I went to work right out of high school at menial jobs. No college, no big family business. Paycheck-to-paycheck, and any minor emergency like a dead car battery was a financial crisis. I did not "get lucky" on stocks or anything. While getting rich has not been a focus for me, I decided I definitely did NOT like being poor. Lots of small steps, and staying on the lookout for ways to improve matters has led me to not be poor. I'm not rich but I'm in decent shape and moving in the right direction: no debt except the mortage, which will be payed off soonish; some money in savings, stocks, 401k, etc. I'm living at a decent level and should be able to retire in some comfort. No magic. No big windfalls. This is doable by most of those depressed people.
This quote from that thread pissed me off all morning: "If you told the common man any time in history other than the baby boomer generation, that the way to get rich was 'hard work' and 'Budgeting' they would die of laughter."
Every day I feel more and more alienated by the victim mentality on Reddit. It seems to be the only tangible by-product of the Occupy Wall Street protests.
I don't even know why I visit Reddit anymore.
Through much of history, hard work and budgeting where not the road to riches--they were the road to not starving or, in good times, to being reasonably well off. The path to being rich was often blocked by ethnic background, religious background, or social class.
Yes, some people were able to break through those barriers, but that usually took more than just hard work and budgeting. They needed luck or brilliance.
If you take a real look around much of the economy is this b.s. burger flipping and shelf stacking, and much of the rest are the welfare queens otherwise known as government employees and corporate managers. There is such an epic wastage of the world's human resources that anyone in the know would cry themselves to sleep. Occupy Wall Street is nothing in comparison to the scale of the problem.
I am in a broke period of my life right now. One can easily tell me about how much it is all my fault, but I thought I had enough money to last for two years when I quit my job, I thought I could find a job within six months in the bay area, people could argue that I am generous to a fault and people I have lent and given money to in the past can't or won't help me out now.
So it is easy to have some depression when scraping together a few bucks for transit to a job interview becomes one of the harder tasks. It's doubly frustrating when you get on the wrong bus and wind up 45 minutes late to the interview.
"Money doesn't buy happiness, but having no money can sure buy a lot of misery." On a related note, it really grinds my gears when I hear well-to-do young adults from middle class families say money doesn't matter when they've never struggled to pay rent or for basic medical care.
I struggle right now because of my poor decisions. I am improving my lot in life through consistently good choices. Sure, life happens, but ultimately, I am in control of my own destiny.
1) Two good incomes on the professional track. We both have good degrees from universities and don't plan on taking any breaks in employment. Even with kids, there are plenty of great childcare options available. Living near family helps too.
2) Drive paid off cars. Buy new cars if you want, but structure your costs so you can pay them off in 2-3 years max and then drive them for another 5 or more. Stagger your purchases so you never have more than one car payment at a time.
3) Buy a home well below your means in area with a lower cost of living. There are plenty of parts of the country where you can earn a combined six figure income while spending less than $100/sqft for a home in a good neighborhood.
4) Limit how often you eat out for lunches and dinners to twice a week or less.
5) Live frugally so that you can save 20-40% of your income. Don't cheapen out on things for you or your family, but don't let yourself be manipulated by the consumerism that surrounds us. If you have a disposable income, use it for experiences like travel rather than collecting stuff.
6) Avoid expensive hobbies/activities that consume a lot of time and don't contribute much to your marketable skills. If a hobby requires spending a considerable chunk of your monthly income, reconsider whether it's really worth it.
TL;DR: It's really not that hard to save your way to $1 mil, you just have to be willing to work a little harder and spend a little less than most people to get there.
I'd rather spread my income around now on a nice(r) house, some fun hobbies and a bit of abject consumerism, and enjoy life more evenly then save now not have as much fun but end up with more money in the bank later. You'll never get your younger years back.
While I do agree to an extent, a very wealthy uncle of mine has always told me "the hallmark of maturity is the ability to delay immediate gratification."
If you're forced to live that way due to some personal hardships, you'll only come to resent your lot in life and you'll just end up over spending as soon as you are able to again.
I read a book called The Millionaire Next Door that described how getting married and staying married was one obvious way to boost wealth. Not only is divorce really expensive, but married people on average use less space per person than single people.
You can obviously construct scenarios where this isn't true—what if you marry a spendthrift?—but it was still a really interesting point.
The growth in the past few years is cool to watch now that we are ten years in and the curve is accelerating; even with the stock market crash in '08.
We are sensible on how we spend but not spend thrifty. We take at least on nice vacation a year and are able to visit family in other parts of the country for holiday's etc. When we invest in equipment for hobbies etc - I tend to buy things that last: Burton snowboards, Patagonia gear (I have a winter coat that is almost 10 years old, etc ...)
There was a monkey wrench thrown into the mix about four years ago but as she gets older her costs seem to be coming down. I'll know more how this affect the long term savings plan when she gets closer to being a teenager.
I suppose the moral of my point is not to be fixated on attaining a net worth, enjoy each day for what it is and get out and do the things you want to do. In a few years do you want to sit back and look at your bank balance or think back to the life you've led. Either way I'm not judging but moreso hoping some others don't fall into the millionaire pursuit.
After a year I realized the real psychological reason for my extreme saving habit was that I hated my job.
The lesson I learnt is this: If you calculate every expense in terms of hours of life worked to attain it, you probably don't like your job very much and you are better off (in the long run) by quitting.
Edit: Now that I run my business, I will spend lavishly on my childhood boy dreams once I can afford it. For me that's cars, and compared with employing people stuff like leasing a top of the range BMW (400 pounds a month deal on a 640d 2 months ago) or even stuff like participating in the Volkswagen Race Cup (15K pounds for second hand race car, 10K pounds a year to run and it's televised advertising) are really very attainable. It also makes for a more interesting life story.
Where are these magical lands? I've lived in Atlanta and the SF Bay Area, and the salary difference between the two for engineers is around 30%, although house prices aren't much cheaper in the former - unless you want to live in the suburbs, and then you make up the difference in gas.
Medical specialists are tied to hospitals, some of which may be more affordable areas, but technologists (who this site arguably caters to) tend to be bound to tech hotspots, where house prices near $1MM don't raise eyebrows.
Regardless, prices in Atlanta suburbs are less than 1/3rd of the prices in the bay area - and I am talking about suburbs just outside 285 - like Dunwoody that are <10 from Buckhead.
A $300K house in Dunwoody would easily cost more than $1MM in almost all of south bay.
There's no way you can make that difference up in gas - unless you go back and forth 5 times a day.
Having said that, your expected income in the bay area more than makes up for that difference if you are working in technology and entrepreneurial.
Suburbs get a bad rap, but they are way more economical once you have kids. And not everyone has to commute. Plenty of us work from home or work in nearby Suburban office parks.
I live in Dallas where costs are similar to Atlanta. Living in the Bay Area would mean four times the cost for family friendly housing at maybe a 40% increase in salary.
The thing about earning more though, is that it also depends more on circumstances not directly in your control. In general, a person has far more control over how much they spend versus how much they earn.
Meanwhile you could have taken the $30,000 difference, and automatically paid those earnings that would have otherwise paid off the loan into savings, a 10K or a start-up.
Yu could also have purchased a motorcycle (for the fun) and a cheap box car (for the practicality). And let's not get into the running costs, the decision to drive every day, insurance and so forth.
Buying depreciating assets with anything but spare cash is really sad.
(When I lived in the US I purchased 2 cars - for a total sum of $2000.)
It's very likely you could have gotten additional savings for paying cash up-front. It's usually cheaper to pass up these offers and negotiate the price down.
That monthly payment is extra cash you could put away into savings or other investments, presumably at a positive interest rate. Even if the market sucks and interest rates on most banks are terrible right now, at the very least, it's still money you could have invested in yourself with some positive return.
I only have an issue with this remark. But perhaps it's because when I "reconsider whether it's really worth it", I consistently find that yes, yes it is worth it. I rather enjoy extreme sports, and spending $100 on a trip to the mountains + gas is quite a lot of money. (It'll be dropping to around $50 + gas when I buy a snowboard).
I suppose it could also be added that, while certain hobbies may start expensive (snowboarding at $600 for a good board + bindings + other snow gear if it's your first time; or, photography for $1100 for camera + $2000 for a few lenses specialized to your primary interests), they become much, much less expensive as time goes on. (I pay virtually no maintenance on my camera and haven't needed a new lens in a while; so, my camera hasn't cost me any more money in a while. I haven't bought new snowboarding clothes either; and after I buy my board I probably won't buy another for a couple-few years)
That has to be considered as well.
TL;DR: I do have a bit of a problem with #6, but it's probably my own personal issue; and, rare/one-time costs are just that. rare/one-time costs.
So I guess what you could say is, if you grow to a million in net worth because you have a booming business with great returns, that's wonderful. But I wonder if getting to a million (or whatever number) over a lifetime by simply saving every possible dime is simply wasted opportunity.
Inflation is a bitch.
Fortunately, there are alternatives to keeping your savings in your mattress.
It will be TAXES.
If you build a career path that can take advantage of tax breaks you wind up with a huge advantage from the start.
For tech entrepreneurs - focus on building your enterprise value. Reinvest profits into GROWTH so that you wind up paying the bulk of your taxes in capital gains vs. personal income tax. On $1m or 2m in money the difference in what you save is staggering.
In real estate you can take advantage of all sorts of loopholes to reinvest or shelter profits that let you drastically increase your available pool to invest and create gains.
And for goodness sakes at the very least start a LLC or S-Corp if you're making more than $25,000 or so a year from "side projects / consulting" so you can properly write off and document all business related fees (computer hardware, cell phone usage, home office, etc).
But applying the above: let's say you're at a low-wage, hand-to-mouth style job today.
a) Today commit to being smart about taxation since that is one of your most addressable costs (and study it, there are literally THOUSANDS of loopholes)
b) As a result, save up enough "runway" over several years to go take a swing at a start-up.
c) Reinvest profits vs. buying a brand new status car or whatever and then cash out w/your $$$ at cap gains.
To my knowledge single employee S-Corps are more and more risky (likely to result in an audit).
Their purpose is to "uncover the truth", not to hose you needlessly.
You CAN write off a home office, you CAN write of computers, car miles, travel and entertainment, business meals, etc.
As long as these are legitimate business-related expenses you're in the clear.
As a single-employee S-Corp there shouldn't be such an overwhelming amount of documentation and you can probably push through an audit with minimal headaches.
Probably should add the disclaimer that I am not a CPA, follow at your own advice, but man have I spent enough bucks w/CPAs in the last 12 years to hopefully pass on a bit of hard-won knowledge ;)
The supposed benefit of being an LLC over a sole proprietor is liability protection, but everything I've heard indicates a single owner LLC is rarely enough protection in court.
What about a single-owner C-corp?
Also, while the rest of your advice is sound, it is unncessary to organize an LLC or incorporate a S-Corporation for side projects. In either case, you will face additional taxes (nominally called "fees") for the privilege, along with additional tax filing burdens. You can already deduct business-related expenses as an individual. Indeed, both LLCs and S-Corps are treated as "pass-through" entities, so you would already be doing that for your LLC/S-Corp expenses.
The primary reason to form an LLC/S-Corp for a side project or for consulting is for liability protections (i.e., lawsuits, debt, etc.). Unfortunately, for single-member LLCs or sole-owner S-Corps, creditors will generally require the owner to contractually waive such protections.
The secondary reason, and the reason you're probably thinking of: you can sell the LLC/S-Corp, recognizing capital gains (lower tax rate) or even avoid taxes altogether (via certain norecognition transactions). In contrast, it is extremely difficult to sell an unincorporated/unorganized business, and you will essentially always recognize the gain in such a sale.
This is hard for me to believe, since health care is around 15% of GDP and taxes are around 25% of GDP. The top 1% only pays about 28% of taxes, so even "taxes paid by the non-1%" are more money than all expenditure on health care.
sources:
http://en.wikipedia.org/wiki/File:International_Comparison_-...
http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenu...
http://economix.blogs.nytimes.com/2009/04/08/how-much-americ...
Relates to contracts you sign (and getting a credit or charge card which you end up signing personally even though it's a "business" card) but not necessarily to expenses or everyday debts (the local printer, the coffee company, merchandise on net 30 terms etc.) In short you can have debt that is shielded as a corporation.
"In contrast, it is extremely difficult to sell an unincorporated/unorganized business,"
Don't agree with this at all. I sold one (20 person company) and the fact that it was a sole proprietorship didn't make it any harder to sell from my experience.
Agree with the other things you said and correctly pointing out that you can deduct business expenses as an individual.
No kids. Two good incomes. Reliably saving 20%. Mid 40s. No college debt or health issues.
That should get you to about a million in assets.
In order to develop a successful model, one should also have negative examples, i.e. people who could have had ~$1M in their mid 40s but do not. The greatest mistakes I made that I see with hindsight are (i) doing a PhD in EE where a MS was more than enough and then taking too long to finish that and (ii) taking too long to get acquainted with the concept of creating wealth, a la http://paulgraham.com/wealth.html; I'd say that, had I read Hackers and Painters 15 years ago (it wasn't printed at that time or course), my life would have been different (or maybe not, it's easy to get caught with might have beens). That's why I buy a copy of this book to many young people I know who are starting life.
Not to say that's a great plan. Having a life without kids wouldn't be a satisfying life for most people, and so if its a choice between kids and wealth, then most would choose kids.
I do think having kids early probably makes it much, much harder to become wealthy. My friends who had kids in their early 20's are generally poorer than my friends who waited until their 30's. I think a more realistic plan would be something that includes children, but waiting until you've had time to get some type of career started.
[9]This is a good plan for life in general. If you have two choices, choose the harder. If you're trying to decide whether to go out running or sit home and watch TV, go running. Probably the reason this trick works so well is that when you have two choices and one is harder, the only reason you're even considering the other is laziness. You know in the back of your mind what's the right thing to do, and this trick merely forces you to acknowledge it.
its a good way to avoid ending up on the street...you'll always be able to get room and board with your kids.
Since our generation won't get any social security or pensions to live off, we are going to need all the help we can get if things go south.
She responded that she had eight retirement plans, and I was the oldest.
Be nice to your kids, and hopefully they will give you room and board in case of emergency -- but I've tried to help my parents many time only to regret it.
In my view, kids are not investment. They take out much resources from you, and you do so willingly because you love them. As they get older, they may or may not show appreciation, depends on your relationship with them.
Debt is definitely the first thing to avoid.
I've made my riches, modestly, by working hard. Hard work, being paid to do things you like to do, having a strong investment in the tools one needs to work hard, then getting on with it. By work, I mean, 'do something that someone else needs done, well'.
Also: get paid. The world is a big, wild, woolly place, and if someone is going to pay you well to haul bricks all day, get out there and haul bricks, to get PAID. Doing a good job means also, getting paid well. Because the person you are working for wants to pay you well, and for little other reason than that your hard work is valuable to them.
This is the nature of the realms in which money, our subject today, becomes of any use: someone else thinks its worth it to do/make BLAH, even if you personally don't.
* Basic living costs (food and clothing and fun).
* Childcare requires either expensive daycare or a parent not working / limited working.
* Money needs to be saved for college.
* Require more bedrooms, which drives up housing costs although it's arguable whether this has an impact on net worth. (This may be double-counting the first point, but going from a $100k condo to a $400k house because of a child is more than just living costs.)
Add those up and yes it probably takes another 10-20 years to meet your net worth goals. OTOH, you have a safety net when you get older. And, you know, a kid.
'TL;DR If your reading this first, your not going to be successful. You're too fucking lazy.'
- http://www.reddit.com/r/AskReddit/comments/rqejz/redditors_w...
Depends on the car, I guess, I ditched my 12 year old Dodge for a 14 year old Toyota and feel much better about the reliability.
Just look at the cars as the cost to own...not actual price you pay.
So even if a car depreciates 20% in that time period, you can still drive something decent.
A $10,000 used car...will depreciate $2,000 or $1,000/yr or $83/mo
$83/mo is a small price to pay to have a reliable car that's just 3 years old.
And if you want something better...
A $40,000 used car...will depreciate $8,000 or $4,000/yr or $333/mo.
$333/mo is nothing, and a $40,000 car started off its life as an $80,000 one.
And that's if you hold the cars for 2 years....if you sell them within the year...you can sell it for the same price you paid for it.
The big thing your entire calculation leaves out is the time it takes to do this transaction every couple of years, because there is no way a dealership is going to give you the money you are looking for...
I'd rather do something else with my time to be honest.
Which will then inevitably lose you the full value.
I can't imagine a 20+yr old car which is a gain, and I'm a fan of classics and owner of an '84 BMW. In terms of money eating vintage cars are worse than gold-diggers unless you let them rot. One must be overentusiastic by their hobby not to see that's a sinkhole, been there done that ;)
I don't know if that's lucky, but I think it's worked out very well.
I am, however, not rich.
If they do they won't reply to those questions. I have friends that are terrible rich by earning it and the first thing they learn is that life is better when few people know about it. (Thieves, kidnappers and envious get out of your life). They life normal lives.
Those that inherit, well, that is another story.
The most common pattern I see is doing a startup, failing, but learning enough about how to do it right, and then trying again and having moderate success with #2 or #3.
9/10 of startups failing could be explained by "virtually all first-time startups fail, and 9/10 founders give up after their first failure, and those that stick with it, succeed". That would actually be rather encouraging.
Almost nobody I know working for a big company is working for their first big company, so you could also say "9/10 of all employments fail", but that's hardly an indictment of employment.
There are exceptions to that rule and ways to increase the odds. As an example, 90% of franchise businesses are still running after 5 years.
I knew an old lady who saved every penny in her life to amass 10.000 euros, it was her dream. She did accomplish it, but never had any fun in her life because she'd always save her money. When she died she had the desired amount on the bank. Her children inherited the money, but only after they paid 40% tax.
How to get rich? Live your life to the fullest and have fun. And yes, raise a family at some point. I promise you that all the money in the world can't buy you what you get from your that!
Get lucky, either through a series of serendipitous events or through birth.
Be old enough to have lived in an era when you didn't have $50K or more in student loans to pay off and could get a good job.
Net worth of $1m quite easily achievable by 50 with two middle class income, not being a spendrift, and not being a bonehead in investing. (For the record, trading stocks too actively is usually a bonehead move, so is putting all savings in CD's.)
http://www.reddit.com/r/AskReddit/comments/rqejz/redditors_w...
http://www.themillionairefastlane.com/ (scammy title I know but seriously read it). The guy who wrote it was the founder of limos.com.
Just beceause it's not a constant adrenaline high doesn't make it wasted.
What would be a good startup to you start, service/product ?
It's pleasent to get some new views on this topic if you are used to the typical screaming self-help books or blogs post about getting rich and success (where you never know wether the author is really rich or just a good writer).
You might be able to get that money other way but it will take so much time that you won't even have few minutes for yourself to brag about your success on reddit.
