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Right. But the people I am talking about are not the same sort of people you are talking about. You are talking about people like my parents who are "rich". Because in investments they have close to 2M. Yeah, that's a lot of money......NOT! There are plenty of those types and the reason they have made their fortune is because they are cheap. There are many cheap people like them. But its a fine and dandy to aspire to be like them. Drive a car until it breaks completely down and buy only used cars, etc. But they do not get to enjoy the most important thing they have. And that is money.
My other family members that are rich. Get to enjoy life to its fullest. They travel around the world and stay in luxury. When my parents travel they stay at the budget hotel and rarely eat food at restaurants that are expensive. When I traveled with my rich cousin he spent 1400 dollars in one meal and the hotel we were staying at cost 300 dollars a night! That is rich and that is the rich most people will never achieve. I am not talking about the investment banker earning a high six figure but that is all that he has aside from his mansion that he is still paying for.
The "rich" you are talking about like my parents. Would never get to live like my cousins. They are high income earners but they do also have a high net worth value. And my father knows a billionaire(not too personal). But he sees that that billionaire and his sons are down to earth. They won't dress up. But the mom? Forget about it. Her husband bought her a private airplane just for herself and she has a lot of jewelry.
There are very few people out there who can both live rich and be rich. I wonder what you consider "cheap".
It's nice to be able to live that kind of lifestyle if you can truly afford it...but it's not essential to being a happy or well adujusted person.
I think maybe your parents have taken frugality to an extreme. And your reaction is to go the opposite and equally unhealthy extreme and to put too much emphasis on living a luxury lifestyle. The difference in the happiness you get from living a luxury lifestyle and a pleasant, middle class, one is actually pretty small or non-existent.
If you spend all of your assets, then you have no assets and are poor
Money can be spent. A lot of assets can't unless you sell them, at which pioint you have mroe money. So there's a difference between being poor na having no assets like a house and not being ABLE to spend money on living, and spending the money you earn on living and things and ending up with no money, but having experienced more.
If you spend all of your assets, then you have no assets and are poor
So you should just accumulate assets and never sale and/or spend the income you derive from them? Again, what is the point? You can't take them to the grave.
Someone that has a lot of wealth but drives a piece of junk, wears old cloths, lives in a small run down house, etc, etc may as well be poor.
Some rich folks got that way by being very frugal and that may be a hard habit to break. That's why they still drive their old jalopies and haven't taken a vacation in years. Or maybe their assets give them a comfortable feeling.
So you should just accumulate assets and never sale and/or spend the income you derive from them? Again, what is the point? You can't take them to the grave.
No. You should accumulate them with a goal towards securing your future, and living free.
Quote:
Originally Posted by user_id
Someone that has a lot of wealth but drives a piece of junk, wears old cloths, lives in a small run down house, etc, etc may as well be poor.
Then I might as well be poor. I am one of those guys. My family income is in the mid 5 figures. My 1950s house is 2200sf, the average age of my three vehicles is 19 years old. My family frequently shops at thrift stores. I try to save at least 10% of each paycheck. More when I can.
No, I'm not rich. But I am under forty, with mid six figures in the bank, and no debt.
Why do I choose to live significantly under my means?
1. Financial security: What would you do if your household income decreased by 25%? Mine did, and I survived with NO change in lifestyle. What about an unexpected health issue? I had one. Again, I navigated it with minimal disruption. If you don't save how do you pay for your kids braces, education, etc? What about your eventual retirement and old age?
2. The possibility of early retirement in the future, when I can live off of a 4% annual withdrawal rate, without reducing principal.
3. The feeling of freedom I get by being able to do what I want, when I want, and not being tied down to my employer if it becomes intolerable.
No. You should accumulate them with a goal towards securing your future, and living free.
If you are living off your assets, then you are spending some of the income that is derived by them...
Quote:
Originally Posted by Keim
Then I might as well be poor. I am one of those guys. My family income is in the mid 5 figures. My 1950s house is 2200sf, the average age of my three vehicles is 19 years old. My family frequently shops at thrift stores. I try to save at least 10% of each paycheck. More when I can.
How much you save in relation to your paycheck and the size of your house are not meaningful indicators. Also, how exactly is three cars modest? One car is modest. There are many 1950's ~2000 sf homes in, for example the bay area, that are millions.
Anyhow, I'm talking about people with a lot of money that don't utilize it, not people with very modest salaries that live very modestly. From the sounds of it your lifestyle matches your income, spending an extra 10% would not dramatically change your lifestyle.
Quote:
Originally Posted by Keim
Why do I choose to live significantly under my means?
Saving 10% of your income is not living "significantly" under your means.
Anyhow, the amount you have saved doesn't match your income, there is no way you've saved that much "in the bank" by just saving 10% of your income, unless of course your income use to be significantly higher in the past. Well that...or you won a lot in Vegas.
Anyhow, the amount you have saved doesn't match your income, there is no way you've saved that much "in the bank" by just saving 10% of your income, unless of course your income use to be significantly higher in the past. Well that...or you won a lot in Vegas.
I save at least 10%. Sometimes much more, was about 25% before having kids. Started early, so compound interest has worked strongly in my favor.
If you are living off your assets, then you are spending some of the income that is derived by them...
True. But one needs to scrimp and save in order to get to the point where they can live off that 4% SWR. Further, once they get to their desired SWR they may need to continue their thrift to maintain it. Thus the need to not look rich, while actually having lots in the bank. It is rare to spend like you are rich while actually being rich. It is all about cashflow.
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......NOT! There are plenty of those types and the reason they have made their fortune is because they are cheap. There are many cheap people like them. But its a fine and dandy to aspire to be like them. Drive a car until it breaks completely down and buy only used cars, etc. But they do not get to enjoy the most important thing they have. And that is money. 