Together, these three categories of affluent customers control the bulk of the wealth in the United States, which means in the world. They represent untold buying power. What is even more interesting is how they handle their money. Their perspective of money is as different from the average person’s as their wealth is greater.
For one, the wealthy insist that their money work for them. They utilize their money to make more money. The wealthy want the money they deposit in the bank to draw interest. But they do not view the interest the bank pays as an investment. The same holds true for CDs. CDs are not an investment. To the wealthy, CDs and bank deposits are nothing more than a place where they keep their money until the money can be truly invested in a much more profitable venture.
Wealthy people invest in stocks. They study the stock market and do not depend on hot-tips or touted stocks. Discipline and management are vital aspects of their stock investments. Their risk of loss is low because they buy cheap and sell high, and they accomplish that through sound information and research.
The Money Times, November 2012, reported that rich executives bought the following stocks: Allscripts-Misys, which yielded a 52-week return of 73.1%. Cincinnati Financial, which yielded 25.8% at the end of 52-weeks. Dow Chemical, which provided a 52-week return of 35.2%. Exelixis, which returned 62.9%, and Fortune Brands, which returned 50.4%.
Wealthy people invest in bonds, using the interest from the bonds to purchase luxury items. Which means they never have to touch the principal. Whereas the average person buys a new car, dipping into his principal for the down-payment and paying interest to the finance company.
Wealthy people invest in real estate, the kind of real estate that makes money. Assets such as commercial properties, apartment complexes, and rental houses. They borrow the money to buy the properties, which provide tax deductions. The money collected from tenants pays off the loan. The investor makes a nice profit. For the wealthy person, the mortgage is an asset and not a liability, because the wealthy person uses the mortgage as a financing system to make money, which he uses to buy more real estate.
What do the affluent like to buy? The recent (June 2012) American Express Platinum Luxury Survey reveals a lot of interesting information. The Gen Xers surveyed made an average of $235,000, and spent more than 20% of their income on luxury goods and services.
Moneyed Gen Xers spent:
$3,235 on fragrance, cosmetics and beauty products.
$6,066 on fashion accessories.
$23,0027 on clothing.
$3,922 on wines and liquors.
$17,554 on dining, travel and home services.
$3,629 for entertainment.
$3,3224 for personal and health services.
$4,176 for sporting events.
In the same survey, the rich – those making $1million to $5 million – spent an average of $81,172 per year on luxury goods and luxury experiences:
$17,185 on luxury jewelry and watches.
$12,831 on luxury products for their pets.
$11,679 on luxury items for their children.
$9,931 on fashion accessories.
$7,703 on wine and liquor.
$6,281 on personal and health services.
$6,363 on entertainment.
$9,313 on sporting events.
$7,611 on dining.
$17,051 on travel.
Phoenix Marketing International reports that affluent customers plan to increase discretionary spending in the following areas by significant amounts.
Dining out is expected to increase 62%.
Entertainment is expected to increase 61%.
Spending on clothing and jewelry is expected to increase 57%.
The amount of spending on vacations and leisure travel is expected to increase 52%.
A 37% increase in spending on home improvements is expected.
Spending on durable household items is expected to increase 35%.
Everyday living expenses are expected in increase 27%.
Spending on household service is expected to increase 25%.
The amount spent on art, antiques and collectibles is expected to increase 24%.
Purchases of new and used vehicles are expected to increase 19%.
Uptown Magazine did a national survey of Affluent African Americans in July 2008. The purchasing power of Affluent African Americans was estimated to be $29.8 billion. According to the survey, Affluent African Americans aspired to more luxurious brands. In other words, they wanted to move up. They expected to spend lavishly on clothing and fashion accessories. The men desired expensive suits, casual wear and shoes. The women desired luxury purses and designer shoes.