Where You Live Affects Your Ability to Build Wealth
A multitude of factors go into building wealth, but perhaps none play as big a role as where you choose to live.
That's according to Sarah Stanley Fallaw, the director of research for the Affluent Market Institute. She coauthored "The Next Millionaire Next Door: Enduring Strategies for Building Wealth," in which she surveyed more than 600 millionaires in America.
"The key to wealth building is to live in a home that one can easily afford," she wrote, building upon research from her father, Thomas J. Stanley. In his book "Stop Acting Rich," he said one's home or neighborhood is their greatest detriment to building wealth.
"If you live in a pricey home and neighborhood, you will act and buy like your neighbors," he wrote, adding: "The more affluent the neighborhood, the more its residents spend on almost every conceivable product and service."
So if your high-income-producing, high-consuming neighbors roll up to the driveway in a BMW or a Mercedes-Benz, it's likely you'll feel the urge to do the same. This pressure to keep up with the Joneses can also be affected by lifestyle creep, the tendency to spend more whenever one earns more.
But it's not just neighborly influences that can affect one's overall wealth — the home's price relative to your income also affects your ability to accumulate wealth over time, Stanley Fallaw said...
