By Joe Dyton, WCI Contributor
When people think of multimillionaires’ spending habits, mansions, fleets of expensive vehicles, extravagant restaurant meals, and maybe even private air travel might come to mind. Sure, some of the truly wealthiest people in the world—corporate and tech executives, professional athletes, and entertainers—may spend on such luxuries, but what about the “other” multimillionaires? You know, the ones who you probably would have no idea of the wealth they amassed unless they told you. How do they spend their money?
The truth is, multimillionaires spend their money in various, and sometimes surprising, ways. Keep reading to learn how multimillionaires spend.
Standard Expenses
While multimillionaires may spend on the previously mentioned luxuries, a lot of their purchases are the same as someone who earns significantly less. Such expenses include travel, medical costs, groceries, gym memberships, dining out, and vehicles. The difference lies in how much more multimillionaires may spend on these items vs. people with a more limited budget.
For example, former WCI Network partner Leif Dahleen, who retired at the age of 43, broke down how much his multimillionaire family of four spent over a year. Dahleen and his family discovered they spent $73,959 over 12 months—an average of $6,163 per month. Food and dining were the family’s largest expense ($11,590), where 60% of the spending went toward groceries ($7,000).
Health and fitness were Dahleen’s family’s second largest line item ($9,064). The $6,500 he paid out of pocket for his son’s surgeries comprised a large bulk of it, along with gym memberships and race entry fees. Dahleen noted that since his family can afford to pay for unexpected medical costs out of pocket, they carry a high deductible health plan and max out a Health Savings Account (HSA).
Travel ($8,649) spending wasn’t as high as it could have been, thanks to a combination of credit card hacking, continuing medical education (CME) travel, and being frugal during their trips.
Dahleen’s remaining tracked costs are what many families expect to spend money on throughout the year—vehicle maintenance and gas, education, property taxes, and utilities. So, while his family may have spent in a year what others earn, what they paid for did not differ much from the everyday five-figure earner.
More information here:
The Lifestyle of Doctors Worth About $50 Million and How They Made So Much Money
How Much This FI Physician Family Actually Spends in a Year
Where and Why Multimillionaires Spend Too Much Money
Some families spend a small amount in a year in relation to what they earn, but that’s not the case with all multimillionaires—including high-earning physicians. There are a number of reasons why even multimillionaire doctors can find themselves spending more of their net worth than necessary:
Lifestyle Inflation
It can take a while before a physician earns “real money.” For some, once they do they have a “lifestyle explosion,” they begin to make purchases that they’ve been putting off for what feels like forever. Unfortunately, many of these items are expensive and unnecessary.
Lack of Financial Literacy
Sometimes physicians will see their salary increase five to six times after they complete their residency and believe they can now spend that much. Unfortunately, they forget that 25%-33% of their earnings will go to taxes. Not setting up retirement accounts, buying enough insurance, and jumping on repaying loans can also eat into that big pay raise. Suddenly, their post-residency spending potential is 50%-100% of their previous salary.
Outside Pressure
Doctors have a reputation for being “rich.” While physicians can earn a nice living, medical school debt could leave them with a negative net worth for years. Despite this, family members, spouses, children, and even physician partners may expect their spending to match their job title—even if their financial standing hasn’t improved. The pressure to meet these expectations can lead to overspending on vacations, homes, private schools, vehicles, and children’s activities.
No Planning for Lean Times
It can be easy for physicians to believe that they’ll earn $20,000-$40,000 a month for the rest of their lives—and spend that income accordingly. The problem is that this type of income isn’t guaranteed, and some doctors don’t realize that until it’s too late—such as if their income decreases suddenly or they can’t work for an extended period of time. Their financial plan was working until they died rather than spending within reason and putting money away for retirement or for potential slow periods, such as the COVID-19 pandemic.
More information here:
How Multimillionaires Are Intentional with Their Spending
Just as some multimillionaires can spend their money aimlessly, others set up plans so they can maintain their millionaire status for life. Here are a few steps multimillionaires can take to manage their money:
Tracking Income and Expenses
It’s easier to manage your money if you know where it’s going. Multimillionaires review past credit card and bank statements to see what they’ve spent their money on and categorize these expenses. If too much is going toward things they don’t value, they can reassess and determine a better use for that money—whether that means putting it toward something more useful or simply saving it.
Taking a Beat Before Spending
It can be tempting to just buy an item you want the second you lay your eyes on it—especially when you know you have the money to get it. Multimillionaires who are intentional about their spending, however, may have a waiting period in place for things above a certain price. Holding off a couple of days, or even a week, can often lead to not making that impulse buy altogether. Instituting a waiting period is also a great way to avoid buyer’s remorse.
Minimizing Future Expenses
Certain recurring costs are unavoidable, such as rent or a mortgage. Many of our monthly expenses are flexible, however, and they could be adjusted or even eliminated if our income was suddenly lowered or disappeared altogether. Mindful multimillionaires keep a close eye on these types of costs so they don’t slowly drain their bank accounts. This could include subscription services, extra vehicles that require maintenance or insurance (boats, for example), storage costs, and timeshares.
Other Ways Multimillionaires Spend Their Money
Multimillionaires spend their money on a lot of the same things lower-wage earners do—just a higher amount, in most cases. Besides the day-to-day expenses like groceries, multimillionaires may find themselves putting their net worth toward supporting their favorite charitable causes, saving for their children (future vehicles, education, weddings, etc.), outsourcing different household tasks to save time, or splurging on an expensive hobby like boating or polo.
If you’re a multimillionaire physician or aspire to be one and you need help batting others’ financial expectations of you due to your profession, check out the WCI Forum, Facebook, or Reddit groups. This circle of friends and like-minded peers can provide you with a much-needed shield to help you fight and win that battle of expectations.
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