How do rich people spend all of that money?

by philg

People with moderate incomes often express an idea of the form “nobody can spend more than $X per year.” So they’re surprised by the public company CEO who seeks to have her golfing buddies on the Board ladle out $20 million per year in shareholder cash. How can she actually spend the after-tax$10 million per year? Or consider Katie Holmes, whose net worth from acting is about $25 million and whose profit from her short-term marriage to Tom Cruise was supposedly about $15 million after taxes (this article provides some background on Holmes’s divorce litigation strategy). She is supposedly returning to the courthouse in an effort to increase the profitability of her child beyond the current $400,000-per-year (tax-free). A reader comment on the Redbook article on the subject is “She needs more than $400 THOUSAND PER YEAR to raise one child? Seriously?” And what about rich retired people? Some of them give half of their money to charity but how can they spend the remaining few $billion?

New Yorker magazine has the answer: “The Couture Club,” complete with photos:

The client on the neighboring yacht, a Russian woman who was relaxing with her family in the fading light, had sailed into Portofino to see the results of Alta Moda’s work.

The [$1700] sundress was a bargain compared to Alta Moda creations, which start at about forty thousand dollars and can cost much, much more.

Suites cost upward of three thousand dollars a night. Portofino, which covers less than a square mile, did not have enough hotel rooms to accommodate all four hundred of the Dolce & Gabbana guests, and some had booked hotels in the neighboring town of Santa Margherita Ligure, or in Rapallo*—a ten-minute boat ride away. A fleet of Mercedes minivans had been amassed from Milan and Genoa, and two dozen boats had been rented for the weekend.

11 thoughts on “How do rich people spend all of that money?”

  1. How do rich people spend all of that money? Probably flying and maintaining their PC12 and R44 🙂

  3. I’m thinking that the folks profiled in that article, and Katie Holmes as well, are not riding in either turboprops or piston-powered aircraft! Perhaps a NetJets membership or BBJ charter.

  4. There is really no upper limit to the amount that you CAN spend – you could have your own personal 747:

    http://www.nydailynews.com/life-style/stunning-photos-show-customized-boeing-747-8-vip-article-1.2129610

    A 600 ft long Superyacht with Helipad (and a helicopter to land on said pad)

    http://www.superyachts.com/motor-yacht-9161/azzam.htm

    A 50,000 sq. foot palace in Beverly Hills (currently owned by the daughter of the dictator of Uzbekiistan

    http://www.forbes.com/pictures/mhj45iklm/le-palais-beverly-hills-ca/

    (Of course you need several houses like this – one in Monaco, one in your home country, an island retreat, one in ski country, etc.

    If you have no shame (i.e. were not raised in a puritanical culture where the rich are ashamed to live a lifestyle that is commensurate with your wealth) then there’s really no problem spending a couple of billion. But a lot of American billionaires never come close to spending their wealth, which leads you to question – what is the point of making money that you will never spend?

  7. Katie Holmes once said she spent her childhood with several sisters, and would change outfits on an hourly basis. She & daughter Suri can buy as many LVMH outfits as they so desire.

  8. They can’t spend all of it, but those transportation toys, real estate, and $10,000 a bottle table wines reflect a sincere effort. Consumption just doesn’t scale like capital accumulation.

  9. Be grateful! Adam Smith’s “Wealth of Nations” ascribes the end of feudalism to, among other things, the developing appetite for ludicrously expensive jewelry among the wives of Barons.

  10. Buy an airplane! Or better yet a Helicopter! You can run a pretty decent 30 foot sailboat for the cost of buying and owning a J-3 cub.

    You can buy a luxury yacht with a full time skipper and sail it every day for a year for the cost buying and owning a Robinson R-44 and flying it 100 hours a year.

  11. Jim: East Coast Aero Club’s retail price for flying an R-44, including all fuel and taxes, is $329/hour. So 100 hours/year = $32,900.

    You are going to pay a full-time captain, the mortgage on a “luxury yacht”, dockage, maintenance, and fuel for $32,900 each year? You can probably find a lot of folks who would want to sign up for that deal!

Comments are closed.