At least for the most recent election cycle, the classic
Democratic class-bait, “Tax break for the wealthiest one percent of
Americans,” didn’t play very well. That doesn’t mean we’ve heard
the last of it. To the contrary. Our federal tax system has trended
ever more steeply toward the “progressive,” meaning that the bulk
of taxes are paid by fewer and fewer people, mostly concentrated at
the top end of the earning spectrum.
Who are these people? Who are “the wealthy,” that group so often
derided by the Democrats and liberals? If you try to get a Democrat
or a liberal to define “the wealthy,” you’re in for a frustrating
experience. Because as soon as you define wealth in America, a
certain uncomfortable something becomes clear. The wealthy are not
Bill Gates and Jack Welch and Leona Helmsley and Oprah Winfrey. You
could round up those people in one good-sized train. No, the
wealthy are us, ordinary Americans.
As Don Connelly, Putnam Mutual Funds’ ace sales trainer, once
said, the average millionaire “can tell you a whole lot more about
dry cleaning fluid than you ever wanted to know.”
If we get real about wealth, and about who the wealthy are, it’s
a whole lot tougher to demonize the wealthy as a class. The bulk of
the information in this column comes from The Millionaire Next
Door, by Thomas J. Stanley and William D. Danko (Longstreet
Press, Inc., 1996). In the 1990s, I worked in the mutual fund
industry. Every fund company targeted the “high net worth
investor.” The Millionaire Next Door was our bible.
First thing: There are a lot more millionaires — defined as
households with net worth of $1 million or more — than you might
expect. Out of about 100 million households, 3.5 million meet that
definition. The average income of these households is $247,000 per
year; $131,000 annual total realized taxable income. The heads of
these millionaire households are self-employed (two-thirds) and
generally in their fifties.
Second thing: While the most common route to wealth involves
owning and developing your own business, regular wage earners can
get rich, too, by following the example of the millionaires next
door. The two most important factors in getting rich are (1) living
cheap and (2) investing 15 percent or more of your net income. A
cop and a nurse can do it. Starting with nothing, saving $1,000 a
month, presuming an average yearly return of 8 percent and
inflation at 2 percent, that policeman and nurse will be
millionaires in 26 years. In reality, given raises and the ability
to invest more as the years go by, they’ll reach their goal a lot
quicker.
What can you most emphatically not do if you want to get rich?
Buy a lot of flashy stuff. Stanley and Danko conducted extensive
surveys of the consumer habits of America’s wealthy. The typical
millionaire, they found, spent less than $399 for the most
expensive suit he owned. Some 30 percent of those surveyed had J.C.
Penney’s credit cards and bought their suits from Penney’s. Half
have never spent more than $140 for a pair of shoes. (Sorry,
Leona.) Half bought their watches for less than $235. Most
millionaires buy used cars, and spend only a little more, on
average, than the $21,000 average spent by all Americans on all
cars.
There are lots and lots of ways to get rich. You can do like the
Pakistani and Indian and Korean immigrants and buy a convenience
store franchise, put the whole family to work, and plow the profits
back into more businesses. Or, as a friend of mine said, explaining
how “Muh daddy got rich” in her fetching Alabama accent, “He rints
trucks.” Or, like the members of a trade association for whom I
used to write a magazine, you can rent musical instruments to
school districts; more than half of my readers were
first-generation millionaires. You can renovate and sell houses in
the dozens of reviving old city neighborhoods where people want to
live nowadays.
But however you choose to do it, this is America, and you can do
it. As Lyn Nofziger pointed out about the Reagan administration,
“We realized Americans didn’t hate the rich; they wanted to be
rich.” And, as Americans, we all know, more or less instinctively,
what doctrinaire Democrats seem to have forgotten. Anybody can
break the code. We don’t care who you are or what your last name is
or what color your skin is. We won’t ask you whether you went to
the right schools or whether your family has a title or not. If
you’re happy to buy, we’re happy to sell, and if you’re happy to
sell, we’re happy to buy.
And anybody can make it work.
