Rich people are hoarding cash

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CyclingDuo
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Re: Rich people are hoarding cash

Post by CyclingDuo » Tue Sep 10, 2019 9:21 am

EddyB wrote:
Tue Sep 10, 2019 9:03 am
CyclingDuo wrote:
Tue Sep 10, 2019 7:04 am

•The Ultra High Net Worth market, in which net worth is between $5 million and $25 million, grew to 1,397,000 households, an increase of 47,000 from 2017.

Edit: The Ultra High Net Worth group listed above represents only 1% of US households.

•There are now 173,000 households with a net worth exceeding $25 million, an increase of 1,000 households from the previous year. In the 2018 Market Insights report, there was an increase of 16,000 households with a net worth exceeding $25 million, so the 2019 report shows the growth in that wealth segment, as well as in all others, slowed considerably.


Edit: This last group is a very small club representing only .13% of US households.
I don’t think it changes your point, but your percentages are off by a couple of orders of magnitude.
:beer

Corrected.
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ThereAreNoGurus
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Re: Rich people are hoarding cash

Post by ThereAreNoGurus » Tue Sep 10, 2019 9:22 am

greg24 wrote:
Tue Sep 10, 2019 9:19 am
ThereAreNoGurus wrote:
Mon Sep 09, 2019 10:32 pm
mrspock wrote:
Mon Sep 09, 2019 10:18 pm

Don’t let the Boglehead crowd skew your reality.... very few people will ever see 7 digits of investable assets.
I'm not so sure about that. According to this link: https://dqydj.com/net-worth-by-age-calc ... ed-states/

For those between the ages of 50-54 (excluding home equity) one million dollars puts you in the 90th percentile
55-59 85th percentile
60-64 84th percentile
65-69 86th percentile
70-74 86th percentile

I think that is more than a very few.
Spock said 7 digits of investable assets.

You list those with a net worth of 7 digits.

There is a HUGE difference. Many of those with a NW in the 7 digits are primarily driven by home equity.
All of those figures are with home equity excluded. (Post was edited for clarity)
Last edited by ThereAreNoGurus on Tue Sep 10, 2019 9:29 am, edited 1 time in total.
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Sandtrap
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Re: Rich people are hoarding cash

Post by Sandtrap » Tue Sep 10, 2019 9:24 am

greg24 wrote:
Tue Sep 10, 2019 9:19 am
ThereAreNoGurus wrote:
Mon Sep 09, 2019 10:32 pm
mrspock wrote:
Mon Sep 09, 2019 10:18 pm

Don’t let the Boglehead crowd skew your reality.... very few people will ever see 7 digits of investable assets.
I'm not so sure about that. According to this link: https://dqydj.com/net-worth-by-age-calc ... ed-states/

For those between the ages of 50-54 (excluding home equity) one million dollars puts you in the 90th percentile
55-59 85th percentile
60-64 84th percentile
65-69 86th percentile
70-74 86th percentile

I think that is more than a very few.
Spock said 7 digits of investable assets.

You list those with a net worth of 7 digits.

There is a HUGE difference. Many of those with a NW in the 7 digits are primarily driven by home equity.
Yes.
Good point to make that differentiation.
Especially in HCOL and UHCOL areas.
j :happy
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Jack FFR1846
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Re: Rich people are hoarding cash

Post by Jack FFR1846 » Tue Sep 10, 2019 9:25 am

goodenyou wrote:
Tue Sep 10, 2019 8:24 am
Maybe rich people will be highlighted on the show “Hoarders” where their homes are buried in piles of $100 bills. Can just imagine tripping over a large pile trying to get to the refrigerator!
That's what I pictured at first. Then I thought about it a little and realized that for myself, my HYSA would certainly be considered cash. With 2 kids in college, you better believe I'm hoarding cash. As the bills come in, I like to be able to pay them. But no.....there aren't piles of cash in my house to trip over. Maybe a pile of laundry that I need to put away. :P
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ThereAreNoGurus
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Re: Rich people are hoarding cash

Post by ThereAreNoGurus » Tue Sep 10, 2019 9:28 am

Sandtrap wrote:
Tue Sep 10, 2019 9:24 am
greg24 wrote:
Tue Sep 10, 2019 9:19 am

Spock said 7 digits of investable assets.

You list those with a net worth of 7 digits.

There is a HUGE difference. Many of those with a NW in the 7 digits are primarily driven by home equity.
Yes.
Good point to make that differentiation.
Especially in HCOL and UHCOL areas.
j :happy
The post was edited for clarity indicating that all percentiles listed exclude home equity.
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Re: Rich people are hoarding cash

Post by flossmoor » Tue Sep 10, 2019 9:36 am

Ferdinand2014 wrote:
Mon Sep 09, 2019 8:30 pm
Having lots of ready cash is a great thing.
Yep. I am a stamp collector. I remember an interview from one of the great old-time dealers from maybe 1960 where he was asked why he had succeeded where so many others didn't.

Never forgot his response: "I always made sure I had access to $50K at a moment's notice."

When bargains appear, you have to be able to grab them.

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Re: Rich people are hoarding cash

Post by WildBill » Tue Sep 10, 2019 10:34 am

Howdy

“Ready money is Aladdin’s Lamp”. Benjamin Disraeli

An example: During a financial crisis Disraeli managed to finagle the Suez Canal away from the French and the Egyptians. It was an acquisition of immense strategic value to Britain. He and the Rothschilds raised the money overnight. I still am awed at how he pulled that one off.

And our old friend Mr Buffet doesn’t mind having $ 100 Billion or so in the checking account. Ready to buy if the price is right.

Happy bargain hunting

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

WildBill
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Re: Rich people are hoarding cash

Post by WildBill » Tue Sep 10, 2019 10:37 am

Howdy

Correction.

Lord Byron said it first. Disraeli quoted him later re the purchase of the Suez Canal.

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

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Re: Rich people are hoarding cash

Post by zaboomafoozarg » Tue Sep 10, 2019 10:39 am

Portfolio7 wrote:
Tue Sep 10, 2019 8:20 am
Of the BH population that answered the survey, if you are 45 or older with $1M of investible assets, well... that puts you roughly in the top 15% of American households, but also in the bottom 15% of the BH group that answered this survey.
That's what I was thinking - anything below $1M is poverty-level on this forum :D

I'm certainly no millionaire but I've always kept a sizeable portion of cash and cash-like (probably around 5-10% of NW).

Partially because I was saving for a house, and partially because of starting my career in 2008 when multiple people I knew lost their jobs, were unable to find another, and lost their house.

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CyclingDuo
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Re: Rich people are hoarding cash

Post by CyclingDuo » Tue Sep 10, 2019 11:16 am

Portfolio7 wrote:
Tue Sep 10, 2019 8:20 am
Of the BH population that answered the survey, if you are 45 or older with $1M of investible assets, well... that puts you roughly in the top 15% of American households, but also in the bottom 15% of the BH group that answered this survey. Might be 10% and 5% respectively, but was just drawing a general picture.

However, one has to recognize that this view of NW includes the PV of SS and Pensions, which depends heavily on assumptions, and there are a wide range of reasonable estimates... I would guess at current interest rates that for most BHs it's a little less than $1M +/- a half million. Then there is the pension on top of that.

So $1M of investible at that age could put you in the bottom 30% perhaps, after adding SS (and pension if you have one.)

That still puts BHs quite a bit above mean, let alone median. (Which is hardly unexpected for a self-selected group of investors like BH members.)
Currently, looks like there are 87,507 registered members on the Bogleheads forums. Who knows how many read and follow the forums without registering as a member? I imagine there are plenty in that latter category.

What were the numbers in terms of how many people actually responded to that survey that was done a few years back before the moderators shut down such a survey from being conducted? Looks like 1101 members responded to the 2015 version according to this link (then people have kept responding over the years since then to bring the number up to 1400 with the last two respondents being one today, and one on Sunday):

https://docs.google.com/spreadsheets/d/ ... =630152586

We should also point out that the Boglehead's Investment Philosophy that is pointed out in the WIKI are principles designed for anyone to follow and build wealth so that their future could lead to also having amassed an investment portfolio of 7 figures if time, inclination, and enough household income to save over a long number of years is available to do so.

https://www.bogleheads.org/wiki/Boglehe ... philosophy

I would continue to argue for all Bogleheads to encourage, share stories of how each individual member accumulated over the years, and how long it took to build their wealth in hopes of focusing on other member's journeys that it can be done. At least that seems in my way of thinking to be a more positive mindset than scaring any member or potential member off of the forums when they read or think that everyone on these forums has large sums accumulated and they do not belong as if this is some sort of a special club.

Not sure a thread entitled "rich people are hoarding cash" is the most ideal subject for that process.

Here's to plenty of Boglehead current members (and future potential members) that are not there yet to arrive at that some point in the future! :beer
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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hdas
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Re: Rich people are hoarding cash

Post by hdas » Tue Sep 10, 2019 11:24 am

an_asker wrote:
Tue Sep 10, 2019 7:21 am
hdas wrote:
Mon Sep 09, 2019 6:39 pm
LilyFleur wrote:
Mon Sep 09, 2019 6:34 pm
The article defines high net worth individuals as have $1 million or more in investable assets. So, looking at that definition, we have a lot of those folks here at Bogleheads.
Perhaps, but 1mm is just the cutoff, median, #HNWI is way higher. Think ~ 8 million. I don’t know of any BH with more $$$$ than this. But I do know some ppl with that and more and they are not BH’s.

Cheers :greedy
What do you mean by the phrase "they are not BH's"? That they don't post here? They don't own index funds? They are not online? Or something completely different?

I recall seeing a thread or two trying to define a Boglehead. Maybe it is time to define an "unBoglehead" :-)
No index fund, Use outside handpick managers
Use alternatives. Hedge Funds, Private Equity
No DIY
Pay for boutique Asset Management services

Cheers :greedy
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hdas
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Re: Rich people are hoarding cash

Post by hdas » Tue Sep 10, 2019 11:26 am

Artsdoctor wrote:
Mon Sep 09, 2019 8:01 pm

Actually, there are quite a few Bogleheads with investable assets at > $8M. The diversity on the forum is pretty impressive.
Certainly, but i don't think they are representative. The 8 mill figure is what it takes to be in the 1% in general in US. Cheers :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

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Re: Rich people are hoarding cash

Post by Buysider » Tue Sep 10, 2019 11:32 am

I use that because several trusts that preen themselves on offering white-glove service to “the rich” name $30 million as the minimum. Bessemer Trust is an example.
Bessemer's average account size is well below that minimum. The allure of a special service is enough to get some people to pay more or really want to be "invited" to join.

Everything in financial services is negotiable, especially fees and "minimums".

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Re: Rich people are hoarding cash

Post by WhiteMaxima » Tue Sep 10, 2019 12:22 pm

When measure wealth, you have to use gold standard :sharebeer
40 years ago when gold was 35USD/oz, 1 mil USD = 28571 oz of gold
today gold is 1500USD/oz, you will need 28571x1500=42 mil USD to be qualified as a true millionaire.
If so, I guess 99% of all BHs are fake millionaires.

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Re: Rich people are hoarding cash

Post by TomatoTomahto » Tue Sep 10, 2019 12:31 pm

WhiteMaxima wrote:
Tue Sep 10, 2019 12:22 pm
When measure wealth, you have to use gold standard :sharebeer
40 years ago when gold was 35USD/oz, 1 mil USD = 28571 oz of gold
today gold is 1500USD/oz, you will need 28571x1500=42 mil USD to be qualified as a true millionaire.
If so, I guess 99% of all BHs are fake millionaires.
That chart was already making me feel like a pauper for not having $60M investible. I also can’t reach $42M. There’s no hope; woe is me.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: Rich people are hoarding cash

Post by firebirdparts » Tue Sep 10, 2019 2:03 pm

I think it is interesting to think about the process by which the market will swing during the next cycle. The number of shares is relatively fixed, so if a few people decide to get out "before the recession" then the prices have to fall to the level of indifference to whomever is next in line. That is an interesting process. When I was younger, I was always an enthusiastic accumulator when the market was down. Lost half my net worth twice and now at 53 I would not like to quite as much.

I had not really thought about the dynamics of this until we had a thread here a few weeks ago about the percentage of wealth that is allocated to stocks. I don't recall the details of these data but just that it made me think. If the price of a share is cut in half, then the amount of money allocated to it gets cut in half before you trade. Changes in the statistics would obviously follow. The amount of trading that causes that, in this dynamic system, might be pretty modest.

I may be wrong about this, but I think if people get afraid to spend, there will be a recession until enough people think the recession has gone on long enough. That is also a bit of a mysterious process. My prediction is that the recession will be short and dull. History is on my side, obviously, and I can't imagine when in history the world has had such plentiful resources.

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Re: Rich people are hoarding cash

Post by LilyFleur » Tue Sep 10, 2019 2:39 pm

firebirdparts wrote:
Tue Sep 10, 2019 2:03 pm
I think it is interesting to think about the process by which the market will swing during the next cycle. The number of shares is relatively fixed, so if a few people decide to get out "before the recession" then the prices have to fall to the level of indifference to whomever is next in line. That is an interesting process. When I was younger, I was always an enthusiastic accumulator when the market was down. Lost half my net worth twice and now at 53 I would not like to quite as much.

I had not really thought about the dynamics of this until we had a thread here a few weeks ago about the percentage of wealth that is allocated to stocks. I don't recall the details of these data but just that it made me think. If the price of a share is cut in half, then the amount of money allocated to it gets cut in half before you trade. Changes in the statistics would obviously follow. The amount of trading that causes that, in this dynamic system, might be pretty modest.

I may be wrong about this, but I think if people get afraid to spend, there will be a recession until enough people think the recession has gone on long enough. That is also a bit of a mysterious process. My prediction is that the recession will be short and dull. History is on my side, obviously, and I can't imagine when in history the world has had such plentiful resources.
Plenty of people lost jobs and houses in the last recession. Lots of the folks who lost jobs in their 50s have never approached their previous income levels if they have even been able to find work. It's not that they are afraid to spend; they can't spend. I wouldn't characterize a recession as "dull." I think that is exciting in a rather negative, life-changing way. Folks who lost jobs and houses and are still living out of their cars aren't really experiencing a world with "plentiful resources."

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Re: Rich people are hoarding cash

Post by TomatoTomahto » Tue Sep 10, 2019 2:58 pm

LilyFleur wrote:
Tue Sep 10, 2019 2:39 pm
Plenty of people lost jobs and houses in the last recession. Lots of the folks who lost jobs in their 50s have never approached their previous income levels if they have even been able to find work. It's not that they are afraid to spend; they can't spend. I wouldn't characterize a recession as "dull." I think that is exciting in a rather negative, life-changing way. Folks who lost jobs and houses and are still living out of their cars aren't really experiencing a world with "plentiful resources."
Many people were never the same. Marriages failed that might have survived without the financial stress. Many people who got another job never regained their level of confidence, even if their compensation came back. I am sure that those who went through it last time are backing off spending more than those who are whistling past the graveyard on their way to the store.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: Rich people are hoarding cash

Post by snackdog » Tue Sep 10, 2019 3:02 pm

hdas wrote:
Tue Sep 10, 2019 11:26 am

Certainly, but i don't think they are representative. The 8 mill figure is what it takes to be in the 1% in general in US. Cheers :greedy
The current BH One-Percenters start at about $12 million (net worth not including SS, pension).

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Re: Rich people are hoarding cash

Post by retiringwhen » Tue Sep 10, 2019 3:07 pm

TomatoTomahto wrote:
Tue Sep 10, 2019 2:58 pm
LilyFleur wrote:
Tue Sep 10, 2019 2:39 pm
Plenty of people lost jobs and houses in the last recession. Lots of the folks who lost jobs in their 50s have never approached their previous income levels if they have even been able to find work. It's not that they are afraid to spend; they can't spend. I wouldn't characterize a recession as "dull." I think that is exciting in a rather negative, life-changing way. Folks who lost jobs and houses and are still living out of their cars aren't really experiencing a world with "plentiful resources."
Many people were never the same. Marriages failed that might have survived without the financial stress. Many people who got another job never regained their level of confidence, even if their compensation came back. I am sure that those who went through it last time are backing off spending more than those who are whistling past the graveyard on their way to the store.
There is strong evidence that the millennial generation is developing fiscal habits that make them behave much more like the Great Depression generation than Gen X or the Baby Boomers. I don't have the reference handy, but I saw a study/survey that showed they have been impacted in significant ways. I know I see it in my children (very very frugal, wary of financial commitments, borrowing etc.) The FIRE phenom is in a way a mechanism to address the same risk aversion as well.

My grandfather (born 1906) always knew that his dog and a .22LR was enough to keep 10 kids fed even if the factory closed or he got fired for helping start a union (that happened twice...)

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Re: Rich people are hoarding cash

Post by Portfolio7 » Tue Sep 10, 2019 3:26 pm

CyclingDuo wrote:
Tue Sep 10, 2019 11:16 am
Portfolio7 wrote:
Tue Sep 10, 2019 8:20 am
Of the BH population that answered the survey, if you are 45 or older with $1M of investible assets, well... that puts you roughly in the top 15% of American households, but also in the bottom 15% of the BH group that answered this survey. Might be 10% and 5% respectively, but was just drawing a general picture.

However, one has to recognize that this view of NW includes the PV of SS and Pensions, which depends heavily on assumptions, and there are a wide range of reasonable estimates... I would guess at current interest rates that for most BHs it's a little less than $1M +/- a half million. Then there is the pension on top of that.

So $1M of investible at that age could put you in the bottom 30% perhaps, after adding SS (and pension if you have one.)

That still puts BHs quite a bit above mean, let alone median. (Which is hardly unexpected for a self-selected group of investors like BH members.)
Currently, looks like there are 87,507 registered members on the Bogleheads forums. Who knows how many read and follow the forums without registering as a member? I imagine there are plenty in that latter category.

What were the numbers in terms of how many people actually responded to that survey that was done a few years back before the moderators shut down such a survey from being conducted? Looks like 1101 members responded to the 2015 version according to this link (then people have kept responding over the years since then to bring the number up to 1400 with the last two respondents being one today, and one on Sunday):

https://docs.google.com/spreadsheets/d/ ... =630152586

We should also point out that the Boglehead's Investment Philosophy that is pointed out in the WIKI are principles designed for anyone to follow and build wealth so that their future could lead to also having amassed an investment portfolio of 7 figures if time, inclination, and enough household income to save over a long number of years is available to do so.

https://www.bogleheads.org/wiki/Boglehe ... philosophy

I would continue to argue for all Bogleheads to encourage, share stories of how each individual member accumulated over the years, and how long it took to build their wealth in hopes of focusing on other member's journeys that it can be done. At least that seems in my way of thinking to be a more positive mindset than scaring any member or potential member off of the forums when they read or think that everyone on these forums has large sums accumulated and they do not belong as if this is some sort of a special club.

Not sure a thread entitled "rich people are hoarding cash" is the most ideal subject for that process.

Here's to plenty of Boglehead current members (and future potential members) that are not there yet to arrive at that some point in the future! :beer
Thank you CyclingDuo. I had to run to a meeting, but had wanted to add something about the beauty of BH Principles is that they work no matter your income. The more you make, the easier to implement; I don't want to overlook the advantages of higher income... but back when I made $25K in 1990 I managed to save over 20% of it - granted I was young and single. Plus, I had to spend that on rent and food when I lost my job, but I saved in my next job too. Where the will is strong enough, there is often a way.
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hdas
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Re: Rich people are hoarding cash

Post by hdas » Tue Sep 10, 2019 3:30 pm

CyclingDuo wrote:
Tue Sep 10, 2019 11:16 am
Portfolio7 wrote:
Tue Sep 10, 2019 8:20 am
Of the BH population that answered the survey, if you are 45 or older with $1M of investible assets, well... that puts you roughly in the top 15% of American households, but also in the bottom 15% of the BH group that answered this survey. Might be 10% and 5% respectively, but was just drawing a general picture.

However, one has to recognize that this view of NW includes the PV of SS and Pensions, which depends heavily on assumptions, and there are a wide range of reasonable estimates... I would guess at current interest rates that for most BHs it's a little less than $1M +/- a half million. Then there is the pension on top of that.

So $1M of investible at that age could put you in the bottom 30% perhaps, after adding SS (and pension if you have one.)

That still puts BHs quite a bit above mean, let alone median. (Which is hardly unexpected for a self-selected group of investors like BH members.)
Currently, looks like there are 87,507 registered members on the Bogleheads forums. Who knows how many read and follow the forums without registering as a member? I imagine there are plenty in that latter category.

What were the numbers in terms of how many people actually responded to that survey that was done a few years back before the moderators shut down such a survey from being conducted? Looks like 1101 members responded to the 2015 version according to this link (then people have kept responding over the years since then to bring the number up to 1400 with the last two respondents being one today, and one on Sunday):

https://docs.google.com/spreadsheets/d/ ... =630152586

We should also point out that the Boglehead's Investment Philosophy that is pointed out in the WIKI are principles designed for anyone to follow and build wealth so that their future could lead to also having amassed an investment portfolio of 7 figures if time, inclination, and enough household income to save over a long number of years is available to do so.

https://www.bogleheads.org/wiki/Boglehe ... philosophy

I would continue to argue for all Bogleheads to encourage, share stories of how each individual member accumulated over the years, and how long it took to build their wealth in hopes of focusing on other member's journeys that it can be done. At least that seems in my way of thinking to be a more positive mindset than scaring any member or potential member off of the forums when they read or think that everyone on these forums has large sums accumulated and they do not belong as if this is some sort of a special club.

Not sure a thread entitled "rich people are hoarding cash" is the most ideal subject for that process.

Here's to plenty of Boglehead current members (and future potential members) that are not there yet to arrive at that some point in the future! :beer
This is called self-selection bias. Cheers :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

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goodenyou
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Re: Rich people are hoarding cash

Post by goodenyou » Tue Sep 10, 2019 4:51 pm

Jack FFR1846 wrote:
Tue Sep 10, 2019 9:25 am
goodenyou wrote:
Tue Sep 10, 2019 8:24 am
Maybe rich people will be highlighted on the show “Hoarders” where their homes are buried in piles of $100 bills. Can just imagine tripping over a large pile trying to get to the refrigerator!
That's what I pictured at first. Then I thought about it a little and realized that for myself, my HYSA would certainly be considered cash. With 2 kids in college, you better believe I'm hoarding cash. As the bills come in, I like to be able to pay them. But no.....there aren't piles of cash in my house to trip over. Maybe a pile of laundry that I need to put away. :P
If you can hoard cash with 2 in college. you are doing very well! I have 2 in college and my cash isn't hoarded. It is burned through! :D
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Re: Rich people are hoarding cash

Post by smectym » Tue Sep 10, 2019 5:34 pm

mrspock wrote:
Mon Sep 09, 2019 10:30 pm
smectym wrote:
Mon Sep 09, 2019 10:15 pm
“what is rich”

I think the lowest number for net investable assets where just about everyone will say, “ok, you’re rich, alright?!” Is $30 million. I use that because several trusts that preen themselves on offering white-glove service to “the rich” name $30 million as the minimum. Bessemer Trust is an example. Here’s a Bloomberg piece from 2018, which may or may not be paywalled depending on your prior metered access to Bloomberg content: they put the bar at $25 million

https://www.bloomberg.com/news/articles ... 25-million
Completely absurd and devoid of empathy. To lump those with >$1m (never mind 10m!) investable, with the middle class is detached from the reality of the actual middle class ... these sorts of views are considered by many tone deaf and even insulting to the plights of the middle class.
I agree the Bloomberg article is "devoid of empathy." (Bloomberg is looking for clicks, and shocker headlines and provocative statements generate clicks.) But the fact remains that the financial industry is segmented in such a way that the idea of "truly rich" is skewed toward those with closer to $30M of investable assets as opposed to a "mere" $1M or $5M--the so-called "mass affluent." The industry seeks to serve (i.e. make money off of) both segments, but they are clearly differentiated.

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Re: Rich people are hoarding cash

Post by Scooter57 » Tue Sep 10, 2019 6:32 pm

Re: Those high ticket financial managers. The high worth for access to their services is part of their marketing. My parents were taken on by a well known NY firm who made a big deal about how they didn't usually take on people with their level of assets but they would take them on as a special favor. Then they soaked them for a very high fee on AUM. They were not given any access to special investments. It was all stock picking and individual muni bonds.

Re millionaires being special: An awful lot of people I have known for decades--some highly educated professionals--are still working in their 70s because they have to. Some lost homes in the financial crisis. Some put kids through private colleges and grad school only to have the kids fail to start viable careers. Several friends are still covering rent for kids in their 30s and even 40s! Divorces late in life also depleted resources. Add to that the impact of having to provide for children with special needs or spouses with dementia that can last for a decade or more and you can see how a person could work all their lives and not squander money but still end up with little.

A lot of the "investors" who comment on other investing discussions online let slip when discussing dividends that they are in the very lowest tax bracket.

Personally I would take reports of very high net worth posted by anonymous posters on a forum with a grain of salt. Some people have odd senses of humor.

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Re: Rich people are hoarding cash

Post by Bacchus01 » Tue Sep 10, 2019 7:54 pm

WildBill wrote:
Tue Sep 10, 2019 10:34 am
Howdy

“Ready money is Aladdin’s Lamp”. Benjamin Disraeli

An example: During a financial crisis Disraeli managed to finagle the Suez Canal away from the French and the Egyptians. It was an acquisition of immense strategic value to Britain. He and the Rothschilds raised the money overnight. I still am awed at how he pulled that one off.

And our old friend Mr Buffet doesn’t mind having $ 100 Billion or so in the checking account. Ready to buy if the price is right.

Happy bargain hunting

W B
Be careful. Buffet doesn’t let that cash sit idle. There are overnight lending situations going on there.

smectym
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Re: Rich people are hoarding cash

Post by smectym » Tue Sep 10, 2019 9:16 pm

Buysider wrote:
Tue Sep 10, 2019 11:32 am
I use that because several trusts that preen themselves on offering white-glove service to “the rich” name $30 million as the minimum. Bessemer Trust is an example.
Bessemer's average account size is well below that minimum. The allure of a special service is enough to get some people to pay more or really want to be "invited" to join.

Everything in financial services is negotiable, especially fees and "minimums".
on the other hand, HSBC Private Bank lists a “minimum relationship”of $5M, but goes on to disclose that the “median account size” is $55.8M

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Re: Rich people are hoarding cash

Post by konic » Tue Sep 10, 2019 9:29 pm

hdas wrote:
Mon Sep 09, 2019 5:57 pm
FT Report
Rich people are hoarding cash, and wealth managers are getting frustrated

....Yet perception of risk is an emotional thing. If people feel comfortable paying extra money in the form of negative rates for the known loss they will suffer on cash versus the unknown and potentially larger loss on riskier assets, it can be hard for wealth managers to talk them out of it. At least, unlike gold bars buried in the ground, finding where their money is will not be a problem, so in that respect the cash-rich could be doing worse in terms of portfolio protection. Wealth managers may need to respect that.
Image

Look at those two pie charts a bit closely. ‘Cash and Cash Equivalents’ went up 0.7%, I don’t see that as a big change in asset class allocation. This is over an year time period, and looks like normal portfolio drift.

So, why the latest ‘hoarding’ conclusion?

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Re: Rich people are hoarding cash

Post by delamer » Tue Sep 10, 2019 9:38 pm

konic wrote:
Tue Sep 10, 2019 9:29 pm
hdas wrote:
Mon Sep 09, 2019 5:57 pm
FT Report
Rich people are hoarding cash, and wealth managers are getting frustrated

....Yet perception of risk is an emotional thing. If people feel comfortable paying extra money in the form of negative rates for the known loss they will suffer on cash versus the unknown and potentially larger loss on riskier assets, it can be hard for wealth managers to talk them out of it. At least, unlike gold bars buried in the ground, finding where their money is will not be a problem, so in that respect the cash-rich could be doing worse in terms of portfolio protection. Wealth managers may need to respect that.
Image

Look at those two pie charts a bit closely. ‘Cash and Cash Equivalents’ went up 0.7%, I don’t see that as a big change in asset class allocation. This is over an year time period, and looks like normal portfolio drift.

So, why the latest ‘hoarding’ conclusion?
The jump in “alternative investments” is by far the largest, percentage-wise.

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Re: Rich people are hoarding cash

Post by davidsorensen32 » Tue Sep 10, 2019 9:47 pm

I don't understand this. Suppose all those rich people invested all of their hoarded cash in the market tomorrow. Guess what ? they will be receiving securities, but the sellers of those securities will be getting all of that cash. So, the cash outside of the market will be constant. It will simply change hands from one set of rich people to another. Why is this news ?
hdas wrote:
Mon Sep 09, 2019 5:57 pm
FT Report
Rich people are hoarding cash, and wealth managers are getting frustrated

....Yet perception of risk is an emotional thing. If people feel comfortable paying extra money in the form of negative rates for the known loss they will suffer on cash versus the unknown and potentially larger loss on riskier assets, it can be hard for wealth managers to talk them out of it. At least, unlike gold bars buried in the ground, finding where their money is will not be a problem, so in that respect the cash-rich could be doing worse in terms of portfolio protection. Wealth managers may need to respect that.
Image

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Re: Rich people are hoarding cash

Post by smectym » Tue Sep 10, 2019 9:58 pm

smectym wrote:
Tue Sep 10, 2019 9:16 pm
Buysider wrote:
Tue Sep 10, 2019 11:32 am
I use that because several trusts that preen themselves on offering white-glove service to “the rich” name $30 million as the minimum. Bessemer Trust is an example.
Bessemer's average account size is well below that minimum. The allure of a special service is enough to get some people to pay more or really want to be "invited" to join.

Everything in financial services is negotiable, especially fees and "minimums".
on the other hand, HSBC Private Bank lists a “minimum relationship”of $5M, but goes on to disclose that the “median account size” is $55.8M
This profile on Morgan Stanley states that the firm demurs when asked about the Private Wealth Management minimum relationship, but points to data indicating that UHNW individuals have “at least $30M, not including personal assets.”


https://smartasset.com/financial-adviso ... ors-review

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Re: Rich people are hoarding cash

Post by abuss368 » Tue Sep 10, 2019 10:07 pm

Richard1580 wrote:
Mon Sep 09, 2019 9:24 pm
27.2% to 27.9% is an increase of 2.5%. That is a rounding error.
Not material enough.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!"

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Re: Rich people are hoarding cash

Post by bizkitgto » Tue Sep 10, 2019 10:20 pm

visualguy wrote:
Mon Sep 09, 2019 8:39 pm
Isn't "cash" (CDs, MM, etc.) returning about the same as "fixed income" these days? Does it really make sense to make a distinction between those two for the purpose of this discussion?
The capital appreciation on bonds have had a major return this year, even though yields are depressed. Look up $BND or $TLT, bonds have been on fire!
Keep it simple: 20% BND, 50% VTI and 30% VXUS

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Re: Rich people are hoarding cash

Post by Dude2 » Tue Sep 10, 2019 10:52 pm

retiringwhen wrote:
Tue Sep 10, 2019 3:07 pm
TomatoTomahto wrote:
Tue Sep 10, 2019 2:58 pm
LilyFleur wrote:
Tue Sep 10, 2019 2:39 pm
Plenty of people lost jobs and houses in the last recession. Lots of the folks who lost jobs in their 50s have never approached their previous income levels if they have even been able to find work. It's not that they are afraid to spend; they can't spend. I wouldn't characterize a recession as "dull." I think that is exciting in a rather negative, life-changing way. Folks who lost jobs and houses and are still living out of their cars aren't really experiencing a world with "plentiful resources."
Many people were never the same. Marriages failed that might have survived without the financial stress. Many people who got another job never regained their level of confidence, even if their compensation came back. I am sure that those who went through it last time are backing off spending more than those who are whistling past the graveyard on their way to the store.
There is strong evidence that the millennial generation is developing fiscal habits that make them behave much more like the Great Depression generation than Gen X or the Baby Boomers. I don't have the reference handy, but I saw a study/survey that showed they have been impacted in significant ways. I know I see it in my children (very very frugal, wary of financial commitments, borrowing etc.) The FIRE phenom is in a way a mechanism to address the same risk aversion as well.

My grandfather (born 1906) always knew that his dog and a .22LR was enough to keep 10 kids fed even if the factory closed or he got fired for helping start a union (that happened twice...)
I will agree to disagree and not sure what the strong evidence is of frugality. Most young engineers I work with are very spendthrift, probably living paycheck to paycheck. True, they may set aside company match in 401k, but other than that, like young people the world over, they are doing/spending whatever they feel is required to attract mates, i.e. nice clothes, flash car, etc. -- certainly not living in their parent's basements reading a library book under a 60 watt bulb while eating peanut butter from a jar.

One major difference is that the young people of today are certain that they must go to college, as are their parents, and so they are more likely than past generations to have that item taken care of in some manner. Whether it is parents paying or loans, it gets done. That's a step up compared to the past.

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Re: Rich people are hoarding cash

Post by michaeljmroger » Wed Sep 11, 2019 12:07 am

Buysider wrote:
Tue Sep 10, 2019 11:32 am
I use that because several trusts that preen themselves on offering white-glove service to “the rich” name $30 million as the minimum. Bessemer Trust is an example.
Bessemer's average account size is well below that minimum. The allure of a special service is enough to get some people to pay more or really want to be "invited" to join.

Everything in financial services is negotiable, especially fees and "minimums".
I can confirm that. I had a few meetings with Bessemer earlier this year when I was considering working with them and they’d definitely accept an account of “only” $6M in investable assets if your overall portfolio is promising enough.

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Re: Rich people are hoarding cash

Post by smectym » Wed Sep 11, 2019 1:26 am

michaeljmroger wrote:
Wed Sep 11, 2019 12:07 am
Buysider wrote:
Tue Sep 10, 2019 11:32 am
I use that because several trusts that preen themselves on offering white-glove service to “the rich” name $30 million as the minimum. Bessemer Trust is an example.
Bessemer's average account size is well below that minimum. The allure of a special service is enough to get some people to pay more or really want to be "invited" to join.

Everything in financial services is negotiable, especially fees and "minimums".
I can confirm that. I had a few meetings with Bessemer earlier this year when I was considering working with them and they’d definitely accept an account of “only” $6M in investable assets if your overall portfolio is promising enough.
It’s true, Bessemer’s stated minimum is now only $10M, and I accept that they will make magnanimous exceptions. However, take your money to Northern Trust and have a few meetings with them. Yes, perhaps they’ll agree to take your money, but their fee structure is so onerous you’d need $30M to really make it work (and even then, not on terms most bogleheads would approve). Don’t know, but perhaps Bessemer is similar

https://www.thewealthadvisor.com/articl ... isors-over

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Re: Rich people are hoarding cash

Post by 3funder » Wed Sep 11, 2019 9:33 am

I invest every two weeks and will do so for the next 30 - 35 years. I'm not worried about market tops or global recessions right now.

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hdas
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Re: Rich people are hoarding cash

Post by hdas » Wed Sep 11, 2019 12:57 pm

konic wrote:
Tue Sep 10, 2019 9:29 pm
hdas wrote:
Mon Sep 09, 2019 5:57 pm
FT Report
Rich people are hoarding cash, and wealth managers are getting frustrated

....Yet perception of risk is an emotional thing. If people feel comfortable paying extra money in the form of negative rates for the known loss they will suffer on cash versus the unknown and potentially larger loss on riskier assets, it can be hard for wealth managers to talk them out of it. At least, unlike gold bars buried in the ground, finding where their money is will not be a problem, so in that respect the cash-rich could be doing worse in terms of portfolio protection. Wealth managers may need to respect that.
Image

Look at those two pie charts a bit closely. ‘Cash and Cash Equivalents’ went up 0.7%, I don’t see that as a big change in asset class allocation. This is over an year time period, and looks like normal portfolio drift.

So, why the latest ‘hoarding’ conclusion?
True, I think they are complaining at elevated levels in general even since 2009. Cheers :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

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hdas
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Re: Rich people are hoarding cash

Post by hdas » Wed Sep 11, 2019 12:59 pm

davidsorensen32 wrote:
Tue Sep 10, 2019 9:47 pm
I don't understand this. Suppose all those rich people invested all of their hoarded cash in the market tomorrow. Guess what ? they will be receiving securities, but the sellers of those securities will be getting all of that cash. So, the cash outside of the market will be constant. It will simply change hands from one set of rich people to another.
This observation is only true if the market consisted only of rich people, but what the article is trying to highlight is the patterns of this specific group. Cheers :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

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Re: Rich people are hoarding cash

Post by firebirdparts » Wed Sep 11, 2019 1:47 pm

davidsorensen32 wrote:
Tue Sep 10, 2019 9:47 pm
I don't understand this. Suppose all those rich people invested all of their hoarded cash in the market tomorrow. Guess what ? they will be receiving securities, but the sellers of those securities will be getting all of that cash. So, the cash outside of the market will be constant. It will simply change hands from one set of rich people to another. Why is this news ?
That's right! So the reason it's news is that the process causes the stated price of the securities to go up. So there are certain interesting measures that are affected. Even though there's no change in the money before and after, the apparent amount of money that appears to be in the market swings and it can swing a lot. It's really pretty interesting.

I always remind people that when people say money is inflowing and outflowing mutual funds, that's real. It really does. But money does not inflow or outflow the stock market.

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Re: Rich people are hoarding cash

Post by mickeyd » Wed Sep 11, 2019 2:45 pm

I do not care what anyone else has in his/her stash I only care about what is in my stash. Does that make me selfish?
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Re: Rich people are hoarding cash

Post by goodenyou » Wed Sep 11, 2019 2:52 pm

mickeyd wrote:
Wed Sep 11, 2019 2:45 pm
I do not care what anyone else has in his/her stash I only care about what is in my stash. Does that make me selfish?
No. That makes you well adjusted.
"Ignorance more frequently begets confidence than does knowledge" | "The best years you have left are the ones you have right now"

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Re: Rich people are hoarding cash

Post by smectym » Wed Sep 11, 2019 6:54 pm

Another rough-and-ready test for "Am I rich?" is: can you afford to pay cash for a 1700 square foot home in Palo Alto

https://www.zillow.com/homedetails/216- ... 5540_zpid/

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Re: Rich people are hoarding cash

Post by Nestegg_User » Wed Sep 11, 2019 9:13 pm

smectym wrote:
Wed Sep 11, 2019 6:54 pm
Another rough-and-ready test for "Am I rich?" is: can you afford to pay cash for a 1700 square foot home in Palo Alto

https://www.zillow.com/homedetails/216- ... 5540_zpid/
I'm not "rich", just "comfortable".. but if we sold out current home.... we could..... hey, it's a bargain at just over 3 mil! 8-)
(but we wouldn't have much/anything left to pay the taxes on it, as the pension (and we'd have to start SS before 70) would be used for food, etc....so **NO**, we obviously cant' "afford" it)....we're just "average" BH with only about 2.7 large investable
("Hi"... from the other side of the tracks)
{and obviously, these's a huge "self-selection bias" here. If overall in the US we are around upper, say, 5%... but are average or below in BH-land, then it's kind of obvious that BH's don't come anywhere close to a representative cross section of the population}

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Re: Rich people are hoarding cash

Post by balbrec2 » Fri Sep 13, 2019 9:13 am

WhiteMaxima wrote:
Tue Sep 10, 2019 12:22 pm
When measure wealth, you have to use gold standard :sharebeer
40 years ago when gold was 35USD/oz, 1 mil USD = 28571 oz of gold
today gold is 1500USD/oz, you will need 28571x1500=42 mil USD to be qualified as a true millionaire.
If so, I guess 99% of all BHs are fake millionaires.
When gold was $35/oz, the dollar was backed by gold and the price was fixed by the government.
When Nixon took us off the gold standard in 1971, the price started rising as it was now set in the open market.
comparing these two periods of gold pricing, (fixed vs. floating) for determining wealth is not instructive.
There is no way to know what the price of gold would have been prior to 1971 had the government not "fixed" it.

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Re: Rich people are hoarding cash

Post by Jack FFR1846 » Fri Sep 13, 2019 9:43 am

goodenyou wrote:
Tue Sep 10, 2019 4:51 pm
Jack FFR1846 wrote:
Tue Sep 10, 2019 9:25 am
goodenyou wrote:
Tue Sep 10, 2019 8:24 am
Maybe rich people will be highlighted on the show “Hoarders” where their homes are buried in piles of $100 bills. Can just imagine tripping over a large pile trying to get to the refrigerator!
That's what I pictured at first. Then I thought about it a little and realized that for myself, my HYSA would certainly be considered cash. With 2 kids in college, you better believe I'm hoarding cash. As the bills come in, I like to be able to pay them. But no.....there aren't piles of cash in my house to trip over. Maybe a pile of laundry that I need to put away. :P
If you can hoard cash with 2 in college. you are doing very well! I have 2 in college and my cash isn't hoarded. It is burned through! :D
We probably do the same thing. I hoard the cash first. Then the bills come. Then I let the college hoard the cash.
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Re: Rich people are hoarding cash

Post by abuss368 » Fri Sep 13, 2019 11:02 am

smectym wrote:
Wed Sep 11, 2019 6:54 pm
Another rough-and-ready test for "Am I rich?" is: can you afford to pay cash for a 1700 square foot home in Palo Alto

https://www.zillow.com/homedetails/216- ... 5540_zpid/
Wow!
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Re: Rich people are hoarding cash

Post by nedsaid » Fri Sep 13, 2019 11:42 am

Cash has essentially the same returns as intermediate term bonds, perhaps what wealth managers are seeing is that people are shortening up the maturities of their fixed income investments. Looking at today's US Treasury yield curve, hoarding cash seems like a very rational decision. As of right now, one month T-Bills yield 1.99% and the US Treasury 10 year bond yields 1.79%. I have noticed that the 30 year US Treasury Bond is now at 2.22%, it started the month of September yielding 1.95%.
A fool and his money are good for business.

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Re: Rich people are hoarding cash

Post by Grt2bOutdoors » Fri Sep 13, 2019 11:43 am

nedsaid wrote:
Fri Sep 13, 2019 11:42 am
Cash has essentially the same returns as intermediate term bonds, perhaps what wealth managers are seeing is that people are shortening up the maturities of their fixed income investments. Looking at today's US Treasury yield curve, hoarding cash seems like a very rational decision. As of right now, one month T-Bills yield 1.99% and the US Treasury 10 year bond yields 1.79%. I have noticed that the 30 year US Treasury Bond is now at 2.22%, it started the month of September yielding 1.95%.
The better returns lie in paying off debt. When people wake up to that, that is when the economy will really start to pick up speed.
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Re: Rich people are hoarding cash

Post by goodenyou » Fri Sep 13, 2019 11:57 am

Jack FFR1846 wrote:
Fri Sep 13, 2019 9:43 am
goodenyou wrote:
Tue Sep 10, 2019 4:51 pm
Jack FFR1846 wrote:
Tue Sep 10, 2019 9:25 am
goodenyou wrote:
Tue Sep 10, 2019 8:24 am
Maybe rich people will be highlighted on the show “Hoarders” where their homes are buried in piles of $100 bills. Can just imagine tripping over a large pile trying to get to the refrigerator!
That's what I pictured at first. Then I thought about it a little and realized that for myself, my HYSA would certainly be considered cash. With 2 kids in college, you better believe I'm hoarding cash. As the bills come in, I like to be able to pay them. But no.....there aren't piles of cash in my house to trip over. Maybe a pile of laundry that I need to put away. :P
If you can hoard cash with 2 in college. you are doing very well! I have 2 in college and my cash isn't hoarded. It is burned through! :D
We probably do the same thing. I hoard the cash first. Then the bills come. Then I let the college hoard the cash.
Yes. That about sums it up! :oops:
"Ignorance more frequently begets confidence than does knowledge" | "The best years you have left are the ones you have right now"

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