Millionaires Who Are Frugal When They Don't Have to Be • Hacker News Board

Re: Millionaires Who Are Frugal When They Don't Have to Be

#61

Post by SlipperySlope » Sat, Jun 06, 2015, 2:24 PM UTC

jasode wrote: post #29

hippich wrote: post #25

Earlier quoted context omitted.

just minor nitpick - "lifetime cap of the health insurance" - i though with obama care this was eliminated, no?

Yes, you may be right. I haven't kept up with the new laws. I just remember actor Christopher Reeves getting paralyzed from his horse accident and he blew right past the health insurance lifetime cap ($250k or $1million I can't remember). Afterwards, the actor and friend Robin Williams chipped in to help with some medical bills. If the lifetime cap is gone, some other issue will crop up such as an experimental (and v…

Regarding insurance, a tactic of the frugal is to forgo insurance if you can withstand the loss. For example, my household does not purchase collision insurance on our vehicles.

Likewise we can withstand high deductibles and as a result obtain lower premiums on other sorts of insurance.

Re: Millionaires Who Are Frugal When They Don't Have to Be

#62

Post by walshemj » Sat, Jun 06, 2015, 2:25 PM UTC

crimsonalucard wrote: post #45

DanAndersen wrote: post #22

Earlier quoted context omitted.

In cases like those in the article, these savings aren't stowed away in gold bars under rich people's mattresses, they're mainly in investments that continue to yield dividends. Those investments are going to various companies that are actually doing something with that money, so it's still circulating through the economy. Is there something I'm missing? I admit I'm not as well-versed in economics as I'd like to be.

Unless it's an ipo an "investment" or exchange of stocks for money on a stock market is simply just a trade among shareholders that generates zero GDP. It does go back into the economy and thus circulates. Dividends is wealth generated by laborers and taken by shareholder owners. Sitting on stocks and eating up dividends while contributing no work of your own does not cause money to circulate through the economy in a…

mm tried to run a business with out access to capital.

Your being very naïve.

Re: Millionaires Who Are Frugal When They Don't Have to Be

#63

Post by walshemj » Sat, Jun 06, 2015, 2:29 PM UTC

grmarcil wrote: post #48

comrade1 wrote: post #28

Earlier quoted context omitted.

I'm in Vienna right now for work and going to the symphony tonight. I was in Barcelona two weeks ago and had some fabulous meals. Was in Sardinia las week on vacation but stayed at a colleagues beach home. We paid 1/2 off for our car with a company perq and are having the company cover about 50k in expenses on a home were in the midst of purchasing. You should take advantage of your opportunities more.

I'm curious - what industry are you in? I've never heard of a company providing perks for car and house purchasing.

depends for Western companies those sent overseas can have some very nice perks.

I remember looking at this in Malaysia and one of the thing that put me off was the "servant" issue - the idea of having a servant was just creepy to me.

Re: Millionaires Who Are Frugal When They Don't Have to Be

#64

Post by FLUX-YOU » Sat, Jun 06, 2015, 2:30 PM UTC

jasode wrote: post #37

gizmo wrote: post #27

Earlier quoted context omitted.

It's laughable to suggest splurging on a 300k Ferrari is irresponsible at $10M < assets < $100M.

Everyone's appetite for risk is different. If I had $10,000,001.00 in the bank, I personally would not feel secure enough to spend $300k on a car (and also pay all the expensive maintenance that it entails.) Since the car is 3% of my available funds, I'd be constantly hyper paranoid about a stray rock being kicked up by the truck in front of me. If I had $100 million, the $300k car would feel a little more "disposabl…

On one hand, you're very frugal about buying a 300k car. On the other hand, that car has to be in pristine condition for you to drive it (or without hyper paranoia). What's up with that? I'd have thought frugal people would stick to their car purchases for a long time. I'm pretty sure that ferrari could be made to last 10-20 years. Yeah the maintenance is expensive, but that just means it's not really a 300k car.

Re: Millionaires Who Are Frugal When They Don't Have to Be

#65

Post by yourapostasy » Sat, Jun 06, 2015, 2:34 PM UTC

hippich wrote: post #25

jasode wrote: post #15

The millionaires at $1m to $10m absolutely DO have to be "frugal" if we use define "frugal" to be about "smart spending" as opposed to fishing pennies out of public fountains. The word "million" is deceptive because it is an amount beyond what 99% have. It makes it seem like some mind boggling amount of money but mathematically, it really isn't that much. A person classified as "millionaire" could be tagged that beca…

just minor nitpick - "lifetime cap of the health insurance" - i though with obama care this was eliminated, no?

This is a confusing area. Here is the official Health and Human Services page about the subject, but this page is not very comprehensive.

http://www.hhs.gov/healthcare/rights/limits/

Take the case of cancer. Look at the list of essential services.

https://www.healthcare.gov/coverage/what-marketplace-plans-c...

I'm not sure where cancer is on that list, so I gather that cancer is not covered by the bare minimum essential services plans. From this, I believe it is incorrect to say ACA (aka Obamacare) requires coverage of unlimited cancer treatment.

Also, see this article:

http://khn.org/news/obamacare-lightens-load-for-cancer-patie...

It points out the key loophole in planning for unexpected catastrophic medical expenses is prescription medication, regardless of lifetime cap issues. Even if you can afford the annual copays and deductibles for the numerous office visits, the medication budget for treating cancer can easily blow out your budget planning by either not being covered at all, or only covered at a 50% level.

What makes this aspect especially hard to plan for is you currently have no way to find out in advance what these medications cost under specific plans. So if for example, you have a family predisposition to a certain type of cancer, then you have no way to find out how to financially plan for the possibility you might also get it, and have to start the medication for it.

In the US at least, I still firmly believe that prudently planning for severe medical conditions is simply not feasible, even with "catastrophic coverage", for families with less than $10M in liquid assets, and $40M in total assets.

Re: Millionaires Who Are Frugal When They Don't Have to Be

#66

Post by adventured » Sat, Jun 06, 2015, 2:42 PM UTC

siscia wrote: post #35

jasode wrote: post #15

The millionaires at $1m to $10m absolutely DO have to be "frugal" if we use define "frugal" to be about "smart spending" as opposed to fishing pennies out of public fountains. The word "million" is deceptive because it is an amount beyond what 99% have. It makes it seem like some mind boggling amount of money but mathematically, it really isn't that much. A person classified as "millionaire" could be tagged that beca…

Cannot read the article, however, we should be careful about the definition of "millionaires". If we define "millionaires" as the individual with 1M of worth asset you are definitely right. If we define "millionaires" as High-Net-Worth individual (HNWi), the people who have at least 1M in investable finance without counting the primary residence it start to get more interesting. However, if we define "millionaires" a…

The last group does have to be frugal most likely. It's a very, very small number of high earners that manage to yield more than $1m in income - much less net that after taxes - and then do it multiple times.

There is a very high rotation on high income earners. They tend to ride temporary booms in whatever their specialty is (eg the real estate bubble days), and also peak out at a certain age bracket (their earning power peaks for only a few years out of a long career).

If you have this seven year peak earning power: $300k, $500k, $600k, $1m, $600k, $500k, $300k - you've yielded $3.8 million in earnings, paid a likely ~$1.5 million in total income related taxes, and have $2.3m left before life expenditures. You're 52 years old, and your earning power has peaked. You have $2.5 million in savings and investments. That has to last the rest of your life and retirement; you spend $10k per month in total life expenses, and have two children, and a decent house with a mortgage; your income will never be much higher than $300k again, and you're going to pay ~30% in income taxes on that.

That's closer to a normal scenario for a $1m earner, than the one where they just yield $1m per year for 20 years and never have a financial care in the world.

Re: Millionaires Who Are Frugal When They Don't Have to Be

#67

Post by yourapostasy » Sat, Jun 06, 2015, 2:49 PM UTC

walshemj wrote: post #63

grmarcil wrote: post #48

Earlier quoted context omitted.

I'm curious - what industry are you in? I've never heard of a company providing perks for car and house purchasing.

depends for Western companies those sent overseas can have some very nice perks. I remember looking at this in Malaysia and one of the thing that put me off was the "servant" issue - the idea of having a servant was just creepy to me.

This is a culture clash. With your sensibilities, if you went along with the servant perquisite, you would likely treat them far, far better than many others, and give them and their family a path out of of their socioeconomic class. Also, nothing prevents you from adding to their pay beyond what your company pays, and including their children with your children's activities, or even education.

Re: Millionaires Who Are Frugal When They Don't Have to Be

#68

Post by adventured » Sat, Jun 06, 2015, 2:54 PM UTC

crimsonalucard wrote: post #55

jsonjson wrote: post #26

Earlier quoted context omitted.

Unless they've sacked their money away under their mattress, it has been deployed back into the economy. It is either invested or in a bank where the majority of it has grown the pie of total dollars through loans (this is often not well understood). If I have ten dollars that I place in a bank, they will only hold the required reserve. Assuming this is 30%, then seven will get distributed in loans. The effective siz…

Yes. This is true. I mean wealth in terms of wealth ownership. Compounding interest from loans, dividends, or stock investments causes the amount of wealth "owned" by rich people to grow unnaturally.

There's nothing unnatural about yielding a return on an investment.

The greatest contributor to wealth inequality in the last 40 years is the Federal Reserve debasing the currency that the middle class depends on (and since ~1970, they've been doing it at a very rapid clip). If your wages go up 2% per year, and inflation averages 3% per year, over 30 years your standard of living is going to get nuked. The super rich can manage inflation by shifting assets, everyone else cannot.

Re: Millionaires Who Are Frugal When They Don't Have to Be

#69

Post by comrade1 » Sat, Jun 06, 2015, 2:57 PM UTC

grmarcil wrote: post #48

comrade1 wrote: post #28

Earlier quoted context omitted.

I'm in Vienna right now for work and going to the symphony tonight. I was in Barcelona two weeks ago and had some fabulous meals. Was in Sardinia las week on vacation but stayed at a colleagues beach home. We paid 1/2 off for our car with a company perq and are having the company cover about 50k in expenses on a home were in the midst of purchasing. You should take advantage of your opportunities more.

I'm curious - what industry are you in? I've never heard of a company providing perks for car and house purchasing.

Car perq is common in German companies at director level and above. We're in Switzerland where it's less common but still happens. The housing is rare the.

Re: Millionaires Who Are Frugal When They Don't Have to Be

#70

Post by moron4hire » Sat, Jun 06, 2015, 2:58 PM UTC

jsonjson wrote: post #26

crimsonalucard wrote: post #16

Please note that although we respect frugality over lavishness. Frugality among rich people is one of the primary reasons behind wealth inequality. Sitting on top of an perverse amount of wealth and not doing anything with it is bad for the economy. Wealth needs to be redeployed back into the economy and it must be done in following a method that doesn't grow the wealth in an unnatural compounding way.

Unless they've sacked their money away under their mattress, it has been deployed back into the economy. It is either invested or in a bank where the majority of it has grown the pie of total dollars through loans (this is often not well understood). If I have ten dollars that I place in a bank, they will only hold the required reserve. Assuming this is 30%, then seven will get distributed in loans. The effective siz…

No, assuming a reserve of 30%, the whole $10 is the entire reserve, and they loan out $33.33, making $43.33 total.