Having a Citation V Twin Jet is awesome. It’s also really cool to own a Gulfstream G550 or a Dassault Falcon 7X. But owning a private luxury jet is one thing, maintaining and running one is an entirely different matter. While a relative few people actually own these super expensive aluminum tubes with turbofan engines attached, everyone knows they’re super expensive to operate. How expensive? Operating costs can range from $2,500 to over $10,000 PER HOUR depending on the type of private jet – and that doesn’t include the initial cost of the jet, it’s maintenance or upkeep. Those numbers are scary big.
But believe it or not, private jets are relatively easy to justify if you have the cash (or financing) to buy one, just like almost everything else that falls into the luxury category.
How to justify a private jet
Let’s say your the CEO of a huge company and you make $5 million per year with a $3.5 million annual bonus. That means your time is worth around $4,086 per hour (based on a 40 hour work week). Considering that a Citation V Twin Jet can travel 550 kph (that’s knots per hour) and easily traverse half the country in less than 2 or 3 hours, and if you take a few highly paid employees with you to inspect that new plant you opened a couple of states away, the jet saves you the hassle of going through airport security and the time wasted with arriving 90 minutes early. Any jet that can save you more than a few hours is surely worth the price tag and the cost of maintenance, right? Right?
This same argument is used to justify overspending on cell phones, automobiles (read my free eBook on Buying A Car), houses, laptop computers, office supplies, televisions, furniture, kitchen remodels, and a host of others. Corporate types reason that spending $7,500 on a quick trip in their Dassault Falcon 7X to check out the new plant is saving money since flying first class on a commercial flight would easily eat up four hours … hey, isn’t saving money fun?!?!
Here’s how the thought process goes:
|Time spent at the airport:||90 minutes|
|Flight time:||120 minutes|
|Time spent at the airport when returning:…||90 minutes|
|Flight time back home:||120 Minutes|
|Total time:||7 hours x $10,000 in salaries = $70,000 for the day|
Flying on a private jet
|Flight time:||120 minutes|
|Returning flight time:||120 minutes|
|Total private jet cost:…||4 hours x $3,000/hr = $12,000 for the day for the plane|
And since $12,000 < $70,000, the plane is justified, right? Right? You already know the answer.
What’s left out of the equation
For one thing, the $1,500 in airline tickets but you can buy a lot of tickets for $20 million (the cost of a plane) as well as the fact that those salaries would have to be paid anyway. What the private business jet actually provides is little more than luxurious convenience at shareholder expense.
And luxurious convenience is expensive.
While everyone but those experiencing that luxurious convenience can usually see that the extremely high cost of a private jet can rarely be justified, we bristle when someone mentions our expensive cell phone data plan, or the new vehicle we just bought, or the flat screen television and satellite package we purchased. We don’t like it when a financial planner suggests that we should delay that trip through Europe for a few years or says that a state college might be a better financial choice than the private college. But is it really any different? A poor choice is a poor choice regardless of the number of zeros behind it … or the letters behind your name.
Not every high-dollar purchase is a poor choice, however
If you’re a rock star making millions, or a CEO with an astoundingly profitable company, a private jet purchase may make sense. If you’ve established your emergency fund, have no debt, have capitalized the kid’s college fund, and have your retirement monies in place, a luxury purchase may make sense for you.
But if your company isn’t profitable, if you’re in debt, if you’re not putting a dime into your savings account, or if you don’t even have an emergency fund, luxury purchases like private jets, exotic vacations, luxurious entertainment systems, over-the-top houses and vehicles are simply off limits for now.
- Evaluate your purchases and evaluate your “needs” in light of your income
- Work hard to make extra money on the side
- Jettison your debt with your extra money
- Get your investment plan in gear
- Fund the college education
THEN explore those luxury purchases. Maybe by then you’ll be able to afford your own private jet!