Dad, Are We Rich? • Hacker News Board

Re: Dad, Are We Rich?

#41

Post by gnaritas » Thu, Jun 06, 2019, 4:02 PM UTC

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…

That's wealthy, not rich. Rich people live off income, wealthy people live off net worth.

Re: Dad, Are We Rich?

#42

Post by turk73 » Thu, Jun 06, 2019, 4:04 PM UTC

jedberg wrote: post #5

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.

That just means you can live on a budget of $40K a year, which is totally reasonable for a single person who isn't in a big city. And that's great! If that's what you want to do, then by all means. But that life isn't for everyone. And if you plan to have kids and go on vacations, then purchasing power is important. I have a friend who did exactly that. We worked together in tech for 10 years, he lived super frugally…

Except it's not that realistic. I have more than that generating passive income and I still can't yet quit my job even though I live in moderate cost of living state. That COL is rising, especially insurance and upcoming education costs.

I've been trying to work it out, but mostly I just need to add to the pile until the passive numbers work out better an do so reliably in good and bad years. $40K on $1M means you have to be 100% in risk assets (stocks). Technically, if you had your whole million in say, an S&P 500 index fund, you could probably safely withdraw 4%, e.g. $40K/year and still grow your principal "most years." You couldn't last year, though.

I earned somewhere around $55K last year without lifting a finger except to judiciously manage the accounts (which takes around 1hr a day), file taxes (10-20hrs once a year), and manage few other things like the odd 401K rollover and what not. It takes the edge off of my main career, but I'm not ready to depend on just that side yet. Inflation is a cruel bitch, always moving the goalposts further away.

My main "plan" is to ditch the coding job if I can find some $40-50K role someplace not in tech, but that would probably still have to be a 40hr/FTE deal so that doesn't give me any additional free time although it probably would be a hell of a lot less stressful. I'm weary of the stress and outsized corporate nonsense, but I still love tech.

I'm open to any ideas.

Re: Dad, Are We Rich?

#43

Post by challenger22 » Thu, Jun 06, 2019, 4:05 PM UTC

Zaak wrote: post #20

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…

Look up the 4% rule and firecalc.com to learn how this 100x multiple is a lot less, more like 25x realistically.

A lot of people are irrationally intolerant of risk. Try not to let fear dominate your intuition about investing.

Re: Dad, Are We Rich?

#44

Post by stevekemp2 » Thu, Jun 06, 2019, 4:05 PM UTC

lotsofpulp wrote: post #30

Spooky23 wrote: post #13

Earlier quoted context omitted.

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.

It's not the cost of birthing/feeding/clothing/daycaring. It's the cost of having a house in the best school district you can afford, sending your kids on ski trips or international vacations with their friends who also have higher income parents, and various other activities that are involved with being in the "up and coming" social group.

I think that's an America-centric view. In a lot of places in Europe it wouldn't matter what neighborhood you lived in - the schools available would be equally good.

Re: Dad, Are We Rich?

#45

Post by SketchySeaBeast » Thu, Jun 06, 2019, 4:05 PM UTC

jedberg wrote: post #36

mempko wrote: post #35

Earlier quoted context omitted.

I think a better way to say this is, are you a capitalist or not. Most people are NOT capitalists (don't own capital) that they live off of.

I guess I should have added a caveat that "my current lifestyle" needs to meet basic needs and make you at least relatively happy.

That also makes those with a truly extravagant lifestyle part of not-rich - I think you'd need to be in the billions to rich a level that you truly could maintain without working - one can always rack up an extraordinary bill buying a new personal jet or private yacht every week.

Re: Dad, Are We Rich?

#46

Post by saltcured » Thu, Jun 06, 2019, 4:06 PM UTC

schwabacher wrote: post #16

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.

Right. It sounds funny to have a 2x guestimate from many people though. Is that evidence of a common mental heuristic for estimating and mitigating future risk?

I personally can think of a net worth figure which seems like it might be comfortable under lucky circumstances (no major crash or catastrophic health issue). And, right now I also feel like twice that would make me feel pretty secure. In spite of my concerns about the future unknowns, having that amount would probably cause me to essentially retire, turning my career into a hobby so I could shed the less enjoyable parts...

Re: Dad, Are We Rich?

#47

Post by legitster » Thu, Jun 06, 2019, 4:07 PM UTC

The vast majority of policy happens at the local level. Zoning, municipal ordinances, occupational licensing, elected judges, etc. Unless you live in NY,LA,SF the 0.01% has little impact on these.

Even making over $100k can have a huge and oversized impact on politics. They are the ones who can afford time to show up to PTA meetins, public hearings, donate to campaigns, etc. The average American city is designed to meet their needs.

Re: Dad, Are We Rich?

#48

Post by gowld » Thu, Jun 06, 2019, 4:08 PM UTC

ikeyany wrote: post #25

bob33212 wrote: post #11

Earlier quoted context omitted.

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 know you mean well, but people tend to want to fit in with their milieu.

Milieu is made of people. You can improve your milieu by being a leader, not a follower.

Re: Dad, Are We Rich?

#49

Post by themagician » Thu, Jun 06, 2019, 4:08 PM UTC

Only wealthy people have a hard time figuring out what the correct measurement is for rich. It’s a total lack of perspective.

It’s always laughable to me what rich people consider “middle”. It’s like the word has a different meaning. Middle, to a wealthy person, extends from the middle all the way up to the top 10% by any measure. Maybe even to the top 5% of they want to talk about how expensive it is where they live, which is totally a choice they are wealthy enough to make. Poor people are treated as non existent.

This kind of tone deafness is why Trump won and why he will continue to win. The actual middle class is tired of hearing about how people making $100k+, with $750k in assets who say, “a million isn’t what it used to be” are somehow in the same socioeconomic class as the actual middle class.

I’m not sure that wealthy Americans understand just how many of their fellow countrymen are in their 30s, 40s and beyond making $20 an hour and living paycheck to paycheck. Average household income is two people working just a few dollars above minimum wage to support their kids.

Re: Dad, Are We Rich?

#50

Post by benj111 » Thu, Jun 06, 2019, 4:10 PM UTC

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…

That makes rich relative though?

If you're into fast cars and faster women but you're only earning $1million a year you aren't rich, whereas if you live like me, you're rich because you have $1million in the bank.

While I don't think your definition is bad per se, if you start mixing with people who define wealth as $10 in the bank, you aren't going to have a very useful conversation, so I think you at least need a different term.

BTW this guy spent nearly £10million in 4 years, I don't think he could ever be rich by your definition. https://en.m.wikipedia.org/wiki/Michael_Carroll_(lottery_win...

Edit: Also this only takes account of assets, not income. If you're earning $1million a year in a safe steady job you are rich, even if you don't yet have enough to retire.