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I recall a recent study asking millionaires if they had enough money, and most of them said something like "no, I won't feel secure until I have 10-20 mil." Th

by jcnnghm 13y ago

I recall a recent study asking millionaires if they had enough money, and most of them said something like "no, I won't feel secure until I have 10-20 mil." That's a rational response, given that's about the minimum necessary to provide high current income ($100-200k/year), securely growing with inflation, without touching the principal. That's basically the definition of financial security. The study indicates that empirically, rich people tend to make sound financial decision, which isn't shocking.

disgruntledphd2 13y ago
Yeah, but the reason its the hedonic treadmill is because when you ask people of any income bracket if they have enough money, they almost all say that they need 15-20% more. It may be that you are correct in your assertions around financial security, but the notion of the hedonic treadmill is broader than that.
- jcnnghm 13y ago
  Yeah, but the reason its the hedonic treadmill is because when you ask people of any income bracket if they have enough money, they almost all say that they need 15-20% more. High income doesn't always imply high net worth. In 2011, fewer than 1.1% of households had over $5 million in assets. Given that at least 98.9% of households don't actually have enough money to provide moderately high current income indefinitely, everyone thinking they need 15-20% more is more of an indication of a failure in planning and basic financial literacy, not an indicator that they don't actually need more money. I think I need $10-20 million, indexed in real terms, assuming I don't step up my quality of life expectations, which is more than 20% beyond what I have today. Think of it this way, you're walking down the street in San Francisco, and you get attacked by a hobo (http://www.huffingtonpost.com/2013/06/11/naked-subway-man-video_n_3423310.html http://www.huffingtonpost.com/2013/06/11/naked-subway-man-vi...), which causes brain damage, leaving you unable to work in your current profession. How many years until you have to make a serious quality of life reduction? The whole hedonic treadmill is kind of like saying that even the people with the most food today, think they will likely need more food in the future, which isn't really shocking.
  - Retric 13y ago
    If that's what your concerned about there is insurance that will cover that type of liability. As does social security.
resu_nimda 13y ago
> That's basically the definition of financial security. I feel like I'm in crazy town. What kind of definition is that? So, anyone with less than 15-20 million in the bank is financially insecure. Just like the article, which claims that "go[ing] out to expensive bars all the time in the City" is some kind of unfortunate necessity for people with high-paying jobs. Is it just me or is there a serious lack of perspective going on here?
- swombat 13y ago
  It's certainly not a necessity, but in my experience and observations it's a strong draw. Peer pressure, opportunity, and the pressures of the job (which makes you feel that you deserve a good time after all this hard work - work hard play hard) conspire to make it very hard not to indulge in an expensive social life when you're in a banking job. Some people will resist that and save up anyway. Usually those who resist the pull the best are those with young children - another major financial drain. I personally don't need £20m in the bank to feel financially secure, because I rely on my ability to earn more, and I account for that. £20m sounds about right if you want a very high likelihood of being able to retire on a perma-holiday for the rest of your life, though. I'd find that terribly tedious, myself, which is why I don't need anywhere near £20m!
- jcnnghm 13y ago
  So, anyone with less than 15-20 million in the bank is financially insecure. Depending on your age, yes. If you are old enough you can draw down your savings, though that's a tricky game because if you live too long you run out of money. If you can't stop working and maintain a comfortable standard of living for the rest of your life, you are financially insecure. Is it just me or is there a serious lack of perspective going on here? There is, you should really try to figure out what you would actually need to live the rest of your life comfortably if you were unable to work. Maybe you want to live like a college student forever, in which case, you would probably need less than $10 million, but if you don't, taking 70% of your salary as an assumption, then multiplying that by 100 wouldn't be a terrible estimate.
  - 9999 13y ago

by jcnnghm 13y ago

disgruntledphd2 13y ago

Yeah, but the reason its the hedonic treadmill is because when you ask people of any income bracket if they have enough money, they almost all say that they need 15-20% more. It may be that you are correct in your assertions around financial security, but the notion of the hedonic treadmill is broader than that.

jcnnghm 13y ago
Yeah, but the reason its the hedonic treadmill is because when you ask people of any income bracket if they have enough money, they almost all say that they need 15-20% more. High income doesn't always imply high net worth. In 2011, fewer than 1.1% of households had over $5 million in assets. Given that at least 98.9% of households don't actually have enough money to provide moderately high current income indefinitely, everyone thinking they need 15-20% more is more of an indication of a failure in planning and basic financial literacy, not an indicator that they don't actually need more money. I think I need $10-20 million, indexed in real terms, assuming I don't step up my quality of life expectations, which is more than 20% beyond what I have today. Think of it this way, you're walking down the street in San Francisco, and you get attacked by a hobo (http://www.huffingtonpost.com/2013/06/11/naked-subway-man-video_n_3423310.html http://www.huffingtonpost.com/2013/06/11/naked-subway-man-vi...), which causes brain damage, leaving you unable to work in your current profession. How many years until you have to make a serious quality of life reduction? The whole hedonic treadmill is kind of like saying that even the people with the most food today, think they will likely need more food in the future, which isn't really shocking.
- Retric 13y ago
  If that's what your concerned about there is insurance that will cover that type of liability. As does social security.

resu_nimda 13y ago

> That's basically the definition of financial security. I feel like I'm in crazy town. What kind of definition is that? So, anyone with less than 15-20 million in the bank is financially insecure. Just like the article, which claims that "go[ing] out to expensive bars all the time in the City" is some kind of unfortunate necessity for people with high-paying jobs. Is it just me or is there a serious lack of perspective going on here?

swombat 13y ago
It's certainly not a necessity, but in my experience and observations it's a strong draw. Peer pressure, opportunity, and the pressures of the job (which makes you feel that you deserve a good time after all this hard work - work hard play hard) conspire to make it very hard not to indulge in an expensive social life when you're in a banking job. Some people will resist that and save up anyway. Usually those who resist the pull the best are those with young children - another major financial drain. I personally don't need £20m in the bank to feel financially secure, because I rely on my ability to earn more, and I account for that. £20m sounds about right if you want a very high likelihood of being able to retire on a perma-holiday for the rest of your life, though. I'd find that terribly tedious, myself, which is why I don't need anywhere near £20m!
jcnnghm 13y ago
So, anyone with less than 15-20 million in the bank is financially insecure. Depending on your age, yes. If you are old enough you can draw down your savings, though that's a tricky game because if you live too long you run out of money. If you can't stop working and maintain a comfortable standard of living for the rest of your life, you are financially insecure. Is it just me or is there a serious lack of perspective going on here? There is, you should really try to figure out what you would actually need to live the rest of your life comfortably if you were unable to work. Maybe you want to live like a college student forever, in which case, you would probably need less than $10 million, but if you don't, taking 70% of your salary as an assumption, then multiplying that by 100 wouldn't be a terrible estimate.
- 9999 13y ago