Financial Crisis: Can You Spare A Dime For My Wealthy Friend?
So, the company you work for is starting to lose money and the layoffs have begun. You hold your breath as the names are read. Then suddenly it dawns on you - it just the working stiffs that are being affected. Is there something wrong with this picture? Where’s the equity in this? Not to fear, after careful research I have determined this financial downturn is so bad, that even the well-to-do are suffering - at least in their own way. Consider the following:
When President Obama announced a $500,000 salary cap on pay for executives at institutions receiving bailout funds this caused a great deal grief for our friends working in Manhattan. It was pointed out in a recent article just how difficult it is to live in the heart of NYC on a measly half-mill a year. With Harvard Club dues at $2,000 a year per couple, and Westchester County golf clubs typically charge $16,000; food and entertaining tabs are another $15,000, what’s the well-to-do to-do on a paltry $500,000 per year?
Well at least those guys have a job. What about the poor Joe’s (and Jane’s) that spent a mint ($32k/year out of state) to attend at a top flight institution with hopes of landing a job on Wall Street? As this article points out, for decades, investment banking was a well-worn path to affluence for business-school graduates. As big banks including Citigroup (C), Bank of America (BAC) and Goldman Sachs (GS) cut tens of thousands of jobs, MBA students who just a few years ago would have been aggressively recruited by companies now expect to fight for the handful of positions available.
How about those those less-fortunate wealthy families - those only earning six-figures. As noted in this article, the Lower Hudson Valley’s small, wealthy communities have not gone unscathed in the troubled economy. The six-figure household incomes earned by many residents in such places as Harrison, Mamaroneck, Yorktown and New City have declined or risen less than 5 percent since 2000 while mortgages and rents have risen by double-digit percentages in many of these communities.
Still not convinced the wealthy are having difficult times?
This Wall Street Journal article shows just how bad it has become for the upper-tier. “Rich people are getting hit, and they’re all expressing the need to curtail unnecessary spending,” said Russ Alan Prince, president of Prince & Assoc., a wealth-research firm based in Connecticut. “Lovers are part of the same calculation.” According to a new survey by Prince & Assoc., more than 80% of multimillionaires who had extra-marital lovers planned to cut back on their gifts and allowances. Still, only 12% of the multimillionaire cheaters said they plan to give up on their lovers altogether for financial reasons.
See, the wealthy are just like you and me. They are feeling the pain of this economic downturn, but they just haven’t been here before. As I work on getting my tongue out of my cheek, I’ll leave my wealthy friends with 21 Suggestions for Success to consider while they work on getting their lives back together.
Full Disclosure: No position in the aforementioned securities.
1. Is The Financial Crisis Getting the Best of Warren Buffett?
2. The Financial Crisis Heats Up!
3. The Most Important Financial Statement
4. Time is My Friend
5. Seven Important Reasons for Dividend Investing