In an op-ed piece in the New York Times, titled Stop Codling the Super-Rich, an interesting read in which he invites congress to up his tax burden along with others who can well afford it. Ironically, I didn’t hear a big round of applause when this was published.
Long before Barenaked Ladies wrote their famous “If I had $1000000,” people have dreamed of becoming millionaires. It’s fair to say that a million bucks isn’t quite what it used to be. In fact, inflation over my lifetime has eroded the value of a million dollars down to $141,000, or conversely, you’d need over seven million dollars to have the same purchasing power as a million had when I was born. (See the Inflation Calculator if you’d like to see how the dollar has changed in value over the years)
- Sandy at Yes, I am Cheap – Hide from the relatives, pay off debt, buy a franchise.
- Elle at Couple Money – Pay off debt, buy a 4 family house to rent, help family, set up a charity fund.
- Kay Lynn at Bucksome Boomer – Pay off debt, give to charity, save for retirement.
- Afford Anything – Wow, she’s jumping into rental real estate big time, leveraging the money and planning to retire on the rent once the mortgages are paid.
- Thrifty Decor Chick – Buying new appliances, redecorating, expanding rooms.
- Retire by 40 – All invested to help get to that goal of early retirement.
- Emilie at I came to run – Emilie starts with far more than the even million, as sh was looking at a recent megabucks drawing. She’s generous, helping students through scholarships she’d set up, and also helping family get rid of their own debt.
- Jeff at Sustainable Life Blog – Wipe out debt, buy a house, take a vacation, invest.
- Andrea at So Over Debt – A nice mix of investing half, paying debt, and coolest of all, giving away $100K to a number of people just because she can.
- Jesse at PFfirewall – Get rid of debt, buy into a franchise, invest.
By the way, there is no million dollar bill, the largest printed bill was $100,000 and it was only used between banks, it isn’t legal to own any longer.
These were fun to read, I commented on a few of these posts that I’d invest such a windfall, every cent. We have six years to go on the mortgage, and feel no urge to pay it faster. I believe the market will rise more than the 3.5% post tax rate the mortgage costs us. And in our late 40’s/early 50’s (yes, Jane is older) we’re not looking to upsize the house, in fact our dream home is about 2/3 the size of the one we are in. I’d be curious to know if the answer to the million dollar question changes with age, I suspect it does.
What would you do with a cool million if someone wrote you a check tomorrow (you know – the giver has to pay the gift tax, not the recipient. It’s all yours)
Charles Dickens’ David Copperfield was first published in 1908*, and this quote is from that book:
|“Annual income twenty pounds, annual expenditure nineteen nineteen six,
result happiness. Annual income twenty pounds, annual expenditure
twenty pounds ought and six, result misery.”
-Wilkins Micawber in Charles Dickens’ novel David Copperfield
I don’t know if Dr Thomas Stanley, author of Stop Acting Rich, is aware of this quote, but after read his latest book, I suspect he’d agree wholeheartedly with the sentiment.
If you are looking for investment advice, this is not the book for you. Dr Stanley does not offer stock tips or advice on retirement planning. He has spent the better part of the last three decades studying the habits and writing about millionaires. His conclusion is that “most people will never earn enough money to become wealthy and to be hyperconsumers at the same time.” Stop Acting Rich offers examples of how the millionaires Dr Stanley observed lived, and teaches us how to make the distinction between the Income Statement Affluent (IA) and the Balance Sheet Affluent (BA). We see how it’s easy for a doctor earning $250,000/yr to live a lifestyle that has every dollar spent and maybe then some, yet a teacher or engineer whose family income may be ‘just’ in the mid-$100K but living beneath their means, managing to save their way to wealth.
Through the book we are shown brand examples, Timex vs Rolex for the choice of watches for instance. Real millionaires tend to not waste their money on the thousand dollar watches, preferring Seiko or Timex. As a fan of statistics and data, I appreciated the depth of analysis showing the correlation between real wealth and living the glittering rich life with no assets to show for it. In fact, it’s often tough to tell just by looks what someone’s balance sheet looks like. Most rich folk do not own vacation homes, boats, or planes. I recall an interview with Warren Buffet, who trades off year to year for the spot of richest man in the US. Mr Buffet was asked about boats, and he said that he had no interest in them, that when you’re Warren Buffet, you get invited on other people’s boats enough that you can avoid the hassle of maintaining one. He said that he was happy to spend time with his friends in his living room watching the 46 inch plasma TV and eating sandwiches. No champagne, no caviar.
A fair amount of writing is given to the discussion of Grey Goose Vodka and how its purchase correlates to glittering rich. Grey Goose buyers tend to drive prestige makes of cars, wear Rolex watches, drink other high end spirits, and spend more dining out. So as I was reading about this, I checked out my pantry (I don’t have a liquor cabinet) and sure enough, Grey Goose. Last I recalled, we had a bottle of Absolut or Smirnoff in there. I asked my wife if someone brought it over and she told me that the last time her sister was over she asked her what her preferred vodka was. Two thoughts came to mind as I heard this. First, for the bottle that will likely last over a year, $15 or $50 won’t ruin our budget. Second, given the details about how there’s little difference in vodka as it’s known for its lack of taste, my dear sister in law fell for the advertising pitch, and my dear wife, trying to make her sister feel welcome in our home, threw away an extra $20 or $30 to do so.
I enjoyed this book as much as I did prior books in Dr Stanley’s Millionaire series. It helped validate my own choices in cars (Toyota, built in the USA, by the way) watches (Timex) and other purchasing decisions that help keep my family on a path toward a stronger balance sheet. If you’d like to understand what the rich really buy, and wear, and where they go to eat, take some time and read this book, you’ll be surprised.
*Note: One of my faithful readers, Elle, alerted me that the date was 1850. Thanks Elle, I fact check my finance data a bit better than this. I promise.
First, my United States of Innumeracy post in which I discussed a viral email making the rounds which claimed the bailout was equal to $250K or so per person. Coincidently, a couple weeks later, Forbes publisher, Rick Karlgaard, published “Math Boneheads, Pt II”, in which he expressed similar sentiment, only he was a bit more aggressive suggesting that the difference between the illiterate and innumerate is that “most innumerates have no idea they they are math boneheads.” I’m with you, Rich.
Next was my post “Send Fuld to Jail” in which I suggested that Sarbanes-Oxley be used to confiscate Fuld’s gains among others. Forbes, in the same issue I cite above, offers the same suggestion, only they felt that applying this regulation against former CEOs of failed banks was a longshot. Can’t say I didn’t try.
(Happy Turkey Day tomorrow.)
CNNMoney had an interesting look at how Obama and McCain would change your taxes in an article titled “what they’ll do to your tax bill“. This article is a few months old, a more recent update is available from the Tax Policy Center, and is as recent as Aug 28. A look at either article shows that both candidates wish to lower taxes overall, but it’s clear that McCain would skew the savings toward the top earners, the 1%. I don’t wish to ‘soak the rich’, but you can see that there’s probably some reasonable medium. Obama wants to raise taxes on those making over $250K, and McCain would give the highest decreases to those same earners. I don’t like either candidates proposal. I say freeze the rates on the top 1%, no change, help those who really are hurting, and invest in the country’s future.