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Observations: 1. Wealth is exponentially distributed. 2. People tend to socialize with people in their rough income range. 3. Expenses tend to grow to fi

by rictic 10y ago

Observations: 1. Wealth is exponentially distributed. 2. People tend to socialize with people in their rough income range. 3. Expenses tend to grow to fill any budget. 4. US society isn't very good at saving money, so most people's budget for spending is their entire income. Corollaries: 1. People tend to know a few people who make >10x what they do, a few people who make <1/10x what they do, and a lot of people that make about what they do. 2. Normal expenses in a milieu are enough to use up a person's entire income. 3. A person's idea of a luxury will tend towards something that would require >10x their income to be affordable.

ChuckMcM 10y ago
I like the list, in my case with #3 that wasn't true. Perhaps because my wife's mother was an accountant and so she was always attuned to the cost vs value equation or perhaps because my involvement in startups where I have always been attuned to the burn rate vs progress equation. When I moved to the Bay Area from LA it was with the plan to get a house as quickly as I could, build up some equity in the house while working for a company with offices outside of the Bay Area and then transfer to one of those offices when we had kids so that using the equity in our California house we could greatly reduce our burn rate and in a lower cost of living location and support a one earner payroll. So paying attention to our burn rate as a family was critical to understanding what the payroll requirements would be on a single earner to maintain a lifestyle that didn't add stress to our lives. And there are lots of things that incrementally add burn rate, communication charges, cable service, eating out, expensive to maintain cars, debt (especially credit card debt) etc. I also had aspirations for paying my kids college tuition (even though tuition was rising much faster than incomes or inflation) and being able to reach a point where I could develop enough passive income from investments/dividends/royalties/what have you that I would not be required charge an employer for my services in order to survive. Doing that math kind of make #4 a necessity, had to send money into the future (save) so that it could cover those costs which I wouldn't be able to cover out of a paycheck. On your corollaries I find #1 is blown away by attending a church. It is especially true if you're volunteering for some of the community service activities at said church. I certainly see #2 as a valid up to a point, per the $75K mention earlier. I remember working as a summer Intern and getting paid $200 a week and thinking "Wow, I can't even spend all the money I'm making!" but yes, you can always spend more without too much effort. During (and after) the 2009 banking crisis when people I knew were out of work and looking at being so for a "long" time a few of them were astonished at how much their monthly expenses has creeped up on them without thinking about it. One guy who was out of work for 18 months, once he got back to work he and his family made an explicit agreement to talk about 'incremental' costs before they took them on. I also don't know about Corollary #3. Perhaps its a magnitude thing.
- rictic 10y ago
  Thanks for the detailed response :) Corollary #3 is the one I feel the shakiest about. Interesting point about church. Childhood friends who went into careers with diverse income ranges, combined with a social scene outside my career does some of the same things for me, but I suspect church would do a yet better job in keeping me grounded.

by rictic 10y ago

ChuckMcM 10y ago

I like the list, in my case with #3 that wasn't true. Perhaps because my wife's mother was an accountant and so she was always attuned to the cost vs value equation or perhaps because my involvement in startups where I have always been attuned to the burn rate vs progress equation. When I moved to the Bay Area from LA it was with the plan to get a house as quickly as I could, build up some equity in the house while working for a company with offices outside of the Bay Area and then transfer to one of those offices when we had kids so that using the equity in our California house we could greatly reduce our burn rate and in a lower cost of living location and support a one earner payroll. So paying attention to our burn rate as a family was critical to understanding what the payroll requirements would be on a single earner to maintain a lifestyle that didn't add stress to our lives. And there are lots of things that incrementally add burn rate, communication charges, cable service, eating out, expensive to maintain cars, debt (especially credit card debt) etc. I also had aspirations for paying my kids college tuition (even though tuition was rising much faster than incomes or inflation) and being able to reach a point where I could develop enough passive income from investments/dividends/royalties/what have you that I would not be required charge an employer for my services in order to survive. Doing that math kind of make #4 a necessity, had to send money into the future (save) so that it could cover those costs which I wouldn't be able to cover out of a paycheck. On your corollaries I find #1 is blown away by attending a church. It is especially true if you're volunteering for some of the community service activities at said church. I certainly see #2 as a valid up to a point, per the $75K mention earlier. I remember working as a summer Intern and getting paid $200 a week and thinking "Wow, I can't even spend all the money I'm making!" but yes, you can always spend more without too much effort. During (and after) the 2009 banking crisis when people I knew were out of work and looking at being so for a "long" time a few of them were astonished at how much their monthly expenses has creeped up on them without thinking about it. One guy who was out of work for 18 months, once he got back to work he and his family made an explicit agreement to talk about 'incremental' costs before they took them on. I also don't know about Corollary #3. Perhaps its a magnitude thing.

rictic 10y ago
Thanks for the detailed response :) Corollary #3 is the one I feel the shakiest about. Interesting point about church. Childhood friends who went into careers with diverse income ranges, combined with a social scene outside my career does some of the same things for me, but I suspect church would do a yet better job in keeping me grounded.