The other thing is - what is the point of having money if you are just squirrelling it away forever? It’s stupid to drive an old shitbox if you are worth millions. I’m not saying you should run out and finance a McLaren P1 supercar, but is a pre-owned BMW M5 really going to put that much of a dent into your fortune?
If I became rich, I don’t think you’d find evidence of it in my material possessions. Even if I was able to see the benefit of a BMW M5 over my ten-year-old Subaru Outback, I wouldn’t feel comfortable having one parked in my current neighborhood. And I don’t want to move into a ritzier neighborhood, because I wouldn’t see the point (I rather like where I’m living now).
But I could totally see me spending a shitload of money on experiences. I’d probably fly up to New York every other week and watch a different Broadway show and eat/sleep well. Or I’d fill my leisure time up with educational enrichment (writing classes, pottery classes, gardening classes). I’d have nice things, of course, and I know I would do more recreational shopping than I do now. But I don’t think it would be readily apparent that I was rich. Just comfortable.
For a two income couple, with reasonable college debt, and reasonable living expenses in the midwest, it wasn’t too hard. We did get to take advantage of the dot com boom and some stock options - so we had a better than 5% return. But we stashed and saved - and live in Minneapolis on the non-expensive side of town. And two incomes are pretty important - we wouldn’t have done it on either one of ours.
That fifteen years also started about the time I turned 30. It wasn’t a right out of college thing. For the almost ten years between college and 30, we couldn’t afford to save other than in our 401ks (and my husband had almost none of that - he had the student loan debt to pay off). Granted, the money that we saved then in our 401ks is worth six figures now and does make the fifteen year thing a little inaccurate, since I’ve had a 401k for 30 years. But I didn’t start investing until I was 30.
Neither of us has a graduate degree.
He was a manager, then a director Fortune 100. I was a systems engineer, than a project manager, for a manufacturing company.
But no, you can’t get that sort of savings if you make $45k a year . And I’m not claiming you can. Even if you are OCD frugal.
A common misconception. You have to spend less. I saved up $100k in about 8 years, making well under $30k/year. I had a part-time job making about $12k (before taxes) and when I went full time, I simply kept my expenses the same and saved the increase, basically continuing to live below poverty level while making a modest income. The greatest luxury the extra money provided was the lack of stress from living well below my means.
I end to agree with Max Barry, who wrote "“You need two things to be happy: Health, Money and Love – any two of them. You can cover the absence of one with the other two.”
So, given the money, one will need to somehow find either Health or Love in order to be happy.
I’m very content with my life. I have more pension/savings than I will need for the rest of my life, and I have quite good health for my age, which is 77. When my health declines, I may have to start looking around for love, which I’ve sort of put on the back burner.
Sam Walton was pretty close to a perfect specimen of this. He lived frugally, without being a miser. He still drove around in his old truck even after becoming a billionaire.
I guess technically I’m a multi-millionarire (in the “just over $2M” camp).
I live modestly but not miserly. In fact I do almost everything that I want to do. But I have cheap hobbies, like writing software, building electronics, machining stuff, and so on. I travel, but I prefer camping to staying in luxury resorts. I like having a pretty nice car, but I have no need for a new one every few years, so I drive a well-maintained 2003 BMW. I’m not into clothing or any other fashion stuff.
It seems to me that the worst kind of expenses are repeating ones–continually going out to nice restaurants or getting new jewelry, etc. When I buy a nice thing it’s likely to be a tool or something that will last many years, so the actual cost is quite low. A $300 meal might be amazing but I’m only going to have dim memories of it a few years later.
The biggest expense in my life is simply my own time, so I aim to retire in a few years. I could do it now but I’m willing to go a bit longer to have a nicer retirement.
The biggest wealth/modesty ratio I’ve seen is Keith Robinson. He (and his brother) own not just a big chunk of Kauai, but the entire island of Niʻihau. I’m not even sure you could put a price on it.
But he spends his days driving a 1950-something Scout pickup and tending to his plants. Wears jeans and beat-up flannel. Just amazingly friendly.
A lot of people can’t spend less. If you’re eating out of soup kitchens and struggle to pay the rent each month, the concept of “saving” is nonsensical. Of course, if you’re flat-broke, buying expensive brand-name handbags or going out to eat instead of saving that money is stupid.
Well, I don’t know him but Warren Buffett seems to live quite modestly.
Absolutely. If you are living at the poverty line, or even above it - it can be really tough to save anything at all. Which is one of the reasons money does buy happiness - in the form of security. Your stress level - when you can afford all of your needs, some of your wants, and still have money to put away for a rainy day - goes WAY down.
I spent my college years poor - and the first years out of college barely making enough to get by. A failed marriage with a spendthrift who didn’t enjoy working full time didn’t help. No health insurance - fortunately, no major illnesses. No car - fortunately worked and lived within a block of a bus. Do you know how many meals you can get out of a box of Jiffy Corn Bread? Or a box of elbow macaroni. Ragu was too expensive!
However, people with middle class incomes CAN save. Maybe not a million dollars over fifteen years, but epbrown is a case in point. You don’t need to be an investment banker or lawyer or management consultant to build a nest egg. You need to make more than you spend, save the rest, invest in low cost index funds regularly, and wait.
The nice thing about saving on a smaller income is that your target savings for independence tends to be a lot smaller. Lawyers and management consultants - even the ones that save - tend to have fairly considerable expenses and a fairly high standard of living to maintain. There are jobs - and those are two of them - where wearing the right clothes, driving the right car, having the right address - is meaningful. Union electricians make pretty good money - and you can drive an old truck.
That’s great and all. But wouldn’t you be happier being able to save $100k in 1 or 2 years?
I have enough money do to whatever I want to do. If I had a “virtually infinite” amount of money (say, a million dollar), I’d probably help out some people I know who are in financial straits that could be fixed with a one-time infusion. I live on SS (the equivalent of the per capita GDP of Mexico or Thailand), which pays all my costs of living in a quiet town in south Texas, and about three thousand left over, which I will use this year on a 6-week trip around the world, and then I’ll be ready to come home again. If I had more, I don’t know what I’d use it for.
I wouldn’t move, I like my apartment location, I can walk everywhere I need to go, and if I didn’t need to walk, I’d get no exercise. I don’t drive, so a nicer car is not an issue. I get live sports streams on pirate sites and music on youtube, so all my entertainment bases are covered.
I can’t think of any way more money would give me more happiness. I guess the secret of happiness is learning to be comfortable living on what you can reasonably attain.
Yeah it’s easy to save money when you steal video content and coffee.
It may well have been evidence of some kind of pathology but I think what is more interesting is that everyone is happy to assume that it is pathological. In fact his riches may have allowed him to live the life of his dreams, sleeping on a cot in a small windowless room.
I don’t think most people invest any time into working out what their life is about. All they contemplate is what they want to get out of it. So if you ask them about being rich they start thinking about what they can buy. I find that if I ask myself, once in a while, what would be different right now if I had millions in the bank, the answer is nothing. I would still be doing what I’m doing, enjoying it or not. It seems to me that the difference with rich people is that what they want their lives to be about is stuff that makes you rich. And they are the lucky members of that cohort.
I went to college with quite a few moneyed people.
The people with the fanciest lastnames, heirs and heiresses to multigenerational multinationals and the occasional rambling “farm” (big enough to swallow my family’s ancestral home whole), were a lot more likely to dress normally, not have a car (as any middle-class kid in our location) or have a pass-me-down they only used on weekends, than those who were one or two echelons below.
Those girls who were horrified when their mothers forced them (forced them!) to renew only half of their wardrobe (oh noes!) after the first year we had labs, because on lab days they’d wear their old clothing (omg last year! they would be seen in public with last year’s clothes!) were the children of the lawyers and CPAs of the people with the Real Money.
A few years ago, I was part of a team in which the guy from Costing and I were the only freelancers, everybody else was part of the consulting firm handling the project. The team lead used to make fun of our cars; so long as he did it in private we rolled our eyes and didn’t reply, but on the day he did it in front of the team we did.
Boss: “haha, the people who get paid the most and they have the worst, smallest cars!”
Hector: “do you know what happens to a freelancer’s first-hand BMW?”
Boss: “uh? No… uh… what happens?”
Hector and me in stereo: “it becomes someone else’s second-hand BMW as soon as the freelancer is out of a project for a couple of months.”
One of the things you need to do to keep your money is spend it wisely. Buying an expensive item because it meets your needs better than a cheaper one and you can pay for it is very different from buying it because it happens to be expensive.
I don’s steal video content. I pay $50 a month for internet access, and select content made available to me by my internet service provider. My coffee vendor offers free refills, and I thank them for that.
However, you are welcome to add in the theft of those items to your budget, and see if that pushes you “easily” over the happiness threshold of fabulous wealth.
Ooooh, cool! Her life story is extremely interesting. Was she as awful as the very critical tales tell?
Poverty really, really sucks. I was poor, living-on-the edge with an average savings of $100-200 until my 40s. I had well-paying jobs, but even good pay doesn’t allow for much savings in the very expensive SoCal cities I lived in.
Like many Americans, I was always a step away from penury. All it took was a devastating car repair, which I’d have to charge and would subsequently pay off over several years with high credit card interest, a minor injury that required a $100 ER co-pay, an urgent vet bill, and so on . . .
I was incredibly, amazingly fortunate to come into a considerable windfall about five years ago. Money can’t buy happiness, but financial security sure does. Oddly, I am finding that I lust after fewer consumer goods than I did when I truly couldn’t afford many of my “wants.”
My BFF, who has an excellent job, as does her hubby, lives in a thoroughly upper-middle class neighborhood, drives used, conservative cars (Honda Civic, Taurus), cooks 90% of their meals at home from ingredients, and has a few “frills” like a gym membership and the occasional $75 dress shoe splurge. I was amazed when, fairly recently, she had to borrow $500 from me to take care of an urgent and unplanned expense.
They are people who have done everything “right,” but are constantly teetering on the edge. Much of this I attribute to them putting both their kids through college without student loans; this is laudable, as we know student loans are the death knell for many millenials, but it has been at the expense of having a comfortable middle-aged security A few months ago there was a recent article on this awful phenomenon in The Atlantic: http://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/ (Though I’m a bit :dubious: about a guy who put his kids through Ivy League schools and has two homes in the NY area. I call this the "Joan Didion Syndrome, which I won’t expound on here).
Thank God I didn’t have kids. I’d probably be in an even worse situation.
It is the INCOME from that money which matters. And safer investments don’t pay very much these days. Plus there is inflation.
So ideally you would have an income from that money which would support you and would also build up the savings more so the income will increase in future years.
One investment is bonds. And a fun thing you can do if you have a bit of cash is to buy enough tax-free state bonds so the income from that pays for your yearly property taxes. (Thank you state!)
Anyway the cash is called “principal”. The income “interest”. If you go and spend the principal, your future will not look very bright!
P.S. Business investments, rental properties, etc. are stressful. It is less stressful to just buy safe bonds and not have any investment stress - if you can afford to do that. But again much less income.
It is silly to buy expensive cars, lottery tickets, and Burberry bags when you’re forced to eating generic mac 'n cheese, but . . .
. . . I read a very intriguing article from an economist about five years ago. He notes that if you are perpetually poor (especially trapped in a cycle of generational poverty), that some of these choices, while not “rational,” make some sense in context:
-You’re never going to be able to own a house, so why not own an expensive car that makes it seem that you work two shitty waitress jobs and two overnights at the plastic factory for something tangible and enjoyable?
-You can’t afford to not work/the time to go to college while holding down three jobs and paying for daycare. And college, even community college, is mo-fucking expensive! Baby gets bronchitis, daycare won’t allow sick kids, and then you miss more classes than the instructor allows and you’ve paid tuition for a big, fat grade of “F.”
-Not to mention that it is likely you had to attend crappy, underfunded K-12 schools and began community college with two semesters of expensive, nontransferable – and sometimes pointless - developmental ed courses.
-You have kids because you want them and you adore them, but they are a major dollar and time suck.
-Some poor folks work what used to be (relatively) high-earning, professional jobs. Now nurses, K-12 teachers and skilled machinists must sometimes rely on food banks and government assistance (and don’t get me started on Wal*Mart, an evil entity who relies on the U.S. Government to subside their workers with foodstamps and healthcare).
-Poverty is humiliating. Why not dress well to hide your lack of resources so you’re not looked down on by co-workers and society in general?
-Many Americans who have done/are doing well started with an economic cushion from mommy/daddy/rich gramma. When you come from poor people, there is no “head start” (I was one of a very, very few who has “made it” in my perpetually poor family and, believe me, we are an extremely hardworking people).
I know of no one who likes being poor (including me, see another screed above). Yeah, people make self-damaging mistakes, but let’s not forget the roles that family of origin, racism, gender, sexuality, region, and a dearth of opportunity play. Heck, if so-called white, middle-class people teeter on the edge of penury, imagine confronting a shitload of other problems.
And let’s remember that white folks made of the overwhelming majority of people who screwed the final system and lost homes to foreclosure.