You know times are tough when even the wealthy start tightening their belts. By JAMES THOMSON
By James Thomson
You know times are tough when even the wealthy start tightening their belts.
According to a survey by Unity Marketing, so-called ultra-affluent consumers in the United States (those with annual incomes of at least $250,000) cut spending by 20% in the first nine months of the year.
A survey by wealth research firm Price & Associates found that around three quarters of families with a net worth between $US10 million to $US30 million are planning cut their spending between now and the end of the year.
Fortunately for these rich folk, there are some glorious examples of super-wealthy cheapskates around the world, including some famous Australian penny-pinchers.
Forbes magazine’s annual list of the world’s thriftiest billionaires contains a few role models for us all to follow.
Top of the list is the world’s richest man, master investor Warren Buffett. While Buffett’s net worth has taken a bit of battering in the last few months as global equity markets have tumbled, he has never been one to waste money.
The Berkshire Hathaway chief, who is worth about $US60 billion, famously lives in the same home in Omaha, Nebraska that he bought in 1958 for $31,500. A few years ago he traded in his six-year-old Lincoln Town Car (which had the personalised number-plate THRIFTY) for a 2006 Cadillac DTS, a car similar to a top-of-the-range Holden Commodore or Ford Falcon.
Buffet spends little on clothes, prefers hamburgers and soft drink to vintage wine, and bought his second wife’s wedding ring from Borsheim’s Fine Jewelry in Omaha, which is owned by his Berkshire Hathaway. Legend has it he even asked for the staff discount.
Second on the list is Ikea founder Ingvar Kamprad. He freely admits he is “a bit tight”. That’s like saying the billionaire, valued at around $46 billion, is “a bit rich”.
A few years ago, the billionaire reportedly sacked his barber after finding another who would cut his hair for $13. He always flies economy (on a low-cost airline, where possible), he drives a 1993 Volvo and always does his food shopping in the afternoon, when the prices drop in the local market. His house is furnished almost entirely with self-assembled Ikea furniture and he regularly eats in the chain’s cheap restaurants.
The story that sums Kamprad up best – part myth and part truth, we suspect – concerns the unveiling of a statue of the billionaire in his home town in Sweden. When asked to cut the ribbon, Kamprad reportedly untied it, folded it neatly and handed it to the mayor, telling him he could use it again.
There might be more to frugal lifestyle than just penny-pinching though. Kamprad knows only too well that the image of a big-spending company owner might not go down so well with Ikea customers. “If I start to acquire luxurious things, it will only incite others to follow suit,” Kamprad said a few years ago. “I look at the money I’m about to spend on myself and ask if Ikea’s customers could afford it.”
Australia has its fair share of frugal billionaires as well.
Back in March 2006, Rupert Murdoch’s wife Wendy Deng told Australian Women’s Weekly that the billionaire (worth somewhere around $US8.3 billion) wore $9 shirts bought at US discount store Wal-Mart.
Then there’s Len Ainsworth, founder of poker machine manufacturer Aristocrat Leisure, who has a personal fortune of $600 million. “If frugal, frugal, frugal were the title of a song, I would be singing it,” Ainsworth once said. His favourite penny-pinching trick? Taking his lunch to work (in his gold Rolls Royce, of course).
But two tightwads stand out.
Greg Poche sold his national freight business Star Track Express to Australian Air Express (a joint venture between Qantas and Australia Post) for $750 million in 2003, but reportedly remains as frugal as ever. He liked to boast he owned just three sports shirts and two business shirts, drives an old Toyota sedan and has been known to drive across Sydney to save $10 on a bottle of wine.
Then again, it’s hard to accuse Poche of being tight. In 2005 he made one of the biggest charitable donations in Australian history, giving $32.5 million to Sydney’s Mater Hospital.
The title of Australia’s richest penny-pincher must be retail king Gerry Harvey. Stories of his never-ending drive to save a buck abound. In the book Gerry Harvey: Business Secrets of Harvey Norman’s Retailing Mastermind, author and Eureka Report editor James Kirby tells how Harvey will spend two months deciding whether or not to buy a pair of shoes. He also relates the story of how Harvey once admonished his wife for buying mandarins from the supermarket when they had a tree in the garden.
Harvey’s not above recycling paper clips or knocking off pens. When addressing the Australian Securities Institute, Harvey grabbed a notepad from the podium and announced he was taking it back to work to cut costs.
“It’s just in my nature. If you’ve lived a big part of your life like that, and then you get money, how do you just throw it away? I can’t,” Harvey said last year.
“People would call me mean, but I’m not mean. I’m just cautious with my money.”