‘The Millionaire Next Door’ is a Myth to Most Millennials

[gerntz]

Parents were born/raised in low middle class in Depression (He was 1/6, she 1/13.), Dad had 8th Grade education, Mom HS grad. Got married with nothing while he was in service in WW2. He was on disability from age 57, never making more than $30K/yr even working second job. Mom worked part-time till we kids were raised & retired from a city clerk's job at 65. Now how could they have left an estate of $600K in their 80's (Which they did.)?

 

[daylatedollarshort]

Some things are simply more expensive. A recent Kaiser analysis found that families' health care costs have risen twice as fast as wages and three times faster than inflation over the last decade. Even for families with employer insurance premiums and out-of-pocket costs reached $7,726 in 2018.

 

[armor99]

What do I think? I think the world is full of possibilities to those who want to claim it.
Life is not safe, or predictable, sanitized for your protection, or even fair as my mother used to say. However, the beauty of Capitalism, is that it is the most fair, to most people, most of the time.
Consider this. When I was in HS there were no cell phones under $1000. Now, almost anyone can afford one. Which also means that anyone has the compendium sum of human knowledge in their pocket. This is something that 50 years ago, even the wealthiest could not have. So with that much technology available to educate yourself so cheaply. What excuse would you really have to NOT try to do better for yourself?
In my opinion from what I have seen so far, is that people who are chronically poor, or chronically unemployed, are contributing greatly to their own misfortune. Good luck and bad visits us all, and yet at my poker table on more than one occasion I have seen a pair of twos defeat an ace/king.

 

[JackJester]

Here’s a recipe to be a millionaire:
1) Be DINKS. Of course, you can reach 1M with kids, but it just takes longer ($250K to raise a kid to age 18).
2) Work as much OT as you can when Mega Corp allows it.
3) Always max out to the company matching 401K. Free $
4) Work to pay off your mortgage in 15 years vs 30. Do smart refinancing and pay a little extra each month.
5) Cook most of your meals. Including making your morning coffees. You’ll eat much healthier and save lots of $.
6) Pay most of your expenses on your credit card, and pay the balance off each month so there is 0 interest owed. Plus, you can earn airline miles to allow for cheaper vacations.
7) Monitor and track all expenses in a spreadsheet so you know where you're spending your $; especially when you start to focus on FIRE ...FIRECALC is your friend

It worked for us. You don’t have to LBYM, you can 'Live At Your Means’ by taking advantage of the cost savings that exist in the world. And you can still have fun, take vacations, eat out every now and then, and buy some toys. Sure, we were lucky enough to go to college in the late 80s when costs were much cheaper than today, but we also worked hard and qualified for free Masters degrees and small stipends (a few years in cockroach infested cheap apartments, but worth it in the long run).

 

[gwraigty]

Here’s a recipe to be a millionaire:
1) Be DINKS. Of course, you can reach 1M with kids, but it just takes longer ($250K to raise a kid to age 18).

It'd be interesting to know how many people have actually spent $250K to raise a kid to age 18. I've seen that figure quoted in the media often. Our 2 kids, born in the mid to late 90's, sure didn't cost us $500K. For half their lives, we didn't even have that kind of money.

 

[Philliefan33]

It'd be interesting to know how many people have actually spent $250K to raise a kid to age 18. I've seen that figure quoted in the media often. Our 2 kids, born in the mid to late 90's, sure didn't cost us $500K. For half their lives, we didn't even have that kind of money.

The articles I’ve read consider direct costs and lifestyle choices.

Besides the cost of food, clothing, and childcare, there’s the decision to buy a house with more than one bedroom in a good school district. Higher mortgage payments, higher RE taxes. Then you want/ need a different vehicle or two: don’t be driving the kids around in your beater 14-yr old car that “usually” starts.

$250K over 18 years sounds like a lot, but when you consider its $1200/month it sounds more plausible. My husband would say we spent half of that on hot water & electricity when our girls were teens. I image feeding a teenage boy isn’t cheap (I remember watching in amazement as my nephew cooked 12 eggs for breakfast for him and his two brothers).

It is not necessary to spend $250K per kid, but I bet we at least came close. Not counting college costs— which for us was almost $200K each.

Damn those kids cost us a lot of money! Good thing we love them so much.

 

[scrabbler1]

It reminded me of the SNL sketch.

https://youtu.be/ATTMB4gH3sU

Funny bit. I wonder if Joseph Sternberg, whose book he was discussing on a recent C-Span2 segment, saw it while he was writing his book.

https://www.amazon.com/Theft-Decade-Boomers-Millennials-Economic/dp/1541742362

"The Theft of a Decade: How the Baby Boomers Stole the Millennials' Economic Future"

 

[Mmm Rrr]

It'd be interesting to know how many people have actually spent $250K to raise a kid to age 18.

Another factor that contributes to the real cost of raising a child is that one or both parents may take time off work and/or make less aggressive career moves because of the parenting role. I took off 2.5 years when DS was small which was over $150K less income, less 401k contributions, and required some career catch-up when I went back.

 

[dirtbiker]

It'd be interesting to know how many people have actually spent $250K to raise a kid to age 18. I've seen that figure quoted in the media often. Our 2 kids, born in the mid to late 90's, sure didn't cost us $500K. For half their lives, we didn't even have that kind of money.

I also think the quarter million per kid is probably pretty accurate. Like Philliefan said above, it's the costs that you may not see as directly child-related that really add up. The bigger home, possibly bigger car, more expensive vacations, etc. Plus add in childcare costs, additional food, clothing, school activity/sports related costs, additional healthcare/health insurance costs, etc.

I also think the difference between no children and having one kid is probably going to be the greatest, and then smaller costs for each additional kid.

My four kids cost me a lot... But the cost is totally worth it. But I also understand why people wouldn't want to have children due to the costs associated with them.

 

[scrabbler1]

Good list, JackJester. I have a few small tweaks to add.


1) Be DINKS. Of course, you can reach 1M with kids, but it just takes longer ($250K to raise a kid to age 18). Or be a SINK, like me. The "NK" part is the part that counts.

2) Work as much OT as you can when Mega Corp allows it. I was on a straight salary most of my working years, so no paid OT possible.

3) Always max out to the company matching 401K. Free $ agreed.

4) Work to pay off your mortgage in 15 years vs 30. Do smart refinancing and pay a little extra each month. I did a refi in 1992 which, along with the booming 1990s markets, enabled me to pay it off in 9 years.

5) Cook most of your meals. Including making your morning coffees. You’ll eat much healthier and save lots of $. agreed, although I am not a coffee drinker.

6) Pay most of your expenses on your credit card, and pay the balance off each month so there is 0 interest owed. Plus, you can earn airline miles to allow for cheaper vacations. Paying the balance in full each month is the key part.

7) Monitor and track all expenses in a spreadsheet so you know where you're spending your $; especially when you start to focus on FIRE ...FIRECALC is your friend I didn't hear of FIRECALC until after I ERed. But the monitor and spreadsheet parts are spot on.

 

[FIREflower]

The articles I’ve read consider direct costs and lifestyle choices.

Besides the cost of food, clothing, and childcare, there’s the decision to buy a house with more than one bedroom in a good school district. Higher mortgage payments, higher RE taxes. Then you want/ need a different vehicle or two: don’t be driving the kids around in your beater 14-yr old car that “usually” starts.

I'm new around here and noticing this assumption a lot. Our two cars are 15 and 16 years old respectively, and are reliable. We drive both nearly every day. If a car isn't reliably starting then it's about a $100 fix to replace the starter and fairly easy to DIY, so maybe another $100 if you get it done at a shop. Starters tend to go out slowly so you would know it's going out and it's unlikely to actually leave you stranded unless you've been ignoring the warning signs. But if you want to never experience the scare of it not starting on the first try you can proactively replace it according to manufacturer's recommendations once you hit the specified mileage.

I know that's just an example, but I don't see how people are connecting older vehicles = unreliable unless they simply aren't maintaining them and replacing any part that begins to wear out. One exception is older hybrids, which do die suddenly when the batteries go (which, again, you can proactively replace if you'd rather). Otherwise, take care of your car and it will take care of you.

 

[Lawrencewendall]

I've been tracking my lifetime earnings to calculate SS. In my 21 year career in the Army, I only made a total of 555k. I'm sure raising my 2 DSs cost a lot less than that. We were living paycheck to paycheck even as an Enlisted moving to Warrant Officer.

 

[kgtest]

I'm new around here and noticing this assumption a lot. Our two cars are 15 and 16 years old respectively, and are reliable. We drive both nearly every day. If a car isn't reliably starting then it's about a $100 fix to replace the starter and fairly easy to DIY, so maybe another $100 if you get it done at a shop. Starters tend to go out slowly so you would know it's going out and it's unlikely to actually leave you stranded unless you've been ignoring the warning signs. But if you want to never experience the scare of it not starting on the first try you can proactively replace it according to manufacturer's recommendations once you hit the specified mileage.

I know that's just an example, but I don't see how people are connecting older vehicles = unreliable unless they simply aren't maintaining them and replacing any part that begins to wear out. One exception is older hybrids, which do die suddenly when the batteries go (which, again, you can proactively replace if you'd rather). Otherwise, take care of your car and it will take care of you.

I agree. I still have the truck I went to my high school prom in... 18 years ago. This is REALLY uncommon for a guy my age today. I bought truck from dad, he bought back from me, i bought back from him. At no point in our 18 years were we like maybe we should sell this.

Plan on driving my current truck right into FIRE 12 to 15 years from now and its 5 years old.

 

[dirtbiker]

I'm new around here and noticing this assumption a lot. Our two cars are 15 and 16 years old respectively, and are reliable. We drive both nearly every day. If a car isn't reliably starting then it's about a $100 fix to replace the starter and fairly easy to DIY, so maybe another $100 if you get it done at a shop. Starters tend to go out slowly so you would know it's going out and it's unlikely to actually leave you stranded unless you've been ignoring the warning signs. But if you want to never experience the scare of it not starting on the first try you can proactively replace it according to manufacturer's recommendations once you hit the specified mileage.

I know that's just an example, but I don't see how people are connecting older vehicles = unreliable unless they simply aren't maintaining them and replacing any part that begins to wear out. One exception is older hybrids, which do die suddenly when the batteries go (which, again, you can proactively replace if you'd rather). Otherwise, take care of your car and it will take care of you.

Because they are less reliable than new cars. On average, a new car is FAR more reliable than an older car. It just is. Parts wear out. Not all parts wear out slowly and not all parts show accurate signs of wear before failing, so you can't just preemptively replace all worn parts to avoid breakdown. Now I'm not saying that you should only drive new cars. I think keeping cars for many years makes smart financial sense. I'm just saying that it's not always as simple as you're making it out to be.

I've been tracking my lifetime earnings to calculate SS. In my 21 year career in the Army, I only made a total of 555k. I'm sure raising my 2 DSs cost a lot less than that. We were living paycheck to paycheck even as an Enlisted moving to Warrant Officer.

It costs $250,000 in today's dollars. If you spent 21 years in the military and made it into the warrant officer ranks, you definitely made FAR more than $555k if you adjust for inflation. A married private E1 with less than two years in service makes about $25k per year before taxes (which would be roughly 550k over 21 years). I suspect you enlisted a few years ago?

 

[Jeffman52]

A Triple A (AAA) membership is pretty cheap and can help alleviate any apprehension of being stranded.

We drive cars until the tires fall off and did so even when the kids were small. In all those years we were never stranded with a broken down vehicle. Since the kids have grown up and left the house, I had one dead battery at the airport when I picked up my car after a flight (AAA sent someone out and jump started it).... hmmm yep that's it.

Both my DS and DD drove my 2002 F150 when they were in highschool. Granted it was newer then...but I still drive it today.

My DD is 28 and drives a 2004 CRV every day (we handed it down to her)
My DS is 27 and drives a 2007 Nissan Xterra that he bought used.

That's not to say there weren't repairs but I always knew when the vehicle had some kind of issue and took it in to be repaired or repaired it myself.

 

[gwraigty]

I also think the quarter million per kid is probably pretty accurate. Like Philliefan said above, it's the costs that you may not see as directly child-related that really add up. The bigger home, possibly bigger car, more expensive vacations, etc. Plus add in childcare costs, additional food, clothing, school activity/sports related costs, additional healthcare/health insurance costs, etc.

I also think the difference between no children and having one kid is probably going to be the greatest, and then smaller costs for each additional kid.

My four kids cost me a lot... But the cost is totally worth it. But I also understand why people wouldn't want to have children due to the costs associated with them.

It's a YMMV thing, for sure. No childcare costs for us. What, I was supposed to feed them? Now you tell me!

 

[HI Bill]

You don’t have to LBYM, you can 'Live At Your Means’ by taking advantage of the cost savings that exist in the world. And you can still have fun, take vacations, eat out every now and then, and buy some toys.

I agree with all of your points, except the assertion that you don't have to LBYM. By definition, if you live at your means, you're spending all of your income, and not saving anything. Cost savings alone may help you buy more goods and services (a la my wife), but they don't directly help you save $!

I balanced LBYM, and spending on vacations, dive travel, buying sports cars, etc. But I paid of loans as quickly as possibly, and didn't over-buy with regards to housing, cars (well, not too much), etc. I also paid $0 in interest and penalties to CC companies.

 

[karen1972]

I've never bought into the $250k/kid except when you are talking to people making $100k/yr.

Most people are not living the lifestyles of the rich and famous. This means, "day care" is really a family member or friend that babysits. Cars run well but have a lot of miles on them. The house is a fixer upper, many small towns you can pick them up sub $100k. Sports are done on the cheap with fund raisers. Vacations are camping or similar. Clothes you are better off getting at goodwill or similar as they are going to grow out of them in 2 seconds anyway. You grow a lot of food, you hunt/fish for meat, and that keeps the grocery bill under control.

Sure you can be like a friend and save $400k for her kids college fund, take him to Europe for 4 weeks every summer, sign him up for space camp, robotics camp, coding camp, etc, and pay for private lessons for a myriad of things. Throw the elaborate birthday parties, give your kid a new car because well he can't drive your Tesla, etc... you can do all these things but its not "normal", its great that they can do that for their kid, but it is far from what most people in America do.

 

[FIREchief]

However, I don't think anyone can become a millionaire. Many people have disabilities, addictions, mental health issues, brain damage from lead poisoning, car accidents, aging parents that need help, grew up in foster care and became homeless when they aged out, war vets with PTSD, etc. where the deck is stacked against them from an early age.

All good points. I would add divorce, awful financial decisions and just plain bad luck.

 

[JoeWras]

Most of us (at least those over 50) grew up in a time when even new cars didn't reliably start. Or vapor locked. Or had tons of flats on those glorious bias ply tires. Etc.

It was an adventure of sorts. I remember a few times walking down the street with mom to find a pay phone because something happened with the damn car again.

There's no risk in life anymore. And young parents a paying a lot for it. Lock the kids up in the house. Take them to their safe activities in the reliable AC-bubbled, under 3 year old SUV. Don't expose them to bees, or for god's sake, peanut butter. Better make sure that car is new because if you break down, there's sure to be some imminent life threatening disaster.

Edit: sounding old. Get Off My Lawn!

 

[FIREchief]

I know or know about many millennial's because my daughter is 28 and most of the people I know have kids in the same age group. The vast majority are doing quite well. More than 50% have jobs paying well over $100K per year.

How do you know how much money your friends' kids make?

 

[Markola]

Good list, JackJester. I have a few small tweaks to add.


1) Be DINKS. Of course, you can reach 1M with kids, but it just takes longer ($250K to raise a kid to age 18). Or be a SINK, like me. The "NK" part is the part that counts.

2) Work as much OT as you can when Mega Corp allows it. I was on a straight salary most of my working years, so no paid OT possible.

3) Always max out to the company matching 401K. Free $ agreed.

4) Work to pay off your mortgage in 15 years vs 30. Do smart refinancing and pay a little extra each month. I did a refi in 1992 which, along with the booming 1990s markets, enabled me to pay it off in 9 years.

5) Cook most of your meals. Including making your morning coffees. You’ll eat much healthier and save lots of $. agreed, although I am not a coffee drinker.

6) Pay most of your expenses on your credit card, and pay the balance off each month so there is 0 interest owed. Plus, you can earn airline miles to allow for cheaper vacations. Paying the balance in full each month is the key part.

7) Monitor and track all expenses in a spreadsheet so you know where you're spending your $; especially when you start to focus on FIRE ...FIRECALC is your friend I didn't hear of FIRECALC until after I ERed. But the monitor and spreadsheet parts are spot on.

Good list and I offer a friendly amendment: Start saving and investing as early as possible so that the power of compounding can have maximum effect. DW and I (DINKS) started when I was 27. Our careers have been spent in nonprofit orgs, so no stock options or pensions. Now I’m 53 and we’re at $1.8M.

 

[Rianne]

Here's a link to the unemployment rate, GDP growth and inflation since 1929. I found this interesting since unemployment was 10.8% when I graduated from college. I found a job and worked my tail off.



https://www.thebalance.com/unemployment-rate-by-year-3305506


There are other factors that make Millennials nervous about FIRE, fewer/no pensions, SS, safety nets, HC but employment?

And, we are DINKS and have paid property taxes that support public schools (for 30+ years). Never complained about that. I've lost friends over the years to having kids, totally understand. Your kids come first. But, do not complain to me about the cost of kids. I'll take bragging about your kids success (truly happy for them). When your kid lives at home until they're 30, not interested. I do believe it is not the Millennials fault if they sponge off their parents. Parents allow this. It is totally OK, provided the parents do not complain to me/DH about the cost of their kids.

 

[pj.mask]

It'd be interesting to know how many people have actually spent $250K to raise a kid to age 18. I've seen that figure quoted in the media often. Our 2 kids, born in the mid to late 90's, sure didn't cost us $500K. For half their lives, we didn't even have that kind of money.

Well, by age 5 we have spent about $108k on childcare alone. Hard to imagine that housing upgrades, food, etc will only cost $142k. 2nd child related housing upgrade will be +$10k/yr tax and probably $500k either at interest or in lost growth (divided by 2 kids)

We are living well within our means and I’m sure we would scale back if needed. Current question is would we rather go out to fancy places or spend the money on convenience and kids education?

 

[pj.mask]

How do you know how much money your friends' kids make?

If their kid makes >$100k, their friends are probably similar (most of my friends studied same major, worked in same/similar positions, or live in same priced housing).

Having significant budget limitations can hamper a friendship; ‘do you want to go out to this fancy bar to celebrate?’

That being said, would have to be a fool to think that is typical since there are plenty of datasets proving most people don’t earn $100k+