Middle-class millionaires
In America, millions make you middle-class. The book is The Middle-Class Millionaire: The Rise of The New Rich And How They Are Changing America ($24, Currency Doubleday).
Some key points:
Middle-class millionaires exhibit 4 qualities: Hard work (70 hrs/wk rather than 40), Networking (using information as capital), Perseverance (typically fail twice professionally), Risk (choose jobs with greater risk and pay rather than avoiding risk).
These books, reports, etc. that try to find similar qualities within a group of people inherently contain a lot of hindsight bias. In this case these are the 4 qualities are described as “Millionaire Intelligence” by the authors. By looking at the winners (such as “millionaires”) people assume that these particular qualities led them to success. However, there are plenty of people that exhibit the same qualities, yet did not end up millionaires. A lot of “success” has to do with pure randomness. Right place, right time. By being prepared you have a bigger window of opportunity, a higher probability of success, nothing more.
Another middle-class millionaire behavior is choosing a house in the best public school district. Regular middle-class people say three things, almost equally, influence where they live — schools, convenience to work and convenience to shopping.
I agree.
The book also reveals that studying for a post-graduate degree, unless it’s an MBA, is unlikely to make you richer.
This is incorrect. I know JDs (”Juris Doctor,” I had to look that up) that are definitely richer. Even a graduate degree in engineering works. It won’t make you rich, but “richer.”
Prince and Schiff [the authors] reveal that, on average, people believe it takes $13.4 million to feel wealthy. Middle-class millionaires put the figure even higher, at about $24 million.
That’s ludicrous.
on March 1st, 2008 at 10:51 pm
well its all relative to who you hang out with.
on March 2nd, 2008 at 9:35 pm
Agreed. Most of those books/reports/etc lead people to believe if they possess certain qualities they will become millionaires by following certain habits. It’s mostly bullshit.
Don’t buy a house for investment purposes if you know how to invest in equity/derivatives or currency. Even with the tax savings it doesn’t make much sense unless you want the house simply because you want a home.
The figures for feeling rich are a little ludicrous, but if you think about it, how much do you really need to buy everything you want whenever you want and live comfortably for the rest of your life? If you need, say 700k/year (number I came up with) to pay for everything you ever wanted then you would need 7mil invested at 10% (general market rate) or 17.5mil invested at 4%(ish - t-bills/bonds) to live that lifestyle. This turns out to be about 58k/month.
on March 3rd, 2008 at 1:30 am
its a lot more straightforward/easier for most ppl to buy a house rather than equities/bonds/derivs/forex. it also helps when ppl can “see” their “tangible” purchase.
on March 5th, 2008 at 8:48 pm
Straightforward/easier, no. Going through escrow, banks, HOA, dealing with an appraiser, etc etc. It’s a pretty long process to buy a house. To invest, you just need to open an account with a broker. It’s just the valuation portion of equities, bonds, derivatives, currencies that gets people confused.
The reason why more people prefer a house over the other investment vehicles I described is probably because they feel like they are more familiar with houses (after all, they’ve been living in one their whole life). Another reason might be because everyone keeps telling them the price of homes always goes up and never decreases (which is bullshit, just look at the funk we are in right now) whilst they hear about stock market crashes and day traders going broke. If you want to talk long term, the market has always yielded superior returns than housing on an average basis over a period of decades.
on March 12th, 2008 at 3:52 am
If you’re an engineering major, a PhD won’t make you any richer, but a Masters will give you a $10k boost for an extra year in school and more opportunities for promotion.