I should hope it is an insignificant amount if we’re talking about someone who can afford a fancy car that comes with a high-compression engine, but if you believe what Stanley and Danko say in their book The Millionaire Next Door, the person we’re talking about is likely to be a UAW (Under Accumulator of Wealth) rather than a PAW (Prodigious Accumulator of Wealth). UAWs drive fancier cars and tend to live paycheck-to-paycheck, so spending an extra $8/week, or $32/month, might mean paying the water bill with a credit card instead of a check, which isn’t sustainable.
I’m sure you’re an exception to Stanley and Danko’s findings, but chances are, if you consider $32/month insignificant, you’re probably not driving a fancy car to begin with, unless you’re a statistical outlier, being a PAW who drives a fancy car, and if you are, good for you.
There’s a somewhat newer view that points out there are two types of rich people. There’s the mega-wealthy, and then there’s the moderately-rich. Mega-wealthy people tend to underspend. Bill Gates famously daily drives cars like Civics and Ford Focuses. Sure, he’s also got a 959 that he pulls out for fun, but for the day to day stuff he doesn’t feel the need to show off by buying a high-dollar car. This is a guy who’s worth more than $100 billion, but he feels no need to boast about it.
Meanwhile, the moderately-rich (worth a million or a little more) tend to get a new BMW every couple of years. They want people to know they’re rich, and they’re willing to spend the coin to do it.
“The Millionaire Next Door” would disagree with these categories, and so do I. There are prodigious spenders at all wealth levels, and I know there are many ‘moderately rich’ folks that don’t spend like crazy.
I’m under no particular obligation to exclusively agree with “The Millionaire Next Door.” It’s no more or less anecdotal than any other “here’s what some rich people we examined do” book.
I haven’t finished reading the book yet, but the sample size in The Millionaire Next Door seems too large to be considered mere anecdote. A brief look at the appendix of my copy of the first edition suggests their research went well beyond anecdote.
The important distinction is that Stanley and Danko measure wealth based on net worth, using a formula that is based on your age and income, not your lifestyle or income alone. Based on their formula, people who spend money for show tend to be under-invested, and have a net worth that is proportionally low compared to their income and age.
Ehh, I don’t know which I am. I drive a 13 year old Chevrolet. My wife drives a 2018 Cadillac. We spend more than we should yet save and plan for the future. I fully expect to work into my 70s, as much by necessity as choice.
I also see no need to wait until I’m a senior citizen to enjoy life. My wife and I work too hard not to travel, live in a nice home, and have a nice car. Saving money is nice, so is walking on the Acropolis, seeing the pyramids, and watching the sunset on a beach in Thailand.
Larry Ellison is one of those mega rich, and he flaunts it. Over the top flaunting. Ellison is actually an abnormality because he got his wealth from Tech. Tech Billionaires don’t seem to flaunt their wealth as much as Wall-Street Billionaires.
BTW…having a couple million dollars does NOT make you rich. It makes you comfortable so you don’t have to worry about too much. And it’s not that difficult to get there if you’re careful with your money. It’s not how much you make, but how much you spend.
Trumpypoo flaunting is unparalleled…Although he’s probably not a billionaire yet. He just pretends to be one.
Gates can go anywhere in a Focus, but if he drove an expensive car, even one that isn’t unique, like a Benz S550, people might pay attention. He is recognizable enough that the Benz might put a target on his back. No one would imagine the real Bill Gates would drive an inexpensive compact car. Must be his doppelgänger.
Ex CEO and founder of Digital Equipment was also on the Board for Ford. As a board member he was given a vehicle of his choice to drive. While other Board members were getting Lincolns, Ken wanted a Ford Escort.
CNBC says Buffet drives a 2014 Cadillac XTS, replacing a 2006 Cadillac DTS. The article was published on Sept 17, 2017. Still a modest vehicle considering his net worth.
Lets not forget the footballers who get millions of dollars a year playing with balls for a living that will spend their entire salary on flashy cars, huge mansions and then be broke once their careers are over.
They are such a small group of statistical outliers that I don’t see the point of focusing any attention on them. Like the lottery winners who take the lump sum payout, most of them will die as poor or as wealthy as they were born. In both cases, these are tragic tales of squandered wealth that should have been enough to sustain a lifetime.
I have sympathy for them. People like Darry Talley, who sustained brain trauma to entertain us on the field of play, deserve both sympathy and empathy. Yes, Talley squandered millions of dollars, but he also suffers from brain trauma-induced depression.
That might not be enough to elicit sympathy from you, but it certainly does form me. I can’t even watch football anymore knowing what I know about the effects of brain trauma.
Because I’ve lived in neighborhoods and cities with those people since I was a kid. I’m one of the few in my neighborhood who could afford a new BMW but drives a 12 year old Acura, that I bought used off-lease, instead. All my neighbors, with the exception of my overly-frugal next door one, complain about not having the money to do the landscaping we’ve been doing to our yard, but it’s because they have 2 shiny new luxury cars that get replaced every couple of years in their driveway. Well, and the boat, and the motor home and the jet skis and the snowmobiles and… and… They all think I’m weird that when I needed a truck to haul stuff for that landscaping, I went out and bought a 1988 Mitsubishi pickup instead of a brand new F150 with leather and nav. My thought was, this is a work vehicle, I don’t want to spend any more than I have to, and I don’t care about being swaddled in comfort over the 2 mile round trip to the compost pile.
My mother’s also in that category, and she’s spent $90,000 on cars in the last 3 years. And doesn’t even like cars, and drives maybe once every 2 weeks, reluctantly. But there’s an odd compulsion when you have a little money to make sure your neighbors know you have a little money. Especially when they have a little money too.
At one point when I was a kid I went to school with people who had a lot more money than we did. It was one of those “elite” East Coast schools attended by families who’ve been multi-millionaires since before the Revolutionary War. The kid I competed with most in class lived in a mansion on a several hundred acre estate with a helipad and an 8-limo garage. Er, sorry, “Carriage House.” And he wasn’t the richest kid in my class, either. I was often the class pariah because my parents weren’t old-megamoney-elite, and I didn’t have prominent national politicians in my family.
I’ve always credited that experience with making sure I don’t equate wealth to worth, either for myself or others. Maybe that’s why I’m OK driving the older Acura instead of the new one that I could, but don’t want to, manage to pay for.