America's rich explode myth of the flashy millionaire

Americans of Scottish ancestry are three times more likely to be millionaires than those of English ancestry, according to a best-selling book just published in the United States. But the most successful group at making big money in the land of opportunity turns out to have its origins in Russia.

These and other surprising findings in The Millionaire Next Door, written by two academics who have made it their mission during the last 20 years to study American millionaires, lend weight to the book's central thesis: that most of those who make it rich are not born into money, they are ordinary, frugal, hard-working people who began life in relatively humble circumstances.

Thomas Stanley and William Danko, who have themselves become wealthy publishing and lecturing on the science of wealth accumulation, define a millionaire in terms of his net worth in US dollars, a figure arrived at by subtracting liabilities from assets. As part of their inquiries for their latest book they conducted a survey to examine an assumption which, they say, is commonly held: that those who have lived longest on American soil are the richest.

The English men and women who followed the example of the Mayflower pilgrims have indeed done well by comparison with most of the rest of the country. Using households, not individuals, as the yardstick, the survey found that those of English ancestry made up 10.3 per cent of the American national total but, impressively at first glance, they represented 21.1 per cent of all millionaires. Of the 3.5 million millionaire households in America, 732,837 are of English descent.

However, the English lag fourth behind the Russians, Scots and Hungarians as a percentage of the American citizens in each group. A remarkable 22 per cent of those of Russian ancestry fall into the millionaire category. The figure is 20.8 per cent for the Scots; 15.1 per cent for the Hungarians; and 7.7 per cent for the English.

"How can it be possible," the question is posed in The Millionaire Next Door, "that the English ancestry group does not have the highest concentration of millionaire households? After all, they were among the first Europeans to arrive in the New World."

The answer is that 80 per cent of American millionaires are first-generation rich. "Typically, the fortunes built by these people will be completely dissipated by the second or third generation. The American economy is a fluid one. There are many people today who are on their way to becoming wealthy. And there are many others who are spending their way out of the affluent category."

Apart from the fact that it helps to have Scottish or Russian blood, what does it take to become a millionaire? And what are the characteristics of those who manage, for one generation at least, to hold onto their wealth?

Dr Danko, a professor of marketing at the State University of New York in Albany, explained in an interview on Friday that initially he began his inquiries by formulating the following wealth calculation.

Exhaustive research had shown him that by multiplying 10 per cent of a person's age by his income you arrived at a reliable figure for the average person's net worth. In other words, if you are 40 and earn $50,000 (pounds 31,250) a year you are likely to be worth $200,000. "If you are above that figure then you are more of an investor than a spender - that is a truth that has held good during the 20 years we have been researching the phenomenon of wealth," Dr Danko said.

It follows, therefore, that the vast majority of those whom Dr Danko calls "ordinary millionaires" are people who place far greater emphasis on saving than consuming, who live below their means. The authors find that 37 per cent of cars bought by American millionaires are used cars; the average values of their homes is $320,000 (pounds 200,000); more than half have never spent more than $399 on a suit; their typical annual income is $131,000; their typical age, 57.

"They have an expression in Texas, `Big hat, no cattle'," Dr Danko said. "It means that if you look the part you probably are not the part."

By way of example Dr Danko recalled a lecture he and his colleague Dr Stanley gave some years back to a group of 80 deca-millionaires - people with fortunes of $10m or more. "It was at a hotel and they were serving caviar and fancy French wine. I asked one of these very wealthy men if he would like to have a glass of 1970 Bordeaux. He replied, `Son, there's only two drinks for me, free beer and Budweiser.'"

The average millionaire is not flashy, which is the chief reason why he is a millionaire in the first place. He is not even particularly obsessed by money. "Typically he will be self-employed and run a small business: a scrap metal dealership, a tool shop, a dry-cleaning chain," said Dr Danko. "Most millionaires lead regular nondescript lives and have regular nondescript jobs."

He describes those who have made a million as "industrious, disciplined, conservative individuals who make money because they are very good at what they do. Productivity and passion for work is the common denominator.

"They have a dream that they believe in and work hard to achieve. The money merely arises from their efforts. Their focus is not to pile up money, it is to run their business well."

The people who are fixated on the idea of making a million dollars, by extension, are driven by the vain desire to draw attention to their wealth. So when they make money they squander it on the fripperies conventionally associated with affluence, which the majority of the solidly wealthy eschew.

"The stereotypical image of the American millionaire as a jet-setter with expensive mansions, women and cars is so untrue. It's the exception, not the norm," Dr Danko said.