How to Live Rich

When the middle-class millionaire wants to wow her, he buys a diamond. Only the millionaire buys the rarest stone, one no one else will have.

On his travels, the millionaire goes where no one can find him--to an exclusive island resort featuring $185,000 fractional memberships in luxury vacation homes.

And at home, he relaxes not before the plasma TV but in his $150,000 yoga room where he receives massages while gazing at a Japanese-inspired garden outside.

These kinds of expenditures are becoming increasingly common among the fast-growing class of "middle-class millionaires." Sixteen-and-a-half million Americans representing a little over 8% of U.S. households fall into this group, which controls almost two-thirds of the country's wealth. They are baby boomers with a median age of 58 who obviously listened to their mother's advice to get a good education and settle down--because three-quarters earned a bachelor's degree and 82% are married.

Would we know if we brushed shoulders with a middle-class millionaire in the hallway? Probably not. "They're successful entrepreneurs," says Milton Pedraza, CEO of the Luxury Institute, a New York City-based research firm. "He's more likely to be the guy that owns 10 McDonald's franchises, the doctor with a MRI clinic, the owner of a small ad agency or even a trash removal company."

But even with a million in the bank, these people aren't all that rich. Russ Alan Prince, president of Prince & Associates, a private wealth research firm and author of The Middle Class Millionaire and The Sky's The Limit, says that today, having a million dollars net worth doesn't mean you are really wealthy. He categorizes the middle-class millionaire as those with $1 million to $10 million, the rich with $10 million to $30 million, and the super rich with more than $30 million.

Pricey Perks

Still, a million dollars is nothing to laugh at. Though nationwide spending has slowed on fears of a slumping economy, this set is continuing to splurge on pricey home improvements, wine and spirits, cars and clothes.

But the middle-class millionaire is not content to simply upgrade the tiles in his bathroom. He's likely building a professional grade home spa. In researching The Sky's The Limit, Prince spoke with a hedge fund manager who covered an entire wall with plasma screens and surround sound at a cost of $40,000 so he could wind down at the end of a long day by playing "Guitar Hero" and Nintendo Wii. Prince also worked with a Wall Street executive who spent over $60,000 to have a boxing ring installed in his Manhattan apartment.

Those kinds of buys make super high-tech security systems throughout the home a necessity. When traveling one of Prince's respondents keeps track of his home by BlackBerry, and, if something looks suspicious, he can fill his house with tear gas at the touch of a button. Safe rooms are also becoming popular, says Prince.

Jewelry is the ultimate symbol of wealth, and in this category, the bigger the better. Today's millionaires invest in high end pieces from companies like Zydo or Di MODOLO. This group is looking for custom-made baubles and won't blink at spending $75,000 on a necklace.

Fashion and accessories are another hot opportunity to spend. A good example is the owner of a plumbing company who, since making it big a couple of years back, treats his wife to a $35,000 Rene Lautrec handbag bag twice a year.

While jewelry and handbags may satisfy the ladies, watches seem to scratch the itch for men. Picture this: One of Prince's respondents owns two limousine companies and sells one for $20 million. After years of collecting watches in the $1,000 to $2,000 range, he rewards himself by splashing out on a $200,000 time piece.

Diamond-encrusted, of course.