I came across a fantastic article on About.com (something that almost never happens) titled, 10 Secrets of the Capitalist Class by Joshua Kennon. I have never heard this term before, and rather than paraphrasing Mr. Kennon’s definition of the class I think it is more valuable to look at his characteristics of the same. I think what struck me about the article is the fact that it felt like the author understood what I am trying to achieve despite the fact that I feel like I am light-years away.
The author refers them as secrets, I don’t think that is anywhere near accurate. While a great read, nothing here is a secret and I think it actually takes a bit away from the article.
Characteristics of the Capitalist Class
The listed characteristics are from the article mentioned above, and then I included some thoughts of my own:
- They Work on Projects that Pay Dividends for 25+ Years, Not a Single Paycheck – Why I want to Build Multiple Streams of Income.
- They Diversify Income Sources as Well as Assets – The need for multiple types of income is something that can be proven with IRS data. For some reason this is so important to me as I feel like any one of my streams can dry up at any time. Possibly a bit paranoid since it is unlikely that they all dry up at the same time.
- The Capitalist Class Prefers Passive Income Over Active Income – No research reasons why I like dividend paying stocks. This just makes a ton of sense. Although I don’t believe there is any form of true passive income (maybe CDs) but the idea is there…let your money work for you instead of the other way around.
- The Capitalist Class Understands the Nature of Money – The author is referring to the nature of compounding and how it can catapult you to another stratosphere if given enough time.
- The Capitalist Class Makes Its Own Luck – Get Off your Ass and Follow Through with Your Business Idea
- The Capitalist Class Doesn’t Care What the Market Does – I am not sure I completely agree with this one, as I am sure people care, but they don’t freak out. I think the main point he is trying to make is don’t bail on the market every time there is a correction. As Buffet once said, “Be greedy when others are fearful and fearful when others are greedy.”
- The Capitalist Class Understands Taxes – Tax rates are different for different investments/income sources.
- The Capitalist Class Thinks of Business as a Game
- The Capitalist Class Realizes Money is a Fungible Commodity – A dollar is a dollar. Debt is Debt it is the terms and cost of that debt that matters. Income is income regardless of it was in the form of a bonus or your weekly paycheck.
I am not sure why the article is titled “10 Secrets…” as I only counted 9, however, Mr. Kennon provides a profile which is interesting to read:
So, now that you know some of the secrets of the capitalist class, it might be useful to see who the average member of the capitalist class. According to government and private research data, the capitalist class:
- More than 90% of capitalist class households consist of a Caucasian married couple where both spouses work and have children.
- More than 90% did not inherit their money – they are entirely self-made.
- Most own their own business and have lived in the same town for more than a decade. These businesses are unglamorous and include things such as HVAC, commercial plumbing, self-employed lawyers, accountants, and real estate investors.
- More than 90% own their own home and have lived in it for years. Fewer than 7% rent or lease.
- More than 90% graduated from college, but grades had no correlation with their financial success. In other words, students with a C- average were just as successful as those with an A average.
Interesting profile. Not sure I am a fan of the mentioning of Caucasian as a profile piece. I think almost anyone in America, regardless of where you stand economically, can use the lessons as something to strive for.