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Old 12-26-2010, 11:24 PM
NCN
 
Location: NC/SC Border Patrol
21,661 posts, read 25,497,207 times
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Quote:
Originally Posted by Keim View Post
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.
And if the cash flows, it does not accumulate.

 
Old 12-26-2010, 11:36 PM
 
Location: Conejo Valley, CA
12,460 posts, read 19,994,347 times
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Quote:
Originally Posted by maschuette View Post
The millionaire next door is a study of the average millionaire. They use the data that they received from thousands of questionaires and even checked their numbers to make sure they were telling the truth.
The book is not a study of anything, its just a book trying to paint a particular picture. There was never any proper scientific studies completed to support the claims in the book. The book spends the vast majority of its time analyzing cherry picked examples. Now, there is some worth in looking at the examples, but making general conclusions from them is not appropriate.


Quote:
Originally Posted by maschuette View Post
Your right, i am talking about traditional investing because that is what the average millionaire does.
No that isn't what the average millionaire does, most wealth is generated via business. Amusingly the book you are citing supports this as well, most of the people were business owners. A business is an asset, it can be bought and sold just like any other asset and it contributes to your overall net worth.


Quote:
Originally Posted by maschuette View Post
For instance, many doctors dont have very good finances compared to their large salaries, because of their lifestyle.
Feel free to cite a study that shows this.
 
Old 12-26-2010, 11:43 PM
 
Location: Conejo Valley, CA
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Quote:
Originally Posted by NCN View Post
You cannot accumulate money by drinking, partying or smoking it away. The millionaire also does not want to bring attention to what he owns, because he will then become the target of someone who wants what he has.
No, but those with a lot of money can accumulate wealth while drinking, partying and burning money at a rate that is dramatically higher than the average person.

The wealthy show off their wealth in all sorts of ways, who do you think is purchasing homes in Manhattan, Aspen, etc? Who is purchasing $200k automobiles? Who is purchasing million dollar pieces of jewelry? All of these things are out of reach for the typical person even with the use of debt.
 
Old 12-26-2010, 11:55 PM
NCN
 
Location: NC/SC Border Patrol
21,661 posts, read 25,497,207 times
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Quote:
Originally Posted by user_id View Post
No, but those with a lot of money can accumulate wealth while drinking, partying and burning money at a rate that is dramatically higher than the average person.

The wealthy show off their wealth in all sorts of ways, who do you think is purchasing homes in Manhattan, Aspen, etc? Who is purchasing $200k automobiles? Who is purchasing million dollar pieces of jewelry? All of these things are out of reach for the typical person even with the use of debt.
The book is the Millionaire Down the Street, not the Billionaire Down the Street. And I will say that even in richer circles that the one showing he has so much is often the one who is in debt up to his neck. You usually find out about these things when the person dies or divorces.
 
Old 12-27-2010, 01:25 AM
 
Location: Troy, Il
764 posts, read 1,552,615 times
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Quote:
Originally Posted by user_id View Post
The book is not a study of anything, its just a book trying to paint a particular picture. There was never any proper scientific studies completed to support the claims in the book. The book spends the vast majority of its time analyzing cherry picked examples. Now, there is some worth in looking at the examples, but making general conclusions from them is not appropriate.



No that isn't what the average millionaire does, most wealth is generated via business. Amusingly the book you are citing supports this as well, most of the people were business owners. A business is an asset, it can be bought and sold just like any other asset and it contributes to your overall net worth.



Feel free to cite a study that shows this.
Again, the book is a study, they took thousands of questionaires and averaged their findings. And your right, they didnt get rich off traditional investments but they do have 20% of their wealth in these investments. They also have 20% of their wealth in their businesses but it is their businesses that provide their income. The book states that 2/3 of the physicians they polled are under accumulators of wealth and then they showed why.
 
Old 12-27-2010, 01:32 AM
 
Location: Conejo Valley, CA
12,460 posts, read 19,994,347 times
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Quote:
Originally Posted by NCN View Post
The book is the Millionaire Down the Street, not the Billionaire Down the Street. And I will say that even in richer circles that the one showing he has so much is often the one who is in debt up to his neck. You usually find out about these things when the person dies or divorces.
The book is the millionaire next door and I'm talking about millionaires as well, someone with say $80 million in net worth is far from a billionaire.

Tell me, how many "richer circles" are you familiar with? How many people do you know with a net worth over $10 million? I'm guessing zero, your comment doesn't even make much sense for the rich. You can't have a high net worth if you have a large amount of debt relative to your assets:

Net worth = assets - liabilities.
 
Old 12-27-2010, 01:39 AM
 
Location: Troy, Il
764 posts, read 1,552,615 times
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I know quite a few millionaires and one billionaire. None of them are fancy or impressive to look at. The billionaire is the best example. He drives a 90 suv and where normal clothes. When going to a restaurant with some of the other guys he ordered a cheeseburger while everyone else ordered steak and then he complained about the price. You dont make money by wasting money. These are people who know the value of a dollar.
 
Old 12-27-2010, 01:57 AM
 
Location: In the Redwoods
30,286 posts, read 51,736,045 times
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Quote:
Originally Posted by sterlinggirl View Post
I don't know about you, but I'd much rather have Thanksgiving dinner with family and friends in a modest house than to eat alone in a mansion.
Who says you can't have friends & family over in a mansion? My father's house is HUGE, and he often has large social gatherings... and never spends a big holiday alone, unless maybe he's on a business trip. He even hosted my sister's wedding at his home, with approximately 250 guests in attendance. Do you think everyone who's "living large" is lonely? Sorry, but that's simply not true.

FYI, I would fall into the "2nd generation" of the patterns mentioned earlier, but I think there's a flaw in the logic. My father came from nothing, worked his arse off, and built up a very comfortable life... he lives within HIS means and saves/invests wisely, but also has most of the nice things you'd expect (big house, luxury vehicle, vacations, etc). My siblings & I were raised while he was building his career, so we went from working/middle-class to upper-class within the first 20-ish years of my life. Therefore we definitely appreciate everything & spend carefully, so you're all right on that particular point.

BUT here's where your logic fails, based on the observations within my own family & social circle... most people raised by self-made wealthy parents are taught the value of a dollar (as it was said), but that usually means we're not given everything either. My father expects us to support ourselves, and only helps out financially when absolutely necessary. I won't have any of that wealth until my father passes away, which will hopefully be when I'm older & have already raised my children (if I have any).

My sister has two young children, and while "Papa" spoils them with love & birthday/holiday gifts, his money is not lavished upon them - so they are NOT spoiled in the least. My sister & her husband both work very hard, pay the bills themselves, and will teach their children to appreciate what they have. So the 3rd generation doesn't always end up spoiled, unless maybe the patriarch dies while the 2nd generation is young... or if they're so loose with their money, they allow it to be spent by their children & grandchildren as they please. The latter is a very unique situation, unless you're talking about people like the Hiltons and Kennedys.
 
Old 12-27-2010, 02:03 AM
 
Location: Conejo Valley, CA
12,460 posts, read 19,994,347 times
Reputation: 4365
Quote:
Originally Posted by maschuette View Post
Again, the book is a study, they took thousands of questionaires and averaged their findings. And your right, they didnt get rich off traditional investments but they do have 20% of their wealth in these investments. They also have 20% of their wealth in their businesses but it is their businesses that provide their income. The book states that 2/3 of the physicians they polled are under accumulators of wealth and then they showed why.
You can call it whatever you like, but its not a "study" in any serious sense. The samples were not random, the samples were too small, there was no fact checking, there was no effort to further research to deal with completing hypothesis of the data, etc. The authors interpreted the data as they wanted.

2/3 of the physicians they polled may be "under accumulators" but that says little about physicians in general, they didn't take a random sample of physicians.

Anyhow, this book paints the wrong picture and its loaded with class envy. But I can see why the book was popular, it tells those with modest incomes that they can become millionaires by just being frugal.

Quote:
Originally Posted by maschuette View Post
I know quite a few millionaires and one billionaire. None of them are fancy or impressive to look at. The billionaire is the best example. He drives a 90 suv and where normal clothes. When going to a restaurant with some of the other guys he ordered a cheeseburger while everyone else ordered steak and then he complained about the price. You dont make money by wasting money. These are people who know the value of a dollar.
I don't believe any of this, worrying about the price of food is a waste of time for those with billions. So is driving around an old car, if it breaks down its a huge waste of time.

Anyhow, you don't make money by being frugal. I can make more in a single business deal than the average Joe can gain from a lifetime of frugality.

Last edited by user_id; 12-27-2010 at 02:14 AM..
 
Old 12-27-2010, 02:04 AM
 
Location: In the Redwoods
30,286 posts, read 51,736,045 times
Reputation: 23653
Quote:
Originally Posted by user_id View Post
The book is the millionaire next door and I'm talking about millionaires as well, someone with say $80 million in net worth is far from a billionaire.

Tell me, how many "richer circles" are you familiar with? How many people do you know with a net worth over $10 million? I'm guessing zero, your comment doesn't even make much sense for the rich. You can't have a high net worth if you have a large amount of debt relative to your assets:

Net worth = assets - liabilities.
Bingo. I love when people assume "if they're living in luxury, obviously they don't have anything saved." Ummmm, did it ever occur to them you can have BOTH? I do know many people in the "richer circle," and highly doubt they're all up to their eyeballs in debt... especially considering their major asset is usually an expensive home (or two), which only increases your net worth over time. Some people live beyond their means, sure, but it's rarely those in the highest income brackets.
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