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Climbing the Wealth Ladder

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Re: Climbing the Wealth Ladder

#151

Post by Kirby64 »

esotericn wrote: post #127
ThaJay wrote: post #113

Earlier quoted context omitted.

You have completely missed the point. The fact that you could does not mean you shoud or even would. Wanting a cabin in the woods and being able to afford it does not make you "House freedom level". That level is being able to buy any house you could want without second thought. The fact that you would not choose such a house is completely irrelevant to this train of thought. Some things you have to plan out and some…

The cabin was referring to the travel level, not housing. I don't think "any X I could want" is meaningful. You're taking it presumably to mean the most expensive offering that exists in the world, but I _could_ want something akin to Buckingham Palace and no amount of money would get me that, or I could want some generic massive palace that would cost $50bn which obviously is above the philanthropy level by any metr…

To some extent they are, but really there's strong limits on this and they can't be broken. At the end of the day, vacations cost more than food and housing costs more than vacations. Full stop.

Your example of saying you don't care about fancy meals... well, sure, but that doesn't change the fact that your price sensitivity to a restaurant is going to be much lower than a vacation. If your end goal is to give a bunch to charity, then scrimping on a vacation too would be a better decision ultimately.

It's really hard to spend more than say, $1k on a meal. Even 3 star Michelin restaurants don't charge that much unless you include alcohol.

Comparatively, it's EASY to spend $1k on a vacation. Incredibly easy.

Re: Climbing the Wealth Ladder

#152

Post by bumbledraven »

The article's focus on viewing payments as a fraction of your net worth is related to the Kelly criterion [1], which suggests making only investments that increase the expected logarithm of your net worth.

For example, say you have the chance to bet on a single flip of a biased coin that comes up heads 51% of the time. If the coin comes up heads, you win $10,000; otherwise, you lose $10,000. According to the Kelly criterion, this bet only starts to make sense once your net worth is at least $250,000 [2].

[1] https://en.wikipedia.org/wiki/Kelly_criterion

[2] https://www.wolframalpha.com/input/?i=solve+0.51*ln%5Bx+%2B+...

Re: Climbing the Wealth Ladder

#153

Post by Pfhreak »

isoskeles wrote: post #100
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…

> Whether you are making $15/hour at a fast food gig, or $200+/hour as an engineer, you aren't going to save yourself into a new level. My experience directly contradicts this. Large increases to your wages allow you to save money into the next level or make a move that increases your wages further. I doubt it works for everyone, but it worked and continues to work for me. Although I don’t think I’ll get to their lev…

Sorry, I meant that without wage increases, saving alone won't bump you. If you get a wage increase, of course you'll be able to move up this ladder. (To a point. You won't reach all the levels with wages alone, no matter how hard you save.)

Re: Climbing the Wealth Ladder

#154

Post by pathseeker »

yellowstuff wrote: post #93
hello_1234 wrote: post #52

Earlier quoted context omitted.

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:…

Yes, it's a really good idea to live within your means and start saving early for retirement. No, most people who are young today will not be able to save anything like $8M doing that. Some things that are exceptional about the woman in this story: * She worked 67 years at the same job. * She invested in individual stocks, mostly during a period when index funds weren't available. This lack of diversification is almo…

>* It sounds like she lived more frugally than most people would find tolerable.

Sounds like an issue with most people.

>* She lived in a rent controlled apartment, meaning her rent was probably closer to free than to market rates for much of her life. Needless to say, this subsidy isn't available to young people today.

The subsidy is available via home purchase. Fixed-rate mortgage payments don't increase over time.

Re: Climbing the Wealth Ladder

#155

Post by yibg »

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 seem to have stopped at some level. I still look at prices for groceries (those mangosteens are pricey) and restaurant items, let alone flight prices. This despite being in the level 4 category in the article.

Maybe it’s being poor since childhood or the first generation immigrant frugality.

Re: Climbing the Wealth Ladder

#156

Post by Pfhreak »

jmchuster wrote: post #96
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…

You might be able to jump by a million with the right job alone, but it's impossible to jump by a hundred million, unless you found a unicorn. Hence why people here are trying to do so.

Yeah, I'd say that a great job, putting you in the top maybe 5-10% of Americans, could get you to level 4. Levels 5 and 6 (tens of millions and hundreds of millions of liquid assets) will not happen for any appreciable segment of the population, but they are given equal weight on the diagram.

Re: Climbing the Wealth Ladder

#157

Post by esotericn »

Kirby64 wrote: post #151
esotericn wrote: post #127

Earlier quoted context omitted.

The cabin was referring to the travel level, not housing. I don't think "any X I could want" is meaningful. You're taking it presumably to mean the most expensive offering that exists in the world, but I _could_ want something akin to Buckingham Palace and no amount of money would get me that, or I could want some generic massive palace that would cost $50bn which obviously is above the philanthropy level by any metr…

To some extent they are, but really there's strong limits on this and they can't be broken. At the end of the day, vacations cost more than food and housing costs more than vacations. Full stop. Your example of saying you don't care about fancy meals... well, sure, but that doesn't change the fact that your price sensitivity to a restaurant is going to be much lower than a vacation. If your end goal is to give a bunc…

I disagree with most of this; but let's just say we inhabit different worlds, and leave it at that. I figure we just take different vacations and go to different restaurants. :)

Re: Climbing the Wealth Ladder

#158

Post by rolltiide »

archagon wrote: post #135
rolltiide wrote: post #112

Earlier quoted context omitted.

These are bad assumptions and it shouldn't bother you that much. There are lots of people making $200k+ living paycheck to paycheck. If the most basic discussion about cost of living is going to blow your mind then just exit this discussion. If you wanted month-to-month rent in my building in San Francisco (as opposed to a more typical yearly lease), it is $11,000 per month, with yearly leases being about half that.…

I work and live in the Bay Area. It is a cruel joke to say that any FANG engineer (or other $200k+ earner) working here is living "paycheck to paycheck". Even in your reply, you provide a solution (just one of many) to this hypothetical renter's problem: switch to a yearly lease and save $66,000 a year . People who are actually living paycheck to paycheck don't have the luxury of making these kinds of financial decis…

You can do whatever you want, there are options at those wealth/compensations ranges

There are also people living up and above their means and want to stay there

Re: Climbing the Wealth Ladder

#159

Post by zrail »

SketchySeaBeast wrote: post #128
philwelch wrote: post #125

Earlier quoted context omitted.

If you buy one share of Toyota Motor Company, you are now a part-owner of a car company, including all the factories and equipment and supply contracts and whatnot that such a thing entails. Owning stock literally entails “owning the means of production”. Buy some stock today and become an evil capitalist!

So only if I buy direct? Not index funds?

(assuming you're asking in good faith)

It's the same thing, just on a different scale. If you own, say, one share of VTSAX (Vanguard Total Market Index) you now own, by proxy, 1.8% of one share of Microsoft stock. You don't have any direct voting or economic rights but because of the way a mutual fund is structured you get most of the economic benefit of that fraction of a share. I.e. you get the benefit of most of the capital gain and dividends that it distributes.

I would personally say that if you want to actually "own the means of production" then directly owning shares is the way to go, but if you don't actually care about making decisions for specific companies then you get most of the benefits without any of the day-to-day thought and worry by owning shares in a mutual fund.

Re: Climbing the Wealth Ladder

#160

Post by greedo »

ben7799 wrote: post #55

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-ra…

A mortgage for a $1M property is roughly $4-$5k depending on credit etc etc.
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