Everything is relative. Pay cuts at $35,000 or $350,000 a year hurt:
Bloomberg has a personal interest story on how Wall Street bonus cuts have hurt those who had expected to get more money.
“The smaller bonus checks that hit accounts across the financial-services industry this month are making it difficult to maintain the lifestyles that Wall Street workers expect, according to interviews with bankers and their accountants, therapists, advisers and headhunters.
“People who don’t have money don’t understand the stress,””
There are several examples. I will pick this one:
“Richard Scheiner, 58, a real-estate investor and hedge-fund manager, said most people on Wall Street don’t save.
“When their means are cut, they’re stuck,” said Scheiner, whose New York-based hedge fund, Lane Gate Partners LLC, was down about 15 percent last year. “Not so much an issue for me and my wife because we’ve always saved.”
Scheiner said he spends about $500 a month to park one of his two Audis in a garage and at least $7,500 a year each for memberships at the Trump National Golf Club in Westchester and a gun club in upstate New York. A labradoodle named Zelda and a rescued bichon frise, Duke, cost $17,000 a year, including food, health care, boarding and a daily dog-walker who charges $17 each per outing, he said.
Still, he sold two motorcycles he didn’t use and called his Porsche 911 Carrera 4S Cabriolet “the Volkswagen of supercars.” He and his wife have given more than $100,000 to a nonprofit she founded that promotes employment for people with Asperger syndrome, he said.”
The solution? The article mentions many who are looking for bargains, shopping on price, and in general cutting back even though they still make much more than most of us.
It should be noted, that this view is only slightly different than that espoused in a recent paper by Kamukura and Du that suggests the cuts in spending by the “rich” are a function of not needing to spend as much to impress since the “less rich” can not afford to spend when the economy is slower.
BTW my biggest piece of advice would be to spend less and remember this simple formula:
Wealth= (What you have) / (What you want)