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?

Wealth Myth – Stay Married to Become Wealthy

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Like everything in life, the “Stay Married to Become Wealthy” saying really depends on the situation!

I have two different friends that have financial inept spouses from Hell.  One got a divorce and is doing fine, while the other is living in a continually tortured life with constant battles with debt.

Friend #1 (this is really the guy in the story Financial Pig 1, in my story of the three little financial pigs)

Of the three little financial pigs that I’ve mentioned before, he is the most dynamic.  After his divorce, and the purging of his debt, he was able to turn his life around and actually get another great job with potential.  Had he stayed married, he still might be living with his wife in relative’s basements while she spends all of the money he makes.

For him, getting a divorce meant that he has a shot at accumulating wealth like he hasn’t before.  I talked to him recently, and now he’s driving an economical Chevy Malibu (which I have too and hate), and is socking way his money.  And although his new wife (she was his girlfriend in the last update), is much better than his previous wife, she does spend more freely than I feel comfortable doing.  But on the other hand, they aren’t going out as much either though, so perhaps I’m not getting a good read on his situation in this area.

I’m positive if he was still married to wife 1, they would still be in massive debt and trying to declare bankruptcy a third time!  Hooray for him, his divorce probably saved him from permanent financial ruin.

Bad Marriage

Friend #2 (I haven’t talked about her before, but she could use a divorce too, and I’ll explain why now)

My other friend at work (who was laid off a year ago), has a husband that floats in and out of work, but spend all their money on toys to entertain himself.

He buys mostly muscle cars, and car parts, always goes out drinking and like to go on trips with friends while my friend just keeps working away like it’s nothing.

They were married in high school, so they have a long history together.  But unfortunately, they aren’t really that compatible.  Perhaps he realizes this and that’s why he cheats on her.  Yep, and the kicker is multiple people have called her and told her so.  So here you have a guy that spend all the money in the family for toys for himself (and the kids), who goes on trips without her and is even cheating on her, but still she stays married.

And the real punch in the gut is that he’s perfectly healthy, but hasn’t worked a real job in the last five years!

In this friend’s case, it would make total sense for her to divorce her husband, but she chooses not to.  I can guarantee that they will never be wealthy unless they win the lottery.  But even if they win the lottery, the money would be gone in five years.

So have I debunked this wealth myth!  It really does depend on the couple.  For my wife and I it makes sense because we are both frugal and agree on many issues, but for my friends above, divorce is the best answer (and not just for financial reasons).

Do you have any stories about couples that are married but would be better financially if they got a divorce?

MR

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