Interesting article. I know several people who are probably more financially successful than most, but you'd never know it by the way they live. I've also met plenty of people who would like to appear rich. The interesting thing about this current economy is that it is starting to separate out the real haves and have nots.

why does having a large house mean anything about one's wealth? It doesn't at all, just like going on extravagant vacations doesn't..The whole notion that people who have large homes "live beyond their means " is nonsense..Many people who live in small homes live beyond their means

My parents are the typical "millionair next door." Started with NOTHING and when Dad retired last year, were worth several million. All living in medium ranch type homes, driving cars 7 to 10 years, paying cash for everything. My dad's only extranvances were a few years where he bought my mom very expenisve diamond jewelry for their anniversary, and for my mom it as a trip to Ireland with her best friend. Other than that, it's cook at home every night, watch TV instead of going to movies, etc. I was raised so frugually. Right now they have their biggest house ever - 2,300 ft2, which by our cit's standards is small.

qdwag - "why does having a large house mean anything about one's wealth? "

I think that was half the point of the article.

The other side is that buying a huge house generally will make you less wealthy, not more, even if you can "afford it." Between interest payments, property taxes, utilities etc maintaining a McMansion can really drain a bank account.

If 2 people have the same income, but 1 spends $1k more per month on living expenses, the second is going to be significantly wealthier in the longrun.

Bill, my comment as directed to the OP not the article..It amazes me how those who choose the "frugal lifestyle" feel a need to ridicule/comment about those who own large homes, this happens on this site frequently...Have you EVER seen a post/thread berating those who live frugally to the point of stupidity? And who cares how much you've saved by being frugal? I am not advocating to spend with no concerns about the future,but stockpiling your cash for a day that may never come is just as ridiculous..

TO EACH HIS OWN....For the record,i have the "large home" can easily afford it and its upkeep,and still save $$$ each month for college/retirement/emergencies...

More power to you. I don't live in a shack either, but I think lots of people buy much larger homes than they need and it is mostly a status issue. As we've seen recently, many people who bought very large homes didn't really have the very large income to match. They were mortgaged to the max and had nothing to fall back on in tough times.

I kinda agree with qdwag, the OP mentioned "that when people come to our house for the first time, they are amazed that it is so small (and not a McMansion), given our income" huh, do you discuss your income with everyone who comes to your house and they they actually discuss with you their amazement at the size of your house. Now that fact in itself is amazing. No one who comes to my house knows my income (big or small) and no one has ever commented to me on the size of my house (big or small). I can only surmise you need to find new friends.

The new pride of frugality is tiresome. Too many people gloat and feel superior to another person based on their personal habits, when in reality it all says nothing about the individual's important values. As if living in a small house and hoarding one's money is superior.

billl, the article mentioned net worth as more of a measuring stick, a big house may or may not increase one's net worth, irregardless of monthly income.

I think most people have a general idea of another person's income whether it is discussed or not. If you know a person's employer, profession, experience, etc., it's easy to make a ballpark guess on how much money another person makes. People do comment on other people's houses without an invitation to comment. They may try to preface it as a compliment, but usually one way or another, a comment will be forthcoming.

I don't understand the disdain of frugality. For many of us, it was the way we were raised and the way we are/were able to better ourselves. My grandparents were raised in complete poverty. They had no choice, but to be frugal. My grandparents used those same principles to better the lives of their children. They weren't completely able to raise my parents out of poverty, but my parents had learned the skills to do it for themselves. My parents, in turn, raised me and my siblings and we ended up with a higher standard of living. At this point, one of my fears as a parent is that my kids have it too easy and aren't learning the skills they need to be successful because they've haven't had to learn to make do or fix something that's broke. Minimizing our house size in comparison to income or keeping a vehicle for nine years even though we don't have to is our way of teaching the kids to manage their finances.

>>Minimizing our house size in comparison to income or keeping a vehicle for nine years even though we don't have to is our way of teaching the kids to manage their finances. >>

A better way to do it is to make your kids responsible for their own purchases. Too many parents buy kids their latest "gotta have this" items instead of teaching the kid to put his/her own skin in the game and really think about the cost vs value proposition. I'm not saying anyone here does this, but I'm sure we all know people of whom this is sadly too true.

It also astonishes me that parents allow their kids to live rent-free forever. My mother said, "Graduate high school, and you're on your own unless you go to college. And then it's out and don't come back unless invited to dinner"!

Conversely, my DH comes from a culture where you don't leave home until you get married, period. So for him it's not a hot button as it is for me.

There were a lot of stupid things I didn't do when I was young, because I knew early on that nobody was going to pull my b**t out of the fire. The financially stupid things, yeah, those lessons I had to learn on my own, LOL.

I don't think there's anything really bad about people trumpeting their frugality, it's just what's in fashion right now. Just as excess - the "too much is not enough" - was the fashion in the '80's and '90's.

The real issue for individuals is always to SPEND WISELY. Nobody except Bill Gates and Warren Buffett has enough money to spend on everything, so the question is, do you know how to prioritize your spending to maximize your enjoyment of life?

We have friends that are very frugal. Unfortunately the husband's frugality extends to not paying anyone to manage their investments, and he is hands-down one of the worst investors I have ever known. They have made decision after decision through the last 30 yrs, that have proven to be short-sighted or just plain wrong. It's literally painful to watch, but outside of sending him financial articles, there's absolutely nothing we can do to help. It's like watching a train wreck in slow motion...extraordinarily frustrating.

I must be very dumb because I have no idea what other people make, even when I know their profession or employer. Do they make $50k or $250k annually, I just don't know?
I just can't imagine commenting in amazement that someones house is so small.
I don't believe anyone has shown disdain for frugality, it is the show of superiority for frugality that is my problem.
I consider myself frugal in some areas a spender in others. My biggest splurge is my house and furnishings, I could pay less, but I care greatly about where I live, and the area I choose to live in is very expensive. I don't care much about clothing or other fussy things, I think I'm frugal in that area.
I don't judge other people that like clothes and spend lots on them or live in cheap housing, I just see different priorities.
I agree it is sad problem if a person buys a large or expensive home for the status, but the assumption that everyone buying a large or expensive house can't really afford it and is stretching for the status symbol is the tiresome thought I keep seeing.
It is the "he has a big house, but I'm a better person for my small house" syndrome.

OK already - I'm in the Fed Government, near Washington, DC. All of us know pretty much what each other make - that is just life in the Fed govt. I can totally understand that if you are in the private sector, your salary is more private. For a long time, there was actually a web site where you could look up the salary for anyone in the Fed Govt.

As for my "crack" about McMansions - around here they cost over a million, and usually above 1.5 million. It's all relative, obviously.

I apologize and will go crawl back into my corner now.

Although you can not look up each individuals Fed salary if you know their grade you can look up the range.

I agree that the new fugality is tiresome. Our mothers and grandmothers were so happy not to have to spend time reusing things, washing and turning reusing sheets and towels. The joy of purchasing a loaf of bread that you did not spend time in a hot kitchen doing amoung other things seems silly to me. Using what you have or not using it should not be a thing to brag about.

I worked with a guy that was at the top of the scale, inherited large amounts from both sides of his family, worked as much overtime as he could but would not go to a resturant without a coupon. On Mondays he went from person to person to get his coupons for the week.

Being wealthy I have always found is how you look at money and the things it purchases. I do not want to go back to the labor that some seem to find so rewarding for doing. I would prefer that the labor that I do is the reward for myself. It is not something I want to parade so my friends can see how righteous I am.

I think living overly frugal is almost as big a mistake as living beyond your means. In both cases, you reduce your consumption below what it could be. I've never understood the drive do live frugally and die with millions. What's the point? You can't take it with you.

I'd agree that being overly frugal to the point of being miserly is undesirable. I've always seen frugality as more of an efficiency where you spend your time and money where it's important. Hopefully, when all is said and done you have a bit of money leftover to put towards the things you find to be fulfilling. Frugality doesn't necessarily mean that a person has to be cheap. It's more of a matter of combing the cost/benefits to get the best quality within the the constraints that your income and skills provide.

"...reduce your consumption below what it could be."

So what exactly is your consumption supposed to be? We are older, kids grown and gone, both cars recent vintage and paid for, a mortgage on a very nice home, we buy what clothes we want, we eat out when we want, we give gifts to kids and grandkids, we don't like travel that much, we are not gadget-freaks, and we have our favorite charities. We owe no money other than the mortgage and regularly recurring utilities and the like.

Money that I don't spend today will be spent after we retire. I have no plans to take it with me.

This part just drive me nuts:

"In Stanley's new book, a millionaire is defined as someone with net-value investments of $1 million or more. The investments include cash, stocks, bonds, mutual funds and equity shares in a private business. The author said he eschewed the traditional way people calculate wealth, particularly as it relates to the value of a home. If your net worth was $1.5 million with 85 percent of that from your home, and the value of your home depreciated by 50 percent -- which it has for too many people -- then your wealth wasn't real. "

An asset is an asset. If you had 85% of your nest egg in stocks that dropped 50%, then by this standard that wealth wasn't real either. Happened in 2008-09, could happen again. What if your net worth was tied up in a private business that is getting wiped out by technological change?

I'd be fine if he talked about houses being illiquid, or that the carrying costs are a drag on your income/lifestyle, or that if you are unwilling to move you might not be able to capitalize on this wealth beyond imputed rents and I would have agreed.

Probably just the accountant in me.

I like Andrew Tobias's definition of a millionaire. He says,"a millionaire is someone with 5 million or more, because lets face it a LOT of people have a million dollars."

I like being frugal, it makes me feel like I'm NOT being ripped off. :0) I also like being green, recycling as in shopping for "used" and not putting used things in a landfill. Also shopping a thrift store or Craigslist is like treasure hunting and everyone, seller and buyer is a winner there!

Thanks to the OP for sharing the article.

bill1: "I don't live in a shack either, but I think lots of people buy much larger homes than they need and it is mostly a status issue."

I have no problem with the first part of your statement, but the second part is just another example of the routine insults and putdowns on this forum aimed at anyone who spends money in excess of what a poster thinks is warranted.

If someone buys a large home they are doing it for "status."

If they drive an expensive car, it is just to be ostentatious and to "keep up with the Joneses".

If they buy organic groceries or shop at an expensive grocery store such as Whole Foods, they are doing so only to impress their friends and neighbors.

Cmarlin said it best earlier in this thread. It is all getting very tiresome.

bethesdamadman - you are entitled to your opinion, but I think it is rubbish. Home sizes have exploded in the US in the last couple of decades even as family sizes have reduced. We've got a massive "home improvement" industry that has arisen out of nothing. The country has a serious case of "keeping up with the Joneses." We went through a period of negative savings rates as a country in which people were literally spending every cent they made plus borrowing to spend more. Much of that money was going towards housing.

Without a doubt though, there are (and have always been) people who manage their money well enough that they can actually afford the finer things in life. That is rightly an advantage for those people who work hard and make good decisions. I don't begrudge those people a cent. However, a sense of entitlement has infected the nation. Everyone seems to think they "deserve" all the luxuries that wealth affords. As a country, we have been living well beyond our means and it has to stop. If you are in the minority of people who was responsible all along, great! Just don't forget the fact that you are in the minority.

colorcrazy I see no need to apologize for anything. This forum is for stating one's opinions and as long as you are not taking pot shots at an individual, I see nothing wrong with any opinion one wants to give.

I used to live in No Va - many years ago. The 2 story home I lived in with my mom which was bought for 55k, was well worth over 1.5million a few years ago. I doubt had we stayed there that we could have afforded the taxes on it, but who knows. I was a teen at that time and didn't have my eye on any particular career. Anyhoo...

Large towns or small, people are people and some are savers and some are spenders. It seems not long ago, people were being classified as the "real or old-money" rich and the nouveau riche, and not all comments about either were positive.

I am at the beginning of the boomer generation and knew about the hardships of my grandparents who went through the depression. I acknowledge that people of that generation and the following generation (my mom) wanted more for their children - but it wasn't just material things, it was a better education, better jobs, etc. I am more of that generation, but I think that each ensuing generation lost sight of what better meant. With the explosion of technology came more means of advertising and the "glorifying" of what one could have (or according to the voices what one SHOULD have.) And, agreeing with Bill here, a sense of entitlement.

In my opinion if people have a lot of money and want to spend it on stuff, no problem, fine by me. When people spend money and buy things it creates jobs for the people who produce that stuff. What I don't care to see however is people overspending on stuff they don't need, incurring a lot of debt that they may even default on, not saving for emergencies, retirement or long term care, and then expecting the government (including taxpayers who have been frugal and didn't overspend) to take care of their needs.

I'm one of those people who lives below my means in large part because I'm saving for retirement and anything else I might need to sustain me for the rest of my life. When your savings are in a pre-tax 401K it's amazing how much you need to allow to pay your income tax on that money - which could be even more if income tax rates go up to cover the cost of recovering from past excesses.

Okay, enough - I think I'm drifting off topic.

A lot of good, albeit, divergent points, have been made here. I agree with Cmarlin that one can be as smug about being frugal as one can be arrogant about being well-to-do. Either way, the person is forming their self-concept & identity around their spending habits or/and net worth.

Billl's point that home sizes have exploded is noteworthy. As someone who was house hunting in 2006 (& purchased when the market was sky high) I was looking around like crazy for a small house in a decent neighborhood. Such a configuration is nearly impossible to find! I bought a house with a little under 2600 sq. ft. Would I have preferred 1700? Yes. I bought a house with a big front lawn. Would I have preferred a smaller lawn? Absolutely. It just didn't work out that way.

Billl also notes the "massive home improvement" industry. Yes, & I "need" to update my kitchen & baths to the tune of oh so much money it makes me sick...IF...I ever am to sell this house. Why? Because expectations have been greatly influenced by this reno trend. I was just "out of it" enough not to even realize when I bought the house, that my rooms were dated! (Our seller was really lucky!) I can make peace with my dated rooms, but will suffer at selling time if I don't "keep up with the Joneses!"

I have little if any need to impress others, but I need to survive in this world! There are lots of reasons why people do what they do. Many of us are just trying to deal with the unanticipated changes, I guess, brought about by the economic downturn. We feel the need to protect this fragile investment called a "home." It can be scary & depressing, but we've got to hang in there, & have faith & hope that things will "bounce back."