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Why So Many Rich People Don’t Feel Very Rich

economix.blogs.nytimes.com

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Re: Why So Many Rich People Don’t Feel Very Rich

#31

Post by msluyter »

jellicle wrote: post #10

It's simple. Make $100K, live near people making $90K = rich. Make $100K, live near people making $110K = poor.

I believe there have been psych studies to this effect. Asked whether you'd rather make 110k when everyone else is making 80k, vs. 140k when everyone else is making 200k -- assuming prices remain constant, which is economically dubious, of course, but hey, it's a thought experiment -- and most people choose the former.

Here's another study to that effect: http://www.telegraph.co.uk/science/science-news/3315638/Rela...

"But the most the exciting finding was the influence of another factor: how the rival player was doing. Activation was at its highest for those players who got the right answer while their co-player got it wrong. But participants who got more money than their co-players showed much stronger activation in the "reward centre" than when both received the same amount."

This has a lot of interesting implications. For one, the classical homo-economimus model of humans as rational utility maximizers is further called into question. For two, it highlights the hedonic treadmill effect. No matter how much you earn, as long as you're comparing yourself to someone who makes more, you're unlikely to be satisfied.

Re: Why So Many Rich People Don’t Feel Very Rich

#32

Post by bhousel »

ugh wrote: post #17

This is just a tangent, but I wonder whether Robert Gibbs really quit at least partly because his salary was too low. (That’s what Obama’s remark about his departure seems to suggest.) I don’t think you become Press Secretary of the White House because of the salary, you become Press Secretary because you are passionate about it. (For all you cynics out there: replace “passionate about it” with “power hungry”.) You c…

Exactly.. At least the last 3 or 4 White House Press Secretaries made that same salary "joke" upon leaving the position and returning back to their high paying private sector media jobs.

Re: Why So Many Rich People Don’t Feel Very Rich

#33

Post by pointillistic »

I posted the article here and I find that many comments are missing the point. Catherine Rampell writes that the exponential growth of the global wealth for the super-rich oligarchy, especially in the last decades made the comparison with them so much more difficult. This all at the backdrop of the devastating recession that thrown many productive people into the object poverty. I might add that the media and the internet is full of the ubiquitous stories about the super-rich so they are at the same time everyone's neighbor and no ones neighbor.

Re: Why So Many Rich People Don’t Feel Very Rich

#34

Post by jasonkester »

boredguy8 wrote: post #27

My adult life began with several years at a non-profit making $18k/yr. I've worked to avoid dramatic changes to my standard of living since then and it's helped me put money in the bank regardless of where I fell on the income scale. I also find that I need to "reset" my spending every 6 months or so, because it's trivially easy to start spending more than you realize, for no practical gain. Sometimes I get jealous o…

The cool thing about this approach is how nicely it works with compound interest.

Live like a college kid for the 5 years after you leave college, and I defy you not to put $10k per year into the market. Fresh out of school with my $32k salary, I'd regularly find month-old paychecks lying around undeposited because I simply didn't need the money to support my cheap apartment, used car, and 10lb sack of potatoes.

With nowhere for your money to go but the market, you quickly discover what 10%/year (or even 5% per year) does to a stack of money. Eventually it's making more on its own than you're putting in. Financial security for life, sorted by age 30.

Re: Why So Many Rich People Don’t Feel Very Rich

#35

Post by [deleted] »

ugh wrote: post #17

This is just a tangent, but I wonder whether Robert Gibbs really quit at least partly because his salary was too low. (That’s what Obama’s remark about his departure seems to suggest.) I don’t think you become Press Secretary of the White House because of the salary, you become Press Secretary because you are passionate about it. (For all you cynics out there: replace “passionate about it” with “power hungry”.) You c…

[deleted]

Re: Why So Many Rich People Don’t Feel Very Rich

#36

Post by kmfrk »

Tichy wrote: post #12

What surprises me is that there seems to be no upper limit for lifestyle expenses. To me it seems certain lifestyle choices are more of a liability than a bonus. A bigger house needs more cleaning, a cleaning lady, probably also a gardener. More cars require more maintenance, parking space, taxes. Yachts, OK, I don't know - they require personnel, but maybe they are nice to have. Then again, probably it is possible t…

Agreed, the margin does not grow much bigger the more you make, if you made one graph for income and one for expenses.

Re: Why So Many Rich People Don’t Feel Very Rich

#38

Post by jeremymims »

This article wonders why the rich are getting richer and the answer is compound interest.

Having $1 million in the bank will reliably generate between $25k and $50k per year.

Having $2 million in the bank will reliably generate between $50k and $100k per year.

Having $3 million in the bank will reliably generate between $100k and $150k per year.

So someone with $3 million in savings and still working their 200k job will be making nearly the same amount as their savings is generating. If they keep working and don't spend their principle, they'll have another million in about 5-6 years.

For someone putting 30k away each year in savings, it will take them decades to reach the first $1 million.

This is why the rich get richer. It's not about salary. It's about savings and investment.

Re: Why So Many Rich People Don’t Feel Very Rich

#39

Post by chris_atwood »

jtbigwoo wrote: post #7
chris_atwood wrote: post #3

Why did they put a non-linear x-axis on that graph? From 0% to 80% of income is only the first 40% of x-axis space! Then tick marks (with equal physical spacing) change from 5% to 1% increments.

We're talking about the top 90% of earners so it makes sense to enlarge the right side of the graph. They're trying to illustrate the huge changes in income for every percentage point. A linear axis would be basically vertical at the right end.

I think a vertical line would show the point more clearly. The idea is that there is a lot more change at the top end than the rest, and a vertical line does that.

Resolution does become an issue (I agree that showing the change from 99.5 to 99.9 is good and a linear scale makes seeing those points harder). A way around that is to have the graph scroll left to right -- which should be easy given that it is an interactive JS/flash graph widget.

Re: Why So Many Rich People Don’t Feel Very Rich

#40

Post by jhamburger »

People only look up when it comes to wealth, everyone who makes less money than you might as well not exist.

I read an article once about what well-off people (net worth in excess of $5 million) consider to be rich. The consensus was about $50 million liquid net worth- Basically the point where you can realistically consider owning private jets and yachts so there isn't any shit to be jealous of your neighbors about anymore (except maybe a bigger yacht).

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