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Am I the only one thinking "no shit sherlock?" The rich have the luxury of working on future income flows while the rest of us work to live now. How is this ne

Am I the only one thinking "no shit sherlock?" The rich have the luxury of working on future income flows while the rest of us work to live now. How is this news to anyone? And those examples are just not practical for most people in real life.

jandrese 5y ago
The title is misleading. The rich also buy stuff, but after they do that they have leftover money to invest into future income. The jist is that if the poor had more money they wouldn't be poor anymore.
- treeman79 5y ago
  Lottery winners often end up broke. This has happened to friends of the family. If you don’t know how to manage money, you won’t keep it.
  - MR4D 5y ago
    You got downvoted probably for the tone more than anything. Factually, you are correct and that is supported by research [0]. Roughly 1/3 of lottery winners go broke within a few years, which is a much higher rate than the population in general. Reading thru the article, it is clear that the PP’s comments are incorrect (“ The jist is that if the poor had more money they wouldn't be poor anymore.”) [0] - https://www.cnbc.com/2017/08/25/heres-why-lottery-winners-go-broke.html https://www.cnbc.com/2017/08/25/heres-why-lottery-winners-go...
    - axlee 5y ago
      You have to be a special kind of person to play the lottery in the first place. Definitely not good a proxy for the population at large.
      - XorNot 5y ago
        This. Anyone with basic investment knowledge knows the lottery is the worst possible thing to do with money you're not just wanting to, for some reason, throw away.
      - MR4D 5y ago
        Looks like about 1/2 of Americans buy lottery tickets [0], and they spend roughly $1,000 per year on them each [1]. So, not so special, and I would argue a good proxy for the population at large. [0] - https://news.gallup.com/poll/193874/half-americans-play-state-lotteries.aspx https://news.gallup.com/poll/193874/half-americans-play-stat... [1] - https://www.cnbc.com/2019/12/12/americans-spend-over-1000-dollars-a-year-on-lotto-tickets.html https://www.cnbc.com/2019/12/12/americans-spend-over-1000-do...
  - dathinab 5y ago
    True, but not that simple, the problem with lottery is: - it's a sudden spike - money is not linear in many ways Give people time to get used to different income levels and they are less likely to go bankrupt. Oh and show them that even through they might think they are rich now they are not, and it's easy to accidentally spend what the have gotten. Many people have wrong ideas of when someone is "rich" compared to "just being wealthy".
  - anonporridge 5y ago
    That's because it takes time to transition from seeing a pile of cash in terms of all the stuff you can buy with it, to seeing the safe withdrawal that money can generate when well invested. The average person who wins $1 million in the lottery sees a new house, car, vacations, maybe a boat. A wealthy person would see it as an extra $30-40k a year in passive income. Of course, people with this mindset generally don't play the lottery, because they do the math. https://www.investopedia.com/terms/s/safe-withdrawal-rate-swr-method.asp https://www.investopedia.com/terms/s/safe-withdrawal-rate-sw... There's no reason why a lottery winner necessarily can't make this transition, but as soon as they win the lottery, it's probably too late to teach them. They're going to quit their job, tell all their friends and family, and eventually the money runs out leaving them with an appetite for consumption they can no longer afford with their meager income potential. That's why it destroys people's lives. On the other hand, if you gradually earn $1 million, or even make risky but calculated long term investments that pay off, you don't wake up one morning to suddenly find yourself with a massive amount of money. You watch your net worth creep up slowly over years or decades. Even if a person like this started by fantasizing about all the stuff they can buy with that much cash, the longer accumulation period gives them time to learn and reflect on what they really want, and therefore are more likely to use this wealth more intelligently. It's the sudden, unexpected windfalls of cash beyond what a person is prepared to handle that are dangerous, not the absolute amount or the person handling it.
  - sidlls 5y ago
    I would love to see a similar statistic about employees who benefit from a successful IPO. At the company I work for (recent IPO, within the last 6 months or so) the lead up to the listing date included sessions with financial advisors and a lot of zoom meetings to discuss tax planning and wealth management in general. I suspect that only people who ignored the material will "go broke."
  - franga2000 5y ago
    True, but knowing how to manage money is something you learn on the way to having a lot of money. Any kind of immediate wealth like winning the lottery, making a single relatively spontaneous thing that unexpectedly makes you tons of money (like a single hit song, etc.) is simply too fast for you to adapt to it and so by the time you learn, you've burned through too much of it. In the same way, a rich person suddenly becoming poor would lack the skill to stretch out their near-zero resources, while one that is conscious of a slow decline will not only stretch out their reserves longer but also be far more used to living frugally by the time they hit that same near-zero level. And it's not like it's too hard either, you just need some guidance. A distant acquaintance had a frankly obscene amount of Bitcoin laying around from back when CPU mining still made sense and the first thing he did when he realised what he had was sell enough to hire the best financial advisor he could find. He now owns a house, a startup incubator, several rental properties and I don't think he's sold much more of that BTC than what he did originally.
- fungiblecog 5y ago
  "The jist is that if the poor had more money they wouldn't be poor anymore." Exactly - who doesn't understand that?
- insert_coin 5y ago
  The rich buy stuff after they become rich. Most entrepreneurs that make it live almost like a college student barely able to afford anything; they are hoping to trade current spending for future spending. And I'm talking about restauranteurs, shopkeepers, carpenters, not only tech entrepreneurs who've been detached from the norm in recent years due to the influx of easy fed money. Most entrepreneurs are the last ones to get paid.
conradev 5y ago
I think the title does not do the article justice, as is usually the case. The article walks through two people who make the same amount from their jobs, but invest it differently and with different outcomes.
sirmoveon 5y ago
It might not be news but it's worth spamming media outlets to bring the subject as a talking point more often.
sologoub 5y ago
The general sentiment is right though - person A continued to live well below their means and invested, while person B fell into lifestyle inflation big time. The key here is that both started out with a huge income for someone just starting out - $200k. If you are making $30k/year, this advice doesn’t really apply - you likely can’t even take advantage of 401k yet. This is for those that are lucky enough to have something to save.
xwolfi 5y ago
I dont know I save a lot of my income and I dont whine about "the rich" all day long. I suppose if you define being rich by being able to save more than 1k USD per month, a lot of people are gonna be it ?

jandrese 5y ago

The title is misleading. The rich also buy stuff, but after they do that they have leftover money to invest into future income. The jist is that if the poor had more money they wouldn't be poor anymore.

treeman79 5y ago
Lottery winners often end up broke. This has happened to friends of the family. If you don’t know how to manage money, you won’t keep it.
- MR4D 5y ago
  You got downvoted probably for the tone more than anything. Factually, you are correct and that is supported by research [0]. Roughly 1/3 of lottery winners go broke within a few years, which is a much higher rate than the population in general. Reading thru the article, it is clear that the PP’s comments are incorrect (“ The jist is that if the poor had more money they wouldn't be poor anymore.”) [0] - https://www.cnbc.com/2017/08/25/heres-why-lottery-winners-go-broke.html https://www.cnbc.com/2017/08/25/heres-why-lottery-winners-go...
  - axlee 5y ago
    You have to be a special kind of person to play the lottery in the first place. Definitely not good a proxy for the population at large.
    - XorNot 5y ago
      This. Anyone with basic investment knowledge knows the lottery is the worst possible thing to do with money you're not just wanting to, for some reason, throw away.
    - MR4D 5y ago
      Looks like about 1/2 of Americans buy lottery tickets [0], and they spend roughly $1,000 per year on them each [1]. So, not so special, and I would argue a good proxy for the population at large. [0] - https://news.gallup.com/poll/193874/half-americans-play-state-lotteries.aspx https://news.gallup.com/poll/193874/half-americans-play-stat... [1] - https://www.cnbc.com/2019/12/12/americans-spend-over-1000-dollars-a-year-on-lotto-tickets.html https://www.cnbc.com/2019/12/12/americans-spend-over-1000-do...
- dathinab 5y ago
  True, but not that simple, the problem with lottery is: - it's a sudden spike - money is not linear in many ways Give people time to get used to different income levels and they are less likely to go bankrupt. Oh and show them that even through they might think they are rich now they are not, and it's easy to accidentally spend what the have gotten. Many people have wrong ideas of when someone is "rich" compared to "just being wealthy".
- anonporridge 5y ago
  That's because it takes time to transition from seeing a pile of cash in terms of all the stuff you can buy with it, to seeing the safe withdrawal that money can generate when well invested. The average person who wins $1 million in the lottery sees a new house, car, vacations, maybe a boat. A wealthy person would see it as an extra $30-40k a year in passive income. Of course, people with this mindset generally don't play the lottery, because they do the math. https://www.investopedia.com/terms/s/safe-withdrawal-rate-swr-method.asp https://www.investopedia.com/terms/s/safe-withdrawal-rate-sw... There's no reason why a lottery winner necessarily can't make this transition, but as soon as they win the lottery, it's probably too late to teach them. They're going to quit their job, tell all their friends and family, and eventually the money runs out leaving them with an appetite for consumption they can no longer afford with their meager income potential. That's why it destroys people's lives. On the other hand, if you gradually earn $1 million, or even make risky but calculated long term investments that pay off, you don't wake up one morning to suddenly find yourself with a massive amount of money. You watch your net worth creep up slowly over years or decades. Even if a person like this started by fantasizing about all the stuff they can buy with that much cash, the longer accumulation period gives them time to learn and reflect on what they really want, and therefore are more likely to use this wealth more intelligently. It's the sudden, unexpected windfalls of cash beyond what a person is prepared to handle that are dangerous, not the absolute amount or the person handling it.
- sidlls 5y ago
  I would love to see a similar statistic about employees who benefit from a successful IPO. At the company I work for (recent IPO, within the last 6 months or so) the lead up to the listing date included sessions with financial advisors and a lot of zoom meetings to discuss tax planning and wealth management in general. I suspect that only people who ignored the material will "go broke."
- franga2000 5y ago
  True, but knowing how to manage money is something you learn on the way to having a lot of money. Any kind of immediate wealth like winning the lottery, making a single relatively spontaneous thing that unexpectedly makes you tons of money (like a single hit song, etc.) is simply too fast for you to adapt to it and so by the time you learn, you've burned through too much of it. In the same way, a rich person suddenly becoming poor would lack the skill to stretch out their near-zero resources, while one that is conscious of a slow decline will not only stretch out their reserves longer but also be far more used to living frugally by the time they hit that same near-zero level. And it's not like it's too hard either, you just need some guidance. A distant acquaintance had a frankly obscene amount of Bitcoin laying around from back when CPU mining still made sense and the first thing he did when he realised what he had was sell enough to hire the best financial advisor he could find. He now owns a house, a startup incubator, several rental properties and I don't think he's sold much more of that BTC than what he did originally.
fungiblecog 5y ago
"The jist is that if the poor had more money they wouldn't be poor anymore." Exactly - who doesn't understand that?
insert_coin 5y ago
The rich buy stuff after they become rich. Most entrepreneurs that make it live almost like a college student barely able to afford anything; they are hoping to trade current spending for future spending. And I'm talking about restauranteurs, shopkeepers, carpenters, not only tech entrepreneurs who've been detached from the norm in recent years due to the influx of easy fed money. Most entrepreneurs are the last ones to get paid.

conradev 5y ago

I think the title does not do the article justice, as is usually the case. The article walks through two people who make the same amount from their jobs, but invest it differently and with different outcomes.

sirmoveon 5y ago

It might not be news but it's worth spamming media outlets to bring the subject as a talking point more often.

sologoub 5y ago

The general sentiment is right though - person A continued to live well below their means and invested, while person B fell into lifestyle inflation big time. The key here is that both started out with a huge income for someone just starting out - $200k. If you are making $30k/year, this advice doesn’t really apply - you likely can’t even take advantage of 401k yet. This is for those that are lucky enough to have something to save.

xwolfi 5y ago

I dont know I save a lot of my income and I dont whine about "the rich" all day long. I suppose if you define being rich by being able to save more than 1k USD per month, a lot of people are gonna be it ?