I definitely recommend you read the book Nickel and Dimed. The author decided to become a member of the working poor in three different cities and see if she could make it. She couldn’t.
In terms of class definitions, I rate “rich” as being a person who can live “comfortably” off of assets and investments, rather than having to earn an income from their own work - excluding pensions/retirement savings.
A person earning $100,000 a year with $2 million in assets isn’t really “rich” in this sense if they live in a major urban area, because most of the assets will be tied up either in retirement savings or non-earning assets like a house.
I work as a lawyer in Toronto, and I do not consider myself “rich” - merely upper middle class. I must work for a living.
Of the advice above, I agree that living below one’s means is important for financial security, but that in and of iteslf will not make you “rich”, unless of course you are defining 'rich" to mean “financially secure”. To my mind, becomming truly rich means at some point taking a major chance with one’s financial future - investing everything in some promising, clever business, striking out on one’s own in a profession, working 70 hours a week to grow some business idea; in short, risking comfort and comfortable financial security for some entreprenurial gamble. The reason more do not do this is simple - in general, most people value steady financial security and comfort over taking such gambles, even if they have the smarts and opportunities to make them.
Yes, and in some markets (including mine), having a $1M+ is just a nice house in the burbs, nothing special. Making $100K is very good, but not all that uncommon here, either. It’s like making $60K out in the hinterlands. I think we should definitely adjust all these these numbers flying around for location.
People, can we all pat Hakuna Matata on the back and move on?
I’ve read it. She also made a lot of sort of stupid mistakes - particularly her stay in the Twin Cities - where I live and where I did my “poor college student time” - and where she admits she made a lot of stupid mistakes. That was her “Wal-Mart” time.
[QUOTE=olivesmarch4th;12805640
But currently the statistical likelihood that someone will rise from the bottom of the heap to the top* or vice versa* is about 3-6%.
[/QUOTE]
Oh I agree that it is extremely difficult to move up in social class. Mostly because people simply don’t know how. It usually takes a bit more than just “go to a good college and study hard”. People get locked into a particular way of thinking and it is very difficult to change it.
My mom, for example, grew up in a very working-class Irish Italian household. She recognized that education and hard work was a path to a more affluent lifestyle and is very career focused. Unfortuantely, the career path she chose was “nursing” which, in spite of several Ivy League doctorate degrees, does not pay well. With her education and experience, she could probably have been an actual medical doctor or go work as a health care industry expert at some consulting firm for big money, but she doesn’t think like that.
We are in the car talking about some of these people we know making big-time money in hedge funds or start-up businesses. My mom gets very defensive if I imply that if you want to make that kind of money, working at some corporate job getting 2% pay raises every review cycle is bullshit. She will say that you “have to think outside of the box” if you want to be that successful, but then she will get very agitiated if you actually think outside of the box.
These are the sort of people who will look at the dot-com boom/bust of the late 90s and say “look at all these people that started bullshit companies that sold nothing”. They don’t look at Amazon, Cisco, EMC, Facebook, Google, Microsoft, Oracle, Yahoo! and others and realize that there were a lot of people who made a lot of money making companies that actually lasted.
Or find investors.
As I have mentioned several times my OP was poorly worded and I shouldn’t have copied it from the poor thread as the wording tended to get people side tracked. It wasn’t really about ‘rich’ per se but about our attitudes about money. I hadn’t expected to get into many of the issues that have been expressed here but it has been interesting.
I guess for me what the thread was about was that for all the issues outlined in the poor thread, middle class people and even many wealthy people suffer from the same lack of awareness about money issues that we tend to mark the poor with. I should have worded the OP more in that vein and in hindsight keep my own personal income out of it as that also got the discussion sidetracked. But this conversation has been interesting, just not the one I had intended!
Money–it is an interesting social issue isn’t it? It tends to divide us as a people, those with it and those without. I personally find it a difficult subject to discuss. Having been on both sides of the equation it is interesting to me, but I think growing up poor has made me more conscious of it then those who were born into middle class society. But as Ihave mentioned it isn’t something I think about 24/7 or even much at all to be honest.
Yeee-eeees… I have worked for a couple of startup companies that, it seemed, didn’t reeeeeeally intend to make or do anything useful. They were all about finding a meme or catchphrase to draw in credulous investors, then hoping to get enough good buzz to be bought.
I’ve decided that my current company hired its CEO because he’s very tall, and he has no soul so he doesn’t mind lying.
The previous company, the CEO was the founding big-ideas man. The company has been broke for years now but he won’t dissolve it… it’s basically just him suing former associates one after another. Oh well, it got him a loft in SoHo for three years, and a company party on Times Square.
If that’s what it takes to get rich, I’d rather be middle class. My husband works for a small private company that makes electronics. The founders are distinctly middle class, fifteen years after founding, but the company is secure and useful and they’re nice guys.
The problem is that it’s often as much LOCATION as it is luck. If you’re Broke in Detroit and can’t move…what are ya gonna do?
Reverse the cycle? People were broke in the south, and came to Detroit. No reason they can’t follow the jobs back south. Broke people do it all the time. Michigan’s population has increased 0.3% in the last ten years. That’s versus over 9% for the country as a whole.
Well, that’s all well and good, but moving across the country (or down it) requires some capital. Either you have to have a job lined up (unlikely), or enough money to live off until you find one (even more unlikely, if you’re leaving Detroit because of the lack of work in the first place).
Remember, if you don’t find a new place to live, or can’t afford one, you become homeless, which makes it even harder to find a job. Potential employers just love candidates whose permanent addresses are homeless shelters.
I don’t buy that people “can’t” move because they are poor.
My great-grandparents on mom’s side where as poor as could be, as poor as any down-and-outer living in Detroit today - they literally had nothing (one grew up in a shtetl in Romania - that is, a farming community composed of Jews); yet they moved, not from one city to another, but literally across continents - working shit jobs to do so. A more recent example is a woman I know who is working as a nanny - her entire family was massacred in Rwanda, and yet she managed to work her way to Toronto, in spite of facing a complete lack of money and racial prejudice.
Why doesn’t everyone do the same if they are in a shit situation? The reason isn’t hard to find - people living in a certain place have developed ways of dealing with the situation, and have emotional, family and friendship ties to a place that they find hard to give up - particularly in the face of serious barriers to moving. It often takes a major event, like a pogrom or massacre, to convince people to leave their home local.
While there is luck involved in where you are born, often it is not simply luck holding people there - it is a rational balancing of options. Should I work really hard to leave to get a chance at a better life, leaving my friends and family behind? Lots of people could quite rationally decide they don’t wanna.
Fair enough. I apologize if there was a little knee-jerking in my initial response, but the phrase “their station” automatically conjures up in my mind an image of culturally enforced, rather rigid Upstairs, Downstairs-type class stratification which I find distasteful.
Also given the very broad and at times rather different definitions of what exactly is “working class” vs. “middle class”, the notion that as a generalization middle-class folks are decent at money management and working class folk aren’t strikes me as questionable. Which may be not what you intended to say, but was my first impression of your post.
I’d also be considered working class under some definitions ( blue-collar job ), middle-class under others ( skilled trade, top quintile in income ). Which just reinforces the already oft-noted issue that defining wealth and class is rather difficult in this country.
It’s really quite simple, and alice_in_wonderland essentially mentioned my thoughts on the matter.
I grew up in a middle class family, and now lead a middle class life. I go to work everyday, doing something I enjoy enough to have been able to do it now for 10 years (I’m in my mid-thirties). I’m comfortable in my job, have a good deal of schedule lattitude, have hobbies I participate in during the evenings and weekends, have friends I enjoy spending time with, and travel a decent amount. I admit I’m lucky in that respect because I travel for work. Between my wife and I, we earn enough to enjoy life in the moment, save up some for the future (both retirement fund-wise and cash reserves), pay off our debts (mortgage, credit card, cell phones, internet, etc) and live pretty comfortably.
In short - I have no major desire to work more hours or climb the corporate ladder because doing so will detract time and resources from other things in life I enjoy doing.
The whole philosophy is summed up nicely in this story.
Life is full of unexpected happenings. I fully realize the value of saving for retirement, but I may get hit by a bus tomorrow and never reach retirement. It’d be a shame to have worked so hard for some date later in the future that’ll never come. Yeah the chances of that happening are low, but it is still an ‘all eggs in one basket’ scenario.
Finally, I saw my dad climb the corporate ladder to become president of an international company. The company was in a small niche market, so while his pay was very good, it was never enough to put us in the ‘rich’ status. Anyway - I saw first hand what that sort of mentality did to his home life. I decided long ago that I didn’t want that kind of stress. Now that he has retired and he does things he enjoys (like moving rocks, weeding the pond, etc - don’t ask), he’s much more fun to be around. He thinks I’m the one who has gotten a sense of humor in the past few years, but he is the one who has changed dramatically.
Oh, BTW - I find it interesting that you fully admit that you were lucky with some investments, which were/are a big reason for your current wealth. Some others aren’t so lucky.
I can relate to your Mom. I have always been very career-focused and tenaciously maintained the belief that education and hard work is the key to success. I got a full ride scholarship in undergraduate school, busted my ass to make it into an Ivy League grad school, and what do I do? Why, I get a degree in social work! I am choosing to put all that social and academic capital into pursing one of the least-prestigious professional degrees in existence. It’s not that I dislike status or money (they are pretty exciting to me, to be honest) it’s that there are other things I value more.
Every day I am reminded it could have been different. My department is located immediately beside the Wharton School of Business, which is pretty much the most prestigious business school in the world. (This is hilarious if you think about it. It’s like they built Social Work building next to Wharton just so we could use one another as an illustrative example of What Not To Do.) These kids are the elitest of the elite, and I’m looking forward to my $40k a year or whatever I’ll make when I graduate.
While I’m happy for others who pursue their dream of material success, I don’t want to care that much about money. My parents owned their own business. They were obsessed with work. Nothing mattered more than the business. They often worked until 2 or 3 in the morning and rather than coming home would just spread out sleeping bags on the office floor and sleep at work. On the weekends, they were at work. They couldn’t go on vacation without talking and fighting about work. And for all that effort they poured into it, we were never more than living paycheck-to-paycheck. We lived in a tiny summer cottage that sold for the price of an economy car in 2004 and was smaller than the 900 square foot apartment I live in now. That’s leaving aside the devastation that followed when the business finally went under. It’s easy to laud the potential rewards of thinking outside the box, but even when businesses don’t fail, the reality of being an entrepreneur can still be pretty bleak. If that’s what it takes to be rich, I’ll pass.
My husband, on the other hand, came from a family full of very successful businessmen. His Italian grandparents came to the U.S. dirt poor, started their own real estate company and are now billionaires. Thanks to the wonders of nepotism, the whole family is crazy rich. If he had pursued a business degree he would be working for the family and pulling in some serious cash. He would have been provided anything he needed, from startup funds to financial advice.
He disappointed them all by choosing to pursue a Ph.D. in clinical psychology. And I do mean disappointed–he got the full dressing-down ‘‘I’m so disappointed in you’’ speech because he was ‘‘throwing his life away’’ on this psychology dream. And yet he still remained committed to his great life’s passion.
Despite the hardship, he doesn’t regret his choice. While his extended family doesn’t get it, they’ve accepted it, and I think they ultimately respect him more for choosing his own way.
It might not make a lot of sense from a financial perspective, but life for us (and many people, I’m sure) is about more than a balance sheet. What is best for a person financially is not always what is best for a person on every other level. While this argument is hard to make for the poorest of the poor, it’s a lot easier to make for the middle-class. Many of us have the freedom to decide how much effort and risk we’re willing to put into accruing wealth. Just because we’re not rich doesn’t mean we wish we were.
silk1976 I fully admit much of my success is luck, and that others (including some good friends of mine) haven’t been as lucky. It isn’t like I had any foresight into knowing that Washington Mutual was going to go under, so that part is luck I think. So I think it is a combination of luck and good timing/investing. I could just have easily bought Washington Mutual stock as opposed to a stock that is still around but due to luck or good advice from my stockbrocker I didn’t do that. Is that luck or good insight–my take is that it is luck!
But for me I think it was a combination of luck and having the resources at the time the opportunities came up. I feel I am in that process right now with my new house purchase. I would not have purchased the home I just bought if the real estate market wasn’t down (as a side note it turned out after the sale I knew the guy who I bought my house from–good thing I wasn’t a jerk during negotiations!).
But I happen to have cash right now and thus am able to take advantage of the situation. However on the other hand I have my old house on the market too, and maybe someone will look at my house in the same way–whoever buys my house will get a deal that they couldn’t have purchased two years ago as well. But I am okay with that, it is selling for twice what I paid for it, at one time it was worth three times what I paid for it, so it is all relative I suppose. So I will either get what I want for it, or rent it or decide to take less then I am selling it for. Again much of that is out of my control and it would be the height of vanity for me to suggest that it isn’t luck. It is luck but it is luck that I feel I have leveraged towards my side a bit. In other words I am using the house rules, but none of it would have been possible if I didn’t have funds. You need money to make money I think.
I also don’t fit the profiles outlined in that book I recomended in that I don’t own my own business (yet) nor do I work lots of hours, etc. I believe life is all about balance and that includes work.
I hope I haven’t given people the impression I am living like a pauper and hoarding every penny into some mutual fund to fill my pockets with every damn cent I can get! I enjoy my life now very much, I have lots of nice gadgets, go on nice trips, etc. I am frugal but not to a fault, just not extravagent. But as I mentioned above I still mentally am a poor person. My favorite hangout—a local brew pub, basic burger and a beer and I am a happy guy. I don’t need to eat at a fancy steak house to have a good time, but I do enjoy that now and again too. I could do that a lot more if I wanted to, but to me it is a treat and that is how I view it.
ps–I have read that story you linked to before. It is a good one indeed!
I apologize beforehand for this semantic highjack that has little to do with the actual topic of the thread.
If someone says “look at all these people that started bullshit companies that sold nothing during the dot com boom” and your response is to list a bunch of companies that, aside from maybe 3 of them, started before or after the bubble period, I think they would have trouble following your argument. Google, and Amazon, sure. Those were companies created in the midst of the madness and were able to come out of the other side still successful. Yahoo, I guess, they seem more of an example of a company that started the boom, instead of being a part of it. But, that’s splitting hairs.On the other hand Oracle, EMC, Microsoft and Cisco were around long before the boom and while they benefited from it weren’t exactly small withering companies beforehand. And, Facebook was created long after the e-Craze ended.
My wife read it. The reason she didn’t make it was because she sabotaged herself (probably not purposely) so she couldn’t make it.
I’ve read that story before, and my reaction them was the same as my reaction now: while a cute parable, the story leaves out one of the major significant differences between a third-world fisherman and a first-world retiree playing at fishing for a hobby - security.
Sure, your poor fisherman who ‘earns enough for his family’ lives a day-to-day idillic existance (or, at least, let’s imagine he does). Let’s also imagine he’s an enlightened sort who does not care about the fripperies of modern existance. But what happens when his kid gets sick, or when a hurricane takes his one and only fishing boat? What happens when he’s injured by a rusty fishook and can’t fish for a month?
I was addressing the comment in the OP that you should have 6-12 months’ expenses saved up. I can’t think of a reason not to take advantage of unemployment insurance or any other benefit I’m eligible for should I become unemployed.