7 ms·

How Rich Is Rich?

42 points by simonreed 16y ago

happybuy 16y ago
Key quote from the article: "Kaye cautions not to confuse wealth with income. Some people can make a million a year, but be spending a million and a half. They are not rich, said Kaye."
- nkassis 16y ago
  Like in business it's all about the cash flow.
- russellallen 16y ago
  Of course they're not rich. What a silly thought. They're poor people with penthouses, Mercedes, caviar and champagne. Umm...
wallflower 16y ago
True wealth is how long you can maintain your preferred lifestyle without working. By scaling back, you become wealthier.
- dkarl 16y ago
  Only if you can manage to "prefer" your new, scaled-back lifestyle.
  - sliverstorm 16y ago
    I think 'manage' is not quite the right word. I am sure there are plenty of people out there who could be happier while spending less- the ones who are spending in search of happiness.
- groaner 16y ago
  Care to quantify that? I could maintain my current lifestyle for 8-10 years from savings (without having to touch retirement accounts), or longer if I move somewhere cheaper, but I don't feel wealthy at all.
  - jaxn 16y ago
    Feeling wealthy and being wealthy are often two very different things.
tsotha 16y ago
>Over time, the shape of your nest egg would resemble a bell curve, growing in the early years, and then declining as inflation required you to withdraw more money to maintain a lifestyle equivalent to $300,000 in 2010. The $12 million would finally dwindle to $934 when you turned 100. My bank is offering savings accounts that pay, like, .01% these days, so it's not so much a bell curve as just the right half of a bell curve. You can get a bit more interest from investments, but your risk goes up too. It would suck to be 50 after 15 years of not working and find you don't have any money. Would you even remember how to tie a tie? Anyway, the big wild card is health care. Nobody will insure you as an individual if you have a health problem, and the bills you can rack up at the hospital are almost open-ended. I went in for just a couple days last year and they billed my insurance $26k. It's not at all clear to me the changes the Democrats made last year will survive the next. I'd want at least 4-5 million in the bank just to feel secure on medical.
- avibryant 16y ago
  As a Canadian (though currently living in the US), that last sentence is both astonishing and scary.
  - tsotha 16y ago
    Admittedly, I'm a bit more conservative than most. But for me this amount would have to cover twenty years of potential problems.
- Bricejm 16y ago
  Over the last 30 years mortgage rates have decreased and with that savings rates (the less it costs to lend money, the less you pay to purchase money). An emphasis was placed on creating wealth in home equity and the stock market vs. saving from your job/paycheck, and living off interest in retirement. Unfortunately it's hard to turn things around (deflation causes depressions) and we have to accept that it's going to take time. Our generation will never see the increase in home prices the way our parents and their parents experienced. The same goes with the stock market. We're overextended and it will take time for things to even out. Being rich is having the amount of money that allows you to live the life you wish to lead. It's going to be more difficult for our generation to reach that point, but you can never go wrong with saving and preparing for retirement.
abp 16y ago
Now all that living without working stuff is not quite right, i think. What if you don't work at all. Sure you can work not, and be non productive. But what does that mean for your life? I want to work and i want to learn constanly. I don't want to be rich. If i would be i don't want to life on the money by myself. I just want to life and money is by far not everything. What the hell is wrong with the persons that brand their lifes to "getting rich is everything"? I think that is actually what anoys me most with startup culture today. Its all about success, high exits, getting rich. Make as much money as you can in a short time. But what for? What did you really gain from that? A burnout? A million? A few millions? And then you probably end like a austrian millionare and donate all your richness, before you really retire, just to life again and don't have to worry about all that richness.
- philk 16y ago
  The point of money is that it enables to choose what you want to work on. Look at Elon Musk. If he didn't have all his PayPal money he wouldn't have been able to found Tesla or SpaceX
  - abp 16y ago
    Sure, but how many people that have money, put their money into something useful, actually?
    - jaxn 16y ago
      I don't think it is about putting money in as much as it is about putting time in. So to shift your question a little, how many people that have money put their time into something useful? I think this number is quite high. Whether it be building new ventures or doing volunteer / philanthropic work. Once you don't have to "make a living" you get to decide what is important to you and live accordingly.
joystickers 16y ago
This article talks about two different things. First, it talks about how much money one would need to live comfortably in different parts of the country. Second, it talks about retirement. I have a question about the latter. Does anyone else notice that the retirement articles are always written by the same old school business journalists, in this case CNN Money? I think this article illustrates a major difference between our generation (I'm 24) and previous generations. The retirement conversation always revolves around living off of a nest egg investment that will hopefully be enough to survive on later in life. Let's change the discussion to be about earning income regardless of employment status. Anyone banking (no pun intended) on a 401k to sustain himself in 40+ years is nuts imo.
- jaxn 16y ago
  Why is that nuts? A 401k is hardly a pension. Once the money is in it is your money. If you were to start putting 10% of your income into your 401k or IRA now, you would be able to live off it in 40+ years easy. Yes, I think passive income is great. Most of my income is passive and I plan to keep growing that part of my life, but that doesn't mean it is a fool's errand to have a retirement account.
  - joystickers 16y ago
    10% is a considerable chunk. This is especially true for someone straight out of college who doesn't have a high income to begin with. You could argue that his/her expenses are lower than someone with a family, but the counter to that again is the income. Someone with a family isn't making a starting salary anymore. Another problem I have with the 401k is that "most" people leave it in the hands of fund managers who we're told know what they're doing. I'm one of those that leaves it to a fund manager as well. The biggest argument for the 401k is that the market will perform X% by the time you retire based on historical data. This assumes that trend will continue and that you don't unexpectedly lose a chunk of it as many retirees did in 2008. Another problem I have with the 401k is that it's incredibly illiquid. If you take money out before you retire you're strictly penalized. I'm not saying don't invest in the 401k. I invest in it, but only enough to get my employer's full match. If someone is offering you free money, you take it. I'm suggesting that it's better to take control of your own finances and earn enough passive income to live on. The 401k money should be a bonus, not the salary.
deleted 16y ago
[deleted]
petercooper 16y ago
Indeed, few experts think a million is enough to quit your day job. I hear the startup crowd screaming "Wha!" $1m is more than enough of a safety blanket to quit your "day job" and work on your own ideas for even a decade or more. This article clearly assumes being rich involves "not working", yet all of the rich people I know personally are perhaps the hardest workers I know.
- gamble 16y ago
  The truest measure of wealth is the degree to which working becomes a choice. It's a continuum - a little wealth gives you short-term freedom like choosing to start a business, whereas $10m+ gives you the option of doing whatever you like for the rest of your life without worrying about an income. I suspect most people have things they like to do if they suddenly came into a large fortune, but continuing at their day job is rarely one of them. Actually, with people who win the lottery you often see the opposite - they don't need to work, but they feel pressured to do something and often end up losing spectacular amounts of money in foolish business ventures.
hess 16y ago
I spent a few month in rural Nepal (think $10/month for rent). An ipod, digital camera and a few grand in the back account was enough to be considered uber-rich. It's all perspective. Sidenote: Now im back in the startup game and im just as greedy as every else
- bsk 16y ago
  An IAMA on reddit would be very interesting. Plus you'll get some publicity for your startup.
danbmil99 16y ago
Har har, $3800/month for a NYC apt that makes you feel rich? Try $6500++
- philk 16y ago
  They also include another additional twelve grand in spending money each month. I'm probably showing my stinginess here but I'd be vaguely baffled by how to get through that amount of spending money each month.
  - tsotha 16y ago
    I think you could do it pretty easily in NYC if you started riding limos around, buying designer clothing, and going to tony restaurants.
lionhearted 16y ago
Is this... > according to Steven Kaye, president of Watchung, N.J.-based wealth management firm American Economic Planning Group. He based that number on real-life figures his clients tell him they need. ...an example of this? - http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html
thewordpainter 16y ago
I think it's hilarious that people are aspiring to 'retire' at 35 --> they must have picked the wrong occupation to begin with! i can't imagine a day when i won't want to work on something that i'm passionate about --> will i ever really retire?

42 points by simonreed 16y ago

Key quote from the article: "Kaye cautions not to confuse wealth with income. Some people can make a million a year, but be spending a million and a half. They are not rich, said Kaye."

nkassis 16y ago
Like in business it's all about the cash flow.
russellallen 16y ago
Of course they're not rich. What a silly thought. They're poor people with penthouses, Mercedes, caviar and champagne. Umm...

wallflower 16y ago

True wealth is how long you can maintain your preferred lifestyle without working. By scaling back, you become wealthier.

dkarl 16y ago
Only if you can manage to "prefer" your new, scaled-back lifestyle.
- sliverstorm 16y ago
  I think 'manage' is not quite the right word. I am sure there are plenty of people out there who could be happier while spending less- the ones who are spending in search of happiness.
groaner 16y ago
Care to quantify that? I could maintain my current lifestyle for 8-10 years from savings (without having to touch retirement accounts), or longer if I move somewhere cheaper, but I don't feel wealthy at all.
- jaxn 16y ago
  Feeling wealthy and being wealthy are often two very different things.

tsotha 16y ago

>Over time, the shape of your nest egg would resemble a bell curve, growing in the early years, and then declining as inflation required you to withdraw more money to maintain a lifestyle equivalent to $300,000 in 2010. The $12 million would finally dwindle to $934 when you turned 100. My bank is offering savings accounts that pay, like, .01% these days, so it's not so much a bell curve as just the right half of a bell curve. You can get a bit more interest from investments, but your risk goes up too. It would suck to be 50 after 15 years of not working and find you don't have any money. Would you even remember how to tie a tie? Anyway, the big wild card is health care. Nobody will insure you as an individual if you have a health problem, and the bills you can rack up at the hospital are almost open-ended. I went in for just a couple days last year and they billed my insurance $26k. It's not at all clear to me the changes the Democrats made last year will survive the next. I'd want at least 4-5 million in the bank just to feel secure on medical.

avibryant 16y ago
As a Canadian (though currently living in the US), that last sentence is both astonishing and scary.
- tsotha 16y ago
  Admittedly, I'm a bit more conservative than most. But for me this amount would have to cover twenty years of potential problems.
Bricejm 16y ago
Over the last 30 years mortgage rates have decreased and with that savings rates (the less it costs to lend money, the less you pay to purchase money). An emphasis was placed on creating wealth in home equity and the stock market vs. saving from your job/paycheck, and living off interest in retirement. Unfortunately it's hard to turn things around (deflation causes depressions) and we have to accept that it's going to take time. Our generation will never see the increase in home prices the way our parents and their parents experienced. The same goes with the stock market. We're overextended and it will take time for things to even out. Being rich is having the amount of money that allows you to live the life you wish to lead. It's going to be more difficult for our generation to reach that point, but you can never go wrong with saving and preparing for retirement.

abp 16y ago

Now all that living without working stuff is not quite right, i think. What if you don't work at all. Sure you can work not, and be non productive. But what does that mean for your life? I want to work and i want to learn constanly. I don't want to be rich. If i would be i don't want to life on the money by myself. I just want to life and money is by far not everything. What the hell is wrong with the persons that brand their lifes to "getting rich is everything"? I think that is actually what anoys me most with startup culture today. Its all about success, high exits, getting rich. Make as much money as you can in a short time. But what for? What did you really gain from that? A burnout? A million? A few millions? And then you probably end like a austrian millionare and donate all your richness, before you really retire, just to life again and don't have to worry about all that richness.

philk 16y ago
The point of money is that it enables to choose what you want to work on. Look at Elon Musk. If he didn't have all his PayPal money he wouldn't have been able to found Tesla or SpaceX
- abp 16y ago
  Sure, but how many people that have money, put their money into something useful, actually?
  - jaxn 16y ago
    I don't think it is about putting money in as much as it is about putting time in. So to shift your question a little, how many people that have money put their time into something useful? I think this number is quite high. Whether it be building new ventures or doing volunteer / philanthropic work. Once you don't have to "make a living" you get to decide what is important to you and live accordingly.

joystickers 16y ago

This article talks about two different things. First, it talks about how much money one would need to live comfortably in different parts of the country. Second, it talks about retirement. I have a question about the latter. Does anyone else notice that the retirement articles are always written by the same old school business journalists, in this case CNN Money? I think this article illustrates a major difference between our generation (I'm 24) and previous generations. The retirement conversation always revolves around living off of a nest egg investment that will hopefully be enough to survive on later in life. Let's change the discussion to be about earning income regardless of employment status. Anyone banking (no pun intended) on a 401k to sustain himself in 40+ years is nuts imo.

jaxn 16y ago
Why is that nuts? A 401k is hardly a pension. Once the money is in it is your money. If you were to start putting 10% of your income into your 401k or IRA now, you would be able to live off it in 40+ years easy. Yes, I think passive income is great. Most of my income is passive and I plan to keep growing that part of my life, but that doesn't mean it is a fool's errand to have a retirement account.
- joystickers 16y ago
  10% is a considerable chunk. This is especially true for someone straight out of college who doesn't have a high income to begin with. You could argue that his/her expenses are lower than someone with a family, but the counter to that again is the income. Someone with a family isn't making a starting salary anymore. Another problem I have with the 401k is that "most" people leave it in the hands of fund managers who we're told know what they're doing. I'm one of those that leaves it to a fund manager as well. The biggest argument for the 401k is that the market will perform X% by the time you retire based on historical data. This assumes that trend will continue and that you don't unexpectedly lose a chunk of it as many retirees did in 2008. Another problem I have with the 401k is that it's incredibly illiquid. If you take money out before you retire you're strictly penalized. I'm not saying don't invest in the 401k. I invest in it, but only enough to get my employer's full match. If someone is offering you free money, you take it. I'm suggesting that it's better to take control of your own finances and earn enough passive income to live on. The 401k money should be a bonus, not the salary.

deleted 16y ago

[deleted]

petercooper 16y ago

Indeed, few experts think a million is enough to quit your day job. I hear the startup crowd screaming "Wha!" $1m is more than enough of a safety blanket to quit your "day job" and work on your own ideas for even a decade or more. This article clearly assumes being rich involves "not working", yet all of the rich people I know personally are perhaps the hardest workers I know.

gamble 16y ago
The truest measure of wealth is the degree to which working becomes a choice. It's a continuum - a little wealth gives you short-term freedom like choosing to start a business, whereas $10m+ gives you the option of doing whatever you like for the rest of your life without worrying about an income. I suspect most people have things they like to do if they suddenly came into a large fortune, but continuing at their day job is rarely one of them. Actually, with people who win the lottery you often see the opposite - they don't need to work, but they feel pressured to do something and often end up losing spectacular amounts of money in foolish business ventures.

hess 16y ago

I spent a few month in rural Nepal (think $10/month for rent). An ipod, digital camera and a few grand in the back account was enough to be considered uber-rich. It's all perspective. Sidenote: Now im back in the startup game and im just as greedy as every else

bsk 16y ago
An IAMA on reddit would be very interesting. Plus you'll get some publicity for your startup.

danbmil99 16y ago

Har har, $3800/month for a NYC apt that makes you feel rich? Try $6500++

philk 16y ago
They also include another additional twelve grand in spending money each month. I'm probably showing my stinginess here but I'd be vaguely baffled by how to get through that amount of spending money each month.
- tsotha 16y ago
  I think you could do it pretty easily in NYC if you started riding limos around, buying designer clothing, and going to tony restaurants.

lionhearted 16y ago

Is this... > according to Steven Kaye, president of Watchung, N.J.-based wealth management firm American Economic Planning Group. He based that number on real-life figures his clients tell him they need. ...an example of this? - http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html

thewordpainter 16y ago

I think it's hilarious that people are aspiring to 'retire' at 35 --> they must have picked the wrong occupation to begin with! i can't imagine a day when i won't want to work on something that i'm passionate about --> will i ever really retire?