Author Topic: $3mil = $1mil??  (Read 12471 times)

tmitchell

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$3mil = $1mil??
« on: May 30, 2015, 09:23:43 PM »
bummer! FS says $1 mil is no longer enough!

discuss!

Ricky

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Re: $3mil = $1mil??
« Reply #1 on: May 30, 2015, 09:35:32 PM »
Ok how the hell do you expect anyone to know what you're talking about when you're referencing an aritcle written in December?

http://www.financialsamurai.com/are-you-a-real-millionaire-3-million-new-1-million/

gomike

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Re: $3mil = $1mil??
« Reply #2 on: May 30, 2015, 09:55:29 PM »
I pay $1.88 for milk, $20 max for jeans, cut my own hair, house could be paid off, who uses stamps?  whopper, eww...  Use miles to fly, out for lunch, no thank you, my honda civic works great.

I think 1 mil will be fine.

Bateaux

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Re: $3mil = $1mil??
« Reply #3 on: May 30, 2015, 10:29:29 PM »
I kinda agree.  I think my accounts will reach 3 million one day.  I'm over the 1 million mark and I don't feel the least bit wealthy.  I'm not organized enough to retire yet.  Hope to be near 2 million total assets by the time I do.  Unless I sell my real estate and live really cheap I don't have the non-retirement funds to FIRE.  I'm 46 and want to be free by 50.  Going to shovel in the cash till 2018 and then reevaluate.
« Last Edit: May 30, 2015, 10:31:37 PM by Bateauxdriver »

patrickza

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Re: $3mil = $1mil??
« Reply #4 on: May 31, 2015, 02:00:54 AM »
I think there's a bit of lifestyle creep going on there with the Samurai. He been living in the big league so long he thinks that you can't be completely happy on anything under $250k a year.

SnackDog

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Re: $3mil = $1mil??
« Reply #5 on: May 31, 2015, 03:39:57 AM »
He apparently fails to understand that 1) the $40,000 starting withdrawal will rise with inflation, 2) the $1MM will probably rise in value faster than inflation if properly invested, and 3)  inflation rates have been very low the US for many years and may remain so (despite his silly examples like G500 and $10 beer).  So much for his finance cred.

KungfuRabbit

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Re: $3mil = $1mil??
« Reply #6 on: May 31, 2015, 05:56:07 AM »
well i do agree that being a millionaire SHOULD no longer be impressive (yet it is, because no one saves), all of his examples are crap.  who cares about most of the crap he lists.

ltt

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Re: $3mil = $1mil??
« Reply #7 on: May 31, 2015, 06:20:13 AM »
If you spend it like crazy, then it won't be.  Plan and invest wisely, and don't spend, then it shouldn't be a problem unless something catastrophic happens.

Hey It's Me

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Re: $3mil = $1mil??
« Reply #8 on: May 31, 2015, 06:22:53 AM »
I'm not familiar with his blog, but FS advice from the few articles I've read sounds pretty poor. Here is his guide to making six figures...

http://www.financialsamurai.com/how-to-make-six-figures-income-at-almost-any-age/

Get into an Ivy and amass debt. There is no other way, folks.

KungfuRabbit

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Re: $3mil = $1mil??
« Reply #9 on: May 31, 2015, 06:35:08 AM »

big_slacker

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Re: $3mil = $1mil??
« Reply #10 on: May 31, 2015, 08:15:32 AM »
I'm not familiar with his blog, but FS advice from the few articles I've read sounds pretty poor. Here is his guide to making six figures...

http://www.financialsamurai.com/how-to-make-six-figures-income-at-almost-any-age/

Get into an Ivy and amass debt. There is no other way, folks.

From that article, lol!

"I believe $200,000 is the income level that brings maximum happiness, so even if you are already making $150,000 a year, you still have more happiness to go."

tmitchell

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Re: $3mil = $1mil??
« Reply #11 on: May 31, 2015, 09:36:52 AM »
i see people on here all the time who are living on like 20k/yr which is so hard for me to imagine. i live in Los Angeles and there's just no way that's possible, but i do think a person can get by here with 40k/yr pre-tax.

that said, wouldn't it be nice to live on 150k. that's good living.

Milizard

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Re: $3mil = $1mil??
« Reply #12 on: May 31, 2015, 09:50:19 AM »
http://www.financialsamurai.com/how-to-get-a-rich-man-to-be-your-boyfriend-or-husband/

he is garbage.  just delete.

I checked out this post just to see if there was a plug for Personal Capital worked in there somewhere.  I almost missed it, but sure enough, there was.

mozar

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Re: $3mil = $1mil??
« Reply #13 on: May 31, 2015, 11:02:16 AM »
I think its interesting from a sociological perspective, to see what someone who is deeply conservative thinks. If nothing else, it is very honest.

Cathy

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Re: $3mil = $1mil??
« Reply #14 on: May 31, 2015, 06:02:41 PM »
The point of the $3 million article is basically that inflation is real. It's not one of his deeper articles.

That said, I like Financial Samurai. I think many of the posters here don't understand him. I've read his entire corpus and a lot of his articles just take deliberately silly positions to create a discussion. The articles are often laced with sarcasm and humour. It's a much better website if you approach it charitably, which some people seem unable to do. I've noticed the same thing in the way some posters on this forum are unable to read my own posts charitably.

Financial Samurai reminds me a bit of Michael O. Church, whose posted positions are often a bit silly and as a result, he is wildly controverisal and sometimes unpopular. However, the value these writers provide isn't in the merit of their stated positions (which is often lacking, and I would assume this is somewhat intentional), but rather the value is in the interesting and thought-provoking issues that they bring up for discussion.

As for Financial Samurai's stated position on the "income for maximum happiness", which he says is $250,000, the posters above are misunderstanding what he is saying there. Basically, if you read it charitably, he is starting from the following premises:
  • Each dollar of increased income leads to a corresponding increase in happiness.
  • Earning higher incomes requires doing proportionally more work, or harder work, or more anxiety-inducing work.
  • The tax system is extremely progressive.

From these three premises, he draws the conclusion that there exists a point where it doesn't make sense to earn more income, because the more income you are earning, the more work you will be doing, and the harder that work will be, and the more anxiety you will be experiencing, but you won't even be keeping much of the money because of oppressive taxes. He says that the tipping point is $250,000, after which you shouldn't bother to earn more. (However, it's clear this is an arbitrary figure and not derived through math, because in other articles, he says $200,000, or other figures.)

I think his argument is logical -- which is to say, if you charitably fill in the blanks, the conclusion does basically follow from the premises.

As for the soundness of the premises, I think #1 is unassailable because each additional dollar earned contracts the time to retirement (and hence, expedites the trip to freedom). For that reason, most Mustachian should try to earn as much money as possible and will be happier when they do so.

Premise #2 is also basically true. Higher income jobs often require being available at all waking hours, facing tight deadlines, and generally being prepared to make the job your main focus in life. In Financial Samurai's case, he has mentioned that his base salary as a Director was over $500,000 per year, and he apparently doesn't think the level of pay was worth the stress, after factoring in the taxes. Now, it is true that these higher income jobs can involve significant downtime during the day where one can do things like browse the MMM forums, but there's still often an expectation of being available if a need does arise. Obviously there might be some high income jobs that aren't much work, but in general the pay is higher because the jobs are more involved, so I don't think we can complain too much about premise #2.

Premise #3 is probably the weakest in his argument. It's certainly controversial. I personally think taxes in the US are very high and too progressive, but most people on this forum would disagree with that contention, so I won't focus on it here. However, it's at least up for debate that there is a point where the additional work required to earn each dollar is simply not justified by the high level of taxes.

I'm not defending this argument. I am just explaining it for the benefit of the posters above who seem to have completely missed the point. In any case, you should be able to see from my explanation that this argument regarding income and happiness brings various interesting issues to the forefront for discussion. An intelligent reader will similarly read many of Financial Samurai's articles and come away with things to think about. On the other hand, if you react with "$250,000 needed for maximum happiness!? what nonsense!", you aren't going to get anything out of his website.
« Last Edit: May 31, 2015, 06:12:55 PM by Cathy »

D Bopp

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Re: $3mil = $1mil??
« Reply #15 on: June 06, 2015, 08:39:31 PM »
"If you retired today at 65 with $1 million and no Social Security, you’d only be able to spend $40,000 – $45,000 a year for 25 years until you’d run out of money".

This financial Samurai must keep all his money in a shoebox under his bed.

taekvideo

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Re: $3mil = $1mil??
« Reply #16 on: June 06, 2015, 08:49:48 PM »
lol $10 for a 6 pack of beer... madness.
Just $3 at the Walgreens 5 blocks from me ;)



"If you retired today at 65 with $1 million and no Social Security, you’d only be able to spend $40,000 – $45,000 a year for 25 years until you’d run out of money".

This financial Samurai must keep all his money in a shoebox under his bed.

I assume he means 40-45k at the start, adjusting upwards for inflation each year, which fits the 4% rule about right.

Cougar

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Re: $3mil = $1mil??
« Reply #17 on: June 07, 2015, 10:23:25 AM »
lol $10 for a 6 pack of beer... madness.
Just $3 at the Walgreens 5 blocks from me ;)



"If you retired today at 65 with $1 million and no Social Security, you’d only be able to spend $40,000 – $45,000 a year for 25 years until you’d run out of money".

This financial Samurai must keep all his money in a shoebox under his bed.

I assume he means 40-45k at the start, adjusting upwards for inflation each year, which fits the 4% rule about right.

 this guy has lost touch with reality, most of the usa lives on around 45,000 and they're not all on suicide watch.

 the goals of a mmm'er shouldnt be needing to live on 6 figures yearly for the rest of their days imo; thats a very rich person's retirement. the goals of a mmm'er should be learning to live on what you need to give you satisfaction in life and allow you to enjoy your life without having to work until youre 60 or 70.

arebelspy

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Re: $3mil = $1mil??
« Reply #18 on: June 13, 2015, 08:05:05 PM »
lol $10 for a 6 pack of beer... madness.
Just $3 at the Walgreens 5 blocks from me ;)



"If you retired today at 65 with $1 million and no Social Security, you’d only be able to spend $40,000 – $45,000 a year for 25 years until you’d run out of money".

This financial Samurai must keep all his money in a shoebox under his bed.

I assume he means 40-45k at the start, adjusting upwards for inflation each year, which fits the 4% rule about right.

Yeah, 95% of the time you wouldn't run out of money, so if he was referring to that, he was wrong, or using way over the top hyperbole.
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Cassie

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Re: $3mil = $1mil??
« Reply #19 on: June 14, 2015, 10:18:54 AM »
The 10/beer is not Bud-it is for craft beers. Here they range from about 7-10 per 6 pack.

BarkyardBQ

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Re: $3mil = $1mil??
« Reply #20 on: June 15, 2015, 10:36:04 AM »
From that article, lol!

"I believe $200,000 is the income level that brings maximum happiness, so even if you are already making $150,000 a year, you still have more happiness to go."


From these three premises, he draws the conclusion that there exists a point where it doesn't make sense to earn more income, because the more income you are earning, the more work you will be doing, and the harder that work will be, and the more anxiety you will be experiencing, but you won't even be keeping much of the money because of oppressive taxes. He says that the tipping point is $250,000, after which you shouldn't bother to earn more. (However, it's clear this is an arbitrary figure and not derived through math, because in other articles, he says $200,000, or other figures.)

I think his argument is logical -- which is to say, if you charitably fill in the blanks, the conclusion does basically follow from the premises.

Except we're all Mustachian's and know that any number that high should be immediately considered ridiculous. Studies have been done and the numbers are no where near that high, in fact it's $75,000. Let's consider this the salary version of the YMOYL "Enough Curve".

https://www.google.com/webhp?hl=en#hl=en&q=salary+for+happiness
http://www.huffingtonpost.com/2014/07/17/map-happiness-benchmark_n_5592194.html
http://blogs.wsj.com/wealth/2010/09/07/the-perfect-salary-for-happiness-75000-a-year/
http://lifehacker.com/the-perfect-salary-for-happiness-by-state-1605278164

I checked out this post just to see if there was a plug for Personal Capital worked in there somewhere.  I almost missed it, but sure enough, there was.

I have come to the conclusion that with the exception of Nord's, we should all probably refute any blogger or blog post associated with Personal Capital. Great tool, lousy advice, most of the posts are complete BS. Example: https://blog.lcapital.com/financial-planning-2/economics-pet-ownership/
« Last Edit: June 15, 2015, 10:43:39 AM by zdravé »

Cathy

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Re: $3mil = $1mil??
« Reply #21 on: June 18, 2015, 09:19:38 PM »
Except we're all Mustachian's and know that any number that high should be immediately considered ridiculous. Studies have been done and the numbers are no where near that high, in fact it's $75,000. Let's consider this the salary version of the YMOYL "Enough Curve".

The higher your income, the more you can save, and the sooner you can retire, leading to more happiness. Studies suggesting that maximum happiness occurs at any given salary only apply to consumers who spend all their money. If you save it instead, a salary of $500,000 will make you a lot happier than a salary of $75,000, other than the fact that you will probably have to do more work and pay more taxes. The combination of those factors leads to an equilibrium around $250,000, according to Financial Samurai. I already explained this in my previous post. If anything, I would claim that maximum happiness occurs at a higher figure than the one he claims; but, in any event, the idea that maximum happiness for a Mustachian occurs at a salary as low as $75,000 per year is silly. Which would make you happier: being free in 15 years or being free in 5 years?
« Last Edit: June 18, 2015, 09:21:45 PM by Cathy »

bb11

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Re: $3mil = $1mil??
« Reply #22 on: June 19, 2015, 01:15:49 PM »
i see people on here all the time who are living on like 20k/yr which is so hard for me to imagine. i live in Los Angeles and there's just no way that's possible, but i do think a person can get by here with 40k/yr pre-tax.

that said, wouldn't it be nice to live on 150k. that's good living.

It is absolutely possible. See my journal in my signature for how I live in a nice part of NYC for less than 20k per year.

Quote
The higher your income, the more you can save, and the sooner you can retire, leading to more happiness. Studies suggesting that maximum happiness occurs at any given salary only apply to consumers who spend all their money. If you save it instead, a salary of $500,000 will make you a lot happier than a salary of $75,000, other than the fact that you will probably have to do more work and pay more taxes. The combination of those factors leads to an equilibrium around $250,000, according to Financial Samurai. I already explained this in my previous post. If anything, I would claim that maximum happiness occurs at a higher figure than the one he claims; but, in any event, the idea that maximum happiness for a Mustachian occurs at a salary as low as $75,000 per year is silly. Which would make you happier: being free in 15 years or being free in 5 years?

I don't think FI date necessarily correlates with happiness all that well. More money allows more choices, but usually doesn't make you much happier after you reach subsistence level. Anyway, the idea of "maximum happiness" is pretty silly, and were such a thing possible money would only be one of many variables for it.

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Re: $3mil = $1mil??
« Reply #23 on: June 19, 2015, 01:54:40 PM »


"I believe $200,000 is the income level that brings maximum happiness, so even if you are already making $150,000 a year, you still have more happiness to go."

Is this guy in a HCOL area?  I cannot imagine a $200k salary bringing maximum happiness. In this area, a person who makes that much is a workaholic who is tied to his/her job. 

To me, happiness is tied to work/life balance, and you do not get that making that much money.

mathlete

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Re: $3mil = $1mil??
« Reply #24 on: June 19, 2015, 02:35:06 PM »
http://www.bloomberg.com/news/articles/2015-03-12/the-retirement-savings-gap-between-haves-and-have-nots-is-getting-bigger

Just remember that most people have no retirement savings at all so whether you have $1mil or $3mil you're doing just fine.

Davids

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Re: $3mil = $1mil??
« Reply #25 on: June 19, 2015, 04:27:07 PM »
I am willing to play the game and say $1.5M could be the new $1M but the whole $2M or $3M = $1M rant is crap. $1M though should be more than enough.

TomTX

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Re: $3mil = $1mil??
« Reply #26 on: June 19, 2015, 09:12:01 PM »
"If you retired today at 65 with $1 million and no Social Security, you’d only be able to spend $40,000 – $45,000 a year for 25 years until you’d run out of money".

This financial Samurai must keep all his money in a shoebox under his bed.

I poked around the site a bit, and apparently he does want you to do that. Just rely on guaranteed return. So.... like 2% from bonds. No inflation adjustment. Just expect to get $40-$45k/year for 25 years.

Dumb.

maizeman

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Re: $3mil = $1mil??
« Reply #27 on: June 20, 2015, 09:40:32 AM »
http://www.financialsamurai.com/how-to-get-a-rich-man-to-be-your-boyfriend-or-husband/

he is garbage.  just delete.

I have so many problems with that article that have absolutely nothing to do with the premise itself. Starting with the fact his idea of how to calculate the number of rich single men is to take the top 1% of tax returns 1.4 million returns, >380,000/year and divide by two, ignoring the fact that tax returns are filed on a household basis, and a big chunk of those returns (likely around 85-90%) will come from married couples each pulling down six figure salaries. For people filing taxes as single, being in the 99th percentile of income clicks in at bit less than $200,000/year. In 2012 there were 576,000 single people making more than $200,000/year and 126,000 making more than $500,000/year. Not that accurate numbers would have made that post any less skeezy...

KungfuRabbit is right, this guy is just phoning it in, while trying to push people's buttons enough generate controversy (read as "web traffic").

tooqk4u22

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Re: $3mil = $1mil??
« Reply #28 on: June 23, 2015, 11:59:40 AM »
well i do agree that being a millionaire SHOULD no longer be impressive (yet it is, because no one saves), all of his examples are crap.  who cares about most of the crap he lists.

I am willing to play the game and say $1.5M could be the new $1M but the whole $2M or $3M = $1M rant is crap. $1M though should be more than enough.

Well I think FS is completely wrong.....the term millionaire is a very old term that in "modern" day became a more common term in the late 1800's/early 1900's.....

$1mil in 1900 would be about $30mil today. 

So then $3mil is not the new $1mil.....$30mil is the new $1mil.

BarkyardBQ

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Re: $3mil = $1mil??
« Reply #29 on: June 23, 2015, 12:44:47 PM »
Except we're all Mustachian's and know that any number that high should be immediately considered ridiculous. Studies have been done and the numbers are no where near that high, in fact it's $75,000. Let's consider this the salary version of the YMOYL "Enough Curve".

The higher your income, the more you can save, and the sooner you can retire, leading to more happiness. Studies suggesting that maximum happiness occurs at any given salary only apply to consumers who spend all their money. If you save it instead, a salary of $500,000 will make you a lot happier than a salary of $75,000, other than the fact that you will probably have to do more work and pay more taxes. The combination of those factors leads to an equilibrium around $250,000, according to Financial Samurai. I already explained this in my previous post. If anything, I would claim that maximum happiness occurs at a higher figure than the one he claims; but, in any event, the idea that maximum happiness for a Mustachian occurs at a salary as low as $75,000 per year is silly. Which would make you happier: being free in 15 years or being free in 5 years?

Cathy, I love your logic, knowledge and understanding put into most of your posts, but not this one. You seem to be making the argument that a higher income immediately correlates to increased happiness, and I disagree. If you absolutely LOVE what you are doing to earn that income and you are satisfied with your commitment and you have enough time to do everything else you want... than it absolutely it applies. However, if there is any sacrifice and loss of other desires you would rather to be doing than you're happiness is taking a direct hit. You may speed up time to FI but there has be a satisfactory work/life balance or you're not increasing happiness, you're postponing it.

My personal experience... I'm about to quit my side hustle to have more free time. I currently work an additional 2-3 weekends a month to squeeze past 75k, I've been doing it for 5 years, and never did it for the money, but in the last year I have sacrificed 75% of my free time and weekends to effectively earn about $7/hour (it's more but not after YMOYL factors in with time commitment, driving, unwinding, expenses). Quitting and dropping to 70k and getting all the free time is worth more happiness than income can provide.

My wife was recently promoted with a nice raise (allowing us to hit a very nice savings rate) but now has more work she often brings work home. It's a limited amount of work, but the additional commitment is questionable. Quitting my extra job will hopefully give us enough combined free time to enjoy more happiness that those extra few hours at night are less consequential.

I'm not arguing for any specific number or than $75,000 is statistically perfect. I'm simply stating that there must be a balance between the amount of time spent working and the time permitted to do the things one would rather be doing while not earning an income. No specific number fits, if you can earn more in your own acceptable amount of time commitment than do it. Income simply buys opportunity, it's your responsibility to increase your own happiness within the parameters you are given. If you aren't happy change the parameters or the requirements.

Income != happiness