Actually they make more money because they sell BSOs to many people, while you buy a BSO only once.

    Its the same principle that the stockbroker makes money buying and selling stock, not in giving you decent stock advice.

  7. broken arrow Says:

    Well said, baselle. Well said.

  8. T_I_N_A20 Says:

    I read the book a few weeks ago and it changed my life a lot... Now, I look down on people who spend a lot of money on designer items or maybe I was always like that. @.@ Ah well. It did change my perpective on things... I think it changed my spending habit by a lot.

Leave a Reply

(Note: If you were logged in, we could automatically fill in these fields for you.)
*
Will not be published.
   

* Please spell out the number 9.  [ Why? ]

vB Code: You can use these tags: [b] [i] [u] [url] [email]