Most people would not know how to spend sums like several million wisely
Posted by John Reed on
The right things for rich people to buy.
This was written in response to a question from one of my Facebook readers.
My house is 3,400 square feet, .36% of an acre lot, five bedrooms, office, 3-car garage. $2.643 M value. 29 miles east of San Francisco.
.
Many ordinary people are eager to get sums like $4M or 5M or more, and sort of assume that would be great and everyone knows it. No, it is more money than a person can spend on ordinary wants and needs. If you suffer a financial disaster like your first son gets admitted to an Ivy League college, (been there, done that in 1999), you may need the $4M or $5M.
.
But after you have bought a median home—about $400,000 now nationwide in the US, and each of the driver age people in your family has a car, about all you “need” money for is a couple of vacations a year.
.
When my wife and I first became millionaires around the mid 1980s, we had our current home, three sons in private school, two cars, then we started getting extravagant. For a while, we had a woman who was studying to be an accountant pick up our kids from school and make dinner for us. I started looking into custom-made polo shirts.
.
A number of our similarly affluent friends owned a resort-area second home. One of them had no kids. We never bought a second resort area home. And never regretted it. Our friends who did buy them went there often initially, then the kids wanted to stay home with their friends when the parents went to the vacation home, then they let the kids bring their friends, they they just got tired of going there and sold it. It is true that often with the rich, to the spoils belongs the victor. That is, a rich man finds his many possessions and houses become an unwanted job.
.
Private planes are another extravagance common among the nouveau riche.
.
The wealthy are also often members of rich-people clubs. We go to those clubs multiple times a year at the invitation of friends who are members. We are members of the Marine Memorial Club which is in a 12-story building that used to be a rich women’s club. That club has a list of reciprocal clubs around the US and world that we have stayed in. Visiting one is about the same as making a reservation in a really nice restaurant which we do about once a month. Our particular club is not expensive, but it is quite the same in every way other than prestige.
.
One sensible thing we “buy” now is a diversified portfolio of assets that protect us from various risks like hyperinflation and depression. So we have a sort of normal financial us where we live off our social security and my wife’s pensions and interest on our bank accounts in the US and around the Pacific Ocean and sales of my books.
.
Then there is hyperinflation us with foreign currency, two home mortgages, equity in two homes, inventory, stocks, cars and all sorts of computers and other equipment, commodities, and a stock pile of food and other necessities. And there is Depression us with US and foreign bank accounts, inventory, social security, pensions.
.
So the main truly useful thing you really can do with multi-millions is hedge against normal, inflation, and deflation, and other disasters like war and natural disasters. But most ordinary people who come into a lot of money due to inheritance or lottery or lawsuit settlement have no clue about that and instead start buying planes, yachts, large land areas, overly large houses, second and third homes, more than one car per driver, manic travel like around-the-world cruises, private schools that are actually less meritorious than public schools in expensive American neighborhoods.
This was written in response to a question from one of my Facebook readers.
My house is 3,400 square feet, .36% of an acre lot, five bedrooms, office, 3-car garage. $2.643 M value. 29 miles east of San Francisco.
.
Many ordinary people are eager to get sums like $4M or 5M or more, and sort of assume that would be great and everyone knows it. No, it is more money than a person can spend on ordinary wants and needs. If you suffer a financial disaster like your first son gets admitted to an Ivy League college, (been there, done that in 1999), you may need the $4M or $5M.
.
But after you have bought a median home—about $400,000 now nationwide in the US, and each of the driver age people in your family has a car, about all you “need” money for is a couple of vacations a year.
.
When my wife and I first became millionaires around the mid 1980s, we had our current home, three sons in private school, two cars, then we started getting extravagant. For a while, we had a woman who was studying to be an accountant pick up our kids from school and make dinner for us. I started looking into custom-made polo shirts.
.
A number of our similarly affluent friends owned a resort-area second home. One of them had no kids. We never bought a second resort area home. And never regretted it. Our friends who did buy them went there often initially, then the kids wanted to stay home with their friends when the parents went to the vacation home, then they let the kids bring their friends, they they just got tired of going there and sold it. It is true that often with the rich, to the spoils belongs the victor. That is, a rich man finds his many possessions and houses become an unwanted job.
.
Private planes are another extravagance common among the nouveau riche.
.
The wealthy are also often members of rich-people clubs. We go to those clubs multiple times a year at the invitation of friends who are members. We are members of the Marine Memorial Club which is in a 12-story building that used to be a rich women’s club. That club has a list of reciprocal clubs around the US and world that we have stayed in. Visiting one is about the same as making a reservation in a really nice restaurant which we do about once a month. Our particular club is not expensive, but it is quite the same in every way other than prestige.
.
One sensible thing we “buy” now is a diversified portfolio of assets that protect us from various risks like hyperinflation and depression. So we have a sort of normal financial us where we live off our social security and my wife’s pensions and interest on our bank accounts in the US and around the Pacific Ocean and sales of my books.
.
Then there is hyperinflation us with foreign currency, two home mortgages, equity in two homes, inventory, stocks, cars and all sorts of computers and other equipment, commodities, and a stock pile of food and other necessities. And there is Depression us with US and foreign bank accounts, inventory, social security, pensions.
.
So the main truly useful thing you really can do with multi-millions is hedge against normal, inflation, and deflation, and other disasters like war and natural disasters. But most ordinary people who come into a lot of money due to inheritance or lottery or lawsuit settlement have no clue about that and instead start buying planes, yachts, large land areas, overly large houses, second and third homes, more than one car per driver, manic travel like around-the-world cruises, private schools that are actually less meritorious than public schools in expensive American neighborhoods.
Share this post
0 comment