Meet the 'Hand-to-Mouth' Wealthy

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By Robert Frank

Some call them HENRY's -- High Earners Not Yet Rich. Others call them the Faux Riche -- people who look rich but aren't.

In my last book, I called them the High-Beta Rich, a new class of wealthy whose spending and wealth fluctuate wildly with markets.

A new paper calls them the "hand-to-mouth" wealthy. And it says there are 70 million such households in the U.S., suggesting that wealth today is far more precarious than many think.

The paper, by economists Greg Kaplan, Giovanni L. Violante, and Justin Weidner said these families often own homes, cars and boats, but spend virtually all of their paychecks.

The high costs of college and other bills has made many wealthy families feel more vulnerable to economic shocks -- especially when their wealth is tied up in illiquid assets.

"The wealthy 'hand-to-mouth' are households who hold little or no liquid wealth (cash, checking and savings accounts), despite owning sizable amounts of illiquid assets," the study said.

The paper said that when governments create stimulus programs, they target the poor. But they might do well to also target the hand-to-mouth wealthy, since they too are likely to spend the extra money and help the economy.

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Plenty of my clients are in the category of "hand to mouth wealthy", as is evidenced by their nervous anticipation of my invoices. Some react with actual distress over amounts easily manageable by "poorer" clients. The difference is that my less "fortunate" clients budget for reality, while the "pseudo-rich" budget for glamour and recreation.

When your water heater explodes, or your toilets block up, your spending preferences become moot, and my 17 year old truck pays off once again.

June 02 2014 at 8:45 AM Report abuse +1 rate up rate down Reply
Will Marinero

This article is written by someone who didn't read the report. Let's start out with stating that 70 million US households are "Hand to Mouth Wealthy".

There are only about 120 million households in the US. The actual report states that 31% of these households are Hand To Mouth (meaning almost no liquid assets) and of those, 2/3 are what they consider "Wealthy HtM". So the total number of Wealthy HtM households is around 24.8 million. Not 70 million.

And they're not really wealthy. What the report defines as wealthy is not what anyone else would call wealth, they are simply people who are not dirt poor. They have average illiquid assets (mostly homes and retirement plans) of $50,000. That kind of money won't make V. Stiviano return your phone calls.

What this report says is millions of middle class Americans live hand to mouth, because their earnings barely keep up with their expenses. Perhaps that isn't as exciting as "billionaires who spend everything" but it's a lot more real.

PS: Read the report here:

May 14 2014 at 3:46 PM Report abuse +1 rate up rate down Reply

They think the Dems will take care of them when they run out of money.

March 25 2014 at 8:56 PM Report abuse -4 rate up rate down Reply

I love the way AOL keeps using the icon of Obama's presidency pictured at the top.

March 25 2014 at 8:55 PM Report abuse -2 rate up rate down Reply

Spending virtually all of one's paycheck, and holding little in cash, checking or savings accounts is not the same and shouldn't be conflated.

It's entirely possible or even probable that many very wealthy people (those with high net worths) don't keep much of their wealth in cash, savings or checking. Returns range between little and none on these asset classes, and the wealthy don't like their money sitting idle. But intentionally minimizing holding that don't generate a return is a lot different than spending all of one's paycheck.

March 25 2014 at 11:27 AM Report abuse rate up rate down Reply