But, as a percentage, what subset of all rich people actually earned their money through technology? Either way, if those people aren't leveraging their home equity, than they don't know much about finance, truth be told. Assume you have good credit and a steady income or assets; there is absolutely no reason to own your house outright. Bill Gates, for example, has a mortgage on his house. The easier way to think about it is that if you're paying 5% interest on your mortgage, but could get 7% return on money elsewhere, you should take all the money out of your house and earn the 2%. Either way, you also get the value increase (or decrease on the equity as whole). This is the same reason that many wealthy college students take out college loans, because with their low interest rate, there is no reason not to have the 40k sitting somewhere else making more money.
I don't know what evidence, other than opinion, you have that rich people don't have a special guild of concierges, or rent handbags or Ferraris. I know several people of the private jet sort who do have an assistant that is not just someone who just takes down their schedule, but rather is someone who can solve problems anywhere, work the network to get a dinner reservation where ever you want, etc. Further, most fabulously wealthy people are very smart with their money, even if they do have ten houses and two yachts, and although they could buy $2000 bags and throw them away in two months, why would they? They could buy a fancy sports car, an asset that radically depreciates and that you can’t drive all the time, or they could rent one whenever they want?
I didn't say that rich people don't have mortgages, but that that they wouldn't borrow against their house to finance purchases. There may be some tax advantage to having a mortgage, but it wouldn't make sense to borrow against one's house to buy stuff that was going to depreciate in value.
Where did you hear that Bill Gates has a mortgage on his house? It seems very unlikely. You can only deduct the interest on the first million of mortgage debt, so it wouldn't seem worth the trouble.
As for the handbag question, try giving a woman the choice of buying a new handbag or renting a used one, and see what she says.
Ya, I would agree with your comment about financing purchases, and I read that slightly incorrectly. My point, even for bill gates, is that if your rate of return on capital, or expected rate of return, is higher than the rate at which you can borrow capital, than you should borrow. That differential is what's important, with the tax break being icing on the cake.
And on the handbag question, haha, I think you're likely correct.
I am less sure about cars, since if you are going to buy and dump a car, it seems like you should lease it, no? I don't know...
I think the other important thing to realize is that the rich aren't, like any large group, unified in their behavior, which is something that article like this always avoid. There is no one way to become a millionaire and there certainly isn't one set of behaviors they exhibit.
On the last point, the same applies for cars. The market for used 1 or 2 year old BMWs is very strong. Rich people buy new ones, and dump slightly used ones.
Well, there are very few risk free returns, obviously. I guess the standard would be US treasury bonds, which don't pay more than mortgages, obviously. But the S&P has an annual rate of return of almost 10% over the last forty years, so if you're risk averse (aren't we all) a good index fund will likely beat your mortgage rate.
I don't know what evidence, other than opinion, you have that rich people don't have a special guild of concierges, or rent handbags or Ferraris. I know several people of the private jet sort who do have an assistant that is not just someone who just takes down their schedule, but rather is someone who can solve problems anywhere, work the network to get a dinner reservation where ever you want, etc. Further, most fabulously wealthy people are very smart with their money, even if they do have ten houses and two yachts, and although they could buy $2000 bags and throw them away in two months, why would they? They could buy a fancy sports car, an asset that radically depreciates and that you can’t drive all the time, or they could rent one whenever they want?