"artifacts" of wealth

I'm reading a book called "The Millionaire Next Door." It was recommended to me by a NUMBER of people....which I find interesting because "so far" I am not quite sure why.

Well -- I don't exactly mean that. I got the book as a "book on tape" (through half.com, for cheap) -- because then I can load it into my MP3 player and take it "with me" in the car/gym/etc. Generally (so far) it is talking about the "differences" between what he calls UAWs (Under Achievers of Wealth) and PAWs (Prodigious Achievers of Wealth).

Interestingly, there is a "Bond grrl" link to all this (in my mind. Then again, there is a Bond grrl link to EVERYTHING in my mind (laugh)). One of the biggest differences between UAWs and PAWs is that PAWs do not "collect artifacts of wealth." What this means is that the surveyed millionaires -- all folks that have socked away $1-10 million in THEIR lifetime, not inherited it, and not including the worth of their house -- they do not have fancy cars, do not "shop for fun," do not have fancy clothes, etc. The #1 car in the group is a Jeep Grand Cherokee (or a Ford F-150). The suits worn are generally from JC Penney (which apparently was written up recently in Forbes has having some of the best cut/wool/etc. suits when done in "blind comparison" to way more expensive brands). They all have budgets. They stick to it. They know where their money is going. They know where their spouse's money is going, and where their kids' money is going. Everyone in the house understands that Frugality is the way to live, because whoever dies with the "best clothes or the most toys" does NOT win -- he who dies with fully funded college programs for his kids, grandkids, etc. and who passes on a "way of living" that will work for these kids DOES win. That person leaves a "legacy."

In the Bond grrl realm, I have said this a number of times -- don't buy for the sake of buying. Trim down -- "travel light." And what you have -- LOVE it and USE it. One of the things that they do is a "per pound" price for automobiles -- millionaires on average pay "$11 per pound" (I think it was) for their cars. (I want to say that in comparison, a Ferrari is about $200/lb -- but I'd have to go back and listen again to be sure that's right.)

One should know how to ACT when faced with caviar, champagne, or ballroom dancing -- but this is not what you eat every day, even if you can "afford it." You take 15% of every paycheck, and put it away in a "wealth account" (assuming all credit cards are paid of course, but we've talked about that before). Plan, plan, plan. Know "how to drive" the Ferrari -- but don't OWN it. PAWs all live in middle class neighborhoods -- and their mortgages don't kill them. Most of them have paid off their houses.

The way to figure out how much wealth you are "supposed to" have accumulated (so if you're a UAW you are under this amount, a PAW you are high above it), is you take your age, divide it by 10, and multiply it by your gross annual income from all sources. So if you're 40, and you make $50,000 gross, that means that 4/10 x 50,000 = you should have $20,000 in stocks/bonds/investments/401k/IRA/whatever (not including your house if you own one, or cars etc. which are not "investments." A house is only an "investment" if it's a ~rental~ and you're the landlord).

Right now, I am at about 1/2 of where I am "supposed" to be (though if you include my house, I'm right at the line). What that means (since I am going to rent my house out) is that "suddenly" by next year, I will be in line -- whereas right now I'm a UAW.

The "budget" thing is king to the writers of this book. I track everything I spend -- but I don't budget per se. I have decided that this will change. I guess part of that is that I'm sick of being "poor" -- meaning, I'm sick of feeling freaked out all the time looking for my next buck. That was the nicest thing when I was an employee -- I knew that every 2 weeks, there would be $. That was bad though too -- because I didn't save that much of it.

The "goal" here is that you have enough wealth, that it kicks out enough "income" for you to be able to live on -- without your "working." That's what retirement really means -- that you have assets that are kicking money out to you, without you "working." A rental property is a perfect example of this -- so long as you are able to pay the mortgage and upkeep on it, then anything "over" that amount is income to you. It's taxable -- but only Federal/State taxes, not Social Security, medicare, self-employment tax, etc. So it's a "better" way to make money than actually "earning" the money.

I read a book about 4 years ago that changed my life -- I wish I had read it in my 20s. It's Rich Dad, Poor Dad. It's a "stupid" book in a way -- easy to read, etc. But it "explains" the whole deal with respect to being an employee, being self-employed, owning a "business" (where the business can run without you), having investments, etc. I wish I had understood what I read in that book a long, long time earlier. I would have gone down a number of different "paths" than the ones I did.

But back to The Millionaire Next Door. They call the "things that rich people are supposed to buy" 'artifacts' of wealth. Meaning -- they are things that "point to" you being wealthy. The super interesting thing is that the ACTUAL wealthy folks -- e.g., folks with over $1 million "in the bank" -- DO NOT buy these things. Who does? It's generally folks that want to "look" wealthy. The authors said that on average, the folks that buy the fancy car, watches, suits, etc. are folks that do NOT actually have $1 million in the bank -- and almost uniformly, they are UAWs. Because when you buy these "artifacts of wealth," you need to keep them up. And you need to buy OTHER "artifacts of wealth" to go WITH them.

One example is that a person buys "too much house" for themselves -- in an upper middle class neighborhood, say, when they really can't afford it. Well, they can't have their beater car in the driveway -- so they need to have a better car. Then they have to furnish it. And the new car needs to be serviced...and not at "Joe's" down the street! And then you can't just wear beat clothes if you're lounging in your rich house....and it goes on and on. Reminds me of the Oprah that's going on now about the Debt Diet. That's how all these folks got started down the Debt Road to Hell.

Apparently the authors found out that the folks who buy these are generally the people who want to SERVICE the wealthy. So for example, a stock broker who wants to attract folks buys the Rolex, fancy suit, flashy car, etc. Even if he can't really "afford" it, and certainly he's generally not putting away 15% of his income towards his own wealth accumulation each year.

The authors say that many, many UAWs seem to want to "cover themselves with artifacts of wealth" because in truth, they have a (very real) fear that they are NOT wealthy -- so they want to "look" wealthy. They pretty much have their heads in the sand. And often, they aren't even crazy about the "artifacts" that they have -- e.g., they are working so hard, they never get to "enjoy" the neighborhood that they have bought into, or the clubs that they have joined, etc.

I can totally relate to this. Right now, I'm feeling the pinch -- as I'm self-employed, I sort of "never know" how much income I am going to have, and for the last 3 months, I have made less than 1/2 of what I "usually" make. (Why this hasn't spurred me to get my *ss in gear and get my house rented, I don't know...probably because my James' daughter is back off her meds and in the house, and I don't like the idea of not having an 'escape' -- who knows, that could be it, even though all my "stuff" is here. ) I haven't heard from my accountant yet, to find out whether I owe taxes or whether I am even or am getting $ back -- but if I owe, there is no $ to pay for it. And my credit cards are once again up -- because though my expenses are very low, with no income, what are you going to do? So the mortgage, gas (oy!), groceries, etc. go on the cards...and after 3 months, I'm looking $8,000 in the face. Ugh.

A lot of crap is going down -- James' daughter being back (and him being truly evil about it -- he does hate her and I can't stand the energy in the house...which means I am not "supportive" -- vicious circle), the lawsuit against me is not ending, I am going thru menopause (don't ask, it sucks), $ is tight, I am eating too much, I'm not working on my book, I'm freaking out about $....so you see! Everyone goes through these sort of times. I was up at 4:00 this morning, staring at the ceiling. Oy!