I sometimes seriously wonder if you born around the 1960s, how didn't you become a millionaire?

Rents were lower, wages were higher, safe investments like T-bills and CD had higher yields, homes exploded in value, education and health care were a fraction of the cost. If you worked at even a minimum wage job you were on track to being a millionaire just by putting money in the bank.

I asked my parents about this recently and it turns out they actually are millionaires... I knew the were well off, but thought they had a third or a quarter of that, I literally had no idea.

Often the first trick is having children. It turns out to be a good way to spend a lot of money. Especially having relatively more children. Other ways are avoiding good investments (it’s already easy today and was even easier 40 years ago when brokerages were more high touch and it was harder to find good information. Another aspect is being bad at investing in the typical way: switching from equities to bonds when there’s a market crash), avoiding investing at all (eg just putting money in a savings account), just spending a lot of money on depreciating assets and not saving, and not earning so much money in the early years when compounding pays off the most or the later years due to seeking out things other than high pay.

In many ways it’s not so different from today.

> Often the first trick is having children. It turns out to be a good way to spend a lot of money.

After hearing this for years, I assumed we’d be hemorrhaging cash once we had kids. As it turns out, kids have been surprisingly much cheaper than I thought.

It’s very possible to spend exorbitant amounts of money on children, but it’s not a necessity. Obviously, plenty of families are raising kids at the median US income which is vastly lower than what we can make in tech careers.

The internet narrative that kids will destroy your finances has been greatly exaggerated for those of us in tech careers. I suggest everyone considering children take some time to talk to actual prenatal around them rather than assuming the worst from internet anecdotes.

From what I've read, a decent portion of the cost is in additional housing expenses. If a couple is planning on having children, those housing costs will most likely come at prior to actually having kids, moving into a larger space in preparation. As a result, the cost difference at the time of having kids isn't as much of a jump.

(At least, that's my interpretation of the available data as I put together estimated budgets for the next 5/10/20 years.)

Child care is crazy expensive if you have two working parents with full time jobs. Most schools or day cares let out around three. If you normally get home between six and seven like most people do then you still need to figure out a few hours of care which means hiring someone. But finding a good person who only wants those hours is hard. And even if your daycare has late hours many people don’t want their kid in daycare for that long, since they don’t get individual attention and if you can afford it you probably don’t want your child in daycare from 8-6 every day. So unless you have family nearby who help you raise kids, it can cost a fortune.

> Child care is crazy expensive if you have two working parents with full time jobs.

Childcare is expensive, but it's still a fraction of the after-tax compensation of most professional jobs. Recent tax changes have made it even more affordable.

> Most schools or day cares let out around three. If you normally get home between six and seven like most people do then you still need to figure out a few hours of care which means hiring someone.

Every daycare we toured was open until 5-6PM. I don't know anyone who hires additional help for a couple hours in the afternoon. If you're in tech, it's not hard to find a job that allows both parents to stagger their working hours so that one can pick them up.

Around here, it's very common for parents of young children to come into the office early and leave early to pick up kids. It's a common practice and plenty of companies support it.

> So unless you have family nearby who help you raise kids, it can cost a fortune.

Again, this hasn't been my experience nor that of any of my parent friends. Also keep in mind that kids grow up fast and daycare isn't something you need to do forever.

Frankly, most non-parents I know have vastly overestimated how expensive and painful it is to raise kids. This is especially true of those who grew up reading Reddit, where angry /r/childfree posts used to hit the front page with regularity.

As a dad, I Aagree 100%. To be honest I don't know how people actually manage to spend those reported fortunes on their kids. For example, kids often show more interest in pine cones than expensive toys. Or play ancient worthless but still good musical instruments. etc etc. I think a lot of people think they need a gigantic car when they have kids. Just tell 'em when you go away on holiday you can only take a few toys. Seems to work, everything will still be there when you come back. ;)

Well said. There is too much being made about how difficult and expensive it is to bring up kids... and sometimes by people who spend thousands on their pets!

Right but if you’re in a typical high-paying tech career (and you don’t want to send your children to private schools) then spending a more typical amount on your children means spending proportionally much less of your income than the average American (remember, this thread was about why more Americans born in the 60’s aren’t millionaires). It will be especially affordable if you get e.g. some level of childcare as a work benefit as this is often one of the biggest expenses to ordinary middle class Americans (either directly or in opportunity cost to parents who have to take more time off work)

We lived happily in an 800 square foot apartment, paid nothing for child care, both held well-paid full-time professional jobs, and saved nothing towards college funds.

All of those changed in some way or other once we started planning to have kids.

It’s also been totally worth it, but that’s beside the financial impact.

Even if the best case scenario is cheaper than you thought it's still a huge gamble. What if your kid is born with a condition that requires lifelong expensive treatment? What if your kid turns out to be a clumsy driver, or never moves out of your home?

Bay Area child care: $1,800-$2,000/child. Then factor additional rooms with housing at $1,000-$1,200/sqft. A couple of children easily add expenses of $8-$10k/month is pre tax income.

Raising multiple young children with their own individual bedrooms in one of the most expensive cities in the country is an edge case.

That said, it's entirely doable, especially in an age where FAANG companies are paying huge compensation in that area anyway.

Obviously, it doesn't make sense for someone with a median non-tech salary to try to raise multiple kids in one of the most expensive areas in the country. For tech people working tech jobs, it still works out fine though.

> The internet narrative that kids will destroy your finances has been greatly exaggerated for those of us in tech careers.

That's a pretty dangerous suggestion to anyone contemplating this.

Kids are brutally expensive (in the US at least). Love my kid more than anything in the universe but let's not pretend it's cheap. Current spend is about $30K-$40K per year. Post-tax money of course, so that's ~$80K off the top from gross salary.

And then there's future university costs, which are trending to be more than my entire gross salary per year so not sure how that'll work out.

What goes into that number? My brother has three kids and is making $50K as a medical resident, what am I missing?

The thing about raising children is that the sky is the limit when it comes to spending money, time, and resources on them. It's not hard to find stories about people who spend their entire incomes on child raising. The catch is that these stories can be seen at every level of income, from $30K to $300K or more. Expenses can and will balloon to exorbitant amounts if you're not careful.

It helps to know parents with more traditional income levels to see how they function. If you're only surrounded by people spending $80K/year on their kids, it starts to feel like spending that much is the only option. It's not.

School alone is ~$20K. Babysitter costs vary based on hours, but it's never less than $1K/month. So those two make up ~35K/year. Add food, toys, camps, etc and it gets to 40K.

I’m assuming this means private school? Considering only 10% of K-12 students attend private school, it already skews the numbers.

If you talk about how expensive it is to own a 6k sq.ft. home, that can be true as well but both seem to speak towards lifestyle inflation rather than the norm.

Yes, private school. Because public schools around here aren't so great. That's the cheapest private school in the area, everything else is way more expensive.

The irony is that if I could afford a 3Ksqft home (forget 6Ksqft, I can't imagine anyone other than a few CEOs could afford that) I could live in an upscale area where the public schools are great.

People could also end up with extended periods of unemployment.

Inflation was brutal around 1980. (~14%)

Software development barely existed as a career option and you almost certainly needed a degree to land a job.

When I graduated from engineering grad school in 1981, my highest offer was $27K and that was a sector (oil biz) which was pretty high-flying at the time. That's about $80K today which is certainly not nothing but probably on the low end of what a lot of software developers expect. (I had the good timing to go back to grad school--which had been in the plans anyway--just as the oil biz was entering one of its cyclical downturns.)

> Software development barely existed as a career option and you almost certainly needed a degree to land a job.

I graduated in 1979. Both statements are quite incorrect. Software was paying well at the time, and was remarkable as more than a few in it had no degree, and certainly not a CS degree.

I had a friend who barely knew anything about software, but was fairly motivated. He was offered $40k in 1980. At the sane time, I was making $28k with a PhD in Physics working on lasers. We were young guys, it ruined our relationship.

I don't know what things are like at Microsoft today, but in the 90s they had not only developers with no degree, they even had dev leads with no degree.

Microsoft only cared about competence.

I have a college and graduate degree. At a previous job, on my team of 6, I had 50% of the higher education degrees :)

"When I graduated from engineering grad school in 1981, my highest offer was $27K and that was a sector (oil biz) which was pretty high-flying at the time."

Hey, I remember that! My mother was retired from the bank she worked at for 40 years when the oil biz blew up in the late '80s.

This was in about 1984. But I was also in the offshore drilling business which was especially sensitive to oil prices given that offshore drilling was relatively expensive.

Similarly for milennials graduating around ~2008 like me. I had the good fortune to graduate right into the chasm of the financial collapse, so was happy with my little $28k/yr job. But with Boston not as crazy hot as it is now, and a roommate, rent was only $600/mo, with no need for a car. That meant I had plenty left over to put a bit in a low-cost index fund (VOO) every month, and damn, with the S&P 500 going from 800 then to 4,000 now... you can't help but end up with a good chunk of change in the bank!

Graduates now are coming into a hot market, so on the one hand they probably can't expect such appreciation on their investments, but on the other you can get crazy high salaries right off the bat! I seriously think it's far easier to become a millionaire now than any other time in history.

You got lucky but most people who graduate during a financial crisis pay for it their whole life. It is harder to get your first job so you get a not so good one and you can easily get stuck in a suboptimal situation for years.

In the dot-bomb era, a lot of people ended up with job offers rescinded or were laid off from their new jobs and ended up at least underemployed for 3 or 4 years. I consider myself very lucky to have navigated that period with a relatively low salary but no meaningful time unemployed.

That’s likely true. It seems the people who graduated a year or two later were similar in many ways except that the job market was a lot better. And indeed many people with the option chose to get a little extra education like a masters degree rather than graduating for this reason.

Why did you invest in a index fund? Who made you aware of index funds?

My point is when you know about what to do with your money it’s an obvious one which has payed off for you. Did you learn about index funds from family, friends or on your own?

As a grad from a similar time I never even heard or knew what a index fund was at that time. I was always good with money never spending what I didn’t have and a small amount of savings but had very little knowledge on finances in general. My parents never taught me, they where not poor but not well off, similar friends never talked about money.

It’s only later in life through curiosity and reading financial posts on the internet am I discovering how to better use my money. If someone would of sat me down in the early 2000s to educate me as a young adult I’d probably be well on my way to a million now. As a young adult fresh out of school/college unless you come from a family that is financially savvy it’s hard to know what to do with money.

This is probably why wealthy families create wealthy families.

If nothing else, inflation makes it easier to become a millionaire over time. A millionaire in the early 1900s would be equivalent to someone with $30 million today.

Yeah, with enough inflation 'millionaire' will mean next to nothing.

I finished school around 2008 as well and would have killed to make $28k/yr.

Average salary for a hitman is actually over twice that: https://www.simplyhired.com/salaries-k-hitman-jobs.html

Having $1 million in retirement savings only lets you spend $40-50k per year during retirement. That's a pretty solid amount of money for not having to do any work, but doesn't lend itself to luxurious lifestyle that people think about when you say 'millionaire'.

Single earner households were more common, mortgage interest rates were above 10% for years, material goods were more expensive. There was no YouTube for learning home or auto repair. Cars weren't very reliable. Not all roses.

Good luck repairing a car now. They are way more reliable, and way more tolerant to owner neglect, but give me an old BMW 2002 or VW bug and I can repair pretty much everything in those machines with my Haynes manuals. Safety on the other hand is orders of magnitude better today.

Most faults on modern cars are still mechanical. OBD scanners or adapters are cheap. YouTube has replaced Haynes/Chilton manuals for instructions.

Well yes, obviously. I was simply expanding on the parents comments that it was difficult to learn to repair your car (or potentially a washing machine). I don't think that's necessarily accurate. Yes, YouTube didn't exist, but it was still possible to get information to rebuild a carburetor and Pep Boys has been around since the 30s. Newer cars are just objectively much more complicated, and when it comes to something like replacing a head gasket, sure it's doable, but yeah I'm going to get somebody else to do that. On the other hand, if it was something like an old flathead, I could feel confident doing that on my own.

Most routine maintenance items are still easily DIY-able and there’s likely an enthusiast forum or group to help give some guidance.

My parents were born in the 40s, but they’re roughly in the generation you’re talking about. They’re still poor. My mom didn’t work much. My dad didn’t make much. Neither were financially savvy.

However, every last one of their 5 siblings is indeed a millionaire after leading relatively modest middle-middle class lifestyles. Maybe one of them you could call upper-middle, but even they traded thriftiness in most areas for the appearance of wealth in others.

I see a mix across that generation as well. It seems some of those that struggle kept the mentality that helped their parents flourish: an expectation that you find a stable job and work it for 40 years. They weren’t exactly in the mindset to constantly hustle and constantly learn new skills. When globalization started to pull the rug out from under them in the 1980s many had difficulty remaining relevant in the economy.

People of this era spent a lot too! In the 70s and 80s not only was there a bicycle boom, but a sailboat boom too!

The working class had money and they spent it.

I don't think we'll ever see that level of luxury consumption by the working class ever again. We've all seen the graphs of how wealth decoupled away from the working class after Regan and how poor a share of wealth millennials have compared to their parents.

60s and 70s were the golden era of light aircraft as well. Lots of working class people flew airplanes as a hobby. (A significant multiple vs today anyway.)

Regulatory changes were a big part of that. IIRC, manufacturers were ruled to be liable for accidents, and they all pretty much stopped making planes. So now planes are rare, very-old Cessnas cost what several cars do instead of what a single car does, and development is so stagnant that leaded avgas is still a thing.

My mother was the head teller at a bank, with 40+ years of experience. When I graduated from college and got one of my first jobs, I mentioned my salary. She (who had been retired for several years at that time) told me she'd never made more than $25,000 per year.

Many people spend every dollar they make (and often then some.) That's how.

Becoming a millionaire in a couple decades is more about living below your means, and consistently saving and investing. "Just" putting money in the bank would not make you a millionaire. You still need growth.

Condos are still cheap. People need to chill out with the whole detached housing thing, it's not economical in the long run (centuries) and we're rapidly approaching the point where it stops making sense near the coasts of the US. A point many countries have already reached.

>Condos are still cheap.

Citation needed with respect to expensive cities. And you don't even need to get very far away from many of those cities--like an hour from Boston, for example--until land isn't really a limiting factor.

At least near DC yeah condos are pretty cheap. I haven't checked Boston but it means housing supply is something that can be increased to meet demand so provided the local regulators are at least partly competent they shouldn't be too expensive.

In Boston metro I doubt you could find a decent condo in a decent area for much less than $500K. Which you can get a house on some land for an hour outside the city in some communities.

It's easy. How many people do you know spent every dollar they made? I don't know a single person from the period of 1950-1970 that didn't.

They could have spent and wasted a lot of money, but if at least some of that money went into real estate that they still own, then they’re probably millionaires.

There was way less information back then.

Investing in funds wasn't preached by every other YouTuber (there wasn't even a YouTube equivalent, obviously). Investment advice was something financial advisors were doing and they have a pretty bad track record.

My parents / grandparents had good salaries, got rich with houses, got incredibly early golden pensions, wasted some money with investment funds and market crises (2000, 2008).

> I sometimes seriously wonder if you born around the 1960s, how didn't you become a millionaire?

> wages were higher

Depends, of course, but for engineering jobs wages are way higher today.

I wasn't around in the 60s but my father was making less than $10K (as a professional with a PhD). That's about $80K today according to https://www.usinflationcalculator.com/

I can easily make twice that anywhere (without a PhD) and 3x-5x that if I shop around for best paying jobs.

No need to go back to the 60s though. In the 90s, $30K-$40K was a very nice starting salary for a software engineer. That's 52K-70K today. But entry level jobs today are paying far over 100K. I just hired a new grad last year for ~150K.

So salaries are certainly much, much higher today.

I'm always shocked every time that I read numbers like these. I'm from the EU. I don't know a single company that could afford to pay a single entry level job €100K or more. Realistic numbers for entry level positions are in the neighborhood of €20K. How can a company from EU hire anybody from the US?

They can’t. I’m shocked when I receive job solicitation from EU based companies. I got one from a Spanish company last year where the non-inflation adjusted salary was worse than my first year salary in a non-expensive locale 20 years ago.

I’d have chalked it up to just spam except the inquiry included recent conference talks & job history that wasn’t linked in simple ways.

Could have been a bot but one that did really interesting connection analysis but not basic salary survey linkage.

My only explanation for this is that you can buy a lot less with a dollar than a euro. Just out of curiosity, inside what range of money was the offer? Around 20K, 30K, maybe more?

There are dozens of threads where people from eu try to find an explanation. It's always "it sucks". Nothing else.

28k euro

This isn’t the norm though. Are you in a tech-center? BLS numbers show the average median mid-career salary for software is $110k. Starting salary is slightly below $70k based on university data that aligns with government data for median salaries.

When I see these comments I wonder how much it’s skewed by the SV peer group on HN

> This isn’t the norm though. Are you in a tech-center?

I'm in silicon valley, so, yes.

But one doesn't have to be here to get hired here. The recent grad I mentioned wasn't anywhere near California when hired. It does need a willingness to move (although moves are on hold for now, of course).

Agreed, but maybe I missed your intent. My point is not whether it’s possible, but rather if it makes sense as a generalized statement. Given how much SV wages diverge from the national average, I don’t think the latter claim can be applied.

I remember precisely when engineers started getting paid for the first time. 1999. Warning. It’s lifetime expectation of earnings, not instantaneous earnings, and when changes devalue your skills, you’ll be in denial.

My parents ended up retiring with over $1m but growing up I remember constantly feeling like my father was terrible with money (to this day there are 8 cars parked at his house) and he worked a very middle-class middle-management job for his entire life. I'm worried the million they have(/had?) wont stretch for the rest of their remaining lifespan...

Starting businesses that went under in 2001 did the trick for mine.

You are right. But they were not millionaires when $1M was “real money.” Inflation has a lot to do with that. The garbage house in Sunnyvale I bought for $128k in 1979 dollars is worth $2.2M today, but I assure you, it’s still a garbage house, a crash pad for a pair of 60-hour-a-week careerists. To me, real value was curing my wife’s cancer, my phone, the Moderna vaccine, high bypass turbofan engines, connections I’ve made on Twitter, Sci-Hub, zlib, etc.

> The book The Millionaire Next Door provided data to support "Seek wealth, not money or status". […] I like the Tweet thread, but prefer the Millionaire Next Door cause it's backed up by actual data.

Fooled by Randomness by Nassim Taleb, most/more famous for Black Swan, pokes holes in the methodology used in TMND, specifically survivorship bias.

Another observation from FbR:

> I will set aside the point that I see no special heroism in accumulating money, particularly if, in addition, the person is foolish enough to not even try to derive any tangible benefit from the wealth (aside from the pleasure of regularly counting the beans).

* https://www.goodreads.com/quotes/553605-i-will-set-aside-the...

Personally, I find living well below my means leads to a great deal of happiness. I never have to stress about money. Never have to worry about losing my job (as long as it isn't a long term loss). I can make future career decisions based on quality of life a not raw salary.

It's an opportunity cost like anything else, but I would argue having more wealth than you need is a tangible benefit all its own.

I don't think Taleb was advocating living above one's means, but that aestheticism is not necessarily a high moral accomplishment. You can't take your wealth across the River Styx, and Charon only demands a single coin, so what's the point of amassing it?

asceticism. I think we can all agree aestheticism is the highest moral accomplishment of all.

Taleb should know that the benefit is having f*k you money. I suppose that once said money is obtained, there may be no greater advantage in accumulating more.

Warning. Taleb is a kind of performance art.

>High status professional are expected to drive nice cars and live in a big house. It's harder to be a millionaire if you're spending a lot of money.

houses and cars are assets. god why do people believe this crud masquerading as science

>I like the Tweet thread, but prefer the Millionaire Next Door cause it's backed up by actual data. It also seems like the Tweet thread is focused on advice that'll get you a net worth in the top 0.1%. The central premise of the Millionaire Next Door is a lot of people have "regular jobs" and get rich (depending on your definition of rich). See the janitor that amassed an $8 million dollar fortune: https://www.cnbc.com/2016/08/29/janitor-secretly-amassed-an-...

The only reason why the janitor story is newsworthy is because of how exceedingly rare it is, not because this is something that can be reproduced. no one publishes stories about lawyers, execs, doctors, coders, bankers, etc. donating millions. You have to donate tens of millions for Harvard to care.

"houses and cars are assets"

Technically. What matters is that the house you live in and the car you drive are not investments. Choosing expensive ones is a bad decision if you want to accumulate wealth.

At best it's an opportunity cost - you are tying up money which could become an investment. Practically it's much worse - a car is practically guaranteed to lose most its value within a few years. A house might gain value but if you want to actually realize the gains you are left without a place to live, so these gains are imaginary money.

> the house you live in and the car you drive are not investments

The house? Probably not an investment. The land underneath it? That's a very different story.

It can kinda-sorta become an investment but only if you are prepared to move somewhere cheaper to retire.

You can also downsize and stay in the same area. Not uncommon for empty nesters.

You can certainly do very well speculating on real estate, but in most places and most of the time you are better off investing in the stock market.

A Classic 911 is an investment and houses don't automatically lose money like cash does.

If I am correct, in the national accounts, the house households live in is considered an investment.

Houses and cars are assets, but the larger the house the larger the non value generating expenditures such as taxes and maintenance too.

Cars are also assets that do not appreciate as a general rule.

Cars are depreciating assets.

right, but they are assets nonetheless, which is why police repossess them for asset forfeitures, and some cars even gain value by becoming collectible

> some cars even gain value by becoming collectible

I've run some figures. Almost none pay back their storage, maintenance, and tax costs, let alone the opportunity cost of tying up the money.

I remember on an episode of "Antiques Roadshow" where some guy had a couple Leica's his father bought in the 1960s. They were mint, with all manuals, receipts, etc. The amount they were worth was pretty large, and the guy was ecstatic that he'd hit the jackpot.

The trouble was, if his father had put the same money into the S&P500, a completely boring investment, it'd be worth more today than those cameras.

Not sure if mint means the cameras were never used or just well maintained?

But if the father was able to take a lifetime of great photos in addition to the cameras increasing in value - I think I go with the camera 100/100 times.

I agree that if he used the cameras a lot, they were worth the money. The same for any other collectible.

But as monetary investments, they're terrible.

Sure, but I think the point here is that given the option to maximize investment in a depreciating asset (buy fancy car) or minimize that investment (buy an inexpensive car) and invest the difference elsewhere, it's better to do the latter.

personally I do not count my primary residence or my daily truck assets even though they’re paid off.

the reason being if I lose them I can’t maintain my current quality of life. so the rising valuation of housing is a net negative, just more tax revenue for the state, doesn’t do me any favor

A new car loses a significant amount of value as soon as you drive it off the lot. If you finance it or lease it, then you don't even own the asset.

This isn't really true anymore. I just sold a 2 year old car with 25k miles on it for just 10% less than I originally paid. Prior to that I sold a 1 year old car with 18k miles on it for 1% less than I paid. You can also lease new cars for a very low fixed rate which includes all maintenance, insurance, etc. There is a value in having a safe, new, reliable car.

The chip shortage has put a dent in new car supply, driving prices up and having ripple effects on the used car market. It's an unusual time and shouldn't be thought of as the new normal.

Anecdotally my used car gained 25% in value over the last six months. But if I sold it and still want something to drive, I'm on the hook to buy a replacement that is also priced higher than normal.

The last time I looked at used vehicle prices, they didn't seem like great deals. Also, I think with modern cars, the reality is that you can get the latest and greatest and, after 10+ years, they're still pretty darned reliable. The trick, especially in snow country, is to get rid of them before rust-related issues, among other things, become a problem. I have a 10 year old vehicle and will probably think about replacing over the next few years.

Things also seem to have slowed down for year to year changes. My 2016 VW GTI is literally the same as the 2021 that is still being sold, for example. A lot of models seem maxed out feature wise. I think we might be at peak car lol

I don't know, we've been buying my wife the same make and model for some time. The latest upgrade can talk to my phone, is more powerful and about 25% more efficient. The increased efficiency alone will save us 50% of the capital cost over the period we own it.

I expect its replacement will be either a PHEV or full EV, a huge change.

Used cars are in high demand now because of covid-related shortages.

Do you have any resources or particular qualms with Thomas Stanley's research techniques? To me, it seemed like he was drawing conclusions based on data. Interested in why you think it was "crud masquerading as science".

>houses and cars are assets.

I would guess that the majority of people do not own their house outright. Just because you have a mortgage on a one million dollar house, doesn't mean you have one million dollars worth of wealth in your house.

Yes this is one of the main points of the book. What people think is wealth is usually just a lot of debt. Wealthy people use debt to make money. Poor people use debt to buy things, to paraphrase another article that was on HN a few weeks ago.

Your mortgage is itself an asset. It’s one of the best hedges against inflation - as long as you don’t fall into the refi trap.

It literally isn't. It's a liability. Debt being reduced by inflation doesn't change that fact.

You are of course not wholly wrong. However, people paying on the latter half of a 30 year mortgage are almost certainly paying much less for housing than they would be paying to lease, due to inflation. And of course these payments are increasingly equity-weighted.

Just because a mortgage is a liability doesn't mean it's a bad financial decision to incur a mortgage to own a house, agreed.

I think it’s going to be futile to argue with you (partially because you’re correct in the technical sense) but I’ll give it one shot.

Imagine you have 20 million. Should you buy a million dollar house outright, or get a mortgage? Look at the prime rate today and compare it with expected market returns over the life of a mortgage.

This is without even considering the ground reality of renting a place (which is the common alternative), where rents are liable to rise perpetually, and without considering a plethora of other factors which contribute to calling a mortgage an asset.

Of course, if you can get by without needing to pay for shelter at all, you should do that.

A better way to describe that is that buying a house with a mortgage is a leveraged investment.

The mortgage is the opposite of an asset.

It seems like you’re in a black and white world. Look up what asset means - it’s more than just antonym to liability.

The whole point of accounting is to force black and white distinctions, especially in ambiguous situations. But in fact there is no ambiguity about this. Owing someone money doesn't earn you money. Owning an asset that you may have acquired with a loan is what earns you money.

I totally agree. I'm making the narrow point that a mortgage is a debt, and classified as a liability. A house is an asset. The benefit of purchasing real estate with leverage vs cash doesn't change how they sit on a balance sheet.

Personally I argue to everyone they should put down as little as possible for the reasons you're stating.

Only if the interest rate is fixed, right? Is it common for mortgage interest rates in the USA to be fixed at a set percentage for the life of the loan?

Yes it is.

And this is one of the relatively few situations that work out in favor of the consumer. With most mortgages, you can refinance to a lower interest rate--perhaps with some associated costs--if rates go down. But if rates go up, you're locked in with a fixed rate mortgage.

What is "the refi trap"?

Some people keep refinancing, taking out more money and accruing more debt. They do this every few years, never paying off their loan.

Car is definitely not an asset. I will consider it as a liability. Price of car drop as soon as it is out of dealership.

That’s the definition of a deprecating asset. The loan you took out to buy the car is the liability.

And milky ways are assets too (inventory I suppose). Doesn't mean you won't go broke putting all your money into milky ways.

Only if you own them, right? Otherwise they are just debt you owe a bank.

> It's harder to be a millionaire if you're spending a lot of money.

"When most people say they want to be a millionaire, what they really mean is "I want to spend a million dollars," which is literally the opposite of being a millionaire."

-Morgan Housel

> It's harder to be a millionaire if you're spending a lot of money.

"Oh, I didn't get rich by writing a lot of checks."

-Bill Gates (fictionalized on The Simpsons)

I'd heard about Millionaire Next Door for years and mistakenly wrote it off as one of those scammy "buy my program" books about visualization.

Then it was gifted to me, and boy, was I wrong! Couldn't put it down. It's packed full of interesting tidbits and data. While I'd highly recommend reading the book yourself, I also wrote some notes on it here [0].

I'd love to see these same studies, but updated to 2021.

[0]: https://mtm.dev/millionaire-next-door

I've got good news for you! There was another book written 2 years ago called Everyday Millionaires by Chris Hogan that conducted a new study of millionaires. I think MND studied 100 millionaires, while EM studied 10000.

https://www.ramseysolutions.com/store/books/everyday-million...

There are various competing concepts that most of us conflate erroneously most of the time:

* having much money in the bank * having much property/wealth on the balance sheet * earning much * having an important role() being able to afford all/most wants * living lavishly * being happy

(*) Angela Merkel might be one of the most powerful world leaders but earns 'only' around 20k a year. Greta Thunberg moves mountains and earns little/nothing for it.

Merkel $US 426K per year.

https://paywizard.org/salary/vip-check/angela-merkel

She's the Chancellor of a country with a multi-trillion dollar economy.

Paying politicians this low begs for corruption and egotists drunk on power.

Paying them millions begs for greedy bastards.

Prominent politicians like George Bush, Obama, Hillary and Pelosi made almost all of their fortunes from "speaking fees", book sales, insider trading on stocks, etc.

If they were paid market rates, it would attract less of this corruption.

> Greta Thunberg moves mountains.

I can only regard this as a joke, and not a very successful one, I am afraid.

I'm with you there. Greta Thunberg has done what exactly?

Anecdotally, at least in western Europe governments and companies seem a lot more careful of looking like they're disregarding the environment than they were 5 years ago (green washing is a thing but if organisations are doing it, at last they think perle care about it now). I don't think it's all down to her, but she played a part.

She started the School Strike for Climate movement.

https://en.m.wikipedia.org/wiki/School_strike_for_climate

Yes, but what has she done?

Supported Indian middlemen strike masquerading as a farmer's protests which among other things had the following demands from the Govt - Ability to burn stubble without consequences, one of the primary causes for Smog in Delhi and North India every year contrary to people' perceptions that pollution and industries are primary source - Subsidized diesel and fuel - No restrictions on using groundwater in a water rich region which is facing a serious issues with the water table due to highly intensive agriculture mostly cultivating crops requiring a lot of water - Continuing Govt subsidies on the above mentioned water intensive crops despite there being a significant overproduction and not allowing Govt subsidies to go towards more reasonable crops - Not allowing farmers to sell their produce directly to the consumer or retailers (and receiving money directly in their accounts). Instead going through highly corrupt and legacy 'arthiyas' (middlemen) who add nothing but another layer of bureacracy for no value

Yes, i am not kidding. The 'environmentalist' Greta Thurnberg supported these protests because according to her and the media, breaking the lobby of powerful interests is akin to corporate takeover of poor farmers. This is without knowing anything about the subject and never involving herself in active debates about the topic

Served as a figurehead for powerful interests

Per month...

> High status professional are expected to drive nice cars and live in a big house. It's harder to be a millionaire if you're spending a lot of money.

> The authors were surprised to find that a lot of the Americans with a net worth over a million did not fit any of the "millionaire stereotypes" at all. They drive an old pickup truck and drink Bud Light.

So do you think people want the money, or do they want a big house and a fast car?

Exactly the reason I didn't like "The millionaire next door". For me it misses the point completely.

This book assumes that people want to be "millionaire" in order to stare at a 7 digits number before they die.

That's your prerogative, and there's nothing wrong with that. Others may prefer the freedom and stability afforded by a large amount of wealth-generating assets.

Or farmers that inherited land.

As someone with a 12 year old Nissan, and buys the cheapest beer beer I'm sympathetic. But what's the point of being a millionaire if you aren't spending? You can just do that on a regular low stress job.

To add to the argument about security, the average stock market return after inflation is around 7%. With investable assets of $1 million, that means you're being paid $70k/year, just for already being wealthy. I imagine that no matter how low stress a job can be, it can be even lower stress knowing that no matter what happens, even if you never work again, you would have sufficient income to live.

(This glosses over the variability of the market, but that just adjusts the amount of wealth needed relative to the yearly expenditures in order to continue indefinitely, and the principle still holds.)

Yeah that 7% is likely an illusion. If we kept up 7% a year forever just about every professional could retire at 50. But its unlikely to continue, we've had a 50 year bull market that is long overdue to end.

Thank you for finding a simple way to describe why that book bothered me so much. The author offers no room for rational dissent. You are either with him, or you're a fool.

In his value system, the additional security offered by millions is worth sacrificing every other potential want or desire in life for. I find that ridiculous, addition non-bullet proof security is just ONE of many things which must be evaluated for its relative worth based on ones own value system.

I say non bullet proof because I feel the author completely disregards the possibility of war or the country collapsing making the "security net" the money could otherwise buy be nullified entirely.

He also implicitly disregards mortality. The opportunity cost of every year spent with a focus on accumulation is one you can never get back. I guess in this case I'm thinking a lot about travel or living abroad at a reasonably young age where the impact is absolutely materially different from retirement in one's twilight years in Thailand.

Having a seven figure liquid wealth affords you the freedom to step away from a toxic job, relationship or other situation. Things that induce a high level of stress for most middle class families like a $5-10k repair bill become mere inconveniences. College costs for the kids are manageable, health crises can be navigated usually.

Earning a massive salary and spending every last dime is a far more stressful way to lead one's life and likely much less enjoyable save for some short lived hedonic rushes when purchasing that newest toy.

Security. Having a paid off house and enough cash in the bank so you don’t have to work can go far in reducing stress.

There is no job (that you need) that’s lower stress than being financially independent, whether retired or not.

Its good insight but also recognize that all of these distinctions are arbitrary.

The only usefulness in these observations is knowing that you can keep raising the rent and there will still be people willing to pay it. Too bad about the favela at the end of your driveway though, but the millionaire janitor’s children will still be able to make rent.

It's very easy to be a millionaire if you bought a big house or a small house in a desirable area >5 years ago with the exception of 2006-2008.

With the Fed pumping out money like candy - debt isn't exactly a bad thing. It's basically a free asset.

I see this a lot on Reddit. People who bought homes a decade ago using mortgages are now sitting on a nice amount of equity.

You normally discount your primary residence when you defining what a millionaire is.

But being a millionaire in today's world is not being rich or wealthy. Millionaire Next Door was published *25 years ago*.

To be relevant today it should be titled "Multi-Millionaire* Next Door (* Net worth > 5M)".

I'm sure for a lot of people 1M sounds like a lot, but when a majority of your wealth is tied up in your house - a much much larger % of a 1M dollars today than even 15 years ago - it's not working for you.

(Though, I concede that today, you have the option of refinancing and putting that capital to work, as interest rates are low).

This also has something, if not, a lot to do with millionaire farmers, mostly funded by incredible and often corrupt subsidies from the government. So before subsidies and pork, they would have made a more modest wage, but the game can be abused pretty easily. If its not designed to be abused because what benefits big agriculture also benefits medium sized "family" farms. Family farms may actually be a series of a dozen or more farms where the owning family does no actual farming on their own, but still live a rural lifestyle (pickups, bud light).

Secondly, its also skewed by government workers on fat pensions who can become millionaires pretty easily due to these collectively bargained benefits but also inflated salaries, especially overtime which is often abused in government jobs.

Lastly, a lot of this is self-reporting. Some people like to put on a modest front for their own reasons. The author got to see their pickup truck and muddy workboots, but not their Florida vacation home or Wisconsin lake house. Or the Corvette under a cover in the 2nd garage.

So some of the advice is hard to handle and not applicable to most. You can sort of FIRE your way into wealth and live like a miserable miser or hope you were born into a socio-economic culture where buying a lot of farmland is possible or getting a public sector union job is possible.