I’m the nouveau riche

[EddyB]

There is nothing as good as the feeling that you earned it.

Some people never get that chance.

While I agree with the words, plenty of the wrong people seem to have that feeling, and some who deserve it deny themselves the pleasure.

[EddyB]

My husband, similarly, would have had an easier time if he hadn’t been the kid who drove the beater minivan to high school, which was arguably the worst car in the parking lot. His dad was in private law practice his whole career and could have given him something a little nicer, but he wanted to prove a point that fell flat, especially among the students at an elite Atlanta private school. Kids can be brutal.

Was he trying to prove a point to your husband’s classmates, or teach a lesson to your husband?

[bigred77]

This reads to me like doctors whose parents were well off enough to pay for their education and likely also weddings, down payment on first house, etc.

If you get that attending job with no loans and have a down payment gift for the house you can live VERY well on most physician incomes and still save 20% for retirement. Most people don’t see the need to save over 50% of their income and that’s perfectly rational.

[ram]

Lets say you make 1 million pretax, 650 k post tax, spend 150K and save 500K.
My recommendation would be to spend more.

Somebody making a third of your income (333k pretax, 250k post tax) can certainly spend 200 K and save 50 K (20%) without being irresponsible.

If you are looking for some peers who have had change in financial circumstances such as yours your are more likely to find them amongst the foreign medical graduates at your hospital.

[Nathan Drake]

I don’t know why you care. Worry about your own situation and don’t compare yourself to others. If you spend so much less than your peers, then congrats; you’ll be able to retire far earlier than them if you wish.

I also wouldn’t be so concerned about “generational wealth” either. We don’t get to take any of this with us when we pass.

[ramram22]

Here’s the thing. You don’t need to be ultra wealthy or come from huge family money to have the outward trappings you are talking about. You are overestimating how much things cost.

A $1M house costs $200k in down payment and back in the good old days you could have gotten a 2.5% 30 year mortgage. $20k in property tax + $20k in mortgage interest.

A new $60k luxury car costs $8k per year in depreciation & insurance. Times two cars is $16k.

A week long vacation to Hawaii for four costs $2k in plane tickets, $500 per night hotels, food, etc. Let’s call it $8k all in. Three times a year is $24k.

How much can one spend on food? How about $20k for family of four?

Clothes, other consumables, how about another $20k.

What else? Utilities, health insurance and OOP spend, various household services. Another $20k?

That’s $140k in annual spend.

But now comes the truly expensive bit - childcare and education. This could be free if you send your kids to public school or $80k year or more if you go private. This really moves the needle.

But let’s say you go public schools. Incremental cost for kids activities brings the total annual spend to $150k.

How much income do you need to comfortably afford $150k per year in spend? Let’s say you save $150k. Income taxes $100k.

$400k total annual income. Is that crazy for two white collar professionals to be making? In my circle it’s basically table stakes. No family money required.

Sounds like you are making way more money but denying yourselves most of these things. Why? You can afford it.

Interesting post but I think your numbers are meaningfully off.

First, a $1 million house is no longer a luxury item on par with $60K cars and 3x per year overseas vacations. Of course, there are some geographical differences here, but in my DC area neighborhood - which is nice but nowhere near the nicest - small old homes go for $700K and large, new builds go for $1.5 million+. We have far more Toyotas than Audis in our neighborhood. In fact, in neighborhoods where Audis outnumber Toyotas, large new homes sell for $2.5 million+.

And of course, no one is getting a 2.5% interest rate these days. Banking on a return to the lowest mortgage rates in history seems optimistic. If we just adjust your numbers for a $1.5 million house with 20% down and a 6% interest rate, the annual interest expense becomes $72K instead of the $20K you posited.

Also, $100K in taxes on $400K of income seems a little bit low. Again, of course there are geographical differences here, but in the HCOL areas where higher incomes are more likely, I’d estimate $120,000 in taxes is more reasonable.

With just those two adjustments – mortgage interest and income taxes – your annual savings are almost cut in half from $150K to $78K. But you included mortgage principal as part of your “savings,” so for actual investments, we’re down to $65K per year. That basically allows the husband and wife to each max out a 401(k) and an IRA, with $5K left over between the two of them for a 529 plan (an amount that is very likely to be inadequate).

So this $400,000 couple – if they try to live a luxury lifestyle – is doing fine by some measures: they’re paying off their house and maxing retirement accounts. However, they’re shortchanging their children’s college fund, and they’re not on the fast track to any sort of financial freedom.

And lastly, even if this couple were saving $100K per year, the OP can save five times as fast; in five years, he accomplishes what the $400K couple takes 25 years to do. IMO, it makes sense to do that before taking your foot off the gas.

[Wannaretireearly]

I cannot relate because I have never done the high income part you wrote about. However, you should read this:
https://www.washingtonpost.com/opinions ... ling-poor/
and this https://www.nytimes.com/2023/01/20/opin ... cracy.html
and this https://bowtiedbull.substack.com/p/goin ... -of-wealth

Then go back into Stealth Mode.

I couldn’t access the first two, but that third link is pure genius. Bookmarked

[slalom]

I'm in a similar boat to you OP - and in the SF Bay Area I seem to meet these people all the time. It's like they've never had to consider money, there's a couple million from the parents for the house, for the grandkids educations, and the inheritance to fall back on later in life so retirement saving isn't even a consideration.

I don't really think it's an issue though because we just don't talk about money, there's plenty of other things to talk about.

I also console myself by saying they probably don't enjoy their position in life as much as I do because they didn't earn it.. there's probably some truth to that.

[EddyB]

I cannot relate because I have never done the high income part you wrote about. However, you should read this:
https://www.washingtonpost.com/opinions ... ling-poor/
and this https://www.nytimes.com/2023/01/20/opin ... cracy.html
and this https://bowtiedbull.substack.com/p/goin ... -of-wealth

Then go back into Stealth Mode.

I couldn’t access the first two, but that third link is pure genius. Bookmarked

I don’t see it, but if there’s genius there, that’s either as satire or as marketing for whatever it’s selling. To me, it reads like it comes from the same family of genius advice as cryptotouts.

[MH2]

There's a story that when John Churchill, or possibly Randall Churchill, was asked "whose descendant are you", he replied "I am an ancestor". I am unable to verify this, but if either one of him didn't say it, he should have.

John Churchill. An officer in the Foot Guards who happened to marry Queen Anne's favorite maid. It also helped that he became arguably the greatest military general of his era, and that his wife was an excellent politician in her own right.

[bltn]

First world problem here, but I’m looking for feedback from new money folks. I don’t know how to be rich. I came up very blue collar, no frills, first generation educated. As a kid there were countless lessons on frugality, but investing was a foreign concept. Having entered a world of urban professionalism, I now find myself surrounded by kind and thoughtful colleagues / new friends who come from family money and spend like there’s no tomorrow. I out earn all of my close friends by a wide margin (even in my field), but spend much less. I’m not a tightwad, by any stretch. Also not looking for FIRE, but to build material generational wealth.

We hide our income from family and old friends, to avoid alienating ourselves. They know I do well, but have no idea to what extent. Our life choices look like a nice step up, but not a dramatic leap.

Likewise I can’t relate to my professional friends, many of whom took gap years abroad, bought 7 figure first homes out of training, had minimal or no student loans, haul toddlers in luxury cars, vacation amongst the elite, and collect fine wines, etc. It took a few years for me to realize that their spending levels were comfortable, despite earning 1/3 of my income, because they stand to eventually inherit large sums from one (or both) sides of a marriage. While we get along great, we also can’t really talk about money because our backgrounds differ so much.

How are these folks passing on wealth without tax issues? There’s no way people come fresh out of residency and have such a pile of cash to buy luxury homes over the past few years. Do parents help buy these homes and cars and nannies and trips? Is that the way things work? Not bitter, but I have busted my ass working since I was 15 to save for school and keep loans low, graduate early, pick up extra shifts to pay off said loans, build a nest egg, etc. Honestly I feel tremendously blessed to be in a fulfilling career that earns well beyond what I ever thought possible as a kid. I want to learn how these people make the sausage. I’m doing the boglehead and WCI thing faithfully, saving over 500k per year, and still don’t feel like I can run with people who earn less. My parents always told us that everybody who looked outwardly rich in any ordinary job was in debt, but I no longer buy that. There are a ton of people who are just generationally wealthy. We seem to have so much catching up to do. I know zero people with my life trajectory, since I skipped several generations of wealth progression.

1. How rich is generationally wealthy, in dollars?
2. Is there an estate planner I should be talking to before my kids grow up (so we can borrow their tricks)?
3. I tend to distrust financial professionals, since my ignorance seems like a vulnerability, but do I need someone who works with rich people? If so, when? I’m not worth more than my umbrella policy yet, so asset protection hasn’t been top of mind.
4. Are these folks way more diversified than my 3 fund? I mean, I know what my portfolio looked like in 2022, and I damn sure wasn’t selling assets to buy a 2m house with cash in a seller’s market or adding my name to the Tesla plaid waitlist. But they were.

Help me out. Who can relate and who did you talk to?

I can relate through our family. I came from a lower middle class background. My parents' financial goals were to send their kids to college and later not become a financial burden on their children. They succeeded through frugal living.

My wife and I have never had your saving capacity, but we have lived fairly frugally, and have lived below the standard of a number of my work peers. I m also interested in establishing a legacy for a modest degree of family financial security for my kids and their children.

My daughter may be in a situation somewhat like yours. She comes from a solid middle class background, but she has just finished a surgery fellowship and gone into practice. And while in training she was better off than some of her peers because her husband is a senior software engineer with a FAANG. At Christmas, during a visit, I mentioned a couple of things to her about saving. When and if she and her husband save 5 million dollars, 3% withdrawn annually to live on is 150,000 a year. Before taxes. I told her she needs to save 50% of her take home pay. She understands. She and her husband bought a low 7 figure home in a HCOL area. They can afford the payments, but that seemed awfully extravagant to me. Her husband puts up with me talking about finances with him, but I don t think he likes those discussions. Fortunately, my daughter takes my advice about saving a big part of her income. We ll see how things work out.

Living below ones means and not letting others know about your growing wealth is very wise. Don t worry about how others spend. I always felt superior to peers with somewhat comparable incomes but much higher lifestyles than mine. That has worked out well for me and my wife.

Best of luck with your accumulation. I think you ve got the right inclination about your finances. Invest in index funds and don t get into more complicated financial schemes. You don t need to.

[luminous]

It’s very easy to see the dividing lines in these replies. I also grew up with modest means, meaning I had a $500 car, worked for minimum wage in high school, and put myself through college with no parental help. My earnings went up gradually, and those early years of paying off the student loans were hard. I married someone younger with a similar, so it felt very normal to keep our spending modest. We saved our first million with him as a stay at home parent and me earning less than $150k/year.

Then my earning power really kicked in (earning over $1M/year) and we became rich, and it was really hard to think about spending the money. Our lifestyle increased a bit but not hugely; our spending has never been over $100k a year. We are using that money to buy time instead of things now: I now work as a very part time consultant instead of full time.

We have never had a house cleaner, shopped at Whole Foods, eaten out regularly, etc even though we could easily afford it. Is that fear or frugality? I may never know. I too have peers taking expensive resort vacations and throwing pricey birthday parties for kids, while we go to national parks and consider it a luxury that we can take family vacations at all, unlike when I was growing up.

You asked about how rich parents pass it on. I’m sure you know some of this, but I was shocked to learn as an adult how many people had their college completely paid for, had house down payments gifted to them, etc. The idea of providing that sort of help to my kids took me years to get used to: for example when we first had kids I insisted that they could pay for their own college. It feels impossible to have that opinion now, but mentally that was a whole journey.

Private school is definitely a way that rich parents keep their kids “around the right kind of peers”. That isn’t the choice we made, our kids are in a large city unified school district with peers of all economic and social backgrounds. They are not the “best” schools by any stretch. It is impossible to know now if that will help my kids become well adjusted adults, as I hope. Our kids know that we are rich but that we are thoughtful about what we spend our money on. We hope to instill thoughtful spending, saving, and frugality on our kids.

OP, thanks for being vulnerable and talking about the hard stuff. You are doing great.

[bradinsky]

Twenty five years ago we had friends who were basically at the same income level as DW & I. They were awesome people who traveled often, entertained & lived very well. We couldn’t understand how they were able to afford the lifestyle. One day the other couples wife was talking with my DW & she was complaining about the interest they had paid on their credit cards over the last year. It was just about $20K & they were struggling. I’m fairly sure that many people fund their lifestyle today, above their means, or income level, with credit cards. I learned at a young age that credit cards in the hands of an undisciplined individual were a recipe for disaster. I can actually remember my brother’s ex saying “I didn’t spend any money, I charged it”. That still rings in my ears.

This post blew my mind. $20,000 of CC interest per year?!

25 years ago!

[PotashDoggerd]

First world problem here, but I’m looking for feedback from new money folks. I don’t know how to be rich. I came up very blue collar, no frills, first generation educated. As a kid there were countless lessons on frugality, but investing was a foreign concept. Having entered a world of urban professionalism, I now find myself surrounded by kind and thoughtful colleagues / new friends who come from family money and spend like there’s no tomorrow. I out earn all of my close friends by a wide margin (even in my field), but spend much less. I’m not a tightwad, by any stretch. Also not looking for FIRE, but to build material generational wealth.

We hide our income from family and old friends, to avoid alienating ourselves. They know I do well, but have no idea to what extent. Our life choices look like a nice step up, but not a dramatic leap.

Likewise I can’t relate to my professional friends, many of whom took gap years abroad, bought 7 figure first homes out of training, had minimal or no student loans, haul toddlers in luxury cars, vacation amongst the elite, and collect fine wines, etc. It took a few years for me to realize that their spending levels were comfortable, despite earning 1/3 of my income, because they stand to eventually inherit large sums from one (or both) sides of a marriage. While we get along great, we also can’t really talk about money because our backgrounds differ so much.

How are these folks passing on wealth without tax issues? There’s no way people come fresh out of residency and have such a pile of cash to buy luxury homes over the past few years. Do parents help buy these homes and cars and nannies and trips? Is that the way things work? Not bitter, but I have busted my ass working since I was 15 to save for school and keep loans low, graduate early, pick up extra shifts to pay off said loans, build a nest egg, etc. Honestly I feel tremendously blessed to be in a fulfilling career that earns well beyond what I ever thought possible as a kid. I want to learn how these people make the sausage. I’m doing the boglehead and WCI thing faithfully, saving over 500k per year, and still don’t feel like I can run with people who earn less. My parents always told us that everybody who looked outwardly rich in any ordinary job was in debt, but I no longer buy that. There are a ton of people who are just generationally wealthy. We seem to have so much catching up to do. I know zero people with my life trajectory, since I skipped several generations of wealth progression.

1. How rich is generationally wealthy, in dollars?
2. Is there an estate planner I should be talking to before my kids grow up (so we can borrow their tricks)?
3. I tend to distrust financial professionals, since my ignorance seems like a vulnerability, but do I need someone who works with rich people? If so, when? I’m not worth more than my umbrella policy yet, so asset protection hasn’t been top of mind.
4. Are these folks way more diversified than my 3 fund? I mean, I know what my portfolio looked like in 2022, and I damn sure wasn’t selling assets to buy a 2m house with cash in a seller’s market or adding my name to the Tesla plaid waitlist. But they were.

Help me out. Who can relate and who did you talk to?

I can relate through our family. I came from a lower middle class background. My parents' financial goals were to send their kids to college and later not become a financial burden on their children. They succeeded through frugal living.

My wife and I have never had your saving capacity, but we have lived fairly frugally, and have lived below the standard of a number of my work peers. I m also interested in establishing a legacy for a modest degree of family financial security for my kids and their children.

There is a concept in economics called consumption-smoothing. Yes, it is important to save for the future, but the present is important, too.
The assets we save are for the purpose of present and future consumption purposes. Radically under-consuming vastly beyond a need to do so can lead to some pretty massive regrets in old age, and lots of unnecessary drama and life-stress along the way, not just for yourself, but for your family too. Generally, most people's regrets revolve around things that they didn't do or never got around to doing or were afraid to do, the "what ifs"? Or stated another way, a well-lived life, a happy life, usually requires a balanced point of view, not an extreme point of view--you don't want to massively overspend, but you shouldn't want to massively under-spend, either. You really have to sit down and evaluate what your values are, not what you think they are supposed to be. That can be very difficult to do, as it involves lots of emotional baggage for most people.

My daughter may be in a situation somewhat like yours.We are all individuals, everyone's situation is different. How big one's income is, how big the pile of assets accumulated, is merely one dimension. There are many others. She comes from a solid middle class background, but she has just finished a surgery fellowship and gone into practice.So then a reasonable assumption is that your daughter is highly skilled, very motivated, very intelligent, very dedicated, and has selected a profession which has a very good chance of her winding up in the 99th% of global annual income and total wealth accumulation, perhaps not immediately, but certainly it's a good likelihood at some time down the road. And while in training she was better off than some of her peers because her husband is a senior software engineer with a FAANG. O.K. bonus, her spouse is about the same economically and professionally as she is, but in a different profession, so as a family they definitely look very likely in the 99th% of global income and assets during the course of their careers. At Christmas, during a visit, I mentioned a couple of things to her about saving. Always an appropriate discussion while waiting for Santa to climb down the chimbley. When and if she and her husband save 5 million dollars, 3% withdrawn annually to live on is 150,000 a year. Before taxes. I told her she needs to save 50% of her take home pay. She understands. No, obviously she decidedly does not "need to save 50% of her take home pay." That's completely arbitrary, how did you come up with that? She's an adult. It's up to her and her spouse to decide how much she/they "need" to save. It's O.K. to make suggestions, not O.K. to lay down fiats, not to someone as successful and competent as your daughter has been, and is. Please respect her accomplishments and try to treat her more as a peer or adult when speaking of financial matters. It's basic respect, it sounds like she deserves it. She and her husband bought a low 7 figure home in a HCOL area. Good for them. I hope they got a nice big home exactly what they wanted. They worked hard and deserve it. They can afford the payments, but that seemed awfully extravagant to me.Stop being the parent who constantly undermines and undercuts their adult child's reasonable financial decisions. Her husband puts up with me talking about finances with him, but I don t think he likes those discussions. Of course he doesn't. He tolerates your "advice" because your his wife's parent. Fortunately, my daughter takes my advice about saving a big part of her income. We ll see how things work out.

Living below ones means and not letting others know about your growing wealth is very wise. Don t worry about how others spend. I always felt superior to peers with somewhat comparable incomes but much higher lifestyles than mine. That has worked out well for me and my wife.

Best of luck with your accumulation. I think you ve got the right inclination about your finances. Invest in index funds and don t get into more complicated financial schemes. You don t need to.

[Oakdale19]

OP congrats on your success.

1) make sure you and your partner are on the same page.
2) make sure you and your partner are on the same page.

A divorce would be the quickest way to lose assets. Make sure your family is your priority. The money would handle itself if you invested in vti and never touched your investments.

3) don’t go too crazy with spending but enjoy. Don’t spend on every vice but find what improves your family’s quality of life, gives you more time, and makes your spouse happy. Quality food. Reasonable travel. A nice, safe car. Whatever spouse says. I wouldn’t blink. Make sure you take care of your health.

Surprised klangfool hasn’t jumped in yet. Set a savings goal. Hit it. Then do whatever you want with the rest.

Good luck. I come from an immigrant family background. I understand your feelings but am no here in your income range. More than I deserve though. Happy life

[hoffse]

My husband, similarly, would have had an easier time if he hadn’t been the kid who drove the beater minivan to high school, which was arguably the worst car in the parking lot. His dad was in private law practice his whole career and could have given him something a little nicer, but he wanted to prove a point that fell flat, especially among the students at an elite Atlanta private school. Kids can be brutal.

Was he trying to prove a point to your husband’s classmates, or teach a lesson to your husband?

My husband. It was one of those “be grateful you have this, and if you want something better, then pull yourself up by your bootstraps and get it yourself” kind of things. I’m not certain how a 16 year old who is also expected to be very involved in school and sports would be able to do that, but that was the mentality.

My husband’s brothers had similar experiences with this, though the minivan was probably the worst beater of the bunch. All three vehicles also failed at various times in really unsafe ways too. The minivan actually failed on the interstate one day at 80 MPH, and it’s lucky my husband was able to get it over to the shoulder without getting in a wreck.

To my knowledge my husband never complained about it to his dad. Heck he didn’t really even tell me much about it until we had our own kids. But he was absolutely ridiculed for it at school. It should have been predictable, given who his peer group was, and it would have been avoided if he had rolled in with a used Accord (which is what I had) or Rav4 or something.

[hand]

I get it - a lifetime of saving every penny doesn't prepare you for the world of consuming, investing and passing money (and values) to future generations.

Some of your new contemporaries are in fact rich and can afford it.
Some are simply spending all they have and possibly all they can borrow.

Those $1M houses are easily financed with well less than 20% down with "physician" loans (which then make other spending easy too.)
Some of the spending (and talking about spending) is designed to convey status in hopes of building the right connections and getting career opportunities - given your success, perhaps you've leapfrogged this?

You're not missing any big secrets, however a couple quick thoughts:

1) If you consider the value of future earnings, asset protection or at least proper insurance may be more of a current priority than you think.
2) The three fund portfolio works until you
3) $500k / yr in savings is way, way outside the norm for employed people, especially if you are doing it by forgoing a good home for your family, schooling for your kids and enjoyable time with your spouse.
4) Intergenerational wealth sounds great, but is destined to be squandered if you don't prioritize intergenerational values transfer first
5) Lessons on frugality, responsibility for kids work best based on their current context, not on the context you grew up with

[AnnetteLouisan]

You say you don’t know how to be rich, but the beauty of it is that you get to do it your way. There is no one right way. Find a way that is consistent with your values and preferences. The book “We Need to Talk,” by Jennifer Risher describes how she felt she needed to “do rich right” and later she and her husband, who was raised poor, learned their own way.

[Chadnudj]

For clarification, I don’t really feel the need to keep up with their spending. Our tastes are modest, so it works out to save a bundle and roll in used toyotas.

Based on what you're saying, I think this might be one place to reasonably loosen the purse strings when the time comes. If you want/need a new car, go for the new Toyota or even new Lexus -- the safety benefits alone may be worth it for protecting your family, and so long as you don't develop a luxury car collection (i.e. you buy only as many cars as your family reasonably needs), it will have a de minimis impact on your financial progress. I'm doing nowhere near as well as you are (although I'm on a pretty decent path), and when we buy cars we buy new (and then drive them for over 10 years).

[PotashDoggerd]

My husband, similarly, would have had an easier time if he hadn’t been the kid who drove the beater minivan to high school, which was arguably the worst car in the parking lot. His dad was in private law practice his whole career and could have given him something a little nicer, but he wanted to prove a point that fell flat, especially among the students at an elite Atlanta private school. Kids can be brutal.

Was he trying to prove a point to your husband’s classmates, or teach a lesson to your husband?

My husband. It was one of those “be grateful you have this, and if you want something better, then pull yourself up by your bootstraps and get it yourself” kind of things. I’m not certain how a 16 year old who is also expected to be very involved in school and sports would be able to do that, but that was the mentality.

My husband’s brothers had similar experiences with this, though the minivan was probably the worst beater of the bunch. All three vehicles also failed at various times in really unsafe ways too. The minivan actually failed on the interstate one day at 80 MPH, and it’s lucky my husband was able to get it over to the shoulder without getting in a wreck.

To my knowledge my husband never complained about it to his dad. Heck he didn’t really even tell me much about it until we had our own kids. But he was absolutely ridiculed for it at school. It should have been predictable, given who his peer group was, and it would have been avoided if he had rolled in with a used Accord (which is what I had) or Rav4 or something.

You and your spouse had cars in high school? At age 16?

I was taking the big yellow bus to school or riding my Schwinn 10 speed if I missed it at age 16.

Do you seriously put that much importance on these sorts of status games?

If so, I got some news for you--whatever school you think is "elite" in Atlanta probably wouldn't be considered "elite" in New York, London, Paris, Geneva, or Tokyo. Among other places. And Georgia Tech is I'm sure a great school, and "elite" in Georgia, but that doesn't make it "elite" in comparison to places like M.I.T., Stanford, or Carnegie Melon

A little perspective is in order with these sorts of notions.

Yes maybe when you were all in high school, then what kind of car you drove or didn't drive mattered to all your insecure peers and perhaps yourselves if you cared about such things.

That should have been left behind when you went to college or certainly by the time you graduated college.

Why is it still an issue in your family? It doesn't have to be.

What your husband's peers in his (objectively non-) "elite" high school in Atlanta thought or said about his minivan, due solely to their own lack of maturity and insecurities, didn't really matter then, and it certainly doesn't matter now.

As far as your husband having an unsafe vehicle provided by his father as a 16 year old, there is such a thing as being penny wise and pound foolish.

Sounds like your husband would have been better off with a really nice ten-speed or 12-speed bike.

[CletusCaddy]

Here’s the thing. You don’t need to be ultra wealthy or come from huge family money to have the outward trappings you are talking about. You are overestimating how much things cost.

A $1M house costs $200k in down payment and back in the good old days you could have gotten a 2.5% 30 year mortgage. $20k in property tax + $20k in mortgage interest.

A new $60k luxury car costs $8k per year in depreciation & insurance. Times two cars is $16k.

A week long vacation to Hawaii for four costs $2k in plane tickets, $500 per night hotels, food, etc. Let’s call it $8k all in. Three times a year is $24k.

How much can one spend on food? How about $20k for family of four?

Clothes, other consumables, how about another $20k.

What else? Utilities, health insurance and OOP spend, various household services. Another $20k?

That’s $140k in annual spend.

But now comes the truly expensive bit - childcare and education. This could be free if you send your kids to public school or $80k year or more if you go private. This really moves the needle.

But let’s say you go public schools. Incremental cost for kids activities brings the total annual spend to $150k.

How much income do you need to comfortably afford $150k per year in spend? Let’s say you save $150k. Income taxes $100k.

$400k total annual income. Is that crazy for two white collar professionals to be making? In my circle it’s basically table stakes. No family money required.

Sounds like you are making way more money but denying yourselves most of these things. Why? You can afford it.

Interesting post but I think your numbers are meaningfully off.

First, a $1 million house is no longer a luxury item on par with $60K cars and 3x per year overseas vacations. Of course, there are some geographical differences here, but in my DC area neighborhood - which is nice but nowhere near the nicest - small old homes go for $700K and large, new builds go for $1.5 million+. We have far more Toyotas than Audis in our neighborhood. In fact, in neighborhoods where Audis outnumber Toyotas, large new homes sell for $2.5 million+.

And of course, no one is getting a 2.5% interest rate these days. Banking on a return to the lowest mortgage rates in history seems optimistic. If we just adjust your numbers for a $1.5 million house with 20% down and a 6% interest rate, the annual interest expense becomes $72K instead of the $20K you posited.

How many people who currently own homes had to get a mortgage in the two years since interest rates skyrocketed? The relevant question is not whether people in their homes can afford it if they were forced to rebuy it now, the question is how do the people that OPs sees around them afford their current living situation? It’s a whole lot more likely they bought their home when interest rates were much lower.

Nonetheless, even if you were trying to buy a home now, 6% is an uncompetitive rate. With $250k moved to Schwab you can get a 30 year fixed for 5.25% right now.

https://www.schwab.com/mortgages/mortgage-rates

Also, $100K in taxes on $400K of income seems a little bit low. Again, of course there are geographical differences here, but in the HCOL areas where higher incomes are more likely, I’d estimate $120,000 in taxes is more reasonable.

Let’s assume two earners making $200k each.
$400k -
$45k maxed out 401ks -
$20k 5% 401k match -
$5k health insurance premiums -
$10k FSA + HSA -
$28k standard deduction
=$292k taxable income
Which incurs:
$57k Federal income tax
$15k State tax @ 5%
$20k social security
$7k Medicare
=$99k total income taxes

With just those two adjustments – mortgage interest and income taxes – your annual savings are almost cut in half from $150K to $78K. But you included mortgage principal as part of your “savings,” so for actual investments, we’re down to $65K per year. That basically allows the husband and wife to each max out a 401(k) and an IRA, with $5K left over between the two of them for a 529 plan (an amount that is very likely to be inadequate).

And with my adjustments and your $1.2M mortgage, we are at $95k annual savings in investments.

$95k savings for 20 years at 4% real return yields $2.8M real. Let’s say they take a step back in their careers at this point (assume age 55) and stop contributing to savings entirely. This is conservative as we are also not assuming any real income growth over 20 years. And let’s also say $500k to send two kids to private college. That’s $2.3M left to compound from age 55 to 70, which yields $4.1M real by age 70. At which point Social Security of $90k real annual benefits kick in. Plus a paid off house.

So this $400,000 couple – if they try to live a luxury lifestyle – is doing fine by some measures: they’re paying off their house and maxing retirement accounts. However, they’re shortchanging their children’s college fund, and they’re not on the fast track to any sort of financial freedom.

“Doing fine by some measures”? More like doing fine by all measures. As long as you don’t compare yourself to some Boglehead Platonic ideal.

[TomatoTomahto]

Comparison is the theft of joy. Spend some of your money on a therapist. I don't mean that in a nasty way; it can be a very positive thing to change your relationship with money, peers, etc.

[cainxinth]

How are these folks passing on wealth without tax issues?

• Shell companies and tax shelters
• Business succession planning
• Sophisticated trusts and life insurance policies
• Offshore accounts
• Fine art stored in tax-free ports
• Tax free, annual family gifts

And many other ways.

There are numerous companies, ranging from entirely above board to "what happens in the Caymans, stays in the Caymans," that help the rich hide their money and avoid taxes.

[Firemenot]

Comparison is the theft of joy. Spend some of your money on a therapist. I don't mean that in a nasty way; it can be a very positive thing to change your relationship with money, peers, etc.

Love that saying. I always try to keep it in mind as it’s so true. And I’ve seen it play out with the truly rich I’ve been exposed to. A former boss of a boss was worth well over $100 million. But he compared himself to literal billionaires that were in his kid’s social sphere and didn’t consider himself particularly wealthy because he didn’t have a private jet like they did.

[bltn]

You say you don’t know how to be rich, but the beauty of it is that you get to do it your way. There is no one right way. Find a way that is consistent with your values and preferences. The book “We Need to Talk,” by Jennifer Risher describes how she felt she needed to “do rich right” and later she and her husband, who was raised poor, learned their own way.

Annette Louisan

You are well read! I m retired and I m not sure I have time to read all the excellent books you recommend. Thanks for these suggestions.

[strummer6969]

How are these folks passing on wealth without tax issues?

• Shell companies and tax shelters
• Business succession planning
• Sophisticated trusts and life insurance policies
• Offshore accounts
• Fine art stored in tax-free ports
• Tax free, annual family gifts

And many other ways.

There are numerous companies, ranging from entirely above board to "what happens in the Caymans, stays in the Caymans," that help the rich hide their money and avoid taxes.

Maybe the offshore thing was big until the IRS started cracking down like a decade ago. If I were mega rich, I don't think the risk to reward would be worth it but who knows what motivates people to do these things. For the less than mega rich, you can pass on $25M without paying estate tax. So there are plenty of legal ways to minimize or eliminate succession taxes without resorting to shady dealings.

[PotashDoggerd]

For clarification, I don’t really feel the need to keep up with their spending. Our tastes are modest, so it works out to save a bundle and roll in used toyotas.

Based on what you're saying, I think this might be one place to reasonably loosen the purse strings when the time comes. If you want/need a new car, go for the new Toyota or even new Lexus -- the safety benefits alone may be worth it for protecting your family, and so long as you don't develop a luxury car collection (i.e. you buy only as many cars as your family reasonably needs), it will have a de minimis impact on your financial progress. I'm doing nowhere near as well as you are (although I'm on a pretty decent path), and when we buy cars we buy new (and then drive them for over 10 years).

Absolutely agree that with that kind of cash to spend, OP should definitely get new vehicles with safety in mind--Toyota SUV or cross over. It will have all the newest safety features and will be highly reliable for many years. I am a used Toyota fan myself but if I could afford it I would get new vehicles for my family simply to have the cars in the best possible tip top shape and all the newest safety features. And we don't have an SUV at the moment but I would probably get those for the sake of the additional versatility and additional metal around my precious family members, and better visibility than a sedan.

[NiceUnparticularMan]

There is no secret, at least no "secret" we don't already know here.

(1) Get a high(er) income career.

(2) Live below your means and save.

(3) Invest your long-term savings in a reasonably diversified way.

That's pretty much it, the rest are basically details.

Particularly recently in the US, this "secret" plan has generated a lot of extra wealth, meaning people following this plan are not just preserving the real value of their long-term savings, they are experiencing a lot of real value growth with their long-term savings.

People can then do a lot of different things with this extra wealth--live a more luxurious lifestyle and/or retire early is one sort of option. But, they can also give some, maybe a lot of it, away. And often they give a lot of it to their kids.

OK, so you are following the "secret" plan yourself now. Like others suggested, obviously the first thing you should do is learn not to care what other families are doing. It isn't your business and only rarely will what other families are doing be useful information for your own personal planning.

But I do think you have some important choices to make, namely what do you REALLY want to do with your extra wealth?

It seems, for example, you mostly plan to give it to your kids. Which in some ways is an "easy" choice, but is it really the best choice? I think there are specific ways in which parental wealth can reasonably help kids, but I also personally worry about the possibility it sometimes can inadvertently lead to worse lives.

So there are two things I would at least suggest you think about seriously.

One is focusing on shared experiences with your loved ones, including family, friends, and so on. The goal isn't to spend money per se, but if spending some of your extra wealth can give you some really cool experiences to share and talk about and so on, that is often a pretty good use of your wealth. And in fact your time, because your time is a scarce resource too.

A second is giving to "strangers" in need. There are many, many possible variations on this theme, and again I think the most rewarding can involve giving not just your money but your time too. But generally speaking, this can not only make others happy, it can help make you happy, and indeed can help inspire your kids to live more happy and fulfilling lives themselves.

And to me, that is the REAL "secret". Many people who are wealthy do not seem so happy or fulfilled anyway. So how to turn wealth into happiness and fulfillment is not an easy task, and learning how to do that may be your most important task.

[PotashDoggerd]

Comparison is the theft of joy. Spend some of your money on a therapist. I don't mean that in a nasty way; it can be a very positive thing to change your relationship with money, peers, etc.

OP may be experiencing cognitive dissonance because maybe he was raised with a "scarcity mindset" and therefore even saving hundreds of thousands a year isn't enough and will never be enough. He likely should be spending a lot more of his money on his family's current consumption, but can't bring himself to do so based on things his parents inculcated in him that may not be true for someone in his situation--like the PP who told his surgeon daughter that she has to "save 50% of her salary." That kind of ingrained toxicity regarding "not having enough money," or worrying so much about what his peer group does or doesn't have in comparison to himself, indicates this is more a psychological than a personal finance issue.

After all, if you're saving $500,000/year you're already in the 99th percentile of global wealth and income.

Why isn't that ENOUGH, OP? That's the question OP really needs to answer....not how his friends are paying for their lives...why does OP feel deprived in some fashion despite his vast wealth? Possibly because he's not spending enough of it to enjoy his life RIGHT NOW.

[Nowizard]

A different view:
Your post is generally being responded to as if it were solely financially based in ways that are consistent with the purpose of this site. However, not being familiar with finances is a common occurrence among smart, well-educated, young people who came from abject poverty and those who came from well-educated families that had limited financial resources for varied reasons. Fortunately, learning about investing is in your wheel house since the majority of it is cognitive, though there is investor psychology that can support or detract from the process for everyone.
Ultimately, the key is not going to be how to invest but how to continue growing into a life that was different from those around you. I can assure you from my prior profession that there are many financially successful people who appear to be without any issues whatsoever. Some are dealing with a range of issues including efforts to appear to have all aspects of life together to those who believe they are imposters living in an almost alien, at least to them, world. One suggestion is that you have not only exceeded your childhood upbringing and those with whom you associated but have done so by a very significant margin. Not only that, but you have done so at a young age. Those are wonderful achievements .
The financial piece will come together, and your awareness of your social concerns are an introduction to another step in life. You are the one who determines whether you are dealing with a natural evolution that everyone deals with as they enter the phase of life where there are more expectations for creating your own structure or whether it is more than that. The biggest issue is definitely not in the financial area but in connecting it with other aspects of your life. In that sense, it is your unique narrative, and some of the answers you seek are right here with a great site of wonderfully helpful people who are likely to focus on finances while this post is focused on what is between the lines.
Tim

[PotashDoggerd]

In 2021, about 62 million adults had a net worth of $1,000,000 USD or more, world wide.

Also, 2.82 billion adults worldwide had a net worth less than $10,000 U.S.D.

OP, maybe you should try to expand your horizons and take a look at the "bigger picture"?

[Dave55]

You say you don’t know how to be rich, but the beauty of it is that you get to do it your way. There is no one right way. Find a way that is consistent with your values and preferences. The book “We Need to Talk,” by Jennifer Risher describes how she felt she needed to “do rich right” and later she and her husband, who was raised poor, learned their own way.

+1 This is brilliant.
Dave

[Firemenot]

Being that you’re a doctor, your “rich guy secret” is probably become a business owner (i.e., own a decent share of a medical practice). Grow the practice to point where it’s a desirable acquisition target. Ultimately sell out the practice to private equity or the like.

[teamDE]

I think here's' a lot of income inequality going around these days, particularly around tech. The recent prevalence is unique in history I think where say a group of friends who grew up together from similar families can suddenly have immense disparities in income. We literally make 15x what some of our friends do, teachers vs tech sector. We're the same people, all working hard, all have work stress, etc. It does make one feel sorta guilty. I will say that I have zero desire to live a "real housewives" lifestyle.

[RJC]

This is a reason why we didn't move to the wealthiest zip codes of our state. The schools were well funded and were always ranked high; however, we did not feel comfortable around all the entitlement and the lack of economic/social diversity.

[Aged Maduro]

I highly recommend an author named Byron Tully who wrote "The Old Money Book" and "Old Money Style". The old money ethos is all about thrift, understated elegance and cultivating the virtues. The best part is that this lifestyle is more conducive to building and preserving wealth. It is about investing in high quality goods, habits and relationships that will last a lifetime. The best lesson learned from these works is that you don't need generational wealth to adopt this lifestyle, only the right mindset. And that mindset will lead to generational wealth.

[Minderbinder]

I live in an extremely affluent community full of people doing what you're talking about and work with similar types.

I drive an old frigging car and change my own oil in the driveway of said affluent community.

My advice?

You do you. No one really cares about how much you spend other than you. In the long run you and your colleagues will be equally dead in the same soil so just be true to your own principles.

[NotWhoYouThink]

OP, congratulations on your career success, and thanks for taking the social risk of starting this interesting thread.

Good points I've seen here -
- Staying married does a whole lot of good in maintaining your wealth. It also takes focused effort, so remember to focus on that.
- It is really hard to tell looking in from the outside who has money to burn and who is about to drown in debt. So don't worry about figuring it out from others, but make sure you are taking care of yourself.
- There is nothing intrinsically good about extreme saving, or bad about lavish spending. Find a lifestyle you can enjoy and feel comfortable with, and don't worry too much about what others do. It might be helpful to try splurging on something to see whether you get a Eureka! moment of why this is a great use of money, or whether that type of spending just makes you feel empty. Plenty of people on this forum prefer coach airline seats even on long flights, even though they could pay for business class and still have millions left in their estate. I think they are bonkers, and they think I am profligate, and it's all ok because I'm managing my money and they are managing theirs.
- Get in the habit of giving some away, if you are not already doing that. And writing checks is great and more of us should do more of it, but first do the research (or find someone you trust who has done it) to make sure your contributions will really improve a problem area you care about. That helps to make the money you earn feel more meaningful.
- Good luck with your kids! It's hard to grow up poor, and hard to grow up rich, because it's hard to grow up. Lots of rich kids flounder, and lots of them soar. Same with poor kids, really. So good luck!

[hoos09]

1. How rich is generationally wealthy, in dollars?
2. Is there an estate planner I should be talking to before my kids grow up (so we can borrow their tricks)?
3. I tend to distrust financial professionals, since my ignorance seems like a vulnerability, but do I need someone who works with rich people? If so, when? I’m not worth more than my umbrella policy yet, so asset protection hasn’t been top of mind.

Help me out. Who can relate and who did you talk to?

1. As my father used to say, "rich is relative." Though I think most banks/wealth managers still classify UHNW as $30m+ in investable assets.
2. If you don't have a will in place, you absolutely should talk to an attorney and an accountant and set one up. They can talk you through options for setting up trusts, tax planning, etc.
3. Find a fiduciary. Do not even take a meeting with someone who is not a fiduciary.

Other comments: if you look for friends based on income, you will end up with a circle who is defined by their income and not much else. As others have said, find your hobbies and make friends through hobbies, whether those hobbies are yours, your partner's, or your kids'. You need to find what you enjoy doing in life and spend without guilt on the things you truly enjoy. Outsource tasks that take up your time and that you don't enjoy (e.g., lawn care / landscaping, house cleaning). Think about what you want to leave your kids. What does that mean? It probably means private schools, summer camps and trips, college and graduate school paid for (probably for grandchildren also), and a down payment on a house. I grew up with a lot of rich kids, including multiple children of billionaires, and in my experience those with unlimited *access* to money tended to be without purpose, drive, or genuine happiness. I would focus on giving yourself more quality time to make memories with your kids at every stage of life rather than simply acquiring a large pile of money to hand down to them.

[nchunter]

I find this topic fascinating, because in all honesty, the folks on this site tend to skew towards ultra conservative with money and more than likely will have "oversaved" relative to their spending habits. I've been privy to a similar experience and while we as a collective tend to think all these people are spendthrift and wasting money, they do seem to get wealthier. I've just witnessed it too many times.

I think the problem you are having and I include myself is that I think like a poor person. By thinking poor we view money as finite and easily exhaustable. The wealthy are always looking at ways to make more.

I can see it with myself and other here. The truly wealthy I know, and yes I know 3 truly wealthy families, are always adding to their net worth.
So for example they send their kid off to college, they buy a house and at the end of the 4-5 years, they sell the house for probably more than they paid. Most here would scream, yes but try doing that in 2008, but our own fears keep us on a narrow path. By most measure even university housing been pretty good ROI. Go back and look at house in most major metros just 5 years ago and you would have made money.

I also save 300k per year yet cut my own grass. It's a curse but I slept well all through 2022. But I also needlessly stress out over spending 5k to repair a roof. It's stupid and I know it. I guess what I'm saying is I'm winning and grateful but realistic in that I'm not going to hit a home run either.

For once I listened to my wife is who more sensible than me and purchased a beach place, cash, in April 2020. I took risk I could afford and quite frankly its doubled in price and even though things have slowed way down. I am pretty confident my kids will keep it in perpetuity because they are more than likely priced out unless they hit it big.

We tend to put most in boxes to justify our behavior but clearly you are in a profession that has high net worth folks. Try to learn the good parts like efficient tax planning.
Also don't be scared to take some risk.

[CletusCaddy]

We tend to put most in boxes to justify our behavior

Your entire post is fantastic but this line is particularly good!

[tedgeorge]

I think the problem you are having and I include myself is that I think like a poor person. By thinking poor we view money as finite and easily exhaustable. The wealthy are always looking at ways to make more.

Put me in that boat too. I'll spend way too much time trying to find a deal on something to save a couple of bucks when really I can afford it. I'm coming around to spending more because I can but it's always in the back of my mind.

For the second part, I think it's also fair to say the wealthy have more opportunities to make more money if they want. Some of my neighbors are getting really large bonuses and draws from their businesses and that's really just fun money to them on top of their regular income. What they do with that is really irrelevant to their basic needs.

Hopefully the OP will come around to realizing their doing great and that saving $490K per year is still ok. Or even $450K.

I mean, take that $50k and you could go crazy and go do Disney twice in the same year!

[Valuethinker]

4. Are these folks way more diversified than my 3 fund? I mean, I know what my portfolio looked like in 2022, and I damn sure wasn’t selling assets to buy a 2m house with cash in a seller’s market or adding my name to the Tesla plaid waitlist. But they were.

Help me out. Who can relate and who did you talk to?

The first thing you should know, and William Bernstein is very good on this, that the whole Private Wealth Management industry exists to extract fees from these families. Paying 1%+ pa for "privileged access" to "special" investments like Private Equity & Hedge Funds (which themselves charge fees of 2%+). There's a thread over on the International investors sub-board about having a PWM in Switzerland and being in too many funds.

The reality is that the 3 fund portfolio, with very low costs, is likely to do as well or beat those "privileged" portfolios.

The second thing is there are a lot of people out there who are actually living quite desperate lives. Making good fractions of $1m but spending it.

I recommend the passage in Tom Wolfe Bonfire of the Vanities about how Sherman McCoy, Master of the Universe, burns through a $1m pa income *then* (the mid 1980s). That's like over $2m now. It was based on an Andrew Tobias article "Getting by on $1m pa" or some similar title.

But also a very similar riff by Risk trader Paul Bettany in Margin Call, the best movie I have ever seen about the politics of financial institutions (it's based on Bear Sterns or Lehman Brothers on the brink of bankruptcy). How to spend $1m pa.

So don't be surprised if you ever discover some of these people are, in fact, borrowed to the hilt.

Among the rich. Well if you have lots of grandkids, and they all go to private 4 year colleges and then a masters in Film Making at Columbia, they will burn through a lot of that trust fund. My father came from such ilk, and by the time he graduated (from a top British boarding school) the generation had to actually go out and earn a living. Dad grew up in 8-10 bedroom houses, with servants etc. His parents hunted (on horses, with hounds - foxhunting) every weekend, etc.

We used to walk by big houses at home, and I'd say "wouldn't it be great to live in that house, Dad?" And he would say "I would never want to live in a big house again. Always something that needs fixing".

It was only when I started to pay the bills for a (small) Victorian row house that I really understood what he meant. Money pits.

There have been various articles about the Kennedy clan, down the years. Suffice it to say that Joe Kennedy was rich, but that by now, 4th-5th generation, that money is quite widely dispersed.

Your friend on the short list for the Tesla Plaid should be reconsidering their priorities. Owning a car to impress others is one of the main warning signs. (I have cousins who are truly wealthy: they drive clapped out Land Rovers, which they can expense through the farms they own - where they do spend money is on very nice, bespoke suits - because that's a signal that other truly upper class people can read, which is invisible to the hoi polloi/ masses).

Houses are (usually) a better store of value but in fact in housing the mantra "Location, location, location" rules. Thus you never have the best house in a neighbourhood or street. Instead you have an OK house in a better neighbourhood or street. Because that holds its value better- it is the low beta stock, the Warren Buffett investment in the housing market. So even if you "win" the housing game, you lose - because you should have bought a less good house in a better location.

[Rocky Mtn Man]

First world problem here, but I’m looking for feedback from new money folks. I don’t know how to be rich.

The overall tone of your post is one of immense insecurity despite, at a wild guess, your probably having more material success and wealth than 99% of people on the planet. Stop mentally (or on internet personal finance forums) comparing yourself to other people that you are afraid might have even more over-abundant wealth than you apparently do. If you really "don't know how to be rich" than give your money away or get an expensive divorce (or two or three) and your problem will be a smaller one. Or, less dramatically, retain a fee-only financial planner to address your legitimate financial issues. Your concern over where you "stack up" compared to your personal and professional peers is not a legitimate financial issue.


I came up very blue collar, no frills, first generation educated. As a kid there were countless lessons on frugality, but investing was a foreign concept. Having entered a world of urban professionalism, I now find myself surrounded by kind and thoughtful colleagues / new friends who come from family money and spend like there’s no tomorrow. I out earn all of my close friends by a wide margin (even in my field), but spend much less. I’m not a tightwad, by any stretch. Also not looking for FIRE, but to build material generational wealth.

O.K. assuming it's true, why is it at all important to you that you "out earn all of my close friends by a wide margin (even in my field)". It's boasting whether or not it's actually true. But what they do or don't earn or how much their assets might be is none of your business and should be of no concern to you. Frankly, unless all your friends have been giving you access to their tax returns and personal financial statements, you really have insufficient data on which to draw any conclusions on your comparative wealth, which is not important anyway, except (as noted above) if you are immensely insecure about your status for some reason.

We hide our income from family and old friends, to avoid alienating ourselves. They know I do well, but have no idea to what extent. Our life choices look like a nice step up, but not a dramatic leap.

So? Why is it important to you that your friends and family are not clearly aware of how financially successful you are? If it's that important I suppose you could tell them, but you're probably not willing to divulge that information to them for reasons of personal privacy. Yet you seem to know the financial situations of all of your friends, family, and colleagues. Not clear why you know about their situations but they don't know about yours. You sure about all that?

Likewise I can’t relate to my professional friends, many of whom took gap years abroad, bought 7 figure first homes out of training, had minimal or no student loans, haul toddlers in luxury cars, vacation amongst the elite, and collect fine wines, etc. It took a few years for me to realize that their spending levels were comfortable, despite earning 1/3 of my income, because they stand to eventually inherit large sums from one (or both) sides of a marriage. While we get along great, we also can’t really talk about money because our backgrounds differ so much.

The fact is no one else at all cares about how much money you have unless they are your immediate family (so that your wealth directly impacts their lives), or, they have some expectation or hope that somehow they will benefit from your wealth, directly or indirectly. Why do you care so much about their wealth and how it stacks up against yours? Is this a contest of some kind?




How are these folks passing on wealth without tax issues?


Your friends' finances are none of your dang business. Worry about your own finances. If you want to know how to minimize YOUR taxes, hire an estate planner and other tax professionals to advise you on your own financial situation.


There’s no way people come fresh out of residency and have such a pile of cash to buy luxury homes over the past few years.None of your business where others get their money from.Do parents help buy these homes and cars and nannies and trips?None of your business, but if you care that much, why don't you ask them?Is that the way things work? Again: none of your business, if you're talking about other peoples' financial situations.

Not bitter,O.K. thanks for clarifying that, but nothing you previously wrote would cause a rational person to think you had any reason to be bitter, about anything but I have busted my ass working since I was 15 to save for school and keep loans low, graduate early, pick up extra shifts to pay off said loans, build a nest egg, etc.How.your.friends.and.colleagues.pay.for.their.lives.is.none.of.your.business. Repeat that phrase to yourself as many times as necessary for it to really sink in. Honestly I feel tremendously blessed to be in a fulfilling career that earns well beyond what I ever thought possible as a kid. I want to learn how these people make the sausage.Why? I’m doing the boglehead and WCI thing faithfully, saving over 500k per year, and still don’t feel like I can run with people who earn less.As noted, you are tremendously insecure with no rational reason to feel that way. My parents always told us that everybody who looked outwardly rich in any ordinary job was in debt, but I no longer buy that. There are a ton of people who are just generationally wealthy. We seem to have so much catching up to do. I know zero people with my life trajectory, since I skipped several generations of wealth progression.It's great to be wealthy, or probably is, I wouldn't know personally, since I'm not anywhere near wealthy. But this obsession with how and where you stack up against other wealthy people doesn't sound too healthy.

1. How rich is generationally wealthy, in dollars?Doesn't matter. Make up your own answer the same way a lot of Bogleheads decide how much international equities they should have.2. Is there an estate planner I should be talking to before my kids grow up (so we can borrow their tricks)?No, but you should actually hire (not just talk to) a fee only financial planner who can probably actually give you an objective picture of where you stand compared to your peers, and also advise you on whatever else is bothering you. I have to tell you, if you can save $500,000 annually, then you are well into the 99th% of global wealth. If that's not enough...well, then you need to be very creative and have a good deal of luck and found your own high tech company, don't lose all your equity to the venture capitalists, and shepherd the whole thing through to a huge IPO, without getting arrested for financial fraud like Elizabeth Holmes or Sam Bankman-Fried. Better get started with that right away, one of your friends is probably already doing it and will get his first billion before you do! Couldn't let that happen. Would bring shame upon the family/s

3. I tend to distrust financial professionals, since my ignorance seems like a vulnerability, but do I need someone who works with rich people? If so, when? I’m not worth more than my umbrella policy yet, so asset protection hasn’t been top of mind.

OP, you save $500,000/year. Take $10,000 and pay for consultations with a dozen or so fee-only financial planners. I'm sure you'll find one you click with. Take it from there.

4. Are these folks way more diversified than my 3 fund? I mean, I know what my portfolio looked like in 2022, and I damn sure wasn’t selling assets to buy a 2m house with cash in a seller’s market or adding my name to the Tesla plaid waitlist. But they were.

People who seem more wealthy than you think they should be, may have lots of stock options from a start-up that was very successful, so they took a lot more risk than a three fund but got rewarded. But selection bias and survival bias means you don't see all the failures because you don't seem too focused on the vast majority of your past colleagues & friends who make much less than you do and can't save anywhere near $500,000/year.

Help me out. Who can relate and who did you talk to?

Have you tried a talking to a therapist?

+1 This is not a financial issue. Maybe OPs parents raged against "rich people" their entire childhood and now he's one of them.

[Valuethinker]

I also save 300k per year yet cut my own grass. It's a curse but I slept well all through 2022. But I also needlessly stress out over spending 5k to repair a roof. It's stupid and I know it. I guess what I'm saying is I'm winning and grateful but realistic in that I'm not going to hit a home run either.
.

Your examples were about making money in real estate. I agree a lakefront property or sea front one, where there are planning constraints which prevent further development, can be a good investment. Generally though I caution against tying up too much money in real estate - the reason Buffalo NY has such amazing Victorian houses is that it was once the city with the most millionaires in all of North America. But it is not so, now. Even Grosse Point MI, where all the GM & Ford execs lived, has not necessarily a good investment over time. After 2008 I read about people going bankrupt - having lost their executive jobs at the big carmakers.

We all know what it is worth if you owned a house in San Francisco in 1970, say, and still do now. But New York City at that point was going to the dogs - it was filthy & unsafe and beginning a long downward spiral. In 1976 it nearly went bust. It wasn't really until the 1990s with the "crime bust" that it became certain that the city had turned a corner. Lots of other great North American cities did not do so (particularly in the Midwest). Montreal was a nicer and richer city than Toronto in 1960, but houses since then in Toronto have probably gone up about 100 times, and in Montreal not more than 50 times.

It was a wrench for us to employ a cleaner for our house. And I don't make anything like what you do. It has nonetheless been a huge improvement to our lives not to spend half a day every other weekend pushing the vacuum round. And the house has never been tidier or cleaner. Benefits have greatly exceeded costs.

But one should also look at it that one is providing employment for someone who would not otherwise have that work.

The roof? You have to fix the roof. Get 3 quotes and go with the person you think can actually do the job.

I think my cousin told me that a loose rooftile cost him c £100k in damage due to timber rot (the house has been in the family for at least 150 years). So you have to look at the benefit, as well as the cost.

I would reckon $1 spent on your roof could save you $5-10 in future expenses.

[cchrissyy]

How are these folks passing on wealth without tax issues?

i find it interesting this question made it into your post.

i think it shows how much you are wildly guessing about other people's situations.

there is no way you have actual tax knowledge on other people's inheritances or estate planning, yet, you assume they are "without tax issues".

more likely, you have imagined a fictional situation.

second-most likely, people's inheritances and estate planning do include tax issues

[sailaway]

From a sociological perspective, generational wealth is all of those little lifts you are able to give your kids (and/or grandkids). If they graduate debt free and you help them with the down payment for their first home, you have passed on generational wealth that eclipses most. What the kids do with that determines where the wealth goes from there whether you give them $10k or $10M.

[bltn]

First world problem here, but I’m looking for feedback from new money folks. I don’t know how to be rich. I came up very blue collar, no frills, first generation educated. As a kid there were countless lessons on frugality, but investing was a foreign concept. Having entered a world of urban professionalism, I now find myself surrounded by kind and thoughtful colleagues / new friends who come from family money and spend like there’s no tomorrow. I out earn all of my close friends by a wide margin (even in my field), but spend much less. I’m not a tightwad, by any stretch. Also not looking for FIRE, but to build material generational wealth.

We hide our income from family and old friends, to avoid alienating ourselves. They know I do well, but have no idea to what extent. Our life choices look like a nice step up, but not a dramatic leap.

Likewise I can’t relate to my professional friends, many of whom took gap years abroad, bought 7 figure first homes out of training, had minimal or no student loans, haul toddlers in luxury cars, vacation amongst the elite, and collect fine wines, etc. It took a few years for me to realize that their spending levels were comfortable, despite earning 1/3 of my income, because they stand to eventually inherit large sums from one (or both) sides of a marriage. While we get along great, we also can’t really talk about money because our backgrounds differ so much.

How are these folks passing on wealth without tax issues? There’s no way people come fresh out of residency and have such a pile of cash to buy luxury homes over the past few years. Do parents help buy these homes and cars and nannies and trips? Is that the way things work? Not bitter, but I have busted my ass working since I was 15 to save for school and keep loans low, graduate early, pick up extra shifts to pay off said loans, build a nest egg, etc. Honestly I feel tremendously blessed to be in a fulfilling career that earns well beyond what I ever thought possible as a kid. I want to learn how these people make the sausage. I’m doing the boglehead and WCI thing faithfully, saving over 500k per year, and still don’t feel like I can run with people who earn less. My parents always told us that everybody who looked outwardly rich in any ordinary job was in debt, but I no longer buy that. There are a ton of people who are just generationally wealthy. We seem to have so much catching up to do. I know zero people with my life trajectory, since I skipped several generations of wealth progression.

1. How rich is generationally wealthy, in dollars?
2. Is there an estate planner I should be talking to before my kids grow up (so we can borrow their tricks)?
3. I tend to distrust financial professionals, since my ignorance seems like a vulnerability, but do I need someone who works with rich people? If so, when? I’m not worth more than my umbrella policy yet, so asset protection hasn’t been top of mind.
4. Are these folks way more diversified than my 3 fund? I mean, I know what my portfolio looked like in 2022, and I damn sure wasn’t selling assets to buy a 2m house with cash in a seller’s market or adding my name to the Tesla plaid waitlist. But they were.

Help me out. Who can relate and who did you talk to?

I can relate through our family. I came from a lower middle class background. My parents' financial goals were to send their kids to college and later not become a financial burden on their children. They succeeded through frugal living.

My wife and I have never had your saving capacity, but we have lived fairly frugally, and have lived below the standard of a number of my work peers. I m also interested in establishing a legacy for a modest degree of family financial security for my kids and their children.

There is a concept in economics called consumption-smoothing. Yes, it is important to save for the future, but the present is important, too.
The assets we save are for the purpose of present and future consumption purposes. Radically under-consuming vastly beyond a need to do so can lead to some pretty massive regrets in old age, and lots of unnecessary drama and life-stress along the way, not just for yourself, but for your family too. Generally, most people's regrets revolve around things that they didn't do or never got around to doing or were afraid to do, the "what ifs"? Or stated another way, a well-lived life, a happy life, usually requires a balanced point of view, not an extreme point of view--you don't want to massively overspend, but you shouldn't want to massively under-spend, either. You really have to sit down and evaluate what your values are, not what you think they are supposed to be. That can be very difficult to do, as it involves lots of emotional baggage for most people.

My daughter may be in a situation somewhat like yours.We are all individuals, everyone's situation is different. How big one's income is, how big the pile of assets accumulated, is merely one dimension. There are many others. She comes from a solid middle class background, but she has just finished a surgery fellowship and gone into practice.So then a reasonable assumption is that your daughter is highly skilled, very motivated, very intelligent, very dedicated, and has selected a profession which has a very good chance of her winding up in the 99th% of global annual income and total wealth accumulation, perhaps not immediately, but certainly it's a good likelihood at some time down the road. And while in training she was better off than some of her peers because her husband is a senior software engineer with a FAANG. O.K. bonus, her spouse is about the same economically and professionally as she is, but in a different profession, so as a family they definitely look very likely in the 99th% of global income and assets during the course of their careers. At Christmas, during a visit, I mentioned a couple of things to her about saving. Always an appropriate discussion while waiting for Santa to climb down the chimbley. When and if she and her husband save 5 million dollars, 3% withdrawn annually to live on is 150,000 a year. Before taxes. I told her she needs to save 50% of her take home pay. She understands. No, obviously she decidedly does not "need to save 50% of her take home pay." That's completely arbitrary, how did you come up with that? She's an adult. It's up to her and her spouse to decide how much she/they "need" to save. It's O.K. to make suggestions, not O.K. to lay down fiats, not to someone as successful and competent as your daughter has been, and is. Please respect her accomplishments and try to treat her more as a peer or adult when speaking of financial matters. It's basic respect, it sounds like she deserves it. She and her husband bought a low 7 figure home in a HCOL area. Good for them. I hope they got a nice big home exactly what they wanted. They worked hard and deserve it. They can afford the payments, but that seemed awfully extravagant to me.Stop being the parent who constantly undermines and undercuts their adult child's reasonable financial decisions. Her husband puts up with me talking about finances with him, but I don t think he likes those discussions. Of course he doesn't. He tolerates your "advice" because your his wife's parent. Fortunately, my daughter takes my advice about saving a big part of her income. We ll see how things work out.

Living below ones means and not letting others know about your growing wealth is very wise. Don t worry about how others spend. I always felt superior to peers with somewhat comparable incomes but much higher lifestyles than mine. That has worked out well for me and my wife.

Best of luck with your accumulation. I think you ve got the right inclination about your finances. Invest in index funds and don t get into more complicated financial schemes. You don t need to.

Useful recommendations in some circumstances. Not so much for my family.

Agreed that balance is very important in living a life. "Radical" saving is detrimental, as are most "radical" things. An appropriate level of saving depends greatly on the amount of income generated as well as the lifestyle to which one has become accustomed. Our family never depended on spending to provide for our happiness. Only a certain level of comfort, of which financial security was an important component.

I don t know what values you think are important to instill in your children, but with mine, I am trying to help them avoid learning a few things the hard way, as I did.

Making money and having money are two different things. And a higher expense lifestyle requires a larger financial accumulation to support it . And time in the market is a very important factor in savings growth. Common sense for most on this forum, but not so common among many high earners.

As to my daughter. She is just getting started in her career in her late 30 s. And my son in law s job causes him significant stress, which may not bode well for its longevity. Saving 50% of their current income just seems to be common sense good advice, and not particularly restrictive given her recent increase in income. Of course my daughter may do as she wishes. But she and I have always respected each other s points of view. I m sometimes surprised how often she agrees with me after she considers our conversations.

Scolding about my advice to my daughter is totally inappropriate in this and other cases. There are no laying down fiats. My daughter, as bright as she is and as well as she understands our finance conversations, doesn't t care that much about money. Immediately after our conversation about saving 50% of her take home pay, she went on her phone and adjusted her automatic deposits from her bank account into her Vanguard account to the 50% level. In 90 seconds. She seemed to appreciate the guidance in an area she hasn't t really thought about lately. She has a 2 year old. My son in law I try to interact with as he feels comfortable. Nothing further, although we all benefit from good role models, which he hasn't t had for some time.

Now to mention a misconception that pops up in this forum from time to time, as it did in your post. Equating spending money with happiness is wrong. Fortunately it was not a big priority in our family and we seemed to be pretty happy. Maybe the difference between extravagance and spending wisely. Being materialistic and being happy are two different things.

As to consumption smoothing, the concept may have some usefulness in a situation with a stable moderate income and long term savings prospects. With big increases in income, increased savings percentages only make sense. I read somewhere that Elon Musk lives currently in a ver small modest house. And Warren Buffett lives in the same relatively modest house he bought in a nice suburb of Omaha many decades ago. Would consumption smoothing be a good idea for them?

Most family "fortunes" don t survive the third generation. Is that due to lack of intelligence in our offspring, or lack of information? I m simply trying to make my kids lives better by providing information that I got through trial and error.

[PotashDoggerd]

I also save 300k per year yet cut my own grass. It's a curse but I slept well all through 2022. But I also needlessly stress out over spending 5k to repair a roof. It's stupid and I know it. I guess what I'm saying is I'm winning and grateful but realistic in that I'm not going to hit a home run either.
.

Your examples were about making money in real estate. I agree a lakefront property or sea front one, where there are planning constraints which prevent further development, can be a good investment. Generally though I caution against tying up too much money in real estate - the reason Buffalo NY has such amazing Victorian houses is that it was once the city with the most millionaires in all of North America. But it is not so, now. Even Grosse Point MI, where all the GM & Ford execs lived, has not necessarily a good investment over time. After 2008 I read about people going bankrupt - having lost their executive jobs at the big carmakers.

We all know what it is worth if you owned a house in San Francisco in 1970, say, and still do now. But New York City at that point was going to the dogs - it was filthy & unsafe and beginning a long downward spiral. In 1976 it nearly went bust. It wasn't really until the 1990s with the "crime bust" that it became certain that the city had turned a corner. Lots of other great North American cities did not do so (particularly in the Midwest). Montreal was a nicer and richer city than Toronto in 1960, but houses since then in Toronto have probably gone up about 100 times, and in Montreal not more than 50 times.

It was a wrench for us to employ a cleaner for our house. And I don't make anything like what you do. It has nonetheless been a huge improvement to our lives not to spend half a day every other weekend pushing the vacuum round. And the house has never been tidier or cleaner. Benefits have greatly exceeded costs.

But one should also look at it that one is providing employment for someone who would not otherwise have that work.

The roof? You have to fix the roof. Get 3 quotes and go with the person you think can actually do the job.

I think my cousin told me that a loose rooftile cost him c £100k in damage due to timber rot (the house has been in the family for at least 150 years). So you have to look at the benefit, as well as the cost.

I would reckon $1 spent on your roof could save you $5-10 in future expenses.

This stuff is all psychological when you get to these income/savings/and asset levels though. It's not financial stuff that's at the heart of the apparently high level of dissatisfaction and (let me say it) jealousy of people who have more than you do.

For someone who has been hitting enough home runs financially to be able to save $300,000--heck, to save $300,000 in a single year, ever, much less consistently--it obviously makes no sense at all to mow one's own lawn. That time would be more productively spent 1) relaxing and destressing to improve efficiency during working hours; 2) if you have to work on something, then work on whatever gig allows you to save $300,000/year! And it's probably not do it yourself landscaping work!

As far as getting the roof fixed--that's a necessary expense to preserve the value of your real estate.

The only reason it's difficult to do is because you didn't include periodic expenses such as roof repair or replacement in your mental spreadsheet.

Basically it's a kind of "magical thinking." Or penny wise and pound foolish.

The people with this sort of "problem" actually need to save LESS, not more, and do some big time consumption smoothing.

They are unhappy because they DO want to spend more of their money on current expenses--not just roof repair and lawn service and those sorts of things, but fun stuff, enjoyment in the here and now. But something in their upbringing has taught them that it is morally wrong to enjoy one's money in the present.

I wish these people with this problem would educate themselves a little bit more on concepts such as consumption smoothing and marginal utility, and they will maybe better grasp that it is pointless to defer consumption which can only take place in the here and now--ie. hiring someone to mow the lawn this week rather than doing it yourself--when one's future consumption is clearly massively overfunded, many times over.

[an_asker]

[...]
$400k total annual income. Is that crazy for two white collar professionals to be making? In my circle it’s basically table stakes.
[...]

I know I've always been underpaid (DW as well), but each day I get a data point that reiterates that!