When a Million Dollars was serious wealth

[jayanu]

Once you have enough to cover your expenses, you have won the game, so why keep playing!

Simple. It is fun, it is a hobby! That is what Buffet would say. Though Nouveau rich would like to flaunt their money these types of people do not. For them, it is just a hobby and fun to make money. As you know Buffet still lives in the same home he bought decades ago and drives old car,

 

[2177V]

If you have a well diversified age appropriate balanced $5 million dollar portfolio you don't need to leverage anything. You let it work for you while you sleep.
Just enjoy your $200k per year lifestyle and watch that $5 million grow to $10 million quickly if the markets perform as expected.

The hard part is accumulating that $5 million and not touching it.
Thats why generational wealth disappears very fast.

I can imagine $50 million. But the thread is about $1 million dollars being serious money? It used to be.

My daughter works as a VP at Charles Swrab and most of her clients leverage their assets simply because it is easy money with little risk. Very few of her clients put it in a diversified portfolio because why live on $200K per year when you can live on an income that is much more than $200K. Her clients with $5M plus understand risk and reward and nearly all of them have businesses and/or real estate holdings in addition to their retirement portfolios due to tax reasons. I do not have $5M but I am headed that way: less dependent on the stock market and I have diversified into other asset classes other than stock and bonds. Stocks and bonds only get you started in getting real wealth. I recently opened a small business, I am buying real estate properties, and I am investing into commodities which are not your typical equity and bond investment.

 

[Koolau]

Simple. It is fun, it is a hobby! That is what Buffet would say. Though Nouveau rich would like to flaunt their money these types of people do not. For them, it is just a hobby and fun to make money. As you know Buffet still lives in the same home he bought decades ago and drives old car,

I could kind of see it, when you consider it a game. But I just find dealing with finances to be more of a chore and somewhat stressful. That's why I FIREd, to get away from things like that. Everyone has to do a certain amount of financial planning and execution. I just like keeping it to a minimum. That's why I've set up my AA to be less prone to losses - with the penalty being less upside potential. I'm with WB on the living in the same house and driving an old car. I just don't want to be going to the office when I'm 90! YMMV

 

[jayanu]

I'll survive - somehow!

I always wonder: Where do folks GET that much wealth. I feel "wealthy" just being able to live in a HCOL area. Then I drive past rows of houses that I know are worth from $10MM to 30MM. There are hundreds of them in the Diamond Head district and perched on the hills overlooking Kalaniana'ole HWY. What kind of "j*b" does one need to do to make that kind of money? YMMV

Bingo. A capitalist country gives a chance to own a business. With hard, honest (or for some short-term winner not so honest) and smart work, you make the business create wealth. You can go bust also but the tenacity makes you go. My colleague at Bell labs quit and started his own - sold for $250 million to Nokia. He has a wonderful story of how he learned (the hard way) along the way. As a fact, he is sharing his story with us Bell Labs alumni in November.

Senator Romneys $100+million was in IRA because he used to invest correctly in business bets. He may have socked away a large sum vs peanuts for you and me in SEP IRA (ah, business angle again) and used "loopholes" of future partnership profit buying rundown companies with assets at a low price and fix and sell or divide up the assets.

It is also a lack of education for some. My nephew made a good six-figure income as an employee of a MegaCorp but had no idea that he could have an IRA also. Same with a doctor that I know who makes $600k/year - working at VA - and wrongly arguing with me that if you have TSP (govt version of 401k ) then you can not have an IRA! The same nephew quit the job and started his business but had no clue of SEP IRA!

Similarly many do not know that a non-working spouse can also contribute the same amount to IRA as a working spouse and lose out on the growth!

Many high earners think that because of high income they can not have an IRA. Correct that you can not have a deductible IRA but you CAN have an IRA and then use backdoor Roth conversion!

Many get wrapped in making money vs. growing money.

 

[2177V]

Simple. It is fun, it is a hobby! That is what Buffet would say. Though Nouveau rich would like to flaunt their money these types of people do not. For them, it is just a hobby and fun to make money. As you know Buffet still lives in the same home he bought decades ago and drives old car,

I agree. People who retired and invest passively will likely get dementia. Investing as a hobby keeps me busy and like you stated it can be fun! I get pleasure when I do my homework on an investment and then my investment pays off big time. Like Warren Buffet, I do not live like a king…just comfortable enough to pursue my hobby of looking for business opportunities or real estate purchases which I can flip for a quick profit. Once you understand how to make easy money in businesses and real estate, you become addicted to making easy money. I can make money in a diversified portfolio, but it is not challenging enough for me.

 

[purplesky]

My daughter works as a VP at Charles Swrab and most of her clients leverage their assets simply because it is easy money with little risk. Very few of her clients put it in a diversified portfolio because why live on $200K per year when you can live on an income that is much more than $200K. Her clients with $5M plus understand risk and reward and nearly all of them have businesses and/or real estate holdings in addition to their retirement portfolios due to tax reasons. I do not have $5M but I am headed that way: less dependent on the stock market and I have diversified into other asset classes other than stock and bonds. Stocks and bonds only get you started in getting real wealth. I recently opened a small business, I am buying real estate properties, and I am investing into commodities which are not your typical equity and bond investment.

The thing is that $5 million portfolio eventually will produce much more income than $200k per year. It will grow big time if you allow it.

The S&P 500 year to date is now at 19.91% and my 60/40 Schwab Intelligent portfolio is at 11.77%.
So definitely room for larger withdrawals than 4% if needed during bull markets.

I bought LUV (Southwest Airlines) last week so I am in theory a business owner.
I sold shares of Apple to take some profit. I am a Apple business owner like every other investor on the planet. lol

I also in theory own real estate in my portfolio and I don't have to deal with renters.

The only type of business I would try is a recording studio. Not for profit but for fun with the hope of breaking even. lol

 

[2177V]

I'll survive - somehow!

I always wonder: Where do folks GET that much wealth. I feel "wealthy" just being able to live in a HCOL area. Then I drive past rows of houses that I know are worth from $10MM to 30MM. There are hundreds of them in the Diamond Head district and perched on the hills overlooking Kalaniana'ole HWY. What kind of "j*b" does one need to do to make that kind of money? YMMV

My opinion: people get super wealthy by: (1) inheriting wealth. (2) real estate by using bank money by leveraging your down payment. (3) opening a successful business. IMO being a wage slave do not make enough and a diversified passive portfolio gets you a decent retirement but nothing more except for people who invested in stock shares such as Amazon, Apple or Tesla when those companies first started up.

For example: let’s assume a guy owns a $500K house free and clear. He can borrow $450K or 90% to buy 9 more $500K houses at $50K down and rents the properties to pay the monthly mortgages. If the value of his 9 houses of $4.5M of total value doubles in price on 10 years, then he made $4.5M in equity after only 10 years using $450K of his own money. That is a 10X return on investment in 10 years.

Another example: My wife who is 20 younger than me opened a business with a partner. They split the profits and losses and she used the Apple model of Steve Jobs and his engineer partner. My wife claims that you should always be smarter than your partner…so that you can make all of the major business decisions. She was right. Her business survived the pandemic and now the business is making money without any loan from a bank or a government grant. She has been asked to open many more businesses for other people due to her knowledge and experience. Since I am retired I help her by doing the bookkeeping, taxes and payroll.

 

[RetiredHappy]

What I wonder is not how do people get so much wealth but rather why do some people have the drive to want so much wealth? We are very comfortable and there is nothing that we want that we cannot afford. Our income requirement/spending including taxes is about $200K a year and we have enough assets and income to support our lifestyle. No pension. However we are not going to play the game of leverage and go for high risk returns because we have enough. Having more money does not make us happier and trying to grow wealth is just another stress which we do not need.

 

[Letj]

What I wonder is not how do people get so much wealth but rather why do some people have the drive to want so much wealth? We are very comfortable and there is nothing that we want that we cannot afford. Our income requirement/spending including taxes is about $200K a year and we have enough assets and income to support our lifestyle. No pension. However we are not going to play the game of leverage and go for high risk returns because we have enough. Having more money does not make us happier and trying to grow wealth is just another stress which we do not need.

+1000. I just don’t have it in me to spend time making more. It will just make my heirs richer. There’s nothing I want I cannot have. At times, I ask myself why did I accumulate so much that I can’t or won’t spend. I have everything I need and more and I am ridiculously satisfied so I don’t know what more would do for me except create angst worrying about what to do with it all for fear that my heirs would squander their inheritance.

 

[Koolau]

What I wonder is not how do people get so much wealth but rather why do some people have the drive to want so much wealth? We are very comfortable and there is nothing that we want that we cannot afford. Our income requirement/spending including taxes is about $200K a year and we have enough assets and income to support our lifestyle. No pension. However we are not going to play the game of leverage and go for high risk returns because we have enough. Having more money does not make us happier and trying to grow wealth is just another stress which we do not need.

Enough is enough is what I always say.

My situation is similar to yours (except our numbers are lower). I just don't understand why people continue to play AFTER they've won the game. BUT I do not criticize either. "You do you and I'll do me." "To each, his own." "I can barely run my own life, I'll not try to run someone else's." I could go on - but I won't as YMMV.

 

[2177V]

What I wonder is not how do people get so much wealth but rather why do some people have the drive to want so much wealth? We are very comfortable and there is nothing that we want that we cannot afford. Our income requirement/spending including taxes is about $200K a year and we have enough assets and income to support our lifestyle. No pension. However we are not going to play the game of leverage and go for high risk returns because we have enough. Having more money does not make us happier and trying to grow wealth is just another stress which we do not need.

It really depends on your personality type. Type A people will continue to work because it is in their blood. Type B will stop when they achieve their financial goals. Type A will continue to work and you can see that in most billionaires and CEO who work into their 70’s and 80’s. Both types are happy but they rarely understand each other. I do know that Type A people tend to outlive Type B because their energy helps their overall health. For example, a recent study found out that if you learn a second language, you delay the onset of Alzheimer’s. Type B do not bother learning another language. Another study indicate Type A people are more likely to maintain their diet, weight and overall health. Type A people knows how to manage stress whereas Type B avoids stress. The saying Use it or lose it is likely true.

 

[street]

It really depends on your personality type. Type A people will continue to work because it is in their blood. Type B will stop when they achieve their financial goals. Type A will continue to work and you can see that in most billionaires and CEO who work into their 70’s and 80’s. Both types are happy but they rarely understand each other. I do know that Type A people tend to outlive Type B because their energy helps their overall health. For example, a recent study found out that if you learn a second language, you delay the onset of Alzheimer’s. Type B do not bother learning another language. Another study indicate Type A people are more likely to maintain their diet, weight and overall health. Type A people knows how to manage stress whereas Type B avoids stress. The saying Use it or lose it is likely true.

WOW! Interesting!! Do you have any references to that science/study?

 

[FREE866]

People who retired and invest passively will likely get dementia.

Hmmm...so I'm likely to get dementia?

 

[youbet]

What I wonder is not how do people get so much wealth but rather why do some people have the drive to want so much wealth? We are very comfortable and there is nothing that we want that we cannot afford. Our income requirement/spending including taxes is about $200K a year and we have enough assets and income to support our lifestyle. No pension. However we are not going to play the game of leverage and go for high risk returns because we have enough. Having more money does not make us happier and trying to grow wealth is just another stress which we do not need.

If you wonder why some people have the drive to want so much wealth, ask yourself why you did it yourself! To someone who lives nicely on $100k/yr and has a $2.5M FIRE portfolio to support that spending level, your relentless drive to have double the FIRE portfolio and spend twice as much as them is hard to understand. It's all relative to where you are on the ladder and whether you're looking up or down.

 

[MichaelB]

From the sublime to the ridiculous...

 

[pb4uski]

That is why the Rich gets richer - money brings in more money. Inequality becomes larger - it is not a level playing field. One can talk and talk about the roots, people not taking on the opportunity and are being lazy, etc. but the bottom line is the there is not a level playing field - not only for the minority but most of the people. ...

While what you write may be true to a large degree, there are enough rags-to-riches stories, including minorities, to make the case that the playing field isn't so unlevel that it can't be overcome with smarts and initiative.

 

[pb4uski]

... It is also a lack of education for some. My nephew made a good six-figure income as an employee of a MegaCorp but had no idea that he could have an IRA also. Same with a doctor that I know who makes $600k/year - working at VA - and wrongly arguing with me that if you have TSP (govt version of 401k ) then you can not have an IRA! The same nephew quit the job and started his business but had no clue of SEP IRA!

Similarly many do not know that a non-working spouse can also contribute the same amount to IRA as a working spouse and lose out on the growth!

Many high earners think that because of high income they can not have an IRA. Correct that you can not have a deductible IRA but you CAN have an IRA and then use backdoor Roth conversion!

Many get wrapped in making money vs. growing money.

+1 DD works for a well-funded start-up with many employees with six-figure+ incomes, but they didn't even have a 401k until after she started there and was high enough in the organization to successfully push for one.

 

[jimbee]

I agree. People who retired and invest passively will likely get dementia.

Good to know, now I can plan for it.

 

[Aerides]

It really depends on your personality type. Type A people will continue to work because it is in their blood. Type B will stop when they achieve their financial goals. Type A will continue to work and you can see that in most billionaires and CEO who work into their 70’s and 80’s. Both types are happy but they rarely understand each other. I do know that Type A people tend to outlive Type B because their energy helps their overall health. For example, a recent study found out that if you learn a second language, you delay the onset of Alzheimer’s. Type B do not bother learning another language. Another study indicate Type A people are more likely to maintain their diet, weight and overall health. Type A people knows how to manage stress whereas Type B avoids stress. The saying Use it or lose it is likely true.

this is as silly as defining people by Myers Briggs. Few people are so neatly packaged and one-dimensional. There's no accredited science behind it, and most people do not conveniently map into one category or the other. Just because I might be your definition of "type B" in the corporate world, doesn't mean I'm not "type A" when it comes to personal interests.

I'm sure even many of us who ER'd were "type A" at some point in our careers. But the number of talented, driven individuals greatly exceeds the C-suite roles. I watched many of them become bitter and angry at getting passed over - if you weren't SVP+ before you started to go grey, it was never going to happen. Disagree with the wrong SVP+ and you were sidelined or worse...for years.

I opted out of the Mega Corporate world, been there done that, life is too short. I'd rather put my energy towards me, my health, my home, and my family, than to a stock price.

 

[FREE866]

Good to know, now I can plan for it.

 

[jayanu]

While what you write may be true to a large degree, there are enough rags-to-riches stories, including minorities, to make the case that the playing field isn't so unlevel that it can't be overcome with smarts and initiative.

I agree. It is somewhat generalization and exceptions will always be there. They are called outliers and not the norm.

 

[MichaelB]

Mark Twain once wrote

All generalizations are false, including this one.

 

[2177V]

WOW! Interesting!! Do you have any references to that science/study?

Here are two studies linking a longer life to speaking more than one languages:

https://www.science20.com/news_releases/being_bilingual_linked_to_longer_life

https://www.bbc.com/news/health-27634990

There are many many more studies so the link between multiple language and longevity is indisputable IMO.

Here are studies linking personality to longevity which is more controversial:

https://nypost.com/2017/12/13/these-type-a-personality-traits-could-help-you-live-a-very-long-life/

https://www.news24.com/health24/lif...clues-to-why-some-people-live-longer-20210222

Early studies linked type A to shorter life due to heart attacks but the more recent findings discovered it was type B people were forced to live a Type A life at work and then they burn out.

I am a type B person but I can do Type A work for a short time because I understand my limitations. As noted in the second link: The current studies are now linking longevity to being "conscientious" This means you are are Competence, Orderly, Self discipline, Agreeable, Achievement Oriented, Motivated. IMO....Passive investors do not fit the definition of conscientious. What is interesting is that your immune system is linked to being conscientious because self discipline means you are not eating junk food, you do not smoke, and you do not drink and end up with underlying health conditions. I am age 70 and got COVID-19 but I easily recovered because I can be characterized as being "conscientious" more than type A or Type B. I am also an active investor because I am Achievement Oriented.

 

[street]

^ thank you very much!

 

[RetiredHappy]

If you wonder why some people have the drive to want so much wealth, ask yourself why you did it yourself! To someone who lives nicely on $100k/yr and has a $2.5M FIRE portfolio to support that spending level, your relentless drive to have double the FIRE portfolio and spend twice as much as them is hard to understand. It's all relative to where you are on the ladder and whether you're looking up or down.

Your response made me chuckle. It is all relative as you have said it.

In my case, I had a very successful career in high tech and with it, a certain amount of stress and lacking personal time. It involved long hours, business travel and eating out almost every meal because of lack of time and energy to cook when home. It became a lifestyle choice to spend money if that would solve a problem or on anything that we wanted. My husband was in a similar situation but in 2007 he had it with the company and wanted us to start our own business. It made peanuts compared to our corporate careers. After 8 years of running our business he wanted to retire. I would have continued to work because I enjoyed working and felt that we did not save enough. I said give retirement a year and see if I wanted to go back to work. Now you cannot get me to go back to work. I don't think we did anything that was a "relentless drive" to accumulate wealth. We worked, spent and saved some along the way.