By: Roshawn Watson

Culturally, we are plagued by images of “bling this” and “bedazzle that”; however, how many “artifacts of wealth” are truly held by real millionaires?” The commonly held myths about the wealthy are so abundant that several have made careers out of dispelling them. Here we discuss seven popular misconceptions to paint a more accurate portrait of the prototypical millionaire.

Millionaires Don’t Pay Their Taxes

A new paper by Greg Mankiw entitled “Spreading the Wealth Around: Reflections on Joe the Plumber” conducts a rigorous analysis and debunks the rumor that the “rich don’t pay taxes”, citing the Congressional Budget Office calculations.



The poorest fifth of the population, with average annual income of $15,400, pays only 4.5 percent of its income in federal taxes. The middle fifth, with income of $56,200, pays 13.9 percent. And the top fifth, with income of $207,200, pays 25.1 percent. The richest 1 percent, with an average income of $1,259,700, forks over 31.1 percent of its income to the federal government.

Accordingly, he concludes that it is simply inaccurate to argue that we do not have a progressive tax system and that the “best analysis shows that average federal tax rates rise steeply with income. For more on the topic, check out Do The Rich Pay Their Fair Share Of Taxes?

Millionaires Just Inherited Their Money

We all know the story of the spoiled heiress who spends her days sipping her beverage of choice by the pool, shopping, or waiting for her next scheduled appearance at the latest club or event opening. This is the protypical “trust-fund baby.” However, inherited wealth is far less common than you might think. Eighty percent of millionaires are first-generation rich, and roughly 65% have been wealthy for less than 15 years according to a study by American Express Publishing. Also, consider that just because you come from money doesn’t mean you will inherit it. Many wealthy don’t feel obligated to contribute to their grown children’s lifestyle or net worth. Forty-six percent of children from wealthy parents never receive an intergenerational transfer of wealth: not one dollar’s worth of inheritance.

Millionaires Feel Rich

Most millionaires do not feel rich simply because they are not. Two-thirds of millionaires have a net worth below $2.5 million. Fidelity recently did a study that says one needs at least $20 million to “feel wealthy.” Thomas J. Stanley also says one needs at least $20 million and $2 million a year in income to fit into the glittering rich (affluent lifestyle and high net worth) category. Now of course, many can feel rich on significantly less, but the truth is that the vast majority of millionaires have some of the same concerns as non-millionaires: retirement-planning, educating children, taxes, etc. The primary distinctions are that they have better financial leverage and may often be better equipped (through their own efforts or through careful employment of advisers) to handle some of these challenges.

Millionaires Have High-Paying Jobs

Millionaires typically do have high incomes, but over 50% of millionaires are self-employed or business owners. In my recent review of The Thomas Crown Affair, I wrote that people who are their “own bosses… can control (their) income capacity, taxes, and expenses.” Of course, these advantages are tremendous in the accumulation of wealth. Additionally, I commented on how elusive job security is in today’s market. “No degree or amount of experience can guarantee that you won’t be out on the street tomorrow.” Imagine what will happen to your wealth-building plan if you are down-sized, given the fact that your income is your most powerful wealth-building tool. Of course, this is why I always emphasize focusing on financial security and independence.

Millionaires All Drive Fancy Cars

Thomas J. Stanley recently described the two types of drivers of premium vehicles: those who are rich and those who act rich. Statistically, which type of driver do you believe is more common? Obviously, the actors are substantially more common and struggle to pay for their artifacts of prestige, wealth, and success. You may wonder why would someone with a net worth that exceeds 99.7 percent of the population (i.e. a decamillionaire) drive a boring car. It is generally because they could care less about impressing anyone by their ability to drive a luxury car. Accordingly, Stanley’s research shows that Toyota is now the most recently acquired vehicle by millionaires. In terms of overall market share (over 10 years), Ford is the most common make. It is not a coincidence that non-luxury brands are the top picks amongst millionaires.

Millionaires Hang Around the Golf Course All Day

About two-thirds of millionaires work between 45 and 55 hours a week. Again, your income is your most power wealth-building tool, so you certainly don’t want to unplug that. Of course, millionaires typically receive portfolio and passive income as well. One could argue that they several millionaires no longer need to work. This is true for most millionaires because millionaires typically are frugal and could survive for at least 10 years or more without working. However, most millionaires also enjoy love their work. Last week, I listened to Sam’s interview (from Financial Samurai) with Consumerism Commentary. I was not surprised to hear him emphasize being able to retire but still working. If you enjoy your career, why not work. Consider that 86% of millionaires love their careers. Of course, you also have a higher probability of succeeding at something you love anyway.

Millionaires Are Elitists

Some are and many aren’t. By now, you may not be surprised to learn that many live in blue-collar neighborhoods where their wealth exceeds their non-millionaire neighbors by over six-and-one half times. Interestingly, most millionaires don’t want to be around people who have a high-consumption lifestyle either. Such neighborhoods are incongruent with their values. Side note, I deal with elitists all the time by virtue of my profession. I doubt very many of them are millionaires. You definitely don’t need to have a high net worth to think you are superior.

There you have it: your inside scoop into the real millionaire. Don’t allow yourself to be force-fed by marketers and mass media into believing that a celebrity or wall-street executive represents the typical millionaire. Stanley estimates that less than 100,000 people are financially able to build substantial wealth while adopting a very glamorous lifestyle. This means that the other 2,766,000 affluent households (investible assets at least $1 million) are decidedly more frugal and economically productive after all.

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Do The Rich Pay Their Fair Share Of Taxes?

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What do you think is the most popular misconception about the wealthy?

