What Do The Rich Really Drive?

[SVT666]

Seriously though, since credit became too loose, it has become harder to judge people's level of wealth by the normal criteria.  A nice house no longer means wealth, unless you know how big the mortgage is.  And a nice car could be leased.  The person could give the appearance of great prosperity, and be drowning in debt.

OTOH, you can't take that too far.  Many people with money act like it -- drive nice cars, live in big houses, etc.

Leased or not, in debt or not, you still have to make enough money to cover those payments.  A lease payment on a BMW 760Li is $2300 a month before tax.  My wife and I grossed $180,000 last year and there is no way we could make those payments even if I was upside down in debt.

[sportyaccordy]

Obviously most people with nice cars have the money to buy them. The hyperbole is stupid.

But let's not pretend like there aren't a ton of people who buy beyond their means. The Housewives Of Wherever The Fuck who live in huge houses, drive nice cars and are on the brink of or have already filed for bankruptcy are the poster childs of this.

[sportyaccordy]

Leased or not, in debt or not, you still have to make enough money to cover those payments.  A lease payment on a BMW 760Li is $2300 a month before tax.  My wife and I grossed $180,000 last year and there is no way we could make those payments even if I was upside down in debt.

Some people fake it and drive the cars till they get repossessed. I am pretty sure that is where most 1 year old used luxury cars come from.

[dazzleman]

In that book I mentioned, The Millionaire Next Door, he defines it as a function of income and age, and a minimum net worth (I think $2MM but that was back in the mid '90s so equivalent to probably ~$4-5MM today). I can't remember the formula, but for example, a 40-year-old guy making $750,000 who has a $1MM net worth is not rich. However, a 49 year-old-guy making $200,000 who has $4MM net worth is rich. He uses celebrities, and rock and sports starts as notoriously non-rich high income earners. He even beats up on doctors, saying they're the worst amongst working stiffs. At the end of it, his statstical study (he does this as a profession as a college professor) is that conspicuous consumption is a hallmark of a lack of wealth (or at least the proper level of wealth).

Those standards seem a little unrealistic.

There's almost no way a 49-year-old making $200,000 per year could have accumulated $4 million without some type of financial windfall not related to working and saving.  Mathematically, it's simply impossible to have saved that much money, even with a reasonable rate of return, on that income.

I've seen some of these formulas, and I don't meet them, even though I save over 50% of my income every year and have gotten a decent return on my investments.

[Eye of the Tiger]

How does someone making $30,000/year get rich?

[dazzleman]

How does someone making $30,000/year get rich?

Win the lottery.

[Rupert]

Invent something really marketable.

[TurboDan]

A couple of weeks ago I chuckled a bit when my dad parked his BMW next to an Avalanche LTZ. Chances are that Avalanche cost almost double what that BMW cost, yet it's still a Chevy.

I know a guy who bought a $60,000 Ford F-Series pickup a few weeks ago. His reasoning: he has to pull his boat, which coincidentally, is the exact same model boat I have, which could be pulled easily by an Escape. 

[dazzleman]

I know a guy who bought a $60,000 Ford F-Series pickup a few weeks ago. His reasoning: he has to pull his boat, which coincidentally, is the exact same model boat I have, which could be pulled easily by an Escape. 

People always create contrived 'needs' to justify doing something they want to do anyway.

[GoCougs]

Those standards seem a little unrealistic.

There's almost no way a 49-year-old making $200,000 per year could have accumulated $4 million without some type of financial windfall not related to working and saving.  Mathematically, it's simply impossible to have saved that much money, even with a reasonable rate of return, on that income.

I've seen some of these formulas, and I don't meet them, even though I save over 50% of my income every year and have gotten a decent return on my investments.

The caveat extolled in the book is most of the wealthy in the US are small business equity owners, so a good portion of their net worth is in their business, which is somewhat to mostly decoupled from personal income. The book mostly talked about how it is immensely difficult, even for frugal high income earners, to become truly wealthy solely from earned income. For all intents and purposes, as you deftly point out, it is impossible save for the extremely small fraction of extremely highly paid income earners such as large company CEOs, Wall Street execs, world-renowned doctors and lawyers, etc.

[AutobahnSHO]

I know a guy who bought a $60,000 Ford F-Series pickup a few weeks ago. His reasoning: he has to pull his boat, which coincidentally, is the exact same model boat I have, which could be pulled easily by an Escape. 

Those people always crack me up. Renting a truck a couple times a year to pull the boat would be way more common sensical.  Or, I have a friend who bought a boat while he was on Rest and Recuperation leave, but also bought a ~$8k USED SUV capable of pulling it...

[Soup DeVille]

Those people always crack me up. Renting a truck a couple times a year to pull the boat would be way more common sensical.  Or, I have a friend who bought a boat while he was on Rest and Recuperation leave, but also bought a ~$8k USED SUV capable of pulling it...

Some people take their boat in and out every weekend, or move from lake to lake. Granted, not most people.

[Soup DeVille]

Invent something really marketable.

Glow in the dark toilet seat?

A microwave that can be controlled by your iPhone?

A drop-in last shot bolt hold open device for Kalishnikovs?

[Rupert]

*scribblescribble*

No, uh, those are terrible ideas.




I'll just be off to call my patent lawyer now...

[Raza]

A microwave that can be controlled by your iPhone?

If you could then create some sort of fridge/freezer pulley system that will move food from the fridge or freezer to the microwave, also controlled by your iPhone, I will invest in that.  Kickstarter time!

[SVT666]

If you could then create some sort of fridge/freezer pulley system that will move food from the fridge or freezer to the microwave, also controlled by your iPhone, I will invest in that.  Kickstarter time!

I want a kitchen that can be controlled entirely by a smart phone.

[dazzleman]

The caveat extolled in the book is most of the wealthy in the US are small business equity owners, so a good portion of their net worth is in their business, which is somewhat to mostly decoupled from personal income. The book mostly talked about how it is immensely difficult, even for frugal high income earners, to become truly wealthy solely from earned income. For all intents and purposes, as you deftly point out, it is impossible save for the extremely small fraction of extremely highly paid income earners such as large company CEOs, Wall Street execs, world-renowned doctors and lawyers, etc.

All that rings true to me.  While many people consider me to be very well off, I probably won't be able to retire that much before standard retirement age, unless I were to cut my spending down to the level of somebody making much less.  And keep in mind that I save over 50% of my pre-tax income.

[TBR]

I want a kitchen that can be controlled entirely by a smart phone.

Give your wife a smart phone and let the texting commence

[CALL_911]

Hell, you don't even need a smart phone for that.

[Rupert]

Voice activated kitchen!

[Lebowski]

Yep, not as much correlation between wealth (or income) and type of car as most people think.

One of the wealthiest people I know drives a Volvo C30 (or did when he lived here, now I think he still drives it when he's in town).  When he moved out west upon retirement, his frontrunner for a new car was, get this, a Nissan Juke  He didn't end up getting the Juke, I don't recall what he got instead, but it was something similarly frugal.  One of his partners (the two literally made the exact same income for the last 15 years), just traded his 599 for a 458, and also has a Hennessey Viper, and his daily driver is a Bentley Flying Spur (or whatev the 4 door continental GT is called).  The hilarious thing is, the guy w/ the C30 is actually more of a car guy, and far more knowledgable about cars.

My parents always drove "normal" cars growing up (we were by no means rich, though my dad always made a good income, easily qualifying as "rich" under the Obama definition).  My dad drove Honda Accords that he would replace after ~180k miles.  He now drives a 4Runner (his third one, both of the previous were driven for well over 100k miles, then handed down to my brother, the mooch).  My mom drove a ford aerostar and then a toyota previa, also driven well past 100k miles, and drives a lexus RX now.

[Lebowski]

According to this wiki link, http://en.wikipedia.org/wiki/The_Millionaire_Next_Door


The formula is age * income * .1

Like most of these formulas, it's really only accurate for a somewhat middle of the road age range.  According to that formula, a 45 year old making $250k should have $1.125m.  I think that's a pretty reasonable target for that age and income range.  At the same time, a 30 y/o making $250k should have $750k according to the formula ... IMO the 30 y/o almost certainly hasn't had enough time to save that much, even with a high savings rate.  And a 60 y/o making $250k/yr should have $1.5m saved according to the formula, while I would argue a 60 y/o who makes that much and plans to retire soon should have saved quite a bit more than that.  Then again, interest rates were a lot higher when the book was written, so even $1.5m may have provided a decent retirement income back then.

[Vinsanity]

Yeah, it's not very realistic at all for a 30-year-old to have a net worth equal to 3x annual salary, especially what with student loans and all.

[Submariner]

People who want to appear rich (but actually aren't) drive 'rich' cars.

People who want to remain rich (who actually are) drive 'normal' cars.

Not sure about that...nearly every truly wealthy person I've met or know personally drives cars that represent their bank account (458, Phantom, Azure, S63, 911 Turbo, etc)

Then again, the former owner of a large restaurant chain (I've heard his net worth is north of 100 MM) keeps his cars in a converted barn on my street.  His DD is a 1996 Lincoln Town Car.

[Submariner]

How does someone making $30,000/year get rich?

$0 down on a three year old 750Li w/ 22' Giovanni's?

[Submariner]

I want a kitchen that can be controlled entirely by a smart phone.

If only you could translate that technology over to women.

[sportyaccordy]

If only you could translate that technology over to women.

Have you seen these chicks in the city? They are definitely subservient to their phones at some level. If Mark Zuckerberg issued some demands to keep them connected they would definitely comply.

[Colonel Cadillac]

Most of the rich people I know don't purchase cars more expensive than a 911 and most drive a 5-series, E-class or the like. There are some exceptionally rich people who go to my country club and I very rarely see a Bentley or the like in the parking lot. Subtlety is key and the WASPy way

[TurboDan]

Most of the rich people I know don't purchase cars more expensive than a 911 and most drive a 5-series, E-class or the like. There are some exceptionally rich people who go to my country club and I very rarely see a Bentley or the like in the parking lot. Subtlety is key and the WASPy way

Part of this is that most ultra-luxury cars aren't really practical for daily driving. Not too many people would want to drive around in a big ol' Rolls Royce, Bentley or S-Class every day. Even a 7er is pretty bulky. If you don't want a humongous car, you have to "downgrade."

An E-Class or 5er is a car that provides luxury and practicality, regardless of whether you have a little bit of money to throw at a car, or are worth tens of millions.

[sparkplug]

There are two trains of thought, some wealthy people are penny pinching to insanity, while other wealthy people realize they only live once. As long as you aren't compromising yourself financially why not have something nice.
I know a fella worth who's weathy. He drives a suburban. I know other people who made 100,000 a year but they don't have anything to show for it.