Middle Class Millionaire Pulling Back…

[Coronita]

http://quote.yahoo.com/banking-budgeting/article/104490/The-Working-Rich-Are-Nervous;_ylt=Akf7GWkyFMjXoCWQgcXWWwK7YWsA

 

Housing has imploded, the market's a yo-yo, recession's in the air. And the "working rich" are learning to do without. So says Russ Alan Prince, president of a private wealth-research firm and author of the book The Middle-Class Millionaire. What does that mean?

"They have certain middle-class values," says Prince. "They will continue giving to charity and to send their kids to get the best education, because those are important components to them. They will still buy the high-end luxury car, but not the sports car."

Prince's latest research shows that 78% of the "working rich," or "middle-class millionaires," defined having a net worth of between $1 million and $10 million and still working for a living, consider themselves "very or extremely concerned about their ability to maintain their current financial position." He also estimates that 21% of them have already begun pulling back on spending.

Unity Marketing's Luxury Consumption Index tumbled 27% in January to its lowest level since the firm started the survey in 2004. During the just-ended fourth quarter of 2007, 24% of luxury consumers said they felt their economic situations were worse than they were a year ago, double the 12% who said so in the third quarter. Sure enough, spending on luxury goods dropped 20% during the second half of 2007 from the first half. The company polled 1,281 mass affluent consumers whose income averaged $155,000 per year.

"Luxury consumers have never expressed such a dismal view of their financial status," says Pam Danziger, Unity Marketing's president.

Compounding the problem, says Prince: Middle-class millionaires network like crazy, influencing each other's buying behavior. Two-thirds say they get asked for buying advice from others in their peer group (compared to 15% of those in the middle class), most commonly for cars, hotels, medical care and investments. Almost 80% say their buying decisions are much more influenced by other middle-class millionaires or their own past experiences than by Consumer Reports or the Internet.

But few are trading down to Target. They're just buying fewer expensive items than they used to. Middle-class millionaires won't stop shopping anytime soon. They'll still be grabbing the tech gadgets they love so much, like BlackBerrys, iPhones, GPS systems, computer accessories and software. Why? Those products, in addition to exuding status, also serve practical needs. They will also go ahead and get nice things for the home, like that big-screen television set or top-grade appliance. And they won't pinch pennies on education and health care, things they consider to be of prime importance.

Golf lessons and personal trainers are still a go, too, since they cost relatively little compared with other luxuries. So are family vacations to Europe. Government figures show a 2.5% rise in travel to the Continent from the U.S. through November 2007 from a year ago, better than the 2006 growth rate. But that may not last forever. "If the dollar keeps falling, they're not going to Europe," Prince says.

Don't expect the luxury-car market to come to a halt either. Porsche Cars North America, for example, said in January that it rode a 19% sales increase of its Cayenne SUV to a record 34,693 vehicle sales in 2007. Take away the SUV line, and Porsche's North American sales dropped 6.4%. The luxury-practicality combo is hot; pure hot rodding isn't.

The second-home market isn't falling apart either–at least not yet. Prices have dipped in several tony markets, according to the Office of Federal Housing Enterprise Oversight. During the third quarter of 2007, prices in Barnstable, Mass., on Cape Cod, were down 3% from a year earlier. In Reno, Nev., near Lake Tahoe, they dropped 6%.

One group that is getting hit: luxury retailers. December sales at Nordstrom were down 3.8% from a year earlier. In January, they dropped 6.6%. Saks managed just a 0.8% gain after a robust November. Sales growth slowed to 2.9% at Neiman Marcus, half the pace of November, while Tiffany needed foreign shoppers taking advantage of a weak dollar to eek out a 3% gain. Tiffany also trimmed its 2008 outlook, causing its stock to tank.

Overall, sales in the luxury segment dropped 4.1% in December from 2006, led by jewelry, according to industry researcher SpendingPulse. It's not that the rich have stopped spending money–they've just stopped spending so much of it on themselves.

Copyrighted, Forbes.com. All rights reserved.

 

 

 

[GoUSC]

That is the worst written article I have read in a long time. It sets its theme in the first few paragraphs that middle-class millionaire are slowing/halting consumption on luxury goods. Then is proceeds to spend the next 5+ paragraphs saying, “But they won’t stop buying this because… and they won’t stop buying this because…”.

Worthless.

[GoUSC]

That is the worst written article I have read in a long time. It sets its theme in the first few paragraphs that middle-class millionaire are slowing/halting consumption on luxury goods. Then is proceeds to spend the next 5+ paragraphs saying, “But they won’t stop buying this because… and they won’t stop buying this because…”.

Worthless.

[GoUSC]

That is the worst written article I have read in a long time. It sets its theme in the first few paragraphs that middle-class millionaire are slowing/halting consumption on luxury goods. Then is proceeds to spend the next 5+ paragraphs saying, “But they won’t stop buying this because… and they won’t stop buying this because…”.

Worthless.

[GoUSC]

That is the worst written article I have read in a long time. It sets its theme in the first few paragraphs that middle-class millionaire are slowing/halting consumption on luxury goods. Then is proceeds to spend the next 5+ paragraphs saying, “But they won’t stop buying this because… and they won’t stop buying this because…”.

Worthless.

[GoUSC]

That is the worst written article I have read in a long time. It sets its theme in the first few paragraphs that middle-class millionaire are slowing/halting consumption on luxury goods. Then is proceeds to spend the next 5+ paragraphs saying, “But they won’t stop buying this because… and they won’t stop buying this because…”.

Worthless.

[Anonymous]

Yes, that’s an odd piece. Most of the people shopping at ‘high end’ retail stores are not the ‘mass affluent’ in my opinion, but predominantly middle class individuals trying desperately to achieve an image of wealth (and that is the literal ‘american dream’ of the moment).

[Anonymous]

Yes, that’s an odd piece. Most of the people shopping at ‘high end’ retail stores are not the ‘mass affluent’ in my opinion, but predominantly middle class individuals trying desperately to achieve an image of wealth (and that is the literal ‘american dream’ of the moment).

[Anonymous]

Yes, that’s an odd piece. Most of the people shopping at ‘high end’ retail stores are not the ‘mass affluent’ in my opinion, but predominantly middle class individuals trying desperately to achieve an image of wealth (and that is the literal ‘american dream’ of the moment).

[Anonymous]

Yes, that’s an odd piece. Most of the people shopping at ‘high end’ retail stores are not the ‘mass affluent’ in my opinion, but predominantly middle class individuals trying desperately to achieve an image of wealth (and that is the literal ‘american dream’ of the moment).

[Anonymous]

Yes, that’s an odd piece. Most of the people shopping at ‘high end’ retail stores are not the ‘mass affluent’ in my opinion, but predominantly middle class individuals trying desperately to achieve an image of wealth (and that is the literal ‘american dream’ of the moment).

[raptorduck]

Agree with the comments. I would add that the definition should not stop at $10 million for the upper level, but say that goes to $20 million in net worth. Above that, you really do have financial freedom and ability not to have to work really. Below that I am not so sure.

[raptorduck]

Agree with the comments. I would add that the definition should not stop at $10 million for the upper level, but say that goes to $20 million in net worth. Above that, you really do have financial freedom and ability not to have to work really. Below that I am not so sure.

[raptorduck]

Agree with the comments. I would add that the definition should not stop at $10 million for the upper level, but say that goes to $20 million in net worth. Above that, you really do have financial freedom and ability not to have to work really. Below that I am not so sure.

[raptorduck]

Agree with the comments. I would add that the definition should not stop at $10 million for the upper level, but say that goes to $20 million in net worth. Above that, you really do have financial freedom and ability not to have to work really. Below that I am not so sure.

[Author]

Posts