Category Archives: Wealth

The Very Wealthy Do Not Know How Much Wealth They Have

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I remember reading an article on Donald Trump many year ago when he claimed that he wasn’t absolutely sure what his net worth was!

At the time, I thought “The Donald” was trying to avoid stating his true value because he wasn’t worth as much as he claimed, but now I’ve changed my mind.

For us average Americans, it’s easy to calculate our wealth level since most of us have just a few saving/investing accounts and a lot of debt.  Debt in the form of credit card debt, car loans, and mortgages.  So to calculate our net worth is fairly simple because of the simple assets and liabilities that we have.  But if we had multiple companies and partnerships along with many different types of investments in diverse assets, well the calculation of wealth would apparently be a much more daunting task.

I have some friends that are what I consider wealthy (having a few million dollars in net worth), but they have a pretty good idea of what they are worth.  So having a few million is definitely not the “Very Wealthy“!  Recently, Mitt Romney stated that he wasn’t sure of how much he made last year, let alone his calculated wealth.  He wasn’t totally avoiding the issue, I believe that he really didn’t know at the time.  Obviously, he is really wealthy…

Rich Dad Poor Dad

Even famous personal finance authors don’t really know their true net worth.  Rich Dad, Poor Dad Robert Kiyosaki has states that he didn’t know how much he was worth in interviews also.  If a financial author doesn’t know how much he is worth, I’m sure the rest of the wealthy don’t either.

This leads me to wonder what that magical threshold is where a person has a difficult time determining their net worth?  Just a wild guess I would venture perhaps somewhere over the twenty million mark.  Wouldn’t it be nice to be so wealthy that having a “number” didn’t really matter?

What do you think would be the number where you no long would even really care to know how wealthy you are?

Alternative Plans For Financial Independence

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Is My Financial Independence Plan Flawed?

With respect to Financial Independence, I now realize that previously, I’ve put my entire financial independence strategy in just one well known plan.

My “Financial Independence Plan A” is pretty much your standard run-of-the-mill savings by frugal means and invest that savings like a fiend.  To be honest, so far Plan A is working for me, I’m doing about as well as can be expected in this economic environment.  While I’m not a millionaire yet, I’m on my way to achieving a net worth of a million in the next eight years following this path (fingers crossed).

But, what if something happens? What if Unemployment keeps rising and I get laid off? 

Getting laid off would severely affect my current employer paying income stream, and would be a serious blow to my investment strategy since eating and feeding my family would get in the way of investing (my family members are so inconsiderate that way, lol).

What if I get Madoffed?  Then I find myself much older and less inclined to want (or even able) to work as diligently?  Is having only one plan analogous to having all your eggs in one basket?

Alternative Plans for Financial Independence

I’m now pursuing at least two other paths for Financial Independence!

Financial Independence Plan B – “Side Job Income“:  Find a job (or create one via entrepreneurship) that in five years should pay at least a quarter of your current “primary job” salary earnings (or self-employed income).  Then take the entire income stream (minus taxes) and invest it in dividend stocks or decent bonds (perhaps municipal bonds – do this when and if the bond market comes back) with a decent yield that are still safe.

The advantages of Financial Independence Plan B are as follows:

  • In combination with Plan A, you should be able to save twice as much as you do if you are just using a Plan A.  This is a great accelerator to achieving Financial Independence!
  • The dividend stream should be invested back into your dividend investments, but alternatively (if you are willing to sacrifice slower growth), you can use a portion of that dividend stream for rewards such as vacations and other family/personal fun activities.  The family/personal fun activities provided by a dividend stream is the route that I am following as seen in the following articles:
  • If something happens to my primary job, I have this one to serve as a backup.  This second income source, dividend streams and the fact that I’m totally totally debt free means that I can get by without any real hardships.  However, my lifestyle (and especially my kids) would definitely have a dip in enjoyment since I would have to forgo vacations and they kids would have to stop playing sports and other fun and educational activities!

The primary disadvantage of Plan B is time.  You will have less time to spend watching TV, being with family, and leisure in general.

Financial Independence Plan C – “Being Smart about spending and saving money” – This is about getting the best deal on a product without doing something foolish like driving wasting gas money, while trying to save a dollar.  And about detecting and taking advantages of income making opportunities instead of giving away time, your work, and stuff away for free.  I will have a more detailed post about this in the future.

Both of my Plans B and C are evolving, so in the future, I’ll expand on each!

Do you have 2 or 3 alternative plans on becoming financially independent?  The beauty of such plans is that as long as they aren’t too expensive, anything goes since they aren’t necessary for you or your family’s livelihood.

Have a great weekend!

MR

Why A World Without Rich People Would Suck

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All to often, the media (whom all are rich themselves, don’t be fooled) points out that the rich people are the problem with society.  They ridicule and make fun of the rich, and blame everything under the sun on the rich.  It’s kind of ironic considering those same folks complaining about the rich are much richer than the top 1%.

Let’s play a game called rich elimination.

In this game, we take the money away from those that are rich and ban them from making money.  They now have to live on the median income amount that the average individual (or household) makes.  Let’s identify those rich folks as people who have more than 20 million.

This destruction of this level of rich folks makes angel investors practically disappear!  Luxury purchase that eventually trickles down to the masses are gone.  Thinks like automobiles will not be invented, same goes with new medicines.  And obviously, tax revenue that the government uses for most of their spending get hit hard!  So naturally the tax increases across the board by 50% or more.

Next now we have a new problem, those that have 2 million to 20 million are now the rich and need to be treated the same as the first wave of rich destruction.  Those that have (now had) 2 million to 20 million will have their money seized by the government.  , This fixes the tax problem, and now these individual are paid the median income amount.

I’m going to stop here because we all know that to continue the destruction of wealth (those that still have 1 million) leads to a communist state and that doesn’t work (look at China and Russia and how they did change to allow capitalism in their society).  North Korea is a great example of a system that doesn’t work, especially when compared to South Korea.

Back to the point that the higher rich levels have been redistributed, what does that mean for society?

  • We all need to pay, oh maybe 60 to 80% in taxes (and in the worst cases all) to support the government (we all know that when the government spends money it’s hard to make them stop spending money).
  • Inventions that are expensive to initially make like Refrigerators, Cars, TVs, Computer, etc…  are no longer created because nobody can afford to buy them because the first models are so expensive that only the rich can buy them  initially.  But at least we get to play plenty of frisbee now!
  • Medical advances stop!
  • Mortality rates climb, because new drugs are being made since the government show down those over priced drug companies.
  • Disaster money disappears
  • Crime increases
  • Businesses stop
  • Society devolution starts.

The thing about being rich is it’s relative.  Unless you are a Gates or Buffett, there is always someone richer than you that makes you feel not poor.  This may be why people like John Stewart and other media performer act that way.  Or perhaps it’s because they get paid to do so.  Perhaps they (the media giants) are all playing us for the fools, because they earn money for doing so.

Thinks of a third world country when you want to see a country without any rich folks.  Shoot, our founding fathers in the US were rich!  If Benjamin Franklin hadn’t gone over to France to woo the French, we would have had the support of the French Army to help us fight the British.

Without rich people, the world would be a much darker place.

Have you ever wondered what it would be like without any rich people in the country?

MR

 

The Cost Of Being A Top 1 Percent Earner?

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Lately, it seems like the media and world in general, are against the top 1 percent of income earners.

It’s presumed that the fortunate top 1 percent have it easy and they just go to work socialize.  Perhaps they go to the golf course and play 18 holes while the rest of the workers (those lowly 99% of income earners are such tools) slaves away making the money for the top 1%.

Actually perhaps there are a few like that, but they don’t last long and their numbers are very low.  Eventually someone a bit leaner and hungry knocks such slacker off of their perch.  So the image of a top 1 percent income earners does not reflect reality.

What makes me so sure?  I’ve seen the suffering of a friend that made it to the top 1%, here is his story…

Jon was a VP of finance when I knew him.  He was a very friendly guy to great, but behind closed doors, he was much, much more.  If you met Jon, you would think what a nice guy, a family man and overall a class act.  Jon really was a great guy but he was also a businessman with business drive.  He had so much drive that he would stay incredible late working with the then CEO of the company I worked at.  Once I was part of their discussions, and this wasn’t the Jon that the other employees knew.

I consider myself a keen observer, so in my mind I put a few things together and painted a crude picture in my mind what his personal life must be like, and it wasn’t pretty.  Mostly he held it together quite well, and stuck with his huckleberry routine, until one day when we had the classic moral building exercises that always happens at larger corporate businesses (or so it seems).

During this “feel-good” meeting, Jon got up to speak.  He was delivering an excellent speech on going a little bit further than the other guys.  After all, it doesn’t matter if you win the race by a nose or a mile, what counts is that you put the time in and win…

That’s when it happened, Jon started going on and on about the time commitments, when he deviated off course and started talking about not seeing his kids.  A red flag in my mind went off, thinking “Hey, this isn’t part of the speech, it doesn’t fit”.  At that point, Jon continued with his speech, but literally he started crying.  Being a pro, he continued with the speech after jumping back on track.  He used his charisma and polished looks to deliver a speech that appeared to most in the audience that the man just had incredible passion.  But, there are a few of us that knew what really happened.  It was an eye opening glimpse into his 1% life, and honestly since I have kids, I choose my kids.  Even if I had the potential to get into the 1, 5 or even 10% income classes, I wouldn’t want to sacrifice the time that I could have spent with my kids doing things (although blogging is really taking a big slice of that time!).

My friend has since moved on to head up another company as a CEO.  When I knew him, he had just crossed that threshold to the 1% club, but not he is firmly ingrained in the 1 percent group.  I don’t see him much anymore, but I’m sure if I did, he would still great me with his warm, but polished and rehearsed greeting.  I’m sure he still works long hours and cries (literally) about his kids growing up, being raised almost sole by his wife.

So before you think that the top 1 percent group has it so great, think of my friend.  If you do, you’ll see why I’m more than happy to live a more (money and time) balanced life, at least now.  I’ll probably regret it when my friend is vacationing in Europe (lol).  I’m pretty sure he has crossed the threshold to financial freedom already.  Still, unless you’re buffett, you can never have enough money…

I hope you found as much value as I did watching Jon’s story unfold when my old friend gave his speech.

Thanks,

MR

 

Update!  I just read that the top 1% earn 17% of the total income in the US, but pay 37% of all the tax revenue brought in!  Check out this Money.cnn.com article called:  Who are the 1%