How to Live Rich

When the middle-class millionaire wants to wow her, he buys a diamond. Only the millionaire buys the rarest stone, one no one else will have.
On his travels, the millionaire goes where no one can find him—to an exclusive island resort featuring $185,000 fractional memberships in luxury vacation homes.

And at home, he relaxes not before the plasma TV but in his $150,000 yoga room where he receives massages while gazing at a Japanese-inspired garden outside.

These kinds of expenditures are becoming increasingly common among the fast-growing class of "middle-class millionaires." Sixteen-and-a-half million Americans, representing a little over 8 percent of U.S. households, fall into this group, which controls almost two-thirds of the country's wealth. They are baby boomers with a median age of 58 who obviously listened to their mother's advice to get a good education and settle down—because three-quarters earned a bachelor's degree and 82 percent are married.

Would we know if we brushed shoulders with a middle-class millionaire in the hallway? Probably not. "They're successful entrepreneurs," says Milton Pedraza, CEO of the Luxury Institute, a New York City-based research firm. "He's more likely to be the guy that owns 10 McDonald's franchises, the doctor with a MRI clinic, the owner of a small ad agency or even a trash removal company."

But even with a million in the bank, these people aren't all that rich. Russ Alan Prince, president of Prince & Associates, a private wealth research firm and author of The Middle Class Millionaire and The Sky's The Limit, says that today, having a million dollars net worth doesn't mean you are really wealthy. He categorizes the middle-class millionaire as those with $1 million to $10 million, the rich with $10 million to $30 million, and the super rich with more than $30 million.

Pricey Perks

Still, a million dollars is nothing to laugh at. Though nationwide spending has slowed on fears of a slumping economy, this set is continuing to splurge on pricey home improvements, wine and spirits, cars and clothes.

But the middle-class millionaire is not content to simply upgrade the tiles in his bathroom. He's likely building a professional grade home spa. In researching The Sky's The Limit, Prince spoke with a hedge fund manager who covered an entire wall with plasma screens and surround sound at a cost of $40,000 so he could wind down at the end of a long day by playing "Guitar Hero" and Nintendo Wii. Prince also worked with a Wall Street executive who spent over $60,000 to have a boxing ring installed in his Manhattan apartment.

Those kinds of buys make super high-tech security systems throughout the home a necessity. When traveling, one of Prince's respondents keeps track of his home by BlackBerry, and, if something looks suspicious, he can fill his house with tear gas at the touch of a button. Safe rooms are also becoming popular, says Prince.

Jewelry is the ultimate symbol of wealth, and in this category, the bigger the better. Today's millionaires invest in high-end pieces from companies like Zydo or Di MODOLO. This group is looking for custom-made baubles and won't blink at spending $75,000 on a necklace.

Fashion and accessories are another hot opportunity to spend. A good example is the owner of a plumbing company who, since making it big a couple of years back, treats his wife to a $35,000 Rene Lautrec handbag bag twice a year.

While jewelry and handbags may satisfy the ladies, watches seem to scratch the itch for men. Picture this: One of Prince's respondents owns two limousine companies and sells one for $20 million. After years of collecting watches in the $1,000 to $2,000 range, he rewards himself by splashing out on a $200,000 time piece.

Diamond-encrusted, of course.

[Via Men's Health]