Lessons from a £1m divorcePosted: 2015-06-05
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.