Lessons from a £1m divorce

The media has reported a divorce with fees of around £1m.  This is for a family with around £6m net worth.  This story sums up a lot of crazy London living to me. Notably:

  • The family has earnings of around £1.5m a year. Let’s call this £800k net of tax. This is very very high – it would put them in the top 5000 or so earners in the UK.
  • At this income level most FIRE eaters would say they would hit financial independence in months, not years. Yet the net worth has been reported at about £6.2m. Into which £1m legal fees carves quite a dent. A net worth of 4x gross income is surprisingly low for such a high earner, reflecting how their cost of living was enormous (and/or how terrible his investment decisions must have been!).
  • The family apparently spent £800k per year. And now the beauty queen wife will receive maintenance of £320k per year. For herself. Gulp. This is luxury living even by their own admission.
  • And by its own admission this family did not save any money.

These guys are those Jones that friends of mine ‘needing income of £500k to live in London‘ are striving to keep up with.

And a lot of the attitudes that drive the sentiment that £500k is a bare minimum were on display in the courtroom as reported by the media:

  • “There’s a limit to how far the wife can reasonably be expected to move from the centre of London”. The husband had proposed Battersea, which is walking distance from the Chelsea/Knightsbridge area they have been living in.  Nope, outrageously too far, was the reaction.
  • Eye-watering sums on bringing the kids up “appropriately”.
  • Eye-watering sums on annual holidays – the wife wanted £75k per year just for this.
  • Extravagance is the new normal.  Can anybody become a beauty queen, if they spend the £60k annually on hairdressers and beauty treatments asked for by the wife, I wonder?

The premise of this blog is that true financial independence entails being able to live where you want to live – central London included – and spend what you are used to spending.  I suppose in theory that means I need to respect the decisions of this couple on what they need to spend.  But they’re about £20m and some good tax planning away from where they need to be on the Save Hard / Invest Wisely front…. good luck to them.


3 Comments on “Lessons from a £1m divorce”

  1. cathybird says:

    The comments that follow the article on the Evening Standard website are predictably unkind to both partners and I don’t want to add to them particularly, but will say that it’s hard not to feel a little impatient with so much extravagance and what appears to be such poor decision-making, and I think the phrase “crazy London living” sums it up pretty well.

    Like

  2. cathybird says:

    I have to say, as someone who lives in London, that I reckon I probably could reduce my annual expenses to £10k (if I was willing to be really spartan), so the notion that you need £500k per year to live in London is in my book just completely mad. However, I don’t have kids, or ambitions to live in a posh area – if you do, it is a different ball game, I guess.

    Like

  3. Mathias says:

    According the wealth formula from Thomas Stanley they were doing fine assumed their age is around forty. 10% X Age X Income = Expected Net Worth, 0.1 x 40 x £ 1.5 m = £ 6 m.

    Liked by 1 person


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s