Millionaires Who Are Frugal When They Don't Have to Be

http://www.nytimes.com/2015/06/06/your-money/skimping-on-the-splurges-even-as-a-millionaire.html

by m-i-l • 11 years ago

78 143 11 years ago

nytimes.com

drpgq3• 11 years ago

The Millionaire Next Door is a good read related to this although it is getting a bid dated.

hliyan• 11 years ago

I highly recommend How Much is Enough? by Robert & Edward Skidelsky.

mark_l_watson• 11 years ago

That book had a large effect on my views of money, not being ostentatious, etc. Some people need to be flashy with their money, but probably not a good idea. I have a friend who usually drives a fairly new model Porsche while I think I have more wealth than he does and I have a 1998 Toyota Corolla. That said, it would be a more boring world if we were all the same!

comrade13• 11 years ago

The farther you are in life in your job, personal life, friends, the easier it is to live enjoyably with spending less money through work trips to fabulous cities, automobile perqs, subsidized meals, work home-buying perqs, etc.

I'm not sure how much these people are struggling with their low spending.

Nrsolis2• 11 years ago

As a person who travels regularly for work I can say you have quite a romantic view of business travel.

The reality is that I usually see (in this order) an airport, a taxi, a conference room, a hotel dining room and/or bar, a hotel room, a taxi, an airport.

The idea that there is much downtime on a business trip is a fantasy of those who don't travel for work.

whiddershins• 11 years ago

This is absolutely true. Then again do you ever schedule a day or two off before or after a business trip? Mini-vacation with free airfare!

comrade13• 11 years ago

I'm in Vienna right now for work and going to the symphony tonight. I was in Barcelona two weeks ago and had some fabulous meals. Was in Sardinia las week on vacation but stayed at a colleagues beach home.

We paid 1/2 off for our car with a company perq and are having the company cover about 50k in expenses on a home were in the midst of purchasing.

You should take advantage of your opportunities more.

cushychicken2• 11 years ago

I have a coworker who has a saying for this: "You can travel to all the exotic locales for work that you want, but it doesn't change the fact that every hotel room looks the same inside."

TeMPOraL3• 11 years ago

Just came back from a business trip to Norway; the list of places I managed to see is: an airport, a bus, the office, the metro (and stations), hotel dining room, hotel room, few buildings in the city center during the three or four hours we had free because we arrived too late to start working the first day, the local Hackerspace. Oh, and tons of Teslas on the road, which made the trip really enjoyable ;).

Indeed, I was surprised how little time we had for anything except of working and sleeping.

UK-AL• 11 years ago

Is this a surprise?

People who have lots of money, are good with spending money? and knowing the value of things?

I don't think they're cheapskates, they just know what ACUTALLY brings value to their life's. They probably wouldn't mind spending, if they get more or equal value from the thing they are purchasing.

Fancy Cars in general are terrible value, for the enjoyment they bring you. Unless say its your hobby.

phlyingpenguin• 11 years ago

Fancy Cars in general are terrible value, for the enjoyment they bring you. Unless say its your hobby.

Buying a brand new fancy car is a terrible investment for the enjoyment, but that doesn't need stop you from having one. The article makes the point that there are plenty of ways to have "nice" things without breaking the bank, even if you don't have $$Texas.

salmonet2• 11 years ago

Sometimes I wonder if people do things like darn their own socks just to show off how frugal they are. I have a hard time believing that a multi millionaire values his time low enough to darn socks to save sock money.

casion• 11 years ago

Maybe he enjoys doing it? Perhaps it's something from childhood or early adulthood with fond memories, or just simply a task he enjoys the process of?

I'm sure most people here can understand the idea that sometimes fixing your own stuff can be fun, even if it's cheaper to replace it.

salmonet2• 11 years ago

I get that it can be fun to fix things instead of replace them even if replacing them is cheaper. I just don't think it is frugal.

SlipperySlope8• 11 years ago

Frugality is easiest to practice as a habit. E.g. rather than regard entertainment as an expense, frugal folks make simple errands and tasks into their entertainment.

Also frugality is not about showing off, except among frugal friends comparing notes.

Another factor its that not advertising one's wealth is an inexpensive form of household security.

DanAndersen2• 11 years ago

The article is decent, though the headline is a little silly. In the sort of cases described in the article, it's the frugality of these millionaires that was a major contributor to how they got to be millionaires in the first place.

Rather than letting falling to the all-too-common temptation to let luxury spending grow wildly with income, it's possible to set clear goals of financial independence, build habits that keep you on that path, and arrest the tendency to keep going on the hedonic treadmill.

I've found value in resources like Mr Money Mustache's blog for quantifying what actions are helpful to work toward financial independence: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim...

SlipperySlope8• 11 years ago

Its important to have a spouse who has a similar desire for sensible frugality. The level of income is less important than simply living below your means for your whole life. With prudent financial planning, compound interest and the passage of time achieves the level of wealth described in the article. Indeed car purchases are a good indicator.

An omission of the article is that often frugal persons are generous to their loved ones and causes they care about.

baldfat• 11 years ago

I have a friend who is a school teacher. He is the most frugal person I know. He paid for his first home by the time he was 29 and than sold that and bought a awesome home that was paid off in 7 years.

Most generous person I know. He would give the shirt off his back if need be. Drives his wife nuts :)

briandear• 11 years ago

Compound interest? Where? The interest rates are such that inflation would destroy whatever gain you have. Nearly all savings accounts are paying an annual yield of less than 1%! That means WITH compounding, you're looking at a 1% or lower gain. Inflation is typically between 1-4%, with 2% being the benchmark in terms of financial planning, though admittedly in April, we had slightly negative inflation, but that trend won't continue.

Investing is the only way to build wealth. It's impossible to save your way to financial freedom. If you make an average of $100K per year from age 30-60, that's $3 million in income. Assuming about 35% in state, local and federal taxes, that leaves you with $65K per year. Now, you're saving 10% of that per year, that's $6,500 saved per year. With a 1% rate, at the end of 30 years, you have about $229K. Assuming you live to be 80, that's $229K that needs to earn enough to pay your bills. Even if you saved 20%, you'd still not even have $500K at the end of 30 years.

With the same 20% savings rate and some reasonably smart investing (12% returns,) then you'd end up with over $3.5 million over the same period. If that investing is in real estate, you could potentially earn that gain tax free (or tax reduced) because building depreciation percentages can generally exceed the "profit" from real estate cashflow. On top of that, a 1031 exchange means you can keep selling and trading up to larger and larger real estate without paying a capital gains tax, which means you build even more net worth that can then be leveraged to buy more properties. Most millionaires get there because of property, very, very rarely because they save their way to it. A typical middle-class wage doesn't lend itself well to saving your way to millions. The math just doesn't work, the tax code also doesn't support it.

Frugality isn't the key to success. The $30 you save by washing your own car is peanuts compared to the value of that time doing something more productive (like sourcing real estate or researching investments.) Frugality can actually cost you more money because of the time-value of money. But admittedly many of us have inherited our parents/grandparents' Depression Era, middle-class ethos. It's a classic example of Rich Dad Poor Dad.

SlipperySlope8• 11 years ago

Sorry I was not clear. * Compound interest in this context is ROI after inflation. * Savings in this context is defined as investment, e.g. saving the earnings of one spouse to make the down payment on a rented duplex. * Frugality in this context is defined as delayed or avoided gratification to spare discretionary funds for investment.

Relative frugality (not being a spendthrift) is a necessary requirement for holding wealth. It is a key - not the only one - to gaining it.

vasco• 11 years ago

You're delusional if you think 12%/year returns are feasible for a period of time of 30 years for the average (hell, even for very good ones) investor. On the other hand you're also delusional if you think it is that hard to save more than 20% on a $100k salary.

charlesdm• 11 years ago

Compound 'interest' does not necessarily mean interest on T-Bills or in a savings account. It can also mean value appreciation in capital assets (e.g. investments in stocks, property, etc) + dividends. It basically means that any capital asset compounds in value over many years.

Let's say the stock market, on average, loses 30-40% in a down year. On the other hand, you usually have 5-7 good years between crashes, where the market appreciates by 10-30% per year. Even if you can't liquidate your stock holdings 'when shit hits the fan', you'll still be making money.

Achieving a 20%+ return is realistic if you don't mind taking some risk (not crazy "seed fund a startup" risk, more like general business risk) and you make sure to minimise your taxes.

The stock market has been BOOMING for the last 5 years. I have a wealthy friend who told me his net worth doubled over the last 5 years. That's tens of millions in capital growth.

ndonnellan• 11 years ago

I agree with vasco that 12% is a very large expectation for compound interest. In the early-retirement community 7% (before inflation) is a good benchmark over long periods of time.

However, your tax assumptions are probably too high for the current environment. If you earn 100k gross, but max out your 401k and HSA, your net income after taxes will be close to 60k, but you'll already be saving 20k+ pre-tax.

Yes, you'll have to pay taxes on the 401k when you reach retirement, but if you're living frugally and only taking out a small amount, your tax obligations will be way less than 35%. Without breaking a sweat, my effective tax rate is under 16% and I'm in the range described.

mcguire• 11 years ago

The net long-term return on the stock market is (something like) 3%, after taxes, inflation, and commissions. (Hah! Reddit is good for something! The link: http://www.crestmontresearch.com/docs/Stock-Matrix-Taxpayer-...) I like to flatter myself as a reasonably smart investor, I have some investments that have produced some very good returns (the trick is identifying those that have long-term prospects vs. those that are played-out in a short time), and I would love to know how to get consistent 12% returns, even before taxes and inflation.

Frugality is a fine key to success, success being defined by Charles Dickens.[1] And keep in mind, before making a time-value-of-money argument, that time spent being productive, like researching investments, actually needs to be productive; it's not hard to go below the minimum wage if you aren't tossing around large amounts of money.

beachstartup3• 11 years ago

the people in this article have multiple or large houses, take expensive vacations, buy luxury goods... they don't sound overly frugal to me. wtf? am i taking crazy pills?

my parents (in their 60s) have 2 lifetimes worth of savings and investments yet still do their own laundry, have a vegetable garden, mend their clothes.... but they drive nice cars, take expensive vacations, and buy tons of gadgets. they have a massive OLED TV that they watch stereotypical old-person shows on, yet still re-use their ziploc bags. this is not an either/or proposition. people are complex creatures, especially when it comes to money.

in other words they're just normal people, not overly or underly frugal. this entire article is confused. older people with $millions today have a huge diversity of backgrounds, philosophies, and lifestyles. it's impossible to capture some kind of over-arching rule. spending habits are usually a mix of contemporary attitudes and early life values.

if nobody spent any of their money our economy wouldn't work. the important thing is to be careful with your savings and investments - the goal isn't to be a complete cheapskate and die with every penny you ever earned. i can't think of a worse way to live.

SlipperySlope8• 11 years ago

Its clear to me that the article's family are still living well below their means. Multiple homes make sense for those who are frugal enough to restrict vacations mostly to the second home, which if well-located can appreciate in value faster than inflation. Frugal families often have such assets that appreciate, rather than expenses or possessions that depreciate.

beachstartup3• 11 years ago

Frugal families often have such assets that appreciate, rather than expenses or possessions that depreciate.

i'll repeat myself. the people in this article have both, like most successful people in general. it's not a mutually exclusive choice. this article is basically not making any kind of point whatsoever. what's the thesis of the article? that most successful people don't blow all their money on bullshit like some poor people do? wow, what a revelation.

these people drive cars and take vacations and buy cartier watches. truly 'frugal' people usually don't do any of this stuff. for example, you don't have to look far on HN to find cheapskates that make professional salaries yet shun cars, live in tiny apartments, shop at garage sales, don't vacation, and live on dry foodstuffs. in fact i was poking fun at them in a comment i made just yesterday. i called it the 'cheapskate olympics'. i think that kind of lifestyle is absurd if you can afford to live a bit better than that.

reagency8• 11 years ago

You can spend your money on high marginal value things like lifting people out of poverty, or on paying someone to create pollution and junk.

beachstartup3• 11 years ago

you have this exactly backwards, because you're ignorant of how poor people actually live in this world and rely on your dogmatic beliefs to guide your interpretation of reality. people being lifted out of poverty do not make high marginal value goods. they make things that create pollution and junk.

i invite you to take a look at a factory in the developing world (the people who are being lifted out of poverty) and see what they produce. i assure you it's not "high marginal value" goods like swiss watches, fixed gear bicycles, and midcentury modern furniture.

jasode4• 11 years ago

The millionaires at $1m to $10m absolutely DO have to be "frugal" if we use define "frugal" to be about "smart spending" as opposed to fishing pennies out of public fountains.

The word "million" is deceptive because it is an amount beyond what 99% have. It makes it seem like some mind boggling amount of money but mathematically, it really isn't that much. A person classified as "millionaire" could be tagged that because of total net assets and not the liquid cash in a bank account. E.g. a $500k house + $500k IRA/401k + $25k car is a "millionaire".

But let's say you have a multi-millionaire (e.g. 2 million dollars). That might be $1 million in cash in the bank. That's still not much money because:

- it's not enough to park $1 million of principal into risk-free US T-Bills and live off the current interest rates of < 1%. That's only $10k income per year which is less than minimum wage.

- if your child gets an expensive health problem like leukemia or spouse gets cancer, your medical bills could blow past the lifetime cap of the health insurance policy and therefore, you have to drain your savings to pay for expensive treatments.

- non-Ivy League schools can cost $50k per year. If you have 2 children and you want to give them the gift of college education without being burdened with student debt, that's at least $400k. And to stay at $400k, it would require the parents to be "cheapskates" and not fund any extracurricular trips like ski vacations and Spring Break parties down in Mexico.

The millionaires that have less than $10 million definitely have to be "frugal" and watch their money. Consider than NBA star Allen Iverson earned $200 million and blew it all away.

At $100+ million, one can start getting frivolous and maybe buy a Ferrari. However, $2 million is not enough cushion to live off interest income and be 100% worry-free from unexpected life events. One would still have to work somewhere to keep adding to the nest egg.

hobo_mark• 11 years ago

Agreed on everything but this line

it would require the parents to be "cheapskates" and not fund any extracurricular trips like ski vacations and Spring Break parties down in Mexico

One would assume a 'frugal' household knows better than that and would want to pass their value system on to the next generation too. Want to get wasted in Mexico? Find a way to make it happen yourself.

cushychicken2• 11 years ago

I would perceive myself as having done something slightly amiss in raising my kid if they asked me to fund their spring break trip to Mexico. My folks only ever funded my spring break stuff if I was doing something with them. Not the worst thing, since it basically made it so I had to spend spring break with my family, or camping. (Had some great spring break camping trips as a result, though.)

hippich• 11 years ago

just minor nitpick - "lifetime cap of the health insurance" - i though with obama care this was eliminated, no?

jasode4• 11 years ago

Yes, you may be right. I haven't kept up with the new laws. I just remember actor Christopher Reeves getting paralyzed from his horse accident and he blew right past the health insurance lifetime cap ($250k or $1million I can't remember). Afterwards, the actor and friend Robin Williams chipped in to help with some medical bills.

If the lifetime cap is gone, some other issue will crop up such as an experimental (and very expensive) cancer drug is not covered by insurance but you want to pay out-of-pocket to try it.

tptacek• 11 years ago

Yes, the ACA prohibits lifetime limits on essential health services. There are things that are insurable that do have caps, but if your kid gets sick, the ACA says there's no limit to how much insurers have to cover.

yourapostasy3• 11 years ago

This is a confusing area. Here is the official Health and Human Services page about the subject, but this page is not very comprehensive.

http://www.hhs.gov/healthcare/rights/limits/

Take the case of cancer. Look at the list of essential services.

https://www.healthcare.gov/coverage/what-marketplace-plans-c...

I'm not sure where cancer is on that list, so I gather that cancer is not covered by the bare minimum essential services plans. From this, I believe it is incorrect to say ACA (aka Obamacare) requires coverage of unlimited cancer treatment.

Also, see this article:

http://khn.org/news/obamacare-lightens-load-for-cancer-patie...

It points out the key loophole in planning for unexpected catastrophic medical expenses is prescription medication, regardless of lifetime cap issues. Even if you can afford the annual copays and deductibles for the numerous office visits, the medication budget for treating cancer can easily blow out your budget planning by either not being covered at all, or only covered at a 50% level.

What makes this aspect especially hard to plan for is you currently have no way to find out in advance what these medications cost under specific plans. So if for example, you have a family predisposition to a certain type of cancer, then you have no way to find out how to financially plan for the possibility you might also get it, and have to start the medication for it.

In the US at least, I still firmly believe that prudently planning for severe medical conditions is simply not feasible, even with "catastrophic coverage", for families with less than $10M in liquid assets, and $40M in total assets.

gizmo• 11 years ago

It's laughable to suggest splurging on a 300k Ferrari is irresponsible at $10M < assets < $100M.

sk5t• 11 years ago

Agreed; lots of folks have enough passion for cars and driving that a Ferrari is not such a preposterous thing, weighed against its marginal utility; and, the race-inclined Ferraris have turned out to be pretty good investments.

jasode4• 11 years ago

Everyone's appetite for risk is different.

If I had $10,000,001.00 in the bank, I personally would not feel secure enough to spend $300k on a car (and also pay all the expensive maintenance that it entails.) Since the car is 3% of my available funds, I'd be constantly hyper paranoid about a stray rock being kicked up by the truck in front of me.

If I had $100 million, the $300k car would feel a little more "disposable". If a runaway shopping cart dings it, I'd just shrug it off and buy another one and donate the imperfect one to my landscape gardener.

On the other hand, Elon Musk bought a $1 million Mclaren F1 after the 1999 zip2 sale netted him ~$20 million. Like I said, everybody's risk profile is different and most people including me do not think he's fiscally irresponsible.

I think the nuance that's getting lost in translation is my idea of "affording" to buy an exotic car. Yes in mathematical terms, $10 million subtracting $300k leaves plenty left over so one can buy without requiring a loan and still be "wealthy."

However, my idea of "afford" also includes the state-of-mind after one pays for it. I'd like the luxury of not giving the super car no more thought than a Toyota Camry. If I'm paranoid about the car, I can't "afford" it no matter what my bank account says. The car is ruling over me instead of the other way around. The cost of ownership is too high (this includes "mental costs"). The threshold isn't "how much money I need to buy the car without a bank loan" but "how much money so that the car feels disposable."

walshemj9• 11 years ago

And a good classic car does not depreciate in the same way a bmw 7 series does.

And for the cost of a fully loaded BMW you can get a very nice classic. and probably buy a cheap ford for daily runabout even the gt500 super snake is fairly cheap.

adrianN• 11 years ago

I think it really depends on the kind of life you want whether one million is enough to live off. There is this guy, "Mr Money Mustache", that preaches a "frugal" lifestyle as a means of retiring very early with less than a million in the bank. On his blog he talks extensively about this.

In particular, he provides some evidence that it's safe to spend 3-4% of your assets every year, indefinitely, if you invest in index funds. That means that it's enough to safe about 30 times your annual expenses. For me, that would be around 650000 Euros. A million certainly would cover this, and have something left over for extreme crisis.

blumkvist2• 11 years ago

That looks like some blog pushing info products and ebooks...

siscia• 11 years ago

Cannot read the article, however, we should be careful about the definition of "millionaires".

If we define "millionaires" as the individual with 1M of worth asset you are definitely right.

If we define "millionaires" as High-Net-Worth individual (HNWi), the people who have at least 1M in investable finance without counting the primary residence it start to get more interesting.

However, if we define "millionaires" as individual with a net profit of 1M in the last fiscal year, they DO NOT have to be frugal :)

aptwebapps2• 11 years ago

I believe your first option is the conventional one so while the others might be interesting they aren't what the article is talking about.

adventured2• 11 years ago

The last group does have to be frugal most likely. It's a very, very small number of high earners that manage to yield more than $1m in income - much less net that after taxes - and then do it multiple times.

There is a very high rotation on high income earners. They tend to ride temporary booms in whatever their specialty is (eg the real estate bubble days), and also peak out at a certain age bracket (their earning power peaks for only a few years out of a long career).

If you have this seven year peak earning power: $300k, $500k, $600k, $1m, $600k, $500k, $300k - you've yielded $3.8 million in earnings, paid a likely ~$1.5 million in total income related taxes, and have $2.3m left before life expenditures. You're 52 years old, and your earning power has peaked. You have $2.5 million in savings and investments. That has to last the rest of your life and retirement; you spend $10k per month in total life expenses, and have two children, and a decent house with a mortgage; your income will never be much higher than $300k again, and you're going to pay ~30% in income taxes on that.

That's closer to a normal scenario for a $1m earner, than the one where they just yield $1m per year for 20 years and never have a financial care in the world.

allendoerfer3• 11 years ago

As long as your income is greater than your expenses (which include healthcare and retirement saving) you can absolutely buy a sports car if it makes you happy and it is not your life-goal to retire early.

I think it is nice if you can provide your children some security, but I do not think that your savings have to be at the highest level when you die.

I come from a country where college education is free and healthcare is not capped. I do have to worry about dental care beyond the basics, though.

crpatino• 11 years ago

Without commenting on the goodness/badness of deriving happiness out of a sport car...

If you can buy the thing in cash, out of pocket, without depleting more than half of your liquid savings... sure, why not. If on the other hand you buy on credit, you are making a commitment against future earnings, that are in no way guaranteed to match or surpass current earnings.

More over, if you make and habit of indulging in anything you happen to fancy, you have no guarantee that other frivolous expenses won't come before you actually finish paying this one. However its other (many) flaws that's one point that Kiyosaki's "Rich dad, poor dad" gets absolutely right: A large income is irrelevant if you inflate your lifestyle even more.

7Figures2Commas• 11 years ago

You can comfortably purchase a Ferrari with far less than $100 million. In fact, there are circumstances under which you could comfortably purchase a Ferrari with well under $1 million.

What most folks don't recognize is that you can get significant leverage on savings, a solid income and a good credit score. In the case of a used exotic car, if you purchase the right make, model and year and negotiate a good deal, you can often drive the car for not much more than the total cost of, say, leasing a Mercedes. In some cases, you can even drive the car for a while for next to nothing.

They key is that you buy used, identify a good deal, put down as little cash up front as is possible (i.e. 10%) and extend the loan term out as far as you can (specialty lenders will do 72 to 120 month loans on exotic cars). If you hit the depreciation curve at the right time, you really can't lose.

You'd be surprised how many people who could pay cash for a $250,000 Ferrari still have a car note. There's really no good reason to pay cash outright in many cases.

dsugarman• 11 years ago

From everything I've heard, the cutoff is around $25MM to really not have to ever worry about money

jpmattia2• 11 years ago

It really depends on your personal burn rate.

In truth, I'm a bit amazed by many of the HN comments. The materialistic stuff (ferrari bmw etc) has powerful symbolism to many. However, if you look at the article, it is mainly about those nearing retirement years.

Materialistic wealth loses a lot of appeal to those who are older and wealthier, many who realize that such things require care and feeding, and really end up owning you rather than the other way around. PG has a terrific essay about materalistic icons losing much of their appeal once you realize that you could easily purchase them; Not being able to have them is part of their mystique really.

The wealth of financial independence (defined as having enough to supply your burn for the rest of your life) enables you to do with your time as you please. Some great questions arise after achieving that kind of wealth, like "What do I want to do with my life?" It turns out that having-a-purpose is of great importance, and that might well appear to younger journalists like continuing to behave middle class.

limeyx• 11 years ago

Possibly but that amount will barely buy you a decent penthouse pad in Manhattan ....

rsp1984• 11 years ago

You have some good points here but keep in mind that some of the things you mention (health care, education, etc..) are very US-centric and far less of an issue in other places such as Europe.

jpmattia2• 11 years ago

Good post. One nit tho:

- if your child gets an expensive health problem like leukemia or spouse gets cancer, your medical bills could blow past the lifetime cap of the health insurance policy

The lifetime cap was one of the things eliminated by Obamacare afaik.

lazyjones• 11 years ago

At $10m you can comfortably buy a Ferrari without losing sleep over it (except in anguish that it might be stolen, or damaged).

But: between being frugal and buying an overly expensive toy car, there's a lot of space. At $10m, you can spend $20k every month and it'll last you forever if you invest the rest in index funds at 3% or so. So a frugal lifestyle is uncalled for at that point, unless it's your personal way to obtain happiness.

jakejake• 11 years ago

I think there's a big difference between being frugal and cheap, and it somewhat has to do with personal style and creativity. Somebody with no taste and a need to show off might require a $300k super car because they feel like that's what millionaires do. But you can get an amazingly awesome vintage sports car for $60k or less. The same could be said for houses, vacations or anything else, you don't have to spend the maximum amount possible to get something fantastic. But you also don't have to live like a cheapskate in order to preserve your wealth.

cko• 11 years ago

Do people with millions of dollars in networth even think about T-bills?

Genuinely curious.

toomuchtodo2• 11 years ago

Yes, they're extremely safe to park semi-liquid funds in.

downandout• 11 years ago

FYI Obamacare eliminated lifetime caps on health insurance payouts.

crimsonalucard18• 11 years ago

Please note that although we respect frugality over lavishness. Frugality among rich people is one of the primary reasons behind wealth inequality. Sitting on top of an perverse amount of wealth and not doing anything with it is bad for the economy.

Wealth needs to be redeployed back into the economy and it must be done in following a method that doesn't grow the wealth in an unnatural compounding way.

DanAndersen2• 11 years ago

In cases like those in the article, these savings aren't stowed away in gold bars under rich people's mattresses, they're mainly in investments that continue to yield dividends. Those investments are going to various companies that are actually doing something with that money, so it's still circulating through the economy. Is there something I'm missing? I admit I'm not as well-versed in economics as I'd like to be.

crimsonalucard18• 11 years ago

Unless it's an ipo an "investment" or exchange of stocks for money on a stock market is simply just a trade among shareholders that generates zero GDP. It does go back into the economy and thus circulates.

Dividends is wealth generated by laborers and taken by shareholder owners. Sitting on stocks and eating up dividends while contributing no work of your own does not cause money to circulate through the economy in a good way. What it does is it causes your own wealth to grow unfairly, further increasing wealth inequality.

fsloth2• 11 years ago

What are you exactly saying?

Isn't 'redeploying money back to economy' basically investing?

I think what you first would want is an increase to minimum pay if you want to increase the flow of money in the areas where I think you want.

crimsonalucard18• 11 years ago

You can invest, or you can spend in a way that generates GDP. If you "invest" or put your money into the stock market, you are not deploying your money in a way that generates GDP.

Unless the stock is an IPO, you are essentially trading paper when you buy a stock. No GDP is generated on that transaction. In a sense you could be redeploying if the seller of the stock takes the money from the trade and redeploys it in a meaningful way.

I agree that rich people paying their workers more money is a meaningful way to redeploy their wealth.

jsonjson• 11 years ago

Unless they've sacked their money away under their mattress, it has been deployed back into the economy. It is either invested or in a bank where the majority of it has grown the pie of total dollars through loans (this is often not well understood). If I have ten dollars that I place in a bank, they will only hold the required reserve. Assuming this is 30%, then seven will get distributed in loans. The effective size of the money is now 17 dollars.

crimsonalucard18• 11 years ago

Yes. This is true. I mean wealth in terms of wealth ownership. Compounding interest from loans, dividends, or stock investments causes the amount of wealth "owned" by rich people to grow unnaturally.

moron4hire• 11 years ago

No, assuming a reserve of 30%, the whole $10 is the entire reserve, and they loan out $33.33, making $43.33 total.

SlipperySlope8• 11 years ago

The dynamics of capitalism put wealth into the control of its wisest custodians - frugality being defined as among the wise virtues in this context.

For those who argue that democratic government is the wisest custodian, e.g. there is estate taxation and government redistribution and investment.

crimsonalucard18• 11 years ago

Are you saying rich people are wiser than poor people therefore they deserve to be rich?

Capitalism made Justin Bieber rich. This makes him a wise custodian of wealth. Not only is my previous statement wrong, but so is yours.

crimsonalucard18• 11 years ago

Calling rich people "wisest custodians" of wealth really got to me. What a self serving statement.

I urge you to watch this video, your comment compelled me to find it:

http://www.ted.com/talks/nick_hanauer_beware_fellow_plutocra...

crimsonalucard18• 11 years ago

I'm getting voted down. But if you got time please watch (or read the transcript) this:

http://www.ted.com/talks/nick_hanauer_beware_fellow_plutocra...

This person elucidates my views completely and in a way that may be easier to understand.

massysett• 11 years ago

"And while they own three homes — condominiums in Naples and Boca Raton, Fla., and a house in Lebanon, Pa., where they grew up, none of them are huge. One splurge is an annual trip to Italy."

Frugal? Is this a joke?

adekok• 11 years ago

I think "frugal" in this context means "spending within their abilities".

In contrast, many lottery winners are bankrupt within 5 years. Why? They're "rich"! They can spend money like it's water! And they do... Then they run out.

As other commenters point out, a million dollars is money, but you still have to be careful. You probably still have to work.

You can go out for dinner three times a week at a reasonable restaurant and not worry about it. You can buy a decent car without it impacting your budget too much.

They're not penny-pinching. They're not part of the 47% of americans who'd have trouble raising $400 for an emergency expense.

But care-free? Nope.

One trip a year to Italy is probably $5K for two people. In comparison, that's like $50 for someone with $10K to their name. It's money, you likely have to plan for it, but it's do-able.

reagency8• 11 years ago

Those three properties together cost less than a starter house in Silicon Valley.

11thEarlOfMar• 11 years ago

The Millionaire bar is lowered each year at the rate of inflation. So to see how I'm really doing vs. my generation, I factor in inflation since my birth date, and that is the number I need to achieve 'Millionaire' status.

It's somewhat arbitrary, but for me, that's about $6,000,000 in 2015 dollars....

drpgq3• 11 years ago

Yeah when they made the film How to Marry a Millionaire in 1953 with Marilyn Monroe, a million really meant something.

mmrasheed2• 11 years ago

When I read this article few minutes ago I found the following phrases and quotes defining the characters of these people and justifying their acts-

...“It’s (money) an important tool. They don’t neglect it, but they also don’t worship it.”...

...“Part of this pressure to keep going is less about greed and more about insecurity that might be self-imposed,” ...

...“It’s about paying attention to what makes you happy and not just doing what our society tells us to do,” ...

... he and his wife simply didn’t care that much about material possessions...

... “We like to travel, and we’ll spend the money for that because it’s worth it having a real experience together.” ...

And when I went through the comments here, I found none so far discussing on any of the points above.

Retra3• 11 years ago

Every one of those quotes is portraying selfishness. Why should anyone discuss those points? They don't have long-term value to anyone else.

crgt• 11 years ago

Hm. Not caring about material possessions is selfish? Not sure I follow that logic...

mmrasheed2• 11 years ago

I would very much like to know how not-worshipping-money, less-greed, less-materialism are the elements of selfishness rather than of selflessness?

sehugg• 11 years ago

Note also that in several states, the average full-career government employee receives a pension worth over $1 million. It's just that we don't commonly use the term "millionaire" when the payment is in the form of an annuity.

http://www.wsj.com/articles/SB100014240527023043607045794151...

reagency8• 11 years ago

Another NYTimes article by a millenial amazed by the completely ordinary lives led by their parents' friends.

secretmillion2• 11 years ago

I'm a "frugal millionaire" with liquid, investible assets of approx 1.2m USD (does not include my home, car, etc.) I saved and invested my way to this after about about 15 years of working. My highest yearly income was approximately 160K while my lowest was around 50K. I drive a 10 year old car (which I bought new, in cash) and my mortgage is fully paid off.

I still go to work everyday (unfortunately.) I'd rather work part time, 2-3 days a week as a contractor/consultant, then work on my own projects the rest of the time.

I often wonder how many others out there are like me... "working millionaires."

ckib16• 11 years ago

I'm curious - how did you amass your 1.2m USD? I have a similar background and have done well but have not reached your level. Was it thru regular investing? Or did you have some "high payout" one-time events like making a lot of money on house appreciation, sale of a company, etc.

In any case, nice work!

secretmillion2• 11 years ago

It was through regular savings and investing. I never had a high payout event.

Millionaires Who Are Frugal When They Don't Have to Be

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