Few people just want to have money for no reason. Most people want to have money because of what they want to spend it on; their outrageous expenses are their passion in life and their reason for wanting money. It isn't helpful advice to say, "Don't spend money on Manolo Blahniks, and then you'll have plenty of money," if your whole reason for wanting money is so you can wear Monolo Blahniks.
In other words, it sounds like a sermon on loving money for itself instead of loving it for what it can buy you. Or, if you read it charitably, it's a sermon on loving security more and short-term pleasures less. As much as I sneer at expensive fashion and gravitate toward the <$10 wine bin at the grocery store, this article strikes me as nothing but unhelpful moralizing. Yeah. I get it. If I don't spend money, I'll have more. Yeah, I really, really get that looking good and living it up is a vacuous pastime -- I'm totally with you on this one -- but it's the most common passion on the planet, and it's a cop out to tell people to stop enjoying the one aspect of life that gives them the most pleasure and call it financial advice.
Most advocates of saving that I’ve seen in mainstream media are interested foremost in personal finance, not anti-consumerism. To them, the problem isn't that people enjoy spending money. On the contrary, they want to help people spend their money in a way that maximizes the amount of enjoyment derived. Writers like Stanley know that spending a lot of money early in your working life is rarely a way to maximize enjoyment.
What a lot of people don’t realise is that “short-term pleasures” cost a lot more when you’re older. In your 20s and 30s, you don’t need much more than a computer and a bicycle to be perfectly content. You have lots of energy to work, study, take cheap outdoorsy vacations, and cut your own lawn. But at some point, you start to find those things significantly more wearisome. That’s when it’s really nice to have the financial freedom to quit your job, eat in good restaurants, and outsource all of your home maintenance. By far the majority of people won’t achieve that level of financial freedom unless they defer a large proportion of their income from the first half of their career to the second half and to retirement.
Evidently, many people must overcome significant psychological obstacles to save their money. That’s why there are so many personal finance books trying to explain the same idea in different ways. Some emphasize the time value of money. Others, how expenses tend to increase over one’s lifetime. Stanley tries to reduce the urge to spend by showing that many big spenders are not actually rich or financially secure. The success of “The Millionaire Next Door” seems to be evidence that a lot of people find this approach helpful.
You might call it unhelpful moralizing, but I would consider it helpful if it alerted people to the pretentious nature of their social signaling and got them back on track financially. Deferred gratification is an important lesson to learn.
I don't know about this. You really aren't enlightening people by saying stop spending money and you will have more money. People aren't stupid. This is the same kind of story as people are fat because they don't know what kind of foods to eat. It's just not true. Everyone know what kind of food to eat, they just don't.
I once went to a nutrionist and she ask what I eat for breakfast; I told her and she said "you know how many calories were in that bagel?" and I told her. She looked puzzled, then I told her "I wasn't fat because I was stupid"
Behaviors with food and even money are learned early on and until people choose to unlearn them; they will be fat and poor.
>Everyone know what kind of food to eat, they just don't.
I think the world you're looking for here is "ignorant". They know. Stupid is knowing what to do and still doing the exact opposite. And I point this out as a stupid person (about some things).
Assume for the moment that this article was read by everyone on earth. Now you're considering buying a BMW. Would it change your mind to know that people may think "he's irresponsible with money" instead of "he's rich?"
If so, then getting the word out may actually help people make better decisions. If they still want the BMW for other reasons, fine.
> Behaviors with food and even money are learned early on and until people choose to unlearn them; they will be fat and poor.
Unless they learned the "correct" behaviors early on. In that case they have the luxury of not thinking about the basics and expanding upon what they already know. Privilege comes in many forms.
A minor correction: People know what the establishment tells them is nutritious, and then don't follow that. There is much debate over whether that is actually nutritious.
You don't have to spend money straight away, you can use money to make your life comfortable, or buy crap. Money does not have a time limit on it.
It is not just about spending less, it is about getting people to realize that rich people do not do show of there riches buy buying crap. (86% of luxury cars are owned by people with less than <$1m). So maybe you should not buy that crap either?
It is only a recent event that we have become such a consumer driven society, just after WW2 when we had all this extra factory producing capabilities (due to the war), and the advertising industry really kicked it up a notch.
I agree with most everything you said, but money does have a time limit in effect. If you hold cash it will become worth less over time. If you invest it your investment may go down.
Some people are buying nothing but garbage (there are whole markets based on selling garbage), but I think right now there are also people trying to move the money they have right now into some other source they trust more. If you try to build a house in Switzerland right now be prepared to wait. A lot of people have emptied their pensions to build houses (they cost a lot in Switzerland) since the crisis hit.
OK, but I think the point is that 1) status symbols may actually be debt symbols, which makes them less attractive, and 2) people who can buy fancy stuff often don't, which demonstrates their belief (maybe true) that it's not worth it.
Secondly, there's a lot to be said for peace of mind. Who is richer: someone who lives in a fancy house and constantly worries about losing it, or someone who lives simply, has no debt, has saving, and can basically do whatever they want?
Who is richer: someone who lives in a fancy house and constantly worries about losing it, or someone who lives simply, has no debt, has saving, and can basically do whatever they want?
Wealth is the extent to which you can let things alone and still be comfortable.
I buy the general principle that living a high-income/high-expense lifestyle isn't the path to accumulating wealth, but you can rephrase the stats to get different results as well.
For example,
86% of all luxury vehicles are driven by people who are not millionaires
can be rephrased in a way that makes it seem like driving luxury vehicles is a trait of rich:
millionaires are 3x as likely to drive a luxury vehicle as non-millionaires
I wonder if this is also skewed by the "millionaire" cutoff not being as high as popular culture thinks of it being; the millionaires of 1970s films correspond to $5m+ today, and the millionaires of the roaring 20s correspond to $12m+ today. A huge proportion of people with net worths in the low single digits of millions have almost all their money in their retirement plan plus house, and not a particularly large disposable income. Sure, in theory they could get money out of the 401(k) and blow it, but the fact that it's semi-locked-up and a hassle to get out makes it easier to preserve it.
It's possible it generalizes to higher tiers of the rich, but I'm not that sure. Do people with net worths of $10m+ have similarly frugal lifestyles? Or is this mainly a feature of people with net worths in the $1m-3m range?
I just realized after reading your comment that my family were millionaires when I was in high school. We had about $25k a year income, no new cars, no college fund but we owned two properties that put us over the millionaire mark. I qualified for and ate the 25 cent lunches at school and had hand me down everything.
Have a million dollar net worth isn't necessarily fun or comfortable, my parents divorced, cashed out the houses and nothing is left, good times.
Similar story. Grew up on a dairy farm. Our taxes stated our income as around $13K for a family of 5. Farm & equipment sold for 1.2 million (2001). Government got about $600K in taxes. Another $200K went towards existing loans. $120K towards a 1000sqft 1 story ranch home for my parents to move to. They gifted 20K to each of us kids to avoid further taxes on that. Each of us has done well using it to pay off education, buying land, or reinvesting.
Anyways, they both have medical problems that no insurance would cover in the past decade (part of the reason for selling the farm). Having just turned 60, they're both sitting on about 150-200K to retire on. One can't look at this as anything except a system rigged towards a Sisyphean outcome.
This isn't the "Ovarian Lottery" Warren Buffet talks about. I doubt anything I say could get through to someone clearly after troll bait and offering no insight.
Each of us worked harder than most people who complain about being slighted by the hand of fate. I started working on the farm when I was 10 and continued helping out until I was 19. It ranks below minimum wage. As for my parents, you think that chastising their frugality and having a paid for house within their means is something to mock? Really?
Farming ranks as one of the 10 most dangerous occupations; you can be injured in pretty much any way imaginable. In fact my father was. Once while my brother was in high-school and again when I was. We each did our part staying home from school running things until my father was recovered on both counts. Trust me, 1.2 million over the course of 30 years isn't as much as it would seem.
I currently live in a neighborhood of mostly ~$1-million homes. Many of the residents are retired people who originally bought their houses in the 1960s for ~$50k. This probably explains why all the on-sale items at the supermarket get sold out right away, and why there's several thrift stores in town.
For what it's worth, my parents got here with dedicated saving: anywhere between $30k-$100k per year for the last two decades. Our investments have performed miserably, and we didn't own a home going into the housing bubble either. It can be done, but it's a lot of hard work.
Do people with net worths of $10m+ have similarly frugal lifestyles?
Or is this mainly a feature of people with net worths in the $1m-3m range?
My parents are with combined income of 7 figures now, 8 figure net worth and they live very frugally. My father drives 1997 Toyota. The wealth is mostly tied in investment and assorted properties. My mother mends socks instead of buying new ones.
Can you share the source supporting your second statement? Not because I think it's wrong, I'm curious as to the number of people in that group and how it's calculated.
The estimates of what % of the U.S. population are millionaires varies, but I was using roughly 5%. So if 95% of the population (non-millionaires) drives 86% of luxury cars, and the remaining 5% drives 14% of luxury cars, that means that the luxury car prevalence ratio among nonmillionaires:millionaires is (86/95):(14/5) = ~1:3.
"86% of all luxury vehicles are driven by people who are not millionaires."
This is a good example of one of those stats designed to fool people who don't understand statistics.
According to wikipedia there are ~9.3 million millionaire households in the US representing ~7% of US households. [1] Meaning that millionaire households purchase luxury cars at a far higher rate than non-millionaire households which is the opposite of what this article implies.
I don't think I got the same message from the article as you did. The unstated assumption that the article is trying to challenge is that luxury vehicles are the exclusive domain of the rich. Even if the statistic were that 43% of luxury vehicles were purchased by non-millionaires instead of 86%, it would still say a lot about how these purchases are actually distributed.
I think the fact that luxury goods have become attainable by non-millionaires says a lot more about the decrease in cost in luxury goods than the irresponsibility of non-millionaires.
The classification of these goods is also confusing. For example, I drive a Lexus IS250 AWD which would be considered a luxury vehicle but actually comes in at the same price point as Toyota 4Runner.
Additionally, the variance in prices between luxury and non-luxury goods is decreasing. A low-end Lexus now costs less than $10k more than a similarly equipped Subaru Outback or Honda Accord, making the difference when it comes to actual affordability pretty small.
The difference in cost between a luxury item and a regular item is also masked by the availability of credit. You can lease a high end Mercedes for the same monthly payment as buying a Honda Accord. It could be that a large portion of that 86% of luxury cars driven by non millionaires are leased.
"You can lease a high end Mercedes for the same monthly payment as buying a Honda Accord. It could be that a large portion of that 86% of luxury cars driven by non millionaires are leased."
...which makes the bottom line even more pathetic. You make your payment on the Honda Accord, and after a few years, you own it. It continues to be drivable, and the amortized cost of ownership begins to decline.
If you hop on the luxury-car leasing merry-go-round, then sure, you get to drive a new car every few years, but the payment never goes away. Meanwhile, you've almost certainly over-paid for the car relative to what it would have cost to buy up front.
When it comes to cars, the financially responsible question is not "4Runner or Lexus?"; it is: "can I live without one?"
I think 'can I afford to live without it' is a miserable way of going through life. I certainly could live without ever going to nice restaurants, trying things like kiteboarding and skydiving, going snowboarding or mountain biking, but why forfeit things I enjoy so I can look at my bank statement and see a slightly larger number at the end of the month than I would otherwise?
I'm not advocating asceticism -- if owning a car is so important to you that you're willing forgo other luxuries to do it, then that's your choice. But don't pretend that it's always a sacrifice to live without owning a car, or that the choice to own one is automatically financially prudent.
For many of us, cars are nothing more than a rarely used, depreciating asset with high maintenance costs that gets us from point A to point B. I'd rather rent one occasionally, and spend the money I save on all of the other things you mention.
You can also pick up a very nice second hand Mercedes for the same price as a new Honda. And the Mercedes will probably last you longer. Driving a BMW or a Mercedes doesn't have to expensive.
only if you do the repairs yourself. Speaking as someone who paid a (I thought quite reasonable) ten grand or so for a '92 bmw in '99 or '00, I was rather shocked at what you get charged when you drive one into a garage.
If you work on them yourself, sure, then it's not much more expensive.
Oh, also, I'm fairly certain that the German brands are actually a good bit less reliable than the Japanese brands in general. I know that my experience with a less than 10 year old BMW was that it was rather less reliable than my current more than 10 years old Nissan.
I mean, the BMW is a nice car; in terms of handling, I agree that you are getting something for the money. But don't kid yourself. It's going to be quite a lot more expensive than a Japanese car, even if the up-front cost seems reasonable.
Good point. Maybe we should stop thinking of Lexus and Acura as luxury brands.
Real luxury brands are the ones those of us in the middle class can't even consider buying. Maybach. Bentley. Rolls Royce. Bugatti. I could drive a Lexus today if I wanted. Even a BMW. I don't think I'll ever have enough money to blow on a Rolls.
What I got out of it is that people with a lot of money (i.e. millionaires) tend to get there by being frugal and responsible with their money. Lots of other people, however, tend to buy big flashy items that say 'look at how much money I have', but buy them all on credit and then put all their disposable income into paying off their flashy lifestyle instead of accumulating lasting wealth.
Moral of the story: being rich and acting rich are two different things.
Actually, every time I hear about anyone talking about blowing a hundred grand on a car, I think "wow, I could spend $20K on a car and hire a driver for two years!" I mean, nice cars are nice, but a driver? that'd be real luxury. It's also got a better justification; I mean, if you drive a lot, with a driver, those could be billable hours!
I mean, if we are going to talk about ridiculous fantasies of wealth, that's mine.
But when you have that much money you can do both. After seeing what rich people (I mean really rich, not investment fund rich) will spend money on I really think most people are just mentally shut off from what a billion dollars means.
In a recent TED Talk, Tim Jackson talked about conspicuous consumption. I really liked this quote:
"This is a story about us, people, being persuaded to spend money we don't have, on things we don't need, to create impressions that won't last, on people we don't care about."
Anti-Consumerism was a main theme in the movie Fight Club. This scene, where Norman describes his "perfect" apartment, will always be memorable to me (partially edited):
Like so many others, I had become a slave to the Ikea nesting instinct. Like a coffee table in the shape of a yin-yang, I had to have it. The Klipsk personal office unit. The Hovetrekke home exerbike. Or the Ohamshab sofa with the Strinne green stripe pattern. Even the Ryslampa wire lamps of environmentally-friendly unbleached paper.
I'd flip through catalogues and wonder "What kind of dining set defines me as a person?"
I had it all. Even the glass dishes with tiny bubbles and imperfections, proof that they were crafted by the honest, hard-working, indigenous peoples of...
If your 26, and saving 20% of your income why not spend the rest however you wish?
At some point spending money now is going to be more fun than spending 10x that much money when your in your late 50's. So, yes plenty of high income people buy nice things, but even if I had invested every cent I had ever revived I would not be a millionaire because I am still to young.
I absolutely advocate spending money but spend it smart. Don't buy e.g. a BMW. They cost a lot, are expensive to fix and don't last any longer than a cheaper brand. They are incredibly beautiful (to me anyway) but the value just isn't there. Instead, I would spend it visit another country or buying something that is expensive but either saves money in the long run or lasts a very long time.
I've always been in the camp you seem to be in, but having just started driving a BMW (not mine, my girlfriend's), I can say there's a lot more to it than just its looks. It's one of the sportier variants, and it is a significantly better driving machine than any of the japanese cars I've owned (I've only ever owned), to the point where it changes the way you drive. I think this is because you're much more confident in its abilities to handle things, and that it actually makes driving fun.
It's different from other cars I've driven like Macs are different from the windows boxes I've used.
I joke that getting a .com job and a bmw was my rebellion, hippie parents, you see. in '99 or '00 I bought a '92 bmw 325is. I'd rate it in my top 10 financial mistakes. You are right that the things handle significantly better, but the other guy is also right, saying they are significantly more expensive, especially to repair. I ended up getting rid of mine in favor of a Japanese car, mostly because I didn't want to limit myself to living places where I had a garage to work on the thing.
Actually, if I had the time and space for the auto repair hobby, I'd probably get another BMW and maintain it myself; The things aren't any harder to work on than a regular car. You do take a reliability hit, but eh, I could probably live with that. The parts are more expensive, but after market parts are a small fraction of the cost of dealer parts (or what a garage will charge you for parts,) so if you look around for deals, you don't end up paying that much more.
(the auto repair hobby has a lot to recommend itself; It's an easy $90/hr post-tax for doing something that is not very stressful at all.)
Still, in a situation where you are paying someone else to maintain the thing, if you aren't willing or able to pay for a new BMW, (which comes with free maintenance for a period) you probably should also avoid a used BMW. too. This is why used 7 series bmws go for so little.
I don't think I ever got the BMW out of the shop for under a grand. Part of that is the BMW has excellent breaks, and excellent breaks wear faster than mediocre breaks. (apparently the metal dust coming off the pads and rotors are actually an important way to vent heat.) and for some reason, replacing the pads and rotors on a bmw was north of a grand by itself. (It was $250 in parts to do it yourself, and maybe two hours of work.) so I think a lot of it is just "oh, he has a bmw, he must have money" Also, well, the BMW reliability just isn't up to the same standards as the Japanese cars, so you'd have little problems that sometimes required a tow.
>the auto repair hobby has a lot to recommend itself
I knew a guy who said "I like older cars because I can work on them". And he did. Every weekend. I vowed I would purposely never learn how to work on cars so that I would never be tempted get involved in such a tremendous time sink. The worst thing about the hobby is it tends to insert itself exactly when you don't want to do it.
eh, the old car issue aside (I fail to see how working on older cars is easier than newer cars... quite the opposite, really. the newer stuff is full of computerized diagnostics. I mean, the computer won't solve all your problems, but good god, have you ever tried to rebuild a carburetor? adjusting the 'richness' of your fuel air blend? oh yes I like the computer, and the OBD system.) it really is a straight time for money play. For the basic stuff, it's pretty easy to get to the point where it takes you as long as the mechanic will charge you for (most mechanics charge 'book rate' - e.g. how much time the book says a task will take rather than how much time it takes them. It's not too difficult to get up to that speed.)
So really, for any given car, if you work on it yourself, you shouldn't be spending much more time than what the shop would charge you for the same work, and, uh, like I said, $90/hr post-tax isn't something most of us sneeze at. (Of course, if you can sneeze at that, good for you!)
that said, right now I'm taking my vehicle to a professional. the thing is, sure, the car only needs something once every 6 months, if you don't count oil changes (which I usually take in, just 'cause it's worth twenty bucks to not deal with the oil) - the thing is, where I am now, maintaining a garage would cost me more than just paying to take my car in. So yeah, it doesn't always make sense.
I'm sure it is just as amazing an experience to drive as it is to look at. The problem is that owning a car is a money-losing proposition. If you buy it new you lose up to 40% of the value just driving it off the lot. Another strategy might be to just buy the vehicle and keep it until the wheels fall off. That wont save you from losing on the transaction but at least you wont have to lose money every 3 years like you might with a cheaper car. Except that wont work with BMW. According to all stats I've been able to find (and I really looked for this because I wanted it to be worth owning one) they don't last any longer than their cheap counter parts but they cost a lot more to fix. The warranty isn't any longer. So that means I'd still have to do the same "piss away thousands every 3-5 years" but with numbers 2 or 3 times larger.
Yeah, she bought it 2 years used, for about 60% of it's original sticker price. They may not last longer than their cheaper counterparts, but while they last, they're extremely different. It's not a great value except in the fun/$ category, in which case I would say a used one blows most cars out of the water. Driving time/$, not so much.
My solution to this problem wrt cars was to buy a low-mileage used BMW off lease and learn to replace my own brakes (highest cost routine maintenance task). I'm making use of someone else's wastefulness (the previous owner) to subsidize my fancy car ownership, and paying less for the car than I would have paid for a new Ford or Toyota.
That depends on the car. A low end Acura or BMW will only lose around 40% over the first 3 years and IMO knowing that you don't need to worry about repairs for 4 years is worth a fair amount by it's self.
It's different from other cars I've driven
like Macs are different from the windows
boxes I've used.
OT, but am I the only one who doesn't see the appeal of os x? I have had a mac with os x for over a year now (also had macs before it in the system/os 7.x-8.x generation) and I still prefer ubuntu or windows 7 (although not by much).
For me the appeal is that I don't have to mess with it. When I get a new windows machine it takes about 2 days to get every thing how I want it. Linux is much longer. I got my first Mac about 2 years ago and it took my a grand total of about 2.5 hours. Part of this might be that some things I wanted to change I couldn't, but a big part of it is just that Mac tends to pick the defaults I want so I don't have to mess with it.
The other thing is that on Mac if I install a new program I don't feel like I've just taken N number of months of the life of the OS install (Linux is even better here).
Basically, I'm older now and I don't have time to use a computer for anything other than what I have it for. Every second I have to spend doing administration is a wasted second.
Maybe this has something to do with environment. When I lived in the states I bought the cheapest stuff I could get and somehow didn't notice that I had to replace the stuff fairly often. I'm not sure if it's the fact that I've gotten older and lost patience for dealing with things breaking or if living in a country where people really consider quality and long term ownership, but I don't shop for short-term cheap anymore. I care about owning experience, lifetime cost and how painful will it be to me to get it fixed if it breaks.
It's funny but you even have to consider this with consumables like toilet paper. If you get the cheap stuff it's practically half-ply so you have to use 3 times as much. Better to get the 3-ply that costs twice as much.
I think the problem is not spending the other 80% of their income, it's spending the income they never had, or spending all of it and not realising that there can be unexpected hiccups.
Since I'm creating a wedding startup, the insane amount of money people throw at one event has been in my mind lately...
It's a brutal cycle — the weddings featured in magazines and online are almost always out of the average couples budget, and what those stories do is create the idea of "this is what you should have". Couples then concern themselves with having the best card boxes, the perfect playlist, hand making favors that will be thrown out the next day by the majority of their guests, because this is what they're told is the right way of throwing a wedding. A one day event that people spend way too much money on because they're persuaded to by this industry.
This calls for another startup -- the funeral startup.
Weddings and funerals are businesses with huge markups. There is a lot of emotional attachment involved in both, and people will be willing to shell out enormous amounts of money on such events.
Did you know they sell decorative boxes to be cremated in? Nevermind you're never going to see the box, nor will the deceased care which box they're in, all it's going to do is _burn_ but the funeral people are all, "what, you'd burn your father in a cardboard box? How horrible."
I tell my wife all of the time, "if I die first, get the cheapest funeral possible. A cardboard box is fine. If you spend too much I will come back and haunt you."
My wife is involved in the wedding industry. Both she and I have commented at various times that if people invested less in their wedding day and more in their ongoing relationship after the day, they'd often be better off.
I find that very interesting as well. I'm getting married in May and quickly figured this out... its about the union of two people and what makes them happy, not how many layers the cake is or how expensive the party favors are... we opted for a destination wedding with the closest people to us - instead of 200 people in a giant, expensive, impersonal function hall
It's an advantage to marry young, then. The older the get, the more friends have invited you to their own wedding. Maybe I worry too much, but I feel uneasy about not returning the favour.
Then again, maybe attending another person's wedding is the actual favour. After all, it usually costs a lot of money to attend a wedding, too.
I think that's one influence, but a great many people do it to impress their friends. You don't want to be the couple that had that bland, short wedding where there were no hook-ups, the dancefloor didn't go nuts, that one person didn't embarrass themselves, no one kicked on afterwards until 4am and people still weren't talking about it years later, do you?
You know that and I know that, but I don't think a lot of people realise it (certainly not in the flurry of planning). Every chick says "I don't want it to be over the top, I just want it to be more like a party where everyone has fun." Fast forward a few months and the bill includes chair covers, marquee, crockery and cutlery hire, catering, lighting, and the list goes on and on.
One of the few episodes of Friends that I watched was where Chandler and Monica were planning their wedding. Chandler told Monica how much money (cash) he had and she said something like "Now we can go with my Plan A wedding" and Chandler said "We're not spending all my money on one party", to which Monica responded "Don't call my wedding a party!"
It'd be nice to think that this was intended and took as a spoof of the conspicuous consumption that big weddings are, but I suspect that, considering the target audience, there was a lot of nodding all around.
This is true. We had a cash bar, and opted for the cheapest chairs and people had to use paper napkins and plastic utensils to eat their BBQ off of paper plates (gasp!).
But the part friends & family still talk about years later is, "Hey, remember when your German Shepherd was your ring-bearer at your wedding, and you sent her running down the aisle? That was great!"
The problem is a cultural narrative of "this is my perfect day!" This is what creates bridezilla out of otherwise very nice (but, not self-aware-enough) women.
That's the female narrative, we're on hacker news, I was assuming he was asking the male point of view. I certainly don't know any men who thought "this is my perfect day".
It's a wedding. In the majority of cases, the male point of view is irrelevant.
Also, as I said elsewhere in this thread, what a woman might say in theory or outside of planning mode is often quite different to how they'll act once things get real.
> It's a wedding. In the majority of cases, the male point of view is irrelevant.
Which is probably why so many marriages end in divorce. If she's not mature enough to know the real purpose of a wedding and thinks it's about having her day to show off to her friends, then she's just not mature enough and she's selfish.
Catch her the second or third time around and see if she hasn't smartened up a bit and if the man's point of view doesn't carry more weight now.
I think the best advice I ever got from my parents about weddings is that you have to have really good food. Nobody hardly remembers anything else, even the bride's dress, but if you have incredible food, people will talk about it for a decade. This may be biased, being from a southern Italian family, but I think it's good advice.
The sad thing is that money problems are a major cause of divorce. Starting out with a bunch of wedding debt is not helpful.
As several folks told my wife and I, "the marriage is more important than the wedding." Our wedding was wonderful, but simple and cheap - I think about $3,000 (with lots of help from friends). But from the start - from dating to pre-marital counseling to continued investment in our relationship - we've been focused on our marriage itself.
It's possible it's even older than this, but the earliest mention I can find of that quote has it being attributed to a Reverend T. Garrott Benjamin, Jr. in 1987: http://books.google.com/books?id=2bMDAAAAMBAJ&pg=PA16
I think the first occurrence is in "Design for the Real World"s preface (Victor Papanek, 1971):
... And possibly only one profession is phonier. Advertising design, in persuading people to buy things they don’t need, with money they don’t have, in order to impress others who don’t care, is probably the phoniest field in existence today.
If like me, you consider that "wealth = how long you could sustain your current lifestyle (same expenses) if your income stopped, today.", then it becomes clear that learning not to show off is really a key to becoming wealthier.
I think that is a real key. That's what we (my wife and I) try to do.
It can be difficult at times, when we see others flaunting their awesome new stuff. We just remind each other that the default behaviour in society these days is to live beyond your means.
Not that we don't have nice stuff. But we limit it and pay cash.
What do we often tell a child who expresses an interest in teaching? "You won't
get rich as a teacher."
Yet, there are more than 350,000 millionaire educators, working or retired
teachers or professors, according to Stanley's research.
I think it's a little misleading to include college professors in the same group as public school teachers here.
I would also bet that those teachers/professors are working on some lucrative (research) projects or are members of a board of directors, e.g. John L. Hennessy at Google[1].
It's also not really fair to include Hennessy on this list -- he is the president of Stanford, after all. That is a very different job from professor, and pays quite well. According to his wikipedia page, "As Stanford's president, Hennessy earns an annual salary of $566,581."
What a world we live in, where 86% of the non-millionaires are apparently able to afford a luxury vehicle. That's fantastic news, that means that money is no longer as important as it used to be for simple stuff like that. Either luxury vehicles have gotten cheaper (what's a luxury vehicle anyway) or banks are stupid enough to give lots of money to people that can't afford to pay the interest (forget about the principal) when it's due.
Any statistic like that can be bent to make it say whatever it is that you want to say.
Before Henry Ford made the first production automobile even the millionaires couldn't drive them and now such luxury items are within reach of most of the gainfully employed people in large parts of the world. That doesn't mean they should stop doing it, what point is there in having money if you can't enjoy it, whatever floats your boat I'm fine with you having it, but there is a catch.
Here in the EU there used to be a save first, spend later mentality. The only thing people would think of borrowing money for were houses, and if you couldn't afford to buy a house then you would be renting one (or if you didn't want to own a house).
Over the years that has changed, with people spending first their own money, and then their banks money on 'conspicuous consumption'. Cars, boats, furniture, package holidays and so on. Little by little the save-first, spend later mentality has been replaced by spend as much as the bank will let you borrow, worry about the consequences later.
Those people that are buying those automobiles they can not afford are being allowed to do so by lending institutions that are pushing cheap credit, no make that ramming, down peoples throats. That's where the real problem lies, given the opportunity to borrow money at initial rates that are designed to lure people in with the nasty consequences written in very small print in gray on slightly-less-gray backgrounds people will fall for it every time.
Banks are the problem, not the people that think they in fact can afford this stuff.
Banks are the problem, not the people that think they in fact can afford this stuff.
Can't agree. Banks may be taking advantage of the situation, but speaking as one who used to have a bad habit of living beyond my means, people who do that are the problem.
I understand the temptation too well, having succumbed to it. When one first starts to have some money after not having had much, all the things one has wanted to buy for so long seem much more important than saving for the future. I don't know that there's any way around that; people just have to go through it (many of us do, anyway).
If you want to put some further restrictions on the banks, I'm not necessarily opposed to that, but blaming it all on them is not right.
Cars don't come with hidden costs in the form of overdraft charges, late payment fees and foreclosure and the seizure of your assets, if you pay cash for them.
There is nothing wrong with cars and the personal responsibilities that go with them, financing is something that most people that are eligible for do not understand sufficiently to evaluate the risk.
Of course the standard capitalist answer is 'sucks to be you, should should have studied harder in school', but the fact is that this out-of-control lending is causing a large amount of trouble.
People should not by default be allowed to borrow this much money for simple reasons such as financial health of the nation and (in)solvency of the banks.
That way, if you can't afford a fancy car you won't be buying it.
Cheap credit has become a way to push the economy forward on money that hasn't been rightfully earned yet, that can't go on forever before it will come back to haunt us, the mortgage crisis is one nice example of what happens when the financial system is rotten. I won't be surprised if there will be another chapter to this based on the amount of credit card debt there and the number of people that find that they are no longer in a position to fulfill their obligations.
Loans and mortgages don't come with hidden costs, either--it's all in the paperwork if you can be arsed to read it or hire a lawyer to read it for you. And by that standard, cars come with "hidden" costs too, in terms of maintenance and insurance. (And the maintenance costs can be pretty well hidden, too. Who knows whether your car's going to be a falling-apart piece of shit in five years?)
> Loans and mortgages don't come with hidden costs, either--it's all in the paperwork if you can be arsed to read it or hire a lawyer to read it for you.
Better bring a magnifying glass then. I wasn't exactly joking about the 1 point gray-on-gray text. You'd almost wonder if there is something there that they don't want you to read.
having borrrowed probably more than one million USD from banks, and having read most of the paperwork, i call BS on anything which could even be jokingly described as "1 point gray-on-gray" text. everything i've encountered has been pleasantly type set, 10 to 12pt (maybe 6pt footnotes), very high contrast. it's all there. i've never been pressured to read things quickly, in fact i've usually had the documents in hand days or weeks before they had to be signed and returned. i've had bankers suggest i take longer reading, since i seemed to be signing too quickly for their tastes.
IME, there's a big difference between the folks that loan you money with lots of zeros at the end, and the folks that loan you money a credit card transaction at a time.
I do agree that people should live within their means, but the root cause is not "the banks". If the government creates an environment in which the choice is, lend too much or go out of business when your rivals do and you have no customers, then a bank has no choice. And the smarter banks knew this; the whole CDO thing was a desperate attempt to somehow offset the risk.
If you want a root cause in the UK at least, look no further than Gordon Brown. 1 pound in 4 NuLabour spent was borrowed... And unlike my neighbours fancy car, that debt does affect me, despite having no part of it, aye, and no part of it spent on me either...
Governments actually have very little control of the economy. They can tax stuff to discourage it, or adjust interest rates. Pretty much anything else they do has horrible side effects that are very difficult to predict and often take years to exhibit. To see what they can do:
They can tax stuff to discourage it, or adjust interest rates.
Or borrow and spend, which ought to drive up inflation, but require the BoE to keep inflation low, by artificially holding interest rates low making money too cheap and risk impossible to assess.
I say it again: if you are bank A and you won't lend at a low rate and banks B, C and D do then A goes out of business when its customers desert it for doing the "right thing" and the situation is unchanged. The alternative is for A, B, C and D to get together and fix interest rates (prices) themselves, at which point their CEOs are looking at jail time.
The banks are merely scapegoats for the politicians. And you've fallen for it hook, line and sinker. What would I like the government to do instead? It can start by paying off the deficit...
Okay, so the government should cut domestic spending, reducing the amount of cash available to government agencies and their suppliers?
Or did you mean it should raise taxes to collect more funds, essentially putting a drag on the economy and sending tax-sensitive organisations elsewhere?
Possibly you meant it should print money, causing hyper-inflation and destroying the value of savings and the public's faith in them.
All three options suck, and all three would lead to negative publicity. I think that the government should cut spending on stuff that I don't think is important. But you and I would probably disagree on what stuff that is.
As for the banks model, bank A would probably launch an adversing campaign clearly describing that investing in banks B,C + D is a sure way to loose your money. This campaign (when successful) would make more funds available (term deposits, savings accounts) to A which it could then safely invest.
Note of course that banks A..D are probably not competing on interest rates (they set them all the same) but instead on loan terms. Bank A decides that it is not in its best interest to grant loans to people without security/equity making money instead from 80% mortgages and the like. Bank A looses high-risk, heavy spending customers and attracts risk-adverse savers and spenders.
Governments actually have very little control of the economy. They can tax stuff to discourage it, or adjust interest rates.
Or governments can, you know, use the legislature to control all legal economic activity. In particular, the US Congress has power over almost all commerce.
That case involves Wickard producing wheat for his own use. The court decided that his wheat growing can be regulated because he used that wheat instead of buying wheat.
A lower court has upheld the Obamacare individual mandate tax on the same basis. (Since Obama says that the healthcare legislation is one of his significant achievements, Obamacare is giving him credit.)
"Cars don't come with hidden costs in the form of overdraft charges, late payment fees and foreclosure and the seizure of your assets, if you pay cash for them."
You are mentioning all of them here. Can we really call these costs "hidden"? Many things in life are hidden from ignorant people. This doesn't mean we should ban them from everyone.
"People should not by default be allowed to borrow this much money for simple reasons such as financial health of the nation and (in)solvency of the banks."
This really just means less freedom for people. The government is then deciding what you can and can't do because you may make an irresponsible and wrong decision. When will it end? Should we ban Mcdonalds because it's making people fat?
"Cheap credit has become a way to push the economy forward on money that hasn't been rightfully earned yet, that can't go on forever before it will come back to haunt us, the mortgage crisis is one nice example of what happens when the financial system is rotten. I won't be surprised if there will be another chapter to this based on the amount of credit card debt there and the number of people that find that they are no longer in a position to fulfill their obligations."
I know so many people that are in Credit card debt (I was also in debt myself..and managed to cut back spending for a couple of years to pay it off). Most of them are there because they wanted to buy things they couldn't afford.
The mortgage crises can also be blamed on irresponsibility. I saw a dateline special where a woman lied on her application to get a house she couldn't afford it ended up going into foreclosure. She blamed the banks. She said they shouldn't have allowed her to get the loan in the first place. It's this line of thinking that is destroying the US.
> The government is then deciding what you can and can't do because you may make an irresponsible and wrong decision. When will it end?
When most people will _not_ systematically fall into the same trap, get into bankruptcies or lose their homes. We are not talking isolated cases of a couple of idiots, but about 3m foreclosure listings (about 1 foreclosure listing for every 100 people in US).
So a couple hundred thousand people are totally stupid and deserve what they got, but when you talk about whole percentages of the population something else is going on.
Did people all of the sudden get stupid in the last 15 years? Somehow I doubt that.
Nobody minds the government telling them if they can drive, what kind of additions to the their house they can build, watching over so food companies don't sprinkle lead and arsenic in the food. Why can't the government also prevent them from getting stupid loans that, if not checked, nationally (or even globally) will lead to the supposed total collapse of the economy?
There is another general issue we have to deal with and that is the assumption that people are rational, autonomous agents. They will process information logically and make the best possible decision for themselves and their dependents. That sounds really good on paper or if one had to design an agent based AI world. In practice, it turns out, people are not rational. They lack critical thinking skills, they will make many decisions that will eventually hurt them, their dependents and their country.
The real answer is a better education system. But that is a long term solution (and we are already failing that US terribly). In short term I think it is acceptable for the govt. to play the role of a nanny. Otherwise we end up with bigger problems overall: poverty, huge income inequality, lots of sick people, lots of homeless people and lots of angry people.
Most bankruptcies are caused by medical problems. Long term unemployment causes a significant fraction of the reminder. Saying, credit is the root cause is missing the reality that most people can bay their debts until a major external issue happens. So lending based on the probability of job loss / medical issue is reasonable.
You are correct. Job loss and medical reasons are the top two 'official' reasons for bankruptcies. Those are the reasons that push people over the edge.
However, I think a culture of over-consumption leads to the people living very close to that "edge" saving little, carrying a significant credit card balance, trying to keep up with the Joneses (or Kardashians).
They live paycheck to paycheck and making minimum payments on their credit card balances. A 2-month loss of regular income will "kill" many American families. Very few have enough savings to be able to survive 6+ months without employment.
BUT Now when it comes to medical bills no matter how much a middle class family saves, they will probably go under as soon as a serious chronic disease strikes. That is fucked up and is wrong. Especially scary is that many of the medical bankruptcies usually have insurance to start with.
In this case here I still stick to my original point and would like the government to step in and offer a public optione. That is what Obama campaigned with and that is what has been stripped out of the health bill. As far as I am concerned, not having a public option makes the rest of the bill just a handout to the health insurance companies as all 4-5 of them they can un-controllably raise rates to compensate for little regulations and red tape that the new bill forces the to go through.
But in an earlier post, you seem to imply that you don't have a major problem with buying something that hasn't been "rightfully earned yet" so long as it's a home. Make up your mind, please.
At least around me, there is a real shift of mentality toward "save-first" again (maybe a generation thing, I'm 33). People start to see that they become enslaved to their jobs if they don't do that.
Sorry, that's a common misconception about Henry Ford. See https://hackernews.hn/item?id=1757576 for a bunch of interesting factoids about early cars and how Ford was not first.
The assembly line concept was as far as I know applied to the automobile first by Ford, if you wish to dispute that I'm fine with it but that's what just about all the sources I've got say about it.
Whether or not his was the very first assembly line ever or whether it was the first mass produced automobile is of no consequence, then you can replace Ford with whoever was the first in the paragraph above to satisfy your needs.
Another thing that Ford pioneered was the living wage for his assembly line workers, which created a much larger market for his products. That probably was the bigger accomplishment of the two.
Read your link and you'll find the following paragraph:
Ransom Olds patented the assembly line concept, which he put to work in his Olds Motor Vehicle Company factory in 1901, becoming the first company in America to mass-produce automobiles. This development is often overshadowed by the independent redevelopment of assembly-line work at Ford Motor Company a few years later (see below), which introduced the ramifications of the method to a wider audience.
This confirms my claim.
On wages, Henry Ford has a mixed history. He approved of, but did not originate, the idea of giving everyone a massive pay raise to $5/day in 1914. The reason was to reduce worker turnover, and not, as the popularizations have it, out of excessive concern for worker well-being.
A few years later he was on the other side. After that well-publicized pay raise, Ford was not as generous with workers as other car companies. Furthermore he was one of the most strenuous opponents of unions in business. The stories you sometimes hear about organized crime being hired to bust UAW strikes with very violent methods? They're largely true, and they're about Ford. Eventually the union managed to shut down the River Rouge Plant. According to people close to the situation, Ford was ready to close down his company rather than come to terms with the union until his wife Clara told him she would leave if he did.
Henry Ford is a pivotal figure. But his history is seldom as simple or as clear as popular myth would have it.
This is such a strange and pernicious thing to say. Marxist-style class anger combined with blaming the enabler combined with a complete lack of understanding of the numbers and the character of the various families of loans in the US. Also, it's all poorly written.
So how are you wrong? Let me count the ways. You seem to blame a facet of capitalism (banks) for conspicuous consumption. One, all capital is handled by people. Two, all transactions are voluntary. Three, long term supply equals long term demand--a borrower does not change the allocation of goods simply by borrowing, and does especially not changing the temporal allocation thereof, unless he has a time machine... so you're going to need to change your mental model of how debt and credit work if you want it to make any sense. If banks stopped lending and borrowing, do the big vacation packages and luxury cars just go poof and disappear? How about all the money that was invested before, but now no longer is?
Sorry to disappoint you but Marx doesn't enter in to it. I used to work for a bank and I've seen first hand what goes in to 'product development' there and how much effort is made to hide the cost of lending. To the point where legislators stepped in and outlawed certain products outright and made them disclose the real costs of lending in clear and unambiguous ways.
Nah, you think you've come up with some unique idea about banks, but Marx came up with it a long time ago, and he probably wasn't the first to think of it.
I'm not sure what you mean by hiding the cost of lending, either. I think that phrase should refer to describe the bank's costs, which goes into the interest rate and fees and everyone knows that already.
Yes, but I still think there's a problem with conspicuous consumption. What, exactly, does it mean when someone buys a luxury car? It certainly doesn't reflect on their character, or what they've contributed to society. All it does is signal that they have enough money to spend on an overly expensive car. And what, exactly, does that mean?
All it means is they have money. That's it.
Or, at least, that's what it should mean. Unfortunately, people still talk about cars as if they actually matter, when, in reality, they're just means to an end.
(Yes, I know people can enjoy cars, and they should. My gripe is with the perception of luxury cars as being an inevitable upgrade from other cars for reasons that seem steeped in consumerism.)
I agree that a save-first, spend later mentality is better. If you have a save-first, spend later mentality, everything you buy will be cheaper. If you don't have that mentality, the bank gets money for almost every luxury product you buy.
But I don't think it is just the fault of the banks. I think the biggest problem is that people don't realize how much borrowing money really costs. They don't add up the total interest they will have pay over their loan, they just look if they can afford the monthly payment. If you don't borrow money you are able to buy a better tv, a better car or more luxury goods in general.
But... why bother being a millionaire if you can just pretend?
The author of this article seems to assume that it's better to actually be a millionaire, even if it means living like the poor. I would think it's better to drive a luxury car (whatever that is) and drink expensive wine, even if you can't afford it, than the other way around.
It's "bad" to pretend, only if it doesn't end well: if you have to repay what you borrowed, and can't -- but if you die before you're bankrupt you win!
Now, none of this means much; it doesn't matter to live like a millionaire, or to be or not to be a millionaire, etc. What matters is peace of mind, happiness, fulfillment.
A subject for another article maybe? Although probably not in the "Color of Money" column.
Why? Do you really believe that driving a fancy car and buying expensive wine actually makes you happier? This is the illusion.
It seems better to me to be able to buy a fancy car and know that you don't want one, than it is to live in a fantasy world were buying stuff makes you happy.
Buying expensive wine - no, that doesn't make me happy. Drinking high-quality wine, which sometimes happens to be expensive - absolutely. I enjoy that very much.
Claiming that my enjoyment of high-quality wine is an illusion because you can't see a difference is just arrogance. The same goes for the consumption of any other luxury good you might not have a taste for yourself.
I do think that there are high-quality things that are expensive, but I think people buy by price rather than by blind quality tests relatively frequently. There are good expensive wines, but the wine price/quality correlation is not very strong at all. If you actually know what you're buying and how to judge it, though, by all means buy whatever you want!
I've personally been something of a beer aficionado for 5-6 years now, and I've seen this creeping into craft brewing quite a bit lately. Especially after the explosion in the last 1-2 years of mainstream popularity, there's now a very weak relationship between the quality of beer you get and whether you pay $3 or $30 for a 22-oz bottle. Tons of good stuff and crap across the spectrum, and increasingly manufacturers are pricing as a way of status-signaling rather than based on either cost or quality. There have even been cases of brewers rebadging the same recipe from a middle-range beer as high-end premium stuff with a fancy label, and it sells and gets good reviews! (But it doesn't do any better in blind taste tests.)
I've driven very nice cars, drank super expensive wine, and done other things that cost lots of money. They were fun for a short period of time, but were not lasting. Time is what I want. I want to be able to do what I want when I want to do it. If the waves are good I want to surf, if I find a cool OSS project I want to work on it. IMHO, that is where real pleasure comes from.
Enjoy things because you enjoy them. Not because they're "super expensive". I don't see why I have to buy a $10 wine when I don't derive enjoyment from them nearly as much as I do out of $30 bottles.
Going out to a nice restaurant with friends, travelling the world and enjoying good food and fun activities all costs a decent amount of money, yet make me happy. As someone else in the comments said - you should want to acquire money to use towards the things you want, not for the sake of acquiring money.
You like to do free stuff that just involves time. That's great. Other people enjoy restoring cars, going on vacations, building new companies, or food and travel like I do, and these require money as well as time.
Ostentatious and pointless displays of money, or purchases which adversely affect your monetary base should be avoided, but not "just because".
There is a large gap between being a millionaire, net worth of 1 million dollars or more, a being a billionaire but there is a point in between when you make enough money to be rich and act like it too. Is there a word for that point that everyone can agree on. The millionaire people want to be is the one that makes enough money to be able to spend it without worry, not the millionaire that is still making a $50k yearly salary with a nice house.
I realized something this morning: when I spend almost all of my life doing something I don't want to do (working a full-time job... Leave the house at 7 am and get home around 6:30 pm) recreational consumption is almost completely full-filling. When I have as much time as I want to work on stuff I like and am passionate about recreational consumption does almost nothing for me.
I've had a similar experience. When I've had work lifestyles where I had to get up early in the morning, long commute, bureaucrapritude job, long commute back, get back late, but every 2 weeks get a huge paycheck, I'd end up spending way too much on discretionary consumption & toys to make me "happy". When I've had more happiness-oriented work lifestyle phases, with no commute, no bureaucrapritude, but smaller or more irregular paychecks and less "security" I've ended up spending way less money on unimportant stuff, saved way more, and was way more happy in a substantive sense.
The whole point of accumulating money is to spend it. Sure, you can accumulate more if you don't spend (I actually sorta doubt it, but let's assume it for argument's sake).
Then, if you live by "the less you spend, the more money you'll have" you'll basically end up having a "big number" on your bank account, but nothing of what you really want.
I'd rather have a super fast laptop and a nice clean apartment, and only $8000 in my account[1], than a crappy laptop and a crappy apartment and $50,000 in my bank account.
[1] assuming I have a steady income, and/or can generate enough revenue so that I can keep getting nice things without draining my bank account.
I said that I doubt the correctness of the logic behind "the less you spend the more you'll have".
I think that to generate wealth, you need to spend some amount of investment upfront, and if you're afraid to "pay" for things, (because it reduces the "number" in your account) then it follows that you don't have the courage to invest in anything, and therefore you are not likely to become rich.
<i>The whole point of accumulating money is to spend it. Sure, you can accumulate more if you don't spend (I actually sorta doubt it, but let's assume it for argument's sake).</i>
I disagree. Once you've learned the basics of investing or stock trading, accumulating capital becomes about increasing your income.
Let's look at your laptop & apartment example.
Case 1: Super fast laptop & nice clean apartment. I can max out a Macbook Pro for about three grand, and a nice 2br apartment in Boston will cost about $3k per month in rent. With your $8,000 bank account, you'll need to earn at least $3,000 per month from your job just to pay for your apartment. More to save up and purchase that laptop, and even more still if you want to afford to eat.
Case 2: Crappy laptop and crappy apartment with $50k. A crappy laptop is about $500 for a really nice netbook, and a cheap apartment in Boston is about $600 per month (for those in Boston, think JP and Forest Hills). Let's invest that $50k in an ETF called "PFF", which currently costs $40 per share and pays a monthly dividend of, on average, .20c per share. That gives you 1250 shares of PFF, for an average monthly income of $250. With $50k, you can buy a $1000 laptop in four months, or pay for almost half your monthly rent.
On a forum where people are constantly trying to generate passive income through webapps and side businesses, I'm surprised people continuously overlook the passive income power of large amounts of capital. $50k can buy you $250 a month for life.
In case 2, the hypothetical person who has all this money but is hesitant to spend any portion of it on a decent laptop is probably scared of the concept of the "number" in his bank account dropping. This hypothetical person would not invest in stock.
If you invest in stock, then you sorta already agree with me. I mean, you are spending your money, and that's my whole point: if you're afraid to spend money then you're not likely to become rich.
And in Case 1, the hypothetical person already has a means of generating enough revenue so that he can continue to spend/invest without going broke.
What's the point of having it if you don't enjoy it? This article doesn't seem to do justice to those who:
- have enough savings on hand to cover a few months' living expenses
- have a sensibly invested pension plan
- spend their surplus cash on things they enjoy
I'm sure the book is simply using the popular, but arbitrary and out-dated 'millionaire' tag as a hook for sound financial advice. But if your goal in life is just to be a 'millionaire', you're missing the point.
The gist of this article is a paradox. Rich people don't act like rich people? Surely, then, you should act like rich people if rich people are spending less, etc.
Money is a commodity like anything else. Talking about wealth in the context of consumption means you've already lost. Better to think about how to produce the most than how to consume the least.
My parents are fiscally conservative "millionaires". They are 70 and 71 and may never need to tap their investments for operating cash (they can live off of pension + social security + misc income). My pet peeve is that I hope they spend a bit of money on themselves before it is too late.
I used to think their "conservative" consumption habits were a generational thing. However, they recently had a college friend who sold their paid off house, bought a very expensive townhouse in DC with their equity plus a giant mortgage (why does a bank give a 30 year mortgage to someone who is 70?), and then proceeded to loose the new house plus all of their equity because they had unexpected medical bills for one of their adult children.
Being rich is an enticing prospect. When I consider it, I often imagine it as "the freedom to do/buy/go what/where you want, without delay".
But then the following warning comes to mind and I'm reminded to carefully scope the bounds and purposes of my worldly ambitions:
"Blessed are you poor, for yours is the kingdom of God. Blessed are you that hunger now, for you shall be satisfied ... But woe to you that are rich, for you have received your consolation. Woe to you that are full now, for you shall hunger." (cf. Luke 6:20,21,24,25)
It's not about spending less, it's about spending your money on the correct things.
People need to spend less on status/signaling goods, and more on creating real value. Spend less on investing/speculating on things you have no control over.
To paraphrase Tim Ferriss: Wealth is what is left over when all of your money and material goods are taken away from you.
I wonder what people will do with their money when they die? Spend all that money in after life?
As my father says: money is irrelevant - think about what you are going to think about your life on dead bed. And the other important saying is: don't think too much about how you spend your money think about how to create wealth.
I'm surprised that no one has cited that there was already a book just like this called "The Millionaire Next Door" which was all about pointing out how the millionaires don't act like we expect "rich" people to. It originally came out in 1998. This seems like a rehash.
The whole "Millionaire Next Door" franchise is a massive example of selection bias. Frugality is not causality for millionaire status. There are plenty of valid reasons to be anti-consumer and frugal, but it might be a less then ideal path to riches.
> $16: what most millionaires pay for a haircut (including tip)
I wish I knew where to find a decent haircut for $16, including tip. Or are they just so rich and powerful they don't have a use for a decent haircut, and elect for the bargain-sub-basement chop?
-
EDIT: I should characterize this statement a bit. My hair is very thick, and has a mind of it's own. It has been my experience, over many many years, that stylists at low-end shops repeatedly
1) fail to blend my hair well, making it look so ragged it looks like a 5yo cut it with craft safety scissors.
2) fail to understand my hair. It won't go the way you want it to go without GLUE, so the stylist has to work WITH my hair.
Mid-range shops usually have barbers who are up to snuff. Costs me $20-25 usually.
I wonder how many millionaires just go over their head with the number 2 guard every couple of months.
On the other end of the spectrum, if you never cut your hair it stops growing somewhere around mid-back and looks fantastic if you invest in conditioner. Decent shampoo and conditioner is pretty cost-effective if you do this.
What about relocating to a place where 16$ is a decent price for a haircut ? That's what I did roughly, and the haircut seems to be welcomed by my wife, too :)
My haircuts in the Philippines were 30 pesos while I was there. That's only a couple years ago and prices haven't changed a bit, which means they are still only about 60 cents US.
I'm in Colorado, USA and you can get decent hair cuts for around $15. It's not hard really, just have to cut hair.
Speaking of which, I've tried doing it myself for free, in a mirror, and it did not come out well. Paying $15 or so for a professional to do it is worth it.
Indeed. But then I recall the time - a few months ago - when I saw a Bugatti Veyron in Bond Street here in London. Those guys - and it's usually guys - are millionaires for sure.
(Bond Street is famous for its jewellers, Sotheby's, etc.)
I think the biggest trouble with this kind of idea is to think that you can get rich just by saving. It is true that you need to save in order to have lots of money, but producing value is what makes you rich.
If you save money during your whole life you will be millionaire when you're 60. By then, 1 million will be more like 100k, and you be still unsure about your future.
It is far better to think about creating value using equity on your own business or real estate, for example.
There's a lot of causal ambiguity in this article, particularly due to the fact that no small percent of millionaires likely come into wealth by way of inheritance or marriage. For example, the author cites the presence of 350k millionaire teachers as contradicting the statement "you won't get rich as a teacher." "get rich" implies causality, but "are rich" (the cited fact) does not.
Having read a few of the books discussed in the article, the author makes a point of showing how actually a small % of millionaires came into their wealth from an inheritance. He states that 80% are first-generation affluant.
I find it interesting there's no mention of luxuries such as freedom and travel. IE: Paying more to rent things than own them, touring various cities, flying out to see friends for a week. Things that aren't easily placed into rampant consumerism, yet still require something of a luxury budget, and can enrich our lives to no end. (Also food, for that matter)
reminds me of one of my favorite messages from guy kawasaki: if you make meaning, you'll often make money.
the ones who end up the wealthiest often don't consider money as their driving factor...so are they that likely to drastically change their habits that got them there?
idk, I think this article just makes me realize how little a million dollars buys now-a-days.
I think the author is setting the bar way too low; There's certainly a psychological appeal to having a specific amount of money with 6 zeros at the end, but let's face it, to live out our collective cultural conception of what it means to be wealthy takes a lot more than just 1 million dollars- I can't really say how much it is today. Probably even more than tens of millions, more like reaching towards 9 figures, if not mid 8 figures. I think that really invalidates the author's point about supposedly wealthy people being frugal, buying habits of non-millionaires aside....
Life passes by us faster than I care to acknowledge, and while saving your money is important you also need to live. The key, I feel, is finding a happy balance.
It's articles like these and the responses they engender that I'm very glad I grew up working class, and lived my 20's punk rock. I can appreciate the finer things in life, but I've also got the skills to survive a near-apocalypse.
Getting rich has never been my motivator for being involved in technology, and to be honest, I'd probably be happier if the industry were de-funded (hopefully in favor of something like biotech or alternative energies, instead of url shorteners like bit.ly), and it cut the fat out, of all the people who prefer schmoozing to hacking.
In other words, it sounds like a sermon on loving money for itself instead of loving it for what it can buy you. Or, if you read it charitably, it's a sermon on loving security more and short-term pleasures less. As much as I sneer at expensive fashion and gravitate toward the <$10 wine bin at the grocery store, this article strikes me as nothing but unhelpful moralizing. Yeah. I get it. If I don't spend money, I'll have more. Yeah, I really, really get that looking good and living it up is a vacuous pastime -- I'm totally with you on this one -- but it's the most common passion on the planet, and it's a cop out to tell people to stop enjoying the one aspect of life that gives them the most pleasure and call it financial advice.