TEDx: Why the Rich are Getting Richer by Robert Kiyosaki (Rich Dad Poor Dad)

[gregoryvg]

But more importantly, they had these traits and also got exceptionally lucky. Having self discipline, perseverance, and a delayed gratification mentality is no where near enough to become wealthy.

Not true at all. Investing a small sum regularly over time can lead to wealth. For instance, investing $300/mo in a mutual fund like Vanguard Total Stock market (historical return 9.72%) over the course of 30 years would yield a market value of $644,124. Edit: Which would be considered wealthy by a lot of people. Not 1% rich, mind you - but plenty to live a comfortable life. Just imagine if you were able to put away a little more, a million dollars is not far-fetched or out of reach.

I think it's important to understand money; and even more importantly, the time value of money, to become wealthy. Lots of people who understand that can become wealthy - almost irregardless of their income.

 

[fleshconsumed]

Not true at all. Investing a small sum regularly over time can lead to wealth. For instance, investing $300/mo in a mutual fund like Vanguard Total Stock market (historical return 9.72%) over the course of 30 years would yield a market value of $644,124. Edit: Which would be considered wealthy by a lot of people. Not 1% rich, mind you - but plenty to live a comfortable life. Just imagine if you were able to put away a little more, a million dollars is not far-fetched or out of reach.

I think it's important to understand money; and even more importantly, the time value of money, to become wealthy. Lots of people who understand that can become wealthy - almost irregardless of their income.

To be fair, in 30 years, those $644K will only be worth $322K in today's dollars. I'd hardly call that wealthy or being able to live on.

I'm not dismissing compound returns or the value of saving for retirement, however, I don't think you can make a blanket statement like you can become wealthy "almost irregardless of income". The bottom 80-90% of the people will never become wealthy because they just won't be able to put away enough money every month.

 

[gregoryvg]

To be fair, in 30 years, those $644K will only be worth $322K in today's dollars. I'd hardly call that wealthy or being able to live on.

I'm not dismissing compound returns or the value of saving for retirement, however, I don't think you can make a blanket statement like you can become wealthy "almost irregardless of income". The bottom 80-90% of the people will never become wealthy because they just won't be able to put away enough money every month.

True, the Present Value (PV) of those dollars would be worth less than the Future Value (FV). Actually, using a 3% rate of inflation the PV of the $644K would be $265K.

But, that was based on a static value investment to begin with. Most people disciplined enough to invest in a regular periodic investment would probably be able to increase the amount invested per month. Even even $25/mo more every year (i.e. $325/mo year 2, $350/mo year 3) would dramatically increase the lump sum at the end ($1,078K FV, $444K PV at 3% Inflation).

Whether that would be enough in itself to live on is the answer to another question. I think we would all rather have $644 - 1,078K FV in our investment account at 60 or 70 than a big goose-egg.

I don't think there is much actual correlation between earning power and savings. There are enough stories of the old "janitor" who died a millionaire. One has to have the discipline and willpower to live below their means and to invest systematically over a long period of time. As a percentage, there are probably nearly as many people making over $250k a year and living paycheck to paycheck as there are people making $50k and doing the same.

 

[mect]

As a percentage, there are probably nearly as many people making over $250k a year and living paycheck to paycheck as there are people making $50k and doing the same.

The data's a little old, but I'd be surprised if anythings changed significantly.

The blue bars represent percent of income saved after taxes and necessities. Red bars indicate year to year increases in assets. Considering the fact that the higher wage earners enjoy both higher incomes/assets and higher percentages, I'd say the raw numbers seriously favor higher earners.

 

[fleshconsumed]

I don't think there is much actual correlation between earning power and savings. There are enough stories of the old "janitor" who died a millionaire. One has to have the discipline and willpower to live below their means and to invest systematically over a long period of time. As a percentage, there are probably nearly as many people making over $250k a year and living paycheck to paycheck as there are people making $50k and doing the same.

Once again, I'm not knocking down diligently saving for retirement. I'm simply saying that diligently saving can only get you so far without some kind of lucky break along the way. Most of the time you need element of luck in addition to hard work, persistence, and self sacrifice in order to become truly wealthy. Luck like getting into the right company at the right time, for example landing position at Intel or Microsoft in the 80's and holding your stock compensation until retirement. Or luck like buying into Amazon or Apple at the right time and holding those shares for 20+ years. Or buying into bitcoin when it was 13 cents a piece. Or finding a niche like Robert Kiyosaki - because for every successful Kiyosaki there are hundreds of motivational speakers that nobody has heard about. Typical American in the lower 80-90% will never become truly rich/wealthy no matter how hard they try, and the less you make, the harder it is. The millionaire janitor example is an inspirational piece that's a huge exception to the rule, not the norm, it's designed to keep populace complacent and to keep the current system which favors the rich unchanged.

 

[gregoryvg]

Once again, I'm not knocking down diligently saving for retirement. I'm simply saying that diligently saving can only get you so far without some kind of lucky break along the way. Most of the time you need element of luck in addition to hard work, persistence, and self sacrifice in order to become truly wealthy. Luck like getting into the right company at the right time, for example landing position at Intel or Microsoft in the 80's and holding your stock compensation until retirement. Or luck like buying into Amazon or Apple at the right time and holding those shares for 20+ years.

Yes, that is reasonable. Being lucky is certainly needed to become a seriously wealthy, as in filthy rich. But diligently saving will get a lot of people to at least modestly wealthy (I think we agree on this).

Is being filthy rich the goal? For me it's not. Investing my money and letting time do it's thing to the point where I can have a comfortable retirement is my goal. And it's achievable by most people who live below their means and invest diligently, with some measure of self-sacrifice.

 

[fleshconsumed]

Yes, that is reasonable. Being lucky is certainly needed to become a seriously wealthy, as in filthy rich. But diligently saving will get a lot of people to at least modestly wealthy (I think we agree on this).

Is being filthy rich the goal? For me it's not. Investing my money and letting time do it's thing to the point where I can have a comfortable retirement is my goal. And it's achievable by most people who live below their means and invest diligently, with some measure of self-sacrifice.

I agree with you, diligently saving would allow most people to live out the rest of their retired life in relative comfort and dignity.

Having said that I disagree that it would make them even modestly wealthy. I define wealthy as being able to perpetually live off investment income, and not just the last 30 years of your life. A nest egg of $500K present value won't last indefinitely, eventually it's going to be depleted to zero. That's not wealthy. Not to mention that the poorer you're, the more difficult it is to save and invest. If a working poor who normally saves $100 a month loses his job for a month, between rent, food, and bills, it automatically wipes out a year worth of saving. You can't save much if your living expenses are too high relative to your income. Sad fact of life is that the bottom 40% will forever remain poor, and not for the lack of trying.

 

[Alpha One Seven]

But more importantly, they had these traits and also got exceptionally lucky. Having self discipline, perseverance, and a delayed gratification mentality is no where near enough to become wealthy.



There is also the small matter that fees eat away so much at small investing that it is not really worth doing. The idea that you can get rich by investing a $100 a month is a myth. You will lose almost all the gains in fees, and if you save it up to invest once or twice a year you lose out on a large amount of compounded interest.

Fidelity has a $7.95 per trade fee, no other fees are charged.

 

[Exterous]

Fidelity has a $7.95 per trade fee, no other fees are charged.

And if you invest in a tax advantaged account you can buy shares of numerous index funds for no trade fee and I believe many big players still waive their base fund minimums if you setup recurring deposits (or enroll in e-statements or something like that). When I started I opened a Roth with $250 and bought $25/mo of VTSMX only ever paying the 0.15% ER

 

[Jhhnn]

Yes, that is reasonable. Being lucky is certainly needed to become a seriously wealthy, as in filthy rich. But diligently saving will get a lot of people to at least modestly wealthy (I think we agree on this).

Not at current interest rates for savings. 10 year CD's pay ~2.4% which might keep up with inflation. You'll need to be $10K ahead to even buy in.

 

[gregoryvg]

Not at current interest rates for savings. 10 year CD's pay ~2.4% which might keep up with inflation. You'll need to be $10K ahead to even buy in.

I agree you won't get there by just "saving" money in a bank. I specifically called out investing in the stock market over long periods of time. I recommend a low-fee total stock market fund to diversify your investments over basically the entire stock market.

 

[Jaskalas]

TEDx: Why the Rich are Getting Richer by Robert Kiyosaki

Or, in a single picture.

That's income inequality, the decline or stagnation of wages next to the growth of the economy and prices within. The working class has far less today, comparatively, than their parents and grandparents did. They work more and get less in return. The difference is pocketed by corporations, a healthy share which goes to the rich.

It used to be the "rich" included mom and pop stores. There were scores of 6 figure Americans who needed tax breaks to help spur employment and growth. Times change, Walmart and the rest of the multinationals on Wall Street don't deserve the excess they've ripped off the backs of workers. Our economic system needs to include the sort of tax funded programs that can help fill The Gap and restore prosperity to the average American.

 

[gregoryvg]

A nest egg of $500K present value won't last indefinitely, eventually it's going to be depleted to zero.

Actually, and surprisingly, a nest egg of $500k could easily last somebody the rest of their life. Obviously, it depends on what you have the nest egg invested in and how much you take out.

If you have your nest egg invested in 75% Stocks/25% Bonds and take out 4% of your portfolio ($20k) the first year and increase the amount by 3% every year ($20k year 1, $20.6k year 2, $21.218k year 3, etc) you have a 94.9% chance of your money lasting 30 years. And in many scenarios the nest egg would increase in value; the extreme case after 30 years you would have $2.8 million in your account, with the average account having $942k left.

Doubling the take to $40k/yr would only give you a 21.4% success rate over 30 years.

I used the following website to calculate my results:
https://www.firecalc.com/index.php

 

[YuliApp]

nobody have privilege to get same chance as everybody else. Though everybody deserves it.

 

[gregoryvg]

That's income inequality, the decline or stagnation of wages next to the growth of the economy and prices within. The working class has far less today, comparatively, than their parents and grandparents did. They work more and get less in return. The difference is pocketed by corporations, a healthy share which goes to the rich.

That chart to me looks like the result of globalism. Wasn't it in the 1970's that we manufacturing started to move overseas?

Our economic system needs to include the sort of tax funded programs that can help fill The Gap and restore prosperity to the average American.

What would that look like? Who do we tax to fill "The Gap" and at what rate? How much additional tax revenue will that provide? How much do we need to fill "The Gap"? What consequences might the extra tax cause?

 

[mect]

That chart to me looks like the result of globalism. Wasn't it in the 1970's that we manufacturing started to move overseas?

What would that look like? Who do we tax to fill "The Gap" and at what rate? How much additional tax revenue will that provide? How much do we need to fill "The Gap"? What consequences might the extra tax cause?

Part of it is globalization, the other part is automation. As we are able to automate more and more processes, the amount of wealth that can be generated through automated processes increases, and all this wealth goes to a few individuals. Automation isn't inherently a bad thing, in theory it could free up time for people, leading to less stress and more leisure. The problem is that this won't work in a system where capitalism is viewed as a religion instead of a tool. In general, I think the solution needs to in some form tax productivity of machines as well as cost savings achieved by outsourcing, and transfer that money back to lower and middle income Americans. I think the best way to do that would be through a universal income, but there are other mechanisms as well.

 

[Jhhnn]

Part of it is globalization, the other part is automation. As we are able to automate more and more processes, the amount of wealth that can be generated through automated processes increases, and all this wealth goes to a few individuals. Automation isn't inherently a bad thing, in theory it could free up time for people, leading to less stress and more leisure. The problem is that this won't work in a system where capitalism is viewed as a religion instead of a tool. In general, I think the solution needs to in some form tax productivity of machines as well as cost savings achieved by outsourcing, and transfer that money back to lower and middle income Americans. I think the best way to do that would be through a universal income, but there are other mechanisms as well.

It's al tied up in our primitive right wing concept of ownership. Does America own her corporations or do the corporations own us?

 

[gregoryvg]

It's al tied up in our primitive right wing concept of ownership. Does America own her corporations or do the corporations own us?

An odd way to put a question. "America" doesn't own any private entity.