The reality of this phenomenon is that people who have done everything "perfectly" in their life and academic career feel a bit cheated when their income tops out in between 100k and 200k. They might be senior engineers or doctors or lawyers but they've hit this brick wall as far as income, sometimes in their 30s and yet there are all these people out there that make more than 10x or even 100x their annual income.
Now there are four ways that I am aware of to make more than about 200k/year.
1. Be an investor/entrepreneur in your own company.
2. Have stock in a company that IPOs or get bought.
3. Work in high finance at a well performing hedge fund or a maor wall street firm.
4. Be a senior partner in a major law firm or an experienced surgeon in an in-demand specialty. Though you'll still top out at about 500k, at least according to glassdoor.com.
> and yet there are all these people out there that make more than 10x or even 100x their annual income
Where by "all these people" we mean an extremely small fraction of the population. If I think about things honestly, I'm paid more than almost everyone I interact with regularly. Many of these people aren't lazy or stupid or dropout or what-have-you. They also went to good schools and got good grades and are excellent at what they do; but it turns out that the "brick wall" in their field is a fraction of what it is in the tech industry. So, yes, I know a few people making more than I do, mostly in jobs I don't want to do, with working hours I wouldn't tolerate; but I'm not feeling too sorry for myself.
I was going to make a related point. To get into the $100K-200K range, all you need is hard work. Study in school, do well on your standardized tests, get into a good college, pay attention to salaries when choosing your major, show up for on-campus interviews, and do your job well when you're hired. It's not hard to be making six figures a few years after graduation on this plan.
But to break the 99th percentile - I think that was $342K/year for 99.5th percentile of single filers - you need to take on some risk. Like forgoing your income for a few years to found a company. Or taking on a lower salary and the risk that you'll be laid off in a year and getting a job at a startup. Or putting up your own money to invest in one. Or taking on high-visibility, high-impact projects that may fail - often at the cost of your regular duties - within your day job.
For people whose whole life has been a steady upwards progression, risk is scary. It often looks impossible. And so they're stuck at a point in life where they know people who have vastly more money than them, but they don't understand how or are unwilling to achieve that.
Major league athlete, regular on a TV show or star in movies, former press secretary/lobbyist, best-selling author, multi-hit-album singer/band, music mogul/producer, real-estate agent in an expensive area.
I bet there are 100s of jobs where the top salaries are over two million. There are very few who can get them, though.
> About one in five of us is retired. About two-thirds of us who are working are self-employed. Interestingly, self-employed people make up less than 20 percent of the workers in America but account for two-thirds of the millionaires. Also, three out of four of us who are self-employed consider ourselves to be entrepreneurs. Most of the others are self-employed professionals, such as doctors and accountants.
Many of the types of businesses we are in could be classified as dull-normal. We are welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers, and paving contractors.
200k isn't that hard. Just go into management. You don't even need to be that high in a big company (even located in a low income region) to pass 200k.
5. Become a top developer at a big software company.
(A variation on 3. You probably won't earn $100 million, but you could definitely earn $1 million. )
6. Become a top performer in entertainment (music, sports, movies).
A fun fact ignored by most people: it isn't just CEO pay that has skyrocketed over the years. Alex Rodrieguez gets $33 million/year, at his peak Babe Ruth got (inflation adjusted) $1.1 million.
The theme of all four of those methods of breaking from the 200-300K/yr income level is: leverage other people to work on your behalf. The most direct way to do that is to start a business. A slightly less direct way is to invest in existing businesses.
Yes, I think you probably missed a lot. I suspect there is a long tail of jobs with > $200k salaries. For example:
"The median income for public-university presidents in the 2007-08 academic year was $427,400. The average head of a private university* took home about $100,000 more." [1]
#1 is a huge open field. You can live almost anywhere and not pay a lot in education and accomplish #1. Not that it's easy. It takes a lot of work and some talent and some luck, but there isn't the educational entry costs of #3 and #4.
My adult life began with several years at a non-profit making $18k/yr. I've worked to avoid dramatic changes to my standard of living since then and it's helped me put money in the bank regardless of where I fell on the income scale. I also find that I need to "reset" my spending every 6 months or so, because it's trivially easy to start spending more than you realize, for no practical gain.
Sometimes I get jealous of people at work who seem to have nicer things. Then a few days later they start to complain about not having money, and I'm reminded that I don't really need a TV, much less a 52-inch what-have-you. Nor do I need to replace my nearly 20 year old car with something newer just because I can. Or more realistically: I don't need to get a new car because someone else I know bought a Z3.
My wife lost her job several months ago (bad economy and all) and for a while we were scrambling to figure out what to do with a near 50% loss in income.
Turns out with her staying at home, working on a startup, and us eating a home-cooked dinner everyday...entertaining ourselves with trips to free museums we never went to before (mostly because we were too busy spending money on expensive bits of entertainment before) not only has made up for her salary, but we're actually saving more too.
The cool thing about this approach is how nicely it works with compound interest.
Live like a college kid for the 5 years after you leave college, and I defy you not to put $10k per year into the market. Fresh out of school with my $32k salary, I'd regularly find month-old paychecks lying around undeposited because I simply didn't need the money to support my cheap apartment, used car, and 10lb sack of potatoes.
With nowhere for your money to go but the market, you quickly discover what 10%/year (or even 5% per year) does to a stack of money. Eventually it's making more on its own than you're putting in. Financial security for life, sorted by age 30.
Every time I read an article like this, I think of all the people I know who are well off, yet appear to be miserable. Then I want to share with them this old wisdom from "The Ethics of the Fathers":
"Who is wise? One who learns from every man."
"Who is strong? One who overpowers his inclinations."
This reminds me of an HN comment from a few months ago. It was something like... "Need more money can usually be replaced with need less stuff"
Edit: I found the comment: 'I bet that 9 times out of 10, "I need more money" should really be rephrased as "I need less stuff"'. http://news.ycombinator.com/item?id=2025234
This is just a tangent, but I wonder whether Robert Gibbs really quit at least partly because his salary was too low. (That’s what Obama’s remark about his departure seems to suggest.)
I don’t think you become Press Secretary of the White House because of the salary, you become Press Secretary because you are passionate about it. (For all you cynics out there: replace “passionate about it” with “power hungry”.)
You certainly don’t have to feel ashamed or poor at cocktail parties if you are the Press Secretary of the White House, I would much rather suspect that you don’t actually have time to go to any cocktail parties and that that could be the much larger problem.
Press Secretary is not a job you have forever (eight years seem like the natural maximum) and I’m certain that you have great chances of landing a highly paid job after that.
Perhaps it's because the definition of "rich" that they would need to feel is one where they'd never have to work again if they didn't want to.
The article points out an annual income of $172,000 as being rich, but by implication, these people still have to work for their money. Therefore probably don't feel "rich"
If they could maintain that income or even half that income in perpetuity without working. If they could spend their days doing just what they want and not what they have to then maybe that's what feels rich?
This article wonders why the rich are getting richer and the answer is compound interest.
Having $1 million in the bank will reliably generate between $25k and $50k per year.
Having $2 million in the bank will reliably generate between $50k and $100k per year.
Having $3 million in the bank will reliably generate between $100k and $150k per year.
So someone with $3 million in savings and still working their 200k job will be making nearly the same amount as their savings is generating. If they keep working and don't spend their principle, they'll have another million in about 5-6 years.
For someone putting 30k away each year in savings, it will take them decades to reach the first $1 million.
This is why the rich get richer. It's not about salary. It's about savings and investment.
Make $100K, meet basic expectations for standard of living with $20K to spare = feel comfortably well-off
Make $100K, do not meet basic standard of living expectations = feels poor.
Have enough money to blow a few million investing in startups just for the learning experience = rich.
The catch is that living near people making more is likely to raise your standard of living expectations (but does not have to). Also, the cost of a particular standard of living is determined (roughly) by the market rather than its worth to you. For example living in Cambridge, MA costs more than living in Hudson, MA, whether you actually value that or not.
I definitely noticed this in grad school. For a few years, I had a $30k fellowship, when the normal stipend, which all my friends made (and which I made the other years) was around $20k. I felt like I had more money than I could reasonably spend, saved about $5k of the excess, and splurged about $5k on what seemed to me to be luxury items, like fancy beer and trips. From my perspective I was, if not wealthy, at least well-off. Supposedly $30k is on the lower end of lower-middle-class, but it didn't feel like it. (Granted, it also helps that I don't have kids.)
I believe there have been psych studies to this effect. Asked whether you'd rather make 110k when everyone else is making 80k, vs. 140k when everyone else is making 200k -- assuming prices remain constant, which is economically dubious, of course, but hey, it's a thought experiment -- and most people choose the former.
"But the most the exciting finding was the influence of another factor: how the rival player was doing. Activation was at its highest for those players who got the right answer while their co-player got it wrong. But participants who got more money than their co-players showed much stronger activation in the "reward centre" than when both received the same amount."
This has a lot of interesting implications. For one, the classical homo-economimus model of humans as rational utility maximizers is further called into question. For two, it highlights the hedonic treadmill effect. No matter how much you earn, as long as you're comparing yourself to someone who makes more, you're unlikely to be satisfied.
I can sum this up for me and my family (fyi...we live quite meekly):
We don't feel "rich" because if something catastrophic happens (one of us loses our job, major health problem, really bad turn in economy again) we are not insulated despite all of our savings for the rest of our lives. We have, perhaps, 2-4 years ability to stave of bankruptcy and the lot. That number is different for everyone, but the "rich" don't think about that, ever. They are set and will always be set unless _THEY_ do something stupid with their money.
Bottom line: I am not rich because I am not in control of the rest of my life still. I am dependent on the system and the people who actually control the system still. "rich" and "money" have always been about freedom to me. Because I am not truly free, I am not rich.
What surprises me is that there seems to be no upper limit for lifestyle expenses. To me it seems certain lifestyle choices are more of a liability than a bonus. A bigger house needs more cleaning, a cleaning lady, probably also a gardener. More cars require more maintenance, parking space, taxes. Yachts, OK, I don't know - they require personnel, but maybe they are nice to have. Then again, probably it is possible to rent them for the odd occasion?
I think from a certain comparatively low threshold, my worry would be how to use my money to make the world a better place, not how to get a even more luxurious lifestyle.
Or, to widen the perspective, why doesn't an American making $30,000 feel rich when he is above the 90% percentile for the world?
(And he feels wretchedly poor because he has to have a roommate and use public transportation.)
Reminds me of the Chicago professor who was complaining about repealing the tax breaks for "rich" people[1] (his household income was in the 250k range). As a bunch of commentators pointed out he felt like he was just scraping by because he was attempting to live the life of someone earning 350k+ not the life of someone earning 150k+.
A growing trend is how quickly the income of those at the top is increasing relative to those at the bottom[2] and the disconnect this brings[3]. At what point does someone earning minimum wage stop and think "How exactly is someone working in a hedge fun worth tens of thousands of me in yearly salary alone?". Would they push for legislative solutions? Can you even use something as blunt as the tax code for this?
I posted the article here and I find that many comments are missing the point. Catherine Rampell writes that the exponential growth of the global wealth for the super-rich oligarchy, especially in the last decades made the comparison with them so much more difficult. This all at the backdrop of the devastating recession that thrown many productive people into the object poverty. I might add that the media and the internet is full of the ubiquitous stories about the super-rich so they are at the same time everyone's neighbor and no ones neighbor.
The amount of money I have left over at the end of the month makes a much bigger difference in whether I feel rich than the number on my paycheck. But, we're trained and encouraged by our culture to spend up to and beyond our means no matter what our income. Even the "responsible" rules of thumb like buying a house for 3x annual income or having debt payments of 40% of income encourage us to increase our expenses as our incomes increase.
It's easy to see why somebody making $200,000 wouldn't feel rich if they own a $600,000 house. Their mortgage costs almost $50,000/year! Design your life to maximize the money in your pocket and you'll feel much richer.
Why did they put a non-linear x-axis on that graph? From 0% to 80% of income is only the first 40% of x-axis space! Then tick marks (with equal physical spacing) change from 5% to 1% increments.
I disagree with this. While I'm not saying I was ever "poor" (as I never felt poor), I started out working for $5.15/hour, and sleeping on a friend's couch while I tried to find an apartment I could afford. Then I moved into a boston apartment that was $1000/month for three of us. It was falling over, and I ate homemade burritos every single day because beans and tortillas were cheap.
Now I own a big house, drive nice cars, and earn a lot more than back then, but I still don't feel rich. The rise in income over 12 years, was more or less matched by a rise in lifestyle and spending. Don't get me wrong, life is more comfortable, and I'm able to do lots of things I want to do that weren't possible before, but I still don't feel "rich" (I do feel lucky and blessed, etc...). I hate my 1/2 working 30 year old electric cooktop. I want a new gas cooktop, but that means new counter tops, and running a gas line, and if I'm doing new counter tops I should probably re-do the cabinets at the same time, and if I'm doing those, I should do the floors, and if I'm doing cabinets I should really replace the wall oven and fridge while I'm at it. But I don't have that kind of money! And I still have to bust my ass every day at work. So until you're really "RICH", and you still have to set the alarm and work every day, and you have things you want, but can't afford, you don't "feel" "rich".
Is this a healthy well adjusted mindset, probably not. Just pointing out that slow acclimation can make you feel like you really haven't moved much, regardless how far you've travelled. I've lost 35+ lbs in the last 3 years, but I don't feel "thin".
People only look up when it comes to wealth, everyone who makes less money than you might as well not exist.
I read an article once about what well-off people (net worth in excess of $5 million) consider to be rich. The consensus was about $50 million liquid net worth- Basically the point where you can realistically consider owning private jets and yachts so there isn't any shit to be jealous of your neighbors about anymore (except maybe a bigger yacht).
Interesting take on rich vs uber rich. I grew up in an area with a lot of that 90th-95th percentile group but everyone seemed to believe they were "upper middle" class. The "rich" people were the few at the very top making millions more.
A family making 250k/year is doing very well, but when they look at someone making a few million - they don't group themselves in that category.
I also wonder if this is reinforced by the numerous 'reality' tv shows that document the uber rich lifestyle. Even in a town full of people that are well above average, no one is living like those top 1-2% of earners and therefore don't consider themselves rich.
This topic always brings me back to the same place: As a culture, when it comes to the "rich" and the "wealthy" we tend to focus almost exclusively on revenue (income) and assets (stuff). Anyone who looks at a simple income statement and balance sheet knows that there is a lot more to the equation.
If someone makes $500k and spends $500k, not only is their net income $0, they have added nothing to their net worth. Conversely, someone who makes $75k and spends $30k has a positive net income of $45k and adds $45k to their net worth. However, because we don't have nearly as much insight into the income statements and balance sheets of our neighbor, we compare our "income" and "stuff" to their "income" and "stuff" (as opposed to what we really should be comparing which is net income and net worth).
I'm also reminded of a great book by P.T. Barnum called The Art of Money Getting (http://manybooks.net/titles/barnumptetext05barnm10.html). It was published in 1880, but it's amazing how relevant it still is. He tells some great stories about life, money, and wealth. This is one of my favorites:
"I know a gentleman of fortune who says, that when he first began to prosper, his wife would have a new and elegant sofa. "That sofa," he says, "cost me thirty thousand dollars!" When the sofa reached the house, it was found necessary to get chairs to match; then side-boards, carpets and tables "to correspond" with them, and so on through the entire stock of furniture.
When at last it was found that the house itself was quite too small and old-fashioned for the furniture, and a new one was built to correspond with the new purchases; "thus," added my friend, "summing up an outlay of thirty thousand dollars, caused by that single sofa, and saddling on me, in the shape of servants, equipage, and the necessary expenses attendant upon keeping up a fine ’establishment,’ a yearly outlay of eleven thousand dollars, and a tight pinch at that: whereas, ten years ago, we lived with much more real comfort, because with much less care, on as many hundreds.
The truth is," he continued, "that sofa would have brought me to inevitable bankruptcy, had not a most unexampled title to prosperity kept me above it, and had I not checked the natural desire to ’cut a dash’."
People between the 70th and 90th percentiles feel squeezed by a lot of expenses that cost less for those lower on the scale, due to price discrimination, progressive taxation, subsidies, etc. College tuition is a good example. It's high enough to take a big chunk of the income of a 70-90th percentile earner, but it doesn't hurt as much to someone higher (spare change!) or lower (financial aid) on the income scale.
[+] [-] narrator|15 years ago|reply
Now there are four ways that I am aware of to make more than about 200k/year.
1. Be an investor/entrepreneur in your own company.
2. Have stock in a company that IPOs or get bought.
3. Work in high finance at a well performing hedge fund or a maor wall street firm.
4. Be a senior partner in a major law firm or an experienced surgeon in an in-demand specialty. Though you'll still top out at about 500k, at least according to glassdoor.com.
Did I miss any?
[+] [-] kscaldef|15 years ago|reply
Where by "all these people" we mean an extremely small fraction of the population. If I think about things honestly, I'm paid more than almost everyone I interact with regularly. Many of these people aren't lazy or stupid or dropout or what-have-you. They also went to good schools and got good grades and are excellent at what they do; but it turns out that the "brick wall" in their field is a fraction of what it is in the tech industry. So, yes, I know a few people making more than I do, mostly in jobs I don't want to do, with working hours I wouldn't tolerate; but I'm not feeling too sorry for myself.
[+] [-] nostrademons|15 years ago|reply
But to break the 99th percentile - I think that was $342K/year for 99.5th percentile of single filers - you need to take on some risk. Like forgoing your income for a few years to found a company. Or taking on a lower salary and the risk that you'll be laid off in a year and getting a job at a startup. Or putting up your own money to invest in one. Or taking on high-visibility, high-impact projects that may fail - often at the cost of your regular duties - within your day job.
For people whose whole life has been a steady upwards progression, risk is scary. It often looks impossible. And so they're stuck at a point in life where they know people who have vastly more money than them, but they don't understand how or are unwilling to achieve that.
[+] [-] loumf|15 years ago|reply
I bet there are 100s of jobs where the top salaries are over two million. There are very few who can get them, though.
[+] [-] wallflower|15 years ago|reply
Many of the types of businesses we are in could be classified as dull-normal. We are welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers, and paving contractors.
"The Millionaire Next Door"
http://www.bookbrowse.com/excerpts/index.cfm?book_number=242...
[+] [-] loewenskind|15 years ago|reply
[+] [-] bgentry|15 years ago|reply
Obviously there's a small number of people for whom this will happen but I'm pretty sure most corporate execs make >$200k
[+] [-] jhamburger|15 years ago|reply
[+] [-] yummyfajitas|15 years ago|reply
(A variation on 3. You probably won't earn $100 million, but you could definitely earn $1 million. )
6. Become a top performer in entertainment (music, sports, movies).
A fun fact ignored by most people: it isn't just CEO pay that has skyrocketed over the years. Alex Rodrieguez gets $33 million/year, at his peak Babe Ruth got (inflation adjusted) $1.1 million.
[+] [-] andrewparker|15 years ago|reply
[+] [-] callmeed|15 years ago|reply
"The median income for public-university presidents in the 2007-08 academic year was $427,400. The average head of a private university* took home about $100,000 more." [1]
And that's old data.
[1] http://images.businessweek.com/ss/09/02/0216_college_pres/1....
[+] [-] WingForward|15 years ago|reply
[+] [-] dockd|15 years ago|reply
[+] [-] unknown|15 years ago|reply
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[+] [-] unknown|15 years ago|reply
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[+] [-] klbarry|15 years ago|reply
[+] [-] boredguy8|15 years ago|reply
Sometimes I get jealous of people at work who seem to have nicer things. Then a few days later they start to complain about not having money, and I'm reminded that I don't really need a TV, much less a 52-inch what-have-you. Nor do I need to replace my nearly 20 year old car with something newer just because I can. Or more realistically: I don't need to get a new car because someone else I know bought a Z3.
[+] [-] bane|15 years ago|reply
Turns out with her staying at home, working on a startup, and us eating a home-cooked dinner everyday...entertaining ourselves with trips to free museums we never went to before (mostly because we were too busy spending money on expensive bits of entertainment before) not only has made up for her salary, but we're actually saving more too.
Crazy.
[+] [-] jasonkester|15 years ago|reply
Live like a college kid for the 5 years after you leave college, and I defy you not to put $10k per year into the market. Fresh out of school with my $32k salary, I'd regularly find month-old paychecks lying around undeposited because I simply didn't need the money to support my cheap apartment, used car, and 10lb sack of potatoes.
With nowhere for your money to go but the market, you quickly discover what 10%/year (or even 5% per year) does to a stack of money. Eventually it's making more on its own than you're putting in. Financial security for life, sorted by age 30.
[+] [-] edw519|15 years ago|reply
"Who is wise? One who learns from every man."
"Who is strong? One who overpowers his inclinations."
"Who is honorable? One who honors his fellows."
"Who is rich? One who is satisfied with his lot."
[+] [-] bradly|15 years ago|reply
Edit: I found the comment: 'I bet that 9 times out of 10, "I need more money" should really be rephrased as "I need less stuff"'. http://news.ycombinator.com/item?id=2025234
[+] [-] rapind|15 years ago|reply
Happiness = Success / Expectations
[+] [-] unknown|15 years ago|reply
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[+] [-] zyfo|15 years ago|reply
[+] [-] ugh|15 years ago|reply
I don’t think you become Press Secretary of the White House because of the salary, you become Press Secretary because you are passionate about it. (For all you cynics out there: replace “passionate about it” with “power hungry”.)
You certainly don’t have to feel ashamed or poor at cocktail parties if you are the Press Secretary of the White House, I would much rather suspect that you don’t actually have time to go to any cocktail parties and that that could be the much larger problem.
Press Secretary is not a job you have forever (eight years seem like the natural maximum) and I’m certain that you have great chances of landing a highly paid job after that.
[+] [-] AlexC04|15 years ago|reply
The article points out an annual income of $172,000 as being rich, but by implication, these people still have to work for their money. Therefore probably don't feel "rich"
If they could maintain that income or even half that income in perpetuity without working. If they could spend their days doing just what they want and not what they have to then maybe that's what feels rich?
Maybe?
[+] [-] jeremymims|15 years ago|reply
Having $1 million in the bank will reliably generate between $25k and $50k per year.
Having $2 million in the bank will reliably generate between $50k and $100k per year.
Having $3 million in the bank will reliably generate between $100k and $150k per year.
So someone with $3 million in savings and still working their 200k job will be making nearly the same amount as their savings is generating. If they keep working and don't spend their principle, they'll have another million in about 5-6 years.
For someone putting 30k away each year in savings, it will take them decades to reach the first $1 million.
This is why the rich get richer. It's not about salary. It's about savings and investment.
[+] [-] jellicle|15 years ago|reply
Make $100K, live near people making $90K = rich.
Make $100K, live near people making $110K = poor.
[+] [-] Goladus|15 years ago|reply
Make $100K, meet basic expectations for standard of living with $20K to spare = feel comfortably well-off
Make $100K, do not meet basic standard of living expectations = feels poor.
Have enough money to blow a few million investing in startups just for the learning experience = rich.
The catch is that living near people making more is likely to raise your standard of living expectations (but does not have to). Also, the cost of a particular standard of living is determined (roughly) by the market rather than its worth to you. For example living in Cambridge, MA costs more than living in Hudson, MA, whether you actually value that or not.
[+] [-] _delirium|15 years ago|reply
[+] [-] msluyter|15 years ago|reply
Here's another study to that effect: http://www.telegraph.co.uk/science/science-news/3315638/Rela...
"But the most the exciting finding was the influence of another factor: how the rival player was doing. Activation was at its highest for those players who got the right answer while their co-player got it wrong. But participants who got more money than their co-players showed much stronger activation in the "reward centre" than when both received the same amount."
This has a lot of interesting implications. For one, the classical homo-economimus model of humans as rational utility maximizers is further called into question. For two, it highlights the hedonic treadmill effect. No matter how much you earn, as long as you're comparing yourself to someone who makes more, you're unlikely to be satisfied.
[+] [-] asmithmd1|15 years ago|reply
make $100k, spend $85k = happiness
make $100k, spend $101k = misery
[+] [-] fingerprinter|15 years ago|reply
We don't feel "rich" because if something catastrophic happens (one of us loses our job, major health problem, really bad turn in economy again) we are not insulated despite all of our savings for the rest of our lives. We have, perhaps, 2-4 years ability to stave of bankruptcy and the lot. That number is different for everyone, but the "rich" don't think about that, ever. They are set and will always be set unless _THEY_ do something stupid with their money.
Bottom line: I am not rich because I am not in control of the rest of my life still. I am dependent on the system and the people who actually control the system still. "rich" and "money" have always been about freedom to me. Because I am not truly free, I am not rich.
Make sense?
[+] [-] Tichy|15 years ago|reply
I think from a certain comparatively low threshold, my worry would be how to use my money to make the world a better place, not how to get a even more luxurious lifestyle.
[+] [-] eggoa|15 years ago|reply
[+] [-] duke_sam|15 years ago|reply
A growing trend is how quickly the income of those at the top is increasing relative to those at the bottom[2] and the disconnect this brings[3]. At what point does someone earning minimum wage stop and think "How exactly is someone working in a hedge fun worth tens of thousands of me in yearly salary alone?". Would they push for legislative solutions? Can you even use something as blunt as the tax code for this?
[1] His blog posts were taken down but you can see commentary: http://www.huffingtonpost.com/2010/09/21/todd-henderson-rich... http://www.theatlantic.com/national/archive/2010/09/in-defen... [2]http://www.forbes.com/2008/04/30/ceo-pay-historic-lead-bestb... - for reference $1 in 1989 is worth around $1.70 now so inflation does not account for a near 6x increase. [3]http://www.theatlantic.com/magazine/archive/2011/01/the-rise...
[+] [-] pointillistic|15 years ago|reply
[+] [-] jtbigwoo|15 years ago|reply
It's easy to see why somebody making $200,000 wouldn't feel rich if they own a $600,000 house. Their mortgage costs almost $50,000/year! Design your life to maximize the money in your pocket and you'll feel much richer.
[+] [-] chris_atwood|15 years ago|reply
[+] [-] seb|15 years ago|reply
[+] [-] modoc|15 years ago|reply
Now I own a big house, drive nice cars, and earn a lot more than back then, but I still don't feel rich. The rise in income over 12 years, was more or less matched by a rise in lifestyle and spending. Don't get me wrong, life is more comfortable, and I'm able to do lots of things I want to do that weren't possible before, but I still don't feel "rich" (I do feel lucky and blessed, etc...). I hate my 1/2 working 30 year old electric cooktop. I want a new gas cooktop, but that means new counter tops, and running a gas line, and if I'm doing new counter tops I should probably re-do the cabinets at the same time, and if I'm doing those, I should do the floors, and if I'm doing cabinets I should really replace the wall oven and fridge while I'm at it. But I don't have that kind of money! And I still have to bust my ass every day at work. So until you're really "RICH", and you still have to set the alarm and work every day, and you have things you want, but can't afford, you don't "feel" "rich".
Is this a healthy well adjusted mindset, probably not. Just pointing out that slow acclimation can make you feel like you really haven't moved much, regardless how far you've travelled. I've lost 35+ lbs in the last 3 years, but I don't feel "thin".
[+] [-] jhamburger|15 years ago|reply
I read an article once about what well-off people (net worth in excess of $5 million) consider to be rich. The consensus was about $50 million liquid net worth- Basically the point where you can realistically consider owning private jets and yachts so there isn't any shit to be jealous of your neighbors about anymore (except maybe a bigger yacht).
[+] [-] jkaufman|15 years ago|reply
A family making 250k/year is doing very well, but when they look at someone making a few million - they don't group themselves in that category.
I also wonder if this is reinforced by the numerous 'reality' tv shows that document the uber rich lifestyle. Even in a town full of people that are well above average, no one is living like those top 1-2% of earners and therefore don't consider themselves rich.
[+] [-] r0h4n|15 years ago|reply
[+] [-] jond2062|15 years ago|reply
If someone makes $500k and spends $500k, not only is their net income $0, they have added nothing to their net worth. Conversely, someone who makes $75k and spends $30k has a positive net income of $45k and adds $45k to their net worth. However, because we don't have nearly as much insight into the income statements and balance sheets of our neighbor, we compare our "income" and "stuff" to their "income" and "stuff" (as opposed to what we really should be comparing which is net income and net worth).
I'm also reminded of a great book by P.T. Barnum called The Art of Money Getting (http://manybooks.net/titles/barnumptetext05barnm10.html). It was published in 1880, but it's amazing how relevant it still is. He tells some great stories about life, money, and wealth. This is one of my favorites:
"I know a gentleman of fortune who says, that when he first began to prosper, his wife would have a new and elegant sofa. "That sofa," he says, "cost me thirty thousand dollars!" When the sofa reached the house, it was found necessary to get chairs to match; then side-boards, carpets and tables "to correspond" with them, and so on through the entire stock of furniture.
When at last it was found that the house itself was quite too small and old-fashioned for the furniture, and a new one was built to correspond with the new purchases; "thus," added my friend, "summing up an outlay of thirty thousand dollars, caused by that single sofa, and saddling on me, in the shape of servants, equipage, and the necessary expenses attendant upon keeping up a fine ’establishment,’ a yearly outlay of eleven thousand dollars, and a tight pinch at that: whereas, ten years ago, we lived with much more real comfort, because with much less care, on as many hundreds.
The truth is," he continued, "that sofa would have brought me to inevitable bankruptcy, had not a most unexampled title to prosperity kept me above it, and had I not checked the natural desire to ’cut a dash’."
[+] [-] bm98|15 years ago|reply