By John Reed /JohnTReed.com

I started out poor. Although, like most poor people, we didn’t know it. My parents spoke about poor people at times. They meant people who had even less money than we did.

Now I know that their referring to others as poor was only relative. We wore hand-me-down clothes, ate fish sticks and peanut butter sandwiches, and got the occasional big treat of a glass of off-brand cola. I’m not complaining. We were happy. We did not know what we were missing—literally. Our neighbors, classmates, and playmates were in the same boat. The poor generally only feel poor when they are around those who have a lot of money.

My brother came home one day from work and announced to our family that we were poor. How did he come to this realization? He was working on the homes of rich people.

Not know how to spend

As an adult, I became nouveau riche—French for “new rich.” One of the common problems of the nouveau riche is that they do not know how to spend money. They tend to waste a lot of it. They also tend to buy stuff that Hollywood shows rich people having in movies and on TV, like caviar, limousines, mansions, private planes, yachts, and all that. Or as “Lifestyles of the Rich and Famous” host Robin Leach used to say, “champagne wishes and caviar dreams.” That’s Hollywood bull. Champagne is a beverage for a few occasions—if you drink alcohol at all. Caviar really doesn’t taste very good. It’s expensive because it’s scarce and because it acquired cachet in an earlier, cruder age, not because it tastes good.

Here’s another French word that’s often used by Americans for you: arriviste. According to Dictionary.com, it means,

A person who has recently attained success, wealth, or high status but not general acceptance or respect; an upstart

or

a person who has recently acquired unaccustomed status, wealth, or success, esp. by dubious means and without earning concomitant esteem.

One way to achieve arriviste status is to run around ostentatiously spending your new found wealth on stupid Hollywood-image-of-the-rich stuff.

Preppies

I also went to Harvard Business School. There I met preppies—short for prep school graduates. Prep schools are very expensive boarding high schools. Preppies usually have old money. Old money means they are from families that made a lot of money generations ago and still have it.

Generally, over time, the nouveau riche make the transition from nouveau riche to old-money rich. As part of that process, they learn how to spend their greater amounts of money more wisely and less in imitation of Hollywood images of rich people. As rich people, they typically join exclusive clubs and so forth and meet other rich people and learn, among other things, how to spend money wisely. By going to Harvard Business School, I was joining a sort of exclusive club that included a lot of old-money rich. My wife also went to Harvard Business School in the class behind me. So we got a double dose of explicit and implicit instruction on how to spend money.

The book Dress for Success generally revealed the secrets of how preppies dress when they are not in their prep school “uniform” of topsiders with no socks, L.L. Bean chinos, two Ralph Lauren Polo shirts worn on top of one another, and a khaki corduroy sport jacket. It’s a good book to follow, but it came out in the 1980s and was not updated. For more recent instruction on how to dress, see:

Style and the Man by Andrew Flusser
Dress Your Best by Kelly and London
The Handbook of Style by Esquire magazine
A Gentleman Gets Dressed Up by Bridges and Curtis
Details Men’s Style Manual by Daniel Peres
Gentleman’s Guide to Grooming and Style by Bernhard Roetzel

Finally, after being affluent for years, we developed our own ideas about how to spend money wisely when you have a lot more than you grew up with. I think the nouveau riche spend lots of money foolishly, childishly. But I also think, to a lesser extent, that the old-money people spend some money unwisely as well. Here are my suggestions, which attempt to take the best from the old-money people as well as the experience of my wife and me.

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As the above list reveals, there are some basic principles to this:

  • Don’t buy a larger size or greater quantity than you need

  • Don’t pay for features that you don’t use or need
  • Don’t spend money to show off
  • Do spend money to reduce the risks your family faces
  • Do use your wealth to reduce the amount of time you spend pursuing money and increase the amount of time you spend on other worthwhile activities
  • Health should be your top priority, including moderate diet, at least an hour of exercise per day, and appropriate medical care (your Body Mass Index should be 18.5 to 24.9—one guy said this is a poor measure if the person has an athlete’s body fat percentage, like 6%, because muscle is denser than fat.
  • Here’s another measure that some say is better: your waist-to-hip ratio should be below .9 if you are male and below .7 if you are female. My BMI on 3/15/07 was 23.7 and my waist-to-hip ratio was 0.82)
  • More expensive things are generally better, but only up to a point. For virtually every product and service, you can overpay because vendors know many dumb rich people value things according to their price.
  • Bigger is sometimes better, but appropriate size is what you should be striving for. Don’t keep buying bigger and bigger homes and boats and vehicles just because you can. Buy what you need.
  • The shopping list of a rich person is shorter than the poor think. Money can’t buy everything and Americans in general are already quite affluent. Pretty soon after you become rich, you should stop shopping and start listing all the risks we are all subject to and reduce whichever ones you can reduce by using your money. It’s nice to eat well, but it’s also nice to sleep well. That means reducing risks that you can afford to reduce. Here is a list of risks that you can generally use your wealth to take steps to protect your family from.

  • fire
  • flood
  • earthquake (occur nationwide, not just on West Coast)
  • tornado if you live in tornado area
  • hurricane
  • loss of public utilities
  • depression
  • catastrophic lawsuit judgment against you
  • decline in value of asset category that you own
  • robbery or home invasion
  • burglary
  • I suspect that many of you will think the above shopping list is not as much fun as you expected to have when you got rich. Good. That is one of my points. Being wealthy is not as great as the poor think. Money can only do so much to make your life better.

    The important things are health, family, friends, and job satisfaction. You can improve those things somewhat with money, but generally, they are not monetary matters.


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