Craig probably did some math and found out that even if he lives to 800 years old, he will not be able to spend it all so why go nuts? This way everything is manageable and he doesn't need to report to anyone.
I'm surprised that more successful people don't do this? Is the drive that lead them to absurd success what leads them to continue well beyond needing to?
I find it hard to imagine hitting $10 million and not just dropping everything and spending the rest of my life on random hobbies and traveling. Maybe that's why I don't have $10 million?
Hell, I have just over 1/10th and I'm trying to extract myself from the workaday life. What is truly ridiculous is that I can't yet do so, largely due to the high cost of buying health insurance yourself. It's like the whole US is designed around debt slavery and moving the goalposts further and further out.
$5-10M is probably the low bar for living a kick-ass non-tied-to-employment lifestyle in the US. Certainly people are doing it on less, but I'm not talking trailer park or RV , I'm talking decent house in a decent neighborhood, with few compromises on travel and doing what you want.
I imagine you have heard of the Mr Money Mustache and his wife who became financially independent at age ~30 with both of them just working regular tech jobs. You should check out his blog[1] if you haven't. His philosophy is low spending while still having "kick-ass life". Offspring, travel, great food, etc. They own their house and spend about $25,000 per year.
yes they went financially indy by becoming super duper frugal which is kind of like saying one can stay skinny if they ate 1200 cals a day without ever eating out
I get that the Bay Area is nice, but a lot of expensive housing is expensive because of its proximity to high-paying jobs. If you don't need one of those, you can live more cheaply.
(Unfortunately, proximity to smart, creative people also seems to correlate with housing costs. I wonder what US cities have the best "proximity to interesting people to living expense" ratio?)
I think Mr. Money Mustache lives in some Colorado suburb, and he was able to buy a nicer house for less money specifically because it's not in the immediate vicinity of a major economic hub.
> I wonder what US cities have the best "proximity to interesting people to living expense" ratio
I wonder what place, worldwide, city or not, has the best "proximity to interesting people" : cost-of-living ratio. I'm at a place in my life where I'd be willing to both immigrate and learn a language if it meant finding myself in this century's Venice.
He lives in Longmount, CO, which is 15 miles northeast of Boulder, CO. He might have picked one of the best "proximity to interesting people to living expense" ratios places.
One of his ideas he highlights is to be choosy where you live and be open to moving. He is from eastern Canada originally and highly recommends the Colorado Front range cities and towns for the quality of life. The Denver area has lots of high tech and quite diverse. Oil and gas, satellites, computers, mining, scientific research, and a small VC/startup scene in Boulder. You can build a lot of housing on the nice and flat great plains and still see the mountains.
... the basement income to qualify as 'rich' will here be
considered to be $400,000 in annual income that'll come in
regardless of whether anyone in the family is holding a
paying job or not.
From "What are your TRUE chances of getting rich in America?
OR How to get rich in America"[1]
You might also be interested in "The super-rich, the 'plain' rich, the 'poorest' rich... and everyone else"[2].
$5-10 million!?!? Thats steep. What are you going to spend $5-10 million on? I plan on retiring early at $1.25 million. I could do it on less but $1.25M lets me keep the lifestyle I have now, which is awesome. I don't live in a trailer park, I own a big (to me) house and I spent tons on food and booze.
5M generating 3-5% on super safe assets is 150-250k/yr that's generated. After taxes (~40%), that is 90-150k which is 7.5-12.5k/month to spend.
A typical 2-3k sqft newish home in an upper-income neighborhood (median income around 80-90k) runs 400-600k+, which will yield a $2-3k/mo mortgage and $500-1000/mo in property taxes + 500-1000 in general utilities. So just to own a home in an upper-income neighborhood is 3-5k/month. Even if the house is paid off, one is looking at 1-2k/month in property taxes & utilities.
Decent health insurance can easily run around closer 1-2k/month for a family. Yes there are plans for $100/mo as well, but those pretty much as good as not having insurance.
Also a portion of the proceeds needs to be reinvested back to keep up with inflation. It feels that most things have doubled in cost since I was in highschool back in the late 90s/early 00s.
Sure, it's possible to live on 25k/yr (family of 4-5?) like Mr Money Mustache. It really depends on the lifestyle one would like the maintain.
The point of being financially independent is to be able to do as one pleases, but if the things that one wants to pursue cost a decent chunk of money, then the retirement income needs to accommodate said hobbies.
Travel, transportation (cars, boats), housing can be cheap, but virtually unlimited amounts of money can be spent on those categories alone and those categories tend to be the ones that people generally enjoy splurging on.
Well that house/lifestyle is unreasonable to me, in my opinion. What area has $12,000 a year in property taxes? Does it come with government lap dances?
That's also not how taxes work on capital gains.
I live in a wonderful house I bought for $220,000 with 20% down. I could downgrade if I need in the future but I like the space right now. The P+I of my mortgage is $750/month, taxes $400, utilities $250, insurance $145. I live in an average neighborhood, I don't live in an upper income neighborhood because I don't like upper income neighborhoods, they are too far away from everything. I also don't live in a 'hood. I live on the coast 2 miles from the beach and waking distance to plenty of places. I doubt my town is somehow unique in that respect.
If your spending is less than your capital gains and dividends you never have to worry about money again.
I was replying to "$5-10M is probably the low bar for living a kick-ass non-tied-to-employment lifestyle in the US." I have a kick-ass lifestyle (to me) for much less than $5-10M so I disagree. I don't think living where you have to drive 20 minutes minimum to go anywhere is "kick-ass." I don't find joy in buying new gadgets to impress my neighbors. I ran the numbers and Kick-Ass is at a million and a quarter to me.
There is no state income tax in Texas, only sales and property tax. A house valued in Houston at $400k will yield ~$7,700/yr in taxes. Search the tax rolls at hcad.org - pick a zip code like 77008 and see for yourself. Just be sure to pick 2016 tax values as 2017 aren't posted yet.
Select "A1" for the property type and/or put in a valuation to filter the dataset down below the max of 3,000 records. Any more than that will return an error.
It's all location dependent. Plenty of suburbs are 5 minutes away from just about everything necessary. I'm referring to upper-income as areas with median incomes much higher than the median US, not necessarily rich neighborhoods: Northern NJ, Bucks County PA, Northern Virginia, etc.
At these rates, a house around 800-900k runs about 10-12k/yr in prop taxes. A ~600k house in NJ runs around 12k/yr. And as you get to closer commuting distance to NY, housing prices go up.
There's a reason why MMM is big on being very choosy about location. Northern NJ is crazy due to its proximity to NY and the taxes scale with the price. A 1 BR condo in SF can be 1M, or you can get a very nice, recently built 2k sqft house for 200k in Texas.
Personally, from living in newer homes and older homes (built in the 1950-60s), I prefer newer homes. They are generally more energy efficient and have less things that are a ticking time bomb that need to be fixed or attended to. Old homes need new furnaces, roofs, water heaters, leaking pipes, new appliances, leaking windows, drafts, etc.
Of course if one's spending is less than their gains & dividends, one is set for life provided that the gains are scaling with inflation or the draw down rate of the savings based on life-expectancy can last long enough.
Personally, I'd definitely agree that ~1M is more than plenty to live very comfortably as a single individual. I would want around ~2-3M if I had to support a family though.
Paul Allen spent about $200 mil on his super yacht, which one could categorize under "hobbies & traveling." I imagine once you hit 8 figures, a new class of shiny toys all of a sudden feel within reach and become a lot more tempting to a lot of people.
That's called "lifestyle inflation," and it's real. Your lifestyle inflates to your income. People tend to spend $40k a year if their salary is $40k a year and spend $500k a year if their salary is $500k a year.
For sure. At 20 billion USD, Paul Allen is in the 11 digit club (googled "paul allen net worth"). If that is mostly Microsoft stock a 2.25% divivend [1] is gonna throw off like $450 million a year in cash. I would have to get real creative to spend a fraction of the wealth.
I imagine many do, you just don't hear about them.
For example I know a few people who are millionaires but you wouldn't know it to talk to them. They don't live overly extravagant lives. They have a nice house, some hobbies (e.g. a very nice car(s), a private plane, an art collection), a job they enjoy and friends they spend time with.
At least for those I know didn't strike it rich with some novel idea, they ran a small business or their own finances well and put away what they could for decades.
That's because that's basically all you can do with only $1M these days! The US is nothing but a grievous lie--we have allowed a tiny few to extract all the wealth to the tippy tippy top. I can't even believe people work for like $50K in most places anymore, they should be taking up arms at this point.
That's like 3k/month after taxes. Great for a single person, but seems tight for a family even in a super low cost of living area. I'm imagining spending around 1k/mo for a 3br place + utils, and another ~1k easily burned on groceries, 2 cars + car insurance. 1k remaining to be split amongst family member needs seems very tight.
Please don't post political or ideological rants to HN, regardless of which flavor. It's not what this site is for and we eventually ban accounts that do it.
For one thing, if you stop working, your are unlikely to be able to step back in the game at that same level. There are people who work less and just keep a toe in, so to speak, but if you just completely stop and let all your connections dry up, you may be unable to make money like that again if you should need it for some reason.
For another, inflation. What used to be a LOT of money isn't anymore. What is currently a LOT of money won't be in a few more years. And the beat goes on.
There are other reasons, but from a practical standpoint, those two are biggies.
Airplane travel is a good example where you just end up chasing the dragon. You start by wanting to make enough money to take a trip every once in a while. Then the cheapest economy class tickets aren't good enough - start making more money, and you just buy a ticket, no need to spend an hour finding that perfect ticket. Then economy class isn't good enough, so you get business class seats. Then you get lounge access, then move up to first class.
Then, you start time sharing a private jet but at that level that's kind of lame, and what you really want is your own private jet, but once you have one, it's so terrible when it's in the shop, so then you get a second, but you're also noticing how cramped the current one is, and go for a larger one this time...
I like to say (not sure if it's original or not), "anyone who says 'money doesn't buy happiness' has never traveled First Class". I got bumped into FC once, and it. was. amazing. Especially on a long haul flight, you actively enjoy the time spent there.
I remember my first time in international First Class. A very spacious seat. Personal service. Continuous champagne, caviar, goose-liver pate, Godiva chocolates, etc, etc, etc. All on linen with silver silverware. Since then, I've flown first class a number of times. Most recently, a friend offered me a "free" upgrade certificate for a flight from Heathrow to Chicago. After fees and taxes, it would have cost me $100. I declined. Been there. Done that. I rationalized that after the trip was over the jet-lag was gone and the flight was just a blurred memory, I'd rather have the $100.
I don't know, I grew up on welfare and after 20 years of being middle class I still have a hard time buying new shoes until my current pair is literally falling apart. Though, I guess my leap isn't as drastic... I'm still poor enough to be in a hotel and think "wow this carpet is really nice"
i can relate on the buying tickets thing. i used to buy tickets on priceline but after travelling every week for a year, i buy directly from american and buy first if the price delta isn't crazy (<$100)
i always buy prem economy though because anything else is asking for a bad time
Upper crust jobs bring a lot of respect with them. Being the CEO of a fortune 500 or even 5,000 company get's you into a social strata well beyond having a few 10's of millions in the bank.
Consider, people enjoy shopping at Neiman Marcus in part because of how the sales staff treat you. Now picture how you feel when an IBM sales team is trying to sell you over priced services.
I find it hard to imagine hitting $10 million and not just dropping everything and spending the rest of my life on random hobbies and traveling. Maybe that's why I don't have $10 million?