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To perhaps paraphrase what’s already been said, persons who never had pecuniary or social advantages, who always struggled with just staying abreast of the latest recurring expense, regard it as being odd and unimaginable to have a financial cushion. They don’t see themselves as ever being financially comfortable, let alone affluent. Thus, if suddenly coming upon some amount of money, there’s no impetus to retain it, and certainly not to invest it. The point is not necessarily, that an easy gain isn’t much valued, and rapidly spent. Rather, the gain itself feels unreal and unstable. Why aim to preserve it, when the natural order of things, is for one to remain poor?
The thing is, is it really "blowing" it, after you look at all of the circumstances?
For instance, if you are flat broke, with some piece of junk car, and you spend $36k on a new vehicle that should last you 10 years of reliable transportation, is that wasted money?
$70K can go so quickly. It's not that much money. Let's say they bought a $36K vehicle and that included all taxes and fees etc. And let's just round down, to say they then have $30K left over.
Realistically, is 30K in the bank going to make you rich? Not hardly. And anyone who has been really broke, probably has a long list of things they could use that money for.
Let's just look at dental care, for instance. Let's say they could use some implants or other major dental work. That can eat up that 30K in a heartbeat.
30K is sure not going to buy them a new house. Even if they could use that entire 30K as a down payment on a piece of property - what would that actually buy them?
And, let's not forget that their monthly income doesn't increase.
And were there taxes that also had to be paid?
You can't look at a poor person who inherits 70K in the same way as a rich person inheriting 70K, because the first party will start out in the hole, normally. The poor person will have a ton of things that have not been taken care of, like medical, dental, etc. Or if they have a home, they have probably been needing a new roof or a new central heat/air system, or the one they have has been needing repairs forever, or they have desperately needed repairs on their vehicle, or a second vehicle.
When you start out in the hole 70K, getting a "windfall" of 70K just puts you at zero.
So, you can't compare those people with someone who has had everything, and 70K is just bonus money - is my point.
The thing is, is it really "blowing" it, after you look at all of the circumstances?
For instance, if you are flat broke, with some piece of junk car, and you spend $36k on a new vehicle that should last you 10 years of reliable transportation, is that wasted money?
The assumption there is that you can't get a reliable car that would last ten years for a smaller percentage of your windfall. Which is probably untrue.
If you can serve your need just as well by spending less of the money you came into, then, yes, spending more is, by definition, wasting money.
The assumption there is that you can't get a reliable car that would last ten years for a smaller percentage of your windfall. Which is probably untrue.
If you can serve your need just as well by spending less of the money you came into, then, yes, spending more is, by definition, wasting money.
But, honestly, $70K is going to turn some poor family into a rich one? How, exactly?
I buy old Japanese used vehicles when I need one, and drive them for around 7 years on average. But, still, there is a cost involved. For instance, in my latest 93 Nissan pickup, I've got a total of around probably $7K into it.
So, let's say I got 70K and I didn't have to pay any taxes on that, and won't have to pay any taxes on it in the future (and how likely is that?).
So, I buy a newer vehicle than the one I have. Then, there are taxes. And my monthly insurance premiums will probably go up.
So, let's be generous, and say now we have $60K left over.
And I need dental work done that will cost $20 - $30K, if I don't want to lose all my teeth and just get dentures, which is all my insurance will cover.
Now we're down to $30 - $40K.
How is this amount of money going to change my life? If I own a house, that can easily get eaten up with a new roof, siding, electrical, landscaping, plumbing, sewer, fencing.
Or maybe I want to send my kid to private school. That will cover maybe one year?
Let's get specific. How is this person going to significantly change their life with $70K?
All I can assume here, is that anyone discussing this so far, are people who already have enough to cover all basic and even major expenses, and $70K would just be additional money that has never been desperately needed for anything else.
This thread makes me think of how people say that some chintzy person must have gotten rich by nickel and diming something. Like saying, oh, that's probably why he's a millionaire, because he duct tapes his sneakers and wears them forever.
No. Anyone who saves the cost of sneakers on an annual basis, doesn't save enough to become a millionaire. The guy duct taping his sneakers is just a jerk who thinks he's more like his poor tenants, even though he has millions of dollars worth of apartment buildings. Saving $200/year is not what will make anyone able to own what he owns.
That's such a pathetic notion.
Last edited by NoMoreSnowForMe; 12-08-2017 at 09:53 PM..
The thing is, is it really "blowing" it, after you look at all of the circumstances?
For instance, if you are flat broke, with some piece of junk car, and you spend $36k on a new vehicle that should last you 10 years of reliable transportation, is that wasted money?
Yes, it's still blowing it because you can spend 1/3 of that amount on a decent used car that will last you 10 years.
Quote:
Originally Posted by NoMoreSnowForMe
$70K can go so quickly. It's not that much money.
Correct. It isn't that much, which is why you don't go out and spend 36K on a car with it when you can still get a nice, reliable car for much less.
Quote:
Originally Posted by NoMoreSnowForMe
Realistically, is 30K in the bank going to make you rich? Not hardly.
No, it won't. But that's the kind of binary black/white thinking that gets people in trouble. First off, I'd have about 55K because I would've spent 15k or less for the car. (I just bought a nice 2 year old used car a year ago for less than that, so I know it's possible). Now 55k isn't rich by an stretch. But depending on how much time someone has it could be a major contributor to their wealth. 55k invested at 8% is $387,000 in 40 years. That's a long time to wait. 55k invested in a dividend oriented stock fund such as Vanguard High Dividend Yield Exchange Traded Fund would pay out about $1573 a year in dividends. And those dividends typically increase over time. But you could certainly supplement your lifestyle with an extra $1500 a year.
I think your point about poor people starting off in the hole is well taken. The problem is, even after they've gotten some of the things they really need (like good dental care), they often do a lot of things that hurt themselves in the long run. Yeah, they may need a car, but they buy the $35K new car instead of the 15K gently used car. They don't shop around for that dental work as hard as they would if they had saved the money for it themselves. And maybe they just blow it on totally unnecessary stuff.
The bottom line is there's a lot more to eliminating poverty than just giving poor people money.
Last edited by mysticaltyger; 12-08-2017 at 10:06 PM..
But, honestly, $70K is going to turn some poor family into a rich one? How, exactly?.
No 70K isn't making anyone rich. It's not about being rich, per se, anyway. It's about being better off in a long term, sustainable way. Are you really better off spending 35k on a car when spending less than half that amount can still get you a decent car that will last almost as long? I don't think so. Especially when you can then take what's left over and spend it on other true needs and invest the rest. The investment gains will add steadily to one's standard of living over time. No, it won't be a luxurious lifestyle. But it will be a better, less stressful one. Luxury doesn't add much to happiness, anyway. But absence of stress sure can.
No. Anyone who saves the cost of sneakers on an annual basis, doesn't save enough to become a millionaire. The guy duct taping his sneakers is just a jerk who thinks he's more like his poor tenants, even though he has millions of dollars worth of apartment buildings. Saving $200/year is not what will make anyone able to own what he owns.
That's such a pathetic notion.
That's because you're cherry picking one example and looking at it in isolation. No, saving $200 a year isn't going to make someone rich. But typically, the person who wears sneakers until they wear out is the same person who's going to buy the used car for 15K instead of buying the new car for 35K. There's an underlying mindset that governs a whole series of decisions, small and large. And that does, indeed, add up to quite a bit over 10, 20, 30 years for someone with a middle class income or higher.
You see the rich guy with worn out sneakers as a cheap jerk. For all you know the guy could've grown up poor, saw what other poor people did and said to himself "no way do I want any parts of that". For all you know, people may make fun of him for doing what he did. But maybe he has other goals (like giving to charity) than wasting time and energy caring about what other people think.
When I sold my house, I got a $20,000 check. The first thing I did was pay back people who had loaned me money for the down payment. I think that left about $5000. Of course, now that I didn't have a house, I had to find a place to live and that took first, last, and security. I spent what was left on a chair which wore out in three years, a sofa which I still have and which looks like new, and a computer that I just replaced last month and was 12 years old.
That sofa will last me a lifetime because I take care of it and it's well made. The computer went way beyond its lifetime and what I learned having a computer is fantastic. But I didn't need to buy that stuff right away and I wish I hadn't been in such a hurry to pay people back.
I had just switched jobs and the job I took turned out to be the worst job I've ever had. I wish like anything I'd saved some money so I could have quit and taken the time to look for another, better job. Instead, I stayed where I was for two hellish years and ended up walking out.
Money gives you choices and I was foolish enough to trade the choices that money gave me for some material things I could have bought later on when I was better off and in a more stable situation.
Quote:
Originally Posted by AlmostSeniorinNJ
It is about their psychological condition and their insecurities that leads to the need to gratifying themselves by buying crap and spending money on a quick fix.
It is basically the same thing as being addicted to alcohol or drugs.
You're a lot closer than you know.
If someone's lived in poverty most of their life, usually they're also depressed. So when they get money and can finally buy something nice, it gives them a jolt that feels good. But that feeling doesn't last. So they buy something again, and again, until the money is gone.
Sorry, but I haven't had that kind of luck - have you?
So not being poor is essentially just being lucky?
Give me a break. There is no big mystery about getting out of poverty. Sure not enough is done to teach people how to be responsible with money but also nothing is stopping people from getting educated on their own. With the internet and all the resources there is no excuse.
When I was 16 years old I signed up with Amway. My mom actually had to sign the papers because I was not old enough. Amway turned out to be a big waste of time but I did begin to learn about setting goals and motivation and parlayed that a few years later into my own successful business. And I started it with very little money out of pocket.
It means setting goals one at a time and completing them. Getting out there and meeting successful people, especially people who came from whatever situation you are currently in learning and observing how they got out of poverty.
If someone is poor its because they are more comfortable being poor than making the personal sacrifices necessary to change their situation. Not luck.
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