Photo courtesy of The JamesList
Last Friday, J.D. Roth at Get Rich Slowly posted the kind of post that drives people nuts in all kinds of ways as evidenced by the 225 (at last check) comments generated. He posed a reader questions to his audience that centered on this point:
Just yesterday, I read an article on an entertainment site about Steven Spielberg’s $200 million personal yacht. I think that this is a crazy, immoral waste of money. He could make a HUGE difference by using that $200 million for charity.
I guess my point is: Am I really any better? No, I’m not buying a yacht anytime soon, but I do buy luxury items. And someday I’d like the satisfaction of being able to buy my husband a Range Rover. (He loves those damn cars.) My husband doesn’t feel guilt for having these things, but (if I’m being completely honest with myself) I do. Oddly enough, I majored in finance in college and am currently studying for the CFA exam, so the topic of “efficiency and equity” is really on my mind.
As I mentioned in the comments, I really dislike questions like this because I think they’re pointless as there is no real right or wrong answer and it comes down to an individual conscience. But what really bothers me is the focus on the price tag without taking anything else into consideration. I mean you’re judging this guy’s yacht but isn’t the homeless guy totally entitled to judge your designer bag/shoes/cell phone/car/etc?
So, to see if I was way off base with this feeling (I usually am and enjoy disproving myself) I did what I do best and I got on the net and started researching.
Do you know what Steven Spielberg’s net worth is?
Three billion dollars ($3,000,000,000).
He bought a yacht that cost two hundred million dollars ($200,000,000).
$200M is 6.67% of $3B.
If that’s still hard to relate to because those numbers are bigger than Monopoly, consider this: According to the Wall Street Journal, in 2009 the average American’s net worth was $182,000. They also admitted the average was pulled upwards by a very small group of the incredibly wealthy, but let’s use that number for right now.
Do you know what 6.67% of $182k is?
$12,139.40.
According to Motor Trend, the lowest base price on the reader’s aforementioned Range Rover is $59,645 . Are things starting to come into focus yet? Let’s look at an even lower net worth since the Journal admits that number is skewed thanks to those ultra-rich dudes.
A more relatable net worth for some might very well be $45,500. 6.67% of that amount is $3,034.85, the equivalent of a gorgeous huge new 3D LCD HDTV. If you’re a loyal GRS reader, you’ll know commenters have a huge thing for TV’s so I thought they’d enjoy that comparison in particular.
At this point in the number-crunching, I’m completely unconvinced his yacht purchase is a “crazy, immoral waste of money.” But maybe you’re not. Maybe you’re just not sure. Maybe 6% of anyone’s money going to a total and complete Want is hard to stomach.
On his website, JD talks a lot about this little thing called the Balanced Money Formula, as proposed by Elizabeth Warren and Amelia Tyagi. It’s very simple.
You take your net income and split it three ways: 50% to needs, 20% to savings, and 30% to wants. In case you’re curious, 30% of $3B is $900M. And yes, I’m aware this formula is intended for income but considering income builds worth, I think it’s applicable.
30% of the $182k average net worth is $54,600 (still less than the cheapest Range Rover). 30% of $45,500 is $13,650 which isn’t enough to buy you a new Honda Civic. And remember, this is assuming a net worth of some sort. With debt, I don’t have any net worth. Not even Adam Baker of Man vs Debt has achieved a positive net worth yet!
Are we starting to back off of Steven yet?
My answer to the reader is this: No, you’re not really better than Steven Spielberg, but that’s ok because there’s nothing wrong with Steven Spielberg. You’re saying he could do a lot of good with that money, but Spielberg has a history of doing good with his money and that’s just a snapshot of charity he’s actually assigned his name to.
We work very hard to earn our money. There is absolutely nothing wrong with indulging our wants if we are doing it responsibly and within reason. If you go by the Balanced Money Formula, that’s 30% you’re free to do with as you please!
$200M as a stand-alone figure is pretty shocking and seemingly unreasonable but when you take everything into account, it’s really not that big of a deal—definitely less so than justifying the purchase of a Range Rover with an average net worth (not that the reader has an average net worth– I have no idea what their net worth is).
By the way, in case the reader wants to be better than Spielberg, they should know that in order for that cheapest base price Range Rover to reflect 6.67% of your net worth, it needs to be $894,228. So to come in under 6.67%, you need more than that. A net worth of $950k will put your Range Rover at 5.75% if that helps.
We each have to find our own way with our finances. You may decide 20% of your Wants category is perfect for charity. You might not. The only wrong answer is that you’re making enough money to have a surplus and are doing absolutely nothing positive with it ever.
For me, it’s simple—Live below or within your means. Provide for a good future. Give.
What about you? Do you think Spielberg was out of line? When it comes to money, what do you do that lets you sleep at night?
Mutant Supermodel 
See, spending 300 on my ol lady is nothing compared to this yatch LOL
HS
I added you to my blogroll so I can check on you more often 😉
LOL yes but what’s YOUR net worth compared to Steven’s? 😉 Thanks for adding me!
Hmm, I see what you mean. But put it this way; the percentage of his net worth that Spielberg has spent on the yacht is the probably the equivalent as an average Joe buying a brand new car. For Spielberg, it’s just more dramatic of course. So if we spend the same percentage to charity as Spielberg does, doesn’t that mean he’s doing his bit like the rest of us?
Actually, I ran the numbers and it’s less than the average Joe buying a new car. I think he’s doing his part, yes. As a matter of fact, I later found some sites that put average American charitable contributions anywhere from 2.5 to 3.5% of net income. And I’ve seen Spielberg put at around 4% but only including the donations he’s made publicly.
Steven Spielberg brought ET to life – he can do no wrong in my eyes. =)
You make an extremely valid point.
If he can afford it without hurting anyone who am I to judge him. He has done allot of good things with his money and as you pointed out it normal joe money it is the equal to buying a car.
Judy
Exactly! I think people just get sticker shot and fail to move beyond that. I guess instead of judging books by covers this should be don’t judge a man by his yacht!
Nicely reasoned counterpoint! I really don’t care what Spielberg does with his money. It’s more disturbing to me when people don’t reason through a story like you did and try to emulate a lifestyle they really can’t afford, then whine and cry about it.
My net worth is positive (thank goodness!), but as the real estate values keep dropping the level of net worth goes down, too. (Argghhh! Maybe I shouldn’t have bought out my ex.) I just keep living below my means so I can sleep peacefully at night, too.
Thanks.
Ah yes those are a whole separate class of people. I mean I’m all for an occasional pity party but at some point, you have to have your own reality check too.
Living below your means is definitely the way to go. Owing money is so stressful!
Nicely done. I also dislike the “how dare he, he could do so much more with that money” comments. To me they rank right up there with the “don’t complain about your [name 1st world complaint here] when there are homeless starving people in the world.”
When it comes to wealthy people spending money, at some point those comments become more about jealousy and sour grapes than about any real belief that the money is poorly spent.
Yeah I think it’s really hard for people to even think of putting themselves in that space of money and instead just get caught up with sticker shock and then want to turn it into something moral or something else because it’s unrelatable.
BTW your comment reminds me of the “Eat your food, there are starving children in Africa!”
People can do what they want with their money so long as they pay their taxes and stay within the law otherwise etc. It would be nice if he gave to my university department though! Somehow I don’t think he’s going to…
That many zeroes makes me head boggle. I don’t think I would buy a yacht if I had that much. I’m not sure what I’d do. I have a very difficult time thinking beyond 10 million dollars, which is what I would need to live the financially independent life I want without making any sacrifices.
My University department sent me a postcard yesterday and I was so happy because it was from my favorite professor and even had a silly picture on the front of a bunch of them. Totally made me smile and I intend on putting some money aside for them when they fundraise. I loved my department.
Once upon a time I did a post on the deficit and trillions of dollars. The number of zeroes was overwhelming. I don’t see a problem with a yacht and would probably very much enjoy one but I’ve always been a big fan of boats, the ocean, etc. But it’s really hard to grasp any of that– even 10M is a lot to me!!
In addition to your awesome comments, I also think about all the jobs that $200MM buy created. The shipbuilder employed an army of people to make it, he will have to hire a staff/crew to maintain it and store the boat, etc. He’s going to keep on giving with all the employees/salaries it will take to keep her in ship shape so to speak.
I’d mentioned that in my initial comment to the post. In the news clip I posted it actually mentions the full-time staff required to man the ship and keep it in shape. There’s even a spa on board!
It’s his own money and he has the right whatever he wants to buy.
What a bunch of shit. You can’t compare the wealth of people like spielberg to everyone else in percentages- if you taxed most people at say 60% they would be fucking homeless. Spielberg could lose 60% of his income and still never need to work or worry about money again.
Also, from what I recall a yach burns as much fuel in a day as several hundred cars use in a year. People are losing their native homes to climate change and this jerk is buying a huge wasteful yacht to make it happen even faster. In economics they call these problems “externalities” because the cost cannot be reasonably predicted in a dollar amount, but it matters to the people hurt by it. Why does one man have the right to use such a disproportionate amount of resources at the expense of many others?
And yes, I will judge your stupid designer clothes. Why the hell wouldn’t I? Kids are slaves so you can have them. Not wanting to be judged yourself isn’t a good argument for *not* judging someone who is much worse. It isn’t less bad because more people are doing it, jesus. Thats an argument from popularity, not reason.
Most high end designer brands do not use child labor to produce their clothes– low to middle end brands are more often guilty of that. High end designer brands are often produced in countries like Italy and France where couture is a very specialized skill.
As far as the rest of your comment, how do you know what a man can and can’t afford to lose? Who are you to make those calls?
As for my argument regarding judgment, my point is NOT that we shouldn’t judge lest we be judged ourselves, it’s that we shouldn’t judge because we WILL be judged. None of us live perfect lives making perfect fiscal decisions, using resources to their highest efficiency, etc, etc. And if you’re an American, you really have no business making any type of judgment against a man for spending irresponsibly or consuming resources at a level far beyond others because compared to most of the world, you’re guilty of the same exact thing no matter how little you do spend or how little you do consume.
Let the guy enjoy is wealth why do you??? He contributes so much already to various causes more than we know.
Yup, that’s pretty much exactly what I wrote
Awesome!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! YEAH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Way to go “STEVE”!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Enjoyed your last movie