9 ms·
The model described in the book does work. Spend less than you make, invest the excess in long term assets that have compounding interest rates above the inflat
by mmcconnell1618 5y ago
The model described in the book does work. Spend less than you make, invest the excess in long term assets that have compounding interest rates above the inflation rate. It does produce millionaires. It also requires tremendous discipline over a long period of time. The math is relatively simple, the behavior is not.
While the millionaire described in the story had $8 million in assets, you will find almost no one "next door" with 10 to 100 million or a 1 billion. That level of wealth requires a return on investment that can't be achieved using the earn and save model. It usually requires creating/controlling an assets that can grow in value many orders of magnitude faster than the stock market (real estate, businesses, intellectual property).
- the-dude 5y ago( Not disagreeing ) If you want to lose weight, just eat less. It is simple calories-in minus calories-out. It is really simple..
- MichaelRazum 5y agoThat is true, in theory easier than gain weight, where you have to do more than less.
- kemitche 5y agoHunger is a pesky thing, however. And I tend to agree with the conclusion of the article - what's the point in saving that money if one has to live on a shoestring budget to acquire it? Specifically the "work all your life, end with $8 million" case. FIRE is different, with the value being the option to stop working much much earlier than 65 years old.
- the-dude 5y agoThe analogy just popped before my eyes, that is all. They both claim to have 'really simple solutions to problems'. Except it is not easy at all. It is very hard.
- marvin 5y agoHard in the "lots of elbow grease" sense of the word. Maybe also in the "unlikely for you, personally, to have the perseverance for" sense, for a given person. Not hard as in conceptually difficult to implement.
- ulucs 5y agoIt's really simple, which does not necessarily imply easy
- xboxnolifes 5y agosimplicity is orthogonal to difficulty. The solution is simple, but difficult.
- deleted 5y ago[deleted]
- nemo44x 5y agoSecurity. Knowing you have the wealth to subside on if need be is really nice. Some people call it “fuck you money” which is freedom. It’s funny they reference Taleb here but he also makes the point that can’t be “cancelled” and is “anti-fragile” precisely because he’s rich and depends on no one.
- jstx1 5y agoAt some point the question is - "is it really worth it?" Sure, if you save 10-20% on a regular basis, you're just being prudent. But if you go out of your way to save 50-80% of your income and lower your quality of life significantly, just so you can have more money in your investment account, or so you can not go to work (but still live that same extremely restrictive lifestyle)... it really doesn't seem worth it to me. But some people obviously disagree.
- the-dude 5y agoThen there is lots of people who just die before they are even retired.
- nemo44x 5y agoIt’s a good thing you can will that wealth to people and organizations you care about. This means a lot to many people - legacy.
- rwmj 5y ago> lower your quality of life significantly I'm quite happy not owning a huge house, a Tesla and the latest iPhone.
- ku-man 5y agoIt's not so much about gadgets, it's more about pretty women. Pretty women (and women in general) don't like to date poor devils.
- bko 5y agoNo one says you have to save 50-80% of your income. The savings rate in the US is 5-10% historically (ignore the 33% spike in 2020). If you're saving 10-20% you're well ahead https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT
- ac29 5y ago
- mkriiv 5y agoYour second paragraph hits the nail on the head. Income is scalable, saving is not. Expand your income, and invest. It's all a lot easier when your income is pumping.
- horrified 5y agoIn my country (Germany) afaik a little over 10% of the population are at least millionaires. So I think the likelihood to have a millionaire living next door is quite high.
- he_is_legend 5y agoAnecdotal (but nevertheless true): I have (at least) two millionaire neighbours (less than 3 doors/gates away). Both won the lottery - one euromillions and one national lotto draw. And if we are talking average income, then everyone on this side of the village is a millionaire simply because of those two. However, most of the rest of us seem to struggle daily.
- tticvs 5y agoIt is actually about 1.6% of the population
- horrified 5y agoSeems I misremebered it, thanks. I found two different estimates right now, too, one for ~1.6%, one for ~0.4%. Sometimes real estate the owners live in themselves is not counted? With 1.6% the odds of having a millionaire neighbor would still be high.
- shadilay 5y agoI think almost all my neighbors are 'millionaires' but 90% have median incomes for the city. Their net worth is just their house.
- he_is_legend 5y agoWhats the point in dying a millionaire though? Surely you want to spend some of that money while you are alive (and active - not 80+)?
- graeme 5y agoDepends. There’s a fair bit of value in knowing you have more than you could ever possibly need your whole life. Like say you spend $500,000 a year and have $10 million, which earns about $700,000 in returns. And you’re happy at that level of spending. You then have massive security your whole life. Whereas if you time it to run out on time, a reversal could leave you destitute when you’re least able to recover. Past a certain point it’s hard to think of what to spend on unless you step up to much more expensive things like personal jets etc.
- djbebs 5y agoI always find it amusing how the people who make arguments like these are also the ones who often and loudly decry generational wealth. The point of dying a millionaire is to give your descendents a good life and something they can fall back on if things go wrong.
- AnIdiotOnTheNet 5y agoPeople loudly decry inherited wealth because it is anti-meritocratic and we're raised with delusion that our system is ostensibly one where wealth is related to merit.
- DamnYuppie 5y agoNearly 78% of all millionaires in the US are first generation.
- shadilay 5y agoMost peoples biggest asset is their home which just costs more in property taxes and doesn't provide much benefit because they still need a place to live, preferably near their workplace.
- chinchilla2020 5y ago> Spend less than you make, invest the excess in long term assets that have compounding interest rates above the inflation rate. It does work. But the cost is your life. My issue with the whole idea is that the wealth comes in the latter years of your existence. Decades of work have dulled your curiosity and desire to enjoy your wealth. You don't need much to exist and could survive off a more humble nest egg. Wheelchair wealth is considerably less valuable than wealth when you are young.
- nighthawk454 5y ago... not really. savings is a percent, you can set it wherever you want. the math works out just the same only over more/less time. you don't have to be a frugal miser, and you don't have to spend like it's burning a hole in your pocket. saving a responsible amount isn't going to dull your curiosity for decades. whether you consider it intentionally or not, when you choose how much to save you're also _directly_ setting your future wealth. the most prudent thing to do is optimize _both_. how 'well' do you want to live vs how much wealth do you want and by when. what actually costs you your life is spending unnecessarily in your youth, which implicitly sets your future wealth nearer to zero and burns the time to fix it.
- throwaway18539 5y agoAnecdotally: I makes less than 100K usd per year. I have a wife (who also makes less than 100K), a car, a kid, and hobbies. I don’t live in the valley, or even the United States. I work 8 hour days, employed by somebody else. I should be a millionaire by my mid thirties unless the stock market explodes. I don’t think I’m all that frugal, but we do try to save more than we make and live within our means. I do recognize that I’m extremely fortunate - I have not suffered any significant setbacks in my life, my health is relatively good, and I have a good family structure, all of which have been immeasurably helpful.
- ZephyrBlu 5y agoI was skeptical, so I ran some numbers here: https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator https://www.investor.gov/financial-tools-calculators/calcula... Assuming 150k USD combined income and 20% savings rate: - Initial Investment: $30k (20% of 150k) - Monthly Contribution: $2500 (1/12 of $30k) - Length of Time in Years: 15 years - Estimated Interest Rate: 10% (Avg Stock Market return) - Interest Rate Variance Range: 0 - Compound Frequency: Annually After 15 years you have just over $1M. I'm assuming you were including your wife's income because otherwise it's nowhere near. I think the takeaway here is: get a partner. Without a partner you need to be a high earner.
- jacquesm 5y agoAnd quite a bit of starting capital and a very great deal of luck.