A fresh look at high-net-worth spending and saving

Long Angle, an online platform that touts itself as a private community of high-net-worth individuals, has published a new report profiling the income, savings and spending behaviors of the younger affluent population.

Long Angle's inaugural "2024 High-Net-Worth Income and Spending Report" draws from a survey of primarily HNWIs in the US aged 30 to 49 years old – including entrepreneurs, corporate executives, technology professionals, and investment managers – with portfolios ranging from $5 million to $100 million.

According to the report, respondents save nearly two-thirds of their post-tax income – $621,000 on average – out of a typical post-tax income of $924,000. However, spending tends to level off at higher income levels.

“Once annual income surpasses $1 million or net worth exceeds $25 million, spending flattens out,” the report noted.

Breaking down respondents' income profiles, the report found active income constituted 68 percent, including 33 percent from salaries and 15 percent from private businesses. Passive sources made up the remaining 32 percent, with brokerage dividends from stocks and bonds making up a substantial 14 percent, and another eight percent coming from private and alternative assets.

Through a net-worth lens, the report found the lion's share of HNWIs worth less than $25 million got their income from active sources. Beyond that, the story reverses, with passive income making up 70 percent of total after-tax-income.

"Respondents spend 37% of their after-tax income and save the remaining 63%," the report said. It said a quarter of the savings were in the form of “structural savings,” which included paying down mortgages, retirement plan contributions and life insurance cash value increases, with the rest manifesting as net free cash flow.

Among survey respondents, high earners taking in more than $1 million yearly after tax said they realize more than 80 percent of that income as net free cash flow. In contrast, the report found those earning less than $250,000 after tax said they have a 15 percent free cash flow rate.

Looking at respondents' spending, Long Angle found housing was the top area of focus, reportedly accounting for 28 percent of total outflows. Across all participants, the median amount spent on primary residences totalled $59,8000; those with a net worth above $25 million had the highest median expense at $94,000, compared to $43,950 for those with a portfolio of less than $5 million. 

Vacations and childcare were tied for a distant second on HNWIs' priority lists, each representing 13 percent of spending. For respondents under the $5 million net worth bracket, vacation budgets averaged $18,397, which tended to increase before leveling off at the $10 million net worth mark.

When it comes to their financial philosophy, a decisive 80 percent majority of participants said they're looking for financial independence, relying purely on passive income to cover their expenses. Another two-thirds shared a focus on maximizing their net worth, while around one-third said they want to leave a significant estate to their heirs.