Tell me about becoming wealthy

The Something Awful Forums > Discussion > Ask/Tell > Tell me about becoming wealthy

Orange Sunshine: May 10, 2011; by FactsAreUseless

Thanatosian posted:

Most people who become wealthy at some point take a risk that pays off. But tons of people take those kinds of risks and fail, but nobody ever really writes or talks about them.

Imagine reading a book called, "I Failed in the Restaurant Business, and You Can Too".

It's about a guy who borrowed $1 million from family members and banks and opened his own restaurant. It failed completely, because the sales weren't high enough. Was the location wrong? Was the menu the problem? Was the concept unworkable? Maybe all of the above, hard to be sure.

Well, nobody would ever read that book, so it won't get published. But a million people experience variations of the above every year, and you never hear about them.

# ¿ Dec 3, 2016 22:08

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# ¿ May 2, 2024 03:09

Orange Sunshine: May 10, 2011; by FactsAreUseless

LogisticEarth posted:

There's a certain subset of goons and the general "financial advice" folks who get into very lucrative jobs in their early 20's, and are able to poopsock their way to financial independence when they hit their early 30's. That's what you're seeing when you read articles like "How this couple was able to retire at 35!". It's like, oh, yeah they were able to invest $150k a year from both their lucrative tech jobs, while living in a low cost-of-living area. It's impossible for most people to save anywhere near that amount. How do you save $50k a year, when you're making $40k?

This doesn't mean the advice these folks put out isn't a good idea. It's just that, instead of being a multi-millionaire at 30, you end up with a moderate emergency savings account, no car payments, and if you're lucky, a decent down payment on a house that isn't a total shithole. If you don't have any major disasters in your life, and use your money responsibly, you might end up with a million or two saved up to retire upon when you hit your mid 60's.

If you aren't one of the unicorns with a super high paying job, and you want to get rich, you have to look into either bootstrapping up a small business, or getting a healthy skillset and ~~con artist experience~~ to start up something using Other People's Money. Both of these are very risky, and can involve a lot of lean years where you're tearing your hair out. But some people make it.

Median personal income in the U.S. is a bit over $30,000 per year. Good luck saving more than a few grand a year.

It's my impression that people who make large amounts of money tend to become completely out of touch and consider themselves to be typical. Like, "Oh yeah, I make an average middle class income, about $250,000 a year".

# ¿ Dec 4, 2016 16:34

Orange Sunshine: May 10, 2011; by FactsAreUseless

freebooter posted:

This is all correct but it's worth pointing out that not beating "the average" is still very good - the average will always, in the long term, outpace inflation. It will certainly beat your bank's interest rate as well. For example in Australia I bank with Westpac and my dedicated savings account gets an interest rate of 1.84%. Over the past five years, the value of shares in Westpac increased by 49%. This holds true for almost any major bank worldwide. Citibank? Up 94%. Barclays? Up 12.1%. Bank of America? Up 271%. Scotiabank? Up 51%.

I don't mean you should shove every cent you have into financial stocks, it's just a useful illustration of the divide between growth in cash savings and growth in the stock market. I know people who are hugely diligent savers and have enormous amounts of money just sitting in a savings account, who would never dream of buying shares because they just don't understand how they work or they think it's too volatile. If you're managing to put away any savings at all, you should absolutely be putting 10-30% of them into index funds and bluechips.

Of course as Imaduck points out, that's a slow and steady plan, not a get rich quick scheme. If I put $1000 into Westpac shares five years ago they'd only be worth $1490 today, or an extra $490, which is the amount of money I can make by picking up about ten hours of overtime at my office job. What you earn will always be more important than how you invest your savings, but how you invest your savings is still enormously important in the long run and - in my experience - is bafflingly overlooked by a lot of people.

Stocks absolutely outpace inflation over time. The problem is that you need to buy and hold for 30+ years to be sure you're going to get the advantage of these gains. In any particular short period of time, such as 5 or 10 years, stocks can be flat, or even go down. The majority of the gains in the stock market over the past 100 years came during a 15 year period between the early 80s and the late 90s. That was a really, really good time to have owned stocks. Other times, not so much.

This is an inflation adjusted graph.

# ¿ Dec 5, 2016 00:31

Orange Sunshine: May 10, 2011; by FactsAreUseless

Planeshifter2 posted:

If this is in any way possible for you, start up a Roth IRA today and contribute the max ($5500/year, may increase with time) every year. Even if you only do this, and even assuming very modest returns (say 5.5% annually) you will retire a millionaire.

(some people might not consider that "wealthy" but you will certainly not starve to death in retirement)

Over a 40 year period, contributing $5500 per year, with 5.5% annual returns, you will end up with $751,000. Of course, after 40 years of inflation, it will be worth maybe half this, maybe much less.

# ¿ Dec 6, 2016 02:33

The Something Awful Forums > Discussion > Ask/Tell > Tell me about becoming wealthy