CEO Salaries

There's been a lot in the news lately about CEO pay packages and how they relate to company performance. The numbers are always mind-blowing, almost inconceivably large. How have we gotten to a point where these salaries are so stratospheric? Anyone who rises to that level in a company must have something going for them in terms of brains, personality, management skills-- at least I'd hope so-- but are they really THAT much more valuable than other workers? Sometimes, obviously, they aren't: the CEOs of companies that have crashed and burned can't possibly be doing their jobs right, yet even when they are fired for it, they walk away with severance packages worth more than most of us could ever earn in many lifetimes.
Why aren't more shareholders up in arms about this issue? How are some of these CEOs themselves not embarrassed by their pay?
I guess the world of corporate boards and compensation consultants is a pretty small circle-- they all think they deserve it themselves, so they vote for it for each other. I came across this chart while looking up a book I'm interested in reading, called Superclass. This chart of connections might strike some people as conspiracy paranoia, but to me, it's just not all that surprising that very rich and powerful people all have connections to each other, and that they would all do whatever they think makes their friends happy, whether that is donating to a favorite charity, or weighing in on how much someone deserves a huge pay package.

The Cost of Curiosity: Online Genealogy

Here's the weirdest thing I've spent money on lately: I paid $32 for a month's worth of access to Ancestry.com.

This started out rather innocuously. A friend was telling me about her family's small business and I tried to Google it. This led to a couple of results popping up that were from old New York Times articles about her relatives. It turns out that they had an interesting history and were prominent enough at one time to have made the papers, back when they used to publish lists of who'd just come in on ocean liners from Europe and who'd been tapped for secret societies at Yale. The family name was unusual enough that I started to see a chain of relationships, with deaths and marriages, and I sketched out a little family tree.

I told my friend what I'd discovered, and she was fascinated, and knew her other relatives would be interested too, especially her mother. She told me a bit more about their family, but said the traces wouldn't go too far back, as her great-grandfather had supposedly emigrated from Scotland and changed his name when he arrived. But I discovered someone else with his name who I suspected might be his father, and started to be even more curious. I moved beyond the NY Times results and began to look at genealogy sites, and with the limited results brought up by ancestry.com's free search, I thought I'd discovered something. I couldn't stand the suspense, so I registered myself for a free trial membership-- within minutes, boom, I was staring at a passport application from 1920 that proved that my friend's great-grandfather was born in the USA, and that the other man I'd seen references to was his father! Then I wanted to trace the family back even further, but to get access to census records from Scotland, I had to actually pay up front for the world membership. I was gritting my teeth about doing it, but I was dying to find out more, so I went for it, and sure enough I found connections to the family back as far as the 1841 census in Scotland.

I feel like I have a whole new hobby now! I wish I'd been a historian, or a detective or something, as I seem to have an obsessive curiosity and patience for digging through records and searching out possible misspellings of names, etc. I've printed out pages and pages of old newspaper articles, letters to the editor, passport applications, census records, passenger lists for Ellis Island arrivals, old phone directory pages, etc. It is amazing what you can find! My friend and I are going to put everything together in a binder and give it to her mom for her birthday, who I think will be amazed to discover that she had a great grandfather who was here in the USA doing interesting things, rather than being some long lost anonymous person in Scotland.

If you're wondering why I'd do all this for someone else's family, well, it's just because they were way more interesting and easier to trace than mine! And guess what, that's largely because they had more money! I have names of my own ancestors going back a few generations, but when you're looking for people with very common names who had 8 brothers on one side of the family, and 16 siblings on the other (!), it gets difficult, and kind of boring! No one in my family had the money to do any international travel and their social activities weren't noted in the papers, so there just isn't as much of a historical record beyond census data. But it was cool to see my grandparents listed on census sheets when they were little kids, almost 100 years ago!

As for the money I paid to dig into all this? There are some free sources of genealogical data, I guess, but I had a hard time finding any that were actually useful at all. Most are horrible to look at, full of broken links, and very limited in terms of what information they cover, or they just refer you to brick and mortar libraries where you can look at microfilm. Ancestry.com is a piece of cake-- it has a great search tool, and lots of data is aggregated there, with very clear images of the original documents. The $30 was well worth it. If you've ever wanted to know more about your family tree, give it a try!

Crazy Days

These are interesting times to be trying to blog about personal finance. It's just one thing after another in the news, from high-priced hookers to the rapid implosion of major financial firms. The stock market is all over the place, the government is trying to bribe people to go shopping, and who knows what kind of bailout they'll cook up for mortgages.

I am not enough of an economic genius to even begin to comment on most of these things. (Though it's tempting to try to tackle the expensive hooker issue.) Like most people, I suppose, I feel like a small boat on really choppy seas, wondering how best to reach the shore. How do we cope with all this? If we're having an unprecedented kind of economic turmoil, do all the old rules apply? Do I still keep plowing money into my usual blend of investments, which is heavily weighted towards stocks? It's so depressing to see your hard-earned contributions completely negated by market losses for several months in a row. Meanwhile, for safer investments, interest rates are dropping, so they don't help much either. Fortunately I think my job is fairly secure, but what if it wasn't? I know a few people who have lost jobs recently and most of them haven't landed anywhere yet. It's scary to think what could lie ahead, and how easily most people's savings could evaporate.

Then you have today's New York Times, which has a special section on "Wealth and Personal Finance." Lots of helpful stuff here: how to set up trust funds that will give your children just enough so that they don't become lazy leeches. How to manage when your wealth is spread out into lots of different accounts. How to start investing in hedge funds once you've made your millions. And tips on figuring out what kind of servants you might need and where to hire them.

Great timing, NYT! I'm sure all those Bear Stearns employees will be gobbling this info right up!

Recent News

Here's a few quick links from the NY Times that caught my eye-- as usual, it takes me forever to get around to posting these!

Easy Come, Easy Go for Idealistic Heirs

Income and Happiness: An Imperfect Link

Expectations Lose to Reality of Sports Scholarships

How Would You Act if You Won $270 Million in the Lottery?

This morning, I had a rare opportunity to watch the Today Show. They interviewed the couple from Georgia who just won a jackpot of $270 million. I'm sure they were not people who were accustomed to being interviewed on national television, but it still kind of cracked me up that they were so completely unemotional about their big win. The wife slightly cracked a smile a few times, but the husband was so expressionless and unexcited. I know everyone's different, but I can't imagine acting that way if I won a huge jackpot that would change my life like that! I'd be nervous on TV too, but I wouldn't be able to wipe the smile off my face!

6 Degrees of Wealth

How close are you to wealth? I was inspired to think about this question by English Major's post about her aunt, who she describes as "... rich. Like, rich rich. Like, lives off her investment income rich."
I thought, wow, I know some people who are well-off but I don't think there is anyone like that in my immediate circle these days. My family are mostly in various tiers of the middle class, and their income comes from working, or their own retirement savings. I can't think of many family members who are likely to have more than 5 figure incomes except one cousin who is a lawyer, one uncle who is successfully self-employed, and the husband of a cousin, who works in the insurance industry. I also have family members who are pretty working class and probably earn well below the US median income (which I believe is around $48,000). If I expand the circle to include friends as well as family, there are a few more lawyers, a Silicon Valley project manager, and a couple other people in the business world who do pretty well, but also a number of people who work in non-profit fields, or low-paying industries like my own.
If I broaden the circle even more, to college acquaintances who aren't really friends any more, then we'd have some bigger money. A bunch of Wall Streeters, one or two people born into wealthy families, a minor TV star, and a few very successful artists and writers. And I'm sure some of them are rubbing elbows on a regular basis with people whose wealth puts them in the stratospheric upper levels of richness. I know for a fact that one person I used to sit next to sometimes in a college class is now married to a celebrity whose earnings are in the millions. Which just seems really weird.
Many personal finance writers talk about how your friends can influence your spending habits. Does having or not having wealthy people around you influence your attitudes about your own wealth? Do you have a financially diverse group of relatives and friends, or is everyone more or less at the same level?

The Wealth Gap in Relationships: Too Big? Too Small?

Here's a question I've been thinking about, regarding financial inequality in relationships: if you were going to have a partner who made more money than you, what kind of difference would you be comfortable with? If you made $75,000 a year, do you think it would be harder to be with someone who made $150,000 a year, or $1 million a year? Would the source of their income make a difference, i.e. whether they worked for it, or inherited a big nest egg? How might this change depending on the actual incomes involved? Is the difference between someone making $25,000 a year and someone making $75,000 a year going to cause more or less stress than the difference between people making $100,000 and $300,000? And does it make a difference if the relationship is gay or straight, and whether it's a man or a woman who makes the higher amount?

Let's say you were seeing someone who made more money than you. You don't know exactly how much more, but guess it is maybe two or even three times your own income, but not more than that. You want to feel like there is a balance in terms of who pays for things, but can sometimes feel like the person who makes more should pay more. But you're both considered middle-class. Maybe one of you is more upper middle class, and enjoys a few extra luxuries with that extra money, but you're both in a position where you work hard to make money, worry about saving enough to support your retirement, and feel like you are surrounded by people who make more money than you.

Then let's consider this alternative: you're seeing someone who was born into a wealthy family. They have some sort of trust fund whose income will comfortably and even luxuriously support them for the rest of their life. You yourself are solidly middle class, with some savings and a decent job, but no hope of ever inheriting any significant wealth. You might not be experiencing any financial hardship, but you know you have to be careful about money in order to stay financially secure.

In which of these situations, if either, would you feel more comfortable saying "hey, you know what? I can't afford to do X, Y and Z, and if you want us to do it together, you're going to have to pay for it." Assuming that the wealthier member of the couple is willing to say "Of course I'll pay for X, Y, and Z. Doing it with you is more important to me than the money," could you just accept that, or would you feel guilty?

And on the flip side, what if YOU are the one making more money? What kind of gap would bother you if you were seeing someone who made less money? How much more money would you have to have before you would feel comfortable paying for more than your share, or would you pay for everything without even thinking about it?

Get a Life... For $4,000 to $10,000 a Month

Another fun story about one way to burn several thousand dollars a month:

Looking for someone to curate your life? Need a personal concierge whose expertise is not picking up dry-cleaning but helping chose your wardrobe, your tastes, your friends? Ms. Storr calls herself a personal manager, but her duties go far beyond that. Her clients, all of them men, pay monthly fees of $4,000 to $10,000 to have her be their personal decider in nearly all things lifestyle-related.

I wouldn't mind a little help with a few things now and then: if I had that much money to burn, I'd want a chef and a personal trainer. But I'll choose my own friends, thank you!

Snobby Salespeople

A tip from reader Charles led me to this article and blog post at WSJ.com, about how salespeople in high-end stores perceive potential customers.

I was talking to a Jaguar salesman last week and asked him what the hardest part of his job was.

“You can’t tell who’s rich anymore,” he said. “It used to be if someone walked in with jeans and a T-shirt I could ignore them or ask them to leave. Now that guy could be a billionaire. You have to be nice to everybody these days.”

Tim Blixseth, the billionaire timber tycoon, once told me about the time he visited a men’s clothing store near Palm Springs to buy a suit for his son. When they walked in, wearing work boots and jeans, the salesman headed them off at the door and said “I think you’d be better off at the mall.” They eventually bought a suit, but Tim made sure to drive by the front door in his Rolls Royce and wave goodbye to the salesman.

Identifying the rich used to be fairly simple: They dressed, talked and looked a certain way. They had iconic last names like Hutton or Hearst or Phipps, often with Roman numerals at the end.

Today, wealth has been democratized and individualized, and the rich come in all ages, shapes, sizes and ethnicities. People often ask me, “What do the rich wear? How can you tell by looking at someone today if they’re rich?” Such questioners are usually recalling old myths about watches and shoes, but my answer is that there is no way to tell. The rich don’t have a uniform anymore. Today, they all wear their wealth differently, from the dot-commers in T-shirts to the hedge-funders in khaki to the CEOs in classic pinstripes.

In her Journal column today, Christina Binkley takes a stroll down Rodeo Drive to do an “emotional audit” of salespeople — i.e., to find out how nice and welcoming they were. A woman at jeweler Van Cleef “sent us out the door with little more than her scowl,” she writes, while a woman at Yves Saint Laurent didn’t offer a smile but a “single upturned corner” of her mouth. In other words: not welcoming.

The articles and comments get at a key issue frequently discussed in the personal finance blogosphere, namely that the more you spend on "looking wealthy" the less actual wealth you are likely to have.
One issue that doesn't really get mentioned much, though, is that of the snobby salespeople themselves-- except in the comments. Here's a couple of outtakes:

[An investment banker says] I care my clients see me as an economic equal. But, I couldn't really give a rats ass what some two -bit clerk at Bloomies thinks of me.

Many sales people in high-end stores are lower middle-class strivers with serious adequacy issues.

If sales people were so wealthy, they wouldn’t be salespeople selling luxury goods. They would be BUYING the goods from these stores. Never understood why sales people at upscale stores have attitudes. They are the ones who need to be working to get by (most of the time) - not the people shopping in the stores.

I'll echo what many of the other commenters said-- if you are working in any kind of store, you should treat everyone in a friendly, courteous manner. Yes, you may be working on commission and not want to waste your time, but it's a mistake to make assumptions about anyone's spending potential based on their appearance.
But that said, I've been on both sides of the counter. I worked in a clothing store when I was in college-- trendy but not high-end. What I learned from that job is that most customers treat salespeople like dirt. The NY Times "Class Matters" interactive graphic on class components puts retail salespeople at the 42nd percentile-- I was surprised it was even that high, as sales jobs are not usually thought to be very prestigious.
When I had that job, I didn't work on commission, so I didn't really have a stake in trying to latch onto rich customers. Most of the time, I was friendly because it just seemed to be the right thing to do. But other times, if I was tired or having a bad day, I didn't smile at people and I probably looked like I had an attitude sometimes. And I kind of did! I was barely making more than minimum wage and the job kind of sucked. Whenever a customer really talked down to me, it was some small comfort to think that I'd be going back to my fancy college where I'd be preparing myself to, I don't know, rule the world someday.
The point is, if people think they are being looked down upon, they may feel like looking down on others is their only defense. And as the comments and article showed, both sales people and customers seem to look down on anyone who doesn't, or doesn't seem to have money.

Curbed: Are Wealthy Neighbors Boring?

Here's a post on Curbed that caught my eyes a few days ago. A reader asked:

I have an apartment in a new, relatively small condo building in lower Manhattan. Although many of the residents are creative, artist types, the atmosphere in the building is one of dullness and boredom. I might as well be living in the suburbs! So the question is: Does wealth and sophistication often breed dullness and distance from other people? Or is this some kind of "neighbor fear" or shyness? All I know is that neighbors hesitate to say hello to one another, and instead scurry quickly into their units. What is your experience?

I was recently having a conversation with someone in which the phrase "boring banker type" was used, so the association of money and boringness was kind of intriguing me. How one interacts with neighbors is only one part of the question. There may be certain cultural tendencies that are more common within different income levels, but I don't think having money necessarily makes people boring. One friend of mine, a struggling artist type herself, once told me that she found people more interesting if they had also experienced some kind of struggle to succeed or a sense of living with risk. To her, having money meant that people took safety and comfort for granted, and that they hadn't had interesting experiences.
Of course to others, it's boring to be poor! Money gives people the opportunity to do interesting things that might otherwise not be possible, like traveling, or working in low-paying but rewarding careers, or devoting oneself to philanthropy.
As for the issue of isolation from others, I do think money can cause that. I've written about this before-- the fact that the more money we have, the more we use private cars instead of public transportation, the more we live in private homes instead of apartment buildings, and use technology like iPods and DVD players to experience music and movies that we might otherwise hear or see out loud, in public, among other people.
Comments on the original Curbed posting included these remarks:

As far as rich people being dull, perhaps spending all that time counting your money, excuse me "managing" your money, can make Jack/Jill a dull boy/girl.

Expensive buildings, generally, have better soundprofing. and yes wealthier people do tend to be more boring. More space does means less human interaction. Even the children of the wealthy have less interaction as they don't have to share a room and can do as they please.

I prefer not to talk to poor people because I am rich and they are not. I am better than them, and they are beneath me. I wish genocide was legal. All poor people would be gone under my rules! Smelly, dumb bastards!

As you'll see, some of the comments went even further into deliberately provocative, rude, trollish remarks, but it was an interesting dialogue nonetheless! What's your opinion?

Oh Ricky You're So Fine?

I liked the intro to this NY Times article about the founder of the Ricky's chain of stores (where I regularly buy my favorite hair product, and the occasional wig or mask):

An Airy Refuge From a Jam-Packed Store

Two years ago, Ricky Kenig, a divorced father of three, found himself paying $7,200 a month for an apartment in TriBeCa. The rent made him uncomfortable. “I’m not as rich as people think,” said Mr. Kenig, the co-owner of 22 Ricky’s stores in Manhattan, Miami and East Hampton.

So Mr. Kenig, 45, decided to look for a home in Brooklyn, where he now occupies a renovated town house on a leafy block in Park Slope. After an 18-month renovation, the house is gloriously light and airy. But the move was less successful financially than architecturally. “My expenses are double what they were before,” he said.

Mr. Kenig, whose first name is on a New York institution — beauty products stores beloved by high school girls and movie stars alike, along with thousands more costume-seeking New Yorkers every Halloween — is not hurting for money. He drives his twin daughters, Max and Dylan, 13, to school in a Mercedes G55, and his house has enough flat-screen TVs for a small hotel. But, he said, he also has a lot of debt.

Mr. Kenig said he spent $1.3 million for the 19-foot-wide town house, built in 1899, and about $1 million to transform what had been three apartments into a minimalist crib, designed by James and Hayes Slade, the husband-and-wife owners of Slade Architecture in Manhattan. As a result, Mr. Kenig said, he owes hundreds of thousands of dollars to his younger brother, Todd, a partner in Ricky’s. He also owes hundreds of thousands of dollars to his contractor, who he said has agreed to accept payments over four or five years....

The article goes on to describe the cool decor of his townhouse, but it was the financial stuff that interested me! Just another millionaire living on the edge...

The (Almost) Truth About Bubbles

You know, writing this blog can be a strange thing. What interests me most about money is often the way it informs daily actions and relationships, and as such, I write a very personal blog. This can get tricky: I tell stories about friends, family, co-workers and loved ones, none of whom know that I write these things. In order to protect the privacy of myself and others, I often change identifying details in these stories-- names, of course, but sometimes other things like locations, jobs, relationships to me, and even gender. But when it comes down to it, I am not, and could never be a fiction writer-- despite any minor embellishments, the heart of every story I tell is true.

That said, there's one story I've told where I realized my tweaking of details went a bit too far, to the point where the real issues going on were somewhat obscured-- and that is the tale of Bubbles: Part 1, Part 2.

The quick recap of those two posts is that "Bubbles" meets "Mike" online and before going out with him, tries to figure out how she feels about some hints that he might be fairly wealthy. Once they meet, Bubbles is disturbed that he turns out to be older than he'd originally said, but despite an initial lack of any real chemistry, wonders if he's worth seeing again because he just seems... nice.

The comments on the post got into the usual issues of male/female dating dynamics, male/female age dynamics, and male/female money dynamics, including this remark:

So the guy is a liar and she's not attracted to him. But he's got money so we'll give it another shot.

Are all women whores, or just Bubbles?

And this is where I started to feel like the message had gone astray, because "Mike" is actually "Mary."

So how does it change things that we're talking about a lesbian dynamic rather than a heterosexual one? If Bubbles is only interested in Mary's money, she's still a whore... but the scenario is totally different in terms of traditional gender roles and dating expectations, and that really changes the story.

Dating between women can be fraught with uncertainties-- when Bubbles met Mary, it was a "hey, it's great to make new friends, or maybe more" kind of thing, not "I'm auditioning potential partners to settle down with so don't waste my time." Bubbles was not entirely sure she wanted to meet a new girlfriend, as she'd only recently ended a longstanding relationship-- she would have been happy just to make a new friend to do things with once in a while.
Mary is older and obviously has a better-paying career than Bubbles, but it was just assumed that they are both independent, professional women who would split the check on their first date-- since, of course, they weren't even 100% sure it was an official date! Before they met, Bubbles did have those thoughts about the weirdness of meeting some rich woman who could be a potential sugarmama type, and there are surely female couples where that is how the relationship works, but Bubbles doesn't see herself that way, and has never really had that inner desire to be taken care of financially. If anything, her curiosity about Mary's financial status had as much to do with a desire to emulate it, and she found herself wondering if she'd be anywhere remotely near Mary's level by the time she was Mary's age.

In agreeing to see Mary a second time, Bubbles at first thought that they might just develop a friendship, and figured it was just as well she wasn't really attracted to her. She liked the idea of having a pal who wouldn't balk at going to a nice restaurant once in a while, as Bubbles doesn't have that many local friends who can afford to go out much. They met for dinner again, and Bubbles felt like they were getting along well-- after all, Mary wasn't really that much older, and wasn't necessarily that much wealthier, either. Or at least she didn't seem so very different in her attitudes towards money, as far as Bubbles could tell: she was just someone from an upper-middle class family who had a good job, had some lucky breaks along the way, and was old enough to have established herself in a way that Bubbles hadn't yet. Again they split the check without any discussion about it.

By the third date-that-might-or-might-not-really-be-a-date, Bubbles is starting to feel like her first impression of Mary was way off base. "She was just a bit shy at first," Bubbles thinks, "but once she relaxes more she's fun... and she's actually really cute... and I love her clothes! Geez, I better go shopping or she'll think I dress like a bum... but I don't know if the sale rack at Banana Republic is going to cut it, she probably shops at Saks... And her jewelry! It makes mine look like something out of a gumball machine..." Now there's a bit of inner monologue that probably wouldn't have happened had Mary been Mike!

Then, they finally have one of these classic moments:

"Let me get this one."
"No, let ME get it!"
"No, really, I've got it, you can get the next one!"
"No, I invited you..."

Under the circumstances, that kind of makes it more likely that it's a date, even if they're still taking turns paying. One thing leads to another and Bubbles eventually visits Mary's home. There's a bit of a "gulp" moment as Bubbles measures the disparity in their respective real estate, but she can at least chalk some of it up to Mary having bought her place long before the recent housing boom... and anyway, Bubbles is soon enough distracted by the surprise discovery that she and Mary actually DO have chemistry... like, serious chemistry, with a capital C.

So who would have expected it? Things seem to be going really well between Bubbles and Mary, and they're spending a fair amount of time together. When she returns the visit, Mary doesn't seem fazed by the fact that Bubbles practically lives in a slum by comparison. But then there's this one odd moment, after they've been joking about a certain kind of boots, when Mary emails Bubbles that she's seen the exact pair advertised for only $1,500 and would gladly buy them for her. Bubbles can't help but shudder slightly-- yes, it's a joke, but does it hint at something real? Is Mary the type to want to dress her up a bit? Or would Mary try to show affection by expensive gifts that Bubbles could never match? Mary doesn't seem like that sort of person, and clearly thinks $1,500 is a ridiculous price for a pair of boots, but she could buy them if she really wanted to. Of course Bubbles could too, but it would make a lot bigger dent in her budget than it would in Mary's. In any case, the remark is just laughed off, and Bubbles hopes it means nothing.

Then there's another offhand remark, about what Mary has told her best friend about Bubbles. Suddenly Bubbles wonders if things are developing to the point where she'll start to meet Mary's friends, and horrified, envisions them thinking she is some down-market girl-toy trying to take advantage of Mary, who perhaps is just besotted with this younger woman after years of being unlucky in love. Suddenly she imagines herself as the Susan Sarandon character in White Palace, except that the bathroom showdown with the bitchy sister involves Bubbles whipping out her business card and a bank statement to prove that she has a good career and plenty of money and isn't taking a penny of Mary's! And anyway, maybe Mary spends all her money... she doesn't seem like the type to live beyond her means, but she does have two homes, a car, a gorgeous wardrobe and some very expensive hobbies. Wouldn't it be ironic, Bubbles thinks, if I turned out to be the one with the higher net worth?!?

So where does it go from here? Will Bubbles' bank balance be besieged by lifestyle inflation as she tries to dress better for Mary? Or might Mary find herself changing some of her habits, worried that they might seem ostentatious to Bubbles? Will Bubbles feel uncomfortable whenever Mary pays for something? Or will she get annoyed if they keep things "too" equal, knowing that the cost of a dinner out is a much larger percentage of her income than it is of Mary's? What if they want to take a vacation together someday? What if Mary comes to her senses and thinks Bubbles is a slacker, or worse, someone whose affection she can't trust?

What if, what if... of course it's still really too soon in the relationship for Bubbles to be thinking about all these what ifs. She should just be enjoying the fun, flirty companionship and getting to know Mary better, not fast-forwarding to hypothetical situations where they might argue over money. Bubbles realizes that the worst aspect of Mary's money is that it had kind of distracted her from noticing a lot of other things about Mary, good things... things that she could have listed on a "Perfect Girlfriend Attributes" checklist (and probably did, as Bubbles can be the anal, list-making type). Of course nobody is 100% perfect, but Bubbles wakes up one day and thinks that if none of the money stuff had ever been an issue, she might have been able to appreciate all Mary's attractive qualities even sooner.

So that is where the curtain will close for a while on Bubbles' love life. Poor Bubbles, I haven't really been all that protective of her privacy, have I? Ah well, I know she won't mind...

NOTE: in response to an anonymous commenter re. the small number of lesbian investment bankers, I have to confess I hadn't given that issue much thought when deciding how to describe Mary's highly-paid profession, and will just remind readers of the post's first paragraph: LOTS of identifying details in these posts have been changed! Any similarity to actual persons living or dead is purely coincidental!

Borrowing for a Bugatti?

I always ignore the automotive section in the NY Times-- I am one of those New Yorkers who may never own a car-- with public transportation, taxis, and the occasional rental, there's no real reason for me to buy a car, and no reason for me to read most newspaper articles about cars. But here's one that caught my eye, from the August 12th issue.

Exotics on the Easy Payment Plan: "some people wealthy enough to pay cash for the most expensive vehicles on the planet sometimes choose to lease rather than buy them outright."

Timothy S. Durham, a financier with a 45-space garage at his home near Indianapolis, said he put down about $400,000 on his latest acquisition, a black-on-silver Bugatti Veyron that sells for more than $1.5 million. His monthly payments on the five-year lease, he said, would approach $20,000 -- or, about enough to buy a new Honda Accord every 30 days.

Why would a multimillionaire submit to the paperwork and other obligations of leasing when he could simply write a check for the full amount?

In Mr. Durham's case, there were two important benefits: he had other uses for the money and, by stretching the payments over several years, he could put off paying some of the sales tax. For a car in this price bracket, taxes alone can run to $130,000 or more, depending on where the deal is struck.

''One of the biggest things is you're deferring your tax because the sales tax is getting stretched over some period of time,'' said Mr. Durham, whose investment firm, Obsidian Enterprises, controls several industrial companies as well as National Lampoon.

Although he expects to buy the Bugatti by the end of the five-year lease term -- at an additional cost of several hundred thousand dollars -- Mr. Durham said he would rather invest the difference in the meantime. He also said he expected that in coming years the Bugatti would be worth more than he has agreed to pay for it.

On the one hand, you can scoff at people who have nothing better to do with their money than collect dozens of million-dollar cars. But on the other hand, it's a good lesson that you should never stop thinking about the best ways to get the most for your money, no matter how much money you have.

How Much More...

Sometimes when I meet people who are obviously wealthier than me, I wonder "How much more money would I need to make to live that kind of lifestyle?"
I was thinking about this in relation to a former boss of mine. She has a great apartment but she's lived there for years and the mortgage is probably quite low and almost paid off. But let's assume it costs her maybe $2,000 a month-- even if the mortgage is paid off, the maintenance on Manhattan co-ops can be brutal. She also has a weekend home in the Hamptons. Again not a recent purchase, so let's figure another $2,000 a month. She has a really nice car and parks it in a garage. I know the garage alone costs over $400 a month, but I don't know how much she spends on the car. If I assume that she leases it, a little online research would indicate that it costs her another $400 a month or so. She has two homes, so let's assume her utility bills are double mine and then some, so let's figure $250 a month. These things alone would require over $60,000 a year of after-tax income, and we haven't even touched things like food, clothing, entertainment, gifts, travel, etc. which I imagine would have to be another $20,000 or more. So if we figure her expenses are at least $80,000 a year, so if you figure about 30% of her income goes to taxes, she'd need to make $115,285 just to break even.
Somehow, that sounds all wrong and I wonder if I am forgetting a lot of things. I don't make that much less than $115k, and I am not even close to being able to afford a second property and a car. Of course, part of that is because I am pretty aggressive about saving money for retirement. If my old boss wants to save $20,000 a year towards retirement, then she would need to make more like $145,000 before taxes.
Even that number still feels oddly low. I mean, it's not low-- compared to most people in the US, it's a very high income. I would guess the person I'm talking about makes around $200,000 a year, though I could be wrong. And I'm probably underestimating her expenses. But still, it kind of makes you realize that above a certain income level, at least for single people without children, you can start to spend your money on all kinds of luxurious things. You need a certain income level to cover the basics like food and a primary residence. But if you don't go too overboard on those, then the rest of your income is just icing on the cake, fun money, a point which is obscured by all the news stories about millionaires who can't keep up, etc.. I just hope I can get to that point someday! It seems much further away than perhaps it really is...

Silicon Valley and Atlantic City

Read these two articles from Sunday's New York Times:

In Silicon Valley, Millionaires Who Don't Feel Rich

Mr. Kremen estimated his net worth at $10 million. That puts him firmly in the top half of 1 percent among Americans, according to wealth data from the Federal Reserve, but barely in the top echelons in affluent towns like Palo Alto, Menlo Park and Atherton. So he logs 60- to 80-hour workweeks because, he said, he does not think he has nearly enough money to ease up.

“You’re nobody here at $10 million,” Mr. Kremen said earnestly over a glass of pinot noir at an upscale wine bar here.

The Days and Nights of Maurice Cherry

Mr. Cherry had no plans to gamble. He is what is known as a rider, one of dozens of New Yorkers — often homeless or nearly homeless — who travel back and forth between Chinatown and Atlantic City or Connecticut each day, and sometimes twice a day. They sleep through the two-and-a-half-hour rides and make a quick buck off the casinos without handling so much as a single chip.

...

The most dedicated riders virtually live on the bus, making two round trips a day. They leave early in the morning from an informal bus depot at Division Street and the Bowery, spend a few hours at the casino, then return in the late afternoon. As night falls, they are back on the corner, ready for their next journey. For some riders, the routine brings with it a sense of shame. “This is the bottom of the barrel,” said one scrawny young man who was hunched against a chain-link fence as he waited for a bus. “There’s not much further to sink.”

...

As riders get off the bus at Resorts, they are handed paper certificates worth $25 in cash, which they head straight into the casino to redeem. “It’s the same people every night, day in and day out,” said Michelle Garland, a Resorts cashier. “I guess it’s the only way for them to get a couple dollars in their pocket.”

The casino, a ’70s-style carpeted maze rife with glassy-eyed gamblers, resounded with the unmistakable electronic melody of money being won and lost on slot machines. But Mr. Cherry was not even tempted to gamble. After redeeming his certificate, he walked from the casino to an Indian and soul food restaurant a few blocks away. After a $6.50 dinner of fried fish and macaroni and cheese, he strolled back along the Boardwalk, sea gulls circling overhead as if hypnotized by the white light beaming off the casinos.

Now stop and ask yourself how you feel. How do you feel about those people? Do you feel scorn? Towards whom? And how do you feel about yourself? Do you feel dissatisfied and envious? Or do you feel fortunate and prosperous? Or something in between, or something else entirely?

The thing that struck me about these stories is that we all seem much more likely to look at richer people and feel poor in comparison than we are to look at poor people and feel rich in comparison. Somebody always has more, and we always want more. That is what we focus on. There are many more people out there who have less, yet we so rarely take that as a lesson in appreciating what we have and seeing it as "enough."

The story about the Silicon Valley millionaires is the #1 most-emailed article from the Times website right now. The Atlantic City article isn't even on the list.

Bubbles' Hot Date

I finally got the scoop from my friend Bubbles about her date-- see this post for the full backstory, but to put it briefly, she meets this guy online, he seems nice, and he also seems like he might be very wealthy. Bubbles can't help but get her hopes up a bit, but is he too good to be true?

Many of the comments on the previous post echoed the same theme: proceed with caution. Was this guy, who I'll call "Tiny"... no wait, that's too weird and will give everyone the wrong idea about the punchline. Let's just call him "Mike." So was Mike dropping little tidbits into his emails to try to impress Bubbles? Is he some dangerous psycho who is trying to lure her with the promise of riches? Or is he, perhaps, a normal guy who might just be overworked, or shy or just straightforwardly trying to meet someone new? And if so, could Bubbles be about to meet Mr. Right and enjoy a future filled with golf outings, travel and all the other trappings of an upper class life? And would she actually enjoy that?

As I pointed out before, Bubbles is an independent, open-minded kind of gal, not someone easily swayed by swagger. She just wants a nice, reasonably cute boyfriend. And though she said Mike's emails weren't the most brilliant or fascinating emails she'd ever read, it seemed like they might have some things in common, and he did sound nice. He also sounded "real" somehow, she said-- he had mentioned his expensive sports and his weekend house in one of the early emails, but otherwise, he didn't seem to be trying to impress her at all and just seemed to be enjoying their banter. He never asked her to send him a photo, which, to her, was a good sign that he liked her personality and was not the type to write someone off just because she wasn't a supermodel. So she didn't ask him for a photo either.

I was a little surprised at that detail. I'd like to think I'm not superficial about these matters, and also, photos can be deceptive. But personally, I'd like to have some sense of who I'm dealing with before I agree to meet them, even if it's going to be in a well-lit public place. Bubbles said she had sometimes felt that way too, but that in this case, she just wanted to "go with the flow." She is pretty cute herself, and she liked the idea of someone being pleasantly surprised when they saw her for the first time, and hoped that would be the case with Mike too. But here's where Bubbles' bubble begins to burst.

When she first sets eyes on Mike, she thinks "Whoa, he looks kind of ... old!" She had thought he was going to be only a couple of years older than her, and given that her last boyfriend was younger, she had this weird moment where she suddenly began to question her own attractiveness, thinking "Yikes, is this what people our age look like? I have to face reality!" But the more she looked at him, the more she thought he really seemed not that well-preserved. But they sat down to dinner and started to talk. He was obviously nervous, which she found sort of endearing. He was nicely dressed, and not bad-looking, but he just seemed... old. And sure enough, within the first 15 minutes, he sheepishly confessed to being 10 years older than he'd originally claimed. Bubbles just said "oh, really?" and let it go. Inwardly, she was a bit disturbed: it wasn't like their age difference was all that extreme, though it was the first time she'd dated anyone whose age began with the number 5. I think she was perhaps less freaked out at the fact that Mike had been untruthful than at how narrow the gap had become between her and a 50-year-old! "He should be old enough to be my father," she said, "except, he's not!"
They ended up having a perfectly fine dinner. Mike was "nice," "polite," "a gentleman," and as far as she could tell, didn't seem to be lying about his position in life-- "kind of self-effacing" was a phrase she used. She didn't dislike him, but didn't feel like there was any chemistry, and though they chatted about all sorts of things, she didn't feel like they really got to know all that much about each other, and she felt like she was doing more than her share of the conversational work. Bottom line, she was disappointed. She couldn't help but think the guy might be some Prince Charming who would sweep her off her feet, just because he had money. I think she thought his wealth would translate to some kind of glamour, but it really didn't. And knowing that he was much older than she'd thought made it somehow less appealing-- like it wasn't as big an accomplishment to have achieved those things at a later age.
It's funny, Fifi (of the bachelorette party) briefly dated a MUCH older man who was wealthy. They actually did have a certain chemistry (which I personally found disturbing), and she was much more willing to consider becoming a kept woman than Bubbles is. (I found that disturbing too.) But the guy ended up not taking her all that seriously. In Bubbles' case, the lack of physical attraction just made her feel like an idiot for even thinking about the money-- her scale definitely tips in the other direction.
But guess what? Mike emailed her as soon as he got home that night and seems to really want to see her again. She hadn't actually set up another date with him when I spoke to her, but it sounded like she was going to give it another chance.
Poor Bubbles. When I spoke to her, she really seemed glad to have someone to talk to about this. I felt a little guilty that I was prodding her about her feelings and motivations, but I guess it made for a good therapy session for her, as well as good material for me! Bubbles, if you ever find this blog, I hope you'll understand!
(She'll probably just be mad that I called her Bubbles.)

Hot Date This Weekend?

As the weekend approaches, I am wondering how a friend of mine will do on her first date with someone she met online. But I'm even more fascinated by some of the email interaction before their meeting, at least as she's explained it to me. It's interesting how we pick up clues about another person's financial status, and how that might change our perception of them as a potential partner.
My friend, Bubbles (oh how I love making up these blog names!), is of a similar background to my own-- middle-class, well educated, well-employed but not raking in huge bucks as far as I know, as she works for a non-profit organization. People she's dated have fit pretty much the same mold. This time, she gets a response to her online profile from a guy who is around her age, who in addition to sharing her interest in films and seeing live music, says he plays squash and golf. Great!, she's thinking, as it's quite clear he means real squash and golf, not video game versions, as would have been more up the alley of her last boyfriend. Then in the next email, he reveals that he lives in a swanky neighborhood in their city and plays squash at some exclusive-sounding private club. She starts to think, whoa, I don't know many people who can afford stuff like that. It further develops that he owns a weekend house, travels a lot, and works for an investment bank.
Bubbles isn't quite sure what to think. Suddenly it is starting to sound like this guy might be A) really loaded or B) lying. And if he really is A) really loaded, why is he looking for dates online? Shouldn't he be able to meet plenty of single debutantes at his fancy club? Is he really single? Why is he single? What is wrong with him?
From what Bubbles has told me, the emails exchanged have been fairly brief. She didn't say anything about how charming and funny he was, just that they seemed to like some of the same books and movies, and that his emails sounded "nice" and were properly spelled and grammatical, which is always a good sign. But I can't help wondering if she'd have been as willing to go out with him without knowing more if he hadn't dropped these little signals of wealth. And some of the signals were subtle, but I mentioned it to another friend of ours who immediately said "Squash? Oh yeah, he's got money." And I kind of thought that myself-- I mean, hey, I read the Preppy Handbook back in 1981, when my entire junior high school, myself included, didn't quite get that it was supposed to be satire rather than instructional. Golf may be an expensive sport to play, but it's totally mainstream. Squash doesn't seem mainstream, it belongs to a certain world.
Bubbles is hardly the gold-digger type, and maybe I'm projecting too much here, but I could see her perhaps thinking that a rich boyfriend might be a nice change from her usual hipster-y, downwardly mobile type... and if I was in her shoes I could see myself feeling the same way-- and I was once in a similar situation where I did kind of feel the same way, but it only took that one date for me to know I didn't want it to go anywhere, regardless of the money! And if it had gone anywhere, I think I always would have struggled with enjoying what money can provide while wishing it was my own money doing the providing...

Big Money Friday

The Times is on a roll this week, or maybe I'm just noticing it more than usual. Today had a front page story about the Blackstone Group partners' clever tax dodge:

“These guys have figured out how to turn paying taxes into an annuity,” Ms. Sheppard said. “What people don’t realize is that the private equity managers, the investment bankers, all the financial intermediaries, are in control of their own taxation and so the debate in Washington about what tax rate to pay misses the big picture.”

The debate in Congress is about whether most of the compensation that fund managers earn should be taxed at the 35 percent rate that applies to other highly paid Americans, or at the 15 percent rate for capital gains.

It's a little complicated, but here's how it works:

Blackstone’s tax maneuver hinges on its use of good will, an accounting term for the value of the intangible assets, like a well-known brand name, that are built up by a company over time. That value is part of the reason a company is worth more than the sum of its physical parts, like buildings and equipment.

Individuals who create good will cannot deduct it. But when good will is sold the new owners can because its value is assumed to erode. The Blackstone partners sold the good will from their left pocket to their right.

In simplest terms, the Blackstone partners paid a 15 percent capital gains rate on the shares they sold last month in the initial stock offering to outside investors (those shares represented a stake in the Blackstone management company, not its funds).

Blackstone then arranged to get deductions for itself for the $3.7 billion worth of good will at a 35 percent rate. This is a twist on the “buy low, sell high” stock market adage; in this case it would be “tax low, deduct high.”

The deductions must be spread out over 15 years. And the original Blackstone partners are getting just 85 percent of the tax savings, leaving the other 15 percent to outside investors. The deductions on the $3.7 billion to the partners are $1.1 billion over 15 years.

If these tax savings were paid as a lump sum this year, the partners would get about $751 million, which is $198 million more than the taxes the partners will pay on the $3.7 billion of good will.

And then there's the story about people who own pied-a-terres, reversing the typical notion of living and working in the city during the week and then getting away on the weekends. I particularly liked this bit about a guy whose second home is a condo in Miami Beach:

A characteristic of all urban second homes, high or low, is that they give owners an excuse to cut loose or at least have a little fun when it comes to designing and furnishing them.

Mr. Sexton, for example, saw it as a chance to indulge a fantasy of his earlier years — in this case, an obsession with the 1980s television show “Miami Vice.”

“When I was younger, I would be glued to that show every Friday night,” he said. “I always wanted to live like that. When we came here, I told the designer I wanted a “Miami Vice”-meets-New York look. It’s pretty amazing. We’ve got purple walls that go into yellow walls and turquoise walls that go into silver walls.”

Well. I guess we can all dream.

Mattresses and Parking Spaces

Anyone wonder why more New Yorkers don't have cars? Check this out in today's NY Times:

For Parking Space, the Price Is Right at $225,000

Parking in new developments is selling for twice what it was five years ago, said Jonathan Miller, an appraiser and president of Miller Samuel [and one of my favorite bloggers].

Although spaces in prime sections of Manhattan are the most expensive, even those in open lots and in garages in Brooklyn, Queens, Riverdale and Harlem are close to $50,000, although at least one new Brooklyn development is asking $125,000.

Scarcity figures big in the escalating prices. Mr. Miller estimated that less than 1 percent of all co-op and condominium buildings in the city have private garages. The city also limits how much parking new buildings below 96th Street can offer, requiring that no more than 20 percent of the units have spaces.

“It’s a fairly rare amenity,” Mr. Miller said. “And in the world of pet spas and on-site sommeliers, it’s actually a pretty functional amenity.”

In other densely packed cities where space and parking are at premium, parking spaces in condos also tend to trade at high prices. In Boston, they can sell for as much as $175,000, and they go for as much as $75,000 in Chicago. But in other cities, like Los Angeles and Dallas, most condos include parking in their prices.

For developers in New York, parking is the highest and best use for below-grade space and fetches about the same price per square foot as actual living space, which costs much more to develop. According to Miller Samuel, the average parking space costs $165,019, or $1,100 per square foot, close to the average apartment price of $1,107 per square foot. Those are averages, of course. A $200,000 parking space is about $1,333 per square foot.

That is more than twice as much per square foot as I paid for my apartment.

Now, for more outrageous ways to spend your money:

The Money’s in the Mattress

All spring and summer, Hastens has been running an ad in magazines like Elle Decor: a photograph of the blue-and-white-checked Vividus bed topped with a puffy white down comforter, one corner pulled back invitingly, with a pair of sharp-toed stiletto shoes on the floor beside it. The come-on reads: “Who would spend $59,750 on a bed?”

Who indeed? And what is the calculus — economic or otherwise — that brings a mattress to that particular figure? Or to $24,000, in Magniflex’s case? Or $50,000, which is the sticker price of a bed being made by Hollandia, an Israeli company that opened a showroom in the Marketplace Design Center in Philadelphia last fall and a flagship store in the Mall at Short Hills, N.J., last Thursday. I mean, what the heck? Why would anybody pay that much for a mattress?

“What did that guy say when he was asked why he climbed Mount Everest?” said Pamela N. Danziger, a marketing consultant and the author of “Let Them Eat Cake: Marketing Luxury to the Masses — as Well as the Classes” and “Why People Buy Things They Don’t Need.”

“ ‘Because it’s there!’ ” she exclaimed. “I would be very interested in how many they sell at that price. I would suggest the price is more of a positioning tool, though it is true that there are a lot of rich folks. Those making over $250,000 a year are the fastest-growing households by income in the country. We know that from our survey.” (Ms. Danziger’s company, Unity Marketing, tracks the luxury market in an annual survey of the spending habits and behaviors of affluent Americans.)

I kept noticing those Hastens ads while I was shopping for my mattress, for which I ended up paying about $700. I didn't realize there were so many other mattress brands breaking the $10,000 barrier and making the $6,299 Tempur-Pedic seem like some grungy remnant from the clearance pile at Bradlee's.

I just think it is sad, and somehow wrong that people are falling all over themselves trying to think up crazy new ways to get rich people to spend all this extra money that they think they have no better use for. We all make choices every day to prioritize our own comfort over that of people less fortunate than us: I don't give every spare penny I have to charity and I don't know anyone who does. We all find ways to morally justify our actions and when we start judging others we're just as likely to fail our own tests under scrutiny. But personally, in the world we live in, I just could not sleep easily in a $50,000 bed.

Lukewarm News

As always, I like to bring you a variety of links to interesting money stories from all over (all over the New York Times), keeping you up to date on what is going on (or was a few days ago).

First of all there was Friday's article about Freegans-- see commentary at Millionaire Artist and Frugal for Life. I'm all for getting used stuff for free, but I'm pretty selective about what I'll pick out of the garbage. And I will definitely not be eating any dumpster-dived food.

Friday's paper also had an article about the decline in smoking in New York City. Unfortunately the online version doesn't reproduce the graphic that showed the dips when higher taxes and the ban in restaurants and bars went into effect, but take my word for it that they were pretty dramatic. Smoking is such a deeply addictive habit for many people, I was kind of surprised that a financial incentive to quit would be so effective. (The tax raised the average price of a pack from $5.20 to $6.85.) It would be interesting to know if the people who quit for that reason had been truly heavy smokers or just the kind of social smokers who might have one or two when they're out in a bar... I also wonder if anyone has kept any stats on the average income level of smokers. If people who couldn't afford the higher cost were the ones who quit, you'd think smokers' average income has gone up. Do you think that's been the case?

I was also fascinated by this story about some leadership squabbles in the Pequot tribe, the ones who own the Foxwoods casino:

Even with its disputes, life on the Pequot reservation resembles the Magic Kingdom compared with the grinding poverty that afflicts many Native Americans. They typically confront unemployment rates of about 40 percent and per capita incomes of less than $13,000, a fraction of what a Pequot might spend on a car.

The gated community here, near the tribe’s $18 million golf course, features rambling homes, manicured lawns and driveways filled with luxury cars. Under the tribe’s profit-sharing system, each member 18 and older, working or not, receives a monthly payment that averages about $100,000 a year, tribal members say.

Tribal leaders make more. One tribal council member, in a court filing several years ago, said she had made as much as $1.5 million in a year. Each Pequot is also guaranteed a job, free medical care, day care and tuition at any private school or college.

Some tribal members say it has been too much too fast.

“My own nieces and nephews are ruined,” said Robert Hayward, Richard’s brother. Two of his sisters said their children were refusing to work or go to school. Tribal officials have acknowledged that some Pequots have also struggled with drugs....

“I wish I could get him to work,” Ms. McKeon said of her 19-year-old son, who she said had dropped out of high school. He receives $8,000 monthly from the tribe, she said, and has bought three cars in the last six months, including one that has already been repossessed.

Just as it's possible to be too thin, sometimes people can be too rich.

And today (ooh! today!), there was this article about baby showers:

What began as an informal gathering for close friends and family has become a major event — and often several events — for expectant parents.

“People love to celebrate the different stages of life,” said Peggy Post, the etiquette expert. “Traditionally, baby showers were small and intimate, just the way wedding showers used to be. But we live in a consumer society and people just love to shop.”

For those in the baby gear business, the growth in showers and registries has been a boon. The concept