How can rich people drop all so much money on a daily basis but when they need larger amounts of money, they need to liquidate assets?
Yes, I know that wealth can come from owning assets outside of cash, but how can you spend hundreds of thousands of dollars a month if a their money and wealth is all tied up?
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Billionaires finances don’t work like the average Joe. We are told our whole lives to stay out of debt, and save money.
For Billionaires it makes more sense for them to rent, mortgage everything, and borrow money because paying interest is cheaper than paying taxes and liquid money doesn’t earn value the way that investments do.
A big factor in why they can do this is that they can afford to have an army of Lawyers and Accountants to manage it all for them.
If a Billionaire needs cash they can get it in a number of ways
1. Borrow money – taking out loans for Billionaires is super easy. They have mortgages and car loans just like you do because it makes more financial sense for them to do that then pay cash. Larry Ellison of Oracle for example has borrowed millions from banks using his own Oracle stock as collateral. The profits he makes by keeping the stocks is more than his interest payments on the loans.
2. Credit Cars – all their day-today expenses are paid on Credit Cards for ease of use and to get the points and benefits. Their accountants take car of the back end.
3. Paychecks – Most Billionaires are officers (CEO, Chairman, etc) of their own companies and draw a significant salary from that. They also write their own contracts so they get obscene benefits packages like travel expenses, corporate jets, free healthcare insurance, expense accounts, and can write-off a lot of expenses.
4. Selling stock – Billionaires can sell off stock and assets to make money, but they avoid doing that because they have to pay significant taxes on that. Also they want to keep their portfolios because stock is ownership in their companies
5. Free stuff – Billionaires and celebrities get a surprising amount of free-stuff. Sponsorship deals for example pay celebrities to use their product for marketing purposes. When you see someone on a TV show, getting an interview, doing a speech, or even showing up to a big party they are often paid to show up and get free hotel + food + travel along with it. The venue does this to encourage other people to come.
5. Dividends – Billionaires are paid dividends on their stock from the profits of their companies.
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