Choose: High Income Or High Net Worth?

Robert Neubecker

Years ago one of the books that made a big impact on me was Thomas J Stanley's The Millionaire Next Door, a study of what really affluent people actually do and how they live. And it found a lot of surprises.  Often those who look the most affluent by their purchases and appearances - are not at all.

The difference between high income and high net worth is an important distinction to make. 

You probably know people who have had jobs with big money coming in, buy all the toys and then when the economy tightens and they are laid off, are in dire straights.

This illustrates the point quite well. It also reminds us that we need to verify the logic behind numbers and statistics that are in the articles we read.

"I estimate that there are 2.5 million households or nearly 2.2% of the total that have annual realized incomes of $250,000 or more.  Using Ms. Muller's estimates that 39% of "the rich" buy luxury brands, one can estimate the number who do so, approximately 975,000.  Ah, but this population is much smaller than those households who drive prestige makes but have annual incomes under $100,000.

About 30 million households have annual incomes in the $50,000 to under $100,000 bracket alone.  Translated:  8% of 30 million = 2.4 million who are buying luxury cars but are not in the so-called "rich" category.  This population is nearly 2.5 times the size of the high income/luxury vehicle buyer."

Which leads to the really important question...

"Could it be that it is the pseudo affluent, the aspirationals, who are keeping the manufacturers of prestige makes of motor vehicles in business?"   You can find the article this is from here. 


Sadly  Thomas J. Stanley, at age 71, died in March 2015 in a car crash.

He used research to smash the stereotype that being wealthy meant looking wealthy. On the contrary, his works said: Self-made millionaires — the real deal, not the wannabes — are much more likely to be frugal and spurn spending for show. More ...

As for the people showing off the bling? “It’s the neurotic middle-class,” he said in a 1991 interview with the Atlanta Journal-Constitution. Or the millionaires’ children."

More on Thomas J Stanley 

Paying Tribute to Thomas Stanley and His ‘Millionaire Next Door’ - New York Times

Remembering Thomas J. Stanley, who redefined what it means to be rich - Washington Post