NEW YORK (MainStreet) — David Mech made his fortune in the entertainment industry and in real estate investments. Although the 37-year-old is independently wealthy, he's frugal especially during the holidays.
"It isn't about calculating savings by not buying gifts," Mech said. "It's more of an attitude the rich have about money that is geared toward building wealth not destroying it."
The Boca Raton-resident buys real estate and stocks, because they increase in net worth over time. "Wealthy people buy assets that appreciate not depreciate," Mech said. "Although I could pay cash for a Ferrari, I choose to drive a Honda, because cars depreciate."
Total U.S. consumer spending on gifts this holiday season is estimated at $71.3 billion, but the affluent or top 10% are expected to spend only $20.7 billion compared to $50.6 billion for the consumers that earn $100,000 or less annually, according to the 2013 Holiday Forecast Study from American Express Publishing and Harrison Group.
"While holiday shopping will be conservative among the top 10%, it appears the remaining 90% are opening their wallets as they return to more traditional holiday spending patterns after a dismal end to last year's holiday season," said Dr. Jim Taylor, vice chairman of Harrison Group.
According to a Spectrem Millionaire Corner study, a full 71% of wealthy consumers plan to spend the same amount of money this year over the December holidays for gifts as last year, and 94% are not planning to make a major holiday purchase, such as a car, new jewelry or other expensive gift.
"Most rich people are aware that during holidays there is a substantial mark-up on gift items that are popular that year," said Ginie Polo Sayles, author of How To Meet The Rich for Business, Friendship or Romance (Berkley Trade 1999). "They often buy off season after the holidays for next year's gifts."
About 74% of Americans are likely to make a holiday spending budget, but 49% are not completely confident they can stick to it, according to the 2013 Capital One Holiday Survey.
"You would be amazed at how good their record keeping is," Sayles said. "They respect their inheritances and privileges and protect it with good bookkeeping."
If budgeting is key to how the rich save money, the average American has a lot to learn.
"Many wealthy spend less during the holidays, because they run their homes and personal lives with the same precision as a business," Sayles added.
Another tried and true holiday secret of the wealthy is to pass the fruitcake.
"The rich are often given complimentary privileges or gifts in appreciation by high-end merchants or service providers, which they then re-gift to others, because they will not use it and have no need for it," Sayles said. "Re-gifting cuts spending costs."
When it comes to holiday travel, largely 50% of the wealthy will stay home and only 11% plan to go on a vacation, according to a survey by Spectrem Group's Millionaire Corner.
"The rich travel less than others during the holidays, because they do not want to go places when the masses are likely to go and they know that airfare and accommodations are more expensive at that time," Sayles said.
Another reason some wealthy may choose not to travel during the holidays is to avoid less fortunate relatives. Only 29% plan to see family.
"All their family members who have less money want to spend the holidays with them in hopes of monetary gifts, which they usually know they will receive," said Sayles.
The wealthy are generous in December but typically for reasons other than just holiday cheer.
A full 73% do plan to donate to charity this month as 2014 approaches.
"The rich scout ways to get rid of money before the year ends to benefit their taxes for that year," Sayles said. "Charitable giving adds a halo to the rich giver and most charitable organizations genuflect with gratitude. $10,000 is the legal gift-giving amount to avoid a gift tax at the end of the year."
As for celebrating New Year's Eve, 37% had no plans to spend any money at all with 28% saying they will go to bed early to start the new year rested.
--Written by Juliette Fairley for MainStreet
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