Rich People Spend Less Money During Recession

By Margarita Nahapetyan

American Express Publishing and Harrison Group presented The Survey of Affluence and Wealth in America, which found that the richest Americans feel guilty about making luxury purchases in the current state of economy and are cutting back on spending money on items they enjoy. Just 29 per cent of individuals with lots of money to spend reported to enjoy being recognized as wealthy, down from 35 per cent a year earlier.

According to the survey, more than 50 per cent of the nation's rich people worry about their own financial security and fear that they may one day run out of money. Nearly 73 per cent of wealthy Americans (3 out of 4) believe that the recession will last longer than a year, a 10 per cent increase from December 2008 and a 25 per cent increase since September 2008. What is even worse, the same group is deeply preoccupied that the United States could be headed for a depression.

The poll questioned more than 1,500 upper middle class, affluent, super affluent and wealthy people, in the first quarter of this year with discretionary annual incomes of at least $100,000 and up to $5 million. Discretionary income is what is left after the mortgage and taxes are paid. Individuals with such discretionary incomes make up 10 per cent for half of all retail sales, 70 per cent of all profit margins at retail and 80 per cent of all non-retirement account assets.

"Our data suggests that this year we will see a decline in retail spending among affluent and wealthy consumers," says Jim Taylor, vice chairman of the Harrison Group, a Waterbury, Connecticut-based marketing and research consulting firm that co-authors the quarterly study. "The negative outlook is, however, modifying. The rate of decline is now in the single-digit range for everything we measure, except private jets and jewelry. This contrasts with rates of decline in excess of 25 per cent last year, in luxury categories."

It was found that during the past one year, individuals have been saving 16 per cent more of their household income and increasing contributions to their retirement plans by 6 per cent. At the same time, their financial investments have been reduced by 7 per cent. An overwhelming 88 per cent of the surveyors said that they have done a great job by making their families more fiscally responsible. To be able to do this, 61 per cent have set a monthly family budget and try to do their best in order to adhere to it.

For example, 80 per cent of respondents now wait for an item to go on sale before they make a purchase, and 65 per cent shop with coupons on a regular basis. In addition, the majority - 77 per cent - are spending way less money on expensive items, to compare with 2008, an increase of 15 percentage points since last December. The same group is carefully reviewing every spending category, to see where they can economize, an increase of 10 per cent over the same period of time in the previous year.

Fewer than half of the surveyors in the poll - 46 per cent - reported feeling extremely optimistic and enthusiastic about their future. Even fewer - 42 per cent - feel very optimistic about the future of their children. However, more than half of the rich individuals - 66 per cent - said that they felt "very happy," actually for the first time since the study began in 2007. According to the report, the decline in optimism appears to have bottomed out, and the possibility for an upturn in optimism certainly exists. More than three-quarters of Americans - 76 per cent - reported to be very proud of their newly acquired shopping habits. Also, 65 per cent now consider themselves as "smarter" shoppers.