Saturday, September 06, 2008

Save Money on Cars & 4 Other Lessons from the Wealthy

Spend a lower percentage of your income on cars. That's one of five lessons that wealthy people can teach us, according to Liz Pulliam Weston in a story called: 5 lessons the rich can teach you.

The lessons include:

1. Give away money:

"Households with $500,000 or more in investible assets gave away 6% of their incomes in 2004, and those with net worth of $5 million, excluding primary residences, contributed 6.1% of their incomes. That compares to an average of about 2% for all American households and 4% for households with incomes under $25,000, according to American Demographics...."

2. Own a business:
Overall, about 12% of American families own all or part of a privately held business, according to the Federal Reserve, compared to 41% of those whose net worth puts them in the top 10% of households.

3. Borrow wisely:

The wealthy are only slightly less likely to owe money than average folks, according to the Fed, but how they borrow is quite different.

Hint: (The rich have fewer installment loans --auto loans and credit-card loans, but take out more mortgages. The wealthy seem to borrow money to purchase appreciating assets, rather than take out loans on items that lose value, such as cars, clothing, etc.

4. Hold the limit on auto spending:
...vehicles represented just 2.4% of the wealthiest households' median net worth, compared with 8.8% of net worth overall.

5. Be a homeowner and invest in other types of real estate:
About 40% of the highest-net-worth group own some kind of real estate such as rental property or a second home, compared to 11% overall.


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