How many of the rich are solid and how many are on borrowed time and other peoples' money?
April 25, 2008 6:20 PM Subscribe
Seeking hard stats on how much of the wealthy population is genuinely rich (owns outright solid assets, stocks, cash, gold, real estate) as opposed to living rich (owns much of above but with borrowed money). I'm curious as to how many people living on, say, Fifth Avenue or in Atherton or Greenwich can actually afford it and how many are simply spinning plates on borrowed time, borrowed money, and a (for now) high income. (Time will tell, of course, and perhaps sooner rather than later, but I'm curious now.) Many thanks.
There is a book called the "Millionaire Next Door" that has lots of stats of the truly wealthy vs people who appear wealthy.
posted by saradarlin at 6:58 PM on April 25, 2008
posted by saradarlin at 6:58 PM on April 25, 2008
I can't see how anyone could have that kind of detailed information. It's all private, you know; acquiring it would be a violation of civil rights.
posted by Class Goat at 7:13 PM on April 25, 2008
posted by Class Goat at 7:13 PM on April 25, 2008
It sounds like you want to know how many people have assets roughly equivalent to their net worth. You can look up net worth by percentile for the US. But I don't know how much luck you would have in mapping that to assets owned.
posted by acoutu at 7:21 PM on April 25, 2008
posted by acoutu at 7:21 PM on April 25, 2008
(owns outright solid assets, stocks, cash, gold, real estate)
(owns much of above but with borrowed money)
This is going to be a problematic question to answer, for the reasons noted above. But also because it seems to stand upon a generalized misunderstanding of what it means to borrow money.
For example, while you may have mortgage payments, you build up ownership equity over the course of the mortgage, provided you are not completely underwater (i.e. experiencing negative equity), and despite the recent woes in the housing market, the vast, vast majority of people in the U.S. are not underwater, especially if they've owned their home for more than 10 years or so.
So, depending on how you read your question ... either every homeowner in the U.S. is "rich," or every homeowner is on "borrowed time" merely because they have a mortgage.
Moreover, many people have retirement savings, in various forms. These plans are often based on institutional stock investments. If you have a 401(k), you "own" stock, inasmuch as your retirement fund is currently being invested for you by a fund manager.
So, similarly, depending on how you read your question ... every person with a 401(k) is "rich." And that's millions and millions of people.
posted by Cool Papa Bell at 9:22 PM on April 25, 2008
(owns much of above but with borrowed money)
This is going to be a problematic question to answer, for the reasons noted above. But also because it seems to stand upon a generalized misunderstanding of what it means to borrow money.
For example, while you may have mortgage payments, you build up ownership equity over the course of the mortgage, provided you are not completely underwater (i.e. experiencing negative equity), and despite the recent woes in the housing market, the vast, vast majority of people in the U.S. are not underwater, especially if they've owned their home for more than 10 years or so.
So, depending on how you read your question ... either every homeowner in the U.S. is "rich," or every homeowner is on "borrowed time" merely because they have a mortgage.
Moreover, many people have retirement savings, in various forms. These plans are often based on institutional stock investments. If you have a 401(k), you "own" stock, inasmuch as your retirement fund is currently being invested for you by a fund manager.
So, similarly, depending on how you read your question ... every person with a 401(k) is "rich." And that's millions and millions of people.
posted by Cool Papa Bell at 9:22 PM on April 25, 2008
It sounds like you're looking for some kind of "sustainable way of living" metric.
The variables you have mentioned are:
Assets
Debt (borrowed money)
Cashflows (Money in - money out)
Potential Earning Power
Exposure to Future Debt
The problem is that the last two can only be guessed at, not measured. People who carry a lot of debt (for example, all the new homeowners in the housing bubble) only took on that debt because they believed they could grow their asset faster than their debt. It's the same reason people buy stock on margin: calculated risk. But you can't predict the future, so you're just making guesses.
posted by meowzilla at 11:17 PM on April 25, 2008
The variables you have mentioned are:
Assets
Debt (borrowed money)
Cashflows (Money in - money out)
Potential Earning Power
Exposure to Future Debt
The problem is that the last two can only be guessed at, not measured. People who carry a lot of debt (for example, all the new homeowners in the housing bubble) only took on that debt because they believed they could grow their asset faster than their debt. It's the same reason people buy stock on margin: calculated risk. But you can't predict the future, so you're just making guesses.
posted by meowzilla at 11:17 PM on April 25, 2008
Best answer: The Survey of Consumer Finances is the best data source for this kind of thing.
posted by thrako at 6:03 AM on April 26, 2008
posted by thrako at 6:03 AM on April 26, 2008
FWIW, I believe around 8% of the US adult population are considered "accredited" investors which roughly means they have at least one million dollars in net liquid assets. Proposals to push the minimum to 2.5 million would leave only about 1.3% eligible.
posted by mrhappy at 7:41 AM on April 26, 2008
posted by mrhappy at 7:41 AM on April 26, 2008
8% of the adults in the US do not have $1,000,000 in the bank.
posted by zpousman at 10:00 AM on April 26, 2008
posted by zpousman at 10:00 AM on April 26, 2008
On point, I'll second the Millionaire Next door suggested by saradarlin above. It's a great read and gets at the heart of these issues by diving the "rich" into two groups. Prodigious accumulators of wealth (note that they're accumulating wealth; their bank accounts are growing) and some other term for the bums who drive beemers and spend approx 105% of their annual income (and about 35% of that servicing (paying on) their debts).
Most common car amongst millionaires: Ford F-150 pickup. Hint: Many millionaires live out west, not on 5th Avenue. But the book is great, because it's based on surveys and interviews, not on speculation.
posted by zpousman at 10:03 AM on April 26, 2008
Most common car amongst millionaires: Ford F-150 pickup. Hint: Many millionaires live out west, not on 5th Avenue. But the book is great, because it's based on surveys and interviews, not on speculation.
posted by zpousman at 10:03 AM on April 26, 2008
Response by poster: To avoid having this question turn into chatfilter, can you be more specific...?
I can try.
I'm positing two groups sharing one tony zipcode. Group A owns the house, car, a safe (cash, bonds, un-optioned stocks) portfolio free and clear. Group B lives in the house, drives the car, and maybe has a highly leveraged portolio that can turn sour over night, and probably high earnings, though not high enough to cover expenses outright. Bottom line - how many are there of group A, how many of group B.
Finance guy I know says that Greenwich is the poorest city in America. Why? Because of all the leveraged hedgefund money. But you don't have to work in finance to be technically behind the eight ball, anyone living beyond their means will do. (Time was Trump was 900 million down, but still lived in the penthouse.)
(Millionaire Nexty Door is interesting but a little dated. I want to know currently roughly how many will be caught short when the current tide finishes washing out.)
I can't see how anyone could have that kind of detailed information. It's all private, you know; acquiring it would be a violation of civil rights.
Not sure if you're being ironic. Of course it should be private, but these days....
Hope that helps. If it were an easy thing to find out, I wouldn't be heading to the hive.
posted by IndigoJones at 11:45 AM on April 26, 2008
I can try.
I'm positing two groups sharing one tony zipcode. Group A owns the house, car, a safe (cash, bonds, un-optioned stocks) portfolio free and clear. Group B lives in the house, drives the car, and maybe has a highly leveraged portolio that can turn sour over night, and probably high earnings, though not high enough to cover expenses outright. Bottom line - how many are there of group A, how many of group B.
Finance guy I know says that Greenwich is the poorest city in America. Why? Because of all the leveraged hedgefund money. But you don't have to work in finance to be technically behind the eight ball, anyone living beyond their means will do. (Time was Trump was 900 million down, but still lived in the penthouse.)
(Millionaire Nexty Door is interesting but a little dated. I want to know currently roughly how many will be caught short when the current tide finishes washing out.)
I can't see how anyone could have that kind of detailed information. It's all private, you know; acquiring it would be a violation of civil rights.
Not sure if you're being ironic. Of course it should be private, but these days....
Hope that helps. If it were an easy thing to find out, I wouldn't be heading to the hive.
posted by IndigoJones at 11:45 AM on April 26, 2008
So, you basically just want to map assets minus debts by zip code?
(I'm wondering if you'd want to focus just on "tony zip codes," however you'd narrow that, since as zpousman says, a lot of people's wealth might be farm or ranch land.)
posted by salvia at 1:43 PM on April 26, 2008
(I'm wondering if you'd want to focus just on "tony zip codes," however you'd narrow that, since as zpousman says, a lot of people's wealth might be farm or ranch land.)
posted by salvia at 1:43 PM on April 26, 2008
Best answer: Is there a way to get the Survey of Consumer Finances at smaller geographies?
For data broken down by census geographies, check out the Census 2000 SF-3 tables. (The American Community Survey updates that but doesn't have quite as much data.) It has data:
* Income from various sources (wages, ssi, investments)
* Housing units - owned vs. rented
* Housing units - with vs. without a mortgage
* Selected monthly owner costs (mortgage + taxes + insurance + etc) - broken down various ways (eg, by household income, by with vs. without mortgage)
* Selected monthly owner costs as % of income - divided various ways (eg, with vs. without a mortgage, by income)
posted by salvia at 2:29 PM on April 26, 2008
For data broken down by census geographies, check out the Census 2000 SF-3 tables. (The American Community Survey updates that but doesn't have quite as much data.) It has data:
* Income from various sources (wages, ssi, investments)
* Housing units - owned vs. rented
* Housing units - with vs. without a mortgage
* Selected monthly owner costs (mortgage + taxes + insurance + etc) - broken down various ways (eg, by household income, by with vs. without mortgage)
* Selected monthly owner costs as % of income - divided various ways (eg, with vs. without a mortgage, by income)
posted by salvia at 2:29 PM on April 26, 2008
Oh, I forgot to say that the SF3 data has the value of the property. Nothing about other assets, though, anything not reported as annual income.
posted by salvia at 2:49 PM on April 26, 2008
posted by salvia at 2:49 PM on April 26, 2008
from Wikipedia which is always wrong, I guess:
" By the SEC Staff’s calculation, approximately 8.47% of U.S. households currently qualify for accredited investor status under Regulation D."
posted by mrhappy at 4:11 PM on April 26, 2008
" By the SEC Staff’s calculation, approximately 8.47% of U.S. households currently qualify for accredited investor status under Regulation D."
posted by mrhappy at 4:11 PM on April 26, 2008
Best answer: SIPP is another data source for asset ownership survey data.
Neither SIPP or SCF will get you to zip code level geographies, I believe. I don't think they survey enough people for that.
There is IRS data available at the zip code level, but it'll just tell you what's on people's tax returns - taxable interest income, taxable dividend income, etc.
posted by yarrow at 4:14 PM on April 26, 2008
Neither SIPP or SCF will get you to zip code level geographies, I believe. I don't think they survey enough people for that.
There is IRS data available at the zip code level, but it'll just tell you what's on people's tax returns - taxable interest income, taxable dividend income, etc.
posted by yarrow at 4:14 PM on April 26, 2008
Response by poster: (I'm wondering if you'd want to focus just on "tony zip codes," however you'd narrow that, since as zpousman says, a lot of people's wealth might be farm or ranch land.)
A fair point, and I welcome all knowledge. The question arises from current roilings in the economy. Plenty of stuff is written about gasping middle classes and abuses of the poor, and, as mentioned, about millionaires next door. What I don't see written about, except on an anecdotal level ("Going Broke in Manhattan on $250,000 a Year!") are the hard statistics of the populace perceived as wealthy.
(In related news (see todays Financial Times), the Fed is currently suggesting that banks now actually check would-be borrowers to learn if they can actually afford the mortgages for which they are applying. The banks are fighting this. Imagine that.)
Many thanks to all who struggled with this question. All interest is appreciated.
posted by IndigoJones at 6:06 AM on April 28, 2008
A fair point, and I welcome all knowledge. The question arises from current roilings in the economy. Plenty of stuff is written about gasping middle classes and abuses of the poor, and, as mentioned, about millionaires next door. What I don't see written about, except on an anecdotal level ("Going Broke in Manhattan on $250,000 a Year!") are the hard statistics of the populace perceived as wealthy.
(In related news (see todays Financial Times), the Fed is currently suggesting that banks now actually check would-be borrowers to learn if they can actually afford the mortgages for which they are applying. The banks are fighting this. Imagine that.)
Many thanks to all who struggled with this question. All interest is appreciated.
posted by IndigoJones at 6:06 AM on April 28, 2008
Looking for something else on the census site, I ran across this report (pdf) on Net Worth and the Assets of Households:2002. Apparently based on the SIPP data?
posted by salvia at 9:16 AM on April 30, 2008
posted by salvia at 9:16 AM on April 30, 2008
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posted by beagle at 6:35 PM on April 25, 2008