6 ms·

Chaps my hide with broke journalist mentality: "This means that 40 percent of why some Americans are extraordinarily well off has nothing to do with smarts, har

by czbond 6y ago

Chaps my hide with broke journalist mentality: "This means that 40 percent of why some Americans are extraordinarily well off has nothing to do with smarts, hard work, frugality, lucky gambles or entrepreneurial ingenuity. It is simply because they were born to rich parents." In the US at least, it isn't hard if in lower middle class or above to invest small sums over long periods to get large amounts. It is simply that they are not doing it, or do not know why one should. To blame that one's own parents or grandparents did not do it, yet anothers did is victim blaming another's actions when they should look at their own descendants action.

PhineasRex 6y ago
Ah yes, the old "poor people just aren't as smart" myth. It's definitely their fault for not investing smartly and not the fact that they live paycheck to paycheck. Increasing inequality has nothing to do with the fact that wealth compounds on itself, it's just a coincidence. The reality that you and other "bootstraps" people ignore is that there is a basic cost-of-living. People need to make rent, they need to pay medical expenses, etc. If your income doesn't rise above this cost-of-living (which is true for literally half of the US population) you don't have any small amounts of money to invest. A lot of long-term investment vehicles have costs for taking out money early, which is a significant risk if you might need that money for an emergency. The wealthier you are, the more ways there are to increase your wealth and there is absolutely a floor under which you have no opportunities besides luck
- czbond 6y ago
  I made no reference to intelligence, it was inferred. Many first generation wealthy live paycheck to paycheck, grind it out, figure the rules of the current game (which take persistent observation but not smarts). My take away is any family, from anywhere, can become wealthy in their future lineage. Which is an amazing thought.
ianleeclark 6y ago
> In the US at least, it isn't hard if in lower middle class or above to invest small sums over long periods to get large amounts. Roughly 3/4 of the country lives paycheck-to-paycheck.
- czbond 6y ago
  I don't disagree, but one cannot say "i want gobs of money in the future - but I'm not willing to sacrifice my lifestyle down a notch or two today to get it".
  - simongr3dal 6y ago
    In this case "sacrifice my lifestyle down a notch or two" means not paying rent and living on the street, or skipping dinner a few times a week.
  - ianleeclark 6y ago
    Can you show that American households are, for some reason, spending outside of their ability for non life-sustaining reasons? When we look at increasing rents, stagnant wages, and rising healthcare costs, then I don't know why what you're saying is even relevant.
    - czbond 6y ago
      I could use charts of new car loans and prices over previous 15 years, new home starts, home mortgages values, and for some, high education loans, subscription to cable, restaurant dining. If wealth preservation were a priority - it would be: inexpensive cars, inexpensive houses, inexpensive schooling until a goal is reached. Paycheck to paycheck is not a function of 'too little money' - but materialism and consumerism and sometimes ego (eg: I want to appear successful, I want to keep up with the Joneses)
      - ianleeclark 6y ago
        I'll give you auto loans. > mortgages values Delinquency rates are lower than they were at 2000: https://fred.stlouisfed.org/series/DRSFRMACBS https://fred.stlouisfed.org/series/DRSFRMACBS This means that for those increasingly few home owners out there, they actually are living within their means. > home mortgages values How are you going to wield the personal responsibility battering ram against people then blame them for grasping one of the one levers available that yield actual material wealth. Rising home values + lower delinquency rates = good for them for growing their wealth You're wrong on this one. > subscription to cable You're really reaching for threads if you're going to bust someone's balls for wanting Netflix. > Paycheck to paycheck is not a function of 'too little money' - but materialism and consumerism and ego. Be kind, friend. There's no reason to hate the poor just because they're poor.
czbond 6y ago
Furthermore, why is an inheritance tax needed? The income was taxed upon earning, and any growth in that sum was taxed via capital gains. To then take even more via 'inheritance tax' is just government thievery.
- graton 6y ago
  That is not true. The capital gains have not been taxed and won't be taxed on death. It is a giant tax free gift upon death. If your parent dies and they had bought a house for $100,00 and now it is worth $1,100,000. So a capital gain of $1,000,000. If they had sold the house they would have had to pay capital gains on the house, minus an exemption amount ($250,000 for single and $500,000 for married). But you as the beneficiary get to take that house and immediately sell and pay $0 in capital gains on it. So that tax is actually forgiven on death.
  - czbond 6y ago
    They have been taxed. Real estate each year is taxed on assessed value; stock market gains unless left in a single security indefinitely are taxed on the gain and placed into another security. To then suggest the money that has been taxed at fair and accepted rates along the way, should now be taxed a large amount bc another family member has it at 20-60% seems out of bound. The reason this thinking feels ok, is because it applies to a minority of those in society who have accumulated (which is not me - but I'm arguing the counter-point). Imagine if your house was taxed 60-80% upon purchase or sale (same concept).
- slg 6y ago
  Inheritance is a transfer of wealth, also known as income. Why should the people receiving that income get it tax free just because it came from a family member or close friend?
  - tathougies 6y ago
    > Inheritance is a transfer of wealth, also known as income. Why should the people receiving that income get it tax free just because it came from a family member or close friend? Good point. The government also taxes the monetary value of any goods transferred. After all, if I were to grant my car to my children upon my passing, that is income and ought to be taxed. But let's continue even more. Whenever my mother-in-law provides childcare, the government should tax me for the money I would have spent on daycare. After all, that's giving me something with clear monetary value. Or when I visit my friend for a free dinner, I should have to pay tax on that too. Why not... it's all transfers of wealth.
sarora27 6y ago
It's possible to invest small sums over long periods to get a large payback IF you're aware that such avenues exist. Having an understanding of personal finance and how money works is a privilege many people take for granted. For most folks in the socioeconomic band you're mentioning, this is not something everyone knows and understands. Many times, they are already living paycheck to paycheck. It's hard to think about anything long term when you're in that cycle whether it's investing or even having the time (and energy) to educate themselves further on personal finance.
Reedx 6y ago
That mentality seems to mostly come from people who were born into wealth and had parents who gave them everything. They project that perspective onto the world. That was their reality after all, and probably their surrounding community. They're too far removed from how that wealth was achieved and don't understand it. See also: clogs to clogs in three generations.
awinder 6y ago
My family trees actions included such egregious sins as being immigrants (fight a generation to survive), and then the next generation fighting to send their kids to college, that generation fighting to learn what tf this world even is, and then me and my brothers learning from mistakes / growing up in the environment where you’d have exposure to know. So you basically have a system that takes 4 generations to get into “just do the right thing” and I think that’s not altogether uncommon. Meanwhile, Donald Trump is born to great inherited wealth and manages to, on basis, generate terrible returns on it, and is still labeled “a success” and is still wealthy. In fact we installed extra safety nets to make sure that someone that rich couldn’t hit the pavement, and even built in a back-up job as president for them. That same person ends a family tree in generation 2 or 3.
- czbond 6y ago
  Absolutely - the first few generations grinding and boostrapping are hard. Doesn't it make you feel great thought that 3-4 generations after you, with the proper planning and effort, they could be centimillionaires?
  - awinder 6y ago
    Honestly not really, because I’m so disconnected from the first generation that I could project that out to 3-4 generations after me and realize — who am I building this for, who even _is_ that person? Maybe they’re awesome and they use it for good, maybe they don’t. It’s capricious, almost like how taking all of that money in taxes would be capricious. It’s a fun thought exercise I guess but I wouldn’t greenfields a system like that.
ryandrake 6y ago
Lower middle class people are not going to become extraordinarily well off by investing small sums over long periods. $1K set aside every month at 6% annually will reach about $1M after doing it for 30 years. $1M in savings is very, very nice but not "extraordinarily well off" as described by the article.
- czbond 6y ago
  I agree - which is why I believe the "habit" should be modified. Educate to beging saving small sums from ages 15-23. More from 24-30. Lot more as career progresses. Savings over 50 years for individuals, then pass a part on to their kids so it can compound another 70 years. Do that a few generations, and the compounding IS big. As engineers, this is actually a very easy problem to solve multi-generationally. It is a resource constraint algorithm.
  - ryandrake 6y ago
    Engineers? In your original post, you were talking about "lower middle class" people. People whose careers stocking shelves and waiting tables do not progress in a way that affords them the opportunity to save $1K per month at any point in their lives, let alone consistently through their lives and across generations.
    - czbond 6y ago
      Totally agree - I jumped thoughts - and addressed engineers directly in an abrupt topic change.

by czbond 6y ago

PhineasRex 6y ago

Ah yes, the old "poor people just aren't as smart" myth. It's definitely their fault for not investing smartly and not the fact that they live paycheck to paycheck. Increasing inequality has nothing to do with the fact that wealth compounds on itself, it's just a coincidence. The reality that you and other "bootstraps" people ignore is that there is a basic cost-of-living. People need to make rent, they need to pay medical expenses, etc. If your income doesn't rise above this cost-of-living (which is true for literally half of the US population) you don't have any small amounts of money to invest. A lot of long-term investment vehicles have costs for taking out money early, which is a significant risk if you might need that money for an emergency. The wealthier you are, the more ways there are to increase your wealth and there is absolutely a floor under which you have no opportunities besides luck

czbond 6y ago
I made no reference to intelligence, it was inferred. Many first generation wealthy live paycheck to paycheck, grind it out, figure the rules of the current game (which take persistent observation but not smarts). My take away is any family, from anywhere, can become wealthy in their future lineage. Which is an amazing thought.

ianleeclark 6y ago

> In the US at least, it isn't hard if in lower middle class or above to invest small sums over long periods to get large amounts. Roughly 3/4 of the country lives paycheck-to-paycheck.

czbond 6y ago
I don't disagree, but one cannot say "i want gobs of money in the future - but I'm not willing to sacrifice my lifestyle down a notch or two today to get it".
- simongr3dal 6y ago
  In this case "sacrifice my lifestyle down a notch or two" means not paying rent and living on the street, or skipping dinner a few times a week.
- ianleeclark 6y ago
  Can you show that American households are, for some reason, spending outside of their ability for non life-sustaining reasons? When we look at increasing rents, stagnant wages, and rising healthcare costs, then I don't know why what you're saying is even relevant.
  - czbond 6y ago
    I could use charts of new car loans and prices over previous 15 years, new home starts, home mortgages values, and for some, high education loans, subscription to cable, restaurant dining. If wealth preservation were a priority - it would be: inexpensive cars, inexpensive houses, inexpensive schooling until a goal is reached. Paycheck to paycheck is not a function of 'too little money' - but materialism and consumerism and sometimes ego (eg: I want to appear successful, I want to keep up with the Joneses)
    - ianleeclark 6y ago
      I'll give you auto loans. > mortgages values Delinquency rates are lower than they were at 2000: https://fred.stlouisfed.org/series/DRSFRMACBS https://fred.stlouisfed.org/series/DRSFRMACBS This means that for those increasingly few home owners out there, they actually are living within their means. > home mortgages values How are you going to wield the personal responsibility battering ram against people then blame them for grasping one of the one levers available that yield actual material wealth. Rising home values + lower delinquency rates = good for them for growing their wealth You're wrong on this one. > subscription to cable You're really reaching for threads if you're going to bust someone's balls for wanting Netflix. > Paycheck to paycheck is not a function of 'too little money' - but materialism and consumerism and ego. Be kind, friend. There's no reason to hate the poor just because they're poor.

czbond 6y ago

Furthermore, why is an inheritance tax needed? The income was taxed upon earning, and any growth in that sum was taxed via capital gains. To then take even more via 'inheritance tax' is just government thievery.

graton 6y ago
That is not true. The capital gains have not been taxed and won't be taxed on death. It is a giant tax free gift upon death. If your parent dies and they had bought a house for $100,00 and now it is worth $1,100,000. So a capital gain of $1,000,000. If they had sold the house they would have had to pay capital gains on the house, minus an exemption amount ($250,000 for single and $500,000 for married). But you as the beneficiary get to take that house and immediately sell and pay $0 in capital gains on it. So that tax is actually forgiven on death.
- czbond 6y ago
  They have been taxed. Real estate each year is taxed on assessed value; stock market gains unless left in a single security indefinitely are taxed on the gain and placed into another security. To then suggest the money that has been taxed at fair and accepted rates along the way, should now be taxed a large amount bc another family member has it at 20-60% seems out of bound. The reason this thinking feels ok, is because it applies to a minority of those in society who have accumulated (which is not me - but I'm arguing the counter-point). Imagine if your house was taxed 60-80% upon purchase or sale (same concept).
slg 6y ago
Inheritance is a transfer of wealth, also known as income. Why should the people receiving that income get it tax free just because it came from a family member or close friend?
- tathougies 6y ago
  > Inheritance is a transfer of wealth, also known as income. Why should the people receiving that income get it tax free just because it came from a family member or close friend? Good point. The government also taxes the monetary value of any goods transferred. After all, if I were to grant my car to my children upon my passing, that is income and ought to be taxed. But let's continue even more. Whenever my mother-in-law provides childcare, the government should tax me for the money I would have spent on daycare. After all, that's giving me something with clear monetary value. Or when I visit my friend for a free dinner, I should have to pay tax on that too. Why not... it's all transfers of wealth.

sarora27 6y ago

It's possible to invest small sums over long periods to get a large payback IF you're aware that such avenues exist. Having an understanding of personal finance and how money works is a privilege many people take for granted. For most folks in the socioeconomic band you're mentioning, this is not something everyone knows and understands. Many times, they are already living paycheck to paycheck. It's hard to think about anything long term when you're in that cycle whether it's investing or even having the time (and energy) to educate themselves further on personal finance.

Reedx 6y ago

That mentality seems to mostly come from people who were born into wealth and had parents who gave them everything. They project that perspective onto the world. That was their reality after all, and probably their surrounding community. They're too far removed from how that wealth was achieved and don't understand it. See also: clogs to clogs in three generations.

awinder 6y ago

My family trees actions included such egregious sins as being immigrants (fight a generation to survive), and then the next generation fighting to send their kids to college, that generation fighting to learn what tf this world even is, and then me and my brothers learning from mistakes / growing up in the environment where you’d have exposure to know. So you basically have a system that takes 4 generations to get into “just do the right thing” and I think that’s not altogether uncommon. Meanwhile, Donald Trump is born to great inherited wealth and manages to, on basis, generate terrible returns on it, and is still labeled “a success” and is still wealthy. In fact we installed extra safety nets to make sure that someone that rich couldn’t hit the pavement, and even built in a back-up job as president for them. That same person ends a family tree in generation 2 or 3.

czbond 6y ago
Absolutely - the first few generations grinding and boostrapping are hard. Doesn't it make you feel great thought that 3-4 generations after you, with the proper planning and effort, they could be centimillionaires?
- awinder 6y ago
  Honestly not really, because I’m so disconnected from the first generation that I could project that out to 3-4 generations after me and realize — who am I building this for, who even _is_ that person? Maybe they’re awesome and they use it for good, maybe they don’t. It’s capricious, almost like how taking all of that money in taxes would be capricious. It’s a fun thought exercise I guess but I wouldn’t greenfields a system like that.

ryandrake 6y ago

Lower middle class people are not going to become extraordinarily well off by investing small sums over long periods. $1K set aside every month at 6% annually will reach about $1M after doing it for 30 years. $1M in savings is very, very nice but not "extraordinarily well off" as described by the article.

czbond 6y ago
I agree - which is why I believe the "habit" should be modified. Educate to beging saving small sums from ages 15-23. More from 24-30. Lot more as career progresses. Savings over 50 years for individuals, then pass a part on to their kids so it can compound another 70 years. Do that a few generations, and the compounding IS big. As engineers, this is actually a very easy problem to solve multi-generationally. It is a resource constraint algorithm.
- ryandrake 6y ago
  Engineers? In your original post, you were talking about "lower middle class" people. People whose careers stocking shelves and waiting tables do not progress in a way that affords them the opportunity to save $1K per month at any point in their lives, let alone consistently through their lives and across generations.
  - czbond 6y ago
    Totally agree - I jumped thoughts - and addressed engineers directly in an abrupt topic change.