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Old 11-15-2018, 12:19 PM
 
4,523 posts, read 4,693,796 times
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Quote:
Originally Posted by aslowdodge View Post
So having real estate is not liquid? Thus as a liquid millionaire I fail miserably.
I personally consider my liquid assets as part of my retirement income (ala a 3.5% withdrawal rate, etc.). I can't sell off 3.5% of the value of my home every year, so I don't count that as part of my financial independence or liquid assets. When it is paid off and owned in full it does greatly reduce the amount of cash flow I need to continue to live the same lifestyle I do today, so in that sense it reduces the amount of money I need in my portfolio, but I can't sell off fractions of my house to buy food, unless I rent out rooms ala Airbnb

If you planned on selling it and moving some place cheaper I guess you could include the difference as part of future liquid investments. For example, if you had a $500k house that would net you $400k after all taxes and fees and you were going to buy a $300k house with the proceeds you could count the additional $100k as future liquid reserves, but for me I'm young enough that I don't know what I will do in retirement, so I just count it as part of my NW, but don't count it towards the amount of money I need to achieve financial independence, which IMO is what your liquid investments are for.

If you are talking about rental properties, then you could just use the cash flow from the rentals as income and thus you would need less money out of your portfolio, so while you're not a liquid millionaire if you have $50k/yr positive cash flow from your rentals and you live off of $60k/yr you'd really only need $250k liquid to get you to your $60k/yr. You're NW is still definitely over a million though, which is how most people define millionaires.
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Old 11-15-2018, 02:27 PM
 
Location: Ohio
19,578 posts, read 14,090,022 times
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Quote:
Originally Posted by aslowdodge View Post
So having real estate is not liquid?
That depends on the market, and there are several thousand markets.

If your real estate is valued at $1 Million, I doubt you could sell it in the next hour. Maybe you could sell it within 3 days, then again, maybe not. It depends on the market. It might take 3 years to sell it at $1 Million, or maybe you could sell it in less than 30 days for $875,000 instead of $1 Million.
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Old 11-15-2018, 03:08 PM
Status: "Signing off due to heavy handed mods" (set 25 days ago)
 
728 posts, read 376,603 times
Reputation: 1145
There are two ways to define wealth: net worth and investible assets.
Net worth is the total of all your assets including RE/House minus all your debts.
Investible assets are the assets in brokerage accounts, IRA's 401k's, bank balances, etc and are generally considered more liquid.
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Old 11-15-2018, 05:01 PM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
5,258 posts, read 3,997,447 times
Reputation: 7006
It's interesting to x see how net worth is viewed my all of us. I don'r think any of us so far here are wrong in their defintions
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Old 11-16-2018, 03:23 AM
 
70,319 posts, read 70,908,839 times
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There are multiple reasons for looking at worth and some require different items to be counted .

the value of an estate for tax purposes is very different than net worth for setting a retirement draw rate , which both may be different then doing it for feeling good .

if i was doing it to feel good i would count our art work , my car , some investment co-ops we own that are at break even , etc . but typically those are never included for setting a draw rate
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Old 11-16-2018, 03:44 AM
 
Location: Cebu, Philippines
4,156 posts, read 1,559,777 times
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I would count assets that can be converted to cash in a reasonable market without impacting my lifestyle. Rentals or business properties, but not family-occupied residences. Collector cars, but not family drivers. Clothing and furniture at yard-sale value, not purchase price.
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Old 11-16-2018, 06:51 AM
 
10,080 posts, read 12,096,768 times
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Quote:
Originally Posted by johnsmith5a View Post
a lot of people are living in cars and storage units now because of this inflation we are having. i wouldn't call that "winning" or "great again". it's a zero sum game. if one person become a millionaire, then another is forced to live in a car or van. we're living in bad times.
Absolutely false.......millionaires are not forcing people to live in a van. They aren't even competing for the same residence to begin with!

So if a guy is living in a warehouse is that better or worse than living under a bridge? A tent? An RV? All non sequitur arguments.
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Old 11-16-2018, 08:17 AM
 
Location: Portal to the Pacific
4,978 posts, read 5,008,197 times
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Quote:
Originally Posted by City Guy997S View Post
Absolutely false.......millionaires are not forcing people to live in a van. They aren't even competing for the same residence to begin with!

So if a guy is living in a warehouse is that better or worse than living under a bridge? A tent? An RV? All non sequitur arguments.
I've thought this over a million times (pun intended!). I once read or heard Wayne Dyer say to not to feel guilty about having wealth. This was a time when we were legitimately poor. And for years this statement bothered me, but at the same time I couldn't exactly come up with a good reason why other than personal jealousy.

Then I got older and wiser and more educated.

When I started thinking about money as the potential exchange for resources and energy I realized that Wayne Dyer could sometimes be right, but most often very wrong. Especially if you have an interest in Ecology and see the planet as one whole organic system. I mean, with deep thought I went all the way back to my 6th grade science education where we learned about renewable and non-renewable resources. We can make the air clean, water clean, we can grow more trees, we can use solar and wind energy. All that is renewable. But it's extremely prohibitively expensive if not impossible in some cases to make certain types of natural materials. Specifically particular metal ores or fossil fuels. Those are, for the most part, non-renewable.

And then it was all summed up in my mind when I heard the catch phrase of the greenies: "You can't have infinite growth on a finite planet".

You can get so deep into the weeds if you think hard about this. You consider this enough and ask yourself "why" and "how" and suddenly you end up in the realm of physics and discussing the laws of thermodynamics. It usually costs more energy to build a system than for it to fall into disrepair. I'm talking about entropy.

So if you have all these millionaires they have, what is essentially, stored energy. Now if most millionaires were like my husband and I, this wouldn't necessarily be a problem. We keep our energy stored and have a modest drip on our money "faucet". We're not using near as much energy as, say, even a lower middle class family, because we use bikes and public transportation. We cook at home. All sorts of cheap lifestyle hacks.

The problem becomes when lots of people with lots of collective wealth decide to use their stored energy. Money buys resources and energy (and ultimately the resources can be broken down into energy too, but we won't get into that).

The biggest problem we are facing in the modern world is that a lot of us have access to resources our ancestors literally could not fathom and we have devised ways of spending energy that would go well beyond their comprehension. Ecologists or people who understand the planet as one giant organic system have told us we are out of balance. Our pace is too much for the system to absorb. It's like if you have an itch and you scratch it a few times and stop there is no harm done. But if you decide to scratch it all day and night then it's beyond the ability of the body to regenerate and you will end up with a sore.

So that's what's happening at scale. That's when it becomes a zero sum game.
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Old 11-16-2018, 08:37 AM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
5,258 posts, read 3,997,447 times
Reputation: 7006
Quote:
Originally Posted by flyingsaucermom View Post
I've thought this over a million times (pun intended!). I once read or heard Wayne Dyer say to not to feel guilty about having wealth. This was a time when we were legitimately poor. And for years this statement bothered me, but at the same time I couldn't exactly come up with a good reason why other than personal jealousy.

Then I got older and wiser and more educated.

When I started thinking about money as the potential exchange for resources and energy I realized that Wayne Dyer could sometimes be right, but most often very wrong. Especially if you have an interest in Ecology and see the planet as one whole organic system. I mean, with deep thought I went all the way back to my 6th grade science education where we learned about renewable and non-renewable resources. We can make the air clean, water clean, we can grow more trees, we can use solar and wind energy. All that is renewable. But it's extremely prohibitively expensive if not impossible in some cases to make certain types of natural materials. Specifically particular metal ores or fossil fuels. Those are, for the most part, non-renewable.

And then it was all summed up in my mind when I heard the catch phrase of the greenies: "You can't have infinite growth on a finite planet".

You can get so deep into the weeds if you think hard about this. You consider this enough and ask yourself "why" and "how" and suddenly you end up in the realm of physics and discussing the laws of thermodynamics. It usually costs more energy to build a system than for it to fall into disrepair. I'm talking about entropy.

So if you have all these millionaires they have, what is essentially, stored energy. Now if most millionaires were like my husband and I, this wouldn't necessarily be a problem. We keep our energy stored and have a modest drip on our money "faucet". We're not using near as much energy as, say, even a lower middle class family, because we use bikes and public transportation. We cook at home. All sorts of cheap lifestyle hacks.

The problem becomes when lots of people with lots of collective wealth decide to use their stored energy. Money buys resources and energy (and ultimately the resources can be broken down into energy too, but we won't get into that).

The biggest problem we are facing in the modern world is that a lot of us have access to resources our ancestors literally could not fathom and we have devised ways of spending energy that would go well beyond their comprehension. Ecologists or people who understand the planet as one giant organic system have told us we are out of balance. Our pace is too much for the system to absorb. It's like if you have an itch and you scratch it a few times and stop there is no harm done. But if you decide to scratch it all day and night then it's beyond the ability of the body to regenerate and you will end up with a sore.

So that's what's happening at scale. That's when it becomes a zero sum game.
If you have all this stored energy and it is a zero sum game, are you not then depriving someone else because you hold so much of it and are not using it?

If you don't live frugally as you do ,then are you not returning it into the system so that others can earn it by supplying goods for that more luxurious lifestyle?
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Old 11-16-2018, 09:16 AM
 
13,554 posts, read 7,192,279 times
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Quote:
Originally Posted by JonathanLB View Post
I've never really understood the "million not including your residence" part. Why should that matter? Yes, you have to live somewhere, but let's say that hypothetically you have a $300K house free and clear and $800K in an investment account, but you're still working and making a really solid income, let's just say for the sake of argument $7,000/month before taxes, you don't HAVE to live in a fully paid off house, you could rent an apartment that's really nice in almost every U.S. city for $2,000/month and live just fine while now being a "true millionaire" because you sold your house, even accounting for the agent commission to sell your house and any other costs associated. I just think it's kind of an asinine line to draw in the sand.

I can understand the reasoning more if we're talking about someone who has $100K in investments and a $900K house they own free and clear in, say, SF where that's not a crazy house and they couldn't easily "downgrade," I guess, though it's still a bit silly.

I know the original quote was with the B, but it reminds me to paraphrase, "A million here, a million there, pretty soon you have some real money."

You just described the retirement plan of many people in high cost of living regions except the home equity and investment account numbers are inverted. There are a ton of people in those places who don't have the $800K retirement account but they have $750K in home equity. $750K isn't much of a house in Boston, NYC tri-state, DC, coastal California, or Seattle. You can always sell the $750K house and move to a lower housing cost area. Top that up with your 401(k)/IRA account and you have that million bucks.


I wrote up-thread that I pretty much only care about cash flow. I'm 60 1/2. My age 70 Social Security check will be a COLA-protected $44K/year that's largely tax-free. With that hypothetical $300K house and $800K spread between other things like 401(k)/IRA, after-tax portfolio, vacation home, boat, etc, I can stop working now and spend a COLA-protected $50K-ish forever and not run out of money. At the point I hit total geezer-dom and can't stay in my house, my house becomes my long term care policy. I don't really care about some mythical 4% rule.
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