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Why So Many Rich People Don’t Feel Very Rich

economix.blogs.nytimes.com

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

#71

Post by loewenskind »

narrator wrote: post #28

The reality of this phenomenon is that people who have done everything "perfectly" in their life and academic career feel a bit cheated when their income tops out in between 100k and 200k. They might be senior engineers or doctors or lawyers but they've hit this brick wall as far as income, sometimes in their 30s and yet there are all these people out there that make more than 10x or even 100x their annual income. No…

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.

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

#72

Post by orangecat »

colanderman wrote: post #57
AlexC04 wrote: post #4

Perhaps it's because the definition of "rich" that they would need to feel is one where they'd never have to work again if they didn't want to. The article points out an annual income of $172,000 as being rich, but by implication, these people still have to work for their money. Therefore probably don't feel "rich" If they could maintain that income or even half that income in perpetuity without working. If they coul…

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.

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

#73

Post by yummyfajitas »

schammy wrote: post #59
jeremymims wrote: post #38

This article wonders why the rich are getting richer and the answer is compound interest. Having $1 million in the bank will reliably generate between $25k and $50k per year. Having $2 million in the bank will reliably generate between $50k and $100k per year. Having $3 million in the bank will reliably generate between $100k and $150k per year. So someone with $3 million in savings and still working their 200k job w…

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?

ING Direct gives you 110bps, 125bps fixed rate if you are willing to tie up your money for at least 2 years. Several other internet-only banks will do the same. As for 250-500bps, I have no clue where to get that. Maybe he meant you can get 5% with a S&P ETF?

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

#74

Post by WingForward »

narrator wrote: post #28

The reality of this phenomenon is that people who have done everything "perfectly" in their life and academic career feel a bit cheated when their income tops out in between 100k and 200k. They might be senior engineers or doctors or lawyers but they've hit this brick wall as far as income, sometimes in their 30s and yet there are all these people out there that make more than 10x or even 100x their annual income. No…

#1 is a huge open field. You can live almost anywhere and not pay a lot in education and accomplish #1. Not that it's easy. It takes a lot of work and some talent and some luck, but there isn't the educational entry costs of #3 and #4.

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

#75

Post by beoba »

jeremymims wrote: post #38

This article wonders why the rich are getting richer and the answer is compound interest. Having $1 million in the bank will reliably generate between $25k and $50k per year. Having $2 million in the bank will reliably generate between $50k and $100k per year. Having $3 million in the bank will reliably generate between $100k and $150k per year. So someone with $3 million in savings and still working their 200k job w…

Additionally, if that income has a label of 'capital gains' slapped on it, it's only taxed at up to 15%, rather than up to 35%.

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

#76

Post by loewenskind »

yummyfajitas wrote: post #61
narrator wrote: post #28

The reality of this phenomenon is that people who have done everything "perfectly" in their life and academic career feel a bit cheated when their income tops out in between 100k and 200k. They might be senior engineers or doctors or lawyers but they've hit this brick wall as far as income, sometimes in their 30s and yet there are all these people out there that make more than 10x or even 100x their annual income. No…

5. Become a top developer at a big software company. (A variation on 3. You probably won't earn $100 million, but you could definitely earn $1 million. ) 6. Become a top performer in entertainment (music, sports, movies). A fun fact ignored by most people: it isn't just CEO pay that has skyrocketed over the years. Alex Rodrieguez gets $33 million/year, at his peak Babe Ruth got (inflation adjusted) $1.1 million.

>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 happened is prices have gone up. The difference you see is that certain professions have much better representation to ensure they get their share of the increased profits.

EDIT: A bit of point clarification.

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

#77

Post by jeremymims »

schammy wrote: post #59
jeremymims wrote: post #38

This article wonders why the rich are getting richer and the answer is compound interest. Having $1 million in the bank will reliably generate between $25k and $50k per year. Having $2 million in the bank will reliably generate between $50k and $100k per year. Having $3 million in the bank will reliably generate between $100k and $150k per year. So someone with $3 million in savings and still working their 200k job w…

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?

Just a quick search shows me 2.39% for 100k in a 5 year cd. (I can think of any number of reasons you might not want to do this.)

I'm guessing for a million you could do better.

Perhaps you'd only be at the lower bound of the numbers I gave but the point still stands that compound interest is what is making the rich richer.

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

#78

Post by tomjen3 »

kmfrk wrote: post #41
jtbigwoo wrote: post #18

The amount of money I have left over at the end of the month makes a much bigger difference in whether I feel rich than the number on my paycheck. But, we're trained and encouraged by our culture to spend up to and beyond our means no matter what our income. Even the "responsible" rules of thumb like buying a house for 3x annual income or having debt payments of 40% of income encourage us to increase our expenses as…

I think it has to do with a lack of a broader education and spiritualism that most people are devoid of. Because they don't know any better, money becomes a hammer, and every problem looks like a nail.

I doubt that - the potus press secretary has have a pretty broad understanding.

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

#79

Post by adestefan »

asmithmd1 wrote: post #21
jellicle wrote: post #10

It's simple. Make $100K, live near people making $90K = rich. Make $100K, live near people making $110K = poor.

or: make $100k, spend $85k = happiness make $100k, spend $101k = misery

The spend side is highly dependent on those around you.

Make $100k while your neighbors make $75k - rent is $800/month.

Make $100k while your neighbors make $125k - rent is $1500/month.

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

#80

Post by roadnottaken »

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…

Boy I'd be happy with 10%/year or 5%/year right now. I think you're still living in 1998.

Eventually it's making more on its own than you're putting in.

This actually takes a long time.

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