10 Things Millionaires Won't Tell You

1. “You may think I’m rich, but I don’t.”

A million dollars may sound like a fortune to most people, and folks with that much cash can’t complain — they’re richer than 94% of U.S. households and earn $350,000 a year, on average, putting them in the top 1% of taxpayers. But the club is a little less exclusive. About 6.7 million households have a net worth above $1 million excluding home equity – more than there were in 2002 but lower than the record high of 9.2 million in 2007, according to a 2009 report by Spectrem Group.

Moreover, a recent survey by Fidelity found just 46% of millionaires “do not feel” wealthy. “They’re worried about health care, retirement and how they’ll sustain their lifestyle,” says Gail Graham, executive vice president of Fidelity Investments.

Indeed, many millionaires still don’t have enough for exclusive luxuries, like membership at an elite golf club, which can top $300,000 a year. While $1 million was a tidy sum three decades ago, you’d need $2.9 million for the same purchasing power today. And two-thirds of all millionaires have a net worth of $2.5 million or less, according to research firm TNS. So what does it take to feel truly rich? The magic number is $7.5 million, according to Fidelity.

2. “I shop at Wal-Mart . . .”

Most millionaires come from middle-class households, and roughly 65% have been wealthy for less than 15 years, according to a 2009 survey of high-networth individuals, published by American Express Publishing and Harrison Group.

They may not buy the 99-cent paper towels, but millionaires know what it is to be frugal. About 84% say they spend with a middle-class mindset, according to the AmEx/Harrison survey. That means buying luxury items on sale, hunting for bargains – and even clipping coupons. In fact, affluent households, including those with income above $100,000, tend to be heavier coupon users than those with lower incomes, according to a 2009 study by Nielsen and market research firm Inmar.

The recent financial crisis has only worked to exaggerate this phenomenon. People making six figures are shopping at Costco. They’re realizing that “they really do need to be more aware of how they spend their money,” says Jon Gallo, principal of Gallo Consulting, which works with financial planners on issues of family wealth.

3. “. . . but I didn’t get rich by skimping on lattes.”

So how do you join the millionaires’ club? One way is to run your own business. That’s how more than a third of all millionaires made their money, according to the AmEx/Harrison survey. Over a third had a professional practice or worked in the corporate world; only 5% inherited their wealth.

Regardless of how they build their nest egg, virtually all millionaires “make judicious use of debt,” says Russ Alan Prince, coauthor of "The Middle-Class Millionaire." They’ll take out loans to build their business, avoid high-interest credit card debt, and leverage their home equity to finance purchases if their cash flow doesn’t cut it. Nor is their wealth tied up in their homes. Home equity represents just 10% of millionaires’ total assets, according to TNS. “People who are serious about building wealth always want to have a mortgage,” says Jim Bell, president of Bell Investment Advisors. His home is probably worth $1.5 million, he adds, but he owes $900,000 on it. “I’m in no hurry to pay it off,” he says. “It’s one of the few tax deductions I get.”

4. “I have a concierge for everything.”

That hot restaurant may be booked for months — at least when Joe Nobody calls to make reservations. But many top eateries set aside tables for celebrities and A-list clientele, and that’s where the personal concierge comes in. Working for retainers that range anywhere from $25 an hour to six figures a year, these modern-day butlers have the inside track on chic restaurants, spa reservations, and even an early tee time at the golf club. And good concierges will scour the planet for whatever their clients want — whether it’s holy water blessed personally by the Pope, rare Mexican tequila, or 12 albino peacocks to be shipped to a yacht in the south of France.

No surprise, though, the recession has the rich scaling back a bit. Stacey Gordon, spokeswoman for global concierge service Quintessentially, says fewer clients are booking private jets and more are toning down their celebrations. “We used to have requests for large extravagant parties – with 500 guests and champagne towers,” she says. Now, events take the form of more intimate dinner parties held at homes rather than at huge venues with large costs attached.

Concierge services today extend to medical attention as well. For $3,600 to $5,000 a year, clients at Enhanced Medical Care, a Boston-area medical concierge, can get 24-hour access to a primary-care physician who can prescribe medication over the phone or email and facilitate admission to a hospital. And if your five-year-old takes a fall and needs stitches on a weekend or holiday, you can bring him in for treatment if the family pediatrician isn’t available or if you’d rather not wait in the emergency room, says a nurse at Enhanced Medical Care.

5. “You don’t get rich by being nice.”

Many millionaires privately admit they’re “bastards in business,” says Prince. “They aren’t nice guys.” Of course, the wealthy don’t exactly look in the mirror and see Gordon Gekko either. Most millionaires share the values of their moderate-income parents, says Lewis Schiff, a private wealth consultant and Prince’s coauthor: “Spending time with family really matters to them.” Just 12% say that what they want most to be remembered for is their legacy in business, according to a 2008 AmEx/Harrison study.

Millionaires are also seemingly undaunted by failure. Don Crane, for example, now runs a successful company that screens tenants for landlords. But his first business venture, a real estate partnership, went bankrupt costing him $20,000 — more than his house was worth at the time. “It was the most depressing time in my life, but it was the best lesson I ever learned,” he says.

6. “Taxes are for little people.”

Most millionaires do pay taxes. In fact, the top 1% of earners paid about 40% of total federal income taxes collected in 2007, according to the Internal Revenue Service. That said, the wealthy tend to derive a higher portion of their income from dividends and capital gains, which are taxed at lower rates than wages (15% for long-term capital gains vs. 25% for middle-class wages). Also, high-income earners pay Social Security tax only on their first $106,800 of income.

But the big savings come from owning a business and deducting everything related to it. Landlords can also depreciate their commercial properties and expenses like mortgage interest. And that’s without doing any creative accounting. Then there are the tax shelters, trusts, and other mechanisms the super rich use to shield their wealth.

7. “I was a B student.”

According to the book "The Millionaire Mind," the median college grade point average for millionaires is 2.9, and the average SAT score is 1190 — hardly Harvard material. In fact, 59% of millionaires attended a state college or university, according to AmEx/Harrison.

When asked to list the keys to their success, millionaires rank hard work first, followed by education, determination, and “treating others with respect.” They also say that what they absorbed in class was less important than learning how to study and stay disciplined, says Jim Taylor, vice chairman of the Harrison Group. Granted, 46% of millionaires hold an advanced degree, and elite colleges do open doors to careers on Wall Street and in Silicon Valley (not to mention social connections that grease the wheels). But for every Ph.D. millionaire, there are many more who squeaked through school.

8. “Like my Ferrari? It’s a rental.”

Why spend $3,000 on a Versace bag that’ll be out of style as soon as next season when you can rent it for $175 a month? For that matter, why blow $250,000 on a Ferrari when for $10,000 it can be yours for a few weekends a year? Clubs that offer “fractional ownership” of jets have been popular for some time, and now the concept has extended to other high-end luxuries like exotic cars and fine art. Online companies like Avelle (formerly Bag Borrow or Steal), for example, cater to customers who always want new designer accessories for $5 a month membership and, for example, $20 a week for a Tory Burch handbag.

The trend seems to be getting hotter. Luxury jewelry rental site Adorn launched in 2006 offering just diamond jewelry focusing on the bridal market and is now expanding to include pieces for all occasions. The company’s sales grew an average of 35% month over month between January 2009 and January 2010, and it boasted its biggest month ever in January 2010. “We’re seeing a lot more clients who probably could buy could buy a $5,000 necklace but don’t want to. It makes more sense for them to spend $200 to rent it than to buy it,” says Laura Carrington, Adorn’s co-founder and chief stylist.

9. “Turns out money can buy happiness.”

It may not be comforting to folks who aren’t minting cash, but the rich really are different. “There’s no group in America that’s happier than the wealthy,” says Taylor, of the Harrison Group. Roughly 65% of millionaires say that money “created” more happiness for them, he notes. Higher income also correlates with higher ratings in life satisfaction, according to a study by economists at the Wharton School of Business. But it’s not necessarily the Bentley or Manolo Blahniks that lead to bliss. “It’s the freedom that money buys,” says Betsey Stevenson, coauthor of the Wharton study.

Concomitantly, rates of depression are lower among the wealthy, according to the Wharton study, and the rich tend to have better health than the rest of the population. The wealthy even seem to smile and laugh more often, according to the Wharton study, to say nothing of getting treated with more respect and eating better food. “People experience their day very differently when they have a lot of money,” Stevenson says.

10. “You worry about the Joneses — I worry about keeping up with the Trumps.”

Wealth may go a long way toward creating happiness, but the middle-class rich still can’t afford the life of the billionaire next door — the guy who writes charity checks for $100,000 and retreats to his own private island. “What makes people happy isn’t how much they’re making,” says Glenn Firebaugh, a sociologist at Pennsylvania State University. “It’s how much they’re making relative to their peers.”

Indeed, for all their riches, some 40% of millionaires fear that their standard of living will decline in retirement and that their money will run out before they die, according to Fidelity. Of course, it may not help if their lifestyle is so lavish that they’re barely squeaking by on $400,000 a year. “You can always be happier with more money,” says Stevenson. “There’s no satiation point.” But that’s the trouble with keeping up with the Trumps. “Millionaires are always looking up,” says Schiff, “and think it’s better up there.”