[Financial] Habits of the Rich

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VictoriaF
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Re: [Financial] Habits of the Rich

Post by VictoriaF » Mon Nov 12, 2018 6:48 pm

alfaspider wrote:
Mon Nov 12, 2018 4:59 pm
VictoriaF wrote:
Mon Nov 12, 2018 4:20 pm
Victoria's Secrets of becoming rich:

1. Select a peer group of people you want to resemble. I bet many Bogleheads became more wealthy and more successful after they have joined the Forum.
2. Be always learning. Pursue advanced degrees, professional certifications, and marketable skills. Do NOT follow your passion; read Cal Newport's books So Good They Can't Ignore You and Deep Work.
3. Get rid of a TV, and you will rid yourself of spurious expenses such as large houses, remodeling, luxury travel, fun cars, and prestigious watches.

Victoria
Magazines were my gateway drug on the automotive front. TV didn't factor. Without fun cars, what's the point of being rich :confused

Which leads me to another point: while LBYM is obviously the key, few people have the constitution to be happy living a life of constant deprivation. It's ok to find something you enjoy that occasionally costs money. However, the key is doing so in a way that continues to allow you to live below your means. If you like cars, don't go out and buy a brand new BMW- buy an old Miata for less than a set of tires for the BMW- you'll have just as much fun if you learn how to drive it properly. There's always a new shiny, but building skills and friends while having unforgettable experiences lasts a lot longer than the thrill of something new.
Poor people treasure their things.
Rich people treasure their time.

This thread is about rich people.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

jojay
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Re: [Financial] Habits of the Rich

Post by jojay » Mon Nov 12, 2018 7:00 pm

The themes within this thread are awesome. Add one more?
Work your butt off. Even though I made good money doing what I did for a "living", I also worked a part time job for about 15 years of my adult life, arranging things around the family schedule.
Work ethic is a huge factor in getting rich slowly.

catfish48084
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Re: [Financial] Habits of the Rich

Post by catfish48084 » Mon Nov 12, 2018 7:18 pm

Not rich (at least by my standards) but:

1) understand what FV = PV * (1+I)^n means - it can be your greatest friend or worst enemy

2) live below your means and save everything you can in tax sheltered investment accounts

3) with the exception of a home and car, never carry an interest accruing credit balance

4) get educated and acquire skills that are in short supply and command above average wages

KlangFool
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Re: [Financial] Habits of the Rich

Post by KlangFool » Mon Nov 12, 2018 7:50 pm

VictoriaF wrote:
Mon Nov 12, 2018 6:48 pm
alfaspider wrote:
Mon Nov 12, 2018 4:59 pm
VictoriaF wrote:
Mon Nov 12, 2018 4:20 pm
Victoria's Secrets of becoming rich:

1. Select a peer group of people you want to resemble. I bet many Bogleheads became more wealthy and more successful after they have joined the Forum.
2. Be always learning. Pursue advanced degrees, professional certifications, and marketable skills. Do NOT follow your passion; read Cal Newport's books So Good They Can't Ignore You and Deep Work.
3. Get rid of a TV, and you will rid yourself of spurious expenses such as large houses, remodeling, luxury travel, fun cars, and prestigious watches.

Victoria
Magazines were my gateway drug on the automotive front. TV didn't factor. Without fun cars, what's the point of being rich :confused

Which leads me to another point: while LBYM is obviously the key, few people have the constitution to be happy living a life of constant deprivation. It's ok to find something you enjoy that occasionally costs money. However, the key is doing so in a way that continues to allow you to live below your means. If you like cars, don't go out and buy a brand new BMW- buy an old Miata for less than a set of tires for the BMW- you'll have just as much fun if you learn how to drive it properly. There's always a new shiny, but building skills and friends while having unforgettable experiences lasts a lot longer than the thrill of something new.
Poor people treasure their things.
Rich people treasure their time.

This thread is about rich people.

Victoria
+1,000.

Time >> thing

KlangFool

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Toons
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Re: [Financial] Habits of the Rich

Post by Toons » Mon Nov 12, 2018 7:57 pm

Sandtrap wrote:
Sun Nov 11, 2018 6:23 pm
Remember what it was like to be "dead broke". :shock:
Resolve to move in the opposite financial direction no matter what.
:happy

:thumbsup
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

H-Town
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Re: [Financial] Habits of the Rich

Post by H-Town » Mon Nov 12, 2018 7:59 pm

Wilhou2015 wrote:
Sun Nov 11, 2018 11:41 am
Many people on this forum are very successful financially. Many of you are probably very disciplined.

What are your habits that elevate your success?

Do you read, take classes, have a mentor? Do you have a daily routine or habit that sets you apart? I would love to hear what habits you use to develop yourself personally or professionally.
1) Build your leverage and know when to use your leverage. In other words, make yourself extremely valuable to your company and they'll give you what you demand.

2) Money is short-term. Power is long-term. Choose power over money.

3) Don't be penny wise and pound foolish.

4) Live your life to the fullest and do what make you happy. This will give the energy and motivation you needed to do the above 3 items.

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willthrill81
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Re: Habits of the Rich

Post by willthrill81 » Mon Nov 12, 2018 8:24 pm

Badger1754 wrote:
Sun Nov 11, 2018 3:21 pm
As an early career millennial who joined the labor market shortly before 2008, and who has a long family oral tradition of being imprisioned, persecuted, and expropriated under Communism.. I live by the following (in no particular order):
  1. Live within your means.
  2. Pay yourself first.
  3. Put aside money for emergencies (actual emergencies).
  4. Ignore the “noise” (CNBC, “financial advisors” trying to sell you stuff). This might be actually a healthier way to live life. I get my news from the NYTimes and the WSJ. My wife gets her news from Facebook and cable TV. I am infinitely calmer during elections. :D
  5. Keep things in perspective.
  6. Don’t let sentiment, emotion, or a “gut feeling” cloud your judgment when there are facts that can be relied upon. In particular, I’ve found that having a basic facility with finance and math (e.g. able to build an Excel model) helps streamline the decision-making process which as in turn helped me avoid several potentially bad decisions.
  7. Invest in the future (monetarily, educationally, philanthropically).
  8. Sic transit gloria mundi — nothing good lasts forever, so don’t expect it to.
  9. There is still a greater concentration of talent, hunger, entrepreneurialism, chutzpah, grit, accessibility, and freedom in the US economy than anywhere else in the world that attracts the aforementioned attributes like moths to a flame. So, while nothing good lasts forever, Rome took over a thousand years to fall.
  10. Stay active (physically, intellectually, economically) — idle hands do the devil’s work; idle money does no work.
  11. Take ownership and responsibility for your own success. No one aside from your parents will give you anything. In fact, there is a large population of people who would freely and shamelessly take advantage of you. But it is up to you (and only you) to find and pursue those opportunities that will lead to success.
  12. A piece of advice I wish all millennials would reflect upon: remember that you can’t save the world if you become a casualty in the process.
  13. Don’t reinvent the wheel — stand on the shoulders of giants!
PS. I have been a Berkshire Hathaway shareholder since I was a teenager (the little shares!) I just showed my wife this list, and she accurately pointed out that pretty much all of this list (except maybe #12) comes from the accumulated wisdom of Warren Buffett’s annual investor letters. So I will add a 13th bullet: don’t reinvent the wheel — stand on the shoulders of giants!
Fantastic! :thumbsup
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

betablocker
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Re: [Financial] Habits of the Rich

Post by betablocker » Mon Nov 12, 2018 8:43 pm

This certainly inspired a lot of responses. I have a slightly different take. Start a business. Don’t waste your time with VC stuff unless you have the next Uber. You’ll have to sacrifice and work hard at the beginning but if you hire smart people and service providers, you can reap a lot of reward. Sacrifice is great and all but I like enjoying life and owning a business has allowed me to both save and spend.

prettybogle
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Re: [Financial] Habits of the Rich

Post by prettybogle » Mon Nov 12, 2018 9:02 pm

We are in the lower middle class but I can share something from what I learned by watching my husband and also few of his friends. Do not trade - be it options, leveraged instruments, sexy new trading vehicles like crypto or anything else that may come up in future. Simply divy the left over income into savings, index funds, hsa, roth and other retirement accounts. If there is still some “play money”, then invest in fundamentally strong companies that pay historically reliable dividends.

AlphaLess
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Re: [Financial] Habits of the Rich

Post by AlphaLess » Mon Nov 12, 2018 9:19 pm

I would have to debate calling most people here rich.

To me, rich is at the level when you are well past the FIRE stage (Financial Independence, Early Retirement).

Of course, you can eventually become rich, but most people here would not qualify.

I would say that you are rich if your assets are producing SIGNIFICANTLY more income per year than your spending needs are.

And significant does not mean 30%, bur rather, multiples, like 5 or 10x.

Now, of course, you don't want to live in the poor-house and push your 'required spend' down so much so as to qualify.

Thus, I should add one more condition: your spending is in the top 1% of your area.

So, say, you live in a high COLA region where top 1% income is 200K. And your assets are allowing for a withdrawal rate that is 3-5x income relative to 200K, or, say 800K.

At 3.1% WR, that's $26MM. That's the very BOTTOM rang of rich.
"You can get more with a kind word and a gun than with just a kind word." George Washington

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Re: [Financial] Habits of the Rich

Post by Gopherever » Mon Nov 12, 2018 9:41 pm

Spend as little as you can on the things that don’t matter, so that you can spend as much as you want to on the things that do matter.

The dividing line? That’s the magic.

SoAnyway
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Re: [Financial] Habits of the Rich

Post by SoAnyway » Mon Nov 12, 2018 10:37 pm

Wilhou2015 wrote:
Sun Nov 11, 2018 11:41 am
Many people on this forum are very successful financially. Many of you are probably very disciplined.
What are your habits that elevate your success?
Do you read, take classes, have a mentor? Do you have a daily routine or habit that sets you apart? I would love to hear what habits you use to develop yourself personally or professionally.
OP, you've received great guidance in this thread. But much of it might be irrelevant for you, depending on your current situation. There's also plenty of great info on this site, starting with this post on the wiki. How old are you? What is your current financial/investing situation? Without more info on where your question's coming from, it's hard to know how we can help. You need to help us help you. And the forum rules require that your inquiry be specific to YOUR situation, not some generalized inquiry about "how to get rich".

FWIW, to the first sentence in your post, I am very successful financially and very disciplined. To your second sentence, perhaps the resources listed here might be helpful for you. Once you've perused those, please consider posting in the format suggested here. As to your third set of questions, I read LOTS of things. No outside classes/mentors, other than my parents (RIP) years ago who hard-wired certain values into me.
Bottom line: You are correct that many BHs are successful, and many more are on their way to being so by following the BH values. I wish all best to those who decide to go a different path. If you're looking for the simple, painless, "get rich quick" scheme, you've come to the wrong place. Getting to "very successful financially...and very disciplined" is simple. That doesn't mean it's easy.

Good on you for asking the question that will get you started, OP!
Last edited by SoAnyway on Mon Nov 12, 2018 11:02 pm, edited 1 time in total.

Basis
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Re: [Financial] Habits of the Rich

Post by Basis » Mon Nov 12, 2018 10:54 pm

I have two daily habits that “set me apart from my colleagues... used to develop myself personally:”

1.) I read and I listen to audiobooks that are educational. As in, going back to school educational. From Amazon Audible, I love the Great Courses series. I use those lectures to direct me to the primary literature, be it Greek mythology or American literary classics, etc. I speak more clearly and engage in better conversation when I’m reading every day. I communicate better.

2.) Exercise. Being thin appears to be a differentiating factor in middle-age.
You see what you know.

Nissanzx1
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Re: [Financial] Habits of the Rich

Post by Nissanzx1 » Mon Nov 12, 2018 11:40 pm

Interesting post.

Yes to reading. You cannot read too much, forget the TV.

Stay humble (we all put our pants on the same way).

Eliminate debt and any interest payments to lenders.

Use simple term life insurance (if you even need life).

Don't get caught up in cars and houses. Buy nice but reasonable things with cash.

Eat out occasionally but not often.

Give to causes that align with your views/beliefs.

SQRT
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Re: [Financial] Habits of the Rich

Post by SQRT » Tue Nov 13, 2018 3:50 am

Everybody will have a different spin on “how they got rich”. For me it was: get lots of relevant useful education, work hard, LBYM, take rational risks, be very lucky.

Once I was rich (and retired), the strategy changed. I started living AT my means. Obviously didn’t work any more, started to enjoy my wealth, kept in good physical shape, was generous, etc. In short continued being an impressive person (modest too) :D

gd
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Re: [Financial] Habits of the Rich

Post by gd » Tue Nov 13, 2018 8:43 am

I kept my minimalist college student (70s era!) mindset, spouse modest working-class mindset. Standard "millionaire next door", details are just personal preferences. We've upgraded somewhat lately, but it was all fine, I often miss it.

Key to being rich, whatever that means: luck. Born into privileged niche of society, kinda smart, sorta-breaks in economy, luck in familial matters. Scrape away the BS and that's usually the story. Habits just let you leverage and build on the advantages. Lose sight of that and your advantage diminishes, and your morality disappears.

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Sandtrap
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Re: Habits of the Rich

Post by Sandtrap » Tue Nov 13, 2018 10:50 am

staythecourse wrote:
Sun Nov 11, 2018 1:39 pm
averagedude wrote:
Sun Nov 11, 2018 12:27 pm
Im an average wage, blue collar worker who will retire in my 50's with no pension. This is what i have done.
1. Set written goals early in life with an action plan.
2. Didn't have any unplanned pregnancies.
3. Lived below my means when purchasing housing and transportation. Never went into debt except to purchase a modest house.
4. Educated myself at an early age on investing. Passively invested 100% in stocks for over 25 years
5. Automated my savings, where i never missed it.
The formula for wealth is money x time x rate of return
Man this should be stickied. We spend all this time wondering if a blue collar, average income guy can be rich. Well, here is the evidence and great advice for all how to do it.

I love these points and agree.

My advice, is focus on no. 1 on this list. You will see way too much "fortune cookie" advice even on this board. Make very specific goals and be very specific on HOW to attain those goals in a very specific time line. You should have short term (1-2 years), medium term (5-10) and long term (20 year) goals to check off. Like running a race if you are trying to make a specific time, i.e. goal you time each leg to see if you are pace.

In my experience, no matter how intelligent or not or rich or not (in matters of income) there are VERY few folks who think even 1 step ahead. Those that think 2 steps is probably 5% or less of the folks out there and those that think 3 steps ahead is down to <1%. Anybody you see that is successful had a preformulated plan to get to where they were trying to get to. No one who is self made goes, "Well I just messed around it just finally happened".

As I tell many friends and family I am probably one of the dumbest in the family, but one of the most successful financially and A LOT of it has to do with simply planning.

Good luck.
Well said. :happy
+1
A mentor once told me to divide up my yearly (and long term) goals and keep track of progress in a daily journal.
Plan > Act > Evaluate > (repeat weekly, monthly, yearly, etc)

marcopolo
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Re: Habits of the Rich

Post by marcopolo » Tue Nov 13, 2018 11:04 am

Sandtrap wrote:
Tue Nov 13, 2018 10:50 am
staythecourse wrote:
Sun Nov 11, 2018 1:39 pm
averagedude wrote:
Sun Nov 11, 2018 12:27 pm
Im an average wage, blue collar worker who will retire in my 50's with no pension. This is what i have done.
1. Set written goals early in life with an action plan.
2. Didn't have any unplanned pregnancies.
3. Lived below my means when purchasing housing and transportation. Never went into debt except to purchase a modest house.
4. Educated myself at an early age on investing. Passively invested 100% in stocks for over 25 years
5. Automated my savings, where i never missed it.
The formula for wealth is money x time x rate of return
Man this should be stickied. We spend all this time wondering if a blue collar, average income guy can be rich. Well, here is the evidence and great advice for all how to do it.

I love these points and agree.

My advice, is focus on no. 1 on this list. You will see way too much "fortune cookie" advice even on this board. Make very specific goals and be very specific on HOW to attain those goals in a very specific time line. You should have short term (1-2 years), medium term (5-10) and long term (20 year) goals to check off. Like running a race if you are trying to make a specific time, i.e. goal you time each leg to see if you are pace.

In my experience, no matter how intelligent or not or rich or not (in matters of income) there are VERY few folks who think even 1 step ahead. Those that think 2 steps is probably 5% or less of the folks out there and those that think 3 steps ahead is down to <1%. Anybody you see that is successful had a preformulated plan to get to where they were trying to get to. No one who is self made goes, "Well I just messed around it just finally happened".

As I tell many friends and family I am probably one of the dumbest in the family, but one of the most successful financially and A LOT of it has to do with simply planning.

Good luck.
Well said. :happy
+1
A mentor once told me to divide up my yearly (and long term) goals and keep track of progress in a daily journal.
Plan > Act > Evaluate > (repeat weekly, monthly, yearly, etc)
staythecourse wrote:
Sun Nov 11, 2018 1:39 pm
No one who is self made goes, "Well I just messed around it just finally happened".
As they say, there are many roads to Dublin.

I have a relative that strictly plans and track short and long term goals, has a "vision board", etc. He is very successful, so fits the model above.

I am certainly not "rich" by the standards of this forum, but have done reasonably well for myself. I have to admit, i did not have this kind of focus, or goal setting. I entered a good college major/profession that i enjoyed, bounced around a couple "just OK" jobs, eventually went back school to get advanced degrees because i found the subject interesting, and got lucky to join a small growing company (in my early 30s) that gave me lots of opportunities for growth. I worked hard, got lucky, and it did kind of just happen. Maybe I would have done even better with more focused goals, but i kind of enjoyed my meandering path.
Once in a while you get shown the light, in the strangest of places if you look at it right.

investingdad
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Re: [Financial] Habits of the Rich

Post by investingdad » Tue Nov 13, 2018 11:17 am

I don't think we're rich by most metrics. But we are more than comfortable and broke into the two comma club six years ago at 39.

No silly rules like...learn one new skill each year, get up one hour early and read, find a mentor, network with such and such, etc or other "habits of the successful".

We earned degrees we thought would afford solid job and earning prospects. I started investing and saving at 23, so did my wife. We married and live below our means (though as our means increase, we allow our living standard to increase).

After 20 years, here we are.

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Cycle
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Re: Habits of the Rich

Post by Cycle » Tue Nov 13, 2018 11:45 am

visualguy wrote:
Sun Nov 11, 2018 1:07 pm
Having a high income is the most important factor, so focus on a career that can make you a lot of money. If the spouse does that too, this can make a big difference as well. It's much easier to save and invest when a lot of money is coming in than when you have to pinch pennies and struggle with debt. Family help in early adulthood also makes a big difference in families that can pull that off.
I agree, but I also want to highlight that a high income job isn't necessary to have high income.

I didn't have great grades in undergrad, and struggled to get my first job. Specifically I saw my colleagues going to medschool and I regretted going out so frequently in college.

Fast forward 13 years of working 40hrs/wk. While my wife and I don't have super high paying jobs, like that of a doctor, our income in 2017 was $230k salary, $40-50k bonus, 18k rent... plus we had 180k in stock market gains. We save $165k/yr. We should hit 4MM by 45.

How old is an interventional cardiologist before they hit 4MM... Maybe 40, 45, 50? Anyways, I no longer regret not getting straight A's in undergrad. There are many roads to Rome.
Last edited by Cycle on Tue Nov 13, 2018 12:16 pm, edited 1 time in total.

Irisheyes
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Re: [Financial] Habits of the Rich

Post by Irisheyes » Tue Nov 13, 2018 11:50 am

betablocker wrote:
Mon Nov 12, 2018 8:43 pm
This certainly inspired a lot of responses. I have a slightly different take. Start a business. Don’t waste your time with VC stuff unless you have the next Uber. You’ll have to sacrifice and work hard at the beginning but if you hire smart people and service providers, you can reap a lot of reward. Sacrifice is great and all but I like enjoying life and owning a business has allowed me to both save and spend.
I like this response a lot. And I agree. I spent 20 years going the "work your butt off and spend modestly" route and got my academic degrees and then an academic job and a fairly modest salary that would allow me to live with a degree of comfort but not much splurging for the rest of my life.

I packed it all in when I had a chance to operate a small business. Friends and peers were aghast when I told them I was giving up a tenure track job in my 40s.

But the business was a blast. It was so much damn fun, and both nervewracking and energizing every day we ran it. (And the fact that we made money hand over fist -- at least compared with my old salary-- didn't hurt.)

I wish I had had more fun the first few decades of my life when I was going the "keep your head down and work hard and watch the pennies" route.

CurlyDave
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Re: [Financial] Habits of the Rich

Post by CurlyDave » Tue Nov 13, 2018 12:09 pm

For me, the biggest thing was when I gave up trying to climb the corporate ladder and developed a side job.

I chose rental real estate and as my holdings increased my confidence at work became greater and my value and salary increased at work also. I never got even close to the top, but my salary and the income from the RE added up to the same as the salary of people 2 or 3 levels above my position. Plus a lot of the return in RE comes in the form of capital gains which are untaxed until they are realized. Essentially my tax advantaged savings rate was huge.

Then comes all of the usual LBYM stuff. And the automatic savings of 401(k) plans. But being able to convert sweat equity into tax advantaged savings was a big deal.

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Re: [Financial] Habits of the Rich

Post by sailaway » Tue Nov 13, 2018 12:14 pm

investingdad wrote:
Tue Nov 13, 2018 11:17 am
I don't think we're rich by most metrics. But we are more than comfortable and broke into the two comma club six years ago at 39.

No silly rules like...learn one new skill each year, get up one hour early and read, find a mentor, network with such and such, etc or other "habits of the successful".

We earned degrees we thought would afford solid job and earning prospects. I started investing and saving at 23, so did my wife. We married and live below our means (though as our means increase, we allow our living standard to increase).

After 20 years, here we are.
Millionaires are still rich by most metrics.

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Re: [Financial] Habits of the Rich

Post by willthrill81 » Tue Nov 13, 2018 12:25 pm

AlphaLess wrote:
Mon Nov 12, 2018 9:19 pm
I would say that you are rich if your assets are producing SIGNIFICANTLY more income per year than your spending needs are.
Then I suppose my problem is that we're too good at spending money. If I just ratcheted back our spending, we might then be rich. :D
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

CurlyDave
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Re: [Financial] Habits of the Rich

Post by CurlyDave » Tue Nov 13, 2018 12:38 pm

AlphaLess wrote:
Mon Nov 12, 2018 9:19 pm
I would have to debate calling most people here rich...

At 3.1% WR, that's $26MM. That's the very BOTTOM rang of rich.
I have to disagree.

Median family income in the US is $59k. And they have to work for that.

If I am retired, or just FI, have ~1.5 times that in family income and don't have to work I am rich by most standards. Not country-club and luxury car RICH, but certainly envied by most of the country.

At 4% WR, that is $2.25M. Which is attainable by almost any of us. Plus throw in a little SS, maybe a modest pension and the portfolio requirements drop well below $2M.

* * * * * * * * * * * * * * * *
When I listen to the news and someone says they are going to pay for some program by "taxing the rich" they are not talking about the scarce few with $26M+ (those guys have tax consultants and can fight back), they are talking about us, and those like us.

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Cycle
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Re: [Financial] Habits of the Rich

Post by Cycle » Tue Nov 13, 2018 12:47 pm

AlphaLess wrote:
Mon Nov 12, 2018 9:19 pm
I would have to debate calling most people here rich.

To me, rich is at the level when you are well past the FIRE stage (Financial Independence, Early Retirement).

Of course, you can eventually become rich, but most people here would not qualify.

I would say that you are rich if your assets are producing SIGNIFICANTLY more income per year than your spending needs are.

And significant does not mean 30%, bur rather, multiples, like 5 or 10x.
I recall this interview where Suze Orman said you need 10-20MM to retire...

https://affordanything.com/why-i-hate-t ... uze-orman/

I think one is rich if given their current weekend spending, they could continue that weekend indefinitely without need of active work.

I forgot to submit my trick... LBYM!!! Get an interesting job that pays well (or create your own)!

alfaspider
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Re: [Financial] Habits of the Rich

Post by alfaspider » Tue Nov 13, 2018 12:51 pm

CurlyDave wrote:
Tue Nov 13, 2018 12:38 pm
AlphaLess wrote:
Mon Nov 12, 2018 9:19 pm
I would have to debate calling most people here rich...

At 3.1% WR, that's $26MM. That's the very BOTTOM rang of rich.
I have to disagree.

Median family income in the US is $59k. And they have to work for that.

If I am retired, or just FI, have ~1.5 times that in family income and don't have to work I am rich by most standards. Not country-club and luxury car RICH, but certainly envied by most of the country.

At 4% WR, that is $2.25M. Which is attainable by almost any of us. Plus throw in a little SS, maybe a modest pension and the portfolio requirements drop well below $2M.

* * * * * * * * * * * * * * * *
When I listen to the news and someone says they are going to pay for some program by "taxing the rich" they are not talking about the scarce few with $26M+ (those guys have tax consultants and can fight back), they are talking about us, and those like us.
The practical definition of rich tends to be "someone with substantially more than I have." Someone with $1MM is fabulously wealthy compared to most minimum wage workers. Someone with $1MM is "poor" compared to a billionaire. But I think if we took it to a national vote, two comma club members of BH would be voted "rich" in a landslide.

Livehard1234
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Re: [Financial] Habits of the Rich

Post by Livehard1234 » Tue Nov 13, 2018 12:51 pm

Study hard for a profession that pays well. Spend less than you make from day one. As you progress in your career, always grow your spending more slowly than your salary.

staythecourse
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Re: Habits of the Rich

Post by staythecourse » Tue Nov 13, 2018 12:59 pm

marcopolo wrote:
Tue Nov 13, 2018 11:04 am
Maybe I would have done even better with more focused goals, but i kind of enjoyed my meandering path.
In my opinion, yes you would have been more successful or as successful, but done it earlier if you planned ahead of time. One of my favorite lines in investing comes from Mr. Ferri, "Investing is about probabilities and not possibilities". It is transferable to life. Sure there are many possibilities of success by figuring it out as you go, but success is more LIKELY and PREDICTABLE if one plans in advance (meaning increases one's probabilities).

It is great that it worked out great for you, but if it was my kid would not advice, "Well just figure it out as you go". My advice will be, "Make plan on how to x and figure out the steps it takes to accomplish it along the way". Dr. Bernstein or Mr. Ferri makes mention of this analogy in a forward to one of their books when it comes to investing and not having a plan as using a road map makes it much easier to get to your destination then just jumping in the car and taking off.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: [Financial] Habits of the Rich

Post by KlangFool » Tue Nov 13, 2018 1:02 pm

Folks,

I am rich because I do not care whether others think that I am rich.

KlangFool

Irisheyes
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Re: [Financial] Habits of the Rich

Post by Irisheyes » Tue Nov 13, 2018 1:23 pm

Conspicuous consumption is only one kind of spending that prevents one from becoming from rich. Many expensive goods are pleasurable in and of themselves, and not because one is using them to "signal to others" how rich one is. Hedonistic goods like high end ingredients for home cooked food, really great wine, a beautiful house with a great view that gives one pleasure every day, a fast car that is a joy to handle and drive form a different kind of consumption..

I understand when people caution against the first kind of spending as something which impedes the path to wealth. The second kind of spending provides a stickier dilemma though, since spending on those things enriches one's material life, even as it depletes one's bank account.

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Re: [Financial] Habits of the Rich

Post by visualguy » Tue Nov 13, 2018 2:17 pm

AlphaLess wrote:
Mon Nov 12, 2018 9:19 pm
I would have to debate calling most people here rich.

To me, rich is at the level when you are well past the FIRE stage (Financial Independence, Early Retirement).

Of course, you can eventually become rich, but most people here would not qualify.

I would say that you are rich if your assets are producing SIGNIFICANTLY more income per year than your spending needs are.

And significant does not mean 30%, bur rather, multiples, like 5 or 10x.

Now, of course, you don't want to live in the poor-house and push your 'required spend' down so much so as to qualify.

Thus, I should add one more condition: your spending is in the top 1% of your area.

So, say, you live in a high COLA region where top 1% income is 200K. And your assets are allowing for a withdrawal rate that is 3-5x income relative to 200K, or, say 800K.

At 3.1% WR, that's $26MM. That's the very BOTTOM rang of rich.
I also view "rich" as belonging to the group with a net worth in the tens of millions or higher, not single digit millions or lower, and definitely not low single digit millions or lower. Rich means being able to live a luxurious lifestyle without worry - fancy cars, boats, luxury home, vacation homes, air travel in first class, country club memberships, etc. In the dictionary, rich is defined as "having abundant possessions and especially material wealth".

This doesn't seem to be what people on this thread are talking about, which is the reason I suggested that a more appropriate title would be "Habits of the financially secure"...

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Re: [Financial] Habits of the Rich

Post by munemaker » Tue Nov 13, 2018 3:08 pm

visualguy wrote:
Mon Nov 12, 2018 5:58 pm
For example, I don't consider a person who can't buy a very nice car without worrying about the money to be "rich", but for some others such a person could still be considered "rich".
If you read the book "Millionaire Next Door," you would be surprised to learn that a lot of us drive very ordinary cars. It is not that we cannot afford to buy fun cars without giving it a second thought; it is just not important to us.

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Re: [Financial] Habits of the Rich

Post by Phineas J. Whoopee » Tue Nov 13, 2018 3:32 pm

Along with the word safe, which has a strong emotional connotation, maybe we should stop using the word rich, which has a strong moral connotation. Observe how many obviously wealthy people claim they aren't rich.
PJW

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Re: Habits of the Rich

Post by marcopolo » Tue Nov 13, 2018 3:50 pm

staythecourse wrote:
Tue Nov 13, 2018 12:59 pm
marcopolo wrote:
Tue Nov 13, 2018 11:04 am
Maybe I would have done even better with more focused goals, but i kind of enjoyed my meandering path.
In my opinion, yes you would have been more successful or as successful, but done it earlier if you planned ahead of time. One of my favorite lines in investing comes from Mr. Ferri, "Investing is about probabilities and not possibilities". It is transferable to life. Sure there are many possibilities of success by figuring it out as you go, but success is more LIKELY and PREDICTABLE if one plans in advance (meaning increases one's probabilities).

It is great that it worked out great for you, but if it was my kid would not advice, "Well just figure it out as you go". My advice will be, "Make plan on how to x and figure out the steps it takes to accomplish it along the way". Dr. Bernstein or Mr. Ferri makes mention of this analogy in a forward to one of their books when it comes to investing and not having a plan as using a road map makes it much easier to get to your destination then just jumping in the car and taking off.

Good luck.
I completely agree with you that planning increases the odds.
I don't that it is either a necessary, nor sufficient, condition.

I was really addressing the comment:
No one who is self made goes, "Well I just messed around it just finally happened".
I am a counter-example, and i suspect there are many others that largely stumbled upon financial success while focusing on other things, like their careers, family, etc.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: [Financial] Habits of the Rich

Post by RadAudit » Tue Nov 13, 2018 4:13 pm

AlphaLess wrote:
Mon Nov 12, 2018 9:19 pm
I would have to debate calling most people here rich.

To me, rich is at the level when you are well past the FIRE stage (Financial Independence, Early Retirement).

….

So, say, you live in a high COLA region where top 1% income is 200K. And your assets are allowing for a withdrawal rate that is 3-5x income relative to 200K, or, say 800K.

At 3.1% WR, that's $26MM. That's the very BOTTOM rang of rich.
Well, in that case, maybe the thread should be "Habits of the Marginally Comfortable".
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The calvary isn't coming, kids. You are on your own.

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Re: [Financial] Habits of the Rich

Post by visualguy » Tue Nov 13, 2018 4:26 pm

munemaker wrote:
Tue Nov 13, 2018 3:08 pm
visualguy wrote:
Mon Nov 12, 2018 5:58 pm
For example, I don't consider a person who can't buy a very nice car without worrying about the money to be "rich", but for some others such a person could still be considered "rich".
If you read the book "Millionaire Next Door," you would be surprised to learn that a lot of us drive very ordinary cars. It is not that we cannot afford to buy fun cars without giving it a second thought; it is just not important to us.
That's fine. If you can easily afford fancy cars, nice houses, a yacht, a personal cook, first-class travel, country club memberships, etc. then you are rich by my definition even if you choose not to acquire those things. I didn't say you had to acquire them to be rich, just that you would need to be able to afford it. It's possible to argue about the level of lifestyle that you would need to be able to afford, but it's definitely higher than middle class or upper middle class. Again, you don't need to live that lifestyle, but you need to be able to afford it in order to qualify as "rich" in my opinion.

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Re: [Financial] Habits of the Rich

Post by AerialWombat » Tue Nov 13, 2018 4:41 pm

So many good ones already posted that I truly believe in, hard to come up with something not already mentioned.

I guess I’ll add this: Take advantage of ALL opportunities to advance yourself that others ignore even though they are available to an entire peer group.

Example: During and after my military service, I was constantly flabbergasted by how many of my peers intentionally failed to take advantage of our education benefits. Free tuition, certification programs, GI Bill benefits, all squandered by most service members.

Example: 401k company match. It’s free money offered to nearly all employees. Seems ridiculous not to take it.

Example: Combined high school + community college dual enrollment programs offered in some states. Blows my mind that more parents and their kids don’t do this. Graduate high school with an AA for free, blow out the BA/BS in just two more years.
Last edited by AerialWombat on Tue Nov 13, 2018 4:42 pm, edited 1 time in total.

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Will do good
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Re: Habits of the Rich

Post by Will do good » Tue Nov 13, 2018 4:41 pm

Badger1754 wrote:
Sun Nov 11, 2018 3:21 pm
As an early career millennial who joined the labor market shortly before 2008, and who has a long family oral tradition of being imprisioned, persecuted, and expropriated under Communism.. I live by the following (in no particular order):
  1. Live within your means.
  2. Pay yourself first.
  3. Put aside money for emergencies (actual emergencies).
  4. Ignore the “noise” (CNBC, “financial advisors” trying to sell you stuff). This might be actually a healthier way to live life. I get my news from the NYTimes and the WSJ. My wife gets her news from Facebook and cable TV. I am infinitely calmer during elections. :D
  5. Keep things in perspective.
  6. Don’t let sentiment, emotion, or a “gut feeling” cloud your judgment when there are facts that can be relied upon. In particular, I’ve found that having a basic facility with finance and math (e.g. able to build an Excel model) helps streamline the decision-making process which as in turn helped me avoid several potentially bad decisions.
  7. Invest in the future (monetarily, educationally, philanthropically).
  8. Sic transit gloria mundi — nothing good lasts forever, so don’t expect it to.
  9. There is still a greater concentration of talent, hunger, entrepreneurialism, chutzpah, grit, accessibility, and freedom in the US economy than anywhere else in the world that attracts the aforementioned attributes like moths to a flame. So, while nothing good lasts forever, Rome took over a thousand years to fall.
  10. Stay active (physically, intellectually, economically) — idle hands do the devil’s work; idle money does no work.
  11. Take ownership and responsibility for your own success. No one aside from your parents will give you anything. In fact, there is a large population of people who would freely and shamelessly take advantage of you. But it is up to you (and only you) to find and pursue those opportunities that will lead to success.
  12. A piece of advice I wish all millennials would reflect upon: remember that you can’t save the world if you become a casualty in the process.
  13. Don’t reinvent the wheel — stand on the shoulders of giants!
PS. I have been a Berkshire Hathaway shareholder since I was a teenager (the little shares!) I just showed my wife this list, and she accurately pointed out that pretty much all of this list (except maybe #12) comes from the accumulated wisdom of Warren Buffett’s annual investor letters. So I will add a 13th bullet: don’t reinvent the wheel — stand on the shoulders of giants!
Saved for future reference!

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Re: [Financial] Habits of the Rich

Post by HomerJ » Tue Nov 13, 2018 4:59 pm

Live below your means. Spend less than you earn. Save the rest. Increase that savings percentage over time.

An easy almost painless way to achieve this is to save half your raises.

Say you are making $40,000 a year. And you're saving 10% or $4000 a year.

When you get a big promotion or move to a new company, maybe you'll get a raise to $48,000. Save $4000 more a year, and spend $4000 more a year.

Your lifestyle still goes up, but your savings doubled. Now you're saving $8000 a year or 16%. And you didn't even notice it, because you were living just fine on $36,000 a year, and now you've got $40,000 to spend!

A couple of years later, you get a big raise to $60,000... You increase your lifestyle $6000 a year, and increase savings $6000 a year. Now you're saving $14,000 a year or 23%, and the money is piling up.

This is how you build wealth, and if you increase savings at the same time you get to increase spending, it's not painful at all.

It's especially easy if you are a couple with two incomes.
The J stands for Jay

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Phineas J. Whoopee
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Re: [Financial] Habits of the Rich

Post by Phineas J. Whoopee » Tue Nov 13, 2018 5:06 pm

HomerJ wrote:
Tue Nov 13, 2018 4:59 pm
...
When you get a big promotion or move to a new company, maybe you'll get a raise to $48,000. Save $4000 more a year, and spend $4000 more a year.
...
Such an event may never occur, and at no fault of the employee.

PJW

staythecourse
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Re: Habits of the Rich

Post by staythecourse » Tue Nov 13, 2018 5:25 pm

marcopolo wrote:
Tue Nov 13, 2018 3:50 pm
staythecourse wrote:
Tue Nov 13, 2018 12:59 pm
marcopolo wrote:
Tue Nov 13, 2018 11:04 am
Maybe I would have done even better with more focused goals, but i kind of enjoyed my meandering path.
In my opinion, yes you would have been more successful or as successful, but done it earlier if you planned ahead of time. One of my favorite lines in investing comes from Mr. Ferri, "Investing is about probabilities and not possibilities". It is transferable to life. Sure there are many possibilities of success by figuring it out as you go, but success is more LIKELY and PREDICTABLE if one plans in advance (meaning increases one's probabilities).

It is great that it worked out great for you, but if it was my kid would not advice, "Well just figure it out as you go". My advice will be, "Make plan on how to x and figure out the steps it takes to accomplish it along the way". Dr. Bernstein or Mr. Ferri makes mention of this analogy in a forward to one of their books when it comes to investing and not having a plan as using a road map makes it much easier to get to your destination then just jumping in the car and taking off.

Good luck.
I completely agree with you that planning increases the odds.
I don't that it is either a necessary, nor sufficient, condition.

I was really addressing the comment:
No one who is self made goes, "Well I just messed around it just finally happened".
I am a counter-example, and i suspect there are many others that largely stumbled upon financial success while focusing on other things, like their careers, family, etc.
My bad, I should have said your chances are MUCH higher. I thought that would be obvious I did not mean no one in history has ever been the exception to that statement. Should have been clearer.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: [Financial] Habits of the Rich

Post by London » Tue Nov 13, 2018 5:27 pm

I’ve never been shy about asking for a lot of money at work. That, coupled with busting my ass to justify the high compensation has been the key to wealth accumulation. Don’t be shy about putting a high valuation on yourself but be prepared to back it up.

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Re: [Financial] Habits of the Rich

Post by simplesimon » Tue Nov 13, 2018 5:29 pm

AlphaLess wrote:
Mon Nov 12, 2018 9:19 pm
I would have to debate calling most people here rich.

To me, rich is at the level when you are well past the FIRE stage (Financial Independence, Early Retirement).

Of course, you can eventually become rich, but most people here would not qualify.

I would say that you are rich if your assets are producing SIGNIFICANTLY more income per year than your spending needs are.

And significant does not mean 30%, bur rather, multiples, like 5 or 10x.

Now, of course, you don't want to live in the poor-house and push your 'required spend' down so much so as to qualify.

Thus, I should add one more condition: your spending is in the top 1% of your area.

So, say, you live in a high COLA region where top 1% income is 200K. And your assets are allowing for a withdrawal rate that is 3-5x income relative to 200K, or, say 800K.

At 3.1% WR, that's $26MM. That's the very BOTTOM rang of rich.
You're not rich unless you can live off of the interest of the interest of your investments.

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Re: [Financial] Habits of the Rich

Post by Theseus » Tue Nov 13, 2018 5:32 pm

- At the age of 27 I had a goal of saving $1 million by the time I was 40. At the time I thought that was enough to retire. Surpassed the goal by a mile, but realized can't retire on that based on the lifestyle I wanted in the retirement. So goal setting can be helpful.

- Always worked at least 20% harder than anyone around me. When I was employee (worked extra, solved problems without being asked, and never asked to be paid for extra hours spent) and when I owned a business.

- Have other people make money for you. I.e. own a business.

- For first 15 years in my career, read one technical book every weekend - cover-to-cover. Gave me competitive edge.

More importantly

- Understood early on the concept of Opportunity Cost. Applied this in daily life (spending money or time), career, business .... everywhere.
- Understood (hard way) the concept of Sunk Cost. Learned to understand and apply this - rather late, but was of tremendous value.
- Avoid analysis paralysis. Make decisions based on the best information I had in front of me. I was wrong a few times, but I was not standing still.

E.g. walked away from an ongoing $1million contract because I didn't like the client and toxic work environment. Was nerve wrecking at the time. But won contracts worth more than $5 million within a year. Opportunity Cost and Sunk Cost both played a role in this decision.

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Re: [Financial] Habits of the Rich

Post by visualguy » Tue Nov 13, 2018 5:54 pm

Theseus wrote:
Tue Nov 13, 2018 5:32 pm
- Have other people make money for you. I.e. own a business.
Yup - this is key. You do need to have the right personality for this, though. Also, when things go south with a business with employees, money can evaporate much quicker than when losing a job, so need to be careful...

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Re: [Financial] Habits of the Rich

Post by HomerJ » Tue Nov 13, 2018 6:13 pm

Irisheyes wrote:
Tue Nov 13, 2018 11:50 am
betablocker wrote:
Mon Nov 12, 2018 8:43 pm
This certainly inspired a lot of responses. I have a slightly different take. Start a business. Don’t waste your time with VC stuff unless you have the next Uber. You’ll have to sacrifice and work hard at the beginning but if you hire smart people and service providers, you can reap a lot of reward. Sacrifice is great and all but I like enjoying life and owning a business has allowed me to both save and spend.
I like this response a lot. And I agree. I spent 20 years going the "work your butt off and spend modestly" route and got my academic degrees and then an academic job and a fairly modest salary that would allow me to live with a degree of comfort but not much splurging for the rest of my life.

I packed it all in when I had a chance to operate a small business. Friends and peers were aghast when I told them I was giving up a tenure track job in my 40s.

But the business was a blast. It was so much damn fun, and both nervewracking and energizing every day we ran it. (And the fact that we made money hand over fist -- at least compared with my old salary-- didn't hurt.)

I wish I had had more fun the first few decades of my life when I was going the "keep your head down and work hard and watch the pennies" route.
I have a friend who quit his high-paying sales job to start his own business. He's working 80 hours a week and he's miserable. He's got so much money sunk into the business, he's not sure how to get out and go back to sales.

Most new businesses fail. Some succeed. Just because it worked for you (and was "total fun!" - that's got to be even rarer) doesn't mean it always works out that way.
The J stands for Jay

Irisheyes
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Re: [Financial] Habits of the Rich

Post by Irisheyes » Tue Nov 13, 2018 6:20 pm

HomerJ wrote:
Tue Nov 13, 2018 6:13 pm
Irisheyes wrote:
Tue Nov 13, 2018 11:50 am
betablocker wrote:
Mon Nov 12, 2018 8:43 pm
This certainly inspired a lot of responses. I have a slightly different take. Start a business. Don’t waste your time with VC stuff unless you have the next Uber. You’ll have to sacrifice and work hard at the beginning but if you hire smart people and service providers, you can reap a lot of reward. Sacrifice is great and all but I like enjoying life and owning a business has allowed me to both save and spend.
I like this response a lot. And I agree. I spent 20 years going the "work your butt off and spend modestly" route and got my academic degrees and then an academic job and a fairly modest salary that would allow me to live with a degree of comfort but not much splurging for the rest of my life.

I packed it all in when I had a chance to operate a small business. Friends and peers were aghast when I told them I was giving up a tenure track job in my 40s.

But the business was a blast. It was so much damn fun, and both nervewracking and energizing every day we ran it. (And the fact that we made money hand over fist -- at least compared with my old salary-- didn't hurt.)

I wish I had had more fun the first few decades of my life when I was going the "keep your head down and work hard and watch the pennies" route.
I have a friend who quit his high-paying sales job to start his own business. He's working 80 hours a week and he's miserable. He's got so much money sunk into the business, he's not sure how to get out and go back to sales.

Most new businesses fail. Some succeed. Just because it worked for you (and was "total fun!" - that's got to be even rarer) doesn't mean it always works out that way.
I said it was "damn fun", not "total fun!" Your misquote changes my meaning, which was that It was enervating and exhilarating both, as opposed to my safe professional job which was just enervating.

I'm well aware that most new businesses fail in the first couple of years. I'm not handing out prescriptions, just giving my own experience as a counterpoint to the prevailing puritan ethos that seems to dominate this thread. Good luck to your buddy.

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Re: [Financial] Habits of the Rich

Post by HomerJ » Tue Nov 13, 2018 6:27 pm

Phineas J. Whoopee wrote:
Tue Nov 13, 2018 5:06 pm
HomerJ wrote:
Tue Nov 13, 2018 4:59 pm
...
When you get a big promotion or move to a new company, maybe you'll get a raise to $48,000. Save $4000 more a year, and spend $4000 more a year.
...
Such an event may never occur, and at no fault of the employee.

PJW
In general, staying in the same dead-end job where you never get raises is definitely the "fault of the employee".

I guess there are people that not capable of improving themselves ever, and maybe it's not their fault because they were born mentally handicapped or with health problems or emotionally damaged by events outside their control.

But how is that relevant to the question and answer?

If someone asked how to learn programming, and someone else said "read this great book", would you answer,

"But some people can't read!"

You'd be right, but what's the point of that response?

In any case, if one never gets a raise they'd still probably be okay with that initial 10% savings rate. Those savings and Social Security would cover most of their needs.
Last edited by HomerJ on Wed Nov 14, 2018 1:40 pm, edited 1 time in total.
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Re: [Financial] Habits of the Rich

Post by vitaflo » Tue Nov 13, 2018 6:58 pm

visualguy wrote:
Tue Nov 13, 2018 5:54 pm
Theseus wrote:
Tue Nov 13, 2018 5:32 pm
- Have other people make money for you. I.e. own a business.
Yup - this is key. You do need to have the right personality for this, though. Also, when things go south with a business with employees, money can evaporate much quicker than when losing a job, so need to be careful...
Employees = risk. But risk = rewards. You can get a happy medium as a sole-prop or as a partnership, which is what I've chose with my two businesses. Could I make more if I had started hiring employees? Probably, but I'm already making a good chunk of change as is and don't need anymore mouths to feed.

Investing in sweat equity though, #1 way to get "rich" IMO.

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