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Climbing the Wealth Ladder

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Re: Climbing the Wealth Ladder

#41

Post by nugget »

clktmr wrote: post #4

The article completely ignores the last and most important level of wealth, which is being financial independent. Being able to pay for rent, food, healthcare etc. for the rest of your life without the need of a day job will probably have the biggest impact on your life.

One of the best definitions of “rich” that I’ve come across is a top 1% income based on a perpetual withdrawal rate of dividends alone (about 3%). This puts the wealth threshold around $15m for most US states and around $25m for the Bay Area.

Re: Climbing the Wealth Ladder

#42

Post by hk__2 »

yboris wrote: post #38

I highly encourage people in developed nations to become philanthropic as soon as they cross their country's poverty line. Giving to cost-effective charities can do tremendously more good for others, way more than you can do for yourself. I currently give at least 10% of my income but my aim is to get back to giving 50% again. Join others who give at least 10% https://www.givingwhatwecan.org/

> Join others who give at least 10% https://www.givingwhatwecan.org/

You should disclose your affiliation with this website.

Re: Climbing the Wealth Ladder

#43

Post by CPLX »

jlawson wrote: post #34
CPLX wrote: post #29

Earlier quoted context omitted.

Yup. I see this kind of logic in personal finance discussions all the time but it's bullshit. There simply aren't any spending decisions you can make that will change you from not wealthy to really wealthy. Those things can just move you from poor to middle class at best, or to a better level of middle class. Outside of real outlier status where you're paid really, really large amounts of money for your services (lik…

Saving money, even from a salary job, gives you the breathing room you need to take economic opportunities. For example, if you save a year of expenses you can start a software business without external capital or connections. Most of the paths from middle-class to wealth involve avoiding frivolous spending.

Yes but if you borrow like a maniac from credit cards and default on everything and live in a van but still start a successful software business you still get wealthy.

My point being that actually owning that successful business is the mechanism for wealth. Avoiding frivolous spending can be very, very helpful to achieving that status, as you point out correctly, but it isn't actually the status itself.

This article and many others seem to be unable to make that key distinction.

Re: Climbing the Wealth Ladder

#44

Post by [deleted] »

Pfhreak wrote: post #27

I'm really not a fan of this breakdown because it seems to put each order of magnitude increase in liquid net worth as equal space on the graph. What percentage of people fall into each level. Maybe 50-60% of American adults fall into level 1? Surely, most folks will never reach Level 3 on this chart. While this is an interesting way for someone who has made significant increases in their income over the years, I don…

[deleted]

Re: Climbing the Wealth Ladder

#45

Post by OnlineGladiator »

CPLX wrote: post #29
disintegore wrote: post #8

I understand this isn't the point of the article, but it seems like a roundabout way of saying "don't overspend". This part in particular bothers me : > More importantly though, the best way to climb the wealth ladder is to spend money according to your level. As far as I (a non-economist) can personally tell, any notion of climbing up some abstract wealth ladder is synonym with a salary increase for the vast majorit…

Yup. I see this kind of logic in personal finance discussions all the time but it's bullshit. There simply aren't any spending decisions you can make that will change you from not wealthy to really wealthy. Those things can just move you from poor to middle class at best, or to a better level of middle class. Outside of real outlier status where you're paid really, really large amounts of money for your services (lik…

> like notable entertainer or cardiac surgeon

Google says cardiac surgeons make $400-800k, assuming that's true a very talented engineer at FAANG can easily match this (staff or senior staff level) without being mired by an additional 10 years of school. I personally know engineers making 7 digits in liquid compensation. Obviously these are not your average engineers, but it's doable if you're the 1% (to be good enough for FAANG) of the 1% (to be amongst the best at FAANG) of engineering talent - so this isn't most people.

Just throwing it out there because I imagine most readers here are engineers and you make it sound like it's an impossibility for any of us. I bet at least a handful of readers here are engineers making over $500k.

Re: Climbing the Wealth Ladder

#46

Post by jacquesm »

nradov wrote: post #35
jacquesm wrote: post #13

Earlier quoted context omitted.

>>the best way to climb the wealth ladder is to spend money according to your level. I would argue that the best way to climb the wealth ladder is to spend below 'your level'. Keeping up with the Jones' who are doing their best to display their achieved status is an excellent way to end up just like they will at the end of a long life of hard work: in hock to the bank for their primary residence and with little to no…

With mortgage interest rates being so low right now it hardly makes sense to pay off your primary residence. Better to have the cash available for emergencies or to take advantage of investment opportunities.

Key bit: right now. What will you do when interest rates change and you end up with an obligation to pay the now much higher monthly amount?

If you have your interest locked down for an x period of time and you intend to keep your property always ensure that you can pay off enough of it to be able to continue to live there even if interest rates go back into the 5-10% range.

Re: Climbing the Wealth Ladder

#47

Post by disintegore »

hirako2000 wrote: post #23
disintegore wrote: post #8

I understand this isn't the point of the article, but it seems like a roundabout way of saying "don't overspend". This part in particular bothers me : > More importantly though, the best way to climb the wealth ladder is to spend money according to your level. As far as I (a non-economist) can personally tell, any notion of climbing up some abstract wealth ladder is synonym with a salary increase for the vast majorit…

I would concur. However, spending wisely needs coupled with higher income. That's what most people don't apply. Save 10% or more of your income at all times, see your revenue continously increasing, even if not tremendously, and in matter of a few years you can start investing (housing, business, whatever) See yourself spending near all you get, even getting significant income increases and you get stuck into a loop…

Saving 10% on a median income adds up to roughly three thousand dollars saved, a year. Depending on the amount of risk you're willing to accept, you may find yourself making between ~2 to 10 grand over a 10 year period from interests alone. I think those numbers are reasonable (and that saving in general is absolutely worth it), but I don't think they're significant enough to grant you upwards mobility.

Even furnishing a savings account is a privilege many people cannot afford, and no amount of frugality will help them. Only access to higher quality jobs.

If you ask me, Jay-Z gambled on the entertainment industry and won. His gambling chips were talent and hard work.

Re: Climbing the Wealth Ladder

#48

Post by esotericn »

Kirby64 wrote: post #12
esotericn wrote: post #3

Earlier quoted context omitted.

I'm not so sure, personally. The six levels: Level 1. Paycheck-to-paycheck: You are conscious of every dollar you spend. This includes people with crippling debt. Level 2. Grocery freedom: How much specific grocery items cost don’t impact your finances. Level 3. Restaurant freedom: You eat what you want at restaurants regardless of the cost. Level 4. Travel freedom: You travel when you want, how you want, and stay wh…

I think you're overthinking this. The article examples maybe aren't descriptive enough. #4 would mean I don't price shop Airbnb, hotels, and plane tickets so much. Or maybe I just take first class everywhere. Either way, you're talking spending amounts in the $10k+ range. #5 means you can buy whatever size house you want within limits. That's more a $1M+ decision (although, amortized out long term) #6 means Bill Gate…

No, they're dependent on preferences in what you want. Your preferences differ from mine here.

Either that, or you're assuming that the reasonable benchmark for comparison is close to the absolute most expensive example within a specific sector, which doesn't really match how I spend money.

Thinking about it more, I'd probably say I even hit #4 before #3. Why?

a) I don't really care that much about eating out, so despite being able to theoretically afford "Super Fancy Meals" I still think about it because I could just give someone else that money instead.

b) First class flights and fancy hotels I find ridiculous, they don't factor into my purchasing decisions. I far prefer a cabin in the woods or going hiking or something like that to some constructed notion of luxury.

I'd sooner give $10k to charity before I take a first class flight - in fact I'm on track to do that this year, and hope to increase it. If you don't count anything below $millions as being philanthropic then of course you've defined level 6 as being the top, that doesn't make sense to me.

Re: Climbing the Wealth Ladder

#49

Post by shantly »

nimbius wrote: post #5

im presently reading Paul Fussells "Class" and this is a fascinating take on the idea in the age of wage stagnation. >the best way to climb the wealth ladder is to spend money according to your level. This is directly contradictory to, and detrimental to, how the US Economy expects its consumers to act. Credit has largely filled the gap of wages and productivity such that consumers now have no real sense of their lev…

> im presently reading Paul Fussells "Class"

That's a really fun read. I had a great time playing "spot the behavior of parents/relatives, described as if he knew them personally" (all of which fell somewhere in Prole or Middle, for the record, so nothing to brag about, particularly in the latter case—oh boy, the poor, sad, misguided Middle)

Interesting lens through which to view Trump—does he ever have some weird displayed-class-markers. He reads as the most Middle and entirely un-self-aware and unobservant person possible, who's also won the lottery so all of that is on extreme display. Like a parody of the Middle. It's so strange. It's gotta be just a perfectly-maintained act, right? Given his upbringing it makes no sense for it to be natural, AFAIK. Utterly bizarre.

Lots of subtle observations in there that really do seem to match reality. The "mirrored surfaces signal you don't clean your own house" thing—that's been a fun one to watch out for. I felt very proud in a totally raised-Middle way that I knew the obelisk thing among the Upper-Middle and Upper was aimed at oblique association with Paris rather than Egypt before he got to the reveal, hahaha.

Some updated version by a similarly-observant person would be awesome, but Class is still remarkably accurate given how long ago it was written.

Re: Climbing the Wealth Ladder

#50

Post by Retric »

tibbon wrote: post #7

This is similar to how I’ve thought about money for a while. Through high school, I had dollar problems. As in, things in the $1-9 range were pretty important. Through college I had $10 problems. Early career it become $100 problems. Now anything under $1000 just doesn’t strike me as an issue. New hot water heater? Just go buy it. $10k things however are what feel like real issues now- new roof? I can do it, but’s it…

I agree, what’s useful about this mentality is not about becoming a multimillionaire, it’s about having your wealth match your income. A doctor making 250k is often living pay check to pay check while spending crazy money. Even with a steady paycheck their not accumulating wealth.

Even worse, a football player with a 20million dollar contract is likely to end up broke if they instantly maximize their spending. However, if their lifestyle is based on their savings account that’s going to quickly grow to match that income.

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