Was having a conversation in this thread and it made me realize how subjective the term "rich" or "wealthy" is. I have some thoughts on this, but I'm wondering what you think?
When you can go food shopping and get whatever you desire without considering the cost, you are wealthy.
That is true. I think that people of means easily forget or misunderstand what it's like when commodities significantly impact your financial situation. Knowing that filling up the tank is going to influence what you eat is a weight. Fortunately my experiences with this kind of living has always been transient. However, I will not forget it.
When you can buy whatever kind of beer you want!
I still have trouble justifying the purchase of Chimay Blue (love it, but it's about 17 NZD for the big bottle, here). I need just a bit more wealth - but don't we all?
That is a damn fine beer. For me it is Hitachino Nest White Ale -$13.00 a bottle. Bit steep but damn tasty
Sounds good - who'd'a'thunk it, a Belgian Wit style, brewed in Japan? The classic original, Hoegaarden White, is one of my favourites.
There is no amount of money (as a lump sum) that will make one comfortable enough to alleviate financial stress. Instead, it's far better to think in terms of passive income and ability to create income. For example, if you were to own 15 homes free and clear of any debt and they rented for $1200/month each generating $600 after all expenses and a vacancy factor, you'd be getting $9,000/month. If you're monthly living expenses are 7000 then you would be very wealthy. If your expenses were 12,000 then you'd still have a bit of work to do but you would be well on your way. The ability to generate income must come first, then investing in vehicles that provide "passive income" would come next. www.promanas.com
Bogs, good to see you here. It seems that whenever anyone talks of passive income, they are talking real estate (rentals etc). What are some other examples of passive income that perhaps I have overlooked? www.hubski.com Also, take a moment and link here: http://hubski.com/pub?id=16624 -and thanks again pal. 8 years strong, who knows... she may have said "no" if I used "Cliquot".
I think the safest passive income is real estate b/c that's what i've done my whole life and understand the best. Some people own cash cow businesses that truly operate without them. Others own huge numbers of franchises. dividend income can be described as passive as well, or bonds but those are extremely low right now and I don't like those because when yield goes up your principal is eroded, sometimes very quickly. Again, I only see what I see b/c of what I do for a living. Royalties, that's another passive income stream but there's usually a timeframe or life to those and then they die out. If you underwrite a real estate deal properly and budget for capital expenditures, tenant turnover, leasing commissions, proper management, and everything else then it's the gift that keeps on giving. Pay too much for it, choose the wrong location, figure the expenses wrong and you're dead - the risk is in knowing how to do it correctly. www.promanas.com I should have made my user name Promanas.
I like "bogs". The numbers below are not real but hypothetical. Lets say I had $100k for a downpayment on a home. I have a family of 3. I am a first time buyer. Would you suggest that whatever I buy I do so with the intention of someday renting it? What should my thought process be?I only see what I see b/c of what I do for a living.
I sometimes think that I made a mistake in buying our home here in NC. For the money I put down on this home, I could have continued to rent and bought two rental properties of my own. I realize that your time is valuable and I'm essentially asking for free advice, but would you say that it was a mistake?
I think the first thing to do is to set up your family in something affordable and buy the home if it's some place you can see yourself for at least 7 years. If not, rent. The key is to figure out exactly what it takes to live each month and then start looking for ways to create the passive income to support it. You have to have a day job to pay for everything now but spend extra time learning about investments and stashing away cash anyway you can - IRA, savings, etc etc. No need to be in a hurry, it's a lifelong pursuit. It actually happens very fast but very fast is usually like 10-15 years. I'm 42, bought my first properties when I was 28. 14 years goes by fast. 6 more years and I'll be an overnight success at 48 years old. I can talk more later but be careful about buying thing by yourself. Single family rentals aren't as easy to deal with as it would seem. I'd look for larger syndicated deals or REITS. Gotta run for now.
I feel rich now. Once passive income is greater than monthly fixed expense is when I started to feel comfortable. I still work. I create investments and offer them to accredited investors so that they can have passive income too. In one fund, we distribute $100,000/month in excess cash flow. It goes out on the 15th every month and it's one of the greatest feelings out there. Of course there is stress but working when one doesn't HAVE to changes ones' perspective greatly. I'm not sure what you mean by "enjoy the fruits of your labors". I realized awhile ago that I'm happiest when I am pursuing a worthwhile goal. Money is just money. Helping other people, donating ones time, spending time with friends and family, etc etc. is most important but like anything else, balance is critical. You can't eat a gourmet meal 3x/day 7 days week or you won't appreciate it. Plus you'll be a fat-ass and a burden to society. Anyway, I feel rich in many ways. I'm not sure it should take money to feel this way but it doesn't hurt - money is a source of control, a belief structure. I didn't set the game up and I think many folks take it too seriously but that's the case with any game, right?
My financial planner had us play a little game. It went something like this: "I want you to write down your five closest friends. Got it? Okay, now next to their name, I want you to write down how much you think they make in a year. Take your time and give it your best guess - obviously, you don't know. Got it? Okay, now I want you to do some math - add up that column of numbers... and divide by five. No, you don't need to tell me what that number is - let me tell you: "That's about how much you make in a year. Now: shall we talk about why country clubs exist?" "Wealth" is a societal marker that allows a person to judge themselves against everyone else. Countercultures argue that money isn't the best metric to judge success and they certainly make a compelling point. I think Bill Gates has a pretty good handle on it: “I can understand wanting to have millions of dollars, there’s a certain freedom, meaningful freedom, that comes with that. But once you get much beyond that, I have to tell you, it’s the same hamburger. Dick’s has not raised their prices enough,” he said, referring to the Seattle-area fast-food chain. “But being ambitious is good. You just have to pick what you enjoy doing.” Frankly, the discussion gets pretty boring pretty quickly so let me leave you with a video that isn't: http://www.youtube.com/watch?v=u6XAPnuFjJc
I tend to agree with Gates. For example, I am middle class; one of my good buddies is a member of the super rich class (his family owns a professional sports franchise among other things). Our lives are more quantitatively different than qualitatively different. We both get up and drive to professional jobs, he just makes more than me and gets there in his choice of several nice cars. We both have houses; his is just a lot bigger than mine, etc, etc. There aren't many things that he does in his everyday life that differ from mine or most people's. The real qualitative differences in wealth are between the very poor and everyone else. If you have to worry about a cholera outbreak in your village, because your drinking water comes from a polluted stream, then you have a qualitatively different life than our experience.
Couldn't agree more. I can whine all day about how there's a clear difference between a son of rich parents paying for a college and a son of middle class parents trying to do the same, but at the end of the day neither of us has cholera.The real qualitative differences in wealth are between the very poor and everyone else.
Your financial planners exercise was off the mark for me, but then I have a wide range of close friends. The "artists" throw the equation way off. For me, I will feel "wealthy" once I hit that stage Gates is referring to, when anything beyond it is simply gravy. When I can safely say I no longer need to work to earn money, the money is doing that itself. Regarding the management of finances, I am horrible at it. My wife is fantastic at it. I'm good at making money, she's good at managing it. It's a nice symbiotic arrangement. I work with a guy that is fantastic at managing his finances. At 30 he already owned 12 rental homes. He lived with his wife and son in a very modest home and bought other modest homes and rents them out. He buys 2-3 houses a year now. Because they are extremely frugal, he is able to do this. He recently asked me about my iPhone. He was considering getting one but thought they were too expensive. This guy owns north of 15 homes but won't buy a $300 phone and instead uses an old blackberry that he got for free. When I asked him why he didn't treat himself to the "nicer" phone, he took out a pen and paper. As he was showing it to me, he kept saying things like, "buy an iPhone", then he would draw the arrow further, "buy a boat", then he would draw the arrow further, "buy a sports car", etc. He has done the math and by the time he is 38 he can have 25 homes and enough passive income to live very comfortably and continue to reinvest in more houses. I don't have his discipline, but my wife does (thankfully). So his definition of wealth or being "rich" is the day he can stop "working" for a company and just manage the properties he has acquired. His definition is not measured against his peers but is measured against a goal he has set forth for himself.
That's definitely an interesting way of looking at it. I don't have that kind of self discipline, and it's not really helped that I'm both an automotive and tabletop wargaming enthusiast. Both pretty expensive hobbies unless you know what you're doing (especially when it comes to things like Warhammer). I have to wonder if it's possible to do what he did nowadays, where I live the median house price is 500,000 AUD.
A passive income that I could live off of would be great, but all of the passive income in the world isn't worth squat if I can't make music. I'd wager you feel the same about cars/gaming.I don't have that kind of self discipline,
Honestly, I don't either but I was smart enough to marry a women that does. She balances me out. I'm not a car collector or a gaming enthusiast but I am a musician that loves buying new instruments.
Wealth is having the resources that enable you did to what you desire.
You can lose your money. Your house. Anything you own. Your friends. Your health. But you cannot lose the things you learn to do. Your learned skills and abilities are your true wealth. Every time you learn to do something new, you become wealthier. This wealth collects interest, in that the more you know, the easier it is to learn more and the more connections you can make. Don't use your time making money than you need. Use your time making new experiences. Use your time learning.
That is why it is so celebrated when someone is able to do what they love and simultaneously earn money. They are able to continuously learn and earn. Also, it makes it a hell of a lot easier to enjoy new experiences when you have the resources (Time being the key one) to do so. I do think a healthy balance between having financial goals and recognizing that those goals exist to provide necessities like food/shelter but also to provide life experiences (not bling) is important. For me, someday being able to focus only on projects of interest -music, art perhaps a startup that I find interesting, while being assured that I can provide for my family securely would be ideal. But this won't just fall in to my lap, I need to set financial goals in order to get there. I agree that our learned skills and abilities are our true wealth. I absolutely agree with that. That is why when someone loses one via injury (brain damage etc) it is considered one of our greatest human tragedies. I do realize that new experiences and learning can occur with little to no money, but to have the sort of worldly experiences that I would someday like to have will take more resources.
To me, rich is being enable to work on the things I wouldn't otherwise be able to do without capital. If I wanted to start a company on the off chance that an out-there research topic works, I'd need up front capital. Unless I get loans from friends and live off ramen for months on end, working well beyond full time, such a plan will not pan out because I simply don't have the money up front to invest in equipment and support a living situation comparable to working a 9 to 5 job on a less interesting project. I like communal living, and I would love to give back to the cause. I'd love to buy one of the many large houses in the area and open it up as democratic and affordable housing. But unless I have hundreds of thousands, if not millions, of dollars, I can't. And such an endeavor would likely bankrupt me. I'd love to work on a video game. I'd love to explore teaching through engaging interactions with a computer. But the risk involved would bankrupt me if my plan didn't pan out. I'm not exactly pursuing a career that I hate with the sole intent of sustaining myself on money, but if price was not an object, I definitely would take more projects that would be risky to my current self.
I'll tell you from experience that eating ramen for months on end in pursuit of a career you really enjoy is well worth it (I'll still eat ramen sometimes even though I don't have to anymore; it never really leaves you, I guess). There's nothing better than getting paid for doing what you love. And don't forget that a business bankruptcy isn't a personal bankruptcy; losing a business won't ruin you life, even if it would be depressing.
Rich is a comparison. On a global scale, if you make $50k per year, you are rich. In the US, if you make $200k, you are rich in most places that you go. However, if you live in a community in the US where most people make about $200k, then you aren't rich unless you make something like $500k. If you live in a community where most people make $1M, rich might be $10M to you. I've felt rich, had more, then felt less rich.
When I stop spending my time to make money, and can afford to spend money to save time.
"Poor and content is rich, and rich enough." - William Shakespeare
Wealth. It is one of those things everybody aspires to but nobody really knows what it is supposed to be. Much like happiness. For me personally it means that I can do what I want without having to worry about the financial aspects. Like being able to buy the just a little bit more expensive peanut butter or bread. Like being able to go to the gym when I want to. Once the financial constraints are gone and you can do what you want (within bounds of course), I would consider myself wealthy.
For me personally it means that I can do what I want without having to worry about the financial aspects
That pretty much sums it up for me too.