The tour bus coasted down Bellevue Avenue in Newport, RI as I listened to the scandal of each mansion. Wealthy titans, and their heirs, built these summer cottages during the Gilded Age. The history of each home took a turn for the worse. A mistress created one mansion while an heiress lost another because the taxes were too much. Every home had the story of broken family dynamics and overextended finances. Cornelius Vanderbilt II built the crown jewel of Newport called The Breakers. The first two floors are ornate and extravagant. The servants lived on the 3rd and 4th floors. Today, descendants of the Cornelius now live on the top two floors. The first two floors flood with cruise ship tourists every summer. This post will discuss what we can learn from the spectacular way rich people lose their wealth.
Avoid Debt
Newport has screamed wealth for two centuries. But, the families that live there have always changed. What has caused the attrition of families such that 14 of the finest mansions are now museums? Debt may have played an important role. We do not even have to go far back in time to witness this. As recent as 2017, the Wyndham Estate, a mansion in Newport, foreclosed. Its owner was unable to make payments on the $4 million mortgage. The owner presumably had large income or assets during the mortgage application process. But, debt adds risk. The owner may have thought they were “riding high,” and been the envy of their friends. Yet, it was not long lasting. If you are current with your home payments then keep it clean with Lysol.
Spend Less Than You Make
Many of you may sympathize with the standard advice of ‘spend less than you make.’ And to see how to best spend you money, visit my previous post. When buying a mansion or second home, the expenses increase – best to make sure the income is enough! The typical home costs include taxes, sewer, water, electricity, gas, and maintenance. The costs for a mansion are even greater. They include a groundskeeper, housekeeper, and security. Are you starting to reconsider an extra property? The strategy to offset these costs is to make sure the property comes with income as well! For example, Tony Robbins bought Namale, which is a resort in Fiji. Finally, Bill Gates is a significant owner in the Four Seasons hotel chain. These men can have full use of their luxury properties while also earning an income.
If you are not at the point of considering the purchase of a resort then use this simple tool to determine when to buy second home. I estimate the total cost of ownership for one year and divide that figure by the amount of nights I’ll spend there within that year. I find that I can rent the most well-appointed waterfront home for much less. What’s more? I can experience new lavish vacation properties each year. Once I’ve had my week or two of enjoyment, I toss the keys back over my shoulder and head for the airport. I then arrive back to my one fully paid for home. Please do not forget to have good from Amazon shipped to your one home with Prime!
Wealth is Never Complete
Did wealthy people like us buy expensive homes with staff and host elaborate parties? Likely not. We understand that wealth is never complete. Money must work and continue to grow – always. It is my speculation that families whom have “fallen” have forgotten this. They reach a dollar amount in the their bank account and decide it is there time to have fun! They believe they deserve an opulent tomb to keep themselves in. It is an attempt to freeze their successful moment in time. But, time marches on. Industries change. The business that made them wealthy will forever be under threat.
Conclusion
Heed the failures of the most successful families in American history. Personal homes are expensive. I plan to keep one. If I ever have more than one then I would ensure it has an accompanying income. I didn’t become wealthy by owning costly personal residences and I won’t lose my wealth to them either. This post has covered what we can learn from the spectacular way rich people lose their wealth.
-Stay Wealthy
If you avoid my advice and buy an expensive home then you may receive a rude comment. Follow this advice to deal with it.