Usually CEOs and other executives have a salary which doesn't exceed £200k per annum (with 50% going to taxes). However, they possess luxury cars, large house and huge savings, i.e. great wealth. How do they afford that?

Next option would be investment and stock trading. However, even if the person invests all his annual salary (minus taxes and expenses would be ~ £70k) and luckily in good stocks, it would take ages to earn at at least £50k. As I believe directors do not have time to do day-trading much.

Does it mean the only way how to earn over a million would be start-upping or being lucky and winning a lottery?

  • 1
    If you were in India or any number of countries where ... and have a good likeable personality, know the local language, can make tall promises, be a good middle man; getting in to the (sic) business of politics can be very lucrative! (did not want to say it early on in comment the three dots after where : corruption is quite high)
    – tgkprog
    Commented Apr 27, 2013 at 18:50
  • Possible duplicate of Why isn't everybody rich?
    – Pete B.
    Commented Nov 28, 2018 at 11:47
  • "it would take ages to earn at at least £50k. " - week? Made that in a good week. You seriously have no idea about returns in trading and what traders are paid.
    – TomTom
    Commented Nov 28, 2018 at 13:30
  • Also you need to learn about CEO pay. There is pay (as employee pay) and bonus, and most get a LOT of bonus and stock options. Those do NOT count as pay. And thid, I know people WAY below CEO that get WAY more than 200k pound. Profession matters.
    – TomTom
    Commented Nov 28, 2018 at 19:42
  • At 50% tax rate, take home is £100k. Investing half of that annually will earn you £50k in just 5 years, assuming an average return of 9%. That is not so long. You wouldn't be living the high life on that budget (wouldn't be so bad either), but your investments would hit £1 million in 12 years.
    – BlackThorn
    Commented Nov 28, 2018 at 23:03

6 Answers 6


Another possibility is that a lot of it is bought using borrowed money. Especially if much of your own money is in the stock market, it may be beneficial to take out a loan to buy something compared to selling other assets to raise the same amount of cash. Even going by the likely relatively conservative £200K/year before taxes, you are looking at a very nice house going for perhaps around 3-5 years' worth of pre-tax income.

Let's say you have good contacts at the bank and can secure a loan for £500K at 3.5% interest (not at all unreasonable if you make half that before taxes in a single year and purchase something that can be used as collateral for the money borrowed; with a bit of negotiating, I wouldn't be surprised if one could push the interest rate even lower, and stock in a publicly traded company can also trivially be used as collateral). That's less than £1500/month in interest, before any applicable tax effects -- less than 10% of the before-tax income. And like @Victor wrote, I think it's reasonable to say that especially if the company is publicly traded, the CEO makes more than £200K/year. Given an income of £200K/year and assuming 30% taxes on that amount (the marginal tax would likely be higher, and this includes e.g. interest expense deductions), the money left over after taxes and interest payments on a £500K 3.5% debt is still about £10K/month. Even with a pretty rapid amortization schedule and even if the actual tax rate is higher, that leaves quite a bit of money to be socked away in savings and other investments.

  • Stocks are not accepted by banks for down payments for mortgages. You have to sell the stock to procure cash. You can borrow on margin, but the bank will demand to know the source of the down payment.
    – Chloe
    Commented Apr 27, 2013 at 23:09
  • @Chloe The down payment is between the buyer and the seller, and if the seller is willing to accept (especially publicly traded) stocks as a part of the purchase settlement then those can simply be transferred in much the same way cash can. That said, I wasn't talking about using stock for the down payment, I was talking about using stock as collateral for a loan, which is quite different.
    – user
    Commented Apr 28, 2013 at 13:05

Share options. If you get options on £200,000-worth of a company and then its share price increases five-fold then you make £800,000, which is often taxed more favourably than salary.

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    For a stock price to rise 400% in a reasonable amount of time seems to me like a rather bold assumption. But sure, I can't argue with the outcome based on that assumption.
    – user
    Commented Apr 27, 2013 at 14:22
  • 1
    Stock options do not need to be pitched at market price. It might cost the employee 200k to exercise the options, but the actual return may be much higher. Though I still agree, 400% return is pretty spiffy (and unlikely) !!
    – Peter K.
    Commented Apr 27, 2013 at 17:20
  • 2
    Actually, when I had stock options (not at CEO level, alas), the increase in price from the option price to the price I sold them at was seventeen-fold. That was a startup, admittedly, but a five-fold increase is not that unrealistic.
    – Mike Scott
    Commented Apr 27, 2013 at 19:11
  • "For a stock price to rise 400% in a reasonable amount of time seems to me like a rather bold assumption" AMD in 2018 after the ZEN architecture. Apple when it was nearly bankrupt and got Steve Jobs back. Microsoft during the forming years. And there are way more. Facebook did NOT start with a billion heavy market capitalzation.
    – TomTom
    Commented Nov 28, 2018 at 13:31

As others have stated, CEO's often make more than 200K, and when they do, they're compensated with stock options and other lucrative bonuses and deals that allow them to build wealth above and beyond the face value of their salary. However, remember that having wealth makes it easier to build further wealth. As Victor pointed out, having wealth allows you to increase your wealth in different kinds of investments. Also, it gives you access to more human capital, e.g. wealth management services at firms like Northern Trust, a greater ability to diversify into investments like hedge funds, more abilities to invest abroad through foreign trusts, etc.

Also, you have to realize that wealthier people often pay a lower percentage in taxes than people who earn a salary. In the US, long-term capital gains are taxed at a much lower rate than income, so wealthy individuals who earn much of their money from long-term investments won't pay nearly as high a rate. In my case, my current salary places me at the top of the 25% tax bracket (in the US), but if I earned all of my income through long-term capital gains instead of salary, I would only pay around 15-20% in taxes. Plus, I could afford numerous tax accounting firms to help me find ways to pay fewer taxes. It's not altruism that causes CEOs like Steve Jobs and Mark Zuckerberg to take a $1 salary.

This isn't directly related to CEOs, and I'm not leveling accusations of corruption against high net worth individuals, but I remember spending a few months in a small town in a country known for its corruption. The mayor had recently purchased a home worth the equivalent of several million dollars, on his annual civil servant salary of approximately $20K. One of the students asked him how he managed to afford such a sizable property, and he replied "I live very frugally." This is probably a relatively rare case (I'm sure it depends on the country), but nevertheless, it illustrates another way that some people build wealth.

  • 1
    So you're saying that he was able to buy a property worth on the order of one-hundred times his annual salary by "living very frugally"? Sorry, that just doesn't quite add up. I'd say there was pretty obviously something more to it. If he'd socked aside even $15K/year for 25 years at 10% growth, he'd still "only" have about $1.5M; even 3% interest on the remaining say $1M would gobble up more than his entire income at $30K/year. And that's not even considering taxes.
    – user
    Commented Apr 28, 2013 at 13:14
  • @MichaelKjörling Of course there's something more going on; that was the point, hence why I said it was in a country known for its corruption. Commented Apr 28, 2013 at 13:51
  • Right, I see now what you mean as I look again. Still, even a casual glance at the numbers say that "I live very frugally" is not a way to afford to buy a multi-million property on a few-tens-of-thousands annual income. If you're going to lie, at least make it believable. :)
    – user
    Commented Apr 28, 2013 at 13:53
  • @MichaelKjörling Have you ever been to a country where endemic corruption is a major open secret? There's no need to make the lie believable; everyone already knows the truth regardless. Commented Apr 28, 2013 at 20:33

You got some answers that essentially inform you that CEOs that have £200k written on their paysheet may in fact get much more. I'll take the opposite point of view and talk about people who (according to whatever definition) have a £200k/year income.

How can they afford it

Guess no 1: not all of them can (in the sense that it is quite possible to end up with negative net worth at £200k/year income - particularly if you immediately want to show off with brand new luxury cars, luxury holidays and a large house in a very representative region).

Guess no 2: not all of the £200k/year CEOs are equally visible. There is a trade-off between going for wealth, large house, and luxury car. I deliberately ordered the three points according to increased display of "wealth". However, display of wealth usually comes at a cost (in a very monetary sense). And there are ways to get much display without having much wealth (see below: lease the car, also the mortgage on the house usually isn't displayed on the outside).

You also need to take into account how long they are already building up wealth. I guess the typical CEO with £200k/year you're asking about did not just finish school and enter his work life in this position. It would be very interesting to see how income, accumulating wealth (and possibly "displayed wealth") correlate. My guess is that the correlation between income and accumulated wealth isn't that high, and the correlation between displayed and actual wealth is probably even lower.

they possess luxury cars, large house and huge savings

Are you sure these are the same managers? E.g. the ones with the huge savings are and the ones with the luxury cars?
I'm asking particularly about the luxury cars, because such cars loose value very quickly and/or are often not owned by the driver but rather by the bank or leasing company. Which on the other hand offers the more savings-oriented CEO who is not that much interested in having a brand new luxury car the possibility to go for a one-year-old and save the rest. Knowing that, your CEO should be able to buy a one-year-old Mercedes SL 350 / year. Or a new one every 1 1/2 years (without building up savings or buying a house). However, building up wealth will be much faster with the CEO going for the one-year-old as the brand-new car option amounts to loosing ca. £20 - 30k within a year.
An even-more-savings-oriented CEO who keeps his existing Mercedes 300 TD for another few years, thinking that this conservative choice of car will be trust-inspiring to the customers. Or goes for the SLK thinking that most people anyways don't know that the K between SL and SLK halves the price...

However, if you just want to be seen with the car: after an initial payment of say £8-10k, you can get a decent SLK 350 (not the base model, either) at a monthly rate of ca. 600£/month or less than £7k/year. Note however, that this money does not count towards any kind of wealth, it's just renting a nice car. In other words: If driving the SLK 350 is your absolute goal, you could in theory have that with a net salary of £25k/year (according to your tax calculation, that should be somewhere around £35k / year gross), if you have the savings for the initial payment (being able to make the initial payment may also help convincin the leasing company that you're serious about it and able to pay your rates).

There are also huge differences in value between large houses, compare e.g. these 2:

And, last but not least, there is a decided one-way component in the timing of priorities here: it is much easier to go and get a luxury car when you have savings than first going for the luxury car and then trying to make up with the savings...

I forgot to answer the question in the caption of your question:

How do I build wealth

  • By going on to live as if your income were only £50k (as far as that is compatible with your job) - I gather the median gross income in the UK is about £30k, so aiming at £50k leaves you a very comfortable budget for luxury spending. If you want to build up wealth faster, adjust that.
    In general, if you can manage to withhold much of any income increase from spending, that will help (trivial but powerful truth).

  • From the leasing calculation you can conclude that you basically have no chance to show off your wealth by luxury cars. That is, you'd need to go for luxury cars that are completely incompatible with with building if you want to show your built up wealth by the car: there are too many people who even destroy their existing wealth in order to display luxury. At least if anyone is around who has either a correct idea what luxury cars cost (or don't cost) or will look that up in the internet. Also, people who know such things may also have the idea that the probability that such a car was downright paid (wealth) is small compared to the probability of meeting a leased or (mortgaged) car. Which means, the plan to show off doesn't work out that well with the people you'd want to impress. As for the other people: just a bit of display you can get far cheaper:
    If you really want to drive the SLK, rent it for an occasion (weekend) rather than for years.
    I met a sales manager who told me which rental cars they get when important customers from far east are visiting. The rest of the year they drive normal business cars. You may want to choose a rental company that doesn't write their name on the license plate.

  • Apply the same ideas to the decision of buying a house. Think about what you want for yourself, and then look where you can get how much of that for how much money.

Oh, and by the way: if I understand correctly, the average UK CEO wage is £120k, not £200k.

  • I believe having a luxury does not always mean showing off. I would have a better inner mood by driving a Bentley than Mercedes 300 TD. However, very good answer! Commented Apr 28, 2013 at 19:14
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    @Arturs: fair enough. And the car manufacturers even sell cars that deliberately do not state the model "code". And anyways, once you have decided why you want to be wealthy, a lot of the other decisions follows. Commented May 1, 2013 at 13:08

Many CEOs I have heard of earn a lot more than 200k. In fact a lot earn more than 1M and then get bonuses as well.

Many wealthy people increase there wealth by investing in property, the stock market, businesses and other assets that will produce them good capital growth.

Oh yeh, and luck usually has very little to do with their success.


CEOs are compensated with stocks and options on top of their salary. Most is in the form of stocks and options. You may see them with a fancy car, but they don't necessarily possess the car, house, etc. They merely control it, which is nearly as good. You may lease it, or time share it. It might be owned by the company and provided as a perk.

To earn a million, there are 4 ways: a job, self-employed, own a business, and invest. The fastest way is to own a business. The slowest way is a job or self-employed. Investing is medium. To learn more, read Rich Dad's Cashflow Quadrants.

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