The Millionaire Next Door is one book and Rich Dad, Poor Dad is another.
Quit being so dense. You've posted about 5 times asking how one is supposed to go about building wealth slowly, then I name a published book on the topic and you counter with another book. Of course, you can get wealthy through massive leverage (as Rich Dad Poor Dad will teach you), but you can also get wealthy slowly. That's all you requested.
FWIW, Rich Dad Poor Dad strongly recommends massive leverage on real estate. Considering headlines like this, we can see how smart that move was.
There's a lot of chatter about cash for clunkers and the debt that is creating. The truth is buying a new car is now the only way to keep a car in good repair. A car can nickle and dime you to the death of the car. A new car today is good for 100K miles before you throw it away. So in essence we are just leasing new cars.
Cat converters are made with platinum. Did you know that? It's the most bizzare thing. So yes putting them in, two so far, was cheap, the cost of the unit was expensive.
I really have come to the conclusion that cars today aren't what the used to be.
Sounds like someone's trying to talk himself into a new car. Autozone has 1998 I6 Grand Cherokee catalytic converters for $150. Did you know that? Five year warranty.
I've owned half a dozen vehicles, all purchased used. A couple had low miles when I got them, some had roughly 100k. None ever nickel and dimed me to death or required repairs that were beyond my minimal capabilities.
You are right though, cars today aren't what they used to be...they're better.
My mechanic and the guy who has sold me more than a couple of cars also told me I should buy new. My mechanic is a fanatic about cars today being better. he installed the first cat coverter then did the replacement a year later under warranty. He can't find the problem. A bigger issue is in the security system, he thinks. The interior lights keep going on and off with the door locks while you drive. it's just another nutty thing.
I do have a 1978 Cadilac with 110K miles I intend to drive until the day I die. There again the 1977 F150 has transmission issues, the Caddy did too, but it's held up better.
Let me say that leverage is another trap and will be for many years to come. A part of the purpose here is that I advocate paying your property off, rather than getting another mortgage, ever.
Let me say that leverage is another trap and will be for many years to come. A part of the purpose here is that I advocate paying your property off, rather than getting another mortgage, ever.
So, despite all your statements about how debt is inevitable and you can't spit without hitting some...you stand firmly on the side of avoiding debt (or paying it off at least)?
You can retire by doing some simple things, like make a budget, work, save, invest, and build up equity. In the 1960s that was certainly a wise thing to do. Even in the 1970s it was possible to build wealth slowly as the book says.
The 1980s not only brought us massive stock price appreciation, it brought us the remainder of the inflation years, so much so interest rates hit 16%.
That was OK, but an end of an era. Wages never caught up to inflation. By the 1990s and the age of the personal computer there were tons of new opportunities. We have e-commerce and day trading that fed the dreams that kept the wheels turning.
Wages appeared to have kept up because of the new technology. New technology brought more stuff we had to have.
In my opinion, just like I think we have a shadow inventory of housing, we have a shadow economy with credit.
It used to be that if you worked one job in the 1960s you could live well. It now appears as though it takes two incomes to live in debt. It was the debate in the blog that got me thinking how difficult it really is to live debt free.
All the people I know who live debt free seem to be a step down in the quality of life category. The discussion is more and more bitter about consumerism.
It's an observation that seems to be panning out here.
All the people I know who live debt free seem to be a step down in the quality of life category. The discussion is more and more bitter about consumerism.
I don't have serious issues with your post, except this part. Where exactly do you mark "steps down" in quality of life?
Let's say there are two families, one family eats out rarely (fast food perhaps once a week and anything nicer less than once a month) but they prepare nutritious cheap home cooked meals in about 20-30 minutes a night and the other family eats out regularly spending as much on food in a week as the first family does in a month.
Which family has a higher quality of life? I honestly can't say in a case like that. The second family may have more freedom to eat out nightly, but it's entirely unclear how that improves the happiness of each member, overall satisfaction with life, health, and cohesion of the family unit.
A big reason I prefer my $2 dinners at home is because it's hard to get food that healthy/good at a restaurant.
A few years ago I read about a guy who was making $25K. His wife didn't work, 2 young kids, they lived in Orting or that area. He had quit a higher-paying job that took too much away from family time. The parents used the laundry list of frugality tricks to make it work, and seemed happy with their choices. They may need to adjust with the times (like higher gas prices), but the point is that it's possible to live a good life on relative peanuts.
The electric company once investigated my grandma. They thought she was stealing electricity because her bill dropped from already the lowest bill in the area, to half of that. They found a lady with a wood stove for heat / cooking, a hand-crank washing machine & line dry, who had replaced all her light bulbs with 25-watters because Carter said we needed to save energy.
Family dinner time is a great example of quality of life.
In the 1970s you could have a comparative lifestyle to others by being frugal. With consumerism in the 1980s there was a wider gap between having and being frugal. There was still a toss of a coin.
In the 1990s you had people hiding wealth. It was chic to be casual. Microsofties drove beat up cars. There were a lot of places that were more reasonably priced for enjoyment.
The first premise and many since is that now we are back to a kind of have and have not mentality. If you made money in stocks, then did some Real Estate deals you are somebody. If you waited it out, some how you lost out.
You can shoot the messenger if you want, but the fact is there is a larger chasm between those that have stuff and those who are noticeably without. All of the people I know who are debt free are also incredibly living with noticably less than counter parts who are living with leverage. I mean rich, poor, or average, are all standing next to larger, glitzier, more over the top consumers.
I've noticed on this blog, you have mentioned on this blog, that the renters are loser mentality seems to be everywhere. It's a cultural thing. How do you fix the broader aspect of that mind set? Better yet what's going to happen to all of those who are foreclosed upon? How will that change the dynamic, culturally? Will the consumers become the bad guys or will they need to see it's OK, it was larger than them?
Family dinner time is a great example of quality of life.
In the 1970s you could have a comparative lifestyle to others by being frugal.....
David,
Let's stop right there at the beginning of your post. Might I suggest that you consider that it may be a mistake to pursue a "comparative lifetsyle" with whomever you are competing / comparing yourself to. You really come across like you really NEED to keep up with your neighbor Jones's. I guess it's important to some to have the "status symbol" house / car / vacation but once you have it, is it going to make you happy?
.
I'm probably the absolute worst to be responding to your post, because I am of the type that I could give a flying f**k what my neighbors really think of me. I live by my own standards. I consider myself a moral, responsible person, pursuing my "bliss" with high regard as to how my actions affect others. If my "lifestyle" doesn't suit whomever deems themselves worthy enough to judge me, well then I guess I don't really need to know them.
.
I know I am a bit older than most that visit this blog. By older I do not mean smarter. But a funny thing happens when you slog thru the day-to-day progression toward the inevitable manifistation of your mortality, is that you slowly realize that MATERIAL SH*T CAN'T MAKE YOU HAPPY! After you have what you need, obtaining more is just showing off.
.
Weird rant is now terminated.
.
.
I've noticed on this blog, you have mentioned on this blog, that the renters are loser mentality seems to be everywhere. It's a cultural thing. How do you fix the broader aspect of that mind set? Better yet what's going to happen to all of those who are foreclosed upon? How will that change the dynamic, culturally? Will the consumers become the bad guys or will they need to see it's OK, it was larger than them?
I don't really see any responsibility to fix this mindset. Let's ignore for a second the people who truly don't have enough (at or near the poverty line, expensive illnesses, family catastrophies) and focus on the huge block of people who make enough money to get by.
Of that group, you can (loosely) split them into the people who avoid debt and thus from the outside look poor and those who use lots of debt and from the outside look pretty good. Those with debt might (I can't really speak for them) feel good because of their outward expression of wealth. And, maybe they even are laughing at the pitiful savers. Meanwhile, the savers are feeling really good about themselves, and they are definitely laughing at the pathetic spenders.
If both groups are just as happy and each is secretly scoffing about the other, then how can you really judge that one group (savers) is wasting their life based on anecdotes that some people from the other group look down on them. This whole argument is, I think, about a pretence that doesn't even matter.
A mortgage is a debt instrument. Beyond making the interest payments it at some point gets paid off. It used to get paid off, now it gets refinanced, or the property gets sold.
The mortgage gets sold, some entitiy collects interest income, then gets a lump sum. The interest income is what floats the discount as the Note gets traded.
The plasma TV that could sell for $400 sells for $900. It is a financed product every step of the way. The employees are paid with borrowed money, the materials are bought with borrowed money, the plant is bought with a mortgage, shipping is a loan of services, and all the little invoices with 1% charged per month are accounts recievable.
Credit cards drive the 70% consumer economy and that interest income is counted towards a financial institutions over all profit.
When you buy a stock you buy it on profit potential.
Debt is driving our economy, but what about the rest of the world? Usary is illegal in some cultures.
Sorry, debt is the most important fact in the American way of life.
Now that debt is everywhere and the response is, it's not my problem that makes for a very bad future. At some point, and I think it's now, the debt instrument economy we have will have to come to a close. It's more than mac and cheese or dinner out. It's something we all pay for in the price of goods.
A house mortgage is $250K to $500K. That's money that is outstanding and will either be paid by an individual or absorbed futher by the general population. We all pay. We are all paying for some one elses use of debt. We invest based on how much paper a company carries as interest income which is pure profit.
So saying don't start with debt is fine, but you will still pay.
That's kind of a leap. I wouldn't argue with a straight face that any financial invention is the only thing that matters. Not even wealth in any way shape or form.
The plasma TV that could sell for $400 sells for $900. It is a financed product every step of the way. The employees are paid with borrowed money, the materials are bought with borrowed money, the plant is bought with a mortgage, shipping is a loan of services, and all the little invoices with 1% charged per month are accounts recievable.
Terrible example. The plasma TV that would have sold for $4000 if debt weren't driving demand costs $900 instead because of greater economies of scale. In such a case, even those who use debt win (in a way), and those of us who don't win even bigger.
Is there building wealth with out risk? Can you build wealth without debt?
The answers are no (on a technicality) and yes. Every action you take (or don't take) has some inherent risk, but you can build wealth without debt; most very wealthy people carry little debt (as in 10% of their net worth). If leverage were such a brilliant idea, why doesn't Buffett leverage his worth 10-1 and get really rich? Even the wealthy you don't realize are well off do it by not going into debt.
Buffett doesn't go into debt because he raises capital.
For the rest of us, one way to raise capital is to take out a loan on income generating real-estate. We are taking on debt and leverage, but betting on inflation in rents and housing to make the bet profitable. Up until recently that was a fairly safe bet since policy direction has an inflationary bias.
Comments
You're right. I wasn't clear what I was driving at, but yes in blind tests many luxury items are not preferred over more generic brands.
Quit being so dense. You've posted about 5 times asking how one is supposed to go about building wealth slowly, then I name a published book on the topic and you counter with another book. Of course, you can get wealthy through massive leverage (as Rich Dad Poor Dad will teach you), but you can also get wealthy slowly. That's all you requested.
FWIW, Rich Dad Poor Dad strongly recommends massive leverage on real estate. Considering headlines like this, we can see how smart that move was.
Sounds like someone's trying to talk himself into a new car. Autozone has 1998 I6 Grand Cherokee catalytic converters for $150. Did you know that? Five year warranty.
I've owned half a dozen vehicles, all purchased used. A couple had low miles when I got them, some had roughly 100k. None ever nickel and dimed me to death or required repairs that were beyond my minimal capabilities.
You are right though, cars today aren't what they used to be...they're better.
My mechanic and the guy who has sold me more than a couple of cars also told me I should buy new. My mechanic is a fanatic about cars today being better. he installed the first cat coverter then did the replacement a year later under warranty. He can't find the problem. A bigger issue is in the security system, he thinks. The interior lights keep going on and off with the door locks while you drive. it's just another nutty thing.
I do have a 1978 Cadilac with 110K miles I intend to drive until the day I die. There again the 1977 F150 has transmission issues, the Caddy did too, but it's held up better.
So, despite all your statements about how debt is inevitable and you can't spit without hitting some...you stand firmly on the side of avoiding debt (or paying it off at least)?
Welcome to the dissonance zone.
You can retire by doing some simple things, like make a budget, work, save, invest, and build up equity. In the 1960s that was certainly a wise thing to do. Even in the 1970s it was possible to build wealth slowly as the book says.
The 1980s not only brought us massive stock price appreciation, it brought us the remainder of the inflation years, so much so interest rates hit 16%.
That was OK, but an end of an era. Wages never caught up to inflation. By the 1990s and the age of the personal computer there were tons of new opportunities. We have e-commerce and day trading that fed the dreams that kept the wheels turning.
Wages appeared to have kept up because of the new technology. New technology brought more stuff we had to have.
In my opinion, just like I think we have a shadow inventory of housing, we have a shadow economy with credit.
It used to be that if you worked one job in the 1960s you could live well. It now appears as though it takes two incomes to live in debt. It was the debate in the blog that got me thinking how difficult it really is to live debt free.
All the people I know who live debt free seem to be a step down in the quality of life category. The discussion is more and more bitter about consumerism.
It's an observation that seems to be panning out here.
I don't have serious issues with your post, except this part. Where exactly do you mark "steps down" in quality of life?
Let's say there are two families, one family eats out rarely (fast food perhaps once a week and anything nicer less than once a month) but they prepare nutritious cheap home cooked meals in about 20-30 minutes a night and the other family eats out regularly spending as much on food in a week as the first family does in a month.
Which family has a higher quality of life? I honestly can't say in a case like that. The second family may have more freedom to eat out nightly, but it's entirely unclear how that improves the happiness of each member, overall satisfaction with life, health, and cohesion of the family unit.
A few years ago I read about a guy who was making $25K. His wife didn't work, 2 young kids, they lived in Orting or that area. He had quit a higher-paying job that took too much away from family time. The parents used the laundry list of frugality tricks to make it work, and seemed happy with their choices. They may need to adjust with the times (like higher gas prices), but the point is that it's possible to live a good life on relative peanuts.
The electric company once investigated my grandma. They thought she was stealing electricity because her bill dropped from already the lowest bill in the area, to half of that. They found a lady with a wood stove for heat / cooking, a hand-crank washing machine & line dry, who had replaced all her light bulbs with 25-watters because Carter said we needed to save energy.
In the 1970s you could have a comparative lifestyle to others by being frugal. With consumerism in the 1980s there was a wider gap between having and being frugal. There was still a toss of a coin.
In the 1990s you had people hiding wealth. It was chic to be casual. Microsofties drove beat up cars. There were a lot of places that were more reasonably priced for enjoyment.
The first premise and many since is that now we are back to a kind of have and have not mentality. If you made money in stocks, then did some Real Estate deals you are somebody. If you waited it out, some how you lost out.
You can shoot the messenger if you want, but the fact is there is a larger chasm between those that have stuff and those who are noticeably without. All of the people I know who are debt free are also incredibly living with noticably less than counter parts who are living with leverage. I mean rich, poor, or average, are all standing next to larger, glitzier, more over the top consumers.
I've noticed on this blog, you have mentioned on this blog, that the renters are loser mentality seems to be everywhere. It's a cultural thing. How do you fix the broader aspect of that mind set? Better yet what's going to happen to all of those who are foreclosed upon? How will that change the dynamic, culturally? Will the consumers become the bad guys or will they need to see it's OK, it was larger than them?
David,
Let's stop right there at the beginning of your post. Might I suggest that you consider that it may be a mistake to pursue a "comparative lifetsyle" with whomever you are competing / comparing yourself to. You really come across like you really NEED to keep up with your neighbor Jones's. I guess it's important to some to have the "status symbol" house / car / vacation but once you have it, is it going to make you happy?
.
I'm probably the absolute worst to be responding to your post, because I am of the type that I could give a flying f**k what my neighbors really think of me. I live by my own standards. I consider myself a moral, responsible person, pursuing my "bliss" with high regard as to how my actions affect others. If my "lifestyle" doesn't suit whomever deems themselves worthy enough to judge me, well then I guess I don't really need to know them.
.
I know I am a bit older than most that visit this blog. By older I do not mean smarter. But a funny thing happens when you slog thru the day-to-day progression toward the inevitable manifistation of your mortality, is that you slowly realize that MATERIAL SH*T CAN'T MAKE YOU HAPPY! After you have what you need, obtaining more is just showing off.
.
Weird rant is now terminated.
.
.
I don't really see any responsibility to fix this mindset. Let's ignore for a second the people who truly don't have enough (at or near the poverty line, expensive illnesses, family catastrophies) and focus on the huge block of people who make enough money to get by.
Of that group, you can (loosely) split them into the people who avoid debt and thus from the outside look poor and those who use lots of debt and from the outside look pretty good. Those with debt might (I can't really speak for them) feel good because of their outward expression of wealth. And, maybe they even are laughing at the pitiful savers. Meanwhile, the savers are feeling really good about themselves, and they are definitely laughing at the pathetic spenders.
If both groups are just as happy and each is secretly scoffing about the other, then how can you really judge that one group (savers) is wasting their life based on anecdotes that some people from the other group look down on them. This whole argument is, I think, about a pretence that doesn't even matter.
A mortgage is a debt instrument. Beyond making the interest payments it at some point gets paid off. It used to get paid off, now it gets refinanced, or the property gets sold.
The mortgage gets sold, some entitiy collects interest income, then gets a lump sum. The interest income is what floats the discount as the Note gets traded.
The plasma TV that could sell for $400 sells for $900. It is a financed product every step of the way. The employees are paid with borrowed money, the materials are bought with borrowed money, the plant is bought with a mortgage, shipping is a loan of services, and all the little invoices with 1% charged per month are accounts recievable.
Credit cards drive the 70% consumer economy and that interest income is counted towards a financial institutions over all profit.
When you buy a stock you buy it on profit potential.
Debt is driving our economy, but what about the rest of the world? Usary is illegal in some cultures.
Sorry, debt is the most important fact in the American way of life.
Now that debt is everywhere and the response is, it's not my problem that makes for a very bad future. At some point, and I think it's now, the debt instrument economy we have will have to come to a close. It's more than mac and cheese or dinner out. It's something we all pay for in the price of goods.
A house mortgage is $250K to $500K. That's money that is outstanding and will either be paid by an individual or absorbed futher by the general population. We all pay. We are all paying for some one elses use of debt. We invest based on how much paper a company carries as interest income which is pure profit.
So saying don't start with debt is fine, but you will still pay.
Terrible example. The plasma TV that would have sold for $4000 if debt weren't driving demand costs $900 instead because of greater economies of scale. In such a case, even those who use debt win (in a way), and those of us who don't win even bigger.
Buffett doesn't go into debt because he raises capital.
For the rest of us, one way to raise capital is to take out a loan on income generating real-estate. We are taking on debt and leverage, but betting on inflation in rents and housing to make the bet profitable. Up until recently that was a fairly safe bet since policy direction has an inflationary bias.