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A Look Into the Spending Patterns of Millionaires


As a resident of the San Francisco Bay area, I’ve seen firsthand how people can prioritize their job above all else. It’s rare to find someone who follows a mere 40-hour work week. Instead, you and your peers probably work like dogs, staggering through one endless week after another in a sleep-deprived hysteria of a life. You hope your hard work and diligence will one day pay off. But of the busiest people I know, those who truly love what they do are far outnumbered by those who are systematically driving themselves insane.


A life well-lived is balanced between your professional life (how you make money) and your personal life (how you spend your time..and likely money ;)). Striking a balance is worthwhile, yet not easily achieved.


In order to become a millionaire, you need to organize your life like one. Non-millionaires can get stuck in a cycle of work and worry. They deprioritize their finances because they are “too busy” to make changes and then fret about whether they will ever reach their financial ambitions. Alternatively, millionaires, as you may learn below, may spend their money in ways such that they can’t claim they are “too busy” to take care of their finances...


“I just don’t have enough time!”

When financial professionals discuss making the most of what you have, we most often talk about money. Do you have a robust emergency fund? Are you contributing enough to your 401(k)? Is your brokerage account invested correctly?


These surely are important questions. But you have a resource arguably more precious than your money that also needs to be accounted for: Your time. After all, I can show you hundreds of ways to make more money, but I haven’t uncovered a way to magically create more time. The key conversation regards the relationship between time and money. You can trade time for money. Your long hours working each week are a great example of this. You can also trade money for time, paying for convenience and delegating tasks to others.


What the wealthy know about time and money

Three large-scale surveys reveal that millionaires' spending differs from that of the middle class in a telling dimension: Materiality. The middle class—and I mean this in the true sense as those between the 40th and 60th percentile—still spend a good amount on material goods like clothes, eating out, shoes, etc. Millionaires, on the other hand, spend considerably on services and intangibles like house cleaning, lawn care, grocery delivery, and child care. In other words, the new American aristocracy spends money to get time back. They are spending on things that aren’t material or obvious to an outsider.

Science shows this can actually make you happier, too.


According to a study published by the National Academy of Sciences, spending money on time-saving services is linked to greater life satisfaction. While almost everyone adjusts to material stuff, control over your time brings more enduring happiness (and the inverse can be an inescapably miserable burden). The emotional benefit of buying time isn’t limited to multimillionaires. People from across the income spectrum reported feeling better about purchases that saved them time.


Buying time might be a great investment. Like the wealthy, you may wish to outsource the areas where you are value negative or neutral (e.g., cooking, laundry, making appointments). You don’t have to feel guilty about paying someone else to complete your disliked tasks. This will free up more time and energy to double down on areas where you add the most value or take the greatest satisfaction.


Then there’s the question—and stark differential—of how millionaires versus non-millionaires spend their time once they free up more hours in the day for enjoyment. It may be a surprise that the two populations have the same amount of overall leisure, but there’s a critical difference in how they spend it. According to a Harvard Business School study, millionaires engage in significantly more active leisure (e.g., exercising and volunteering) and less passive leisure (e.g., relaxing and watching TV). While the term active leisure may sound like an oxymoron, it entails actively shaping how you enjoy your free time rather than passively letting it soak in and the time pass. You might get home after a long day and, as a default, go on social media or scroll through Netflix without thinking much about the activity. Active leisure requires spending time with greater intentionality.



The chart above shows the differences in passive (light green) and active (dark green) leisure activities between millionaires and the general population, in minutes. On an average day, a non-millionaire spends 16.3 more minutes relaxing than a millionaire. The millionaire will spend 19.3 more minutes exercising. They both spend a similar part of their day on overall leisure.


Translating wealth into well-being

While we all need a little rest and relaxation, you may wish to take a look at how you spend your free time to see if you are spending it like a millionaire. That’s because active vs. passive difference is important for a reason you might not expect. It turns out controlling your time, both in and out of the office, is one of the keys to being happy.


Researchers found that the differences in time spent on active leisure is a predictor of the happiness gap between millionaires and the general population. They posit that this greater engagement of the wealthy in active leisure contributes to their greater life satisfaction compared to the general population. Less Netflix → more happiness.


Conveniently, there are also many “discounted” ways to enjoy your time. Here are some of our favorites:


It is depressing to get stuck in the work & worry cycle. One approach is to simply keep working like dogs, hoping we'll someday get to a magical financial happy place. A better tactic can be to divert some money to creating more free time, then spend your newfound time on activities that improve your finances or on activities you find rewarding.


When you allocate your money and your time with intention, you find that you achieve your goals far sooner than you imagined possible.


-Alison

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Wealth In Hand does not provide tax, legal, or accounting advice. The descriptions above are for illustrative purposes only, and are not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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