A producer from ABC’s 20/20 news magazine television show once asked if I could identify neighborhoods where the millionaire next door types live. After checking my database, I pinpointed several neighborhoods where these people resided. The resulting televised program certainly raised eyebrows. Most of the homes depicted were in the $200,000 to under $400,000 price range. All of the millionaire next door types who lived in these neighborhoods had an investment portfolio of at least $1 million. Yet the median price they typically pay for a bottle of wine is just over $10.00 – certainly not the acting rich crowd.
Then I did a statistical analysis of my database and ultimately a profile of millionaires who live in homes currently valued at between $125,000 and $395,000, the low profile millionaires next door. A more detailed examination of the data brought to mind another television episode. It took place while I was promoting The Millionaire Next Door on the Oprah Winfrey Show. A rather well-dressed woman from the audience asked me the same question I had heard a thousand times before: “What good does it do to have all this money if you don’t spend it?” The woman was agitated, even indignant, that I was touting frugality. She further indicated that “these people couldn’t possibly be happy.” She, like most people who are not wealthy, believed that the more one spends, the more satisfying life is. Thus, more money translates into more spending and therefore more happiness.
But she does not completely understand the benefits of being wealthy. It has much more to do with being financially independent and secure than owning prestige brands. High self-esteem is related to achieving financial independence. Both the sense of achievement that comes from success and financial independence lead to happiness and life satisfaction, not meaningless badges.
So, what percent of the millionaires who live in homes valued at under $400,000 are happy? More than 9 in 10 (91 percent) indicate that they are extremely satisfied with life. Yet only one in twenty has a wine collection. Happy people tend to live well below their means. I have found this to be the case in all of the studies I have conducted.
Most of the people who make up this low profile millionaire segment never earned very high incomes. In fact, their median household annual realized income (from all sources) of this group was $113,334 at the time they first reached millionaire status.
In regards to millionaires who live in homes valued under $400,000, ninety-two percent are married. In 90 percent of the cases, the male head of the household is the major breadwinner. Fully 62 percent of those who are married have never been divorced. The median value of their home is $293,214. Their median realized household income from all sources in 2006 was $152,193 or more than one-half of the current value of their home.
Not all regions of the country are equal in producing these low profile millionaires. As a proportion of their respective populations, the Midwest had a higher concentration of these high net worth people, 1.65 times greater than the expectation given the size of its overall population. The South is also above the norm with a multiple of 1.2 while California and especially the Northeast areas of the United States have less than half the expected number. These concentrations are inversely related to the respective proportions of wine zealots found in each region. The traditional values of thrift and modesty in spending are still alive in many parts of the Midwest, where acting rich is typically not in vogue. If I were to open an exclusive wine bar or luxury car dealership, the last place I would consider would be to place it in the Midwest.