Upper class habits to stay rich

[publicsectorlife]

What habits do the upper class have to stay wealthy? What would they never buy that they would consider a waste of money?

Our household income is very good. But yet we seem to be haemorrhaging money with high mortgage, commuting and childcare costs.

But yet our friends with generational wealth (ie small mortgage) seem to be living such a different lifestyle with about 6 holidays a year.

We can’t do much about having no inherited wealth but I think we must be missing a trick.

They plan, and pass wealth down more quickly - it saves tax. There are trust funds for grandkids, and money has been gifted.We have been given well over 7figures by family, there is more to come.

I suspect no one could guess quite how well off they are as it's obvious there is money, but not the extent.

As the Trustee to 4 trust funds, I can tell you trusts pay rather a lot of tax these days. They are not the same now as old long established trusts

It’s not just that they have lower outgoings and more money; it’s also psychological. They don’t need to save or worry about tommorow. If they have the money in their bank to do 6 holidays then they can. Whereas you are probably thinking about saving for future, pension, children etc. So they can run to the line. You can’t. That’s even less ‘money’ you have even if you had exactly the same in cash terms.

For ordinary people on ordinary incomes, I think the best single thing anyone can do to create wealth from their own efforts is to adopt a mindset of paying yourself first.

Most people have an income. Out goes the mortgage, the bills, the expenses and, if there's any left at the end of the month people tend to either blow it or save it.

Far better is to look at the overall budget and say "I can save £250 per month." And the day after payday that goes straight into a regular investment vehicle. There's no temptation to piss it up the wall because it's still in the current account a week from the next payday.

I understand your question OP. Based on my experience of the type of family that you are describing.
Rarely holidaying abroad and if so it would be France. Never doing instagram worthy things like pumpkin picking. Growing own food and baking bread, making jams, chutney etc. Cooking a big roast joint of meat and eating it for days after with the bread and chutney. Never driving a flash car. Using clothes for children for years like knitted cardigans, ditto toys. Having the thermostat on low and sitting round the fire on an evening. Rarely eating out or having take aways but entertaining at home. Generally just a slower pace of life doing things like dog walks, runs, reading, baking and gardening at the weekend, most of which don’t cost much money, if any.

Investment and capital growth.

If you are lucky enough to have a bit left over, and put savings in the bank, they will be eroded by inflation, which is generally higher than the interest rate, so you will end up poorer.

The rate of return on investments is generally higher that the rate of growth. So the country's economy might grow by 1% a year, and the rate of return on investmrnt might be 4% plus inflation. So every year the owners of capital not only get richer, they also own an increasing share of the nation. Conversely, the rest of us own a smaller share.

For the average person, investing in a pension is the commonest option for accumulating wealth by capital growth, but other options are available.

(In fact, of course, the required rate of return is a LOT more than 4% above inflation)

I’m not talking mega-wealth here, but what has made a difference in this family is the fact that both sets of grandparents (by no means rich people) bought their own (very ordinary) homes at some time in the late 1920s/early 1930s.

My parents had been pretty skint when we were children, but these fairly modest legacies from house sales in the 70s enabled them to make investments that grew, and that they nurtured. They weren’t scrooges, they had a comfortable lifestyle, some nice holidays, etc., but they felt it their duty to nurture what they’d inherited, preferably to grow it, and in time to pass it on.

Dh and I feel the same about what we’ve been lucky enough to inherit.

This stereotype of the really rich being frugal, 2nd hand clothes etc., might be comforting but it's not universal.
A lot of wealth people do spend.
I see well to do couples driving around in top of the range Range Rovers, and they also have expensive sports cars, villas abroad, yachts, etc. go on cruises.
They aren't rich because they are stingy, but because they either inherited it or sold a company, or more than one.

Not sure I agree - a large latte is 5.95, and a muffin 3.95 - call it a tenner.

If a couple spend this everyday, that's 7,300 per year. If higher rate taxpayers - that could be 12,167 per year into a pension.

Compounding at 7% per year, after a 50 year working career that's over 5 million.

Perhaps an extreme example - but it goes to show how seemingly trivial spending can add up.

We visited the home of a very posh wealthy family once (titled) and there was much talk regarding a new wardrobe that was required. I did wonder why they didn't just get themslves down Ikea and buy one until I realised that these people inherited furniture, they didn't buy it

Perhaps an extreme example

Perhaps 😆

I don't know any couples who spend £600 a month on coffee & muffins!

Sure, interest only works for the benefit of the wealthy whilst it keeps poor people in debt slavery. No matter how hard poor people work, the banking system is rigged against them.

I don't believe royalty work harder than your average nurse so how does it make sense that their lifestyles are so different purely by accident of birth? Why not redistribute wealth more fairly? Eg by taxing land which was appropriated by violence centuries ago.

It's a major reason why so few people own most of the wealth whilst the rest of us fight over the scraps leftover.

This doesn't answer the question.
If interest is outlawed, the banks invest your money and make money out of it.
Then they keep it.
If you get interest, at least you make something from keeping your money in banks.

When people look at multigenerational wealth, often they don't recognise that there is a lot of attrition, because they meet the (say) 5th generation wealthy person, whereas they don't meet the various cousins or siblings that didn't do as well. As an example, Bob makes a tonne of money in the city, marries and has 3 kids (Jane, Mike and Steve)- Jane becomes a mega successful magic circle lawyer, Mike goes into property development but goes bankrupt, and Steve doesn't care about money, gets a chill job in a surf shop and lives off Bob and his inheritance. That leaves Jane as 2nd gen wealthy, she has kids, etc. If this keeps repeating and you meet the 1 of the three that survived the generational attrition then you'd be forgiven for thinking that multi-generational wealth is easily maintained, but in each generation there are more Steve and Mike's and their descendants than there are Jane's and hers. Steve's GGGGC dont probably even know that there was once family money.

Compounding at 7% per year, after a 50 year working career that's over 5 million.

How many 20 yr olds have £300 a month spare to invest? And are able to keep that up for 50 years? Things like university, buying property, having dc tend to get in the way.

What do you think interest is, exactly…?

They plan, and pass wealth down more quickly - it saves tax. There are trust funds for grandkids, and money has been gifted.We have been given well over 7figures by family, there is more to come.

It's crazy how much people resent paying tax. One could argue that also makes a better wider world for your dc & gc to grow up in.

I’m trying to teach my young adult SD’s to invest in S&S ISA. Even £25 a month & increasing ad they’re income allows, as the PP said compound interest. Once you get above £150k it really starts rolling. I wish I’d known this when I was younger.

@boredwfh I'm fully aware of the benefits of compound interest & our whole family have ISAs, I've been paying into dcs since birth.

The fact remains the majority of young people do not have hundreds spare a month that they can invest for decades.

I'm aware I've not made the distinction between tax and interest in my post; the point is, the two are linked.

Unfair taxes and interest together perpetuate wealth inequality since rich people claim interest on that wealth from poor people who work and may be forced to take on debt to then pay interest which goes to someone who didn't earn it. It's either a virtuous or vicious cycle depending on which end you're at. Compound interest is especially grotesque, it keeps whole nations in debt slavery.

DH has a few family members who are in this bracket of multi generational family wealth.

They don't waste money on day to day spending or stuff that depreciates, unless its out of regular income. Eg they will not borrow for things they can't afford to buy outright like expensive cars or holidays.

They will tend to buy long lasting higher quality item rather than following fashion trends, especially with regard to things like furniture & home decor. They are definitely not redecorating that often & when they do its a more subtle/timeless style.

They tend to own not rent - everything. Of course you can do this if there is capital to buy in the first place. E.g every single aunt/uncle/grandparent owns a holiday home somewhere. So no one is ever paying accomodation costs for a holiday, they just stay in uncle tom's apartment in the algarve or auntie louise's chalet in chamonix.

I’m not sure I think resent is correct in this context. The point about tax here was that by handing money on promptly it saves tax, which in turn doesn’t erode wealth. The question was fundamentally how do HNW people stay rich, I was illustrating one point.

I agree taxes are needed for a good stable society and pay a huge amount every year.

Not necessarily upper class but family wealth makes risk taking easier. I’m thinking of some of my kids uni friends. For eg if my kids started businesses/high risk investments and they lost money it would be a major issue whereas with family wealth behind you taking risks is no problem, if they fail they can just start again, repeat until majorly successful.