How Millionaires Spend Their Money


A great deal of time and research is spent trying to determine how investors invest their funds, and what factors lead to the decisions they make.

One factor which Spectrem takes into consideration is the way investors spend their money.

Spectrem’s study Portfolio Trends, Expenditures and Perceptions of Providers shows the details of investors’ portfolios in terms of where their investable assets are assigned and what individual products are invested in. But the study also asks investors to detail how they spent money over a recent 12-month period to determine what services and products investors value enough to spend money on. 

Let’s start with an obvious statement which permeates the expenditures portion of the study: the wealthier the investor, the more money they have for personal spending. This basic fact is most obvious when the subject is vacation or automobile spending, as well as more luxury shopping for jewelry or boats. 

But, spending on items that are considered standard expenditures reveals the significance of discretionary assets and how those with more discretionary assets have fewer personal economic choices to make in terms of spending.   

Here are some examples from the study (see how you compare to others in your net worth range): 

  • Home improvement – There is no physical structure that does not, from time to time, require repair. Homes also occasionally require updating (especially in light of continued changes in technological upgrades). There is no way to avoid spending money on one’s home. But some people are required to make difficult choices about spending on their home. Budgets sometimes do not allow for major overhauls. According to Portfolio Trends, Expenditures and Perceptions of Providers, approximately 20 percent of investors with a net worth under $1 million (not including the value of their primary residence), did not spend any money on home improvement over the 12 months prior to participating in the study. A majority of those investors limited themselves to less than $5,000 in expenditures on home improvement. For those investors, however, their home is likely their most precious physical commodity, and upkeep of that structure is key to the value of their portfolio. 
  • Collectibles – Few investors spend on valuable collections of physical items such as artwork, vintage automobiles, books or coins. More than 70 percent of investors with a net worth up to $15 million claimed to spend no dollars on collectibles in the 12-month period prior to participating in the study. But those who did spend on collectibles may see their spending as a hobby, and 10 percent of investors with a net worth over $15 million spent at least $5,000 on their collections in that 12-month period.  
  • Charitable and political contributions – There is virtually no argument against making charitable contributions, especially when the person making the contributions has the available funds to give away freely. According to Portfolio Trends, 6 percent of investors with a net worth between $15 million and $25 million gave at least $50,000 to charity in the preceding 12 months. The role for advisors in discussing charitable contributions is to assist investors in ensuring that the charitable organizations they are giving to allocate their donations appropriately. Studies are frequently conducted on how charity organizations allocate funds between administrative costs and actually benefitting those they raise funds to help. Despite the onslaught of advertising related to political campaigns, approximately 75 percent of all investors do not make contributions to political parties or candidates.  

Talking to your advisor about your spending habits can lead to a better connection between yourself and the person helping you make investment decisions. Your advisor can also assist you in understanding the value of the items you purchase, including remodeling of your home and investing in those coins.