How the rich spend during a down economy

By Lauren Sherman

updated 4:41 p.m. ET June 4, 2008

America's wealthiest citizens might not be feeling the pain of the slow economy in their back pockets, but that doesn't mean they haven't altered their spending habits.

More than a few upper-class Americans are cutting back on spending, even if it's just a little, according to a March 2008 survey conducted by Alpharetta, Ga.-based market-research firm the American Affluence Research Center.

In fact, 55 percent of the 5,000 wealthy men and women surveyed said that they had reduced or deferred expenditures in the past 12 months or would make a conscious effort to do so in the next 12 months.

Those who partook in the survey — which was the 13th of its kind, conducted twice a year by the AARC — represent the 11.2 million households that make up the wealthiest 10 percent of the U.S. population, as determined by the Federal Reserve Board. The average annual household income of those surveyed was $315,600, with an average primary residence value of $1.2 million, average net worth of $3.1 million and average assets of $1.5 million.

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Ron Kurtz, founder of the AARC, says that in the seven years he's been conducting this survey, high-net-worth consumers have never felt so dismal about the economy.

"Even in 2002 and 2003, when there was a bit of a downturn, people were much more optimistic [than they are now]," he says. Historic numbers on Kurtz's Affluent Consumer Expectations economic index — which measures the attitudes of those surveyed regarding future business conditions — is at 99 for Spring 2008, 32 points lower than Fall 2002. "There are more fundamental problems in the economy right now, including a soft dollar and major overhang of the housing market."

The fundamental difference between the rich and not-so-rich is that cutbacks for the former are generally voluntary, not mandatory. Chances are, those among the wealthiest 10 percent of the U.S. population weren't directly affected by the subprime crisis, for example. That doesn't mean they're spending like crazy during the downturn, but they're not slowing down all that much, either.

"We’re finding 'cutting back' to be a relative term," says James Chung, president of Reach Advisors, a marketing strategy and research firm focused on the wealthiest half-percent of Americans. "The stuff wealthy consumers view as non-essential is getting cut out entirely. Areas that the wealthy consumer views as necessities in their life aren’t getting cut back."

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