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Personal finance experts don’t get wealthy by following their own advice

larryludwig.com

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Re: Personal finance experts don’t get wealthy by following their own advice

#131

Post by [deleted] »

californical wrote: post #66
PKop wrote: post #5

Part of the discussion should be, can the 'masses' "Generate income not based on hours worked", "Minimize taxes", and "Leverage time and debt to become wealthy like the personal-finance gurus themselves did?"... in other words, is becoming wealthy possible? It is worth being honest about the false hope these authors are peddling about "becoming wealthy", instead of what they are really advising which is, to become ab…

Definitely not everyone, but most people in America can become millionaires (inflation adjusted) within their lifetimes. Saving $100 per week should be possible for most households today. $100 per week over 40 years with an 8% return is $1.3m. If you think the market will be slower in the future, or higher inflation, or whatever, use the absurdly conservative 6% and it’ll take 50 years instead of 40. Add in the possi…

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Re: Personal finance experts don’t get wealthy by following their own advice

#132

Post by californical »

carnitine wrote: post #127
californical wrote: post #66

Earlier quoted context omitted.

Definitely not everyone, but most people in America can become millionaires (inflation adjusted) within their lifetimes. Saving $100 per week should be possible for most households today. $100 per week over 40 years with an 8% return is $1.3m. If you think the market will be slower in the future, or higher inflation, or whatever, use the absurdly conservative 6% and it’ll take 50 years instead of 40. Add in the possi…

The problem isn’t that inflation will erode the return percentage, but that it will erode the value. $1.3m in 40 years really doesn’t sound like that much money.

It’s enough money to pay for perpetual retirement — it would provide an inflation-adjusted $50k per year indefinitely, which is what that median-earner was making. So $1.3m is enough to never need to work, and that doesn’t include social security.

Throw in that extra $15-20k per year from SS and you’re living a pretty wealthy life (especially if you’ve managed to pay off a house during your life, so no mortgage. Otherwise just put $300k of the 1.3 to pay cash for a house. Having no mortgage makes your money go even further, and you’ll be rolling in money.)

Re: Personal finance experts don’t get wealthy by following their own advice

#133

Post by ghaff »

hn_throwaway_99 wrote: post #115
zffr wrote: post #80

Earlier quoted context omitted.

Yes and several members of professional sports leagues like the NBA/NFL are also very rich too. While it is possible to become very rich working for someone else, I think the author's point is that it is extremely unlikely.

As others have pointed out, though, while I used an extreme example, you can take your average, middle-of-the-road yet high-quality software engineer, and if they make the right decisions (select jobs that pay well, live well below their means, invest with a standard diversified portfolio), they could easily retire in their 40s. I'm not saying this route is available to everyone, but certainly available to plenty of…

>easily retire in their 40s

That's a stretch. An average of $150K/year before taxes throughout 20s and 30s is a pretty good job in the US. Say they save $50K/year--which is a lot on that salary--that's $1million saved overall which, depending on your assumptions, will give you about median US household income annually. So possible in a sense if retiring as soon as possible is your goal but certainly not to everyone's tastes.

Re: Personal finance experts don’t get wealthy by following their own advice

#134

Post by mgkimsal »

"Yet you almost never hear the financial experts recommending that you start a business."

And... many times when I do hear people recommend "start a business", it's "for the tax write-offs". Or at least that's the one bite-size thing some folks internalize. Have seen friends and neighbors get in to "business" - like various MLMs - and talk about "write offs". Naive at best, and dangerous at worst, I'm not surprised more people aren't specifically pointing out "start a business" to mass audiences - I'm not sure most people can do that responsibly. But most people can enroll in a company 401k and save a bit of money for later. The biggest damage they may do is lock up some money until they're 59. "Start a business" without much thought can lead to a lot more problems for folks.

Re: Personal finance experts don’t get wealthy by following their own advice

#135

Post by mdp2021 »

wincy wrote: post #43

This seems like a good place to be vulnerable and ask for advice. I am 35 and still spend like in a teenager. I grew up really poor where if the money didn’t get spent right away it would just sort of disappear, into drugs or beer or whatever my mom and stepdad were spending it on. My only real asset is my house which has appreciate significantly in value, but all it would take is one job loss to get me behind on tha…

> it’s pathetic

No it isn't. But that is revealing the issue: you tend toward the irrational. In fact,

> How do I stop

By realizing that there is no need for that, rationally. You want to buy new X, but you do not need them: _see the fact_ - they are per se useless and replaceable for their improper purpose of emotional release: to have X is just petty if you want to fix your finance. You can replace the feeling of that X with something free. If there is one stroke of luck of living in these times, is that access to stimula has probably never been so rich in options and free in cost.

> trying to think of things to buy

Think instead of things to enjoy. They are really, mostly free nowadays (even our presence here at Dan's is). Be faster than the other habitual pattern and replace it - if you think of something to buy, realize you are doing it and think of something to enjoy. Replace the thought. You are used to collect items: collect experiences instead. Realize that you can replace items with experiences. For that, one laptop is enough, a basic car etc.

That thought habit is a mental pattern to replace, to replace with something that makes sense - the other does not, as you have to realize and in fact realize.

(And about Amzn, if other people were unable to read this, I would add: Bzos is bald. And you do not seem to have stopped to consider that. If you want to buy from him - who am I to convince you otherwise. But he is bald (you should see that - it should be a thought stopper, a doubt inducer). And possibly the last person in the world who needs your money. With your money you vote: is that what you want to promote? The very fact that you shop there raises the question: how long have you thought about your actions? The single ones, the generic ones. Some people think you are supposed to evaluate your actions before doing them. You take a step back, look at what you do, and what you have done and what you would do, and judge them as good ideas or bad ideas, for what they are. I am sure you know mathematics sufficiently. If I shop from somebody with those traits, I have deliberately deliberated it, it is a conscious choice. Read these paragraph carefully, and understand them. If you want clarifications, we are here.)

Re: Personal finance experts don’t get wealthy by following their own advice

#136

Post by daveguy »

> Investing that $2.50 you spend every day on a latte in the stock market instead can lead to a life of riches. How’s that for putting a damper on one of the little joys in life?

Budgeting will let you realize there are essentially infinite ways to spend your money. You have to decide the best way to do that. If you're trying to make money, buying yourself a latte is not the best way to do it. If you're trying to enjoy the money you earned, buying a latte may be the best way (but probably not).

Budgeting helps you better understand the balance between spending and earning. When you start considering the best investment for the dollar you have earned, it makes a difference.

Re: Personal finance experts don’t get wealthy by following their own advice

#137

Post by jstummbillig »

rossdavidh wrote: post #129

From his own article: "I’m not suggesting the advice the gurus are giving is outright wrong. Their recommendations will make you modestly successful. You’ll more than likely live an OK life and have an above-average net worth." In fact, Suze Orman and the like are talking exactly to this audience, and their advice is in many cases a lot better than what they are doing now. Also, being married to a small business owne…

Are you alleging that most small business efforts fail before they make any profit -- as in +50%? That seems rather unlikely but if anyone has strong numbers on that I'd be very interested.

Re: Personal finance experts don’t get wealthy by following their own advice

#138

Post by zhdc1 »

rossdavidh wrote: post #129

From his own article: "I’m not suggesting the advice the gurus are giving is outright wrong. Their recommendations will make you modestly successful. You’ll more than likely live an OK life and have an above-average net worth." In fact, Suze Orman and the like are talking exactly to this audience, and their advice is in many cases a lot better than what they are doing now. Also, being married to a small business owne…

> there's a "dirty little secret" that this article doesn't mention: most of them never get paid a dime by their own business. They are spending their way through a business loan, or they have family money, or some other source

Over fifty percent of generic small businesses survive for more than five years, so it's unlikely that a majority of them are completely subsisting on government loans, investors, or family money.

The most common outcome (for the small businesses that last) is to turn into something that creates just enough revenue to support the owner and a handful of employees. The owner takes a small salary and uses the rest of the cash flow for float or reinvests it into the business.

However, depending on the country, tax laws can be fairly advantageous for small business owners (e.g., higher limits on tax-deferred retirement accounts). There's also the benefit of building net worth in the business, which isn't something that employees benefit from. So, while the owner may not be getting paid all that much, they still benefit in a bunch of other ways.

Re: Personal finance experts don’t get wealthy by following their own advice

#139

Post by mgkimsal »

peterangular wrote: post #62
MattGaiser wrote: post #26

The goal of most personal finance experts is not to teach you to be mega rich, but rather to be average and while still being pretty average in terms of income, hours worked, and capability, remarkably comfortable to peers. > Yet you almost never hear the financial experts recommending that you start a business. Is the average business owner any better off? I know that there are plenty of successful business owners,…

> Is the average business owner any better off? Obviously anecdotal, but not really IMO. I've bounced back and forth between being in business for myself and working for the man. Between healthcare, saving for retirement, etc. things are really optimized against someone "pulling themselves up by the bootstraps" in this way. I've listened to the politicians in the US scream how important small business only to vote ag…

"small business" to national politicians typically means you employee under 500 people. Almost no one considers "self-employed" or "1-3 people" as "small business" when crafting tax legislation. I certainly consider "self-employed" and "I have a couple folks on payroll" to be "small business", but it's just not in the same league as the local brewery employing 85 people, for example.

Perhaps we need the term "micro business" to gain more traction? I suspect that's where more work is heading.

Re: Personal finance experts don’t get wealthy by following their own advice

#140

Post by foogazi »

dtjohnnymonkey wrote: post #10

This is a mischaracterization of Ramit Sethi’s class. I’ve taken it and it’s the opposite of what the article claiming. It focuses on helping you build your business and income streams.

Yeah, I read IWTYTBR back when it came out and even then he stressed how skipping the latte was not enough: you had to increase your income + assets
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