Why doesn't a lot of money feel like a lot of money?

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Filetmerlot
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Re: Why doesn't a lot of money feel like a lot of money?

Post by Filetmerlot » Thu Jan 24, 2019 11:22 am

bryansmile wrote:
Wed Jan 23, 2019 11:41 pm
cherijoh wrote:
Wed Jan 23, 2019 1:37 pm
bryansmile wrote:
Wed Jan 23, 2019 11:42 am
A very simple way to feel it's a lot of money: withdraw all of it from the bank and count the cash.
As a summer job in college, I worked as a fill-in teller for the local bank. As the regular tellers went on summer vacation, I would be assigned to fill in. At first the cash drawer seemed like an immense amount of money but that only lasted for the first few days. The second summer I ended up getting assigned to the vault where we reconciled deposits made to ATMs and the night drop for business deposits. That was an order of magnitude more cash and yet I again quickly lost my awe of big bunches of cash.
Good story! Glad you still remember the first time you saw the piles of money.
I remember working as a teller also. I never really thought much of holding $10,000 in my hand because I just looked at it the same as when I worked at a grocery store - just stock that I needed to provide the customers. whether I had a hundred dozen eggs left before the next refrigerated truck arrived or $100,000 in hundred dollar bills left in the vault for a Friday afternoon of cashing checks at my teller window was the same feeling that I hope I didn't run out.

22twain
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Re: Why doesn't a lot of money feel like a lot of money?

Post by 22twain » Thu Jan 24, 2019 11:39 am

Thesaints wrote:
Wed Jan 23, 2019 4:25 pm
"Marginal utility of money". Google it.
Bingo. Before I even reached this post, I remembered this phrase and Googled it to see if I remembered correctly. Example:

Diminishing marginal utility of income and wealth (economicshelp.org)

According to this article, the concept goes back to at least 1890.
My investing princiPLEs do not include absolutely preserving princiPAL.

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Regattamom
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Re: Why doesn't a lot of money feel like a lot of money?

Post by Regattamom » Thu Jan 24, 2019 11:50 am

OP here.

Lots of great posts and I appreciate all the perspectives. I have known about the diminishing marginal utility of wealth for a long time but it never seemed to apply to our family as we always had needs that we were addressing. We must have reached a tipping point recently and it now applies to a much larger degree. Reading about it and experiencing are very different but it's nice to have an understanding of what has changed.

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cockersx3
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Re: Why doesn't a lot of money feel like a lot of money?

Post by cockersx3 » Thu Jan 24, 2019 12:11 pm

Grt2bOutdoors wrote:
Wed Jan 23, 2019 11:18 am
Have you ever been in a situation where you had no money? Where money was actually scarce?
That is when you realize the value of a dollar, and depending on how long that scarcity existed, you will never forget it!
This does it for me. I grew up without a lot of money, and yet I don't remember that as the defining characteristic of my early life. It was just...a thing, I guess. It's a state you get used to and you just deal with it, just like any other obstacle.

But now, with a very highly paid job and significant savings and investments, I get used to the big numbers but pick up on the smaller things. For example, when I pay the activity fee associated with one of my kids' sports teams, or when I pay for music lessons for another of my kids, I still look at that and get disturbed that yeah - I can pay for it. But there are a lot of other families - including the cockersx3 family from decades ago - for whom that would be a struggle. It's always a constant reminder of how privileged my family is, and that others are not so fortunate.

That said, we also get reminders whenever we visit immediate family (both my wife's and my own) that there are many out there who simply do not live like we do, and for whom large dollar amounts that I routinely deal with would be mind boggling to them.

One thing that helped my kids relate is a trip we made to Mexico once, where our tour van drove by a shack that turned out to be the local public school. That had a significant impact on both out kids - again, driving home the idea that their current lifestyles are a luxury. Even since then (and perhaps as a result of the behaviors of my spouse and I) they are watch their spending carefully and they seem to better appreciate the things they have.

SeaToTheBay
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Re: Why doesn't a lot of money feel like a lot of money?

Post by SeaToTheBay » Thu Jan 24, 2019 2:11 pm

I think those conditioned to saving, like most of us here, are more quickly inured to making more money because it just doesn't impact your daily life that much. My wife and I have been lucky enough to see some sizable raises and bonuses over the past few years, but we haven't changed our spending much at all. And once you start saving a big chunk of your income, incremental increases don't make that much of a difference in your savings rate.

If we were to spend close to 100% of our pay, suddenly a big bonus or raise would feel immediately amazing. Instead, we are socking it away, where it will benefit us in other ways down the road.

Flashes1
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Re: Why doesn't a lot of money feel like a lot of money?

Post by Flashes1 » Thu Jan 24, 2019 2:44 pm

My bonus doesn't feel so big after it gets whacked with a 40% 401k contribution on that paycheck and taxes.

wjhunter
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Re: Why doesn't a lot of money feel like a lot of money?

Post by wjhunter » Thu Jan 24, 2019 3:10 pm

When we payed off our mortgage early, I had a similar feeling. Why am I not more excited about this? I thought we would be jumping up and down and high-fiving. So anticlimatic.

We did celebrate with a staycation - we went to a nice 4+ star hotel in town for the weekend - of course we had to get the room at a huge discount on Priceline via a bid on an off season weekend. :)

b

GibsonL6s
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Re: Why doesn't a lot of money feel like a lot of money?

Post by GibsonL6s » Thu Jan 24, 2019 3:33 pm

I have started to view money for the future income it provides. So when I get my bonus I cut the number in half (taxes) and then take 4% (SWR). My wife hates this math. So an example 50k bonus becomes in my mind $1,000 of annual retirement income. It is humbling but relevant math. :happy

azianbob
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Re: Why doesn't a lot of money feel like a lot of money?

Post by azianbob » Thu Jan 24, 2019 3:51 pm

I still live today like I did as a grad straight out of college. No one other than my wife knows what I really make.

Money seems to mean less now than before but I try to live the same as it did then. I clip coupons, buy sales, and try to save.

At the end of the day, do I really want that $70,000 new BMW SUV, with the associated insurance costs? When a used Honda Civic gets me to and from work at the same time for under $10,000? When that $60,000 can be invested and take off like potentially a decade of needing to work?

I only get excited when my net worth reaches a new digit, and even that only lasts for about a week before it's back to normal. When I saved my first 1,000 in middle school I thought I was king of the world. When I got to my first 10,000 after graduation and working, I felt good. When I hit my first 100k I felt like I was the man. I'm sure when I hit my first million I'll be estatic but then it will die down as always.

When my wife first married me and she saw my five digit bonus check later that year for the first time she was head over heels. Now she doesn't even ask about it and when I mention we got it in passing she just says nice and goes back to whatever she was doing. So you are not alone.

Cuzz35
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Re: Why doesn't a lot of money feel like a lot of money?

Post by Cuzz35 » Thu Jan 24, 2019 6:13 pm

KyleAAA wrote:
Wed Jan 23, 2019 4:19 pm
Regattamom wrote:
Wed Jan 23, 2019 4:02 pm
KyleAAA wrote:
Wed Jan 23, 2019 4:01 pm
I still get pretty excited about a large bonus. I usually don't spend any of it.
What excites you? The idea of financial freedom at some point?
The money itself.
I'm in the same boat. It excites me and makes me happy. I guess it's just extra icing on the cake for working my butt off. Maybe if I were rich already I wouldn't be as excited by the bonus but I'd feel pretty darn good about being rich.

Maybe more money doesn't equal more happiness but it sure prevents alot of unhappiness.

azianbob
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Re: Why doesn't a lot of money feel like a lot of money?

Post by azianbob » Thu Jan 24, 2019 6:29 pm

Cuzz35 wrote:
Thu Jan 24, 2019 6:13 pm
Maybe more money doesn't equal more happiness but it sure prevents alot of unhappiness.
This is pretty true. Money doens't make you happy by itself, but it sure the heck is pretty hard to be completely happy with no money.

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burt
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Re: Why doesn't a lot of money feel like a lot of money?

Post by burt » Thu Jan 24, 2019 6:43 pm

8foot7 wrote:
Thu Jan 24, 2019 10:44 am
Cuzz35 wrote:
Thu Jan 24, 2019 9:09 am
burt wrote:
Thu Jan 24, 2019 8:24 am
Why doesn't a lot of money feel like a lot of money ? Answer: SWR (Safe Withdrawal Rate)

$1 million dollars seems like a lot of money until you realize at a 4% SWR it only produces $40,000/year.

burt
Yeah but $1million beats the heck out of only having $100k. I think its still something worth smiling about, but I wouldn't know.
Not to mention not only do you have that 40k a year, but you also still have the million.
Not necessarily.
A bad sequence of returns will chew it up quickly.
If unlucky... the million will last 30 years and you die with zero dollars.
If lucky.... you die with $3 million for heirs.

burt

l1am
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Re: Why doesn't a lot of money feel like a lot of money?

Post by l1am » Thu Jan 24, 2019 7:05 pm

deanmoriarty wrote:
Wed Jan 23, 2019 10:12 pm
Here you can see the chart with the numbers I'm talking about:

Image

Cheers.
It's good to do some analysis, but bad to obsess over it. A lot of posters here have the opposite problem to the general population. Completely obsessing over investing/saving to the point of never celebrating, kicking back and enjoying life in the present.

That $1M windfall you got is significant. I hope you celebrated it appropriately with a nice expensive vacation, a new car or something. It's good to have a partner that's somewhat impulsive sometimes too because we tend to be very "delayed gratification" personality types.

Optimizing over money and savings constantly is not a balanced approach. And yes, I'm aware this is a finance forum - but obviously a finance forum will attract a certain type of person and it's good to counter/challenge that perspective. You're an engineer, so that's how your brain works.

One way for analytically minded people to manage this is similar to how we can manage calories. Literally set aside some pile of cash each month as your enjoyment money. 'Plan the impulsivity' as bizarre as that sounds.

bhsince87
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Re: Why doesn't a lot of money feel like a lot of money?

Post by bhsince87 » Thu Jan 24, 2019 7:53 pm

8foot7 wrote:
Thu Jan 24, 2019 10:44 am
Cuzz35 wrote:
Thu Jan 24, 2019 9:09 am
burt wrote:
Thu Jan 24, 2019 8:24 am
Why doesn't a lot of money feel like a lot of money ? Answer: SWR (Safe Withdrawal Rate)

$1 million dollars seems like a lot of money until you realize at a 4% SWR it only produces $40,000/year.

burt
Yeah but $1million beats the heck out of only having $100k. I think its still something worth smiling about, but I wouldn't know.
Not to mention not only do you have that 40k a year, but you also still have the million.
Although this is a common assumption, it is not true in most cases. Especially if inflation is considered.

The 4% rule will entirely deplete the portfolio after 30 years in some cases.
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

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8foot7
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Re: Why doesn't a lot of money feel like a lot of money?

Post by 8foot7 » Thu Jan 24, 2019 8:03 pm

bhsince87 wrote:
Thu Jan 24, 2019 7:53 pm
8foot7 wrote:
Thu Jan 24, 2019 10:44 am
Cuzz35 wrote:
Thu Jan 24, 2019 9:09 am
burt wrote:
Thu Jan 24, 2019 8:24 am
Why doesn't a lot of money feel like a lot of money ? Answer: SWR (Safe Withdrawal Rate)

$1 million dollars seems like a lot of money until you realize at a 4% SWR it only produces $40,000/year.

burt
Yeah but $1million beats the heck out of only having $100k. I think its still something worth smiling about, but I wouldn't know.
Not to mention not only do you have that 40k a year, but you also still have the million.
Although this is a common assumption, it is not true in most cases. Especially if inflation is considered.

The 4% rule will entirely deplete the portfolio after 30 years in some cases.
The money isn’t all going to disappear at once. You would obviously make adjustments to your withdrawal rate or your investments. My point is you have a wad of cash and the cash it throws off, so even if you just view the withdrawal stream you also must account for the principal.

kcxie
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Re: Why doesn't a lot of money feel like a lot of money?

Post by kcxie » Thu Jan 24, 2019 8:11 pm

Bogleheads mind indeed works differently. If I get 50000 dollars
Bonus. Bogleheads will take 50% off for tax etc. then you get 25000 dollars left. Using 3% SWR, you get 750 dollars per year . It is about 2 dollars per day. I understand the math, but suddenly 50000 shrink to 2. It is not even enough to buy a beer to celebrate!

Spedward
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Re: Why doesn't a lot of money feel like a lot of money?

Post by Spedward » Thu Jan 24, 2019 8:38 pm

The feeling is very real. In connection with year end planning, I went back and looked at my earning history since my college days. I remember when I got my first bonus (which was tiny) and how proud I felt. Now however for me it isn’t the kill but the thrill of the chase the excites me..... I also have found other motivations that keep me going.

What is even more interesting is how I remember feeling when I got to the point when I was saving a few hundred a month in excess of tax deferred contributions. One thing I started doing when I was 22 was a projected net worth statement based on “pie in the sky” variables that I projected out to my 80s. And I have done it every year, but what is really kind of cool is looking back at where we stand vs. those then “pie in the sky” variables.

ByThePond
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Re: Why doesn't a lot of money feel like a lot of money?

Post by ByThePond » Thu Jan 24, 2019 9:18 pm

Haven't read all the posts yet, but those I have read remind me of two things:
1) What I call relative proportionalism, whereby you compare the added increment to the amount already on hand. e.g., $1,000 to a poor person means much more than $1,000 to a rich person. Perhaps the same as hedonic adaptation.
2) The invisibility of money or unexpected money. As noted above, we feel wealth is less real because we so often don't have it pass through our hands, and simply shunt it into some account somewhere, often automatically at that. It becomes a mere tally.

One way I long ago learned to use and appreciate unexpected windfalls is to do 3 things with it: save 1/3 for long-term, e.g. retirement, save 1/3 for short-term, e.g. new roof, and splurge with the remaining 1/3, e. g. a vacation. I have found it to be a humanistic answer to found money.

ge1
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Re: Why doesn't a lot of money feel like a lot of money?

Post by ge1 » Thu Jan 24, 2019 10:25 pm

I‘m about to receive my annual bonus and it‘s very material, almost equal to my very good salary.

There are 2 very different ways I think about it:

- One perspective is as a employee and how does the bonus compare to my target, my performance feedback, last year‘s number etc. This has NOTHING to do with the absolute size of the number is all relative: relative to market, relative to expectations etc.

- The other perspective - and I try hard to maintain this - is to never forget the absolute value of the bonus and how crazy it is that I‘m getting paid more in one paycheck what many people don‘t earn in several years.

Both perspectives are valid and necessary. As an employee I need to make sure I am adequately paid and if I‘m getting paid X-10k, I could be very disappointed with good reason, even though the absolute number is very good. OTOH, I should never forget to realize how fortunate I am to earn this kind of money and it actually really doesn‘t matter if I receive X or X-10k- I‘m well paid and lucky regardless.

Captain kangaroo
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Re: Why doesn't a lot of money feel like a lot of money?

Post by Captain kangaroo » Thu Jan 24, 2019 10:38 pm

Money that is invested to me doesn't feel like 'real money'.

1,000,000 invested in the market somehow feels less than 1,000 in my checking account.

bluquark
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Re: Why doesn't a lot of money feel like a lot of money?

Post by bluquark » Fri Jan 25, 2019 2:30 am

dh wrote:
Thu Jan 24, 2019 10:52 am
I completely understand what you are saying. My suggestion to not "lose touch with the value of a dollar" is to give 20% to your favorite cause / charity. Dividing the bonus by 5 and giving that portion will make you feel great. It also makes you stop and say, "20% is a solid donation;" it puts the entire amount into perspective. You feel great about yourself, you make a difference in this world, and you feel great about saving 80% of the bonus. I think you will find that it puts the value of a dollar back into perspective. Congrats to you and your husband.
Great suggestion. Since this is Bogleheads, I would add that you should set up a DAF and make the donation out of appreciated stock for maximum tax-efficiency :beer

are_cynic
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Re: Why doesn't a lot of money feel like a lot of money?

Post by are_cynic » Fri Jan 25, 2019 5:58 am

Money makes problems disappear. As my income has increased I’ve used money to remove things in my life that made me unhappy- stress, drudgery, choice fatigue, recurring tasks, human interaction (except for the rare ones I initiate because I want to). In the absence of unhappiness, I am happy- long hours of peace to pursue whatever piques my curiosity, time to think without pressure. I can’t think of anything I’ve bought that directly brought happiness. Granted, I’ve bought many things for my wife that made her happy, which makes me happy.
"Invert, always invert" ~Carl Jacobi

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corn18
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Re: Why doesn't a lot of money feel like a lot of money?

Post by corn18 » Fri Jan 25, 2019 7:10 am

I was paid $90 / mo my last year at the Naval Academy. Hard to stretch that and no option for a job. I graduated, moved to Pensacola for flight training and got my first paycheck (before direct deposit). $762. I still remember what I thought: "What the hell am I going to do with $762?" That was the most money I had ever had to spend. This keeps us grounded.

I also remember seeing my FIL's finance spreadsheet up on his computer once: $700,000. Holy crap! I thought that was an unbelievable amount of money. Makes me appreciate my savings.

But the OP is right. My bonus this year is stupid big and I am not excited. It has all been scheduled out in detail for deposit into the taxable account. It does make me happy that we are 2 years from FI and this is a huge part of that, but that is 2 years from now.

What has been fascinating to me is our transition from living in debt to having savings. We used to buy a new car whenever we felt like it. Just meant another 6 years of payments, right? Now that we have to pay cash (our rule), we have been keeping our cars 10 years. The marginal utility of a new car is not worth delaying FI. We just moved and should get new furniture, but spending thousands on new stuff to sit on just so it matches the new decor these days (greige is now in, whatever that is) is not appealing anymore. We'd rather be FI in 2 years.

Maybe in 2 years we'll thank our today selves. Or we may be dead. The saver's dilemma.
Don't do something, just stand there!

tindel
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Re: Why doesn't a lot of money feel like a lot of money?

Post by tindel » Fri Jan 25, 2019 9:52 am

I get a bonus of up to 30% of my salary. Since we're still early in our accumulation phase, this can be a decent part of our savings for the year. There's also always home improvements we need and want to make - so it helps smooth those things out as well. We are starting to hit the threshold of if we made 10k or 20k or even 50k more, it wouldn't effect our overall lifestyle, so it doesn't excite us much. It would be welcomed income, but not necessary.

I did receive a $5000 "Performance Award" the other day. I thought, "That's nice, does it come with a certificate?" I value the certificate a lot more these days as proof of a job well done - mostly to show other potential employers my value. $5000 after taxes doesn't even move the needle any more. My current supervisor made a mistake of assuming that what drives me is Benji's...

I remember early in my career being upset that I got a 3% raise. I told my manager, "It's not like I make $100k and it's a $3k raise!" I ended up getting another job. If I only knew.

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unclescrooge
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Re: Why doesn't a lot of money feel like a lot of money?

Post by unclescrooge » Fri Jan 25, 2019 10:40 am

KlangFool wrote:
Wed Jan 23, 2019 12:56 pm
Regattamom wrote:
Wed Jan 23, 2019 12:23 pm
KlangFool wrote:
Wed Jan 23, 2019 11:35 am
Regattamom wrote:
Wed Jan 23, 2019 11:31 am

Maybe we should buy something nice (we definitely could use a new TV) to "celebrate" the windfall. It might remind my husband how well he is compensated throughout the year.
Regattamom,

Buy two electric bicycles. Then, both of you can go out more. It makes a difference.

KlangFool
KlangFool,
Are you worried we will become couch potatoes with a new TV? :D
No worries, I just talked with my husband and being the physically fit guy that he is, he thinks he wants to buy an elliptical or Concept 2 erg.
Regattamom
Regattamom,

Not exactly. With an electric bike, you can go further. Depending on where you are, you could substitute running an errand with your car with an electric bike. It makes a difference in my life. For example, a trip to the grocery store/library/UPS store became an electric bike drive.

To an extreme, my older sister flew around the world with her foldable bike. Then, she bikes around the country that she flew into.

KlangFool
Which bikes do you both have?

SQRT
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Re: Why doesn't a lot of money feel like a lot of money?

Post by SQRT » Fri Jan 25, 2019 10:49 am

I find that hanging around some of the financial chat rooms that spend a lot of time on LBYM issues helps to keep me grounded. Reinforces the fact that I really am incredibly lucky.

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unclescrooge
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Re: Why doesn't a lot of money feel like a lot of money?

Post by unclescrooge » Fri Jan 25, 2019 10:53 am

Filetmerlot wrote:
Thu Jan 24, 2019 11:22 am
bryansmile wrote:
Wed Jan 23, 2019 11:41 pm
cherijoh wrote:
Wed Jan 23, 2019 1:37 pm
bryansmile wrote:
Wed Jan 23, 2019 11:42 am
A very simple way to feel it's a lot of money: withdraw all of it from the bank and count the cash.
As a summer job in college, I worked as a fill-in teller for the local bank. As the regular tellers went on summer vacation, I would be assigned to fill in. At first the cash drawer seemed like an immense amount of money but that only lasted for the first few days. The second summer I ended up getting assigned to the vault where we reconciled deposits made to ATMs and the night drop for business deposits. That was an order of magnitude more cash and yet I again quickly lost my awe of big bunches of cash.
Good story! Glad you still remember the first time you saw the piles of money.
I remember working as a teller also. I never really thought much of holding $10,000 in my hand because I just looked at it the same as when I worked at a grocery store - just stock that I needed to provide the customers. whether I had a hundred dozen eggs left before the next refrigerated truck arrived or $100,000 in hundred dollar bills left in the vault for a Friday afternoon of cashing checks at my teller window was the same feeling that I hope I didn't run out.
Fifteen years ago I got called into the branch manager's office of a small regional bank. He explained that by withdrawing $20,000 dollars in cash I was leaving them in a situation where they wouldn't have enough money to meet their daily transaction needs, and could cause a run on the bank in a worst case scenario. :shock:

He recommended I give them 24 hours notice next time.

KlangFool
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Re: Why doesn't a lot of money feel like a lot of money?

Post by KlangFool » Fri Jan 25, 2019 11:00 am

unclescrooge wrote:
Fri Jan 25, 2019 10:40 am
KlangFool wrote:
Wed Jan 23, 2019 12:56 pm
Regattamom wrote:
Wed Jan 23, 2019 12:23 pm
KlangFool wrote:
Wed Jan 23, 2019 11:35 am
Regattamom wrote:
Wed Jan 23, 2019 11:31 am

Maybe we should buy something nice (we definitely could use a new TV) to "celebrate" the windfall. It might remind my husband how well he is compensated throughout the year.
Regattamom,

Buy two electric bicycles. Then, both of you can go out more. It makes a difference.

KlangFool
KlangFool,
Are you worried we will become couch potatoes with a new TV? :D
No worries, I just talked with my husband and being the physically fit guy that he is, he thinks he wants to buy an elliptical or Concept 2 erg.
Regattamom
Regattamom,

Not exactly. With an electric bike, you can go further. Depending on where you are, you could substitute running an errand with your car with an electric bike. It makes a difference in my life. For example, a trip to the grocery store/library/UPS store became an electric bike drive.

To an extreme, my older sister flew around the world with her foldable bike. Then, she bikes around the country that she flew into.

KlangFool
Which bikes do you both have?
unclescrooge,

She has a Tyrell FX.

http://www.tyrellbike.com/en/products/

I have an A2B Kuo+

https://www.wearea2b.com/index.php/uk/e ... b-kuo-plus

KlangFool

stoptothink
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Re: Why doesn't a lot of money feel like a lot of money?

Post by stoptothink » Fri Jan 25, 2019 11:23 am

tindel wrote:
Fri Jan 25, 2019 9:52 am
I did receive a $5000 "Performance Award" the other day. I thought, "That's nice, does it come with a certificate?" I value the certificate a lot more these days as proof of a job well done - mostly to show other potential employers my value. $5000 after taxes doesn't even move the needle any more. My current supervisor made a mistake of assuming that what drives me is Benji's...
Interesting. I am the complete opposite, to the point where I don't value anything like that. All the hundreds of sports trophies and medals I've won, almost immediately tossed. Even my 4 degrees probably would have been tossed if my wife wouldn't throw a fit. I think it is an Asperger's thing, validation is essentially meaningless to me.

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Abe
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Re: Why doesn't a lot of money feel like a lot of money?

Post by Abe » Fri Jan 25, 2019 11:32 am

Captain kangaroo wrote:
Thu Jan 24, 2019 10:38 pm
Money that is invested to me doesn't feel like 'real money'.

1,000,000 invested in the market somehow feels less than 1,000 in my checking account.
I can relate to this. I've invested all my life, and except for income from rental property, I've never touched a penny of any money I invested. I know this doesn't make much sense, but I can't bring myself to spend it. It's almost like it's not there. I do get satisfaction out of knowing it's there if I need it.
Last edited by Abe on Fri Jan 25, 2019 11:36 am, edited 1 time in total.
Slow and steady wins the race.

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Toons
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Re: Why doesn't a lot of money feel like a lot of money?

Post by Toons » Fri Jan 25, 2019 11:34 am

Isn't there a study somewhere regarding income,,etc and happiness
Something like after 75 k ,,it lies between the ears.
:mrgreen:
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Re: Why doesn't a lot of money feel like a lot of money?

Post by lexie2000 » Fri Jan 25, 2019 11:48 am

Throughout our lives, we had many "money goals"; eventually, the ultimate goal was to hit double commas in net worth. I had imagined that I would feel some level of elation that day. When the day came, I did feel a small sense of achievement, but that was about all. Hitting doube commas didn't change anything about how we felt about money or how we spent money.

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Re: Why doesn't a lot of money feel like a lot of money?

Post by lexie2000 » Fri Jan 25, 2019 11:52 am

michaeljmroger wrote:
Wed Jan 23, 2019 11:38 am
I have a different experience. I think almost every single day that I'm extremely fortunate to be wealthy, and that some of the things we envision would simply not be possible otherwise (e.g. buying a house in cash). Money doesn't buy happiness, but it definitely contributes to it.
For me it would be more like, money doesn't buy happiness, but it helps prevent a certain level of unhappiness.

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Re: Why doesn't a lot of money feel like a lot of money?

Post by HomerJ » Fri Jan 25, 2019 12:03 pm

burt wrote:
Thu Jan 24, 2019 8:24 am
Why doesn't a lot of money feel like a lot of money ? Answer: SWR (Safe Withdrawal Rate)

$1 million dollars seems like a lot of money until you realize at a 4% SWR it only produces $40,000/year.

burt
$1 million dollars is a ton of money.

$40,000 a year is a lot of money.

I think people pay too much attention to their salaries and not their expenses.

"I make $100,000 a year! $40,000 is not very much at all..."

But the person making $100,000 is paying:
$6000 in payroll taxes
$24,000 for a mortgage
$10,000 into savings

So $40,000 gone. Everything else costs $60,000. But you won't have those costs in retirement.

So with Social Security (at least $20,000 a year) plus $1 million ($40,000 a year), you'll have the exact same lifestyle as someone making $100,000 during their accumulation years.

And a $100,000 salary lifestyle (in 90% of the country) is a very nice lifestyle. And all you need is $1 million to have that lifestyle while retired.
Last edited by HomerJ on Fri Jan 25, 2019 12:05 pm, edited 2 times in total.
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Re: Why doesn't a lot of money feel like a lot of money?

Post by HomerJ » Fri Jan 25, 2019 12:05 pm

lexie2000 wrote:
Fri Jan 25, 2019 11:52 am
michaeljmroger wrote:
Wed Jan 23, 2019 11:38 am
I have a different experience. I think almost every single day that I'm extremely fortunate to be wealthy, and that some of the things we envision would simply not be possible otherwise (e.g. buying a house in cash). Money doesn't buy happiness, but it definitely contributes to it.
For me it would be more like, money doesn't buy happiness, but it helps prevent a certain level of unhappiness.
Money buys a jetski, and I've never seen anyone unhappy while riding a jetski... :)
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Re: Why doesn't a lot of money feel like a lot of money?

Post by Abe » Fri Jan 25, 2019 12:06 pm

Thanks HomerJ for putting things in perspective. I think we have a tendency to lose touch with reality on this forum.
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Re: Why doesn't a lot of money feel like a lot of money?

Post by lexie2000 » Fri Jan 25, 2019 12:23 pm

Regattamom wrote:
Wed Jan 23, 2019 12:39 pm
snackdog wrote:
Wed Jan 23, 2019 12:25 pm
If it helps, convert it to brand new Cadillacs. They run around $50,000 so think of the bonus as how many ever brand new Cadillacs it would buy.

If it is quite a large number them and you are overwhelmed, bump it up to Mercedes-Benzes ($100,000), Bentleys ($300,000) or modest NYC apartments ($1MM). If his bonus is worth more than a NYC penthouse, then I suggest you ring up some yacht dealers or maybe visit a London fine art gallery.
This is a good exercise. I don't value Cadillacs, but if we think about the things we value that we could purchase with the money, it makes it seem more real. We can tell ourselves that we could purchase X if we really wanted, but that we prefer to put the money in savings.
This is exactly what we did while we were younger. We saved $50K for the down payment on a home, but decided to only spend half of it on the 20% down and keep the other half for a healthy emergency fund. We were 27 at the time and it was 1985.

By having that money "in the bank", we knew we could buy (have) almost anything that we wanted. When we saw that one of our peers had bought this or that (a new car, fancy clothes, etc.) we never felt as though we were "missing out" because we knew that if we REALLY wanted it, we could have it. Mentally, that makes a HUGE difference.

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Re: Why doesn't a lot of money feel like a lot of money?

Post by Filetmerlot » Fri Jan 25, 2019 12:43 pm

Captain kangaroo wrote:
Thu Jan 24, 2019 10:38 pm
Money that is invested to me doesn't feel like 'real money'.

1,000,000 invested in the market somehow feels less than 1,000 in my checking account.
This.

When I see a large change in my Vanguard or 401k accounts I generally don't bat an eye.

I feel rich when I have $1000 in my checking account a day or 2 after payday. Pay usually gets deposited on Thursday and then on Friday most of it goes out to Vanguard or savings accounts so I rarely have more than a few hundred dollars in my checking account at any one time. When I make a larger purchase (I ordered 2 new beehives for me and my son for this spring which were $400 total) I just make a one time adjustment to the amount that goes to savings for that particular pay period.

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Re: Why doesn't a lot of money feel like a lot of money?

Post by michaeljmroger » Fri Jan 25, 2019 1:09 pm

HomerJ wrote:
Fri Jan 25, 2019 12:05 pm
lexie2000 wrote:
Fri Jan 25, 2019 11:52 am
michaeljmroger wrote:
Wed Jan 23, 2019 11:38 am
I have a different experience. I think almost every single day that I'm extremely fortunate to be wealthy, and that some of the things we envision would simply not be possible otherwise (e.g. buying a house in cash). Money doesn't buy happiness, but it definitely contributes to it.
For me it would be more like, money doesn't buy happiness, but it helps prevent a certain level of unhappiness.
Money buys a jetski, and I've never seen anyone unhappy while riding a jetski... :)
That’s pretty great :mrgreen:

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Re: Why doesn't a lot of money feel like a lot of money?

Post by lexie2000 » Fri Jan 25, 2019 1:30 pm

nexesn wrote:
Wed Jan 23, 2019 5:02 pm
HomerJ wrote:
Wed Jan 23, 2019 11:06 am
The first time my wife got a $5000 bonus, we went out to a bar, drank way too much, woke up in bed the next morning, with a box of half-eaten pizza in the bed with us. :)

Bonuses after that were just deposited in our Vanguard account.

A lot of money still feels like a lot of money to us. We still high-five each other when a bonus comes in (Just got my Employee Stock Purchase Plan deposit, after selling my stock), but it's not as exciting I will admit.

I certainly still feel a happy glow every time our money grows, but it's pretty common for humans to settle into a "new normal".

A counter-point, by the way.

I'm going to Vegas this weekend, my wife and I have been discussing what our gambling budget will be.

What's funny, when I was young, when I didn't have any money, I'd take $1000-$1500 to Vegas no problem, without even thinking about it.

Now, when I have plenty of money, $1000 sounds like a lot of money, and it wouldn't be much fun to lose that much.

(Doesn't help that $1000 25 years ago would go a LONG way at $2 blackjack and crap tables - not so much at today's $10 tables - and of course, back then, I always assumed I would win)
+1
Except I tried to stay with the nickel slots.... :)
I still stay with the nickel slots. :happy When we go to the casino, I take $4 for entertainment. $2 is to play the nickel slots and $2 is a $1 tip for each of two free margaritas that the cocktail waitress brings me. $4, a couple of hours of pushing buttons, and two margaritas - I figure I'm ahead!!

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Re: Why doesn't a lot of money feel like a lot of money?

Post by lexie2000 » Fri Jan 25, 2019 1:40 pm

noco-hawkeye wrote:
Thu Jan 24, 2019 8:40 am
Thesaints wrote:
Wed Jan 23, 2019 4:25 pm
"Marginal utility of money". Google it.
The reason why it does not feel like a lot of money is also behind all progressive taxation systems.
This is the correct answer. The inverse of this is the marginal propensity to save.

When I was young, my first paycheck over $1,000 seemed giant and I had the entire world at my fingertips. I spent it on video games and all the silly stuff I had been denied the freedom to buy before working.

If I get a $10k bonus now, I don't have any dire needs and most of it goes into savings of one form or another.

This is also why if you want to get money flowing through an economy, giving money to lower income earners will create more activity. They are much more likely to spend it vs save it. Not trying to have any political statements, but this is a known economic phenomenon.
Interesting because this was huge for us when we were first starting out. We lived off of one income and spent nothing from the second income, any overtime pay, or any increases in pay. Luckily, I got my spending spree days out of the way while I had a job in high school and before I had real bills to pay.

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Re: Why doesn't a lot of money feel like a lot of money?

Post by cruzbay » Fri Jan 25, 2019 2:04 pm

I like to think of it this way: Money cannot buy happiness but money can buy freedom. What you do with that freedom will determine your happiness.

This is why some lottery winners crash and burn. They cannot handle the freedom. For us, the freedom is knowing that we have enough and should not have to worry about future finances. Freedom from that worry makes me happy. More happy than spending it. :happy

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Re: Why doesn't a lot of money feel like a lot of money?

Post by Hikes_With_Dogs » Fri Jan 25, 2019 2:11 pm

The distance between your NW and $0 is a lot smaller than your NW and infinite money.

Therefore gains seem tiny compared to losses.

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Re: Why doesn't a lot of money feel like a lot of money?

Post by Abe » Fri Jan 25, 2019 3:02 pm

cruzbay wrote:
Fri Jan 25, 2019 2:04 pm
I like to think of it this way: Money cannot buy happiness but money can buy freedom. What you do with that freedom will determine your happiness.

This is why some lottery winners crash and burn. They cannot handle the freedom. For us, the freedom is knowing that we have enough and should not have to worry about future finances. Freedom from that worry makes me happy. More happy than spending it. :happy
You just put into words exactly how I feel. :beer
Slow and steady wins the race.

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Re: Why doesn't a lot of money feel like a lot of money?

Post by goodenyou » Fri Jan 25, 2019 9:55 pm

The same reason time seems to move faster as we age. Every additional year is a smaller percentage of our age.
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Re: Why doesn't a lot of money feel like a lot of money?

Post by ttjt_99 » Fri Jan 25, 2019 10:01 pm

Bonus? What’s that?

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Re: Why doesn't a lot of money feel like a lot of money?

Post by tindel » Sat Jan 26, 2019 5:06 am

stoptothink wrote:
Fri Jan 25, 2019 11:23 am
tindel wrote:
Fri Jan 25, 2019 9:52 am
I did receive a $5000 "Performance Award" the other day. I thought, "That's nice, does it come with a certificate?" I value the certificate a lot more these days as proof of a job well done - mostly to show other potential employers my value. $5000 after taxes doesn't even move the needle any more. My current supervisor made a mistake of assuming that what drives me is Benji's...
Interesting. I am the complete opposite, to the point where I don't value anything like that. All the hundreds of sports trophies and medals I've won, almost immediately tossed. Even my 4 degrees probably would have been tossed if my wife wouldn't throw a fit. I think it is an Asperger's thing, validation is essentially meaningless to me.
Note that I don't want the certificate for myself, but for potential employers. Walk into an interview with a stack full of certificates and say, "I got this certificate with a $5000 financial award last week because I <fill in the blank>" Most interviewers then get a sense that you are someone who delivers.

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Re: Why doesn't a lot of money feel like a lot of money?

Post by beyou » Sat Jan 26, 2019 7:06 am

Hikes_With_Dogs wrote:
Fri Jan 25, 2019 2:11 pm
The distance between your NW and $0 is a lot smaller than your NW and infinite money.

Therefore gains seem tiny compared to losses.
That + inflation are the reason there is never enough. Grew up in 1970s and remember 2 digit CD rates.

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Re: Why doesn't a lot of money feel like a lot of money?

Post by BlueCable » Sat Jan 26, 2019 7:46 am

tindel wrote:
Sat Jan 26, 2019 5:06 am
Note that I don't want the certificate for myself, but for potential employers. Walk into an interview with a stack full of certificates and say, "I got this certificate with a $5000 financial award last week because I <fill in the blank>" Most interviewers then get a sense that you are someone who delivers.
This would be such an odd thing to do that as an interviewer, I wouldn't really know how to take it, which wouldn't be good for you.

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Re: Why doesn't a lot of money feel like a lot of money?

Post by SQRT » Sat Jan 26, 2019 11:16 am

lexie2000 wrote:
Fri Jan 25, 2019 11:52 am
michaeljmroger wrote:
Wed Jan 23, 2019 11:38 am
I have a different experience. I think almost every single day that I'm extremely fortunate to be wealthy, and that some of the things we envision would simply not be possible otherwise (e.g. buying a house in cash). Money doesn't buy happiness, but it definitely contributes to it.
For me it would be more like, money doesn't buy happiness, but it helps prevent a certain level of unhappiness.
Probably agree with this. Happiness is a very complicated subject and I think to a large extent is inherent in a persons personality.

I’m not sure why we always try to measure money against happiness? We don’t measure such things as good health, intelligence, attractiveness, kindness, or sensitivity this way?

One thing I do believe though, is that having money can be a lot of “fun”. It can reduce uncertainty and increase one’s sense of empowerment. Allow for generosity, etc. Whether these (and possibly other) benefits of money make you happy or not is a bigger question.

Why not just leave it at that?

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