5 ms·

HN might not exactly be the right audience for this message, given the nature of Ycombinator. And even on an average American software engineer salary, it's no

HN might not exactly be the right audience for this message, given the nature of Ycombinator. And even on an average American software engineer salary, it's not extremely challenging to become a millionaire - you just have to be frugal and save a large percentage of your salary for a decade or two (depending on your compensation & stock options).

Simon_says 8y ago
Keep in mind that a millionaire meant something entirely different when this phrase was first uttered. It'd be something closer to $10 million in wealth today. Today being a millionaire just means you won't eat cat food when you retire.
- prepend 8y ago
  A frugal engineer on an $98k adjusted salary can pretty easily make $10M over a 45 year career. Not accounting for huge windfalls from stock, etc. The median salary for an electrical engineer was $97,970 [0]. If you invest $50k/year at 6% return you get $10M in 45 years. Of course this requires pretty massive discipline. But it’s easy in the sense that if you go to a good stem school, get a job and keep it, and don’t get sick, anyone can do it. Of course 6% is super conservative as the total return of the s&p over 90 years is 9.8% [1]. If was you could get that rate somehow, you only have to save $15k/year. Of course this is really hard in the sense of willpower, discipline, etc. And there’s certainly bad luck that make it not 100% certain, but it’s an open path to anyone in America (and other countries). Even for $10M. [0] https://www.bls.gov/ooh/architecture-and-engineering/mobile/home.htm https://www.bls.gov/ooh/architecture-and-engineering/mobile/... [1] https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...
  - Simon_says 8y ago
    45 years ago, the median salary was not $97k. You need to adjust for inflation of the salary as well. Edit: You're also not accounting for taxes, which will take a sizable chunk of dividends and capital gains.
    - prepend 8y ago
      45 years ago the example was $1M. My scenario is for if you want to make $10M starting today. It’s a simple model that doesn’t take into account many factors. But it’s meant to demonstrate that getting $10M is certainly feasible and reliably predictable. If you’re wondering if taxes and inflation change the outcome of the example, they don’t. (Which is why I didn’t include them) So the fact that there are taxes doesn’t matter for purposes of this example. Neither does inflation as the example is about getting $10M, not in getting $10M in present day purchasing power. But certainly inflation is important in how $10M will be worth much less 45 years from now. But I don’t expect anyone to not know that. But maybe I missed how inflation would impact this illustration. Let me know if you think inflation would change the meaning or validity of the example. There are way better programs and calculators if you want to actually carry this out. They will factor in tax deferral, capital gains, inflation, etc etc. But the nice thing is that if you were 18 and thinking of what to do with your life. It’s pretty reliable that you could get an engineering degree and save for 45 years to get $10M. If you wanted to. I don’t think I would want to be in the “inner circle” because it’s quite a different lifestyle than I want.
      - Simon_says 8y ago
        I'm sorry, but I think there's still something that your analysis is missing with respect to taking inflation into account. Either that, or we're talking past each other in some way. Today's hypothetical 18 year old doesn't want $10 million as a nominal amount. He wants 10 million present day dollars worth of value. In 45 years, this might be something closer to $25 million (as measured in 2063 dollars). That's actually a difference that you need to consider. Using your numbers of somebody who saves $50k per year and gets 6% annual returns, and assuming that their wage and savings increases with inflation, he'll end up with about $15MM. Certainly no small chunk of change, but equivalent today to about $6MM. Enough to retire comfortably and leave a legacy, but not a staggering sum. Also, the taxes do matter. Marginal changes in your post-tax rate of return have compounding effects due to the long investment timeline. Getting an effective annual return of 5% instead of 6% shaves off almost a full third from the final amount. Also, if the taxes didn't matter, the government wouldn't bother collecting them =P
  - RugnirViking 8y ago
    1) who is getting 6% annual return on small amounts of money and where? 2) casually investing half of your salary before tax. That works out to around 65% of your money after tax if we're being conservative. If you were able to do that, I say spend that 65% of income that is just free income presumably if it's not going to rent or food. 45 years of massively more comfortable during the prime of your health and brain function is probably worth it over eventually being very rich in your later years
    - Simon_says 8y ago
      To answer question 1: Everybody who invested in the US stock market over the last 140 years.
    - prepend 8y ago
      It’s not convenient, and certainly not casual, but there are many doing this in a variety of configurations. Check out the Financially Independent, Retire Early folks. Wouldn’t it be super strange if it was casually easy for everyone to earn $10M. Comically, if it was, then we’d have hyper inflation until it got hard again. I provided a link to the s&p history. Check it out. Anyone who can open a vanguard account can buy an s&p index. Of course maybe you’re wondering who is getting 6% risk-free and the answer is no one. Past performance doesn’t guarantee future returns, but it’s a good idea anyway. Check out Buffet’s bet on whether index funds will beat the professional hedge fund managers in a 10 year period [0]. My point is that while very difficult due to discipline and with some risk, it is possible if you set your mind to it. As opposed to say, winning the lotto which has no reasonable way for a hard working person to pay out. So if you want to join the inner circle, it’s better to just get training and work hard for 45 years than to win the lotto. You can certainly trade this for being “massively more comfortable” if that’s your preference. Most people do. Every time I look at my Netflix viewing history over long periods I kind of wish I hadn’t traded hard work for “massive comfort.” [0] http://blog.longnow.org/02018/02/09/warren-buffett-wins-million-dollar-long-bet/ http://blog.longnow.org/02018/02/09/warren-buffett-wins-mill...

Simon_says 8y ago

Keep in mind that a millionaire meant something entirely different when this phrase was first uttered. It'd be something closer to $10 million in wealth today. Today being a millionaire just means you won't eat cat food when you retire.

prepend 8y ago
A frugal engineer on an $98k adjusted salary can pretty easily make $10M over a 45 year career. Not accounting for huge windfalls from stock, etc. The median salary for an electrical engineer was $97,970 [0]. If you invest $50k/year at 6% return you get $10M in 45 years. Of course this requires pretty massive discipline. But it’s easy in the sense that if you go to a good stem school, get a job and keep it, and don’t get sick, anyone can do it. Of course 6% is super conservative as the total return of the s&p over 90 years is 9.8% [1]. If was you could get that rate somehow, you only have to save $15k/year. Of course this is really hard in the sense of willpower, discipline, etc. And there’s certainly bad luck that make it not 100% certain, but it’s an open path to anyone in America (and other countries). Even for $10M. [0] https://www.bls.gov/ooh/architecture-and-engineering/mobile/home.htm https://www.bls.gov/ooh/architecture-and-engineering/mobile/... [1] https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...
- Simon_says 8y ago
  45 years ago, the median salary was not $97k. You need to adjust for inflation of the salary as well. Edit: You're also not accounting for taxes, which will take a sizable chunk of dividends and capital gains.
  - prepend 8y ago
    45 years ago the example was $1M. My scenario is for if you want to make $10M starting today. It’s a simple model that doesn’t take into account many factors. But it’s meant to demonstrate that getting $10M is certainly feasible and reliably predictable. If you’re wondering if taxes and inflation change the outcome of the example, they don’t. (Which is why I didn’t include them) So the fact that there are taxes doesn’t matter for purposes of this example. Neither does inflation as the example is about getting $10M, not in getting $10M in present day purchasing power. But certainly inflation is important in how $10M will be worth much less 45 years from now. But I don’t expect anyone to not know that. But maybe I missed how inflation would impact this illustration. Let me know if you think inflation would change the meaning or validity of the example. There are way better programs and calculators if you want to actually carry this out. They will factor in tax deferral, capital gains, inflation, etc etc. But the nice thing is that if you were 18 and thinking of what to do with your life. It’s pretty reliable that you could get an engineering degree and save for 45 years to get $10M. If you wanted to. I don’t think I would want to be in the “inner circle” because it’s quite a different lifestyle than I want.
    - Simon_says 8y ago
      I'm sorry, but I think there's still something that your analysis is missing with respect to taking inflation into account. Either that, or we're talking past each other in some way. Today's hypothetical 18 year old doesn't want $10 million as a nominal amount. He wants 10 million present day dollars worth of value. In 45 years, this might be something closer to $25 million (as measured in 2063 dollars). That's actually a difference that you need to consider. Using your numbers of somebody who saves $50k per year and gets 6% annual returns, and assuming that their wage and savings increases with inflation, he'll end up with about $15MM. Certainly no small chunk of change, but equivalent today to about $6MM. Enough to retire comfortably and leave a legacy, but not a staggering sum. Also, the taxes do matter. Marginal changes in your post-tax rate of return have compounding effects due to the long investment timeline. Getting an effective annual return of 5% instead of 6% shaves off almost a full third from the final amount. Also, if the taxes didn't matter, the government wouldn't bother collecting them =P
- RugnirViking 8y ago
  1) who is getting 6% annual return on small amounts of money and where? 2) casually investing half of your salary before tax. That works out to around 65% of your money after tax if we're being conservative. If you were able to do that, I say spend that 65% of income that is just free income presumably if it's not going to rent or food. 45 years of massively more comfortable during the prime of your health and brain function is probably worth it over eventually being very rich in your later years
  - Simon_says 8y ago
    To answer question 1: Everybody who invested in the US stock market over the last 140 years.
  - prepend 8y ago
    It’s not convenient, and certainly not casual, but there are many doing this in a variety of configurations. Check out the Financially Independent, Retire Early folks. Wouldn’t it be super strange if it was casually easy for everyone to earn $10M. Comically, if it was, then we’d have hyper inflation until it got hard again. I provided a link to the s&p history. Check it out. Anyone who can open a vanguard account can buy an s&p index. Of course maybe you’re wondering who is getting 6% risk-free and the answer is no one. Past performance doesn’t guarantee future returns, but it’s a good idea anyway. Check out Buffet’s bet on whether index funds will beat the professional hedge fund managers in a 10 year period [0]. My point is that while very difficult due to discipline and with some risk, it is possible if you set your mind to it. As opposed to say, winning the lotto which has no reasonable way for a hard working person to pay out. So if you want to join the inner circle, it’s better to just get training and work hard for 45 years than to win the lotto. You can certainly trade this for being “massively more comfortable” if that’s your preference. Most people do. Every time I look at my Netflix viewing history over long periods I kind of wish I hadn’t traded hard work for “massive comfort.” [0] http://blog.longnow.org/02018/02/09/warren-buffett-wins-million-dollar-long-bet/ http://blog.longnow.org/02018/02/09/warren-buffett-wins-mill...