An Assault on Wealth

Is your wealth under attack… from you? I recently read an excerpt from The Perfect Square: A History of Rittenhouse Square by Nancy M. Heinzen. Rittenhouse Square was home to high concentration of very wealthy in the mid to late 19th century. It describes a shift in the relationship between the wealthy and their money.

In the beginning, wealth in this country behaved largely as wealth in the Old World. As more people became wealthy, and they became wealthy fast, they took on trappings of wealth quickly as well.

 "The jeweler J. E. Caldwell, who catered to Philadelphia society, told his friends that after the Civil War there was such extraordinary demand for jewels that it was hard for him to keep up with orders. To his great surprise, he found he no longer knew most of his customers, since many of them were buying their first diamonds.”

The new wealthy were spending their new wealth rapidly without the benefit of the generations of experience that the old rich had. This trend was documented in The Theory of the Leisure Class by Thorstein Veblen. Briefly the newly wealthy began using their wealth and spending itself as a badge of their status and position in society.

If you look around at business owners today it can be seen that many are still adorning themselves with trappings of wealth. This diversion of wealth from investments and productive capital allocation sap earnings and future wealth growth. For example, a $68,000 difference in base price will upgrade your vehicle from a Honda Accord to a BMW 7 Series. That gets you 10 more speakers, one more air bag and a 1.1 second faster 0-60 time for the 11-year life of the car. The same $68,000 of capital is worth $143,000 over that same period if invested at 7%, the average, inflation adjusted return of the S&P 500. That same principle, if left invested is worth over half a million dollars after 30 years.  …or you can have 10 more speakers, one airbag and 1.1 more seconds.

Perhaps a more mindful approach to spending, investing and the trappings of wealth would be a profitable undertaking. Here’s the link to the excerpt article on