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No One Gets Rich by Shunning New Cars and Lattes
- HarryHirsch 7y agoNo. 2. Prioritize investing for your future Simple, right. But how does this play out over a longer time horizon? How about the family fortune? Is having a mortgage you can barely afford to live in a decent school district and increase your childrens' earning power a wise investment?
- loeg 7y agoIt's at best extremely risky and no guarantee of your childrens' success, with poor failure modes.
- swiley 7y agoNo? Even nice public schools aren’t great (there are some extreme exceptions but most are mediocre.) Send your kid to a good private school or homeschool co-op (essentially the same thing) and stop doing dumb things with real-estate. Be involved in their hobbies and try to communicate the important ideas you’ve learned, no school can replace that and it’s one of the most powerful ways you can improve your child’s future. (This is intuitively obvious, but I think there are also a number of moderately recent studies to back it up.)
- jcranmer 7y agoA "good private school" isn't cheap, about $20k/year on average [1]. If you have 2 children, then spending an extra $3k/yr to get a good school district is a cheaper option than private school. [1] Actually, I'm pulling this number from average private school prices. And the average private school is probably only as good quality as "nice public schools [that] aren't great." But I don't have a good comparison since the public school district I grew up in contained several schools in the top 100 in the nation.
- swiley 7y agoThat’s why included the homeschool co-ops, they tend to be a lot cheaper although they usually expect parents to do a lot of volunteer work. There’s not just a monetary cost to moving to a nicer school district, often that can mean a lot more driving which means absorbing a lot of risk (accidents, maintenance) and burning more fuel and time.
- grecy 7y agoThe headline amuses me, because it implies the goal of life is to get rich.
- enumjorge 7y agoI read it more as “Of the people who are rich, none of them got there by not buying new cars and lattes”.
- perl4ever 7y agoSome people get rich while buying new cars, but only every 15-20 years.
- ryanwaggoner 7y agoI think you’re projecting. “No one accomplishes X by doing Y” does not imply that the goal of life is X.
- hu3 7y agoThat's quite the extrapolation.
- deleted 7y ago[deleted]
- meddlepal 7y agoNot everyone has the same goals, but for some of us it definitely is.
- bitxbitxbitcoin 7y agoThe title should be "No One Gets NBA Basketball Player Rich by Shunning New Cars and Lattes," but that wouldn't get as many clicks.
- loeg 7y agoAnd IMO, being able to retire and live comfortably with your savings is rich; a good touch of frugality helps drive the very first point in the article, which is: spend less than you earn. This doesn't require tens of millions or more; a handful will do just fine, and not buying $40k cars is a great way to help get there. Most of the world doesn't have this kind of retirement. A good portion of the US doesn't have that.
- cvwright 7y agoAnd plenty of professional athletes do go broke buying (too many, too fancy) new cars and houses etc.
- MisterBastahrd 7y agoI must have missed all those stories of people saving for decades to leave fortunes behind. Taking financial guidance as a middle class wage earner from a trust fund baby is probably also a bad idea.
- icedchai 7y agoCheckout out the financialindependence subreddit. You will find plenty of average folks with 7 figures in savings and investments: https://www.reddit.com/r/financialindependence/ https://www.reddit.com/r/financialindependence/
- StavrosK 7y agoYeah but what of it? If you're 35 and live frugally ($3k/mo) you still need more than $1.3m to never work again, and that assumes you don't live longer than average.
- icedchai 7y agoThat is definitely achievable by someone working in the software industry. Perhaps not by 35, but certainly by 45 or 50, which is still very early retirement.
- tokai 7y agoSome guy called David Bach apparently made a whole self-help carrier on the latte thing. https://www.thelattefactor.com/ https://www.thelattefactor.com/
- CPLX 7y agoYou get rich either by being in the absolute top echelon of your field assuming also that you are in a lucrative field, by ownership of the means of production, or by inheriting or marrying into it. Those are pretty much the choices.
- sendbitcoins 7y agoA mechanism you haven't enumerated is use other people's money to buy an income stream. The easiest case being using the banks' money to buy a rental income stream.
- ryanwaggoner 7y agoReally depends on what “rich” means. And whether you consider investing in public markets or real estate to be “owning the means of production”. Because many, many millionaires get rich by those methods, for some reasonable value of rich.
- toomuchtodo 7y agoTruth. Living within your means and maxing out retirement accounts will get you to millionaire status in 20-30 years, faster if you’re more aggressive about it (buy a fixer upper to realize sweat equity, BRRR real estate investment method, build your own business). I’ve followed these principles and am financially independent in my late 30s. https://threadreaderapp.com/thread/1002103360646823936.html https://threadreaderapp.com/thread/1002103360646823936.html TLDR Own and build things that generate income and store wealth (real estate, equities, fixed income, shares in a business, etc). Optimize for wealth, not status. This won’t get you to be a billionaire. That requires mostly luck, inheritance, knowing the “right” people, etc.
- tomatotomato37 7y agoBy absolute top echelon I think he's talking about billionaires, not millionaires. You can't bootstrap a used car dealership or dry cleaner into mega-yacht wealth territory, but you can still retire with a nice sailboat.
- CheckBlanket 7y agoOr, the subject of astonishing wealth inequality could be addressed instead of blaming those already struggling.
- planetzero 7y ago"blaming those already struggling" Those struggling need to take some of the blame or the situation will never change. I know many people that if you gave them a million dollars today, they would spend a million and one.
- LeoTinnitus 7y agoThere needs to be a culture shift away from excessive consumerism. You need pretty much 100% of the female population to get on board with that though in order for men to follow suit too.
- Y-Bopinator 7y agoi closed the page when it said “Don’t send your kids to college”
- DailyHN 7y agoNo, but shunning new cars and lattes can give you the focus to do something that does get you rich.
- jseliger 7y agoIf you want a fine take on this subject, and one that is much better than the comments so far, read The Millionaire Next Door. https://www.amazon.com/Millionaire-Next-Door-Surprising-Americas/dp/1589795474 https://www.amazon.com/Millionaire-Next-Door-Surprising-Amer...
- nshepperd 7y ago> It is all about living within your means, No, it's about spending wisely. Ask not "can I afford it?", but "is it worth it?" (taking into account, yes, your financial situation). This article hasn't done much to convince me that a brand new car is worth the huge markup.
- segmondy 7y agoBut plenty of folks do save a lot by shunning new cars and lattes
- chrisgd 7y agoTeach your 18 year old to pick 5 companies they think will be around in 15 years. Stick some money into each and don’t touch it. Taking money out of great stocks because I thought it was too expensive has been the greatest mistake I made
- ryanwaggoner 7y agoStatistically, your 18 year old would be much better off in a Vanguard broad market index fund. The chances that they’re going to pick 5 companies that outperform the market is pretty remote.
- chrisgd 7y agoBut a concentrated portfolio is actually more likely to beat an index. So besides a 401k, do what I suggested
- ryanwaggoner 7y agoGot a source on that? It contradicts most research I've seen. Obviously the right concentrated portfolio will beat an index...but that's the trick, isn't it?
- jmathai 7y agoA good size of the population should be able to get to $1m-$5m of net worth by retirement by being disciplined with a 0-based budget, avoiding debt (mortgage is an exception) and steadily investing in your retirement. Keep it simple.
- HarryHirsch 7y agoYet the median balance that fiftysomethings carry in their 401(k) is 60 kUSD: https://www.investopedia.com/articles/personal-finance/010616/whats-average-401k-balance-age.asp https://www.investopedia.com/articles/personal-finance/01061... That tells you that it isn't easy to save an adequate balance for retirement, despite what Suze Orman and all the other avocado toast shunners tell you.
- jmathai 7y agoI don’t think it is easy at all. At least in America, all the forces are working get you to spend all your current and future money. I wish we would talk more about how it’s possible than how hard it is.
- jandrewrogers 7y agoNet worth would be more instructive than 401(k) balance, particularly since many people do not have access to a 401(k) for much of their career. I know more than a few people with meager 401(k) but large taxable accounts, real estate, business, etc portfolios. It is a mistake to conflate retirement accounts with investments accessible in retirement. This is no different than the "Americans have no savings" trope, which conflates having savings accounts (which are an anachronism that many Americans have no use for) with having access to cash-like liquidity.
- HarryHirsch 7y agoIt doesn't look much rosier when you look at net worth: https://www.federalreserve.gov/publications/files/scf17.pdf https://www.federalreserve.gov/publications/files/scf17.pdf Median net worth in the 55-65 age bracket: 187 kUSD. Effectively, it's much less than that because the lion's share of these 187 kilodollars will be owner-occupied housing. Yes, you can sell up, but you'll always need a roof over your head. The political system will have to deal with the retirement shortfall in the next 10 to 20 years.
- IAmGraydon 7y agoYou shouldn't shun nice things, but you should definitely shun buying those things to prove anything to anyone. That is the disease that so many people (at least in the US) seem to have now worse than ever. Stop using the little money you have to prove to others that you have it. Isn't it funny how people will bankrupt themselves to try to make people think they aren't bankrupt?
- pwg 7y agoMuch of the premise of the 1996 book "The Millionaire Next Door" (https://en.wikipedia.org/wiki/The_Millionaire_Next_Door https://en.wikipedia.org/wiki/The_Millionaire_Next_Door)
- LeoTinnitus 7y agoI'm currently going back to school and I'm noticing it a lot on my campus. Lots of people travel or own mustangs or newer cars. I believe most of them are just using a parents car or something however it boggles my mind nobody considers the long term effects of that. Although I currently drive a real shoddy beater of a truck, I'd like something better simply because for dates and stuff, I'd come across as someone who isn't a total cheapass you know? However I can't justify doing it because I know buying used vehicles in my price range can be a total crapshoot.
- smallcharleston 7y agoI wonder how people become so deluded that a major news publication needs to tell them this. Surely if it were reasonably easy to become rich by refusing lattes, several people from your social circle would have done it already and you could just ask them.
- dlhavema 7y agoI think the car rule is more often don't by a 50k car if you make 50k a year. Also related, cars go down in value. They are cool to own but by no means an investment. They are a utility to get you around and more specifically to your job that actually does make you money. The biggest rule though they stated first is huge. If you are making 300k a year, buy that 50k car or save up for a relatively "short while" and get a 100k car.
- bluedino 7y agoAs someone who wasted a large amount of money on cars in his younger years... The problem with buying a $50k (or whatever the vehicle you want) car, is that you will probably grow bored with it and want another one in two years. And chances are that $50k car is going to depreciate like a rock. And be expensive to insure. And you'll also have the bad habit of spending even more money on modifications/customizations etc. Buying a brand new, expensive vehicle isn't the worst idea if you keep it for ten years, drive it every day, etc. But if it's a thing you drive a few times a month, is impractical, and you get rid of it in 1-3 years for the newest model, it's financial suicide. I never got $35k of 'enjoyment' out of a new car purchase. And they aren't brand new for very long.
- Thriptic 7y agoThis seems like a silly article. No one is making pronouncements like "you should never ever buy a new car regardless of your income / wealth" or "not making small daily purchases like lattes is the cornerstone of a sound financial plan". What they are saying is that you should be aware of how much those purchasing habits ultimately cost you and make an informed decision. A lot of people who are not Kawhi Leonard never consider how such purchases impact their financial well being.
- esotericn 7y agoThis really depends a lot on location I would think. In the North of England an expensive car might cost as much as a house. In London it might be two years' rent. If you live in an area with high rents then almost everything else is irrelevant by comparison unless you really throw money about, but that's not true everywhere.
- unsatchmo 7y agoIn Silicon Valley, the down payment on a house could buy you a mansion pretty much anywhere else in the US. In Florida, you could get a waterfront mansion in many places.
- PopeDotNinja 7y agoHaving just bought a tank of Petrol in Scotland, I kind of feel the gasoline cost as much as a house.
- paulpauper 7y ago-- It's financial suicide to own a house -- Don't send your kids to college Those two are especially stupid
- 0xff00ffee 7y agoThe "don't buy a house" crowd really cracks me up. I bought my first house in 1991 for $100k outside of San Fran. I'm on my fourth house, having lived >5 years in each one. Subtracting MINOR remodeling, maintenance, and interest (excluding mortgage interest ded.) I've cleared about $500k of tax free profit. Now could I start this today? It would be way harder for me to start this today. The housing markets where the good jobs are have gone bonkers. But pretty much everyone I know who's bought modest houses since the early 90's as grown significant equity. I'm excluding people that bought mcmansions or non 30-year fixed mortgages for houses they couldn't afford. Most of them got cornholed in 2001 and 2009. I think if you can do it, you should do it. The instances that led to fucking were rare and predictable.
- jeremydeanlakey 7y agoWhen I was a student, buying lattes would have significantly hurt my freedom. My stress level would be higher and I may have struggled to graduate before running out of money. After building a career, worrying about lattes was a waste of effort. But buying a nice car would have limited my freedom. For example, I would not have bought as much investment real estate and I would probably be >$500K poorer. But worrying about buying new cars probably won't make sense for me soon. Avoiding lattes and new cars was, in fact, very important for my finances (in the past, but not now). The article acknowledges the importance of individual circumstances: > What should determine personal spending is the totality of the buyer’s financial circumstances. But the headline risks misleading people.
- deleted 7y ago[deleted]
- jknoepfler 7y agoWhat a tone-deaf and bizarre article. It begins with a straw-man: "as I financier I often encounter people who equate buying lattes and new cars with financial suicide" It then boldly introduces a distinction: there's a difference between spending and spending beyond one's means... literally, and I quote: > Simply saying no to consumption is lazy and thoughtless. What should determine personal spending is the totality of the buyer’s financial circumstances. I don't think anyone lives in this simple-minded universe, torn between the deadly sin of exuberant spending (on things!) and the austere life of impoverished simplicity. Money is a means. It has no intrinsic worth. We all understand this, keenly.
- jaybeavers 7y agoThe wisest man I met in my life was a 65 year old cab driver in Washington DC who was about to retire with $3m in the bank. He saved 10% of his income from the day he started working and didn't buy lattes or sports cars. Yes, you most definitely can get rich by not drinking lattes. This article is a disservice. Maybe for the author of this article, a $6 latte is "within his means". For most of the world, it's not because they're not saving 10% of every paycheck, so they should minimize discretionary spending until they do.
- GoodJokes 7y agoAh yes, driving a cab till your 65 and then retiring with 3 million. The American Dream.
- mikedilger 7y agoMy friend and ex-neighbor Tim has worked in a blue collar machine operator near-minimum-wage job his entire life. But he's frugal as hell, never buys new things, considers coffee a waste of money. At 55 he has two houses and upwards of a million in cash and investments. It not at all uncommon.
- raydev 7y ago55 yo, you say? When did he buy his houses?
- raydev 7y agoIf we're being absurdly generous, let's say the cab driver makes $70k/year, after taxes, for 40 years. 10% of that doesn't add up to any million.
- mikedilger 7y agoSpending scolds don't just come out and tell people to not buy new cars or lattes. It's almost always in response to a complaint by someone that they are having trouble making ends meet. The advice is spurned because they aren't atually trying to solve a near-term budgeting problem, they really are just expressing jealousy of richer people, and in particular jealousy of their richer lifestyle. As such, any advice suggesting they adjust down their own lifestyle (which is easier than trying to earn more, as it is more fully under your own control) is to them offensive and is going in the wrong direction. I take this from two data points in my personal dealings, which is a small dataset, but considering I've never had anybody actually need and use budgeting advice I suspect it's broadly true. TO ADD: I'm not saying nobody has a budgeting problem, I'm saying that those who don't take seriously the advice to curtail spending probably have more of a jealousy problem than a budgeting problem.
- zozbot234 7y ago"Having trouble making ends meet" and "being dissatisfied with one's disposable income" are simply orthogonal issues. Fixing your budget is a way to deal with issue 1. Living beyond your means does not really address issue 2 either (your dissatisfaction and envy): it's just giving you additional problems to deal with, that are going to stress you out and make it even harder to earn more money. It's a really, really dumb thing to do.
- kyleperik 7y agoI don't think it's correct to say it's not good to buy lattes or new cars, but I think we should be aware of what it costs you verses the alternative. I think it's common knowledge that new cars deprecate extremely quickly, so for most middle class individuals it's better to go with a used car to avoid losing loads of money in the long run. A medium latte costs at least $3. For daily drinkers that's about $90/month, which is at least triple the value of the beans and milk it took to produce. Frugal living alone doesn't make you rich but I think it can really help you if you're in debt (like most Americans)