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Why So Many Rich People Don’t Feel Very Rich

132 points by pointillistic 16y ago

seb 16y ago
Because they don't know what it means to be poor?
- cpswan 16y ago
  It doesn't matter where you start out. You're always staring up at that sheer cliff (in fact it's probably true that it seems steeper and harder to climb the closer you get to it).
- modoc 16y ago
  I disagree with this. While I'm not saying I was ever "poor" (as I never felt poor), I started out working for $5.15/hour, and sleeping on a friend's couch while I tried to find an apartment I could afford. Then I moved into a boston apartment that was $1000/month for three of us. It was falling over, and I ate homemade burritos every single day because beans and tortillas were cheap. Now I own a big house, drive nice cars, and earn a lot more than back then, but I still don't feel rich. The rise in income over 12 years, was more or less matched by a rise in lifestyle and spending. Don't get me wrong, life is more comfortable, and I'm able to do lots of things I want to do that weren't possible before, but I still don't feel "rich" (I do feel lucky and blessed, etc...). I hate my 1/2 working 30 year old electric cooktop. I want a new gas cooktop, but that means new counter tops, and running a gas line, and if I'm doing new counter tops I should probably re-do the cabinets at the same time, and if I'm doing those, I should do the floors, and if I'm doing cabinets I should really replace the wall oven and fridge while I'm at it. But I don't have that kind of money! And I still have to bust my ass every day at work. So until you're really "RICH", and you still have to set the alarm and work every day, and you have things you want, but can't afford, you don't "feel" "rich". Is this a healthy well adjusted mindset, probably not. Just pointing out that slow acclimation can make you feel like you really haven't moved much, regardless how far you've travelled. I've lost 35+ lbs in the last 3 years, but I don't feel "thin".
  - Retric 16y ago
    if I'm doing new counter tops I should probably This is the mindset that makes high income people feel poor. You can get a vary nice gas stove installed wihtout looking out of place for ~10k or you can spend ~100k and get the same thing but shiny.
    - modoc 16y ago
      10k is a lot of spending money. I'm trying to build up some savings/retirement money, so finding a "spare" 10k+ isn't easy.
      - Retric 16y ago
        I don't know much about your income, expenses, etc. However, I am suggesting that dealing with the I hate my _ list does not need to be that expensive. Relative to "I own a big house, drive nice cars* etc. Home Equity Line of Credit + reasonable expectations means you could get a gas stove that does not look ugly for around 120$ a month. And in the increased value of your home and the real cost could be less than 80$ a month. (AKA 40$ a month becomes another form of savings.) Now for you personally it's hard to (edit: quickly) cut 120$ a month from your nice cars and big house. But, I am willing to bet you would get more enjoyment from that 120$ than getting the "nicer" versions of other things in your life. PS: It was vary freeing when I realized I was not spending my money to optimize my happiness. Rather I was buying things based on the amount of spare money I had when I was buying it. (Edit: Not that you have this problem, but it seems common.)
  - mitcheme 16y ago
    Lifestyle inflation is very sneaky. I grew up fairly poor (and felt it), like trailer trash in a back-woods area known for potsmoking hicks poor, and now that I'm a "starving college student" with a decent PT job I feel pretty rich most of the time. I don't have the nicest apartment and I've parked my car for the year because the bus is cheaper and (usually) good enough. But even though I'm still not even middle class, I've noticed lifestyle inflation so I'm actively working to combat it. (Especially since I predict my income probably going up as I graduate and go FT year-round, I want the good habits now.) Firstly I try to be frugal. Some people think this means cutting coupons for everything and not spending any money on fun things, but really it just means not spending money on things you don't care about, so that you can spend money on things you do care about instead. The exact categories there are different for everyone and will change over time and as your situation/environment changes. For me, I chose to give up the car so I could have more wiggle room wrt general spending money (eating out, coffee), and could afford a new laptop and glasses. Other people will bring their own lunches and coffee so they can afford a vacation, or cut down on buying electronics so they can live in a nicer place. Sometimes I fail at frugality -- recently I've spent a lot of money on videogames that I don't really enjoy and won't play much, when I already have unplayed ones and games with lots of leftover replay value. So for the next month, I'm not spending any money on videogames, and after that I'll try to think more carefully about whether I'll enjoy a game and whether I actually have a small enough pile of games to get around to it soon, rather than whether I can afford the game. Because for any individual game, the answer to that question is always YES, so it's not a helpful question to ask myself. You mentioned you drive nice carS -- does this mean you own/lease more than one at once? You can only drive one at a time, so unless you have a family with seriously incompatible schedules or are a hardcore car aficionado, that might be something you could "afford" rather than something you truly need/want. Secondly I try not to own too much stuff, especially stuff I don't use. Owning stuff costs time and money, but we don't always see that because the costs are hidden and sprinkled around all over the place. If you're using your big house mostly to store a big bunch of stuff you've accumulated, you are paying your hard-earned money to heat your own personal junkyard. When you move house, you pay to move the junk. When the junk breaks you pay to fix it or to replace it -- because by keeping it you've already convinced yourself you "need" it, even if it's something you never/rarely use or whose function could easily be replaced by some other tool you have. So I try to purge the things I own regularly, keeping only the things I use and want. I did a big purge last summer and I'll probably do another one this spring. It can be hard, especially if you've been raised to believe that owning stuff is a good thing, or that "you'll never know when you need it", but it feels really good when you're done. This doesn't mean I live in a minimalist apartment with no stuff, of course. It just means I have a somewhat-smaller, carefully-curated collection of stuff -- stuff I'm consciously willing to actually heat and move and repair and replace. Sorry if getting money advice from a poor college student seems insulting/silly. It probably is at least a bit silly, but it seems like you and I (and lots of others) have the same problem on different scales, so the things that help me might help you, if you want.
- Goladus 16y ago
  That sums it up nicely. Essentially people in the 90th percentile who aren't truly rich (ie they are on the wrong side of that curve in the article) usually have a much higher standard of living they simply don't appreciate. For one example I moved to an apartment not infested with mice and roaches and it's cost me an extra $2,000 a year in rent. And honestly the roach place was overpriced and my current apt is a pretty good deal. Basically, someone in the 90th percentile but not feeling rich is probably living somplace nice, buying a lot more reasonably-nice clothes (and bicycle and ski gear maybe), brand-name groceries (Whole Foods, etc.), newer cars, an entertainment center, college and retirement savings, etc. No individual item seems like a massive luxury, like a Yacht or a mansion or luxury penthouse; and you can't invest a million in startups just for the fun of it; but across the board it all adds up.
chris_atwood 16y ago
Why did they put a non-linear x-axis on that graph? From 0% to 80% of income is only the first 40% of x-axis space! Then tick marks (with equal physical spacing) change from 5% to 1% increments.
- jtbigwoo 16y ago
  We're talking about the top 90% of earners so it makes sense to enlarge the right side of the graph. They're trying to illustrate the huge changes in income for every percentage point. A linear axis would be basically vertical at the right end.
  - chris_atwood 16y ago
    I think a vertical line would show the point more clearly. The idea is that there is a lot more change at the top end than the rest, and a vertical line does that. Resolution does become an issue (I agree that showing the change from 99.5 to 99.9 is good and a linear scale makes seeing those points harder). A way around that is to have the graph scroll left to right -- which should be easy given that it is an interactive JS/flash graph widget.
- yummyfajitas 16y ago
  Based on the way the info box follows the mouse, I think it's because their graphing tool puts an equal amount of space between data points. Most likely, the data points they fed into it have x-values of [5%, 10%, ..., 75%, 80%, 81%, ...]. This is a useful way of tabulating percentile data, though not such a useful way of graphing it.
AlexC04 16y ago
Perhaps it's because the definition of "rich" that they would need to feel is one where they'd never have to work again if they didn't want to. The article points out an annual income of $172,000 as being rich, but by implication, these people still have to work for their money. Therefore probably don't feel "rich" If they could maintain that income or even half that income in perpetuity without working. If they could spend their days doing just what they want and not what they have to then maybe that's what feels rich? Maybe?
- adovenmuehle 16y ago
  I think what people are really searching for is satisfaction. If they define satisfaction as being top 5% in wealth, then they'll probably have a long road to satisfaction. As for me, and I suspect others here, I'm satisfied when creating value. Dollars made is just a fallible measure of how much value has been created.
  - dasil003 16y ago
    Anyone who defines satisfaction that way is fooling themselves; probably in more ways than one.
- Alex3917 16y ago
  "The article points out an annual income of $172,000 as being rich, but by implication, these people still have to work for their money." I think the real issue is that someone making 300,000 probably doesn't have much more disposable income than someone making 80,000. Whatever extra money they have is likely just going to a slightly nicer house, their IRA, dental insurance, a slightly better preschool for their kids, etc. In other words, if you're making 300,000 per year then you probably can't afford to fly to Hawaii for the weekend on a whim any more than someone making 80,000 can.
  - BrandonM 16y ago
    You make a good point, I would just substitute "choose not to" for "probably can't." The person chose that nicer house and an expensive lifestyle. As a counterpoint, I went to Virginia Beach for a week on a whim at a time when I had no real income to speak of.
jkaufman 16y ago
Interesting take on rich vs uber rich. I grew up in an area with a lot of that 90th-95th percentile group but everyone seemed to believe they were "upper middle" class. The "rich" people were the few at the very top making millions more. A family making 250k/year is doing very well, but when they look at someone making a few million - they don't group themselves in that category. I also wonder if this is reinforced by the numerous 'reality' tv shows that document the uber rich lifestyle. Even in a town full of people that are well above average, no one is living like those top 1-2% of earners and therefore don't consider themselves rich.
edw519 16y ago
Every time I read an article like this, I think of all the people I know who are well off, yet appear to be miserable. Then I want to share with them this old wisdom from "The Ethics of the Fathers": "Who is wise? One who learns from every man." "Who is strong? One who overpowers his inclinations." "Who is honorable? One who honors his fellows." "Who is rich? One who is satisfied with his lot."
- deleted 16y ago
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- bradly 16y ago
  This reminds me of an HN comment from a few months ago. It was something like... "Need more money can usually be replaced with need less stuff" Edit: I found the comment: 'I bet that 9 times out of 10, "I need more money" should really be rephrased as "I need less stuff"'. http://news.ycombinator.com/item?id=2025234 http://news.ycombinator.com/item?id=2025234
  - deleted 16y ago
    [deleted]
  - blahedo 16y ago
    Or rather, "I need to need less stuff".
  - meterplech 16y ago
    I definitely get this viewpoint- but I would like to add that per gp comment, you should be satisfied with your lot. Which for some people may mean spending money on some things. I've noticed on HN and other sites a fascination with acquiring wealth. I understand why, but in the end you acquire wealth for the utility you can gain from using it. Obviously, this doesn't need to mean spending 5k on the biggest TV, and doesn't mean outstretching yourself on a huge mortgage for a McMansion. But, if you save a little less and tactically spend on things that will make you happier I think that is definitely worth it. This isn't a huge defense of "stuff," but I think it's also okay to lose some wealth to gain happiness. I personally like spending money on travel/experiences. There was a lifehacker article about that yielding increased happiness. Link: http://lifehacker.com/5608980/spend-on-experiences-instead-of-possessions-for-longer-happiness http://lifehacker.com/5608980/spend-on-experiences-instead-o...
jellicle 16y ago
It's simple. Make $100K, live near people making $90K = rich. Make $100K, live near people making $110K = poor.
- _delirium 16y ago
  I definitely noticed this in grad school. For a few years, I had a $30k fellowship, when the normal stipend, which all my friends made (and which I made the other years) was around $20k. I felt like I had more money than I could reasonably spend, saved about $5k of the excess, and splurged about $5k on what seemed to me to be luxury items, like fancy beer and trips. From my perspective I was, if not wealthy, at least well-off. Supposedly $30k is on the lower end of lower-middle-class, but it didn't feel like it. (Granted, it also helps that I don't have kids.)
  - klbarry 16y ago
    It's really so sneaky. Before I started school, I worked full time and I was still living paycheck to paycheck. I started school, with an obviously lower part-time salary, and I'm now comfortable adapted to the new salary (have money to burn and everything).
  - stevenbedrick 16y ago
    Yup, this hits the nail on the head. I was in the same situation- I lucked out into a very nice fellowship whose stipend the first four years of grad school started out one or two kilobucks higher than the standard level, and (amazingly, for a grad school stipend) went up a little bit each year. By the end, I was almost at $30k, and felt like a millionaire compared to friends who were on the school's standard stipend scale. Of course, during the fifth year, for various reasons, the fellowship's funding agency adjusted their stipend scale, at which point I discovered that there is a very real difference between making $25k and $30k. Even better, my funding ran out entirely a few months ago, so the last four or five months of my PhD have involved living off of my savings from the previous five years and the odd bit of consulting income. Let this be a lesson to other grad students out there: save like heck, 'cause you never know when there's going to be a gap in your funding, or a change in its level.
Tichy 16y ago
What surprises me is that there seems to be no upper limit for lifestyle expenses. To me it seems certain lifestyle choices are more of a liability than a bonus. A bigger house needs more cleaning, a cleaning lady, probably also a gardener. More cars require more maintenance, parking space, taxes. Yachts, OK, I don't know - they require personnel, but maybe they are nice to have. Then again, probably it is possible to rent them for the odd occasion? I think from a certain comparatively low threshold, my worry would be how to use my money to make the world a better place, not how to get a even more luxurious lifestyle.
- kmfrk 16y ago
  Agreed, the margin does not grow much bigger the more you make, if you made one graph for income and one for expenses.
- kbutler 16y ago
  > I think from a certain comparatively low threshold, my worry would be how to use my money to make the world a better place, not how to get a even more luxurious lifestyle. I expect many people feel this way, at all income levels. The point is that the "comparatively low threshold" varies depending on your current income - the more income you have, the higher your threshold becomes. "If I had a little more, I'd give." "I have a little, so I give." (widow's mite) kb
eggoa 16y ago
Or, to widen the perspective, why doesn't an American making $30,000 feel rich when he is above the 90% percentile for the world? (And he feels wretchedly poor because he has to have a roommate and use public transportation.)
ugh 16y ago
This is just a tangent, but I wonder whether Robert Gibbs really quit at least partly because his salary was too low. (That’s what Obama’s remark about his departure seems to suggest.) I don’t think you become Press Secretary of the White House because of the salary, you become Press Secretary because you are passionate about it. (For all you cynics out there: replace “passionate about it” with “power hungry”.) You certainly don’t have to feel ashamed or poor at cocktail parties if you are the Press Secretary of the White House, I would much rather suspect that you don’t actually have time to go to any cocktail parties and that that could be the much larger problem. Press Secretary is not a job you have forever (eight years seem like the natural maximum) and I’m certain that you have great chances of landing a highly paid job after that.
- matwood 16y ago
  That's simply a cover. No way he quit because of a salary issue. On top of that, no way he would have felt ashamed or poor at a cocktail party. I mean, he is directly speaking to the POTUS - likely daily. Many very rich people don't even have that luxury.
- bhousel 16y ago
  Exactly.. At least the last 3 or 4 White House Press Secretaries made that same salary "joke" upon leaving the position and returning back to their high paying private sector media jobs.
  - jbooth 16y ago
    Yeah, but more notably, they all left after a couple years. I think it's a pretty high stress job, and leaving is probably more about the stress than the salary. It just manifests itself as "I'm not getting paid enough for this shit".
    - aprrrr 16y ago
      More cynically, to the extent that ex-press secretaries' private sector value derives from their access to those in power, they're worth more while their crew is still in office.
jtbigwoo 16y ago
The amount of money I have left over at the end of the month makes a much bigger difference in whether I feel rich than the number on my paycheck. But, we're trained and encouraged by our culture to spend up to and beyond our means no matter what our income. Even the "responsible" rules of thumb like buying a house for 3x annual income or having debt payments of 40% of income encourage us to increase our expenses as our incomes increase. It's easy to see why somebody making $200,000 wouldn't feel rich if they own a $600,000 house. Their mortgage costs almost $50,000/year! Design your life to maximize the money in your pocket and you'll feel much richer.
- kmfrk 16y ago
  I think it has to do with a lack of a broader education and spiritualism that most people are devoid of. Because they don't know any better, money becomes a hammer, and every problem looks like a nail.
  - tomjen3 16y ago
    I doubt that - the potus press secretary has have a pretty broad understanding.
    - kmfrk 16y ago
      I'm not including him in that group; I'm not convinced that he left for financial reasons.
kentf 16y ago
Excellent article. Thank you for sharing.
boredguy8 16y ago
My adult life began with several years at a non-profit making $18k/yr. I've worked to avoid dramatic changes to my standard of living since then and it's helped me put money in the bank regardless of where I fell on the income scale. I also find that I need to "reset" my spending every 6 months or so, because it's trivially easy to start spending more than you realize, for no practical gain. Sometimes I get jealous of people at work who seem to have nicer things. Then a few days later they start to complain about not having money, and I'm reminded that I don't really need a TV, much less a 52-inch what-have-you. Nor do I need to replace my nearly 20 year old car with something newer just because I can. Or more realistically: I don't need to get a new car because someone else I know bought a Z3.
- jasonkester 16y ago
  The cool thing about this approach is how nicely it works with compound interest. Live like a college kid for the 5 years after you leave college, and I defy you not to put $10k per year into the market. Fresh out of school with my $32k salary, I'd regularly find month-old paychecks lying around undeposited because I simply didn't need the money to support my cheap apartment, used car, and 10lb sack of potatoes. With nowhere for your money to go but the market, you quickly discover what 10%/year (or even 5% per year) does to a stack of money. Eventually it's making more on its own than you're putting in. Financial security for life, sorted by age 30.
  - roadnottaken 16y ago
    Boy I'd be happy with 10%/year or 5%/year right now. I think you're still living in 1998. Eventually it's making more on its own than you're putting in. This actually takes a long time.
    - jasonkester 16y ago
      In 1998, a reasonable expectation was 50% per year, though you'd usually beat that if you invested in anything starting with a lower-case 'e'. Naturally, it all went away if you left it in, but that's beside the point. Today, it's still not unrealistic to expect that money you put in today will make on average 5-10% per year over the next 40 years. If you're investing your money for a shorter period than that, it's not really retirement savings but speculation, which can be fun but is its own thing. Regardless, I don't think I'd discourage people from saving in their 20s because you don't think the market is going to continue doing its thing. It'll be back, and the few hundred K that you can set aside in your 20s will do some amazing things over the course of your life if you invest it in index funds rather than granite countertops.
narrator 16y ago
The reality of this phenomenon is that people who have done everything "perfectly" in their life and academic career feel a bit cheated when their income tops out in between 100k and 200k. They might be senior engineers or doctors or lawyers but they've hit this brick wall as far as income, sometimes in their 30s and yet there are all these people out there that make more than 10x or even 100x their annual income. Now there are four ways that I am aware of to make more than about 200k/year. 1. Be an investor/entrepreneur in your own company. 2. Have stock in a company that IPOs or get bought. 3. Work in high finance at a well performing hedge fund or a maor wall street firm. 4. Be a senior partner in a major law firm or an experienced surgeon in an in-demand specialty. Though you'll still top out at about 500k, at least according to glassdoor.com. Did I miss any?
- klbarry 16y ago
  I think that's most of it, but there's also sales commission on huge projects.
- bgentry 16y ago
  5. Become a high-level executive of a large or extremely profitable company. Obviously there's a small number of people for whom this will happen but I'm pretty sure most corporate execs make >$200k
  - barrkel 16y ago
    As far as I can see, the best ways to become this is are: (a) be an early employee of a company that grows large enough; (b) get your own company acquired (a subset of case 1); (c) meet the right people early on, especially at a young age; and (d) act entrepreneurially within an existing organization's management, which, depending on the health of the organization, may entail more political talent than productive talent.
    - sedachv 16y ago
      That list might be how people assume it happens, but it doesn't reflect reality. Most early employees never make it anywhere near management if they weren't management employees to begin with (and with venture-funded companies, those usually get replaced; Steve Blank wrote about this I think). Ditto for getting your company acquired (how many acquired YC alumni ended up quitting right after acquisition? something like 99%?). Meeting the right people also doesn't have as much to do with it as you'd suspect - a lot of CxOs are found through searches, and may come from companies in a completely different sector of the economy. As for entrepreneurial drive, that's the reason we're all here reading HN instead of being content with working for an "entrepreneurial" manager. I recommend reading Sharon Voros' The Road to CEO - it describes the typical public company's executive officers' background pretty well. The basic idea is you have to work your way up the management chain of command and build up a solid resume (spending time at a prominent business consulting shop apparently can act as a short-cut for this). Personal qualities related to making good first impressions seem really important at the high level - the author spends a couple of chapters on things related to grooming and appearance. I don't run in CxO circles, but that seems an accurate impression from the senior management people I've encountered. Bottom line seems to be you need to get into management and work and charm your way up.
pointillistic 16y ago
I posted the article here and I find that many comments are missing the point. Catherine Rampell writes that the exponential growth of the global wealth for the super-rich oligarchy, especially in the last decades made the comparison with them so much more difficult. This all at the backdrop of the devastating recession that thrown many productive people into the object poverty. I might add that the media and the internet is full of the ubiquitous stories about the super-rich so they are at the same time everyone's neighbor and no ones neighbor.
- CWuestefeld 16y ago
  That makes a nice, pandering story, but it's really a very very complex. There's some truth in the idea that the rich get richer, faster than the rest of us. But today, in a practical sense, what does it mean for someone to have much more money than I do? And what causes it? It's certainly not that some plutocracy is holding our heads below water, as much some people like to paint that picture. I'd encourage you to read this article, which has a pretty insightful analysis of where this inequality originates, and why: http://www.the-american-interest.com/article-bd.cfm?piece=907 http://www.the-american-interest.com/article-bd.cfm?piece=90...
jeremymims 16y ago
This article wonders why the rich are getting richer and the answer is compound interest. Having $1 million in the bank will reliably generate between $25k and $50k per year. Having $2 million in the bank will reliably generate between $50k and $100k per year. Having $3 million in the bank will reliably generate between $100k and $150k per year. So someone with $3 million in savings and still working their 200k job will be making nearly the same amount as their savings is generating. If they keep working and don't spend their principle, they'll have another million in about 5-6 years. For someone putting 30k away each year in savings, it will take them decades to reach the first $1 million. This is why the rich get richer. It's not about salary. It's about savings and investment.
- schammy 16y ago
  I know of no such bank offering interest rates even close to that. You're talking 2.5% - 5%. That's unheard of these days. At my current bank, $1M in a money market account would generate about $2,500/year, which is nothing short of insulting. Who are these fabled banks offering 10x the interest rate?
  - barrkel 16y ago
    Indeed, (relatively) risk-free interest rates available for modest amounts of money currently do not exceed the rate of inflation; money in the bank is money declining in value.
  - artmageddon 16y ago
    Before the subprime crash in 2007, interest rates were well in that range. I had an ING savings account(regular savings account, not a CD) with a rate that was earning me $7 per day, as opposed to now in which I get maybe $2 per month.
    - schammy 16y ago
      Yeah, I know, interest rate used to be good. I used to get 5% on my emigrant direct savings account. Now it's 1%, and I don't know of anything higher (for a money market account anywys)
jhamburger 16y ago
People only look up when it comes to wealth, everyone who makes less money than you might as well not exist. I read an article once about what well-off people (net worth in excess of $5 million) consider to be rich. The consensus was about $50 million liquid net worth- Basically the point where you can realistically consider owning private jets and yachts so there isn't any shit to be jealous of your neighbors about anymore (except maybe a bigger yacht).
kahawe 16y ago
I think you are only really "rich" when you are making a decent (e.g. middle/upper middle-class) monthly salary without even (theoretically) setting a foot out of bed, ever. Given the complete freedom to do a lot of things in your life without ever HAVING to participate in the rat race of daily work has got to be the ultimate freedom and should be the bar for "rich" for me. Everyone below that is more or less well off.
- jhamburger 16y ago
  You are confusing 'rich' with 'idle rich'.
  - gaius 16y ago
    No, it's not that you do do that, it's that you have the option.
r0h4n 16y ago
Spend one week in India and you will feel like a Billionaire for the rest of your life.
- loewenskind 16y ago
  A lot of people from india work in the west, send that money back home to have a mansion (servants and everything) and live like a billionaire for the rest of their life (well, presumably. I obviously don't know any that have done this and died of old age yet).
acconrad 16y ago
I'll save you reading the article and summarize it in 1 sentence: income distribution is exponential, so rich neighborhoods can have significantly (relatively) richer/poorer residents, while poor neighborhoods all make relatively the same.
bane 16y ago
There's definitely a middle ground though. Being poor sucks...bad. Not because you can't the things you want, but because you can't get the things you desperately need (and I mean things in the physical sense). I remember reading various studies a few years ago (sorry, can't find them now) showing folks who make 40-50k/yr in the U.S. tend to be the most satisfied with life. With inflation that's probably more like 60-70k (and possibly more for the Bay Area and NYC), but the point stands. You can cover most life needs with that and have a little left over for indulgences. But not so much that you get caught up in material wants. Also I noticed many people with money who are unhappy, tend to be unhappy because of the social isolation that brings. As it turns out, human interaction is something we need, and also happens to be very cheap/efficient in most cases.
- kin 16y ago
  Agree especially to the last line. Being the only person in my group of friends in the 60-70K category while they're in the sub 40K category keeps me on a college budget. Cheap dates, happy hour, home cooking, take-out, etc.
anthonycerra 16y ago
It must be tough to have a smaller yacht than your friends.
- larrywright 16y ago
  $172,000 per year is not a yacht level income. It's a good salary (some might say great), but you're not going to have a mansion and a yacht.
  - sedachv 16y ago
    That depends on what you mean by "mansion" and "yacht." Outside of NYC and the Bay Area you can definitely afford a mortgage on a nice house, two good cars, and a decent-sized sailboat and manage to feed a family of four on that income (assuming you don't send the kids to private school).
    - sedachv 16y ago
      I was looking at ads for places today, and happened across this listing: http://montreal.kijiji.ca/c-housing-house-rental-ST-COLOMBAN-COTTAGE-DE-LUXE-FINANCEMENT-100-PROPRIO-W0QQAdIdZ253342623 http://montreal.kijiji.ca/c-housing-house-rental-ST-COLOMBAN... Small mansion 1 hour commuting distance from Montreal, $400,000 Let's look at craigslist: http://montreal.en.craigslist.ca/boa/2116842083.html http://montreal.en.craigslist.ca/boa/2116842083.html 35' cruising yacht, good condition, $49,000 This is certainly doable on $172,000
duke_sam 16y ago
Reminds me of the Chicago professor who was complaining about repealing the tax breaks for "rich" people[1] (his household income was in the 250k range). As a bunch of commentators pointed out he felt like he was just scraping by because he was attempting to live the life of someone earning 350k+ not the life of someone earning 150k+. A growing trend is how quickly the income of those at the top is increasing relative to those at the bottom[2] and the disconnect this brings[3]. At what point does someone earning minimum wage stop and think "How exactly is someone working in a hedge fun worth tens of thousands of me in yearly salary alone?". Would they push for legislative solutions? Can you even use something as blunt as the tax code for this? [1] His blog posts were taken down but you can see commentary: http://www.huffingtonpost.com/2010/09/21/todd-henderson-rich_n_732813.html http://www.huffingtonpost.com/2010/09/21/todd-henderson-rich... http://www.theatlantic.com/national/archive/2010/09/in-defense-of-the-self-pitying-wealthy-poor/63777/ http://www.theatlantic.com/national/archive/2010/09/in-defen... [2]http://www.forbes.com/2008/04/30/ceo-pay-historic-lead-bestbosses08-cx_sd_0430flash.html http://www.forbes.com/2008/04/30/ceo-pay-historic-lead-bestb... - for reference $1 in 1989 is worth around $1.70 now so inflation does not account for a near 6x increase. [3]http://www.theatlantic.com/magazine/archive/2011/01/the-rise-of-the-new-global-elite/8343/ http://www.theatlantic.com/magazine/archive/2011/01/the-rise...
- mdda 16y ago
  Minimum wage for a year is approximately $10k. Ten thousand times that is $100MM. Hedge Fund salaries are not of that order - topping out at $10MM. I agree that Hedge Fund bonuses can be large, but as far as the fixed salary component goes, the person on minimum wage in your example is misinformed.
skittles 16y ago
My idea of being rich is when you don't have to work to maintain your lifestyle (as long as you are happy with that lifestyle--being a miserable homeless person doesn't count). The problem with a majority of high-earners is that they have too many on-going expenses that force them to keep working.
fingerprinter 16y ago
I can sum this up for me and my family (fyi...we live quite meekly): We don't feel "rich" because if something catastrophic happens (one of us loses our job, major health problem, really bad turn in economy again) we are not insulated despite all of our savings for the rest of our lives. We have, perhaps, 2-4 years ability to stave of bankruptcy and the lot. That number is different for everyone, but the "rich" don't think about that, ever. They are set and will always be set unless _THEY_ do something stupid with their money. Bottom line: I am not rich because I am not in control of the rest of my life still. I am dependent on the system and the people who actually control the system still. "rich" and "money" have always been about freedom to me. Because I am not truly free, I am not rich. Make sense?
- GFischer 16y ago
  So, I should feel richer than you because my country provides a far better safety net? (even though I probably make between 10 to 20 times less?)
Gilpo 16y ago
What does it take to feel rich? These articles never seem to say.
- Gilpo 16y ago
  I guess what I mean is, what does it feel like to feel rich?
T_S_ 16y ago
Greed feels like a ladder but is actually a hamster wheel.
bm98 16y ago
People between the 70th and 90th percentiles feel squeezed by a lot of expenses that cost less for those lower on the scale, due to price discrimination, progressive taxation, subsidies, etc. College tuition is a good example. It's high enough to take a big chunk of the income of a 70-90th percentile earner, but it doesn't hurt as much to someone higher (spare change!) or lower (financial aid) on the income scale.
joshwa 16y ago
http://en.wikipedia.org/wiki/Hedonic_treadmill http://en.wikipedia.org/wiki/Hedonic_treadmill
yason 16y ago
The thing is, if you're of this "I don't have enough" sort of type (or one of its numerous manifestations) it doesn't matter how much you have. You, thus, by your own words, never have enough of anything and your life is much worse off because of that. If you're poor, you have worries most people can understand but your worries are real to you. If you're rich, you have worries that seem outrageous to most people and your worries are (still) real to you. Hence, you're not any better off in reality, even if you don't have to starve. Of course you're not any better off because you still think you don't have enough. And the funny thing is that it you don't have to become rich to have enough. When you're happy with first what you have, then everything is restored to back to 'okay'. And you can still try to get more but you don't have to try to get more.
sabat 16y ago
One reason I can imagine that you wouldn't feel rich: because it feels unstable. If you're afraid you're going to lose it all at any moment, you just feel momentarily lucky.
jond2062 16y ago
This topic always brings me back to the same place: As a culture, when it comes to the "rich" and the "wealthy" we tend to focus almost exclusively on revenue (income) and assets (stuff). Anyone who looks at a simple income statement and balance sheet knows that there is a lot more to the equation. If someone makes $500k and spends $500k, not only is their net income $0, they have added nothing to their net worth. Conversely, someone who makes $75k and spends $30k has a positive net income of $45k and adds $45k to their net worth. However, because we don't have nearly as much insight into the income statements and balance sheets of our neighbor, we compare our "income" and "stuff" to their "income" and "stuff" (as opposed to what we really should be comparing which is net income and net worth). I'm also reminded of a great book by P.T. Barnum called The Art of Money Getting (http://manybooks.net/titles/barnumptetext05barnm10.html http://manybooks.net/titles/barnumptetext05barnm10.html). It was published in 1880, but it's amazing how relevant it still is. He tells some great stories about life, money, and wealth. This is one of my favorites: "I know a gentleman of fortune who says, that when he first began to prosper, his wife would have a new and elegant sofa. "That sofa," he says, "cost me thirty thousand dollars!" When the sofa reached the house, it was found necessary to get chairs to match; then side-boards, carpets and tables "to correspond" with them, and so on through the entire stock of furniture. When at last it was found that the house itself was quite too small and old-fashioned for the furniture, and a new one was built to correspond with the new purchases; "thus," added my friend, "summing up an outlay of thirty thousand dollars, caused by that single sofa, and saddling on me, in the shape of servants, equipage, and the necessary expenses attendant upon keeping up a fine ’establishment,’ a yearly outlay of eleven thousand dollars, and a tight pinch at that: whereas, ten years ago, we lived with much more real comfort, because with much less care, on as many hundreds. The truth is," he continued, "that sofa would have brought me to inevitable bankruptcy, had not a most unexampled title to prosperity kept me above it, and had I not checked the natural desire to ’cut a dash’."
kin 16y ago
I once had an hour long conversation with a stranger at a bar about this. Coincidentally, we were in the same field, hacker. And he told me that coming out of college it's a little bit too easy to just work for the man. Being young and fresh out of college, you really can afford to take risks and be in that small percentile of people that are so much richer. Of course, it's a risk, and you have to take it and put your heart into it.
hoag 16y ago
The argument presented in the article is plausible, but I call it "the guy with the S65 AMG Benz admiring the guy with the Maybach" argument, i.e., the Maybach is a few hundred thousand dollars dearer than the Benz, itself a $200K car. While valid, I think it illustrates the effect of the unhappiness problem rather than the underlying cause. I call the root of the problem The SimCity Effect. The SimCity Effect -- as I describe it -- is essentially a real life application of the economic principle of diminishing marginal value, i.e., the more of a given good you gain, the less value you gain from each subsequent good. I think wealthy peoples' unhappiness with life is due to the far greater decrease in value -- or utility -- they gain each time they move up the ladder than those with lesser means. This is in turn is caused by a fundamental failure by most people to have a predetermined sense of "satisfaction" or "accomplishment" in life. This is where the SimCity analogy comes to play. Those of you who grew up playing SimCity probably experienced this phenomenon: you start building a city, eagerly growing larger and larger, with more and better public utilities, education, etc., and your satisfaction curve probably faced an initial upward curve: all things being equal, the goal of SimCity was arguably to build the largest, cleanest, most educated, and high tech city you could manage. Trouble is, that's a pretty vague goal: what does "large" mean? 1M people? 2M? 10M? In the absence of a clear and defined goal, and no way to "win" the game in the traditional sense, most SimCity builders suffered a very real sense of diminishing marginal value, and thus their satisfaction -- joy with the game, etc. -- decreased as well. This is not to say that one should set finite goals beyond which we should strive no further, but rather that we should at least set a mental note alerting us to when, in our life, we have obtained our goals, so we can at least breathe a sigh of relief and say "I've done it." Anything beyond that would be a bonus and it would essentially reset our internal "utility" curve accordingly to, perhaps, begin anew. This would certainly explain serial entrepreneurs and the like. This to me is the real problem with happiness -- or lack thereof -- at the highest echelon of society: it is not unhappiness per se, but rather a lack of satisfaction due to what can be best described as satisfaction desensitization. Just my 2c.

132 points by pointillistic 16y ago

seb 16y ago

Because they don't know what it means to be poor?

cpswan 16y ago
It doesn't matter where you start out. You're always staring up at that sheer cliff (in fact it's probably true that it seems steeper and harder to climb the closer you get to it).
modoc 16y ago
I disagree with this. While I'm not saying I was ever "poor" (as I never felt poor), I started out working for $5.15/hour, and sleeping on a friend's couch while I tried to find an apartment I could afford. Then I moved into a boston apartment that was $1000/month for three of us. It was falling over, and I ate homemade burritos every single day because beans and tortillas were cheap. Now I own a big house, drive nice cars, and earn a lot more than back then, but I still don't feel rich. The rise in income over 12 years, was more or less matched by a rise in lifestyle and spending. Don't get me wrong, life is more comfortable, and I'm able to do lots of things I want to do that weren't possible before, but I still don't feel "rich" (I do feel lucky and blessed, etc...). I hate my 1/2 working 30 year old electric cooktop. I want a new gas cooktop, but that means new counter tops, and running a gas line, and if I'm doing new counter tops I should probably re-do the cabinets at the same time, and if I'm doing those, I should do the floors, and if I'm doing cabinets I should really replace the wall oven and fridge while I'm at it. But I don't have that kind of money! And I still have to bust my ass every day at work. So until you're really "RICH", and you still have to set the alarm and work every day, and you have things you want, but can't afford, you don't "feel" "rich". Is this a healthy well adjusted mindset, probably not. Just pointing out that slow acclimation can make you feel like you really haven't moved much, regardless how far you've travelled. I've lost 35+ lbs in the last 3 years, but I don't feel "thin".
- Retric 16y ago
  if I'm doing new counter tops I should probably This is the mindset that makes high income people feel poor. You can get a vary nice gas stove installed wihtout looking out of place for ~10k or you can spend ~100k and get the same thing but shiny.
  - modoc 16y ago
    10k is a lot of spending money. I'm trying to build up some savings/retirement money, so finding a "spare" 10k+ isn't easy.
    - Retric 16y ago
      I don't know much about your income, expenses, etc. However, I am suggesting that dealing with the I hate my _ list does not need to be that expensive. Relative to "I own a big house, drive nice cars* etc. Home Equity Line of Credit + reasonable expectations means you could get a gas stove that does not look ugly for around 120$ a month. And in the increased value of your home and the real cost could be less than 80$ a month. (AKA 40$ a month becomes another form of savings.) Now for you personally it's hard to (edit: quickly) cut 120$ a month from your nice cars and big house. But, I am willing to bet you would get more enjoyment from that 120$ than getting the "nicer" versions of other things in your life. PS: It was vary freeing when I realized I was not spending my money to optimize my happiness. Rather I was buying things based on the amount of spare money I had when I was buying it. (Edit: Not that you have this problem, but it seems common.)
- mitcheme 16y ago
  Lifestyle inflation is very sneaky. I grew up fairly poor (and felt it), like trailer trash in a back-woods area known for potsmoking hicks poor, and now that I'm a "starving college student" with a decent PT job I feel pretty rich most of the time. I don't have the nicest apartment and I've parked my car for the year because the bus is cheaper and (usually) good enough. But even though I'm still not even middle class, I've noticed lifestyle inflation so I'm actively working to combat it. (Especially since I predict my income probably going up as I graduate and go FT year-round, I want the good habits now.) Firstly I try to be frugal. Some people think this means cutting coupons for everything and not spending any money on fun things, but really it just means not spending money on things you don't care about, so that you can spend money on things you do care about instead. The exact categories there are different for everyone and will change over time and as your situation/environment changes. For me, I chose to give up the car so I could have more wiggle room wrt general spending money (eating out, coffee), and could afford a new laptop and glasses. Other people will bring their own lunches and coffee so they can afford a vacation, or cut down on buying electronics so they can live in a nicer place. Sometimes I fail at frugality -- recently I've spent a lot of money on videogames that I don't really enjoy and won't play much, when I already have unplayed ones and games with lots of leftover replay value. So for the next month, I'm not spending any money on videogames, and after that I'll try to think more carefully about whether I'll enjoy a game and whether I actually have a small enough pile of games to get around to it soon, rather than whether I can afford the game. Because for any individual game, the answer to that question is always YES, so it's not a helpful question to ask myself. You mentioned you drive nice carS -- does this mean you own/lease more than one at once? You can only drive one at a time, so unless you have a family with seriously incompatible schedules or are a hardcore car aficionado, that might be something you could "afford" rather than something you truly need/want. Secondly I try not to own too much stuff, especially stuff I don't use. Owning stuff costs time and money, but we don't always see that because the costs are hidden and sprinkled around all over the place. If you're using your big house mostly to store a big bunch of stuff you've accumulated, you are paying your hard-earned money to heat your own personal junkyard. When you move house, you pay to move the junk. When the junk breaks you pay to fix it or to replace it -- because by keeping it you've already convinced yourself you "need" it, even if it's something you never/rarely use or whose function could easily be replaced by some other tool you have. So I try to purge the things I own regularly, keeping only the things I use and want. I did a big purge last summer and I'll probably do another one this spring. It can be hard, especially if you've been raised to believe that owning stuff is a good thing, or that "you'll never know when you need it", but it feels really good when you're done. This doesn't mean I live in a minimalist apartment with no stuff, of course. It just means I have a somewhat-smaller, carefully-curated collection of stuff -- stuff I'm consciously willing to actually heat and move and repair and replace. Sorry if getting money advice from a poor college student seems insulting/silly. It probably is at least a bit silly, but it seems like you and I (and lots of others) have the same problem on different scales, so the things that help me might help you, if you want.
Goladus 16y ago
That sums it up nicely. Essentially people in the 90th percentile who aren't truly rich (ie they are on the wrong side of that curve in the article) usually have a much higher standard of living they simply don't appreciate. For one example I moved to an apartment not infested with mice and roaches and it's cost me an extra $2,000 a year in rent. And honestly the roach place was overpriced and my current apt is a pretty good deal. Basically, someone in the 90th percentile but not feeling rich is probably living somplace nice, buying a lot more reasonably-nice clothes (and bicycle and ski gear maybe), brand-name groceries (Whole Foods, etc.), newer cars, an entertainment center, college and retirement savings, etc. No individual item seems like a massive luxury, like a Yacht or a mansion or luxury penthouse; and you can't invest a million in startups just for the fun of it; but across the board it all adds up.

chris_atwood 16y ago

Why did they put a non-linear x-axis on that graph? From 0% to 80% of income is only the first 40% of x-axis space! Then tick marks (with equal physical spacing) change from 5% to 1% increments.

jtbigwoo 16y ago
We're talking about the top 90% of earners so it makes sense to enlarge the right side of the graph. They're trying to illustrate the huge changes in income for every percentage point. A linear axis would be basically vertical at the right end.
- chris_atwood 16y ago
  I think a vertical line would show the point more clearly. The idea is that there is a lot more change at the top end than the rest, and a vertical line does that. Resolution does become an issue (I agree that showing the change from 99.5 to 99.9 is good and a linear scale makes seeing those points harder). A way around that is to have the graph scroll left to right -- which should be easy given that it is an interactive JS/flash graph widget.
yummyfajitas 16y ago
Based on the way the info box follows the mouse, I think it's because their graphing tool puts an equal amount of space between data points. Most likely, the data points they fed into it have x-values of [5%, 10%, ..., 75%, 80%, 81%, ...]. This is a useful way of tabulating percentile data, though not such a useful way of graphing it.

AlexC04 16y ago

Perhaps it's because the definition of "rich" that they would need to feel is one where they'd never have to work again if they didn't want to. The article points out an annual income of $172,000 as being rich, but by implication, these people still have to work for their money. Therefore probably don't feel "rich" If they could maintain that income or even half that income in perpetuity without working. If they could spend their days doing just what they want and not what they have to then maybe that's what feels rich? Maybe?

adovenmuehle 16y ago
I think what people are really searching for is satisfaction. If they define satisfaction as being top 5% in wealth, then they'll probably have a long road to satisfaction. As for me, and I suspect others here, I'm satisfied when creating value. Dollars made is just a fallible measure of how much value has been created.
- dasil003 16y ago
  Anyone who defines satisfaction that way is fooling themselves; probably in more ways than one.
Alex3917 16y ago
"The article points out an annual income of $172,000 as being rich, but by implication, these people still have to work for their money." I think the real issue is that someone making 300,000 probably doesn't have much more disposable income than someone making 80,000. Whatever extra money they have is likely just going to a slightly nicer house, their IRA, dental insurance, a slightly better preschool for their kids, etc. In other words, if you're making 300,000 per year then you probably can't afford to fly to Hawaii for the weekend on a whim any more than someone making 80,000 can.
- BrandonM 16y ago
  You make a good point, I would just substitute "choose not to" for "probably can't." The person chose that nicer house and an expensive lifestyle. As a counterpoint, I went to Virginia Beach for a week on a whim at a time when I had no real income to speak of.

jkaufman 16y ago

Interesting take on rich vs uber rich. I grew up in an area with a lot of that 90th-95th percentile group but everyone seemed to believe they were "upper middle" class. The "rich" people were the few at the very top making millions more. A family making 250k/year is doing very well, but when they look at someone making a few million - they don't group themselves in that category. I also wonder if this is reinforced by the numerous 'reality' tv shows that document the uber rich lifestyle. Even in a town full of people that are well above average, no one is living like those top 1-2% of earners and therefore don't consider themselves rich.

edw519 16y ago

Every time I read an article like this, I think of all the people I know who are well off, yet appear to be miserable. Then I want to share with them this old wisdom from "The Ethics of the Fathers": "Who is wise? One who learns from every man." "Who is strong? One who overpowers his inclinations." "Who is honorable? One who honors his fellows." "Who is rich? One who is satisfied with his lot."

deleted 16y ago
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bradly 16y ago
This reminds me of an HN comment from a few months ago. It was something like... "Need more money can usually be replaced with need less stuff" Edit: I found the comment: 'I bet that 9 times out of 10, "I need more money" should really be rephrased as "I need less stuff"'. http://news.ycombinator.com/item?id=2025234 http://news.ycombinator.com/item?id=2025234
- deleted 16y ago
  [deleted]
- blahedo 16y ago
  Or rather, "I need to need less stuff".
- meterplech 16y ago
  I definitely get this viewpoint- but I would like to add that per gp comment, you should be satisfied with your lot. Which for some people may mean spending money on some things. I've noticed on HN and other sites a fascination with acquiring wealth. I understand why, but in the end you acquire wealth for the utility you can gain from using it. Obviously, this doesn't need to mean spending 5k on the biggest TV, and doesn't mean outstretching yourself on a huge mortgage for a McMansion. But, if you save a little less and tactically spend on things that will make you happier I think that is definitely worth it. This isn't a huge defense of "stuff," but I think it's also okay to lose some wealth to gain happiness. I personally like spending money on travel/experiences. There was a lifehacker article about that yielding increased happiness. Link: http://lifehacker.com/5608980/spend-on-experiences-instead-of-possessions-for-longer-happiness http://lifehacker.com/5608980/spend-on-experiences-instead-o...

jellicle 16y ago

It's simple. Make $100K, live near people making $90K = rich. Make $100K, live near people making $110K = poor.

_delirium 16y ago
I definitely noticed this in grad school. For a few years, I had a $30k fellowship, when the normal stipend, which all my friends made (and which I made the other years) was around $20k. I felt like I had more money than I could reasonably spend, saved about $5k of the excess, and splurged about $5k on what seemed to me to be luxury items, like fancy beer and trips. From my perspective I was, if not wealthy, at least well-off. Supposedly $30k is on the lower end of lower-middle-class, but it didn't feel like it. (Granted, it also helps that I don't have kids.)
- klbarry 16y ago
  It's really so sneaky. Before I started school, I worked full time and I was still living paycheck to paycheck. I started school, with an obviously lower part-time salary, and I'm now comfortable adapted to the new salary (have money to burn and everything).
- stevenbedrick 16y ago
  Yup, this hits the nail on the head. I was in the same situation- I lucked out into a very nice fellowship whose stipend the first four years of grad school started out one or two kilobucks higher than the standard level, and (amazingly, for a grad school stipend) went up a little bit each year. By the end, I was almost at $30k, and felt like a millionaire compared to friends who were on the school's standard stipend scale. Of course, during the fifth year, for various reasons, the fellowship's funding agency adjusted their stipend scale, at which point I discovered that there is a very real difference between making $25k and $30k. Even better, my funding ran out entirely a few months ago, so the last four or five months of my PhD have involved living off of my savings from the previous five years and the odd bit of consulting income. Let this be a lesson to other grad students out there: save like heck, 'cause you never know when there's going to be a gap in your funding, or a change in its level.

Tichy 16y ago

What surprises me is that there seems to be no upper limit for lifestyle expenses. To me it seems certain lifestyle choices are more of a liability than a bonus. A bigger house needs more cleaning, a cleaning lady, probably also a gardener. More cars require more maintenance, parking space, taxes. Yachts, OK, I don't know - they require personnel, but maybe they are nice to have. Then again, probably it is possible to rent them for the odd occasion? I think from a certain comparatively low threshold, my worry would be how to use my money to make the world a better place, not how to get a even more luxurious lifestyle.

kmfrk 16y ago
Agreed, the margin does not grow much bigger the more you make, if you made one graph for income and one for expenses.
kbutler 16y ago
> I think from a certain comparatively low threshold, my worry would be how to use my money to make the world a better place, not how to get a even more luxurious lifestyle. I expect many people feel this way, at all income levels. The point is that the "comparatively low threshold" varies depending on your current income - the more income you have, the higher your threshold becomes. "If I had a little more, I'd give." "I have a little, so I give." (widow's mite) kb

eggoa 16y ago

Or, to widen the perspective, why doesn't an American making $30,000 feel rich when he is above the 90% percentile for the world? (And he feels wretchedly poor because he has to have a roommate and use public transportation.)

ugh 16y ago

This is just a tangent, but I wonder whether Robert Gibbs really quit at least partly because his salary was too low. (That’s what Obama’s remark about his departure seems to suggest.) I don’t think you become Press Secretary of the White House because of the salary, you become Press Secretary because you are passionate about it. (For all you cynics out there: replace “passionate about it” with “power hungry”.) You certainly don’t have to feel ashamed or poor at cocktail parties if you are the Press Secretary of the White House, I would much rather suspect that you don’t actually have time to go to any cocktail parties and that that could be the much larger problem. Press Secretary is not a job you have forever (eight years seem like the natural maximum) and I’m certain that you have great chances of landing a highly paid job after that.

matwood 16y ago
That's simply a cover. No way he quit because of a salary issue. On top of that, no way he would have felt ashamed or poor at a cocktail party. I mean, he is directly speaking to the POTUS - likely daily. Many very rich people don't even have that luxury.
bhousel 16y ago
Exactly.. At least the last 3 or 4 White House Press Secretaries made that same salary "joke" upon leaving the position and returning back to their high paying private sector media jobs.
- jbooth 16y ago
  Yeah, but more notably, they all left after a couple years. I think it's a pretty high stress job, and leaving is probably more about the stress than the salary. It just manifests itself as "I'm not getting paid enough for this shit".
  - aprrrr 16y ago
    More cynically, to the extent that ex-press secretaries' private sector value derives from their access to those in power, they're worth more while their crew is still in office.

jtbigwoo 16y ago

The amount of money I have left over at the end of the month makes a much bigger difference in whether I feel rich than the number on my paycheck. But, we're trained and encouraged by our culture to spend up to and beyond our means no matter what our income. Even the "responsible" rules of thumb like buying a house for 3x annual income or having debt payments of 40% of income encourage us to increase our expenses as our incomes increase. It's easy to see why somebody making $200,000 wouldn't feel rich if they own a $600,000 house. Their mortgage costs almost $50,000/year! Design your life to maximize the money in your pocket and you'll feel much richer.

kmfrk 16y ago
I think it has to do with a lack of a broader education and spiritualism that most people are devoid of. Because they don't know any better, money becomes a hammer, and every problem looks like a nail.
- tomjen3 16y ago
  I doubt that - the potus press secretary has have a pretty broad understanding.
  - kmfrk 16y ago
    I'm not including him in that group; I'm not convinced that he left for financial reasons.

kentf 16y ago

Excellent article. Thank you for sharing.

boredguy8 16y ago

My adult life began with several years at a non-profit making $18k/yr. I've worked to avoid dramatic changes to my standard of living since then and it's helped me put money in the bank regardless of where I fell on the income scale. I also find that I need to "reset" my spending every 6 months or so, because it's trivially easy to start spending more than you realize, for no practical gain. Sometimes I get jealous of people at work who seem to have nicer things. Then a few days later they start to complain about not having money, and I'm reminded that I don't really need a TV, much less a 52-inch what-have-you. Nor do I need to replace my nearly 20 year old car with something newer just because I can. Or more realistically: I don't need to get a new car because someone else I know bought a Z3.

jasonkester 16y ago
The cool thing about this approach is how nicely it works with compound interest. Live like a college kid for the 5 years after you leave college, and I defy you not to put $10k per year into the market. Fresh out of school with my $32k salary, I'd regularly find month-old paychecks lying around undeposited because I simply didn't need the money to support my cheap apartment, used car, and 10lb sack of potatoes. With nowhere for your money to go but the market, you quickly discover what 10%/year (or even 5% per year) does to a stack of money. Eventually it's making more on its own than you're putting in. Financial security for life, sorted by age 30.
- roadnottaken 16y ago
  Boy I'd be happy with 10%/year or 5%/year right now. I think you're still living in 1998. Eventually it's making more on its own than you're putting in. This actually takes a long time.
  - jasonkester 16y ago
    In 1998, a reasonable expectation was 50% per year, though you'd usually beat that if you invested in anything starting with a lower-case 'e'. Naturally, it all went away if you left it in, but that's beside the point. Today, it's still not unrealistic to expect that money you put in today will make on average 5-10% per year over the next 40 years. If you're investing your money for a shorter period than that, it's not really retirement savings but speculation, which can be fun but is its own thing. Regardless, I don't think I'd discourage people from saving in their 20s because you don't think the market is going to continue doing its thing. It'll be back, and the few hundred K that you can set aside in your 20s will do some amazing things over the course of your life if you invest it in index funds rather than granite countertops.

narrator 16y ago

The reality of this phenomenon is that people who have done everything "perfectly" in their life and academic career feel a bit cheated when their income tops out in between 100k and 200k. They might be senior engineers or doctors or lawyers but they've hit this brick wall as far as income, sometimes in their 30s and yet there are all these people out there that make more than 10x or even 100x their annual income. Now there are four ways that I am aware of to make more than about 200k/year. 1. Be an investor/entrepreneur in your own company. 2. Have stock in a company that IPOs or get bought. 3. Work in high finance at a well performing hedge fund or a maor wall street firm. 4. Be a senior partner in a major law firm or an experienced surgeon in an in-demand specialty. Though you'll still top out at about 500k, at least according to glassdoor.com. Did I miss any?

klbarry 16y ago
I think that's most of it, but there's also sales commission on huge projects.
bgentry 16y ago
5. Become a high-level executive of a large or extremely profitable company. Obviously there's a small number of people for whom this will happen but I'm pretty sure most corporate execs make >$200k
- barrkel 16y ago
  As far as I can see, the best ways to become this is are: (a) be an early employee of a company that grows large enough; (b) get your own company acquired (a subset of case 1); (c) meet the right people early on, especially at a young age; and (d) act entrepreneurially within an existing organization's management, which, depending on the health of the organization, may entail more political talent than productive talent.
  - sedachv 16y ago
    That list might be how people assume it happens, but it doesn't reflect reality. Most early employees never make it anywhere near management if they weren't management employees to begin with (and with venture-funded companies, those usually get replaced; Steve Blank wrote about this I think). Ditto for getting your company acquired (how many acquired YC alumni ended up quitting right after acquisition? something like 99%?). Meeting the right people also doesn't have as much to do with it as you'd suspect - a lot of CxOs are found through searches, and may come from companies in a completely different sector of the economy. As for entrepreneurial drive, that's the reason we're all here reading HN instead of being content with working for an "entrepreneurial" manager. I recommend reading Sharon Voros' The Road to CEO - it describes the typical public company's executive officers' background pretty well. The basic idea is you have to work your way up the management chain of command and build up a solid resume (spending time at a prominent business consulting shop apparently can act as a short-cut for this). Personal qualities related to making good first impressions seem really important at the high level - the author spends a couple of chapters on things related to grooming and appearance. I don't run in CxO circles, but that seems an accurate impression from the senior management people I've encountered. Bottom line seems to be you need to get into management and work and charm your way up.

pointillistic 16y ago

I posted the article here and I find that many comments are missing the point. Catherine Rampell writes that the exponential growth of the global wealth for the super-rich oligarchy, especially in the last decades made the comparison with them so much more difficult. This all at the backdrop of the devastating recession that thrown many productive people into the object poverty. I might add that the media and the internet is full of the ubiquitous stories about the super-rich so they are at the same time everyone's neighbor and no ones neighbor.

CWuestefeld 16y ago
That makes a nice, pandering story, but it's really a very very complex. There's some truth in the idea that the rich get richer, faster than the rest of us. But today, in a practical sense, what does it mean for someone to have much more money than I do? And what causes it? It's certainly not that some plutocracy is holding our heads below water, as much some people like to paint that picture. I'd encourage you to read this article, which has a pretty insightful analysis of where this inequality originates, and why: http://www.the-american-interest.com/article-bd.cfm?piece=907 http://www.the-american-interest.com/article-bd.cfm?piece=90...

jeremymims 16y ago

This article wonders why the rich are getting richer and the answer is compound interest. Having $1 million in the bank will reliably generate between $25k and $50k per year. Having $2 million in the bank will reliably generate between $50k and $100k per year. Having $3 million in the bank will reliably generate between $100k and $150k per year. So someone with $3 million in savings and still working their 200k job will be making nearly the same amount as their savings is generating. If they keep working and don't spend their principle, they'll have another million in about 5-6 years. For someone putting 30k away each year in savings, it will take them decades to reach the first $1 million. This is why the rich get richer. It's not about salary. It's about savings and investment.

schammy 16y ago
I know of no such bank offering interest rates even close to that. You're talking 2.5% - 5%. That's unheard of these days. At my current bank, $1M in a money market account would generate about $2,500/year, which is nothing short of insulting. Who are these fabled banks offering 10x the interest rate?
- barrkel 16y ago
  Indeed, (relatively) risk-free interest rates available for modest amounts of money currently do not exceed the rate of inflation; money in the bank is money declining in value.
- artmageddon 16y ago
  Before the subprime crash in 2007, interest rates were well in that range. I had an ING savings account(regular savings account, not a CD) with a rate that was earning me $7 per day, as opposed to now in which I get maybe $2 per month.
  - schammy 16y ago
    Yeah, I know, interest rate used to be good. I used to get 5% on my emigrant direct savings account. Now it's 1%, and I don't know of anything higher (for a money market account anywys)

jhamburger 16y ago

People only look up when it comes to wealth, everyone who makes less money than you might as well not exist. I read an article once about what well-off people (net worth in excess of $5 million) consider to be rich. The consensus was about $50 million liquid net worth- Basically the point where you can realistically consider owning private jets and yachts so there isn't any shit to be jealous of your neighbors about anymore (except maybe a bigger yacht).

kahawe 16y ago

I think you are only really "rich" when you are making a decent (e.g. middle/upper middle-class) monthly salary without even (theoretically) setting a foot out of bed, ever. Given the complete freedom to do a lot of things in your life without ever HAVING to participate in the rat race of daily work has got to be the ultimate freedom and should be the bar for "rich" for me. Everyone below that is more or less well off.

jhamburger 16y ago
You are confusing 'rich' with 'idle rich'.
- gaius 16y ago
  No, it's not that you do do that, it's that you have the option.

r0h4n 16y ago

Spend one week in India and you will feel like a Billionaire for the rest of your life.

loewenskind 16y ago
A lot of people from india work in the west, send that money back home to have a mansion (servants and everything) and live like a billionaire for the rest of their life (well, presumably. I obviously don't know any that have done this and died of old age yet).

acconrad 16y ago

I'll save you reading the article and summarize it in 1 sentence: income distribution is exponential, so rich neighborhoods can have significantly (relatively) richer/poorer residents, while poor neighborhoods all make relatively the same.

bane 16y ago

There's definitely a middle ground though. Being poor sucks...bad. Not because you can't the things you want, but because you can't get the things you desperately need (and I mean things in the physical sense). I remember reading various studies a few years ago (sorry, can't find them now) showing folks who make 40-50k/yr in the U.S. tend to be the most satisfied with life. With inflation that's probably more like 60-70k (and possibly more for the Bay Area and NYC), but the point stands. You can cover most life needs with that and have a little left over for indulgences. But not so much that you get caught up in material wants. Also I noticed many people with money who are unhappy, tend to be unhappy because of the social isolation that brings. As it turns out, human interaction is something we need, and also happens to be very cheap/efficient in most cases.

kin 16y ago
Agree especially to the last line. Being the only person in my group of friends in the 60-70K category while they're in the sub 40K category keeps me on a college budget. Cheap dates, happy hour, home cooking, take-out, etc.

anthonycerra 16y ago

It must be tough to have a smaller yacht than your friends.

larrywright 16y ago
$172,000 per year is not a yacht level income. It's a good salary (some might say great), but you're not going to have a mansion and a yacht.
- sedachv 16y ago
  That depends on what you mean by "mansion" and "yacht." Outside of NYC and the Bay Area you can definitely afford a mortgage on a nice house, two good cars, and a decent-sized sailboat and manage to feed a family of four on that income (assuming you don't send the kids to private school).
  - sedachv 16y ago
    I was looking at ads for places today, and happened across this listing: http://montreal.kijiji.ca/c-housing-house-rental-ST-COLOMBAN-COTTAGE-DE-LUXE-FINANCEMENT-100-PROPRIO-W0QQAdIdZ253342623 http://montreal.kijiji.ca/c-housing-house-rental-ST-COLOMBAN... Small mansion 1 hour commuting distance from Montreal, $400,000 Let's look at craigslist: http://montreal.en.craigslist.ca/boa/2116842083.html http://montreal.en.craigslist.ca/boa/2116842083.html 35' cruising yacht, good condition, $49,000 This is certainly doable on $172,000

duke_sam 16y ago

Reminds me of the Chicago professor who was complaining about repealing the tax breaks for "rich" people[1] (his household income was in the 250k range). As a bunch of commentators pointed out he felt like he was just scraping by because he was attempting to live the life of someone earning 350k+ not the life of someone earning 150k+. A growing trend is how quickly the income of those at the top is increasing relative to those at the bottom[2] and the disconnect this brings[3]. At what point does someone earning minimum wage stop and think "How exactly is someone working in a hedge fun worth tens of thousands of me in yearly salary alone?". Would they push for legislative solutions? Can you even use something as blunt as the tax code for this? [1] His blog posts were taken down but you can see commentary: http://www.huffingtonpost.com/2010/09/21/todd-henderson-rich_n_732813.html http://www.huffingtonpost.com/2010/09/21/todd-henderson-rich... http://www.theatlantic.com/national/archive/2010/09/in-defense-of-the-self-pitying-wealthy-poor/63777/ http://www.theatlantic.com/national/archive/2010/09/in-defen... [2]http://www.forbes.com/2008/04/30/ceo-pay-historic-lead-bestbosses08-cx_sd_0430flash.html http://www.forbes.com/2008/04/30/ceo-pay-historic-lead-bestb... - for reference $1 in 1989 is worth around $1.70 now so inflation does not account for a near 6x increase. [3]http://www.theatlantic.com/magazine/archive/2011/01/the-rise-of-the-new-global-elite/8343/ http://www.theatlantic.com/magazine/archive/2011/01/the-rise...

mdda 16y ago
Minimum wage for a year is approximately $10k. Ten thousand times that is $100MM. Hedge Fund salaries are not of that order - topping out at $10MM. I agree that Hedge Fund bonuses can be large, but as far as the fixed salary component goes, the person on minimum wage in your example is misinformed.

skittles 16y ago

My idea of being rich is when you don't have to work to maintain your lifestyle (as long as you are happy with that lifestyle--being a miserable homeless person doesn't count). The problem with a majority of high-earners is that they have too many on-going expenses that force them to keep working.

fingerprinter 16y ago

I can sum this up for me and my family (fyi...we live quite meekly): We don't feel "rich" because if something catastrophic happens (one of us loses our job, major health problem, really bad turn in economy again) we are not insulated despite all of our savings for the rest of our lives. We have, perhaps, 2-4 years ability to stave of bankruptcy and the lot. That number is different for everyone, but the "rich" don't think about that, ever. They are set and will always be set unless _THEY_ do something stupid with their money. Bottom line: I am not rich because I am not in control of the rest of my life still. I am dependent on the system and the people who actually control the system still. "rich" and "money" have always been about freedom to me. Because I am not truly free, I am not rich. Make sense?

GFischer 16y ago
So, I should feel richer than you because my country provides a far better safety net? (even though I probably make between 10 to 20 times less?)

Gilpo 16y ago

What does it take to feel rich? These articles never seem to say.

Gilpo 16y ago
I guess what I mean is, what does it feel like to feel rich?

T_S_ 16y ago

Greed feels like a ladder but is actually a hamster wheel.

bm98 16y ago

People between the 70th and 90th percentiles feel squeezed by a lot of expenses that cost less for those lower on the scale, due to price discrimination, progressive taxation, subsidies, etc. College tuition is a good example. It's high enough to take a big chunk of the income of a 70-90th percentile earner, but it doesn't hurt as much to someone higher (spare change!) or lower (financial aid) on the income scale.

joshwa 16y ago

http://en.wikipedia.org/wiki/Hedonic_treadmill http://en.wikipedia.org/wiki/Hedonic_treadmill

yason 16y ago

The thing is, if you're of this "I don't have enough" sort of type (or one of its numerous manifestations) it doesn't matter how much you have. You, thus, by your own words, never have enough of anything and your life is much worse off because of that. If you're poor, you have worries most people can understand but your worries are real to you. If you're rich, you have worries that seem outrageous to most people and your worries are (still) real to you. Hence, you're not any better off in reality, even if you don't have to starve. Of course you're not any better off because you still think you don't have enough. And the funny thing is that it you don't have to become rich to have enough. When you're happy with first what you have, then everything is restored to back to 'okay'. And you can still try to get more but you don't have to try to get more.

sabat 16y ago

One reason I can imagine that you wouldn't feel rich: because it feels unstable. If you're afraid you're going to lose it all at any moment, you just feel momentarily lucky.

jond2062 16y ago

This topic always brings me back to the same place: As a culture, when it comes to the "rich" and the "wealthy" we tend to focus almost exclusively on revenue (income) and assets (stuff). Anyone who looks at a simple income statement and balance sheet knows that there is a lot more to the equation. If someone makes $500k and spends $500k, not only is their net income $0, they have added nothing to their net worth. Conversely, someone who makes $75k and spends $30k has a positive net income of $45k and adds $45k to their net worth. However, because we don't have nearly as much insight into the income statements and balance sheets of our neighbor, we compare our "income" and "stuff" to their "income" and "stuff" (as opposed to what we really should be comparing which is net income and net worth). I'm also reminded of a great book by P.T. Barnum called The Art of Money Getting (http://manybooks.net/titles/barnumptetext05barnm10.html http://manybooks.net/titles/barnumptetext05barnm10.html). It was published in 1880, but it's amazing how relevant it still is. He tells some great stories about life, money, and wealth. This is one of my favorites: "I know a gentleman of fortune who says, that when he first began to prosper, his wife would have a new and elegant sofa. "That sofa," he says, "cost me thirty thousand dollars!" When the sofa reached the house, it was found necessary to get chairs to match; then side-boards, carpets and tables "to correspond" with them, and so on through the entire stock of furniture. When at last it was found that the house itself was quite too small and old-fashioned for the furniture, and a new one was built to correspond with the new purchases; "thus," added my friend, "summing up an outlay of thirty thousand dollars, caused by that single sofa, and saddling on me, in the shape of servants, equipage, and the necessary expenses attendant upon keeping up a fine ’establishment,’ a yearly outlay of eleven thousand dollars, and a tight pinch at that: whereas, ten years ago, we lived with much more real comfort, because with much less care, on as many hundreds. The truth is," he continued, "that sofa would have brought me to inevitable bankruptcy, had not a most unexampled title to prosperity kept me above it, and had I not checked the natural desire to ’cut a dash’."

kin 16y ago

I once had an hour long conversation with a stranger at a bar about this. Coincidentally, we were in the same field, hacker. And he told me that coming out of college it's a little bit too easy to just work for the man. Being young and fresh out of college, you really can afford to take risks and be in that small percentile of people that are so much richer. Of course, it's a risk, and you have to take it and put your heart into it.

hoag 16y ago

The argument presented in the article is plausible, but I call it "the guy with the S65 AMG Benz admiring the guy with the Maybach" argument, i.e., the Maybach is a few hundred thousand dollars dearer than the Benz, itself a $200K car. While valid, I think it illustrates the effect of the unhappiness problem rather than the underlying cause. I call the root of the problem The SimCity Effect. The SimCity Effect -- as I describe it -- is essentially a real life application of the economic principle of diminishing marginal value, i.e., the more of a given good you gain, the less value you gain from each subsequent good. I think wealthy peoples' unhappiness with life is due to the far greater decrease in value -- or utility -- they gain each time they move up the ladder than those with lesser means. This is in turn is caused by a fundamental failure by most people to have a predetermined sense of "satisfaction" or "accomplishment" in life. This is where the SimCity analogy comes to play. Those of you who grew up playing SimCity probably experienced this phenomenon: you start building a city, eagerly growing larger and larger, with more and better public utilities, education, etc., and your satisfaction curve probably faced an initial upward curve: all things being equal, the goal of SimCity was arguably to build the largest, cleanest, most educated, and high tech city you could manage. Trouble is, that's a pretty vague goal: what does "large" mean? 1M people? 2M? 10M? In the absence of a clear and defined goal, and no way to "win" the game in the traditional sense, most SimCity builders suffered a very real sense of diminishing marginal value, and thus their satisfaction -- joy with the game, etc. -- decreased as well. This is not to say that one should set finite goals beyond which we should strive no further, but rather that we should at least set a mental note alerting us to when, in our life, we have obtained our goals, so we can at least breathe a sigh of relief and say "I've done it." Anything beyond that would be a bonus and it would essentially reset our internal "utility" curve accordingly to, perhaps, begin anew. This would certainly explain serial entrepreneurs and the like. This to me is the real problem with happiness -- or lack thereof -- at the highest echelon of society: it is not unhappiness per se, but rather a lack of satisfaction due to what can be best described as satisfaction desensitization. Just my 2c.