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Dad, Are We Rich?

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Re: Dad, Are We Rich?

#11

Post by bob33212 »

simonh wrote: post #2

Some wealthy trust fund babies were asked how much wealth they thought they would need to really feel financially secure long term. They had inherited wealth ranging from tens, up to hundreds of millions. Almost all of them named a figure about double their personal net worth, regardless of what that net worth was.

Humans naturally anchor to their social network. If those people grew up in rural West Virginia with coal miner family income they would tell you that 250k/year is wealthy.

You have to actively resist this anchoring behavior. You have to remind yourself that just because your neighbor has a 50k car, it doesn't mean that your 10k car is not a good fit for you.

Re: Dad, Are We Rich?

#12

Post by Zaak »

I have some Pacific Islander friends that consider me rich because I live in a nice house (rented), own three cars (bought used), and have a steady desk job (after many years of recurring job instability).

Of course, that's wealthy compared to most of the world.

Re: Dad, Are We Rich?

#13

Post by Spooky23 »

war1025 wrote: post #4
octosphere wrote: post #3

> The bad news is that 1M isn’t what it used to be. It would take 20M to match the buying power of 1M from a century ago. Wholly disagree with the purchasing power notion. I have lived frugally for years and 1M is enough to set me up for life (providing I don't have kids). This is because budgeting is now an ingrained habit and I wouldn't suddenly stop budgeting just because I can now spend more on things.

Having kids is the wrench in the gears for many people I'd guess. There's a reason for the term DINK (Dual income, no kids). Edit: Also to clarify, I absolutely agree with the living frugally thing, and think most people would be in general better off if they focused less on spending every penny they make.

The costs of having children are dramatically over-costed on internet forums.

People going the DINK route are mostly prioritizing careers over life. It's a vicious cycle for many, who end up changing their mind and spending alot of money and opportunity cost trying to make up for it.

Re: Dad, Are We Rich?

#14

Post by lotsofpulp »

docker_up wrote: post #6

My kids asked me this and I said we are "comfortable". We are easily 1%-ers in terms of income level but we don't consider ourselves rich. I consider someone rich who has the luxury of not working and still maintaining a very good lifestyle. In Silicon Valley you can't do that without substantial net worth. The reason why we don't consider ourselves rich is because both my wife and I have to work very hard. We love o…

It's volatility that makes people feel not rich, even though they are 1%-ers. Annual income is meaningless if you feel like there is a substantial risk of you losing that income and having to make lifestyle adjustments. In a dual income household, if you live in a high CoL area and want to send your kids to the best schools, then you're competing with other dual income households, so if one spouse loses their job or has a health issue, it will cause financial instability.

Question is are you willing to downgrade to a single income lifestyle (while still earning two incomes and investing the rest), in exchange for sending the kids to a school in a lower income area and whatever consequences that would have.

Re: Dad, Are We Rich?

#15

Post by geggam »

bob33212 wrote: post #11
simonh wrote: post #2

Some wealthy trust fund babies were asked how much wealth they thought they would need to really feel financially secure long term. They had inherited wealth ranging from tens, up to hundreds of millions. Almost all of them named a figure about double their personal net worth, regardless of what that net worth was.

Humans naturally anchor to their social network. If those people grew up in rural West Virginia with coal miner family income they would tell you that 250k/year is wealthy. You have to actively resist this anchoring behavior. You have to remind yourself that just because your neighbor has a 50k car, it doesn't mean that your 10k car is not a good fit for you.

I came from a poor area. I used to think 80k/yr was rich.

Time passed, I got work in Silicon valley with a wife and kids. Living there I think 500k would be middle class. Not even upper middle class.

Perspectives change as you are exposed

Re: Dad, Are We Rich?

#16

Post by schwabacher »

simonh wrote: post #2

Some wealthy trust fund babies were asked how much wealth they thought they would need to really feel financially secure long term. They had inherited wealth ranging from tens, up to hundreds of millions. Almost all of them named a figure about double their personal net worth, regardless of what that net worth was.

I'd define being 'financially secure', as being confident that you will not need to make changes to your lifestyle for financial reasons. It makes sense that that depends pretty heavily on how expensive your current lifestyle is.

Re: Dad, Are We Rich?

#19

Post by bluGill »

jedberg wrote: post #7

My measure of rich is "Can I live my current lifestyle without regular income from a job?". If the answer is yes, then you are rich. The trick here is to make sure to keep your lifestyle costs in line with your salary when you first start out, so that as your income grows you can save. So yeah, if you want a big house and nice cars and nice vacations, you wouldn't consider yourself rich compared to people who don't h…

My measure is can I buy whatever toys interest me. This will probably never be the case so I'll never be rich. I have plenty to eat and a lot of toys and a great savings: my world standards I'm doing very well, but I will always have to be careful.

I don't think anyone makes rich by my definition: there is always a nicer boat...

Re: Dad, Are We Rich?

#20

Post by Zaak »

jedberg wrote: post #7

My measure of rich is "Can I live my current lifestyle without regular income from a job?". If the answer is yes, then you are rich. The trick here is to make sure to keep your lifestyle costs in line with your salary when you first start out, so that as your income grows you can save. So yeah, if you want a big house and nice cars and nice vacations, you wouldn't consider yourself rich compared to people who don't h…

I agree with you. For example, if I had 100 times my current yearly income in savings/investments/etc, I could live my current lifestyle indefinitely (barring eg, a market crash) because even with zero interest, the money would last 100 years, and with minimal effort (ie index funds) the money would grow over the long term at a rate greater than 1%.

Of course, that would require persisting in my current lifestyle in the face of a massive increase in wealth, which takes nontrivial self-discipline.

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