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They Spend $2 Million Per Year On WHAT?? Spending Habits of The World’s Richest People

7/26/2015

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In his fascinating book, Richistan, Robert Frank delves into the lives of the new rich and how they spend their fortunes. Frank fashions Richistan as a completely different country populated entire by millionaires who acquired their wealth during their own lifetimes – timber kings, fund managers and eccentric entrepreneurs, but no “old money”. 
While he also talks in depth about the nouveau riche’s social ambitions and the psychological stress caused by “keeping up with the Joneses”, one of the most intriguing parts of the book involves the “I can’t possibly spend it all” mentality, which leaks into their lavish spending habits.

Let’s take a look at some typical Richistani annual expenses…

$50 Million Net Worth

Gardening/pools maintenance - $140,000

Charities - $500,000
Restaurant/bars - $60,000
Cars - $300,000
Beauty salon/spa - $27,000
Clothing - $30,000
Club memberships - $225,000
Political contributions - $61,000


$80 Million Net Worth

​House staff and personal assistants - $315,000

Gardening/pools maintenance - $146,000
Home furnishing and appliances - $93,000
Household supplies - $43,500
Travel - $500,000


$1.2 Billion Net Worth

Real estate taxes - $900,000

House staff and personal assistants - $2,200,000
Charity/philanthropic events - $3,000,000
Restaurant/bars - $250,000
Cars - $1,000,000
Beauty salon/spa - $200,000
Clothing - $300,000
Club memberships - $500,000
Entertaining (at home) - $2,000,000

Frank points out that this massive amount of spending has a trickle-down effect on the economy. He gives a story of a stonemason who was able to purchase a Ferrari because he had been building tons of stone walls for hedge fund managers.

Financial columnist Dan Gross calculated that the top 1% of earners in New York City support over 150,000 jobs. If a mega-rich fund manager spends $1 million on services (like a driver, house staff, etc.), he could support around 25 livelihoods.

What do you think about the spending habits of the ultra-rich? Let me know in the comments!

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Old Money vs. New Money: Profiles of America's Richest Families

7/15/2015

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What is the difference between old money and new money? The difference is Jay Gatsby vs. Jay-Z. In this post, “new money” refers to first-generation wealth, whereas “old money” has been passed down for a few generations.

 Because they’ve earned their wealth in the first generation, new money has a higher propensity to spend their money. You tend to find they have more of an “it’s MY money, not my kids’” attitude and use the money to further their own enjoyment. For example, Mark Zuckerburg (an example of new money) spent $30 million to buy the four houses surrounding his current home. Old money wouldn’t spend as lavishly. Old money usually saves more, with a goal to keep the money in the family as long as possible. Old money has a tradition of large inheritances, but new money doesn’t have a tradition at all. They’ve just made their way into money!

While referring to old money as “snooty” may seem like a stereotype, new money tends to be more relaxed and closer to the public. This is because a lot of new money millionaires have built their wealth from the ground up – they were once just regular people. Old money has never had to live without money, so it’s more difficult for them to relate to others. Because of this, old money tends to socialize with those in their earnings bracket and keep a tight circle.

New money tends to be flashier. They’re more likely to buy Ferraris and Porsches, while old money strays away from flashy and luxurious. Old money will go for a classic style and something that gets them from point A to point B. New money has a harder time saving and planning with their wealth, because they haven’t had their entire lives to be wealthy. Old money is made up of planners and savers, who know what it’s like to have been wealthy their whole lives. However, they won’t spend as much because they might have concerns about being able to recreate that wealth. New money and entrepreneurs have more confidence about making money. They think, “I did it once, so I can do it again!”

Here’s a profile of “old money”:


  • You use your money for private schools, books, genteel hobbies and travel. Because you’ve inherited a lot of “stuff” (furniture, paintings, cars), money is spent to keep it all in great condition. 
  • Your clothes are all in excellent condition and they last a long time. You consider it a mark of distinction to be able to wear the same clothes that belonged to your father/grandfather. You avoid anything trendy and go for a clean, classic look. 
  • You are the same political affiliation as your father. If he was a Republican, so are you. You vote however you like, but your party affiliation is the same as his. 
  • You are heavily involved in social and civic organizations. Even if you never go, you are a member of your local country club. You are on the board of trustees at your school/college and make regular donations. Finally, you are affiliated with an older Protestant church and make donations (or tithes) even if you never attend services. 

Here’s a profile of “new money”:

  • You attended public school and didn’t much care for it. While you’d prefer that your children go to private school, you appreciate the experience public school had on your personal development. 
  • Politics don’t matter as much to you. You’re much more liberal with your beliefs and you vote with whatever political party you believe is best. 
  • You love flashy, trendy stuff (like this $10,000 purse). You get all the latest gadgets, cars and clothes. 
  • You are self-reliant and take full responsibility for your life. After all, you created your wealth and you are the captain of your own ship. 
  • Because you aren’t born into a circle of wealth, you love to network. You have a contact list full of people who value your friendship and who will help you get to where you want to be. You never stop networking. 
  • You work hard. You know that without hard work, you’ll get nowhere in life. You don’t depend on luck and you expect the utmost out of yourself. You’ve sacrificed everything to get where you are now and you know that when you’re “on”, nothing can stop you. 

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The Importance of Setting Goals [VIDEO]

7/11/2015

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Too many people go through life without setting any meaningful goals. Having no financial goals can kill your chances of ever building wealth. It's critical to have a destination in life.
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Four Secrets of Financial Independence

7/4/2015

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Happy Independence Day! Today marks America’s 239th birthday (just imagine how much you’d have if your money compounded that long) and it’s time to fire up the grill and light some fireworks.

Today is a day to reflect on and appreciate the opportunities and freedoms we enjoy in our everyday lives. One of the greatest freedoms that we enjoy is the ability to add value to society and collect wealth as a result.

To help celebrate this special occasion, I’d like to share with you five simple secrets of one of the most important types of independence – financial, that is.

Secret #1: Income does not equal wealth. Too many people believe that a high-paying job will be their ticket to financial independence. Of course it will be easier to become wealth if you have a lot of money flowing to you, but you have to spend less than you make. It seems like common sense, but studies by Thomas Stanley have demonstrated that high-earning doctors are the least likely group to amass significant wealth.

The real secret to wealth is spending less than you make. If you stopped working today, how long could you maintain your standard of living? Think of it this way: if you’re earning a high income from a job, you could get fired any day, but the only way to lose wealth you’ve created is to spend it.

Secret #2: The only reason to save is to invest. Please do not save just to save. The only way to take advantage of true money-growing opportunities is to invest. Becoming financially independent can take some time, so be patient. If you continue to funnel money into your investment accounts, you’ll grow your wealth on a larger scale through the magic of compounding. You can’t get much compounding if you’re saving just to save. After all, most savings accounts are paying less than 1% right now.

Stay disciplined and keep investing until you reach the critical mass where your interest generated is greater than your expenses. $10,000 earning 8% is $8,000, but $1,000,000 earning the same 8% means an extra $80,000 in your pocket.

Secret #3: Taxes can make or break you. When it comes to taxes, get the best advice that you can afford. Interview multiple accountants and make sure that the value they provide is greater than what you’re paying. Everyone’s tax liability is different, so you must consult a professional that understands your situation.

Uncle Sam wants to make sure that you pay your fair share, but please understand that this doesn’t mean your entire income, it just means your taxable income. You can lower your taxable income through real estate, 401(k)s, IRAs and municipal bonds. By reducing your taxable income, you get a few extra dollars to keep investing, leading to huge returns as time goes on.

Secret #4: Don’t miss out on life along the way. This requires a fine balance. You don’t want to sacrifice tomorrow for today, but you don’t want to be miserable today either. Financial independence is a journey and it requires some long stretches. If there’s something that you’ve always wanted to do, don’t postpone your happiness, because you don’t know what tomorrow will bring. 

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