Though the affluent are showing more optimism about the future, per the Spectrem Affluent Investor Index® (SAII), Millionaires are still pessimistic. Though the day to day expenses of the affluent population (those with $500,000 plus in investable assets) may fall into different categories of necessity and extravagance, all groups are showing some wear these days. In the present state of economy, when the affluent were asked if they would cut back on their luxury purchases, 64% said yes. Though only 12% said they were worried about losing their jobs, the cutting back on luxuries seems par for the course.

Though determining what “luxury items” means to the affluent might be a tricky proposition, this finding shows that while the affluent are returning to the market (see page 6), they are still cautiously preparing for the economy to get worse before it gets better. A luxury to an average investor, but a possible necessity to the affluent, household help, seems safe from the chopping block; only 14% reported reducing this expense, though it is unknown how many affluent actually have household help. A luxury for the affluent may be the difference between domestic and international travel. Thirty-six percent will be cutting back on international travel, opting for domestic instead.

Whether or not it is a reaction to the more green-friendly thinking that has gripped the country or a response to the ailing economy, or both, 47% of those polled are planning on considering a new or used car with better fuel efficiency and while 65% are planning on keeping their current car for longer. Considering that filling up a high-end SUV can cost upwards of $80 these days, this might have become more of liability in the affluent household.

Cutting luxury items is a logical step in a recession, and not very surprising. The key will be watching for the next level of personal budget cuts. Though the Affluent have returned to the market, albeit in more recession-proof vehicles, watching how the Millionaires react (as they are being typically more cautious) will be the true test of what the future may bring for this group.

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