These are the richest of the richest people anywhere. They live where they want to live. A billionaire doesn't move his whole existence across the country to save 10 million dollars in taxes.
But they don't even need to do that, in this instance.
The article stated $17k tax on a $100M (market value) condo. Assuming the buyer pays in cash, the property retains its value, and ignoring the condo fees, that person is paying $1417 a month for the option of living in one of the most prestigious places in the world.
I'm not an expert on housing costs in NYC, but that seems like a pretty good deal.
The wealth moves from $100M in cash to $100M in ultralux NYC condo. Absent some event that diminishes the value of ultralux NYC condos, the only real sacrifice is in liquidity. It's harder to spend a condo if you need to.
When you can pay cash for everything, the budgetary math is more oriented around periodic cash flows. Taxes and insurance and depreciation become monthly accounting expenses that have to be paid from monthly incomes. The actual sale price of the place is almost irrelevant.
What if you had so much money that you have already bought everything you ever wanted? Keeping it all is now just a matter of keeping the monthly expenses below the monthly incomes.
Yes. Yes, you do. But you also need to buy a Costco membership to shop there.
Having money makes it easier to save money, even on a much smaller scale.
If you can pay cash for your commuter car, you pay $15000. If you get a 48-month loan at 5%, you pay 10.5% more total over those 4 years. That additional expense is not added to the resale price of the car.
If you can pay cash for your house, you pay $250000. If you get a 360-month loan at 5%, you pay 93% more total over those 30 years. That additional cost is not added to the value of the property.
Loan interest is an expense that is consumed. It does not return to you as equity in any asset. Rent and taxes are similar, in that the money you pay does not return to you as retained value. They are gone, in the same way that a cake that is eaten cannot be saved for later.
If you're rich, you can establish an accident liability escrow account instead of buying car driver's insurance. You can effectively self-insure with a risk pool of one person. The money in the escrow account still earns interest. Not only do the people who do that not pay premiums, which are lost, they can keep all their money, and even pay themselves a little extra, for not causing accidents. But if they have one, no big deal. They pay for the damage, then top up the escrow account. Their premiums do not increase.
All you need to save money is to be rich. So simple. Everyone should do it, right?
That's what the extreme frugality crowd does. If you drastically reduce your living expenses, you can save more rapidly, and begin to take advantage of the lowered expense opportunities available to people with lots of savings, such as the incredibly simple elimination of all loan interest payment expenses. And that allows you to save more.
And the calculations don't care about how much you earn. The only thing that matters is what proportion of your income you can save, and how much your savings can return in excess of inflation.
But you can't just become rich by doing the things that rich people do. They already have their rich people membership cards; their discounts are not yet available to you. You have to get rich first, then do those things to stay rich or become richer.
