Author Topic: Why Don't the 1 Percent Feel Rich?  (Read 21940 times)

dcheesi

  • Handlebar Stache
  • *****
  • Posts: 1309
Why Don't the 1 Percent Feel Rich?
« on: April 03, 2014, 08:54:20 AM »
http://www.theatlantic.com/business/archive/2014/04/why-dont-the-1-percent-feel-rich/360061/

My favorite line:

Quote
The merely rich don't think they are rich because they aren't rentiers. They think "rich" means having the kind of aristocratic wealth that lets you quit your job and live comfortably off your interest income alone.
[emphasis mine]

I knew MMM was a badass, but who knew he was also an aristocrat?!


warfreak2

  • Handlebar Stache
  • *****
  • Posts: 1136
  • Location: UK
    • Music by me
Re: Why Don't the 1 Percent Feel Rich?
« Reply #1 on: April 03, 2014, 09:40:30 AM »
Uh... he has a moustache. Obviously he's an aristocrat.

randymarsh

  • Handlebar Stache
  • *****
  • Posts: 1369
  • Location: Denver
Re: Why Don't the 1 Percent Feel Rich?
« Reply #2 on: April 03, 2014, 09:52:09 AM »
The 1% think they're poor because they spend all their income on things they think are necessities. They've been brainwashed into thinking that their expensive cars, homes, preschools, vacations, boats, nannies, gardeners, etc. are actually required expenses.

I read an article similar to this one where a rich person declared you're not middle class if your kids don't go to private school. WTF.
« Last Edit: April 03, 2014, 10:31:36 AM by thefinancialstudent »

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 23129
  • Age: 42
  • Location: Toronto, Ontario, Canada
Re: Why Don't the 1 Percent Feel Rich?
« Reply #3 on: April 03, 2014, 09:53:44 AM »
Quote
You try living on $350,000 a year when you have to pay taxes, the mortgage on the house in a tony zip code, the nanny who knows how to cook ethnic cuisine, the private school tuition from pre-K on, the appropriately exclusive vacation, and max out your retirement and college savings accounts.

Deal.


Provide me with 350,000$ a year, and I will attempt to live on it.

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4929
Re: Why Don't the 1 Percent Feel Rich?
« Reply #4 on: April 03, 2014, 09:56:17 AM »
Quote
You try living on $350,000 a year when you have to pay taxes, the mortgage on the house in a tony zip code, the nanny who knows how to cook ethnic cuisine, the private school tuition from pre-K on, the appropriately exclusive vacation, and max out your retirement and college savings accounts.

Deal.


Provide me with 350,000$ a year, and I will attempt to live on it.
I plan to pay for private school but that means not maxing out the retirement account and working longer to pay for college.  People seem to not want to make choices.

SnackDog

  • Handlebar Stache
  • *****
  • Posts: 1260
  • Location: Latin America
Re: Why Don't the 1 Percent Feel Rich?
« Reply #5 on: April 03, 2014, 10:01:24 AM »
$350,000 is the entry point to the 1%.   The other end is Bill Gates.  Lots in between.

dcheesi

  • Handlebar Stache
  • *****
  • Posts: 1309
Re: Why Don't the 1 Percent Feel Rich?
« Reply #6 on: April 03, 2014, 11:11:36 AM »
The 1% think they're poor because they spend all their income on things they think are necessities. They've been brainwashed into thinking that their expensive cars, homes, preschools, vacations, boats, nannies, gardeners, etc. are actually required expenses.

I read an article similar to this one where a rich person declared you're not middle class if your kids don't go to private school. WTF.
Part of the problem is that they hang around with other one-percenters. People judge their wealth  and success in relative terms, so if your social circle is full of people with luxury yachts, you feel like you're falling behind if you can't easily afford one as well (and the only way to prove otherwise is to buy one!).

Forcus

  • Pencil Stache
  • ****
  • Posts: 714
  • Location: Central Illinois
Re: Why Don't the 1 Percent Feel Rich?
« Reply #7 on: April 03, 2014, 11:43:18 AM »
I just skimmed the article but it looks like it comes down to the classic income does not equal wealth (or in business terms, revenue does not equal profitability). I am not surprised that even high income earners struggle with this based on my interactions with people of all incomes.

Jamesqf

  • Magnum Stache
  • ******
  • Posts: 4038
Re: Why Don't the 1 Percent Feel Rich?
« Reply #8 on: April 03, 2014, 12:02:44 PM »
$350,000 is the entry point to the 1%.   The other end is Bill Gates.  Lots in between.

There's another point: I have... oh, about twice that $350K entry point in investments, and could* live quite comfortably on the income.  Which makes me one of those aristocratic rentiers too, n'est ce pas?  While the guy who earns $350K per year, but spends $351K, is just another debt-ridden working slob :-)


*Though I choose to work.

La Bibliotecaria Feroz

  • Walrus Stache
  • *******
  • Posts: 7124
Re: Why Don't the 1 Percent Feel Rich?
« Reply #9 on: April 03, 2014, 12:05:48 PM »
Sounds like the old difference between "wealth" and "stuff." All they have is stuff, no security--I've just started reading The Millionaire Next Door and it's the same idea. They don't feel rich... because they aren't. Because of their own choices and expectations.

hybrid

  • Handlebar Stache
  • *****
  • Posts: 1688
  • Age: 57
  • Location: Richmond, Virginia
  • A hybrid of MMM and thoughtful consumer.
Re: Why Don't the 1 Percent Feel Rich?
« Reply #10 on: April 03, 2014, 12:21:53 PM »
I think it is very difficult for most people to look down from 20,000 feet and see their place in the world.

 

CarDude

  • Pencil Stache
  • ****
  • Posts: 609
  • Location: Chicago, IL
  • Beep Beep!
    • The CCD
Re: Why Don't the 1 Percent Feel Rich?
« Reply #11 on: April 03, 2014, 03:38:06 PM »
The 1% think they're poor because they spend all their income on things they think are necessities. They've been brainwashed into thinking that their expensive cars, homes, preschools, vacations, boats, nannies, gardeners, etc. are actually required expenses.

I read an article similar to this one where a rich person declared you're not middle class if your kids don't go to private school. WTF.
Part of the problem is that they hang around with other one-percenters. People judge their wealth  and success in relative terms, so if your social circle is full of people with luxury yachts, you feel like you're falling behind if you can't easily afford one as well (and the only way to prove otherwise is to buy one!).

Yes, remember Westchester Frugal. She didn't feel they were spending that much, because all her friends also were country club members with golf course sized lawns, Audis and children in prep school. She wasn't nuts. We benchmark ourselves against our friends, and view them as normal.

Exactly. Which is why I surround myself with people far worse off than I am!

rocksinmyhead

  • Handlebar Stache
  • *****
  • Posts: 1489
  • Location: Oklahoma
Re: Why Don't the 1 Percent Feel Rich?
« Reply #12 on: April 04, 2014, 06:45:29 AM »
The 1% think they're poor because they spend all their income on things they think are necessities. They've been brainwashed into thinking that their expensive cars, homes, preschools, vacations, boats, nannies, gardeners, etc. are actually required expenses.

I read an article similar to this one where a rich person declared you're not middle class if your kids don't go to private school. WTF.
Part of the problem is that they hang around with other one-percenters. People judge their wealth  and success in relative terms, so if your social circle is full of people with luxury yachts, you feel like you're falling behind if you can't easily afford one as well (and the only way to prove otherwise is to buy one!).

Yes, remember Westchester Frugal. She didn't feel they were spending that much, because all her friends also were country club members with golf course sized lawns, Audis and children in prep school. She wasn't nuts. We benchmark ourselves against our friends, and view them as normal.

Exactly. Which is why I surround myself with people far worse off than I am!

I don't do it on purpose, but I think it actually does help that most of my friends make less than me. and are generally non-materialistic people. no keeping up with the Joneses around here!

golden1

  • Handlebar Stache
  • *****
  • Posts: 1541
  • Location: MA
Re: Why Don't the 1 Percent Feel Rich?
« Reply #13 on: April 04, 2014, 12:30:46 PM »
A year ago or so,  I read the book Plutocrats by Christia Freeland.  It was an eye opener, for sure.  Income inequality really kicks in in the 0.1-1% range so when you run in the circles of the obscenely rich, what you have looks inadequate compared to others in your social circle, even more than with the middle class or upper middle class.   

anisotropy

  • Pencil Stache
  • ****
  • Posts: 681
Re: Why Don't the 1 Percent Feel Rich?
« Reply #14 on: April 04, 2014, 03:34:14 PM »
$350,000 is the entry point to the 1%.   The other end is Bill Gates.  Lots in between.

$350,000 Net (after all taxes and expenses) is the entry point to the 1%, not gross, nor AGI.

Albert

  • Handlebar Stache
  • *****
  • Posts: 1244
  • Location: Switzerland
Re: Why Don't the 1 Percent Feel Rich?
« Reply #15 on: April 04, 2014, 04:27:13 PM »
Actually they are right. 350,000 a year is of course a lot of money and one could get to FI really quickly by living at least "halfmustachian" lifestyle, but it's not a real wealth. It is not enough to acquire any real influence (over others not yourself).

Shor

  • Bristles
  • ***
  • Posts: 478
  • Location: Orange County, CA, USA
Re: Why Don't the 1 Percent Feel Rich?
« Reply #16 on: April 04, 2014, 07:48:55 PM »
Actually they are right. 350,000 a year is of course a lot of money and one could get to FI really quickly by living at least "halfmustachian" lifestyle, but it's not a real wealth. It is not enough to acquire any real influence (over others not yourself).
Hmm... because when you have obscene amounts of money, clearly your best and only course of action is that you need to influence others to do obscene and immoral things which will then defend your obscene lifestyle.

The only reason rich people couldn't fathom living with less is because they are just as human as you and I, and as such get all riled up over security, emotions, and social pressure. Different circles, but same old story of someone being judgmental of others to prop oneself up.

In the end we're all just meatbags with very squishy organs.

Albert

  • Handlebar Stache
  • *****
  • Posts: 1244
  • Location: Switzerland
Re: Why Don't the 1 Percent Feel Rich?
« Reply #17 on: April 05, 2014, 04:43:07 AM »
Actually they are right. 350,000 a year is of course a lot of money and one could get to FI really quickly by living at least "halfmustachian" lifestyle, but it's not a real wealth. It is not enough to acquire any real influence (over others not yourself).
Hmm... because when you have obscene amounts of money, clearly your best and only course of action is that you need to influence others to do obscene and immoral things which will then defend your obscene lifestyle.

No, but it's the most human course of action. Power is addictive for our kind... Not everyone desires it, but very few can renounce it when they already have it.

WorkingOnIt

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: Why Don't the 1 Percent Feel Rich?
« Reply #18 on: April 05, 2014, 05:27:18 PM »
Ok .. I'm new to this forum .. and this so far has been my favorite part of the MMM forum ! Too funny.

BUT ... Let's just discuss those who are **just** in the top 1% - those earning 343K AGI. 

This is not living a MMM lifestyle but ....
- Saving 2K/mo for college (multiple kids) public colleges
- having a 400K house
- No private school for kids
- Paid for 8K cars
- health insurance
- taxes
- charity
- maxing out IRA and 401k (you have to count some 401k - as these people pay alt min taxes ...
- savings


There are 2 sides here
-- 343K doesn't stretch as far as people imagine .. by a long shot
-- It is STILL A LOT of $$, and no one should complain (but I don't think that is what some of these articles are really talking about)

Maybe these people are really just saying .. that "wow I thought when I got to earning this much -- I'd feel RICH .. and after saving etc (they should be saving at least 1/2) ... they just feel "well off" .. I think that is more the point. It is surprising how much is "needed" to feel "rich" .. (thanks to TV, movies etc).  Americans just have it TOO easy.

I've been in the bottom %'s (earning about 30K a year) .. I'm surprised too how the top 1% doesn't feel as big as my dreams were when I was a kid ...

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4929
Re: Why Don't the 1 Percent Feel Rich?
« Reply #19 on: April 05, 2014, 06:15:44 PM »
Ok .. I'm new to this forum .. and this so far has been my favorite part of the MMM forum ! Too funny.

BUT ... Let's just discuss those who are **just** in the top 1% - those earning 343K AGI. 

This is not living a MMM lifestyle but ....
- Saving 2K/mo for college (multiple kids) public colleges
- having a 400K house
- No private school for kids
- Paid for 8K cars
- health insurance
- taxes
- charity
- maxing out IRA and 401k (you have to count some 401k - as these people pay alt min taxes ...
- savings


There are 2 sides here
-- 343K doesn't stretch as far as people imagine .. by a long shot
-- It is STILL A LOT of $$, and no one should complain (but I don't think that is what some of these articles are really talking about)

Maybe these people are really just saying .. that "wow I thought when I got to earning this much -- I'd feel RICH .. and after saving etc (they should be saving at least 1/2) ... they just feel "well off" .. I think that is more the point. It is surprising how much is "needed" to feel "rich" .. (thanks to TV, movies etc).  Americans just have it TOO easy.

I've been in the bottom %'s (earning about 30K a year) .. I'm surprised too how the top 1% doesn't feel as big as my dreams were when I was a kid ...
I think most people earning that amount put their kids in private school.  I went to private school and the parents (with a couple exceptions) made less (max of $250,000) so I doubt the higher earns are not doing it.

CarDude

  • Pencil Stache
  • ****
  • Posts: 609
  • Location: Chicago, IL
  • Beep Beep!
    • The CCD
Re: Why Don't the 1 Percent Feel Rich?
« Reply #20 on: April 05, 2014, 09:26:51 PM »
^ It's like that principle about the time to complete a task expanding to fill the time available to complete it. I don't make (or need) 100k a year, but I could figure out a way to spend it quickly enough; ditto at the 1M mark or even the 1B mark. In the end, we're still mortal, and throw ever-increasing sums of money against that ultimate barrier as we accumulate more.

Albert

  • Handlebar Stache
  • *****
  • Posts: 1244
  • Location: Switzerland
Re: Why Don't the 1 Percent Feel Rich?
« Reply #21 on: April 06, 2014, 05:29:09 AM »
Another factor is that to make so much money you very likely would have to live in a very expensive area (or have a very long commute).

There are a lot of households here in Switzerland making that much or more including few of my coworkers. They find a way to spend most of it even considering that there are hardly any private schools here, college is almost for free and the fanciest health insurance won't be more than 7-8k a year.

capital

  • Bristles
  • ***
  • Posts: 454
Re: Why Don't the 1 Percent Feel Rich?
« Reply #22 on: April 06, 2014, 01:40:23 PM »
The other thing is that most of the top 1% hasn't seen a particularly large increase in wealth in the past 50 years or so:
http://equitablegrowth.org/2014/03/29/2434/evening-must-read-emmanuel-saez-and-gabriel-zucman-measuring-american-wealth-inequality-at-the-top
It's mostly, rather, the real oligarchs in the top .1% and higher that have seen their wealth rocket ever-higher. And if you're in the top 1%, you might well live and work in NYC or coastal California, and see the very rich bid up high-end status symbols like luxury real estate and feel like you're being left behind. My income apparently puts me in the 97th percentile of single Americans, but living in NYC and seeing the truly rich cavort and seeing real estate prices rocket ever-upward, it takes a lot of effort to maintain that perspective.

zataks

  • Bristles
  • ***
  • Posts: 348
  • Location: Silicon Valley
Re: Why Don't the 1 Percent Feel Rich?
« Reply #23 on: April 07, 2014, 11:40:48 AM »
My income apparently puts me in the 97th percentile of single Americans, but living in NYC and seeing the truly rich cavort and seeing real estate prices rocket ever-upward, it takes a lot of effort to maintain that perspective.

This is something I'm learning/coming to terms with.  My GF and I have a combined household income that puts us in the top 5% or so of American household incomes.  Living in Silicon Valley, there is fantastic wealth here that makes it easy to lose perspective on how much I earn.  This website helps with that a lot though.  And I go, "Hey me, take a face punch and take happiness and saving over feelings of insufficiency and debt."  And I'm starting to feel like I am not poor.  Which is a great feeling.

warfreak2

  • Handlebar Stache
  • *****
  • Posts: 1136
  • Location: UK
    • Music by me
Re: Why Don't the 1 Percent Feel Rich?
« Reply #24 on: April 07, 2014, 12:30:06 PM »
My income apparently puts me in the 97th percentile of single Americans, but living in NYC and seeing the truly rich cavort and seeing real estate prices rocket ever-upward, it takes a lot of effort to maintain that perspective.

If you don't count yourself among the "truly rich" then I recommend rethinking your perspective; a better descriptor for the people you're talking about might be "relatively richer". You're in the 97th income percentile of one of the richest countries in the world.

I'm somewhere around the 15th-20th income percentile in the UK (by choice). But my girlfriend is Polish, and she (correctly, although not literally) facepunches me when I occasionally describe some people as "not rich, really". Minimum wage in Poland is about 30% of what it is here, and Poland is a first-world country. By the UK's standards I am poor, but I think I am very well off; I struggle to describe myself as rich, but if there is an objective test of richness, I surely meet it.

Capsu78

  • Pencil Stache
  • ****
  • Posts: 765
  • Location: Chicagoland
Re: Why Don't the 1 Percent Feel Rich?
« Reply #25 on: April 07, 2014, 04:00:51 PM »


This is something I'm learning/coming to terms with.  My GF and I have a combined household income that puts us in the top 5% or so of American household incomes.  Living in Silicon Valley, there is fantastic wealth here that makes it easy to lose perspective on how much I earn.  This website helps with that a lot though.  And I go, "Hey me, take a face punch and take happiness and saving over feelings of insufficiency and debt."  And I'm starting to feel like I am not poor.  Which is a great feeling.
[/quote]

Zataks,
I always knew I would live in a Million $ house... I just didn't think it would be that crappy one that that backed up to the freeway in Fremont that we paid $176,000 for in 1986!  I loved my Bay Area years, but having had multiple opportunities to move back, none of my California born kids or wife have any desire to... (and my kids have many fewer tattoo's that the kids they once went to daycare with.)
We are close to 1%ers for 3 years in a row now, but that is on the shoulders of having great sales performance in a desireable technology field...an income that would drop immediately if sales slumped, and a position that would be lost if one could not meet minimum performance standards.  There are no guarantees, and try to pattern our lifestyles accordingly.
We do not consider ourselves rich, but fortunate to be able to live an upper middle class lifestyle- public colleges for the kids, weddings we could afford, same house for 23 years.  Too often, I find folks focus on "what is rich" and "what is poor", and don't stop to consider "what is enough".     

anisotropy

  • Pencil Stache
  • ****
  • Posts: 681
Re: Why Don't the 1 Percent Feel Rich?
« Reply #26 on: April 07, 2014, 05:03:47 PM »


"what is enough".   

I really liked that comic arebelspy (i want some things) linked.

It's never enough :)

We are spending our prime time in life (both 30) slaving instead of perma-vacation because of N reasons:

N > 0
1) we dont have enough
2) we dont have enough
3) we dont have enough
4) ....
.
.
.
N) we dont have enough

CarDude

  • Pencil Stache
  • ****
  • Posts: 609
  • Location: Chicago, IL
  • Beep Beep!
    • The CCD
Re: Why Don't the 1 Percent Feel Rich?
« Reply #27 on: April 07, 2014, 06:42:05 PM »
I am so, so glad I married someone from a poor country, though that was hardly the reason at the time. I asked my husband how he'd feel about having a baby while living in a studio and he looked at me like I was nuts and pointed out his entire family shared a BED until he was 10. He just has much lower material expectations.

Very well put.

dragoncar

  • Walrus Stache
  • *******
  • Posts: 9923
  • Registered member
Re: Why Don't the 1 Percent Feel Rich?
« Reply #28 on: April 07, 2014, 06:44:02 PM »
Yep, because they are still wage slaves. 

Jamesqf

  • Magnum Stache
  • ******
  • Posts: 4038
Re: Why Don't the 1 Percent Feel Rich?
« Reply #29 on: April 07, 2014, 10:54:30 PM »
Minimum wage in Poland is about 30% of what it is here, and Poland is a first-world country.

Since when?  I think Poland counts as a second-world country: one of the former Soviet Bloc countries still recovering from the effects of Communism.

dragoncar

  • Walrus Stache
  • *******
  • Posts: 9923
  • Registered member
Re: Why Don't the 1 Percent Feel Rich?
« Reply #30 on: April 07, 2014, 11:21:33 PM »
Minimum wage in Poland is about 30% of what it is here, and Poland is a first-world country.

Since when?  I think Poland counts as a second-world country: one of the former Soviet Bloc countries still recovering from the effects of Communism.

Ha!  That's a pet peeve of mine too.  Although it more often arises when someone describes some second-world country as a third-world country.

edit: although those former Soviet Bloc countries are embracing capitalism and democracy more these days, no?  Does that make them former-second-world?
« Last Edit: April 07, 2014, 11:24:58 PM by dragoncar »

Rich M

  • Stubble
  • **
  • Posts: 191
  • Location: Boulder, CO
  • Fortune Kookie

The Happy Philosopher

  • Bristles
  • ***
  • Posts: 342
    • thehappyphilosopher
Re: Why Don't the 1 Percent Feel Rich?
« Reply #32 on: April 08, 2014, 12:21:14 AM »
There are several reasons why the lower sliver of the 1% don't feel rich...or at least feel like they should be richer than they are.

1. Taxes. Go to turbotax and put in 100k and a couple kids vs. 400k and a couple kids. I get 6500 vs 104000 in federal taxes.  With 401k, ira, etc. the 100k couple can pay minimal tax whereas there is nowhere to hide from federal tax when you have 300-400k w2 income.  State taxes are usually progressive as well which further equalize.

2. Age.  Many people in this demographic have advanced degrees (law, medicine, etc.) and get a later start in the workforce. All being equal they need to save more of their income to retire at the same age of a person starting in the workforce right out of college, trade school, etc.  They oftentimes have more student loan debt to service as well.

3. Workload and outsourcing.  Many high paying jobs are high paying because one has to take call, work nights and weekends, etc.  This leads to less opportunity to learn other skills and less free time overall leading to more outsourcing of wants and needs.

4. Peer pressure.  Rich people hang out with other rich people so spending crazy amounts of money seems normal.  This is the easiest one to battle, all you have to do is read MMM! Seriously though, it takes much more willpower to spend 40k a year when you are making 400k than if you are making 60k.  Your hourly wage is so much higher that it become a psychological battle to talk yourself out of a latte from starbucks. If you are making $240/hr then that $4 drink is literally 1 minute of your time.

I'm not saying these people don't have crazy amounts of money; but after taxes, retirement savings and debt servicing it is less than one might assume just looking at income.


warfreak2

  • Handlebar Stache
  • *****
  • Posts: 1136
  • Location: UK
    • Music by me
Re: Why Don't the 1 Percent Feel Rich?
« Reply #33 on: April 08, 2014, 12:13:36 PM »
Minimum wage in Poland is about 30% of what it is here, and Poland is a first-world country.

Since when?  I think Poland counts as a second-world country: one of the former Soviet Bloc countries still recovering from the effects of Communism.
Well, there's no formal definition of a "first-world country", so you can make the case either way. Most of the arguments for it being a second-world country seem to be based on its history, though, rather than its present economic conditions. But just to avoid terms that are too vague and ambiguous, substitute "clearly-not-poor" for "first-world".

Wikipedia does have it as a second-world country. However, it's well within the top 1/3 of countries by GDP per capita, and the UN Development Program has it on the list of "very high human development" countries, so there's that.

Philbert

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: Why Don't the 1 Percent Feel Rich?
« Reply #34 on: April 08, 2014, 01:41:03 PM »
Sounds like the old difference between "wealth" and "stuff." All they have is stuff, no security--I've just started reading The Millionaire Next Door and it's the same idea. They don't feel rich... because they aren't. Because of their own choices and expectations.

This article reminded me of TMND, too. People who make a lot of money often choose to live in a high-income neighborhood, where they have the need to keep up with the Joneses. Getting the right car, the right clothes, etc. And soon enough, there goes their money. It's amazing how many 1%ers are living paycheck to paycheck just to compete with each other and maintain a certain image. Plus, as others here have pointed out, high earners get stuck with high taxes, so they aren't even starting out with $350k. 

(And here's where I'll plug The Millionaire Next Door again because it's a great book!)

HopetoFIRE

  • 5 O'Clock Shadow
  • *
  • Posts: 38
Re: Why Don't the 1 Percent Feel Rich?
« Reply #35 on: April 09, 2014, 06:08:32 PM »
There are several reasons why the lower sliver of the 1% don't feel rich...or at least feel like they should be richer than they are.

1. Taxes. Go to turbotax and put in 100k and a couple kids vs. 400k and a couple kids. I get 6500 vs 104000 in federal taxes.  With 401k, ira, etc. the 100k couple can pay minimal tax whereas there is nowhere to hide from federal tax when you have 300-400k w2 income.  State taxes are usually progressive as well which further equalize.

2. Age.  Many people in this demographic have advanced degrees (law, medicine, etc.) and get a later start in the workforce. All being equal they need to save more of their income to retire at the same age of a person starting in the workforce right out of college, trade school, etc.  They oftentimes have more student loan debt to service as well.

3. Workload and outsourcing.  Many high paying jobs are high paying because one has to take call, work nights and weekends, etc.  This leads to less opportunity to learn other skills and less free time overall leading to more outsourcing of wants and needs.

4. Peer pressure.  Rich people hang out with other rich people so spending crazy amounts of money seems normal.  This is the easiest one to battle, all you have to do is read MMM! Seriously though, it takes much more willpower to spend 40k a year when you are making 400k than if you are making 60k.  Your hourly wage is so much higher that it become a psychological battle to talk yourself out of a latte from starbucks. If you are making $240/hr then that $4 drink is literally 1 minute of your time.

I'm not saying these people don't have crazy amounts of money; but after taxes, retirement savings and debt servicing it is less than one might assume just looking at income.

I agree with the above comment.  I guess we are in the top 1% if the definition is AGI > $350000.  Taxes take a big chunk out of your earnings.  I got my bonus last year and had 45% taken out for taxes.  My withholding is already the max that it could be.  Surely, I was due for refund.  Well, turns out I owe an additional $4k in taxes.    Our expenses include $2k for daycare and $1k for student loans right off the bat.  Not because we want to put them in fancy schools, but just because both of us work.  We do live in a nice house,which is by choice, but still very affordable for our income.  The one thing I could care less about is keeping up with people who earn the same amount we do (DH tends to care a bit more).  Not complaining about our income at all because I know we are very fortunate in the financial sense.  However, I don't feel rich in a sense that I can buy whatever we want whenever we want.  We are trying to make the best decisions we can now with our money because this opportunity may not last forever.

warfreak2

  • Handlebar Stache
  • *****
  • Posts: 1136
  • Location: UK
    • Music by me
Re: Why Don't the 1 Percent Feel Rich?
« Reply #36 on: April 09, 2014, 06:21:19 PM »
However, I don't feel rich in a sense that I can buy whatever we want whenever we want.
I don't think anyone will ever be this rich, because they will always think of more expensive things to want. (Some people resist lifestyle inflation and can be happy with only modest wants, of course, but those people aren't generally chasing the $MM+ incomes.) Even Bill Gates can't buy whatever he wants whenever he wants, because what he wants to buy is a global end to poverty.

HopetoFIRE

  • 5 O'Clock Shadow
  • *
  • Posts: 38
Re: Why Don't the 1 Percent Feel Rich?
« Reply #37 on: April 09, 2014, 06:44:44 PM »
However, I don't feel rich in a sense that I can buy whatever we want whenever we want.
I don't think anyone will ever be this rich, because they will always think of more expensive things to want. (Some people resist lifestyle inflation and can be happy with only modest wants, of course, but those people aren't generally chasing the $MM+ incomes.) Even Bill Gates can't buy whatever he wants whenever he wants, because what he wants to buy is a global end to poverty.

I agree with what you are saying.  However, I mean things that some middle class people have, I can't even justify.  I can't justify spending $40 for a smartphone plan, $40k for a car, etc.  I'm not talking about a seaside second home In Hawaii or anything like that.  We are still very mindful about how we spend for everyday things.  If I felt that we were "rich", I probably would not even blink an eye when purchasing those things.  I understand that the term is very relative.

brewer12345

  • Handlebar Stache
  • *****
  • Posts: 1381
Re: Why Don't the 1 Percent Feel Rich?
« Reply #38 on: April 09, 2014, 07:35:26 PM »
Another factor is that to make so much money you very likely would have to live in a very expensive area (or have a very long commute).

+1.

I was in the 1% income wise for a single, solitary year.  I took a job as a hedge fund analyst in Greenwich.  One of the problems was that I lived in a plebian/middle class area of central NJ.  Could I comfortably afford a house within reasonable commuting distance of my place of work?  Um, no.  Part of my boss's directions on how to get somewhere in the area were, "if you are not passing houses so big they appear to be hotels, you have made a wrong turn."  Smallish hedge funds being what they are, I also did not know how long the job would last (3.5 years, as it turned out).  So I had no other realistic choice but to commute, 70 miles each way through NJ, the Bronx (I know all the ways to sneak onto the GWB without sitting in line), Westchester and Greenwich.  Traffic was, in a word, horrible.  I partially coped by rolling out of bed at 4:45 every morning, filling my coffee mug, and driving up there to hit the gym and shower.  Coming home I took the nightly beating.  Even though I was making more money than I had ever seen and getting absolutely cornholed by the tax code, I was the poor relation.  I can vividly remember going into a local store on Greenwich Ave to try to buy some leads for my mechanical pencil and being first followed by a member of the staff and then treated like I was homeless when I showed them my pencil and asked if they carried leads (nope).  This was in a year when my household income crested 400k.  As a fishmonger's son, I never cared or chose to get into the status game with the people around me near work, but if you were trying to fit in or look special it would have taken an absurd amount of money every single year.  When the job went away after a few years, it was a relief in more ways than one althoughh the timing could have been better (august '08).

paddedhat

  • Handlebar Stache
  • *****
  • Posts: 2228
Re: Why Don't the 1 Percent Feel Rich?
« Reply #39 on: April 10, 2014, 06:47:26 AM »
Interesting. During our last holiday gathering I got talking to a slightly younger (late 30s) cousin who I have a deep respect for.  She climbed her way back from being a junkie, to being a VP of a mid-sized consulting firm in the Chicago area. She not only expressed a lot of what was said here about how you can't be "rich" and keep up with the other 1%ers, but as many note, once you are in the prime of your career and in that position, the company owns your soul. It's no longer a job, but a sentence.

In closing the conversation, she noted that she had spent hours with many other women at her high school reunion. She walked away, deeply affected by the reality that when she really drilled hard into the current lives of long lost friends, the ones that became a post "man" or a secretary at the local manufacturing plant, are obviously far more satisfied, and "complete" when compared to herself and the other execs, at work.

This reflects another experience in my career. I spent roughly 15 years as a part time project manager, doing planning and supervision of volunteer "team building and community service" construction projects, for a large financial institution. This often involved spending a week with a diverse cross section of the employee pool, but it always included five or six senior execs. Sadly, once you get to know these guys pretty well, I think it's safe to say that the majority live a fairly unhappy and even pathetic existence. Issues like radically dysfunctional families, the complete inability/unwillingness to work well with their lower level people, and a single minded drive to line their own pockets, are all pretty common. I walked away, well aware that in general, it's not a case of me being uncomfortable with interacting with the 1%, it's more a case of having little respect for what they allow themselves to become.
« Last Edit: April 11, 2014, 06:11:55 AM by paddedhat »

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: Why Don't the 1 Percent Feel Rich?
« Reply #40 on: April 27, 2014, 05:31:03 PM »
There are several reasons why the lower sliver of the 1% don't feel rich...or at least feel like they should be richer than they are.

1. Taxes. Go to turbotax and put in 100k and a couple kids vs. 400k and a couple kids. I get 6500 vs 104000 in federal taxes.  With 401k, ira, etc. the 100k couple can pay minimal tax whereas there is nowhere to hide from federal tax when you have 300-400k w2 income.  State taxes are usually progressive as well which further equalize.

2. Age.  Many people in this demographic have advanced degrees (law, medicine, etc.) and get a later start in the workforce. All being equal they need to save more of their income to retire at the same age of a person starting in the workforce right out of college, trade school, etc.  They oftentimes have more student loan debt to service as well.

3. Workload and outsourcing.  Many high paying jobs are high paying because one has to take call, work nights and weekends, etc.  This leads to less opportunity to learn other skills and less free time overall leading to more outsourcing of wants and needs.

4. Peer pressure.  Rich people hang out with other rich people so spending crazy amounts of money seems normal.  This is the easiest one to battle, all you have to do is read MMM! Seriously though, it takes much more willpower to spend 40k a year when you are making 400k than if you are making 60k.  Your hourly wage is so much higher that it become a psychological battle to talk yourself out of a latte from starbucks. If you are making $240/hr then that $4 drink is literally 1 minute of your time.

I'm not saying these people don't have crazy amounts of money; but after taxes, retirement savings and debt servicing it is less than one might assume just looking at income.

Good stuff, frugaldoc. We're toward the bottom of the top 1% on income -- not there yet on net worth.

My wife and I don't feel "rich" but we do feel very blessed and very abundant. I honestly don't use the term "rich." It's so subjective.

On your #4 I can assure you this is the easiest one to battle. Yes, my wife and I belong to an expensive health club (FACEPUNCH!). Yes, we have lawn mowing and cleaning services (small face punch -- we both work full time, have a toddler and a dog). Yes, I bought her a new Lexus last summer (HUGE F'ING FACE PUNCH! This was before I "discovered" MMM. I won't sell the car and constantly remind her to take great care of it because she will own it for at least 15 years before we give it to our daughter who will then be 18.

We still saved 50% of net income last year. So clearly we're practicing some good old fashioned MMM'ing. Catch be on my bike, yo. I'm an introvert, which helps.

And to your #1, we gave a FUCK LOAD to the Fed government and to California. When I drive on the roads and they're bumpy as shit, take the BART and it smells like piss, look at school ratings which suck ---- I go back and focus on how blessed my wife and I are.

Mt9982

  • 5 O'Clock Shadow
  • *
  • Posts: 25
Re: Why Don't the 1 Percent Feel Rich?
« Reply #41 on: June 04, 2014, 03:56:32 PM »
Quote
You try living on $350,000 a year when you have to pay taxes, the mortgage on the house in a tony zip code, the nanny who knows how to cook ethnic cuisine, the private school tuition from pre-K on, the appropriately exclusive vacation, and max out your retirement and college savings accounts.

Deal.


Provide me with 350,000$ a year, and I will attempt to live on it.

Keep in mind you'll have 180k after tax in New York.  If you have two kids in private school in New York (40k a year) you're now down to 100k.  A decent two bedroom will run you 5k a month so 60k a year.   Now you have 40k left.  Dining out?  A car?  Parking is at least 500 a month.  Vacation? 

See you aren't rich. 

randymarsh

  • Handlebar Stache
  • *****
  • Posts: 1369
  • Location: Denver
Re: Why Don't the 1 Percent Feel Rich?
« Reply #42 on: June 04, 2014, 07:34:52 PM »
Quote
You try living on $350,000 a year when you have to pay taxes, the mortgage on the house in a tony zip code, the nanny who knows how to cook ethnic cuisine, the private school tuition from pre-K on, the appropriately exclusive vacation, and max out your retirement and college savings accounts.

Deal.


Provide me with 350,000$ a year, and I will attempt to live on it.

Keep in mind you'll have 180k after tax in New York.  If you have two kids in private school in New York (40k a year) you're now down to 100k.  A decent two bedroom will run you 5k a month so 60k a year.   Now you have 40k left.  Dining out?  A car?  Parking is at least 500 a month.  Vacation? 

See you aren't rich.

Why do you need a car in NY(C, I assume)?

I've mentioned it before, but this is classic rich person "I want all my money after I spend it on nice things!".

Your example family has made choices. They've chosen to live in one of the most expensive cities in the world. They've chosen to send their kids to private school.

I know housing prices in places like NYC and San Francisco have reached the stratosphere, but people need to stop expecting the big city lifestyle they see on TV. The city itself is what you're paying for, so you might have to cut back on other things.

Families like this are more than welcome to move to the midwest where nice family homes are 150K, public schools are good, and parking is abundant. If they can earn 350K in NY I'm sure they can earn 150K here, unless they're managing hedge funds.

dragoncar

  • Walrus Stache
  • *******
  • Posts: 9923
  • Registered member
Re: Why Don't the 1 Percent Feel Rich?
« Reply #43 on: June 04, 2014, 07:55:42 PM »
Quote
You try living on $350,000 a year when you have to pay taxes, the mortgage on the house in a tony zip code, the nanny who knows how to cook ethnic cuisine, the private school tuition from pre-K on, the appropriately exclusive vacation, and max out your retirement and college savings accounts.

Deal.


Provide me with 350,000$ a year, and I will attempt to live on it.

Keep in mind you'll have 180k after tax in New York.  If you have two kids in private school in New York (40k a year) you're now down to 100k.  A decent two bedroom will run you 5k a month so 60k a year.   Now you have 40k left.  Dining out?  A car?  Parking is at least 500 a month.  Vacation? 

See you aren't rich.

Why do you need a car in NY(C, I assume)?

I've mentioned it before, but this is classic rich person "I want all my money after I spend it on nice things!".

Your example family has made choices. They've chosen to live in one of the most expensive cities in the world. They've chosen to send their kids to private school.

I know housing prices in places like NYC and San Francisco have reached the stratosphere, but people need to stop expecting the big city lifestyle they see on TV. The city itself is what you're paying for, so you might have to cut back on other things.

Families like this are more than welcome to move to the midwest where nice family homes are 150K, public schools are good, and parking is abundant. If they can earn 350K in NY I'm sure they can earn 150K here, unless they're managing hedge funds.

I'm pretty sure that was meant as satire.

Workinghard

  • Pencil Stache
  • ****
  • Posts: 636
Re: Why Don't the 1 Percent Feel Rich?
« Reply #44 on: June 05, 2014, 02:54:47 AM »
+1 for making me feel rich on less than a third of the income!
[/quote]

Keep in mind you'll have 180k after tax in New York.  If you have two kids in private school in New York (40k a year) you're now down to 100k.  A decent two bedroom will run you 5k a month so 60k a year.   Now you have 40k left.  Dining out?  A car?  Parking is at least 500 a month.  Vacation? 

See you aren't rich.
[/quote]

dude

  • Handlebar Stache
  • *****
  • Posts: 2369
Re: Why Don't the 1 Percent Feel Rich?
« Reply #45 on: June 05, 2014, 08:52:58 AM »
The other thing is that most of the top 1% hasn't seen a particularly large increase in wealth in the past 50 years or so:
http://equitablegrowth.org/2014/03/29/2434/evening-must-read-emmanuel-saez-and-gabriel-zucman-measuring-american-wealth-inequality-at-the-top
It's mostly, rather, the real oligarchs in the top .1% and higher that have seen their wealth rocket ever-higher. And if you're in the top 1%, you might well live and work in NYC or coastal California, and see the very rich bid up high-end status symbols like luxury real estate and feel like you're being left behind. My income apparently puts me in the 97th percentile of single Americans, but living in NYC and seeing the truly rich cavort and seeing real estate prices rocket ever-upward, it takes a lot of effort to maintain that perspective.

From my experience living in NYC for 8 years, here's what I suggest -- ride the subway from one of the outer boroughs (say, Brooklyn) early in the morning.  Like 5am - 6am early, and look around.  What you will see is a shitload of manual laborers of all stripes making their 1-hour+ commute into the City for their low-paying jobs.  You will feel rich, believe me.  I found that in NYC it's easy to see the wealth, because it stands out.  But if you truly look at your fellow New Yorkers with an eye toward seeing who is lower on the rungs than you, you'll find many, many more of them than the wealthy.  It takes a LOT of worker bees to keep the queens in their high places.

hybrid

  • Handlebar Stache
  • *****
  • Posts: 1688
  • Age: 57
  • Location: Richmond, Virginia
  • A hybrid of MMM and thoughtful consumer.
Re: Why Don't the 1 Percent Feel Rich?
« Reply #46 on: June 05, 2014, 09:08:54 AM »
My income apparently puts me in the 97th percentile of single Americans, but living in NYC and seeing the truly rich cavort and seeing real estate prices rocket ever-upward, it takes a lot of effort to maintain that perspective.

If you don't count yourself among the "truly rich" then I recommend rethinking your perspective; a better descriptor for the people you're talking about might be "relatively richer". You're in the 97th income percentile of one of the richest countries in the world.

I'm somewhere around the 15th-20th income percentile in the UK (by choice). But my girlfriend is Polish, and she (correctly, although not literally) facepunches me when I occasionally describe some people as "not rich, really". Minimum wage in Poland is about 30% of what it is here, and Poland is a first-world country. By the UK's standards I am poor, but I think I am very well off; I struggle to describe myself as rich, but if there is an objective test of richness, I surely meet it.

It's all perspective, isn't it? I'm fine with the differentiator "truly rich", because these folks live in a completely different world than me, whereas my world is not all that different from the folks a few rungs down the economic ladder from where we are, and we do pretty well by American standards (about the 90% percentile I think, does someone have a good link for that?).

If I lived in a world where a 20,000 SF home, a multi-million dollar yacht, a private plane, etc. were the norm I would feel completely out of place. I work for lawyers, and occasionally I get to be in their world for a bit. I occasionally get invited to play golf at the Country Club of Virginia where the top half of 1% play golf (and they don't live like the example I mentioned), and I feel like a fish out of water even when I am the strongest golfer in the group! It's not that I don't enjoy myself, but it's more a feeling of "I don't fit in here", because I would never drop 60K on an initiation fee like one of our partners did several years ago. This just isn't my crowd even if I could afford it.

This is what I think the poster meant, that even though he is fabulously well off compared to the rest of the world, those above him live in a completely different world from him. 

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 23129
  • Age: 42
  • Location: Toronto, Ontario, Canada
Re: Why Don't the 1 Percent Feel Rich?
« Reply #47 on: June 05, 2014, 09:45:41 AM »
Quote
You try living on $350,000 a year when you have to pay taxes, the mortgage on the house in a tony zip code, the nanny who knows how to cook ethnic cuisine, the private school tuition from pre-K on, the appropriately exclusive vacation, and max out your retirement and college savings accounts.

Deal.


Provide me with 350,000$ a year, and I will attempt to live on it.

Keep in mind you'll have 180k after tax in New York.  If you have two kids in private school in New York (40k a year) you're now down to 100k.  A decent two bedroom will run you 5k a month so 60k a year.   Now you have 40k left.  Dining out?  A car?  Parking is at least 500 a month.  Vacation? 

See you aren't rich.

That wasn't the deal.  Provide me with the yearly cash and I'm even willing to move to New York to make this difficult attempt.

Jamesqf

  • Magnum Stache
  • ******
  • Posts: 4038
Re: Why Don't the 1 Percent Feel Rich?
« Reply #48 on: June 05, 2014, 11:42:44 AM »
That wasn't the deal.  Provide me with the yearly cash and I'm even willing to move to New York to make this difficult attempt.

You'd move to NYC for a mere $350K?  Not worth it, IMHO.

MoneyCat

  • Handlebar Stache
  • *****
  • Posts: 1752
  • Location: New Jersey
Re: Why Don't the 1 Percent Feel Rich?
« Reply #49 on: June 05, 2014, 12:13:31 PM »
I know quite a few 1%ers and the ones who really "get it" are the ones who weren't born into that kind of money.  They understand how fortunate they are.  The ones who were born rich just see it as commonplace and complain constantly about really trivial things as if they are huge ordeals.  The 1%ers of that ilk also scoff at the poor and say that they are just lazy, because they think life must be as easy for everyone else as it is for them.  Ever since I moved to NJ, it's been very interesting to get to know these people and learn how their minds work.

 

Wow, a phone plan for fifteen bucks!