Below is an
interesting article, which seems to say it all :
The rich mostly do not waste
their money on things harmful to their minds and bodies.
Most interestingly, most rich do not smoke,
and do not like to gamble.
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How are the rich different?
Wednesday,
Oct 15, 2014
The
Business Times
Much
has been said on how to get rich; be it saving hard, spending carefully and
investing wisely, building relationships with the right people and
entrepreneurship.
We
can read about how investing legends and corporate titans made their millions
and billions. But just as interesting is how they spend their money. What do
the rich spend it on?
Are
they spending on these items because they can well afford to? Or does spending
the way they do somehow perpetuate their wealth?
Today,
using data from Singapore's latest household expenditure survey, we can answer
the first question.
Some
things are not so surprising. The rich spend on and live in more expensive
homes. Half of households living in landed properties earn $20,000 and more a
month.
The
rich spend a lot more on what economists call discretionary goods and services.
These are things that people spend on because they can afford to, not because
they need to.
These
include nice-to-have but non-essential items like restaurant meals, wine, fancy
clothing, package tours, pets, hotels and higher-end cars.
They
also spend a lot on services that arguably enable them to retain their wealth
and status: Private tuition and overseas education for their children - which
give them more opportunities to succeed in school and in life - are
particularly striking examples.
But
the rich do not automatically spend more in every category.
Notably,
there are two major items they avoid. These are tobacco and the coyly named
"games of chance", which presumably includes gambling at casinos,
lottery variations run by Singapore Pools, mahjong and card games. In short,
the rich do not tend to smoke or gamble, compared to everyone else. They can
very well afford to, but they don't.
Meanwhile,
poorer households are spending more money on heavily taxed cigarettes, which
are harmful to their health. They are also spending more on gambling activities
which, statistically, result in them losing out in the long run.
THREE
MEALS IN A HAWKER CENTRE, FOODCOURT OR RESTAURANT?
Before
we get to casinos and cigarettes, let us examine the data on the most critical
need of humans - food.
In
Singapore, households across most income levels spend similar amounts of money
on basic food items like bread, meat, fish, eggs, fruit and vegetables.
Most
spend between $400 and $500 a month on these food items and non-alcoholic
beverages combined. The third-poorest tenth of households, for example, spends
just $50 less than the top tenth of households on these items every month.
Similarly,
most households spend about $500 a month enjoying relatively cheap food at
Singapore's ubiquitous hawker centres, foodcourts and coffee shops.
However,
the data suggests that pricier restaurants, cafes and pubs are direct competitors
to Singapore's hawker centres.
This
means that as people earn more money, they tend to stop eating out cheaply.
Spending on cheaper dining options drops sharply for households in the top
third by income, replaced by restaurant dining expenditure.
The
rich spend, on average, a few hundred dollars more a month on food than the
rest.
MOVING
UP AND AROUND
When
we turn to expenditure like clothes and shoes, education and transport, more
distinct patterns start showing.
People
spend more on clothes and shoes as they earn more. A household in the bottom
fifth by income spends $50 a month on them. This increases by $50 for each
rung, hitting about $250 for a household in the top fifth.
Meanwhile,
spending on polytechnic education is distinctly lower among the top two fifths
of households by income. Most households spend similar amounts per month on
average on local university education.
But
the households making the most money tend to spend a lot more on an overseas
university education.
The
top fifth of households by income, on average, spends five times as much on an
overseas university education as those in the next two fifths.
The
top fifth of families by income spend more than five times as much as the
bottom fifth of families on private tuition and other courses.
Moving
on to transport, the rich appear more mobile and less reliant on public
transport.
Monthly
household spending on bus fares are highest for households in the 21st to 60th
percentiles by income.
The
top fifth of households do not spend as much on public transport, but they
spend significant sums buying and operating cars. They also spend more on taxi
fares.
Some
70 per cent of the top fifth of households own a car, 55 per cent of households
in the second fifth and 43 per cent in the middle fifth. The rich also spend
more on air transport and on holidays abroad.
NO
SMOKING, NO GAMBLING
So
far, richer households tend to outspend poorer households in almost every
category.
Expenditure
patterns are not as clear for necessities like food items, and are most
distinct in areas like education and transport.
But
when it comes to vices like smoking and gambling, the trend reverses. The rich
smoke and gamble less. Why is that the case?
The
link between smoking and social class has been discussed by academics.
In
surveys by Germany's Robert Koch Institute, it was found that men of lower
social status are more likely to smoke. Smokers also tend to be young adults.
A
combination of factors might explain why households earning more income spend
less on tobacco. For example, education is typically strongly correlated with
income. High-income earners are more likely to be university educated.
As
people become more educated, they might understand more about the risks of
smoking, such as heart disease, stroke and lung cancer. Thus, they smoke less.
This
is seen in the household expenditure statistics, where if a household is headed
by an income earner with secondary-school education, it spends four times as
much on tobacco as a household headed by an income earner with university
education.
As
people get older, they also tend to earn more and start families. They might
want to avoid the harm that smoking can inflict on themselves and their
children.
Wealthy
people often want to live as long as they can to enjoy perks such as travelling
around the world, spending free time with one's family and consuming fine
restaurant food. Higher-income families also spend more on health services.
All
these might explain why spending on tobacco declines among higher-income
families.
Being
healthy will reduce expenses for one's lifetime and increase one's enjoyment of
life.
Similarly,
the rich do not spend as much money on games of chance.
Perhaps
they gamble on stocks, as a colleague snarkily pointed out. But smoking could
be correlated with gambling, such that if one gambles less, one smokes less, or
vice versa.
And
perhaps the rich also understand statistics.
New
Toto rules which kicked in this month have made the top prize even harder to
win. The odds have gone from one in eight million to one in 14 million.
But
prizes of $10 are now easier to win. This means more people are likely to be
hooked.
Like
all casino games, however, repeated attempts to play Toto mean the individual
player will ultimately lose more money than he puts in. Small wins will make
him feel better and gamble again, but the typical punter will eventually lose
out to the laws of probability and statistics.
Unfortunately,
both smoking and gambling are addictive behaviours that will trap the unwary
and, more often than not, the poor and less educated.
The
rich have many thousands of dollars to throw at baccarat or blackjack. But,
more likely than not, they are scanning the market for their next investment or
building their businesses to achieve higher sales and profits.
Of
course, plenty of excess money will go to designer clothing, good meals and
sports cars - expenditure that also serves as a display of status.
But
a key difference between the rich and the rest is how they do not waste their
money on things harmful to their minds and bodies.
Ultimately,
that is what everybody else can learn from them.
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