Depends on what you define as “useless crap.” A lot of rich people buy useless crap, and a lot of poor people don’t.
What’s your point?
No…Rich people spend money BECAUSE they are rich and can afford to. They GET rich because they make enough money to put some of it aside. There are plenty of people who are “house poor” or “ghetto rich” where they heavily leverage themselves to buy/lease a lot of crap they can’t afford so they can look the part, then have trouble making payments or buying groceries.
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Originally posted by Sinful
Ok, its a bit simplistic. However, my point is that ANYONE can be well off simply by not spending their money on useless crap. Up to 70% of your income can be saved and put into investment; why not enjoy life when you’re 30, and not have to bust your ass off at 35?
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Maybe…if:
- one earns $100,000 a year
- lives with their parents until they are 30
- commutes 3 hours a day from the boonies to a major city.
- only pays for rent and food and has no car, no TV, no phone, no heat and no fun.
I hate to shed a little dose of reality onto the Rich Dad Poor Dad fantasy, but you need money to buy income property. The average Joe/Jane is never going to be able to do that saving $20 a day.
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*Originally posted by Sinful *
Before reading Rich Dad Poor Dad, I spent 80% of my income on instant gratification (restaurants, new mobile phone, other stuff teenagers buy), saved 10%, and used 10% to pay for my school books.
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Just to furthur shatter this fantasy world, I am guessing that as a teenager, you have no real expenses. Other than books and gas, the rest of your expenses are paid for by Mom and/or Dad. That means you are living an equivalent lifestyle of someone making your salary + whatever it costs your parents to cloth, feed and house you.
If and when you become a self-sufficient adult, you may be in for a shock. All of a sudden, you will be be making a relatively low salary (unless you are very lucky) but find you have all these new expenses: rent, furniture, phone, heat, clothes, maybe new work clothes (can’t wear cargo shorts to the office…well I can, but I digress), probably a car (which now means gas, maintenance, insurance, repairs, etc), probably cable and Internet. You aren’t going to sit at home all night, every night so you will need going out money. And let’s not forget all that little crap that adds up like toothpaste, shampoo, toilet paper, window blinds, lightbulbs and all the other stupid stuff one has to buy. And don’t let me forget food either!
Anyhow, the point is that unless you plan on living in the dark in a crackhouse appartment, riding a bike to work, and dressing like a hobo OR you land some sweet job making a lot more than I do (and I make a pretty good salary), don’t expect that %70 of your income is discretionary.
But at least you are recognizing that money saved now is worth a lot more later and that debt is a bad thing. When I was your age, most of my friends just blew their money on stupid crap and graduated college with $5000 credit card bills. Not a smart way to start out in life.
I haven’t thought about the crap that is Rich Dad, Poor Dad in a while. If anyone is interested on all the bad and even illegal advice that Robert Kiyosaki touts, check out this website.
When, pray, during the odd 50-60 hour work week would you like the working poor (or anyone else for that matter) to develop a network of contacts? How many extra hours should that eat up, or should they reduce their down time/family time/living time? Should they develop this network without financial resources to meet, greet and socialize? That money, remember, is being socked away for your special “property investment”. You do remember the $140 dollars a week (say $560 a month) most people don’t have?
Thick as a plank. Listen up Kreskin, the median household income in 2001 in America was $42 228 Census Income. Let’s say that’s for 4 people. Lets also say taxes eat 40% of that so home income per month is $2100. Now housing is 1000 so we’re at 1100. Let’s say the sole car is paid off but we’ve still got insurance/plates and gas (100 + $20 per week) for a new sub total $920. Now as for food even’s numbers scare me but I’ll defer so that’s $680 a month for food. Look at that, we’ve only got $140/month left for heat, electricity, water, insurance, gifts, and entertainment. So let’s say we only spend $20 (not much right?) on those little items. Your median family is now officially able to invest $20 a month.
As others have said, if you’re pushing motherhood statements that no one can fault “save some money”, “don’t kick puppies” “I like pi” 
fine. Admit, however that your insulting view of the “lazy poor” is severely in need of adjustment.
BTW, it’s funny this Kiyosaki tells the poor not to buy stupid “useless crap” and frivolous items, but constantly brags about his porsche, his mercedes and his Rolex. Hmmmm…
I work in commercial real estate. I appraise all kinds of commercial properties: malls, high-rise office buildings, apartment complexes, multi-tenant industrial flex buildings, you name it. I also do consultation… I’m paid money to research property markets, to sum it up.
If you’re an “investor”, and you’re spending 2 hours a day doing the research, you’re either so small potatoes the word “investor” is a laugh, or you will lose a whole lot of money in the real estate market. That’s a promise. You may have some kind of bachelors degree and a book on your side, but I’ve got the experience in commercial real estate to know you will crash and burn.
Furthermore, if you’re recommending people below the poverty line go out and buy up duplexes and fast food restaurants, you’re giving some pretty bad advice, for all the various reasons that have been outlined in this thread and you’ve yet to address. Saving and investing money is one thing, going willy-nilly into commercial real estate is something else entirely, and exceedingly poor advice for a household that’s a paycheck away from foreclosure to begin with. Nice, safe T-bills, CDs, muni bonds, even well-established mutual funds, that’s where I’d tell anyone below the poverty line to stick whatever cash they can scrimp together.
The website John Harrison provided is outstanding, and confirmed much of what I had guessed of this Robert Kiyosaki guy. “I own 10 rental buildings in three cities.” WTF is that? At the next NAIOP meeting, I ought to bring this joker up… I mean, anyone who owns 10 “rental buildings” has gotta have all the answers, right?
Phft… “rental buildings”… I can’t imagine any reason on the face of the planet why this guy wouldn’t say “office building” or “strip center” like a normal investor, excepting of course the obvious reason…
While the OP was over-the-top, nevertheless there is a grain of a grand insight in there.
The insight is that many people who are ‘cash poor’ are that way not because life handed them lemons, but because they made poor financial decisions along the way. Obviously this doesn’t apply to the truly destitute, but it DOES apply to many, many people who call themselves ‘poor’.
I know someone who would be classified as ‘poor’. Always moving from job to job. Living in a small apartment. Driving a beat-up truck. But this person and her partner both smoke. About a pack a day each. In Canada, that’s about $600/mo for cigarettes. In fact, it’s exactly the $20/day the OP was talking about.
The number of smokers is higher among the poor than the wealthy. I know two-pack-a-day smokers who can’t afford their rent.
Moving up the ladder to the lower middle class, how many people out there take loans to buy new cars? This is a financial disaster for those who spend a significant portion of their income on car payments. A person who buys a $20,000 car at 10% interest financed over five years will spend a total of about $25,000 for the car. At the end of the five year period, that car will typically be worth maybe $6,000. So the car cost $19,000. If that person had instead driven a beater, the total cost of ownership over the same period might have been $5000. Take that $14,000 difference, put it into an investment earning 10% (the historical average is about 10% for growth investments). If you do that at age 25, by retirement at 65 that investment will be worth $945,000!
But what about inflation eating it away? Well, let’s assume that inflation averages 3% a year over that time. The net value of that investment will still be $281,000.
That’s just ONE decision, to drive a new car for five years instead of a beater. Now, imagine the decision to ALWAYS drive ‘beaters’ instead of buying a new car every five years. That one choice alone can make the difference between retiring as a millionare and being broke.
A poor person with a $5,000 credit card balance who only pays off the interest each month is paying in the neighborhood of $850/yr in credit card interest. That also adds up to serious money over a period of decades.
These are mistakes not of the rich, but of the poor and middle class. Not the poverty-stricken, who can’t get credit cards or afford cars at all, but of the people who are ‘barely getting by’ with decent jobs.
I dunno Sam, I’ve a friend who was a lawyer and describes the finances of many of the people he worked with as making precisely the errors you’re pointing at. They were making 100k+ per year, but they were still living paycheck to paycheck, because they had giant mortgages and car loans, etc.
Obviously, living at the edge or beyond of one’s means is hardly limited to the lower and middle classes. It’s just that the upper classes don’t generally end up truly destitute because of it. The grain of truth in the OP is just that making responsible financial decisions is a good thing. But that’s hardly controversial, nor is it anything that the OP expresses with any perspecuity. His suggestion that “anyone” can save over half of his/her income is just beyond ridiculous.
Gorsnak, who drives a beater and doesn’t smoke or carry a balance on his credit card
Sam Stone: I agree with what you said in your post. People like that sicken me. Especially the ones like that that decide they want to have kids. That’s gonna make your finances better, huh?
Yep. because the poor don’t deserve children. Kids don’t need love, they need mansions. (said by a person thats somewhat worse off for being raised poor, but still lucky enough to have a wonderful childhood in a loving family that no money could buy).
even sven: Even though that’s what I implied, that isn’t necessarily what I meant. What I meant was that I know people who decide to have children even though they can’t afford what they have now. If you can’t support yourself then it’s ridiculous to expect to be able to properly support a child. Note that I didn’t say love. The poorest of the poor can love their children all they want, but if there’s no food or house then how can you possibly say that’s in the best interest of child?
Also, even sven I seem to have grown up in a similar family situation as yourself but without all the love. 
Even though I wouldn’t trade my situation for anything, I also would never want my children to eat hot dogs or bologna (if we could afford bread) for a month straight.
Gorsnack: Yeah, but I’d consider him upper-middle class, not rich. Of course, the truly rich can do stupid things as well - Michael Jackson is nearly broke. But there are certain habitual habits that you find among the poor and middle class that play a big part in their lack of wealth mobility.
I learned the answer to this in my college business class 101.
When you got the cash, you can take advantage of sales etc, and generally if you are savvy, make the $20 cash pay for itself.
If you don’t have $20 you lose out on the sale or you apply for a Sears Credit Card. Costing you more but keeping the ball rolling.
I’m almost 50 and I’ve managed to stay out of debt. Luckily, I could borrow from noble friends instead of being embarrassed at the bank. Having no credit, even owning the pot I piss in and pay taxes for, by todays standards is considered low on the totem pole, according to the banks. They want you to owe money for some reason, instead of loaning money to a person who always saved up for major purchases.
Its great that they are turning me down. All the more reason to come up with it on my own.
Oh, yeah, and the rich borrow money, too. They put their $20 in the bank (coupled with other $20s) then take out a 90 day GAC (good as cash) signature loan with their savings as collateral. Thats working that $20 bill.
My situation bears some resemblance to Shodan’s: I was born a lower middle-class immigrant’s kid. I worked my way through college (it took me five years), studying engineering instead of my first, less marketable career choice. (I did, however, benefit from a cheap [read heavily tax-subsidised], relatively high-quality public university in my hometown – this enabled me to graduate debt-free). I had basically no connections in the field – I got my first engineering job through an on-campus interview.
The OP has a point: plenty of people could improve their long-term financial situation, and choose not to. The choices can be hard, and don’t bring results overnight.
However, the OP fails to acknowledge something critical: life is a bell curve. If everyone tried to do what Shodan and I did, a few would get rich, some would rise to the middle class, and some would stay poor.
It’s wrong to assume that everyone who’s poor is lazy, just as it’s wrong to assume that everybody with a good income is a trust-fund baby.
It’s also important to acknowledge the breaks that we do get – while I sure wasn’t born with a silver spoon in my mouth, I’ve had better luck than some (e.g., relatively good health, a strong economy when I graduated, etc).
Nice segue there from the general to the specific.
I love it when people make vast generalizations and then go on to “prove” their assertions with a single piece of anecdotal evidence. “There’s this person i know…”
Great sample there, statistics boy.
** mhendo ** I don’t think Sam was after a definitive proof of anything. I find it hard to imagine that what you want out of GD is more slinging of statistics. Sam was illustrating a point. He did that in a way that was easily understandable.
I don’t even agree with Sam, but I recognize that the example was meant to elucidate the generalization. Let’s cut out the semantic nitpicking.
What, examples aren’t allowed in arguments? We must always speak in generalities, or else provide a statistically significant number of examples?
What a ridiculous argument. I gave a general point, and backed it up with a personal example to illustrate the point. I wasn’t trying to prove it statistically.
And nice job of sidestepping the whole argument. Are you suggesting that the poor always make the best economic decisions that they can? That their lack of wealth always forces them into only one financial choice?
Do you deny that large swaths of the middle class do truly stupid things with their money?
If not, why the hostility?
If everyone in the United States saved $20 a day more than they currently do, the economy would take a two trillion dollar a year hit. I’m not sure the country would survive that large of a contraction; it would certainly have dramatic effects.
90%? Are you fuckiing serious? I earn approximately $18K per year while paying for school books and living on my own, and I still save $12,000 of it for investment purposes, while living comfortably. I haven’t even reached my goal of 70% yet, so far I’m at 66.66%, but with business profits increasing this year I expect a lot more money coming in.
My budget is simple. School amenities fees and books comes to around $1000 per year (second hand books are cheap if you buy them from older students). Rent is $50 a week (board), and sometimes I don’t even pay because I offer to do some odd jobs for the houseowner (I only paid $2000 last year for 40 weeks rent, the other 12 weeks I got for free for tutoring their kids). Entertainment is $3000 per year, which is around $57 per week (I usually go catch a movie with some friends, eating out occasionally, sometimes save up a bit for a vacation).
How much is total? $6000. The rest of the money usually goes into improving the business, or saving up a deposit for IPs.
Rent in a cheap suburb with rail connection is $7000 per year on average. Food, if you make it at home, is only $5000 per year (estimating at $13 per day, which is double my food budget). Other necessities are estimated at $5500 per year. CLothing, $500 a year for a factory worker is probably overboard, but lets pretend Mr Factory Worker is a really spiffy dresser (pants cost $100 on average, and you’re not going to throw them away in a year). Thats a total of $17,000.
As for income? Well, you can get up to $37,000 per year, and if you have a low-income job you get paid welfare (my parents get welfare, even though they both work fulltime).
Thats $17,000 a year you have left over. And this is for an adult WITHOUT any investment income. With $17,000 a year generating 7% return that is $1190 left over for next year. Add another $17,000 and you’ve got an income of $2380; the next year you have $3570. Thats already $7140 in the space of 3 years, from investment. And that doesn’t include learning how to invest smarter.
Finally, if you have a low income, you can get on average $10,000 just from welfare alone. If you are poor AND have a family, you can get up to $15,000 per year.
There you go. Before you call someone stupid, take some time to figure it out, or at least give a reason. And “u r evil capitalizt!!!” isn’t a reason.
Really? Where did you get this number, because it seems a bit low. And you are aware that the majority of suburbs do not have rail connections, right?