Why Are You Not A Millionaire?


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4. Live way below your means, invest the rest.


Stop. Buying. Yarn. I'd include Paizo goodies, but I someone would come after me.


bugleyman wrote:
4. Live way below your means, invest the rest.

+1....not sure if this will really make you a millionaire (depends on how much/well you invent). But good advise to live by and sadly living under your means is something most americans don't do (in my experiance).


Ruick wrote:


not sure if this will really make you a millionaire (depends on how much/well you invent).

One of the simplest and most reliable ways to make you a millionaire.

$5000 per year invested at 5% will make you a millionaire in 50 years. The long term annual average return of an index (fund) is above 9%; the fifteen-year annual average return has been below 5% for only one year since WW2.

If you can't scrape up $5000, live further below your means.


Orfamay Quest wrote:

One of the simplest and most reliable ways to make you a millionaire.

$5000 per year invested at 5% will make you a millionaire in 50 years. The long term annual average return of an index (fund) is above 9%; the fifteen-year annual average return has been below 5% for only one year since WW2.

If you can't scrape up $5000, live further below your means.

That is, of course, the issue.

Many people could live below their means, and choose to do otherwise. They are largely responsible for their own situation.

Many others, however, even those who work full time, do not make enough to survive, let alone save. I simply can't fault folks in this situation, however popular doing so seems among certain ideological groups.


bugleyman wrote:


Many others, however, even those who work full time, do not make enough to survive, let alone save. I simply can't fault folks in this situation, however popular doing so seems among certain ideological groups.

While it's certainly true that there are people who don't make enough to survive, I suspect that the number of such people on this forum is extremely small.


Orfamay Quest wrote:
bugleyman wrote:


Many others, however, even those who work full time, do not make enough to survive, let alone save. I simply can't fault folks in this situation, however popular doing so seems among certain ideological groups.
While it's certainly true that there are people who don't make enough to survive, I suspect that the number of such people on this forum is extremely small.

No, but the number who'd have trouble saving $5000/yr might be higher.

The number capable of doing so for 50 years straight is probably much lower. I know I started out making so little money $5000 would have been a huge problem and went through several bouts of unemployment. Now I'm doing fine and have been saving well over $5000/yr lately. Other people buy houses, have kids and other things that cut drastically into their savings.

Also 50 years is longer than the normal working life: Either starting working enough to save serious money in high school or working past normal retirement age.
It also ignores inflation: 50 years ago, $5000 was serious money. Very few could afford to save that. And 50 years from now, you might be a millionaire when you retire if you follow that plan, but it won't be enough to last.


thejeff wrote:
Orfamay Quest wrote:
bugleyman wrote:


Many others, however, even those who work full time, do not make enough to survive, let alone save. I simply can't fault folks in this situation, however popular doing so seems among certain ideological groups.
While it's certainly true that there are people who don't make enough to survive, I suspect that the number of such people on this forum is extremely small.
No, but the number who'd have trouble saving $5000/yr might be higher.

Well, this goes straight into the "want" vs. "need" issue, I'm afraid. Buying houses, having kids, and such can indeed be very expensive -- but lots of people manage to buy houses and have kids on an income much below the median. Just as a simple example, the average house size (in the USA) has increased from 1400 square feet in 1970 to 2700 in 2009. I'm not sure how many people on this forum can genuinely say they need a house larger than 2000 square feet.

Similarly, I'm not sure how many people can even say they need to buy a house. Having lived for three years in a single rented bedroom in a private house (fortunately with kitchen privileges), I fully appreciate having my own place and my own space, but I demonstrably don't need it. I don't need a second car for my family, and indeed even the first car is substantially more expensive than a monthly bus pass. I want the convenience but don't need it.

And that's rather the point behind "live below your means." Don't buy wants, don't pay for convenience, and save the difference. While I'm not faulting anyone for the choices they make, I also recognize that mathematics is a harsh and inflexible master.

Quote:


Also 50 years is longer than the normal working life: Either starting working enough to save serious money in high school or working past normal retirement age.

Normal retirement age is now 70.

Quote:
It also ignores inflation: 50 years ago, $5000 was serious money. Very few could afford to save that. And 50 years from now, you might be a millionaire when you retire if you follow that plan, but it won't be enough to last.

Well, that's definitely a reason not to save it, then. Much better to save only $2500, or $1000, because saving $5000 won't make it. :rolleyes:


Do I live below my means? Yes, I do.

Should I live further below my means? Yes, I should. Right now I save about 10% of my income; I should be saving twice that. So if I don't have enough money at retirement, that's my fault.

But I've also been fortunate: No major illnesses in the family, limited periods of unemployment, etc. The best laid plans can quickly go astray. Obviously people need to take responsibility for their behavior, but let's not overlook that behavior, while important, is just one factor of many.

Grand Lodge

Pathfinder Adventure, Rulebook Subscriber
Quote:
Well, that's definitely a reason not to save it, then. Much better to save only $2500, or $1000, because saving $5000 won't make it. :rolleyes:

I thought the point was that you have to save more as time goes on to keep up with inflation.


Orfamay Quest wrote:
thejeff wrote:
Orfamay Quest wrote:
bugleyman wrote:


Many others, however, even those who work full time, do not make enough to survive, let alone save. I simply can't fault folks in this situation, however popular doing so seems among certain ideological groups.
While it's certainly true that there are people who don't make enough to survive, I suspect that the number of such people on this forum is extremely small.
No, but the number who'd have trouble saving $5000/yr might be higher.

Well, this goes straight into the "want" vs. "need" issue, I'm afraid. Buying houses, having kids, and such can indeed be very expensive -- but lots of people manage to buy houses and have kids on an income much below the median. Just as a simple example, the average house size (in the USA) has increased from 1400 square feet in 1970 to 2700 in 2009. I'm not sure how many people on this forum can genuinely say they need a house larger than 2000 square feet.

Similarly, I'm not sure how many people can even say they need to buy a house. Having lived for three years in a single rented bedroom in a private house (fortunately with kitchen privileges), I fully appreciate having my own place and my own space, but I demonstrably don't need it. I don't need a second car for my family, and indeed even the first car is substantially more expensive than a monthly bus pass. I want the convenience but don't need it.

And that's rather the point behind "live below your means." Don't buy wants, don't pay for convenience, and save the difference. While I'm not faulting anyone for the choices they make, I also recognize that mathematics is a harsh and inflexible master.

Living in single rented bedroom doesn't really work well for families. Depending on where you live and work, a car may be necessary or even two. I could technically get to work without one, but it turns a 20-minute commute into close to a 2 hour one. Or I could move to a more expensive area. And I'm not even rural.

And a house can be the equivalent of savings, though it won't make you a millionaire and it could also turn into a money pit.
Orfamay Quest wrote:
Quote:


Also 50 years is longer than the normal working life: Either starting working enough to save serious money in high school or working past normal retirement age.
Normal retirement age is now 70.

Normal Retirement age is officially 67. Average retirement age is 61. How much of that is convenience and how much of it is medical or just not being able to find work is open to debate. There's a lot of evidence of age discrimination in job hunting. Even over 50, much less over 60. And people who aren't working desk jobs often have a lot of trouble keeping up physically as they get older, even without specific medical problems.

And even so, if you've got a family, you'll also need to be saving for college and all their other expenses. For which you may need to save even more since the time line is shorter.
Orfamay Quest wrote:
Quote:
It also ignores inflation: 50 years ago, $5000 was serious money. Very few could afford to save that. And 50 years from now, you might be a millionaire when you retire if you follow that plan, but it won't be enough to last.
Well, that's definitely a reason not to save it, then. Much better to save only $2500, or $1000, because saving $5000 won't make it. :rolleyes:

That was more on the specific "How to be a millionaire" proposal, not an argument against saving.

The proposal to save X dollars every year to reach a target is a silly one, since inflation fights against it on both ends: The amount of money you need to put in early on, when it's most effective due to compound interest is higher than you can really afford. Later you can afford more, but it won't compound as much.

And just for the record: That historical average 9% return doesn't count inflation. Which puts it closer to 6%. Which admittedly doesn't affect the simple math, since you're talking nominal dollars the whole way, which makes no sense over a 50 year horizon.


thejeff wrote:
Living in single rented bedroom doesn't really work well for families.

It did for hundreds of years. It still does, for literally millions of families in the United States. Even if you decide you want -- not need -- your own place, the average house size in Hong Kong is less than 500 square feet. That kills very few of them.

Quote:


Depending on where you live and work, a car may be necessary or even two. I could technically get to work without one, but it turns a 20-minute commute into close to a 2 hour one.

Shrug. So you don't need one.

These are all choices you make. You can choose not to live in a rented bedroom, and save the money instead. You can choose not to save the money and instead to live in better conditions.

Quote:


The proposal to save X dollars every year to reach a target is a silly one, since inflation fights against it on both ends: The amount of money you need to put in early on, when it's most effective due to compound interest is higher than you can really afford. Later you can afford more, but it won't compound as much.

And just for the record: That historical average 9% return doesn't count inflation. Which puts it closer to 6%. Which admittedly doesn't affect the simple math, since you're talking nominal dollars the whole way, which makes no sense over a 50 year horizon.

I'm not quite sure what the point of this is supposed to be. The problem posed was "How To Become a Millionaire," not "is a millionaire enough to shoot for?" If your goal is to have enough money lying around that you can live on your own Greek island and live off the interest, then one or even fifty million dollars may not be enough, especially fifty years from now. If you want to ask how to become a pentacontamillionaire, that's a different question.

If you can't afford or are unwilling to save $5000 per year, then you're less likely to become even a nominal millionaire over a normal lifespan. If you can and do save more, you can hit that target substantially faster.

But the key phrase there that I want to single out is "higher than you can really afford." I'm willing to bet that almost everyone on this thread can afford more to save than they actually do save. The difference between saving what you can, and what you feel comfortable saving, is, in practical terms, the difference between becoming wealthy or not. (Read The Millionaire Next Door for some detailed examples. A great quote, often attributed to that book, is that "in America it is easier to generate a high income than it is to accumulate great wealth.")


I'm digging a Ditch
I'll never get Rich
I'm in the Army now.


Yes, I understand. If necessary, I could survive on the street living in cardboard box, scavenging food from restaurant dumpsters, (though I'd prefer to do so in a warmer climate). Everything else is a unecessary convenience. Of course, it's hard to earn enough money to put $5000 away every year under such conditions.

As for the larger point: Talking nominal dollars over a 50 year timespan is nonsense. 50 years ago, average income was around $6000. Trying to save $5000 of that wouldn't be about giving up conveniences, it would be impossible. And 50 years from now, judging by past trend, a million won't buy you a Greek island, it won't even buy you a comfortable retirement. 50 years ago being a millionaire meant being really rich. Now it really doesn't, not if it takes you your entire life to get it. Soon it won't even be enough to keep you through retirement.

The Saving X dollars a year thing for 50 years just doesn't make sense. You can't afford it when you start and you can't live on it at the end.

Or more simply: I'm not a millionaire because I haven't been working 50 years. If I had been working 50 years I still couldn't have followed your strategy. Following your strategy if I was starting now would eventually make me a millionaire, but that would be far too little.

And that assumes you can actually get those 9% returns. After fees and such, funds usually trail the actual index.


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“Anyone who lives within their means suffers from a lack of imagination.” --Oscar Wilde


thejeff wrote:


And that assumes you can actually get those 9% returns. After fees and such, funds usually trail the actual index.

By a few tenths of a percent, if you go through someone like Vanguard. Not enough to make a difference when I'm using a 5% return for the calculations.


Comrade Anklebiter wrote:
“Anyone who lives within their means suffers from a lack of imagination.” --Oscar Wilde

Capital !!


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How about now?? Did your plans begin working yet?

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[ vid = 5 Reasons You're Poor ]

Basically, it is all your own fault.

.


Electric Wizard wrote:


[ vid = 5 Reasons You're Poor ]

Basically, it is all your own fault.

Because I didn't buy a suit and put out youtube videos plugging my "Get Rich" program?


thejeff wrote:
Electric Wizard wrote:


[ vid = 5 Reasons You're Poor ]

Basically, it is all your own fault.

Because I didn't buy a suit and put out youtube videos plugging my "Get Rich" program?

Let's start with #1. Did you even realize you could put out a youtube video plugging a "Get Rich" program?

.


You too can be a millionare.

It works like this.

Go on late night TV. Advertise that you have a book that will help people get rich. All they have to do is pay 99.99 for it per copy.

Make up a bunch of stuff (Like Stephen Covey's books), and just like he did, you can get rich by telling others how to be successful (which they really don't, because if they did, they'd say use the same method they used which is to lie, exploit, and cheat everyone by making pyramid schemes and writing books with made up stuff in them to sell to others!).

OR...you can do the Warren Buffet way. That takes a LOOONG time. Buffet actually freely gave the best advice I ever heard in regards to the stock market. Invest...and keep it there. Don't do this day trading stuff, when you invest, invest for the long term...like 30 years long term.

Of course, it works out best if you invest WISELY and get a good company that actually expands quickly.

For example, if you had invested in Apple or MS thirty years ago, probably a pretty nice investment....if you could have invested in them.

It's all the long term...and patience...at least in the markets trade.

Too many don't understand that, and with the increasing numbers who are trying to play the market in the public, make for a rather chaotic day to day standings. Luckily, the long term investments still pan out.


GreyWolfLord wrote:

OR...you can do the Warren Buffet way. That takes a LOOONG time. Buffet actually freely gave the best advice I ever heard in regards to the stock market. Invest...and keep it there. Don't do this day trading stuff, when you invest, invest for the long term...like 30 years long term.

Of course, it works out best if you invest WISELY and get a good company that actually expands quickly.

It probably helps if you're the son of a congressman and stock broker as well.

Not that he hasn't done very well, but he definitely started farther ahead than I've ever been.


Too lazy. Pure and simple. I belong to the church of the sloth lords.


GreyWolfLord wrote:
For example, if you had invested in Apple or MS thirty years ago, probably a pretty nice investment....if you could have invested in them.

What if you're not that old -- what to invest in today?

.


Electric Wizard wrote:
GreyWolfLord wrote:
For example, if you had invested in Apple or MS thirty years ago, probably a pretty nice investment....if you could have invested in them.

What if you're not that old -- what to invest in today?

.

That takes some foresight.

There are several problems with some giving advice, as in some ways that can be seen as trying to manipulate markets (whether or not it is or isn't, it's been done). In addition, if someone takes the advice seriously and it turns out bad advice, that can open lawsuits.

So, I'd say, if you are serious into investing today, try to take a long term picture. Try to reasonably look at what should be doing well in 30 years and what looks to be in that arena today and has a good business plan and idea of expansion.

I think that's generic enough but useful enough for you to use, but not enough for you to sue.

Sometimes there's still risk, but it's an educated guess type risk.

If you really want serious advice, try to find someone with extensive experience in the field. Try someone with at least a decade or two of experience, who has been relatively successful (but not Ponzi scheme successful), and either get their advice (pay or otherwise) or see an investor corporation.


Electric Wizard wrote:
GreyWolfLord wrote:
For example, if you had invested in Apple or MS thirty years ago, probably a pretty nice investment....if you could have invested in them.
What if you're not that old -- what to invest in today?

The next big breakthrough tech company, of course.

Otherwise? Market index funds. They're not glamorous and you won't get rich, but you also won't lose your shirt.

An awful lot of research has shown that most of the top investors don't consistently beat the market. At any moment, some do, but if you check back in later, they aren't likely to have continued to do so.

The Exchange

You are a millionaire. I am holding these funds for you. Send your name, dob, address, and a one dollar transfer fee and I will transfer these funds within two months.

Your friend, the prince of southern earth.


No one has mentioned The Death Tax. That's a Socialist thing isn't it? (I really don't know.)

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Electric Wizard wrote:
No one has mentioned The Death Tax. That's a Socialist thing isn't it? (I really don't know.)

I can't tell if you're being serious.

I mentioned the estate tax upthread...that's what some people call the "death tax." And it's "Socialist" in so far as the very idea of taxation itself is Socialist -- which is to say, not at all.

Liberty's Edge

To answer the OP:

I was busted and lost it all (what I was busted with had a retail value of about five million dollars, so I was a millionaire for about two minutes before the Feds swooped in ;-) ),

Sczarni RPG Superstar Season 9 Top 16, RPG Superstar 2015 Top 32

I haven't worked a million hours.


1 person marked this as a favorite.
houstonderek wrote:

To answer the OP:

I was busted and lost it all (what I was busted with had a retail value of about five million dollars, so I was a millionaire for about two minutes before the Feds swooped in ;-) ),

Hey, that's two minutes longer than I've managed...

RPG Superstar Season 9 Top 16

I haven't been taken on as a vizier yet, I'm starting to worry they lost my application.


Since, I'm the lazy, selfish product of an entitlement society, I will
soon be a millionaire (without having to do any work, because I'm
entitled to be a millionaire).
But, I'm still waiting for my money -- where do I pick up the check?
Why isn't it here already?

.


Electric Wizard wrote:

Since, I'm the lazy, selfish product of an entitlement society, I will

soon be a millionaire (without having to do any work, because I'm
entitled to be a millionaire).
But, I'm still waiting for my money -- where do I pick up the check?
Why isn't it here already?

Calvin agrees


What Warren Buffet has over most of us here is he's able to invest in Preferred Stock. He has the money and connections to get in on the ground floor of businesses just starting out or re-starting out. If it turns out he made a not-so-good choice, that preferred stock is still worth something when they liquidate the company.

If we invest in the same company and it goes bad we get nothing or next to nothing.

I have a large extended family and a couple of those branches on the tree are indeed worth millions. Not sure how many millions since those aren't the branch I live on but the cars they drive, the houses (yes plural - houses) they own, and the vacations they take are consistent with multi-millionaire status.

I've also seen how little enjoyment some of them get out of all their money. They take big risks to make more and they work hard... except for a couple of cousins but we'll see what the future brings for them.

However, "rat race" aptly describes much of their life. They know plenty of people but have few (if any) friends. They get divorced for sad and (often) petty reasons. And they cheat I'm sure. Business assets used extensively for personal use and such. Nothing that (so far as I know) could be uncovered in a standard audit. They are generous in an absolute sense - charitable donations in the thousands but amounting to something less than 2% of their income. Hard to say for sure but my point is their generosity is relatively low in proportion to their income.

I wouldn't mind being worth millions* but not like that. So, I likely never will be.

* In inflation-adjusted dollars going forward.


Quark Blast wrote:

I wouldn't mind being worth millions* but not like that. So, I likely never will be.

* In inflation-adjusted dollars going forward.

.

You are making an informed decision to not be a Millionaire. (I'm entering your data into the spreadsheet.)

.


Ugh finance.


Quark Blast wrote:

What Warren Buffet has over most of us here is he's able to invest in Preferred Stock. He has the money and connections to get in on the ground floor of businesses just starting out or re-starting out. If it turns out he made a not-so-good choice, that preferred stock is still worth something when they liquidate the company.

If we invest in the same company and it goes bad we get nothing or next to nothing.

Surely you're not suggesting that the game is rigged? ;-)


.

According to Alec Baldwin some millionaires are buying huge tracks of land
in northern Maine, because they believe in 15 years, after global warming
has caused food production to plummet, they will form collective farming
communities. That is, you can become an indentured servant on their land
to keep you and your family alive; and they will be the land Barron to which you pay homage.

Get it while you can.

.


Grand Magus wrote:

.

According to Alec Baldwin some millionaires are buying huge tracks of land
in northern Maine, because they believe in 15 years, after global warming
has caused food production to plummet, they will form collective farming
communities. That is, you can become an indentured servant on their land
to keep you and your family alive; and they will be the land Barron to which you pay homage.

Get it while you can.

.

The good thing is, some moron mentions "peak oil" right at 1:30 letting you know that you don't need to bother sitting through all 10 minutes.


.

The S&P 500 has closed above its five-day moving average for 20
consecutive days. This has only happened three times before in the
last 20 years.

I think I'll sell a handful of Calls.

.


Grand Magus wrote:


The S&P 500 has closed above its five-day moving average for 20
consecutive days. This has only happened three times before in the
last 20 years.

I think I'll sell a handful of Calls.

Because market timing has always been a reliable way to make money.

Well, maybe by GM's standards, it's not bad....


Orfamay Quest wrote:
Grand Magus wrote:


The S&P 500 has closed above its five-day moving average for 20
consecutive days. This has only happened three times before in the
last 20 years.

I think I'll sell a handful of Calls.

Because market timing has always been a reliable way to make money.

Well, maybe by GM's standards, it's not bad....

.

What does this mean? (pretend you are explaining your thoughts so others can understand you)

.

Liberty's Edge

Grand Magus wrote:
Orfamay Quest wrote:
Grand Magus wrote:


The S&P 500 has closed above its five-day moving average for 20
consecutive days. This has only happened three times before in the
last 20 years.

I think I'll sell a handful of Calls.

Because market timing has always been a reliable way to make money.

Well, maybe by GM's standards, it's not bad....

.

What does this mean? (pretend you are explaining your thoughts so others can understand you)

.

Why are you holding him to a higher standard than your own?


Grand Magus wrote:
Orfamay Quest wrote:
Grand Magus wrote:


The S&P 500 has closed above its five-day moving average for 20
consecutive days. This has only happened three times before in the
last 20 years.

I think I'll sell a handful of Calls.

Because market timing has always been a reliable way to make money.

Well, maybe by GM's standards, it's not bad....

What does this mean?

Technical analysis -- buying and selling on the basis of forecasts the study of past market data, primarily price and volume -- is a poor way of making money. One of the most robust finding among academic financial studies and academic economic studies is that, while technical analysis may provide small positive returns if you neglect trading costs, the small positive returns are generally dwarfed by costs, so you end up losing money.

Investing on the basis of day-to-day variations (e.g. five-day moving averages) is generally an even worse plan, because it encourages frequent (and expensive) round trips. One has a tendency to miss long-term trends and as a result, miss most of the benefit of long-term growth because you are always a day or so behind the actual market.

Finally, options trading in particular is sensitive to this, because not only are the trading costs substantially higher, but they're also more sensitive to timing, so you will often end up guessing right on the direction but wrong on the timing and still lose money that way. (I don't mind admitting that I got burned on some gold options that way; I correctly predicted the 2013 drop, but I thought it would happen a year earlier than it did.)

Basically, if this is how you make investment decisions, I'd be very surprised if you were a long-term winner.


Krensky wrote:
Grand Magus wrote:
Orfamay Quest wrote:
Grand Magus wrote:


The S&P 500 has closed above its five-day moving average for 20
consecutive days. This has only happened three times before in the
last 20 years.

I think I'll sell a handful of Calls.

Because market timing has always been a reliable way to make money.

Well, maybe by GM's standards, it's not bad....

.

What does this mean? (pretend you are explaining your thoughts so others can understand you)

.

Why are you holding him to a higher standard than your own?

.

Respect, of course.

So, would you buy Home Depot right now?
[ chart = HD ]

.


Grand Magus wrote:


So, would you buy Home Depot right now?

Probably not, although my investment strategy may be different than yours (e.g. I may have a higher or lower risk tolerance, or I might have a longer or shorter investment horizon), so you might have a different opinion. Part of the reason is that I've not done due diligence on HD, and (as per above), looking at a chart has not been shown to be any more informative than looking at tea leaves.

They've had some nice earnings surprises recently, but the consensus growth estimate is a little smaller than I like to see, and the P/E ratio doesn't make it (to me) a screaming buy.

That's my opinion, anyway. But knowing nothing at all about your investment aims, I wouldn't be in a position to give you investment advice even if I were allowed to.


Orfamay Quest wrote:
Grand Magus wrote:


So, would you buy Home Depot right now?

Probably not, although my investment strategy may be different than yours (e.g. I may have a higher or lower risk tolerance, or I might have a longer or shorter investment horizon), so you might have a different opinion. Part of the reason is that I've not done due diligence on HD, and (as per above), looking at a chart has not been shown to be any more informative than looking at tea leaves.

They've had some nice earnings surprises recently, but the consensus growth estimate is a little smaller than I like to see, and the P/E ratio doesn't make it (to me) a screaming buy.

That's my opinion, anyway. But knowing nothing at all about your investment aims, I wouldn't be in a position to give you investment advice even if I were allowed to.

everyone who isn't already long Home Depot should not be. (Because you're getting stoned too much.)

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