Why So Many Rich People Don’t Feel Very Rich • Hacker News Board

Re: Why So Many Rich People Don’t Feel Very Rich

#181

Post by sedachv » Wed, Jan 12, 2011, 5:35 AM UTC

sedachv wrote: post #144

larrywright wrote: post #117

Earlier quoted context omitted.

$172,000 per year is not a yacht level income. It's a good salary (some might say great), but you're not going to have a mansion and a yacht.

That depends on what you mean by "mansion" and "yacht." Outside of NYC and the Bay Area you can definitely afford a mortgage on a nice house, two good cars, and a decent-sized sailboat and manage to feed a family of four on that income (assuming you don't send the kids to private school).

I was looking at ads for places today, and happened across this listing:

http://montreal.kijiji.ca/c-housing-house-rental-ST-COLOMBAN...

Small mansion 1 hour commuting distance from Montreal, $400,000

Let's look at craigslist:

http://montreal.en.craigslist.ca/boa/2116842083.html

35' cruising yacht, good condition, $49,000

This is certainly doable on $172,000

Re: Why So Many Rich People Don’t Feel Very Rich

#182

Post by benmccann » Wed, Jan 12, 2011, 7:52 AM UTC

roadnottaken wrote: post #176

benmccann wrote: post #173

Earlier quoted context omitted.

The S&P 500 was up 11% last year, the Dow was up 9.5%, and the Nasdaq was up 17.5%

How 'bout the year before that?

The year before that was much better. The S&P 500 was up over 25% in 2009 and the Nasdaq was up almost 50%.

Re: Why So Many Rich People Don’t Feel Very Rich

#183

Post by loewenskind » Wed, Jan 12, 2011, 8:17 AM UTC

btilly wrote: post #132

loewenskind wrote: post #76

Earlier quoted context omitted.

>A fun fact ignored by most people People aren't ignoring it. The two things aren't related to each other. Alex Rodrieguez makes so much money because tickets to see him play cost so much (especially compared to what it cost to see Babe Ruth). For the situation to be the same Rodrieguez would need to be making the same as Ruth (inflation adjusted) but the managers to be making 100+ times more money. What's actually h…

Alex Rodrieguez makes so much money because tickets to see him play cost so much (especially compared to what it cost to see Babe Ruth). Sorry, this theory is wrong. Looking at http://eh.net/encyclopedia/article/haupert.mlb the average price of baseball tickets has, after adjustment for inflation, not changed very much. What has changed is the value of the income from TV. Even so, the revenue for players has risen fa…

>Looking at http://eh.net/encyclopedia/article/haupert.mlb the average price of baseball tickets has, after adjustment for inflation, not changed very much.

>What has changed is the value of the income from TV.

And as mentioned by another commenter, merchandise and so on. Even if what you're saying were true that players have a larger percentage of the overall pie that their team makes (I don't believe this for a second without a lot more analysis) that could indicate that they were under-compensated before and are now getting a fairer share. Perhaps because of unions, perhaps because of (as you mention) free agents.

Re: Why So Many Rich People Don’t Feel Very Rich

#184

Post by loewenskind » Wed, Jan 12, 2011, 8:21 AM UTC

flacon wrote: post #125

loewenskind wrote: post #71

Earlier quoted context omitted.

200k isn't that hard. Just go into management. You don't even need to be that high in a big company (even located in a low income region) to pass 200k.

I live in Madison WI. 200K is C-suite territory around here for a mid-sized company. An exec at one of the huge insurance companies or biotech companies make more but that not typical. We have an Amazon affiliate here and mid-level managers make around $80-100K I think. I highly doubt their Chief Architects make more than 200K. 200K for mid-level management in the Midwest (outside Chicago) is unrealistic for sure.

Well, that's bizarre then because the place I was in was a very depressed salary zone and a company with a (well deserved) reputation for underpaying even for their salary zone. And with any managers I've discussed this with, while never disclosing their salaries to me, have never been surprised.

Re: Why So Many Rich People Don’t Feel Very Rich

#185

Post by frobozz » Wed, Jan 12, 2011, 12:33 PM UTC

colanderman wrote: post #152

orangecat wrote: post #72

Earlier quoted context omitted.

If I had one year of $172,000 income, I could bank it and live off the interest for the rest of my life. Er, how? Assuming a very optimistic 4% return after inflation and taxes, that's only $7k/year.

Right now I live off of about $12k/year, and I'm paying about $4800/year in loans (which will be paid off soon enough). That works out to about $7k/year.

Unless your $7K expenditure calculation includes putting away quite a bit of savings (Which, unless there's a massive early repayment fine on your loans, it shouldn't), you'll also need to pretty much halve that optimistic 4% to ensure that your capital doesn't decline in real terms. That's assuming inflation remains as stable as it currently is.

I did some back-of-envelope calculations, a few years ago, based on the inflation common savings interest rates of the time, and median salaries where I lived. Basically, given £1M in a savings account and no other income, someone who lives as though earning the median salary (including reinvesting about 30% after tax), could expect to start eating into their capital (in real terms) within about 3 years. I can't remember how long it would take for their capital sum to actually drop below £1M, but I do remember it taking about 30 years to drop to 0.

Now, you're obviously a bit more frugal than the average bear, but you're talking about having a tenth of that capital, and a sixth of that expenditure, which already doesn't add up. Also, my calculations above were made when even a risk-free savings account would score you nearly 5% APR.

Re: Why So Many Rich People Don’t Feel Very Rich

#186

Post by schammy » Wed, Jan 12, 2011, 11:09 PM UTC

artmageddon wrote: post #68

schammy wrote: post #59

Earlier quoted context omitted.

I know of no such bank offering interest rates even close to that. You're talking 2.5% - 5%. That's unheard of these days. At my current bank, $1M in a money market account would generate about $2,500/year, which is nothing short of insulting. Who are these fabled banks offering 10x the interest rate?

Before the subprime crash in 2007, interest rates were well in that range. I had an ING savings account(regular savings account, not a CD) with a rate that was earning me $7 per day , as opposed to now in which I get maybe $2 per month.

Yeah, I know, interest rate used to be good. I used to get 5% on my emigrant direct savings account. Now it's 1%, and I don't know of anything higher (for a money market account anywys)

Re: Why So Many Rich People Don’t Feel Very Rich

#187

Post by GFischer » Fri, Jan 14, 2011, 8:42 PM UTC

barrkel wrote: post #67

roc wrote: post #49

Earlier quoted context omitted.

> "someone making 300,000 probably doesn't have much more disposable income than someone making 80,000" I don't think that's borne out by the stats. As I recall fixed costs essentially flat-line as a percentage of income somewhere south of 200k, up until you reach the "don't look at prices anymore" brackets. Also, I note that it really doesn't take much more disposable income to add flashy consumption. Five thousand…

I don't even make 80K USD, but living in the UK and thus with more vacation time (25 days), even I take at least 3 holidays abroad every year.

I make 13K USD, and I took 2 holidays abroad :)

(where abroad is Brazil and Argentina, since I live in Uruguay)

I know that people in the US have half the holiday time that I have, but they should be able to have the money to enjoy what time they do have.

Re: Why So Many Rich People Don’t Feel Very Rich

#188

Post by GFischer » Fri, Jan 14, 2011, 8:46 PM UTC

orangecat wrote: post #72

colanderman wrote: post #57

Earlier quoted context omitted.

If I had one year of $172,000 income, I could bank it and live off the interest for the rest of my life. People who make that much and don't feel "rich" feel so because somehow they incur $172,000 in expenses every year. I'm a tutor and often work with kids of rich families, and it astounds me what their parents spend money on (think private jets and race cars). Actually, I work with kids of poor families as well, an…

If I had one year of $172,000 income, I could bank it and live off the interest for the rest of my life. Er, how? Assuming a very optimistic 4% return after inflation and taxes, that's only $7k/year.

Here in Uruguay, I'd buy 2 or 3 houses, which would give a return of about U$ 1000/month.

That's U$ 12k/year right there (and rent is inflation adjusted here).

Yes, we do have a housing boom here, why do you ask :) - it's far cheaper to own than to rent, but most people don't have the capital - I rent, as I make U$ 13k/year

Re: Why So Many Rich People Don’t Feel Very Rich

#189

Post by GFischer » Fri, Jan 14, 2011, 8:48 PM UTC

fingerprinter wrote: post #81

I can sum this up for me and my family (fyi...we live quite meekly): We don't feel "rich" because if something catastrophic happens (one of us loses our job, major health problem, really bad turn in economy again) we are not insulated despite all of our savings for the rest of our lives. We have, perhaps, 2-4 years ability to stave of bankruptcy and the lot. That number is different for everyone, but the "rich" don't…

So, I should feel richer than you because my country provides a far better safety net?

(even though I probably make between 10 to 20 times less?)

Re: Why So Many Rich People Don’t Feel Very Rich

#190

Post by eneveu » Sat, Jan 15, 2011, 11:34 PM UTC

jasonkester wrote: post #34

boredguy8 wrote: post #27

My adult life began with several years at a non-profit making $18k/yr. I've worked to avoid dramatic changes to my standard of living since then and it's helped me put money in the bank regardless of where I fell on the income scale. I also find that I need to "reset" my spending every 6 months or so, because it's trivially easy to start spending more than you realize, for no practical gain. Sometimes I get jealous o…

The cool thing about this approach is how nicely it works with compound interest. Live like a college kid for the 5 years after you leave college, and I defy you not to put $10k per year into the market. Fresh out of school with my $32k salary, I'd regularly find month-old paychecks lying around undeposited because I simply didn't need the money to support my cheap apartment, used car, and 10lb sack of potatoes. With…

This is my exact situation. I'm 24, finished engineering school 2 years ago, and work as a web developer. My lifestyle has stayed the same (I even spend less on many things). I don't need/own a car and don't really care about buying expensive gadgets...

I'm currently reading The Investor' Manifesto* and it seems I am very lucky to have money to invest in the market. A bear market is a boon for young investors.

By the way, this book is awesome. I regret not reading it earlier. Derek Sivers plugged it on HN almost a year ago (http://news.ycombinator.com/item?id=1026296) and his reading notes are available online at http://sivers.org/book/InvestorsManifesto.