The Millionaire Next Door (PDF)

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					        The Millionaire Next Door

                                     Fundraising Implications
                                        Prospect Profiling
Based on the book
“The Millionaire Next Door” Stephanie Komon
Asst. Director, Prospect Management
Kent State University
The Research
Studies were conducted by Stanley and Danko over the
past 20 years through personal and focus group interviews
with over 500 millionaires and 11,000 surveys of high net
worth and/or high income respondents

More than 1,000 responded to the latest survey, which was
conducted in May 1995-January 1996.

Each participant answered 249 questions on topics ranging
from household budget planning, children, consumer
habits and a variety of other wealth-related issues.
The Facts
 Most millionaires ARE NOT driving this
 year’s car models, only a minority drive
 foreign models

 Most millionaires DO NOT wear
 designer clothes or expensive watches

 Half of millionaires DO NOT live in
 upscale neighborhoods in luxury homes
Millionaire Traits

 The typical millionaire is a 57 year-old male
 that is married with three children (PP)

 Millionaires live well below their means   (FI)

 Millionaires are not heavy consumers of goods

 They tend to be frugal   (FI)
Millionaire Traits

They are prodigious accumulators of wealth
they speak of their achievements,
experiences, families and how they’ve built
their business.

Under accumulators of wealth (high consump-
tion/low savings) tend to emphasize their
income, consumption habits and status
artifacts (homes, boats, cars vacations, etc.)
Millionaire Traits

 As a group millionaires believe that education is
 extremely important to them, their children and their
 grandchildren. (FI)

 17% of millionaires or their spouses attended a private
 elementary or high school. (PP)

 55% of their children are attending or have attended
 private schools. (PP)

 Nearly half of all millionaires never received any college
 tuition from their parents or other relatives
 Millionaire Spouses

Are meticulous budgeters and
planners and are more
conservative than the
millionaires are.
Half their spouses are
housewives and are most likely
to receive significant annual
financial gifts. (FI/PP)
The number one occupation of
spouses that work is an
elementary or high school
Children of Millionaires

  32% of millionaires pay for their adult
  children’s graduate education (FI)

  Millionaires are more than five times as
  likely than average households to have
  a son or daughter graduate from
  medical school and are four times as
  likely to have a child who is a law
  school graduate. (FI)
Top Ten Occupations of Children of Millionaires

   Corporate Executive       Attorney
   Entrepreneur              Engineer/Architect/
   Middle Manager            Scientist (PP)
   Physician                 Accountant
   Advertising/              College/University
   Marketing/ Sales          Professor (PP)
   Professional              Elementary/High
                             School Teacher (PP/FI)
Millionaire Businesses
Millionaire Businesses

  Self-employed people make-up
  less than 20% of the work force in
  America, but account for 66% of
  the millionaires.

  75% of the self-employed are
  considered entrepreneurs; others
  are professionals (doctors,
  lawyers, accountants).
Millionaire Businesses
Many of their businesses are not glamorous
(paving contractors, welding contractors,
auctioneers, rice farmers, pest controllers,
owner of mobile home parks, etc.). (FI)

They work 45-55 hours a week.

Business owners outpace all other
occupational categories in accumulating
   Most high income owners have more experience in
   evaluating potential suppliers, employee applicants and
   human resources than individuals in other occupations.
Millionaire Businesses
91% never received, as a gift, as much
as $1 of the ownership of a family

Less than 20% of business owners will
turn his/her business over to their
children to own and operate. (PG)
  They understand the risks and other
  uncontrollable variables associated with
  succeeding in business.
Home Ownership

                 97% of millionaires
                 are home owners
                 The average value
                 of their homes is
                 $320,000 (PP)
                 50% have occupied
                 the same house for
                 more than 20 years
  Annual Realized Household
  Income (taxable)
$131,000 (median)
  80, 100, 125, 131, 175, 247, 300
  80 100, 131, 175, 274, 300
  175-131=44/2=22; 131+22= 153

$247,000 (average)

$500,000 - $999,999 (8%)

$1M or more (5%)

 Many millionaires with a net worth of $2-3
 million have annual household incomes of
 $80,000. (FI)

 The typical millionaire may be cash poor
 (60% of their annual realized income is
 invested in assets that tend to appreciate in
 value without generating realized income
 (20% in equity, 20% pension, 20%
 business). (PG)

 A millionaire with household income of

 On average, the millionaire’s annual tax
 bill is an amount equal to a little over
 2% of their wealth compared to the
 typical household of 12.9% or more.

 Ross Perot pays 8.5% in taxes on his
 income. He minimizes his tax bill by
 investing heavily in municipals, tax-
 sheltered real estate and stocks with
 unrealized gains.
Consumer Habits of Millionaires

  Half have never spent over $399 on a
  suit ($195-$285 is more common) (FI)
  Half spent less than $140 for a pair of
  shoes and $235 for a watch (FI)
  Most millionaires have not purchased a
  vehicle in the last two years (FI)
  Very few millionaires lease their
  vehicles (FI)
Consumer Habits of Millionaires

  Most millionaires hold a Visa and
  Master card
  The millionaire household is 4 times as
  likely to hold a Sears card (43%) than
  a Brooks Brothers card (10%)
  Many millionaires shop at JC Penney
  and 30.4% of them hold a JC Penney
  credit card
Consumer Habits of Millionaires

  81% of millionaires purchase their
  59% of millionaires surveyed never
  spent more than $29,000 in their entire
  life for a vehicle, the typical millionaire
  paid $24,900 for his/her most recent
  vehicle. (FI)
Vehicle Models Purchased by Millionaires
(in rank order)

Ford (F-150 Pick-up    Three-way Tie
and Explorer)          Between:
Cadillac               Jeep (Grand
(Deville/Fleetwood     Cherokee)
Brougham)              Lexus (LS 400)
Lincoln (Town Car)     Mercedes (S Class)
  Net Worth

6% of millionaire households have net
worth of $10M

The average millionaire household net worth
is $3.7M

The typical millionaire household has a net
worth of $1.2M (median)
Millionaire Estates

  Most millionaires
  have never received
  an inheritance

  80% are first
  generation wealth
Millionaire Estates

  Within the millionaire “married couple”
  population the expected average age of a
  male decedent is 75½, while the average
  female decedent is 82. Most of the females
  never remarry. (PG/FI)

  Housewives rank first in both the size of their
  inheritance and the incidence of inheriting
  wealth from their parents. (FI)
    Widows that Fit the Bill

Those we know:        Those we don’t know:
Helen Dix (ltsp)      Anna Dunn
Jean Fairfax          Loretta Holmes (ltsp)
Pauline Franks        Marjorie Woodring
Paige Palmer (ltsp)
Olga Mural (ltsp)
Marie Salandra
Top Ten States with Estates Valued
at $1M or More (predicted for 2000)

California (11,952)   Pennsylvania
Florida (5,835)       (2,761)
New York (5,702)      New Jersey (2,482)
Illinois (3,140)      Ohio (2,192)
Texas (3,014)         Massachusetts
                      Connecticut (1,650)
The Future: Top Estimated Millionaire
Households in the Year 2005 by State

California (773,213)   New Jersey (258,917)
New York (431,607)     Pennsylvania
Texas (365,034)        (238,010)
Florida (289,231)      Michigan (202,929)
Illinois (283,329)     Ohio (197,554)
                       Virginia (171,516)
The Millionaire Profile

                         Have 3 children
Decent                      Most likely are doctors,
                            lawyers or professional

57 year-old male (or
                         Are business owners or

Married (have one
                         Average home value is
spouse/majority not
                         $320K (owned for years)

                         Live conservatively
Spouses tend to be
                         ($80-$100K household
housewives or teachers
Key Points for the Fundraiser

Millionaires talk about their achievements,
family, experiences and how they built
their businesses.
Millionaires live WELL below their means.
  Need to talk about mission/vision and return on
Education is very important to them
Number one occupation of millionaire
spouses is TEACHER
Many of their businesses are NOT
 Key Points for the Fundraiser

Half have lived in the same home over 20
Many live the lifestyle of a person making
$80-100K annually
They don’t tend to buy designer clothes
They don’t tend to drive a new car
Scrutinize teachers and housewives – they
can be the “royal flush” in prospect poker

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