The ultra rich, defined as individuals with a net worth of over $30 million, have tremendous wealth and with that comes unique opportunities and challenges in terms of how to utilize their money. With so much affluence, the ultra wealthy have options average people can only dream of when it comes to managing their finances and leveraging their money to grow their wealth even further.
Where do the ultra rich keep their money?
The ultra rich tend to diversify their money across several different vehicles in order to protect and grow their wealth. Here are some of the most common places the ultra wealthy keep their money:
- Stocks – The ultra rich often have significant investments in stocks across various companies and sectors. This provides them exposure to stock market growth while allowing them to diversify their holdings.
- Bonds – Bonds provide wealthy individuals with a source of fixed income. Municipal and corporate bonds are popular choices as they provide tax benefits.
- Venture capital – Wealthy individuals will often act as venture capitalists, investing money into startups and small businesses in exchange for an ownership stake. This comes with high risk but also the potential for high returns.
- Real estate – Luxury real estate has long been a favorite asset holding of the ultra rich. They may own multiple homes across the world as well as commercial real estate investments.
- Gold/precious metals – Gold and other precious metals like silver are popular holdings among the ultra rich as hard assets that will retain value even in volatile markets.
- Cash – Being ultra rich enables large cash holdings, whether in bank accounts or physical cash in safes. Cash provides complete liquidity.
- Offshore accounts – The ultra rich often keep some of their money offshore, whether to diversify geographically or to take advantage of tax benefits.
- Trusts/family offices – Wealthy individuals use trusts and family offices to manage their wealth and plan for inheritance in the future.
Having such copious amounts of money enables the ultra rich to spread their wealth across all of these investment vehicles and more. Their high level of diversification protects their fortunes and allows different aspects of their holdings to be managed by specialists in each area, like investment bankers investing capital or trust lawyers overseeing trusts.
How do the ultra rich spend their money?
While the ultra rich certainly invest large chunks of their net worth, they also engage in high levels of spending. Here are some of the most popular ways the ultra wealthy spend their money:
- Luxury consumer goods – This includes extravagant homes, cars, jewelry, apparel, electronics and more. The ultra rich have access to a world of opulence.
- Travel/leisure – Wealthy individuals spend a lot on travel, whether private jets or 5-star hotels and experiences. Luxurious leisure pursuits like yachts are also common.
- Philanthropy – Many billionaires and ultra high net worth individuals give away significant amounts of their fortune to charitable causes and foundations.
- Political influence – The ultra rich use some of their wealth to influence political outcomes through lobbying and campaign/PAC contributions.
- Education – Wealthy families spend freely on prestigious private schools and elite universities for their children.
- Healthcare – Concierge medical services, personalized treatments and anti-aging services are ways the ultra rich spend on advanced healthcare.
- Services – The ultra wealthy hire elite lawyers, money managers, accountants and consultants to offer specialized services.
- Security – Home security systems, bodyguards and armored vehicles help the ultra rich protect their fortune and family.
The ultra rich live in a realm of affluence removed from the world of average people. This enables and often necessitates lavish spending to maintain their lifestyle, ensure their family’s future prosperity, and exert influence on the world.
How do the ultra rich avoid taxes?
The ultra wealthy are able to utilize both legal and illegal means for minimizing their tax burdens. Here are some of the most common ways the ultra rich avoid paying taxes:
- Tax havens – Jurisdictions like Switzerland, the Cayman Islands, and Bermuda allow the wealthy to shelter money in offshore accounts away from tax authorities.
- Trusts – Complex trust structures can enable transferring wealth without triggering gift/inheritance taxes.
- Capital gains vs. income – The ultra rich derive more money from long-term capital gains, which are taxed less than ordinary income from salaries and wages.
- Carried interest loophole – Private equity and hedge fund managers can classify their income as capital gains rather than normal wages.
- Donations – Large charitable donations are tax deductible but allow the wealthy to indirectly control where their money is spent.
- Estate planning – Sophisticated estate planning utilizes exemptions, valuations, and trusts to reduce estate taxes.
- Shell companies – Anonymous shell companies in tax havens obscure the true ownership of money and assets.
- Tax lobbying – The ultra rich lobby and influence policymakers to create and preserve tax breaks that benefit them.
- Illegal evasion – Some wealthy individuals engage in outright illegal activity like tax evasion to hide money from authorities.
Minimizing taxes is a priority for the ultra rich to preserve dynastic wealth across generations. A complex array of accounting tricks, offshore strategies, and political influence accomplishes this goal while staying within the law, or sometimes crossing the line.
How do the ultra rich use debt and leverage?
Rather than solely relying on their own liquid wealth, the ultra rich leverage debt and borrowed money in order to amplify their wealth. Here are some of the ways they utilize debt:
- Low interest loans – Wealthy individuals can access loans at extremely favorable interest rates, allowing them to cheaply leverage and multiply investment funds.
- Secured loans – Banks will lend against securities like stocks as well as real assets like art or real estate.
- Complex credit lines – The ultra rich set up revolving credit lines and complex borrowing structures to obtain flexible access to large debt amounts.
- shell companies – Anonymous shell companies allow the wealthy to borrow while obscuring their identity and true financial position.
- Tax benefits – Interest payments on loans are often tax deductible, providing an additional benefit.
- Philanthropic pledges – Wealthy donors can “fund” charitable pledges without giving away actual money by using pledged donations as collateral for loans.
- Trust structures – Sophisticated trust structures allow the ultra wealthy to formally separate beneficial ownership of assets from control in order to facilitate leveraging those assets.
Given their access to such enormous amounts of capital, the ultra rich are able to use debt in ways average individuals cannot to unlock greater wealth. Debt magnifies their buying power, facilitates secrecy of their financial dealings, and provides tax advantages.
How do the ultra rich turn money into political influence?
There are various channels the ultra rich can use to convert their vast fortunes into political outcomes they desire. Some of the main ways they exert political influence include:
- Lobbying – Wealthy individuals and the companies/organizations they control spend billions lobbying politicians directly.
- Think tanks – Billionaires fund policy-focused think tanks that influence lawmakers and public opinion.
- Campaign finance – Massive political contributions to candidates, parties, PACs, and Super PACs sway elections.
- Dark money – Anonymous political spending by opaque nonprofits allows unlimited money in politics while obscuring agendas.
- Revolving door – Former politicians and government officials cash out to industries they used to oversee to become lobbyists.
- Media influence – The ultra rich and large corporations wield influence over news coverage through their control of media companies or by being important customers for advertising.
- Threats – Wealthy interests make veiled or explicit threats to back challengers against politicians who go against their wishes.
- Quid pro quo – Outright bribery still occurs, with politicians supporting policies that favor donors.
With such astronomical resources at their disposal, the ultra rich have many means to shape government policy on taxes, regulations, subsidies, government contracts, international agreements and more to serve their own interests rather than the public.
How does wealth become concentrated in family dynasties?
Wealth dynasties perpetuate from one generation to the next through a cycle ofprivileged upbringing coupled with inheritance and tax avoidance. Mechanisms include:
- Inheritance – Assets like companies, real estate, and investments are passed down to heirs tax-free up to a very high threshold.
- Tax avoidance – Sophisticated estate planning shields wealth from gift, inheritance, and capital gains taxes as it’s handed down.
- Education – The next generation has access to the best schools and experiences money can buy, cementing their place in the upper class.
- Family businesses – Keeping ownership of valuable companies like hedge funds within the family helps maintain dynastic wealth.
- Social networks – Joining elite social circles creates opportunities to grow the family fortune through business deals and marriages.
- Lower taxes on capital – The income of the ultra wealthy derives primarily from capital like investments, which are taxed less than wages and perpetuate inequality.
- Political influence – Lobbying and financing campaigns preserves laws and loopholes that enable dynastic wealth concentration.
These self-reinforcing dynamics make it very difficult to disrupt wealth becoming increasingly concentrated within family dynasties over time and across generations. A privileged upbringing enables building and shielding ever-growing fortunes.
How do the ultra rich spend on luxury and opulence?
The ultra wealthy live in a world of extravagance and indulgence that most people can only imagine. Some examples include:
- Real estate – Mansions, penthouses, beach properties, ranches, and even islands make up real estate portfolios totaling tens of millions.
- Transportation – Private jets, yachts, helicopters, luxury vehicles with premium customizations.
- Services – Butler and maid services, personal shoppers, chefs, chauffeurs, and elite concierge doctors.
- Security – State-of-the-art home security, armored vehicles, executive protection details.
- Jewelry and apparel – Extravagant jewelry collections with precious gems and metals, haute couture fashion, custom tailoring.
- Dining – Eating at Michelin star restaurants, private dinners prepared by celebrity chefs, memberships at elite country clubs.
- Art and antiquities – Oil paintings, sculptures, and rare artifact collections worth tens of millions.
- Travel and leisure – Five star accommodations in exotic locales, chartered yacht and safari experiences, access to prestigious events.
- Education – Private tutors, boarding schools, Ivy League universities.
- Personal care – Access to elite spas, trainers, anti-aging treatments, concierge healthcare.
The ultra wealthy spend freely on these luxuries without limit. For regular people, just one of these purchases could be a once-in-a-lifetime extravagance. For the ultra rich, opulence is their everyday lifestyle.
How do billionaires influence the media and public opinion?
The ultra wealthy leverage their vast resources to shape media narratives and sway public opinion to serve their interests in a variety of ways:
- Ownership of news outlets – Several billionaires own major media publications and networks, allowing them to dictate overall editorial direction and coverage.
- Advertising revenue – Corporate advertising dollars overwhelmingly fund media operations, disincentivizing critical reporting on major companies or billionaire CEOs.
- Direct lobbying – Billionaires and corporate interests directly pressure news executives and political journalists regarding desired coverage.
- Threats – Implied threats by powerful figures of withdrawing advertising or access can influence media narratives.
- Agenda-driven funding – Billionaires fund journalistic ventures focused on particular political agendas, sometimes without full transparency.
- Think tanks – Policy think tanks funded by the ultra wealthy provide expert talking heads to reinforce desired narratives.
- Astroturf groups – PR groups disguised as grassroots organizations shape opinions through manufactured social media engagement and letter/comment writing campaigns.
- Limited elite circles – Media figures and billionaires co-mingle in exclusive social circles, creating a insular viewpoint distant from most citizens’ concerns.
This enormous influence over media and the broader information landscape allows the ultra wealthy to manipulate public opinion in their favor on issues like tax policy, regulation, government spending, and foreign affairs while deflecting negative coverage.
Conclusion
The ultra wealthy inhabit a sphere of nearly unlimited wealth and luxury beyond the imagination of ordinary people. With millions or billions at their disposal, no desire is out of reach. From owning luxury goods to influencing elections to avoiding taxes, their money enables shaping the world to serve their interests. Even as these elite circles become more removed from everyday reality, the tremendous resources they control ensure that their priorities take precedence in economics, politics, and society more broadly.