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This needs to start earlier than in your work life. How does the guy earning $200K take-home as a 27 year old and saves 30% of his income compare to the guy earning $50K take-home as a 27 year old and saves 90% of it?
The $200K guy saves $60K a year
The $50K guy saves $45K a year, despite having a 3X higher savings to total income ratio as the $200K guy. And the $200K guy still has a whole lot left over.
Then you ask yourself, what 27 year old makes $200K a year take-home? Answer: The guy who graduated from Harvard or Wharton or Stanford MBA, or any lucrative degree from a top school.
Then you ask yourself, who goes to these top MBA schools?
Answer: The guy who works a blue-chip job on Wall Street or did something else amazing (Ex: The Olympic Athlete or the guy that graduated from West Point and led a platoon of 25 solders in Iraq)
Then you ask yourself, how did these people get to where they are?
Answer: By busting their ass when they were younger. The Wall Streeter graduated from a top college to get his job, he was probably in the top of his high school class to get into that top college, using study skills he learned from when he was 6-7 years old. The Olympic Athlete put in hours and hours of practice, starting from the time they were 5 or 6. It is very difficult to get into, nonetheless survive West Point, and then leading a platoon in Iraq is no small task. An even higher disparity is in professional sports, where there are 27-year olds earning millions. If they did not win the genetic lottery, then they would have practiced since the time they were very young. (And even if they did, they still had to put in immense amounts of practice as well).
As the saying goes, you cannot save your way to prosperity, and the best way to increase your net worth is to start young - very young. I would say when you are young, you should be focused on earning more than saving.
I can use another analogy:
You cannot train for basketball for 4 years in college, and then expect to picked on NBA Draft day without playing any basketball when you were younger. (Unless you win the Genetic lottery)
You cannot study hard for 4 years in some third-tier college, and then expect to get a lucrative job at Goldman Sachs or McKinsey without studying hard in High School so you can get into a top college. (Unless you have connections)
You cannot save for 4 years before retirement, and then expect to retire well without contributing to your nest egg when you were younger. (Unless you win the actual lottery, or of course unless you saved from your NBA career which you trained your whole life for or unless you already make 7-figures at Goldman Sachs or McKinsey, which in that case, you already put in the time hitting the library when you were younger)
Manhattan parents already have this figured out. In New York, you start placing pressure on a kid at nursery-school age. Manhattan parents are deeply competitive to get their kids into the right one, because it's been embedded into their brains that that leads to the right prep school, the right college, the right job on Wall Street, the right connections. Their trajectory is planned from the time they're 6 weeks old. Of course, the parents in Middle America would prefer that Johnny live a "normal childhood", but when Johnny can't pay for the hospital bills when he's 60, or when it's 2009 and Johnny has $200K in student loan debt and no job prospects, the parents may have wished differently.
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Originally Posted by SpeedyAZ
I wouldn't necessarily say that. I'm 29 and while I don't make $200K, I do have a fairly high income level for my age. Didn't go to a top-tier school (went to ASU) but I did find the right connections to land an engineering job for a defense contractor. I save a very large chunk of my income, I simply do not blow it on partying like much of my age range does. It's not about what you make, it's what you fake. A young intern in our company is the epitome of a $30K/ year millionaire. Drives a (leased) Mercedes C-Class, wears designer clothing everyday ($200 jeans, $100 shirts, etc), and parties every night of the week at one of the Mill Ave clubs. The ones who talks about money all the time, usually don't have much of it.
My boss on the other hand is much more down to earth. Lives in a medium-sized home in Gilbert, wears inexpensive clothing, etc. The only part of wealth he shows is a fleet of cars he owns and usually drives a different one each day of the week. The truly wealthy have no need to prove anything, but those without it sure want to.
Both people make good points.. I'd add to NYCAnalyst that not everyone who works their ***** off when they're young for dreams of making it at an Ivy league school will be able to sustain all of that pressure for a long time.
Not everyone is successful at making meaningful career connections either.. they may not be in the right place at the right time.
The one thing you can control is how much you save. But do you really want to live a meager life so you'll have millions when you're 60?
So the most reasonable approach: don't put all of your eggs in one basket (and the basket refers to a single approach to wealth.) Start early and try to get a good education; try to make good connections; don't waste money on useless things, particularly status items when you're young (good car, good house, etc.)
Figure out how much money you actually need to live a reasonably enjoyable life. Do you really need a $2000+/mo mortgage? Or $30,000+ car? Think about it carefully. Then again, you can't live without spending anything on food, for example. Figure out the minimum you need to spend to live a decent but not lavish life and compare it to your income. If it's still vastly smaller, you can, at your discretion, increase spending on things that increase your enjoyment (say you only budget $1500 a month but you earn $10,000 after taxes.. you could safely bump that up to $5000 and still have plenty left to save.)
Then save your money in a well diversified portfolio... don't even think about socking it in a bank (or even worse, under a mattress) and forgetting it. If you don't know where to begin, start reading The Crawling Road and let compound interest do the work on your hard-earned cash.
D.O.D./Librarian/Vacation Agent (Personal Business) job in my hometown - total $103K annually
Owning 4 Rentals (in the process of closing on another) total $6k per month
Living with my parent in their 2100 sq ft house paying utility bills. I've been here for about 2 months now and my parents like it. Call me spoiled but the best financial decision I ever made moving back in with my parents. I'll reach my monthly savings of $15k in no time. I'll guess my net worth is a little over 500k
Its all about cash flow with me
The goal is 45 years of age $15k, at 50 years of age $20K
D.O.D./Librarian/Vacation Agent (Personal Business) job in my hometown - total $103K annually
Owning 4 Rentals (in the process of closing on another) total $6k per month
Living with my parent in their 2100 sq ft house paying utility bills. I've been here for about 2 months now and my parents like it. Call me spoiled but the best financial decision I ever made moving back in with my parents. I'll reach my monthly savings of $15k in no time. I'll guess my net worth is a little over 500k
Its all about cash flow with me
The goal is 45 years of age $15k, at 50 years of age $20K
Six people in a 2100 sqft house? No thanks even more so considering you are living with your parents.
A lot of people are saying that living at home with their parents post-graduation was a good financial decision. I wonder what kind of financial impact that had on the parents?
A lot of people are saying that living at home with their parents post-graduation was a good financial decision. I wonder what kind of financial impact that had on the parents?
I lived at home for a few years, maybe 3, and was expected to pay utilities, buy my own food, do own laundry, pay my own bills, etc. Just didn't have to pay rent. I don't think I cost hardly much even in terms of wear and tear like a renter would. And it gave me a huge boost financially when I was just starting out. I'm in my mid-30s and if my parents lived nearby and I didn't have to pay rent I'd be tempted to move in again
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