The Millionaire Next Door

What Percent of Your Neighbors Inherited Their Wealth?

In Stop Acting Rich, I stated that “the greatest detriment to building wealth is our home/neighborhood environment.  If you live in a pricey home and neighborhood, you will act and buy like your neighbors. . . the more affluent the neighborhood the more its residents spend on almost every conceivable product and service.  We take our consumption cues from our neighbors. . .most self-made millionaires. . . were able to build wealth precisely because they never lived in a home or neighborhood environment where their domestic overhead made it difficult for them to build wealth.”

The higher the market value of the typical home in a neighborhood the higher the proportion of homeowners who are in the inherited wealth category.  About 1 in 4 (23.8%) of those who live in America’s toniest neighborhoods where the current market value price exceeds $2M inherited at least 10% of their net worth [the nominal definition of inherited wealth].  Contrast this with millionaires who live in neighborhoods where the typical home sells for less than $400,000.  Only 13.7% of these homeowners are in the inherited wealth category. 

Keeping up with the Joneses who earn enough to live in a $2M home is difficult by itself.  But it is all the more difficult if your competition next door was heavily subsized by their wealthy parents, grandparents, etc.  It is not surprising that there are nearly 3 times more millionaire households living in homes valued at $300,000 or less than there are millionaires living in homes in the 7-figure  and above category.  “The data strongly indicate that. . . ‘wealth building productivity’ is inversely related to the market value of one’s home as well as those of one’s neighbors.”

1 thought on “What Percent of Your Neighbors Inherited Their Wealth?”

  1. I have always wondered if we would have bought the house we did, if I had read Stop Acting Rich first. As it is, it has made me very aware of the traps of a somewhat wealthy neighborhood. On a positive note, many of our neighbors in this neighborhood are 1st generation immigrants who seem to be very level headed and not extravagant. I think it helps keep the entire neighborhood from going too crazy.

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