7 ms·

These people will always be interesting to me. They "won" the game, they accumulated wealth and made a comfortable life for themselves. Yet they usually live fr

by belval 5y ago

These people will always be interesting to me. They "won" the game, they accumulated wealth and made a comfortable life for themselves. Yet they usually live frugally and die with several millions just because they never actually spent the money. Some of my relatives were like that. Lots of money in the banks, 70 years old, yet his wife would chastise him for buying a small $16k Mazda truck to replace his +10 years old $12k Ford truck.

zozbot234 5y ago
That's how "new money" turns into "old money". Low time preference on a generational scale is all it takes.
- oh_sigh 5y ago
  Only if you inculcated the same standards into your children, which is definitely not a given. If you were just a miser and your children didn't understand your reasoning, I would expect them to blow their entire inheritance and leave a pittance to their children.
  - tejohnso 5y ago
    Couldn't this be addressed with some kind of legal entity like a generational trust where the children don't have direct access to the principle?
    - oh_sigh 5y ago
      Yes, absolutely, and it would be a great idea if you don't trust the financial competence of your beneficiaries, but you want them to have access to your assets. The problem is that those trusts may be viewed as overly restrictive or unnecessarily burdensome to the beneficiaries and so may not be created in the first place. IE beneficiary needs $X for a rational business investment, but can only get $X/4 out of the trust within the timeframe, even though 1000*$X in total is in the trust.
      - Scoundreller 5y ago
        > IE beneficiary needs $X for a rational business investment, but can only get $X/4 out of the trust within the timeframe, even though 1000*$X in total is in the trust. I mean, the trust can (usually) invest money without it being considered a distribution. I suspect that happens a lot based on the trustifarians I see in capital-intensive businesses and crushing it (due to below-market cost of capital). I feel bad for their competitors having to prove themselves to a bank or other arms-length financier.
  - hackerfromthefu 5y ago
    Often happens over three generations not two
horsawlarway 5y ago
The mindset that "wins" the game (as you put it) is the same mindset that carefully considers whether a 16k truck is really worth the expense. If you start inflating expenses "because you have money", you don't become the old guy with lots of money in the bank.
- Sebb767 5y ago
  The reason most people want to be rich is to have a good lifestyle. Sure, lifestyle inflation is a thing and you want to have money in the bank for emergency and retirement, but being the old guy with lots of money is no better than being the old guy with a solid retirement fund if you're just going to sit on the money.
  - horsawlarway 5y ago
    > but being the old guy with lots of money is no better than being the old guy with a solid retirement fund if you're just going to sit on the money. I'm confused - those are the same person. Most "millionaire next door" types are not people who suddenly had a million dropped into their account. They're the people who routinely make good choices with their money. That includes putting it in a diversified investment portfolio and taking full advantage of all the legal ways to reduce expenses (of which - retirements accounts are a great option - the tax savings you get filling your 401k compound to quite a nice bit of cash over a 40 year timeline, not even mentioning the principle you contributed). So in this case - I'm with the guys wife: He's 70 already, what's he really going to be using that truck for? It sure isn't going to be heavy labor (he's 70). Couldn't a smaller more efficient car have done the same job? And it's a 16k truck - so it's either incredibly low trim and lightly used, or nice but heavily used (because 16k is dirt fucking cheap for a decent truck unless it's 10+ years old). So is she nagging because he spent 16k, or because he spent 16k on something that's not really practical for that point in their life? I'd bet money it's the later. Not even mentioning - a 70 year old might easily live another 25 years. Blowing all your savings now is a terrible call if you need long term care later in life (you want to talk about expensive, long term care makes that 16k truck look like a match box car)

by belval 5y ago

zozbot234 5y ago

That's how "new money" turns into "old money". Low time preference on a generational scale is all it takes.

oh_sigh 5y ago
Only if you inculcated the same standards into your children, which is definitely not a given. If you were just a miser and your children didn't understand your reasoning, I would expect them to blow their entire inheritance and leave a pittance to their children.
- tejohnso 5y ago
  Couldn't this be addressed with some kind of legal entity like a generational trust where the children don't have direct access to the principle?
  - oh_sigh 5y ago
    Yes, absolutely, and it would be a great idea if you don't trust the financial competence of your beneficiaries, but you want them to have access to your assets. The problem is that those trusts may be viewed as overly restrictive or unnecessarily burdensome to the beneficiaries and so may not be created in the first place. IE beneficiary needs $X for a rational business investment, but can only get $X/4 out of the trust within the timeframe, even though 1000*$X in total is in the trust.
    - Scoundreller 5y ago
      > IE beneficiary needs $X for a rational business investment, but can only get $X/4 out of the trust within the timeframe, even though 1000*$X in total is in the trust. I mean, the trust can (usually) invest money without it being considered a distribution. I suspect that happens a lot based on the trustifarians I see in capital-intensive businesses and crushing it (due to below-market cost of capital). I feel bad for their competitors having to prove themselves to a bank or other arms-length financier.
- hackerfromthefu 5y ago
  Often happens over three generations not two

horsawlarway 5y ago

The mindset that "wins" the game (as you put it) is the same mindset that carefully considers whether a 16k truck is really worth the expense. If you start inflating expenses "because you have money", you don't become the old guy with lots of money in the bank.

Sebb767 5y ago
The reason most people want to be rich is to have a good lifestyle. Sure, lifestyle inflation is a thing and you want to have money in the bank for emergency and retirement, but being the old guy with lots of money is no better than being the old guy with a solid retirement fund if you're just going to sit on the money.
- horsawlarway 5y ago
  > but being the old guy with lots of money is no better than being the old guy with a solid retirement fund if you're just going to sit on the money. I'm confused - those are the same person. Most "millionaire next door" types are not people who suddenly had a million dropped into their account. They're the people who routinely make good choices with their money. That includes putting it in a diversified investment portfolio and taking full advantage of all the legal ways to reduce expenses (of which - retirements accounts are a great option - the tax savings you get filling your 401k compound to quite a nice bit of cash over a 40 year timeline, not even mentioning the principle you contributed). So in this case - I'm with the guys wife: He's 70 already, what's he really going to be using that truck for? It sure isn't going to be heavy labor (he's 70). Couldn't a smaller more efficient car have done the same job? And it's a 16k truck - so it's either incredibly low trim and lightly used, or nice but heavily used (because 16k is dirt fucking cheap for a decent truck unless it's 10+ years old). So is she nagging because he spent 16k, or because he spent 16k on something that's not really practical for that point in their life? I'd bet money it's the later. Not even mentioning - a 70 year old might easily live another 25 years. Blowing all your savings now is a terrible call if you need long term care later in life (you want to talk about expensive, long term care makes that 16k truck look like a match box car)