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Climbing the Wealth Ladder

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Re: Climbing the Wealth Ladder

#81

Post by Retric »

bronco21016 wrote: post #63
Retric wrote: post #50

Earlier quoted context omitted.

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. Howeve…

It bothers me when people use the phrase living paycheck to paycheck to describe both someone who literally doesn’t make enough money to cover the essential bills of living as well as someone making $200k+. These people are not in the same boat whatsoever. The doctor, or any professional making that much, simply needs to turn in the lease on the luxury car, or downsize their house, or cancel their vacation to materia…

That’s your own assumption and has nothing to do with the phrase. A doctor who loses their license is generally financially fucked.

What’s being described is a massive dependence on continued employment, and someone with 200k of student debts and zero net assets easily qualifies.

Re: Climbing the Wealth Ladder

#82

Post by jacquesm »

nradov wrote: post #67
jacquesm wrote: post #61

Earlier quoted context omitted.

Most? The rate difference is so large that if you are a good earner that it could very well make sense to go for a much shorter fixed rate term. There are many different products ranging from free floating all the way to 30 years, depending on the age of the borrower 30 years fixed might not even be available to them.

Yes I would say that 87% counts as "most". https://www.debt.org/real-estate/mortgages/30-year-fixed/

Wow, I had no idea that this was so common in the USA. Here it's a bit different, these are the current rates:

https://www.abnamro.nl/portalserver/mijn-abnamro/hypotheken/...

The 10 year fixed term is right now better than variable (which is pretty odd for this market), the 30 year rate is at 2%.

Typically first time home owners will choose for the longest periods and second ore later buyers will choose shorter terms depending on their income generating capacity and expenses. The other bigger differentiators are whether or not a payment on the principal is required each month and whether or not you get 'NHG', a warranty construct resulting in lower interest.

Re: Climbing the Wealth Ladder

#83

Post by hk__2 »

yboris wrote: post #53
hk__2 wrote: post #42

Earlier quoted context omitted.

> 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…

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

The way you wrote the sentence really looked like a product promotion, especially to someone (most of us?) who doesn’t know GWWC. Based on your response I don’t think there’s a conflict of interest, but I needed your clarification in order to think that.

Re: Climbing the Wealth Ladder

#84

Post by lioeters »

slumdev wrote: post #77

Not a good article. There are three steps on the wealth ladder: 1. Wage slave - Most people will never leave this step, no matter how many ugly Merc SUVs they own or first-class flights they've taken. 2. FU Money - This person has enough money set aside to walk if they don't like a job or a customer. 3. F-Everyone Money - This person doesn't need to work at all.

There's also an implicit rule of the game: as you climb up each step (or are born into it), join your cohorts in making sure to kick the ladder from under you.

Re: Climbing the Wealth Ladder

#85

Post by esotericn »

lowercased wrote: post #79
esotericn wrote: post #62

Earlier quoted context omitted.

It can give you the breathing room to actually _do_ something that can change your status and allow you to have a decent shot at "own the means of production", though. I've probably had hundreds of conversations with people who will say "well, not everyone can afford to move town" or "not everyone can afford to take a week off work" or whatever else. That's an enormous handicap - you're basically a slave to your curr…

"not everyone can afford to take a week off work" even if you can , financially, it's often hard to do so mentally/emotionally. if you're taking time away from work, that means no income - whether you desperately need it or not may be immaterial to the mental state you've built for yourself.

I think that's the point of the article.

If you have 4 weeks' worth of spending saved then it's difficult.

If you have 40, then it's fairly easy.

If you have 400, it's trivial.

Re: Climbing the Wealth Ladder

#86

Post by lazyguy2 »

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…

It's entirely possible for a wage earner to become a millionaire in the USA. Anybody with a middle class income can do it. It's not even complicated or hard to figure out. The problem is that it requires discipline and living under your means.

The first step is to eliminate debt and don't make stupid purchases. Debt includes credit card, personal loans, car loans, and mortgages. Stupid purchases are things like expensive vacations, eating from restaurants all the time, or buying new cars, or buying boats. That sort of thing.

Pretty much: if you buy a brand new car you are a moron if your goal is to increase wealth. You want to do things include living in inexpensive neighborhoods, having secondary sources of income, having no adult 'children' and so on and so forth. Woe is to parents that are still paying for their 20-somethings.

If you go drive around your city and you want to see were "middle-class millionaires" live you need to avoid the 'wealthy' neighborhoods. Look for the 50-something living in a older neighborhood driving older economy cars around. These people are going to have very low credit scores, as well. The best of them are going to have a credit score of 0, which means no credit history for several years.

Do you calculate the cost of purchases by how many payments can afford in a month? If so you are doing it wrong. Instead you should only ever pay cash. If you don't have money in the bank to pay for it you can't afford it.

The S&P 500 has, historically, provided a 12% return over average 20 year period. If you start off at age 30 and invest 500 dollars a month at that rate it would take you about 26 years to make your first million dollars.

6 years after that would be your 2 million dollar mark. 3 years later would be your 3 million dollar mark. By retirement you would have just under 4 million dollars.

If you make $50k dollars a year then that amounts to about 12% of your income.

You think that is too hard?

The average car payment in the USA is at $550. The average credit card debt is $4,717. At 15% interest and doing minimum payments at $189 that card is going to take 10 years to pay off and $22,869 in total. That means that for every 1 dollar you spend the bank makes 4.

If you can afford to make banks rich you can afford to make yourself rich. Just can't do both at the same time.

Re: Climbing the Wealth Ladder

#87

Post by arkh »

hultner wrote: post #60
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 compa…

> grocery store cashier who makes $2000 USD/month after taxes

Not "close" to most European/western countries. You may be really disconnected from normal people revenues.

> assuming average yearly yield with reinvested dividends at 8.5%

That's a big assumption.

> At this level travling/vacation expenses isn't a problem for the cashier

Inflation over 30 years then 20 more years of retirement may change this.

Re: Climbing the Wealth Ladder

#88

Post by account73466 »

hultner wrote: post #60
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 compa…

>> a cashier ending up as a multi millionear set for life at 55

Except that the most interesting part of life is over

Re: Climbing the Wealth Ladder

#89

Post by esotericn »

arkh wrote: post #87
hultner wrote: post #60

Earlier quoted context omitted.

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 compa…

> grocery store cashier who makes $2000 USD/month after taxes Not "close" to most European/western countries. You may be really disconnected from normal people revenues. > assuming average yearly yield with reinvested dividends at 8.5% That's a big assumption. > At this level travling/vacation expenses isn't a problem for the cashier Inflation over 30 years then 20 more years of retirement may change this.

He's specifically talking about the Swedish perspective where the income distribution is much flatter.

In the UK it'd be more like $1K for the cashier and $10K for the exec rather than 2 and 5.

Re: Climbing the Wealth Ladder

#90

Post by wonderwonder »

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…

I would argue that this overlooks the factor of time and compound interest. Lets say I make 60k a year and am 25 years old. If I am living paycheck to paycheck due to bad choices (partying, eating out, etc.) and then I switch my spending habits and can now live comfortably on that 60k and I can save / invest. Lets say my take home after taxes and health insurance (32% reduction) is $3,400 a month. If I can invest $1,200 a month of that, and assume a safe 7.5% return by the time I retire at 67 I have ~$4 million which is considered wealthy, but not really wealthy.

But yes in the short term the only way to gain wealth is to earn more money.

Edit: This assumes a perfect scenario, 98% of the time, that person making 60k a year ends up on social security barely making it at 67.

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