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Climbing the Wealth Ladder

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Re: Climbing the Wealth Ladder

#51

Post by disintegore »

OnlineGladiator wrote: post #45
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…

> 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 enou…

It's not an impossibility. Nothing is an impossibility. We are all temporarily embarrassed millionaires and most of us are temporarily embarrassed for life.

Re: Climbing the Wealth Ladder

#52

Post by hello_1234 »

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…

You are completely discounting the power of compounding. Saving every penny won't make you rich in a year or even in 10 years. But think about 20 years in the future. Think about retirement. Every extra dollar that you put into your 401K will make a meaningful difference on how you retire in 20-40 years. Here's one real example for you: 96-Year-Old Secretary Quietly Amasses Fortune, Then Donates $8.2 Million - https://www.nytimes.com/2018/05/06/nyregion/secretary-fortun...

Re: Climbing the Wealth Ladder

#53

Post by yboris »

hk__2 wrote: post #42
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.

Sorry -- was thought it would be obvious that I've taken the pledge Giving What We Can recommends.

I'm not quite sure why it matters whether I've taken the pledge or not though. Could you elaborate why I should disclose this explicitly?

Also disclosing affiliation seems sensible if I'm promoting a product and I'm going to benefit from others purchasing it. Here I'd be thrilled for more people to join in, but this is akin to telling others about an opportunity to volunteer. Are you thinking there's some conflict of interest?

I'm really curious -- thank you for your time.

Re: Climbing the Wealth Ladder

#54

Post by nradov »

jacquesm wrote: post #46
nradov wrote: post #35

Earlier quoted context omitted.

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.

Most borrowers have 30 year fixed rate mortgages so future changes in interest rates are largely irrelevant to them.

Re: Climbing the Wealth Ladder

#55

Post by ben7799 »

I think this kind of article is helpful.

The thing I notice most is a lot of people buy cars (and replace them frequently) that are way above their "level" and represent hugely irresponsible decisions.

E.x. you should be way into 7 figures of wealth accumulation before you start leasing/buying $50-70k luxury cars.

You never know what someone's stock portfolio/401k/IRA whatever looks like but it's always an eyebrow-raiser for me to see someone drive up in an expensive car and then they later tell you they pay rent and have never bought property and the longer you talk to them the more you realize they're probably living paycheck to paycheck.. just with a relatively large paycheck that disappears nearly completely.

Especially when the trendy area to rent gets you a small studio or 1BR apartment for $2.5-3.5k/month and that's enough to pay the mortgage on a $1M property within 10 miles of said apartment.

Re: Climbing the Wealth Ladder

#56

Post by maire »

So the funny thing is this article is the exact opposite of the two most influential financial books in my life: "The Millionaire Next Door" and "Rich Dad Poor Dad". The true wealthy don't ever think of spending money as if it isn't important. Instead they distinguish between spending on income generation vs spending on luxury. They only spend on luxury intentionally but will spend on income generation freely.

In other words, if someone is frivolously spending their money on luxuries they are very definitely not wealthy. They only want to appear wealthy. The true wealthy really don't look wealthy. They never really leave level 1 on the chart.

Re: Climbing the Wealth Ladder

#57

Post by duxup »

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'm reminded of when Radiohead sold their album for whatever folks wanted to pay on the internet and someone wrote an article about how all bands could do that too:

Step 1: Be Radiohead...

The idea being that the hard part is getting to where you can even use the advice, and after that you're all but done.

Re: Climbing the Wealth Ladder

#58

Post by anirudhrx »

> Lastly, you might argue that you shouldn’t increase your consumption with your net worth, but I would counter that some lifestyle creep can be highly rewarding in terms of maximizing your leisure time and long-term life satisfaction.

I don't agree with this. I think life satisfaction is a function of what you think you need rather than what you really need. Changing that perspective can create as much contentment with existing resources as increasing consumption. For example - no one misses what they never knew they could have. Very few people come up with a _necessity_ for a private jet from first principles.

Re: Climbing the Wealth Ladder

#59

Post by anewguy9000 »

disintegore wrote: post #47
hirako2000 wrote: post #23

Earlier quoted context omitted.

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 furnishi…

2-10 grand over 10 years wont even cover inflation. so you're actually poorer.

Re: Climbing the Wealth Ladder

#60

Post by hultner »

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 wouldn't fully agree with this, I'd say income that non-linear to amount time spent it the highest driving factor.

Let's take an example. I'm going to use Swedish living conditions and salaries as an example as that's where I live but they are close to most European/western countries. We have a frugal grocery store cashier who makes $2000 USD/month after taxes. We have a high level executive in a medium-sized company who makes $5000 USD/month after taxes.

The grocery worked lives like a student (student loan/benefits in Sweden is about $1000 USD/mo) and saves the rest on the stock market (assuming average yearly yield with reinvested dividends at 8.5%), efficiently saving $1000USD/month for future non linear income. The cashier plans to stop working early at 55, at a net worth of about $2 900 000 USD. This allows for a safe withdrawal rate at about $10 000 USD/month. At this level travling/vacation expenses isn't a problem for the cashier. Housing probably does but they can most likely live comfortably even if they decide to rent. They can also easily increase monthly spending allowance by 10% if they decide to continue working half time.

At the same time our executive have been burning through every pay-check, and have effectively no net worth at the same age, sure there's plenty enough to lease a nice car, don't care about restaurants bills but more expensive traveling will still be a setback and vacation time per year is certainly limited as income is still linear to time spent.

So in this example we have a cashier ending up as a multi millionear set for life at 55 with no need to work a day more and a high level executive who'd be back at 0 without the job and a strictly linear income.

Sure salary increase does matter, but in the long run underspending matters more. With a longterm plan it's possible to become a multi millionaire with an entry level job, for instance there's a famous Swedish railroad worker who recently passed away who ended up with somewhere around $17 000 000 USD net worth at the time of his death, and achieved this by living under his expenses with a low salary and investing the rest, he initially turned to the stock market because he couldn't afford a house in his youth. Not Jay-Z levels for sure but well beyond what most people would consider very wealthy.

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