I have been thinking during the past week a lot about the topic of being stealthy while growing and maintaining one’s wealth. Although we’re not rich (yet), I can see a time in the not-too-far future where Mrs. Mase and I will have to intentionally make strategic decisions with how we live our lives so that not too much of our private financial business is revealed to others. We have it easier than a lot of people – neither of us are doctors, lawyers, financial planners, etc. so there are few social pressures or expectations around dressing a certain way all the time, driving a luxury (or at least newer) car, or living in a fancy home in a very fancy neighborhood.
That’s the good part. The trick comes in when you want to enjoy a certain level of lifestyle – I know there is a point in my life when I do want to charter a private jet. I do want to set up scholarship funds that help thousands. I do want to own very nice things. I’d be lying if I said material wealth was not a motivating factor in wanting to be rich. Although it is not the only factor, of course, it is something we aspire to.
Maybe I’m getting ahead of myself, because we are definitely not rich yet. I’d say we’re solidly stable and growing, which is a great feeling, since just a few years ago we were in a very different place. I think one of the reasons this is starting to come into my mind is because there are already certain topics that I know would feel awkward or uncomfortable discussing with people – paying off our mortgage for example. With the exception of one or two very close family members, nobody will ever know (at least, that’s the intention). Knowing the personalities of people I know and associate with, there are just too many potentially negative consequences of even casually mentioning it in a conversation.
I think the best way to go about it is to keep your wealth to yourself. There are many bloggers and gurus out there who gladly share all of their financial info on the internet for the sake of complete transparency, and I respect that. People benefit from real-world numbers. But putting my net worth and income out there for everyone to see is just something I don’t know if I or Mrs. Mase will ever feel comfortable doing!
This brings us to the subject of the opposite of stealth wealth – those who are completely open with their spendy lifestyles. From the late Dr. Tom Stanley’s research, we know that the majority of people who live in very nice houses in the fancy parts of town are in fact, not millionaires, but simply high income earners who have enough cash flow in the here and now to leverage their lifestyle. It’s one thing to read this in a book, but another to see it in real life. Just the other day Mrs. Mase shared some interesting data with me about a few of the neighborhoods in our area that are well known as “good” places to live. Neighborhood A is considered the Ritz Carlton of the city, where the perceived “rich people” are said to live. Neighborhood B is considered to be another very nice neighborhood, but not as glitzy as Neighborhood A. Here are the average home values and household incomes of each that my wife found:
- Median Home Value: $695,435
- Median Household Income: $177,507
- Median Home Value to Income Ratio: 3.91
- Median Home Value: $323,003
- Median Household Income: $96,564
- Median Home Value to Income Ratio: 3.34
Overall St. Louis Area
- Median Home Value: $108,100
- Median Household Income: $34,488
- Median Home Value to Income Ratio: 3.13
Neighborhoods A and B are certainly well above average on the income scale, especially compared to the local St. Louis region as a whole. Both probably are full of dual income households made up of professionals and small business owners. The thing that gets me is people in both neighborhoods are generally less conservative with their housing than your average St. Louis household is. Even though the folks in Neighborhood A make twice as much as those in Neighborhood B, there are homes are more than twice as valuable.
This higher than expected home value to income ratio suggests that the high income earners in Neighborhood A are mostly “income statement affluent” types, who feel they should be able to leverage more money than the average person because they make so much more.
In talking with Mrs. Mase about where our next place to live would be (we will inevitably leave our current neighborhood b/c of space constraints and the availability of certain types of properties), we’ve thought about living in a place like Neighborhood B. It is solidly more affluent, and has a high but not shockingly high average household income. I say that last part in particular to highlight how important we feel it is to own a home in a neighborhood where our personal household income is higher than the median, at least to some degree. This is important to us because, as Stanley’s research points out, where you live have a heavy influence on your spending patterns.
If we moved to Neighborhoods A or B our spending patterns would likely increase without us knowing it. This is the classic “keep up with the Jones’ syndrome”. Sure, we all have ultimate control over what we spend and what we do not. The thing is though, it’s a lot harder to avoid splurging if you constantly see new cars in your neighbors’ driveway.
We’ve also had our eye on houses in Neighborhood C. This neighborhood is a solid, working class neighborhood that isn’t flashy, but boasts some beautiful homes with a wide range of values. There a businesses constantly moving in and setting up shop, it’s walkable, etc. Here are the housing/income stats:
- Median Home Value: $121,912
- Median Household Income: $35,175
- Median Home Value to Income Ratio: 3.46
Ahh, now this is a neighborhood that is more indicative of the St. Louis region as a whole. The average home value to income ratio is a little higher than I’d like to see, but the median household income and median home values are low enough in an absolute sense that I’d feel more comfortable moving into this neighborhood (in some ways) than into Neighborhood B. It’s not flashy, would still provide great housing options, and has some other perks.
Needless to say, the point of this discussion is simply to recognize that every neighborhood has it’s own characteristics, and that those who hide their wealth are much less likely to live in flashy neighborhoods. I think I read that the vast majority of millionaires live in homes values at less than $350,000. That seems about right. It’s big enough to get a nice amount of space, very solid features, and a good location (at least in the St. Louis area!) However, it’s not so big and glamorous that people look at it as they walk through your doorway and immediately start asking for handouts.