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Redditors who are rich (net worth $1 million+) - how did you get rich?

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Re: Redditors who are rich (net worth $1 million+) - how did you get rich?

#81

Post by spindritf »

smackfu wrote: post #38
mikeryan wrote: post #24

Earlier quoted context omitted.

I have to say I almost wondered if this plan was meant as a bit of a joke. I'd rather spread my income around now on a nice(r) house, some fun hobbies and a bit of abject consumerism, and enjoy life more evenly then save now not have as much fun but end up with more money in the bank later. You'll never get your younger years back.

There's a middle ground between not spending and spending extravagantly. So many people with large incomes just waste it away and end up with nothing at the end. We're not talking about a single $500 iPad. We're talking about a $500 night at a club.

How great a night we're talking here? Because, in general, experiences are worth more than gadgets (see below what I mean). Though (sky)diving lessons or vacation would probably be better than a night out.

"Asked which of the two purchases made them happier, fully 57% of respondents reported that they had derived greater happiness from their experiential purchase, while only 34% reported greater happiness from their material purchase."

"If Money Doesn't Make You Happy Then You Probably Aren't Spending It Right", Journal of Consumer Psychology

"In 5 studies, we find that people's material purchase decisions are more likely to generate regrets of action (buyer's remorse) and their experiential purchase decisions are more likely to lead to regrets of inaction (missed opportunities)."

"Buyer's remorse or missed opportunity? Differential regrets for material and experiential purchases.", Journal of Personality and Social Psychology, Vol 102(2), Feb 2012, 215-223.

Re: Redditors who are rich (net worth $1 million+) - how did you get rich?

#82

Post by vbtemp »

dwc wrote: post #27

There's a sad undercurrent to this, as some redditors respond that they find this depressing. While I understand their plight, I do not understand the sustained pessimism for most of the depressed ones. I went to work right out of high school at menial jobs. No college, no big family business. Paycheck-to-paycheck, and any minor emergency like a dead car battery was a financial crisis. I did not "get lucky" on stocks…

> I decided I definitely did NOT like being poor

"Money doesn't buy happiness, but having no money can sure buy a lot of misery." On a related note, it really grinds my gears when I hear well-to-do young adults from middle class families say money doesn't matter when they've never struggled to pay rent or for basic medical care.

Re: Redditors who are rich (net worth $1 million+) - how did you get rich?

#83

Post by patrickd »

Jun8 wrote: post #20
smackfu wrote: post #9

Easiest way: No kids. Two good incomes. Reliably saving 20%. Mid 40s. No college debt or health issues. That should get you to about a million in assets.

I fulfill all the above (except that I have a son, but he's young so the only big cost is daycare, around 13K/year), so where's my million!? In order to develop a successful model, one should also have negative examples, i.e. people who could have had ~$1M in their mid 40s but do not. The greatest mistakes I made that I see with hindsight are (i) doing a PhD in EE where a MS was more than enough and then taking too l…

Thanks for that link... enjoyed it a lot.

[9]This is a good plan for life in general. If you have two choices, choose the harder. If you're trying to decide whether to go out running or sit home and watch TV, go running. Probably the reason this trick works so well is that when you have two choices and one is harder, the only reason you're even considering the other is laziness. You know in the back of your mind what's the right thing to do, and this trick merely forces you to acknowledge it.

Re: Redditors who are rich (net worth $1 million+) - how did you get rich?

#84

Post by aresant »

jberryman wrote: post #69
aresant wrote: post #50

The #1 expense over your lifetime won't be your house, your entertainment, or your cars. It will be TAXES. If you build a career path that can take advantage of tax breaks you wind up with a huge advantage from the start. For tech entrepreneurs - focus on building your enterprise value. Reinvest profits into GROWTH so that you wind up paying the bulk of your taxes in capital gains vs. personal income tax. On $1m or 2…

Respectfully, as someone who doesn't know anything about getting rich, isn't your advice more "how to get richer" rather than "how to get rich"?

Here's a shorter answer to "how to get rich" - be a successful entrepreneur.

But applying the above: let's say you're at a low-wage, hand-to-mouth style job today.

a) Today commit to being smart about taxation since that is one of your most addressable costs (and study it, there are literally THOUSANDS of loopholes)

b) As a result, save up enough "runway" over several years to go take a swing at a start-up.

c) Reinvest profits vs. buying a brand new status car or whatever and then cash out w/your $$$ at cap gains.

Re: Redditors who are rich (net worth $1 million+) - how did you get rich?

#85

Post by aresant »

grandalf wrote: post #76
aresant wrote: post #50

The #1 expense over your lifetime won't be your house, your entertainment, or your cars. It will be TAXES. If you build a career path that can take advantage of tax breaks you wind up with a huge advantage from the start. For tech entrepreneurs - focus on building your enterprise value. Reinvest profits into GROWTH so that you wind up paying the bulk of your taxes in capital gains vs. personal income tax. On $1m or 2…

What you're describing is the distorted landscape created by corrupt tax policy... it's not a good thing, but I suppose someone has to exploit it. To my knowledge single employee S-Corps are more and more risky (likely to result in an audit).

I've been through three audits (of businesses) in the past 12 years.

Their purpose is to "uncover the truth", not to hose you needlessly.

You CAN write off a home office, you CAN write of computers, car miles, travel and entertainment, business meals, etc.

As long as these are legitimate business-related expenses you're in the clear.

As a single-employee S-Corp there shouldn't be such an overwhelming amount of documentation and you can probably push through an audit with minimal headaches.

Probably should add the disclaimer that I am not a CPA, follow at your own advice, but man have I spent enough bucks w/CPAs in the last 12 years to hopefully pass on a bit of hard-won knowledge ;)

Re: Redditors who are rich (net worth $1 million+) - how did you get rich?

#86

Post by johngalt »

dwc wrote: post #27

There's a sad undercurrent to this, as some redditors respond that they find this depressing. While I understand their plight, I do not understand the sustained pessimism for most of the depressed ones. I went to work right out of high school at menial jobs. No college, no big family business. Paycheck-to-paycheck, and any minor emergency like a dead car battery was a financial crisis. I did not "get lucky" on stocks…

If you're inspired by success, chances of emulating it are much higher. If you believe that someone else's success takes something from your own, you will walk through life being depressed by every success story.

Re: Redditors who are rich (net worth $1 million+) - how did you get rich?

#87

Post by Gormo »

carguy1983 wrote: post #19
jaxn wrote: post #18

Earlier quoted context omitted.

That is crazy talk. The rate for small businesses as a whole is around 50% failure within the first 5 years. There are exceptions to that rule and ways to increase the odds. As an example, 90% of franchise businesses are still running after 5 years.

Anecdata: Walk down a main commercial street in any large metropolis and count the number of completely unviable businesses (these are the ones that turn over their real estate every few months). These are further polluting the statistics.

If you're just looking at storefronts, how do you know what's viable and what isn't without making assumptions? Looking at real estate turnover tells you something about the location - and what businesses are appropriate for it - but doesn't tell you much about the viability of any particular business model.

Re: Redditors who are rich (net worth $1 million+) - how did you get rich?

#88

Post by corkill »

This book sums up everything you need to be wealthy, what people who live hand to mouth believe and why most people's 9-5 job, live frugally for 50 year plan to be rich in their retirement is stupid (hint: because you just pissed away your whole life).

http://www.themillionairefastlane.com/ (scammy title I know but seriously read it). The guy who wrote it was the founder of limos.com.

Re: Redditors who are rich (net worth $1 million+) - how did you get rich?

#89

Post by alex_c »

astine wrote: post #78
kylebrown wrote: post #74

Earlier quoted context omitted.

I'm not sure why you would find that quote so offensive, but to be fair, the disillusioned youth on Reddit are probably just as sensitive to the "anyone can pull themselves up by their own bootstraps" assertions by smug boomers (like the GP). Such a world-view is increasingly at odds with an economic reality in which income inequality is higher than its been in decades, and growing.

High income inequality is not at odds with the ability for folks lift themselves out of poverty or social mobility in general.

It may not be inherently at odds, no, but I haven't seen any evidence or studies that social mobility is in any way increasing - and it does seem counter-intuitive that social mobility could increase at the same time as income inequality.

http://www.economist.com/node/15908469

"How rising inequality affects social mobility is still unclear. Those born since inequality started to rise sharply are only just now becoming adults. However there are some troubling signs according to two papers to be presented at the Tobin Project, an alliance of scholars, this month. Christopher Jencks of Harvard University finds that income inequality has been accompanied by a widening gap in college attendance. Ms Sawhill argues that a rising correlation between income levels, likelihood of marriage and level of education will make society more stagnant."

Re: Redditors who are rich (net worth $1 million+) - how did you get rich?

#90

Post by rprasad »

aresant wrote: post #50

The #1 expense over your lifetime won't be your house, your entertainment, or your cars. It will be TAXES. If you build a career path that can take advantage of tax breaks you wind up with a huge advantage from the start. For tech entrepreneurs - focus on building your enterprise value. Reinvest profits into GROWTH so that you wind up paying the bulk of your taxes in capital gains vs. personal income tax. On $1m or 2…

As a tax lawyer, I can say with complete certainty that healthcare costs will trump taxes as the #1 lifetime expense for almost everyone (except the Buffets and Gates). #2 will be costs associated with childraising. Taxes are a distant #3, and for people with sufficient debt (mortage and/or student loan), may actually fall to #4.

Also, while the rest of your advice is sound, it is unncessary to organize an LLC or incorporate a S-Corporation for side projects. In either case, you will face additional taxes (nominally called "fees") for the privilege, along with additional tax filing burdens. You can already deduct business-related expenses as an individual. Indeed, both LLCs and S-Corps are treated as "pass-through" entities, so you would already be doing that for your LLC/S-Corp expenses.

The primary reason to form an LLC/S-Corp for a side project or for consulting is for liability protections (i.e., lawsuits, debt, etc.). Unfortunately, for single-member LLCs or sole-owner S-Corps, creditors will generally require the owner to contractually waive such protections.

The secondary reason, and the reason you're probably thinking of: you can sell the LLC/S-Corp, recognizing capital gains (lower tax rate) or even avoid taxes altogether (via certain norecognition transactions). In contrast, it is extremely difficult to sell an unincorporated/unorganized business, and you will essentially always recognize the gain in such a sale.

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