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Comment by enraged_camel | Hacker News Reader

I'm not sure a $500k white shoe lawyer is middle class. Sure, they may work for a living, but they're also likely to have enough investments that they can just live off the interest if they wanted.

I mean, $500k a year is a LOT of money, even in places like SF.

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Here are some numbers to consider. $500k pre-tax is about $325k after taxes (SF or NYC). Spend 50% ($162.5k), save 50% ($162.5k). After 10 years of a consistent $500k pre-tax income (no burnout, no voluntary breaks, no unemployment), with modest annual stock market growth, and no black swawns (family illness, lawsuits, divorce), you've saved up about $2 million. The rate at which you can spend money and not run out before you die (called the Safe Withdrawal Rate or SWR) is about 4% (some will argue closer to 2.5-3%). 4% of $2 million is $80k/year pre-tax. How long you need to work to cover your $162.5k/year lifestyle becomes an obvious function of savings rate and market returns over an extended period of time (decades). The bottom line is that it's extremely difficult for working professionals to become ''rich'' in the sense that they can indefinitely sustain an upper class lifestyle on passive investment income alone. Read ''The Millionaire Next Door'' by Thomas Stanley (http://fave.co/2cLN5gp) to learn more about how wealth is truly accumulated and managed in the United States. This book had a greater impact on me than pretty much any other I've ever read.

Which is why the number of years until you can retire has nothing at all to do with how much you earn, and everything to do with how much you save as a percentage of your income.

http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim...

Given that consumption (almost always) scales with social position, I imagine people will only really consider someone "rich" when they can still buy whatever they like, for the rest of their lives without working for a living.

Bill Gates can't buy everything he might want to for the rest of his life. While people tend only think of things they can afford as reasonable expenses, there is no clear line between an iPad and paying for a Mars mission.

If anything the Medean income seems like a good ballpark for enough. But, it's really hard to stop.

Maybe so, but when its not worth it to you to pick up off the ground more than what other people make... I think its close enough to not quibble.

The clear line is a yacht with 2 helipads.

Is that above or below two yachts with a helipad each?

Like Paul Allen's [1] you mean?

" Octopus sports two helicopter[2] pads on the top deck, a twin pad and hangars at the stern and a single pad on the bow; and a 63-foot (19 m) tender docked in the transom. There are a total of seven tenders aboard. The yacht also has a pool, located aft on one of its upper decks[citation needed], and two submarines (one of them operated by remote control for studying the bottom of the ocean).[citation needed] Side hatches at the water line form a dock for jet skis. "

[1] https://en.wikipedia.org/wiki/Octopus_%28yacht%29

Well, Bill Gates is a bit of an odd example. He's very thrifty. He could certainly afford $50 hamburgers, but due to the cost decides he doesn't want them.

Even if MicroSoft didn't take off, he'd still be wealthy. He's the kind of guy that waits to get the absolute maximum value out of each dollar he spends.

That's not a bad thing, by the way, just unusual.

He lives in a 'thrifty' 66,000-square-foot house. Sure, he could spend 10x as much on his lifestyle, but there is a point where more expencive does not mean better.

As to being rich, sure he inherited millions. But, connections, background, timing, and luck only go so far. You really can blow any amount of money.

In 1988 Gates was a billionaire. spending 6% of his net worth on a house really doesn't seem crazy. Most americans, well, most americans don't own a house. Those that do, it's their biggest asset. And his house has nearly tripled in value. Of course it has taken 25 years, because real estate is like that.

I've never met the guy. By all accounts he's smart, dedicated and hard working. I think he'd be doing just fine regardless of the field he went into. He got very lucky, so he's a billionaire 80 times over.

And, yes. The prince of Brunei is a great example of not thrifty. 14 billion in just 10 years. [1]

[1] http://www.vanityfair.com/news/2011/07/prince-jefri-201107

He did spend 28 billion at one point. Which is my point.

It's natural to think of spending in morale term so donations or gifts don't count or relative to income. Which makes finding a reasonable limit on the absolute scale meaningless. Supose he had 10 trillion and spent 1% on a house would a 100 billion be extravagant in that context?

I don't understand. I asserted that Gates was thrifty. As in "using money and other resources carefully and not wastefully."

I guess you're saying he's just doing whatever he thinks is fun from moment to moment, like prince Jefri. It seems like there's a subtle difference there, but I don't know how to articulate it.

I don't think thrifty simply implies someone lives well below their means. I think thrift applies in both a relative and absolute terms, so living a multi million dollar a year lifestyle you can easily afford does not count.

I make good money as a developer and live well below my means, but I am not thrifty. I simply don't have much interest in buying most things, but I can point to 10's of thousands of dollars in wasteful spending.

Bill Gates bought a Porsche 959 for $225,000 (in 1987 dollars) and left it in customs bonded storage for 13 years while he and his buddies successfully lobbied for a law blocking its importation to be changed [1]. The idea of BillG as some thrifty philanthropist isn't born out by reality.

Being the richest man in the world makes pretty much everything appear a trivial expense, but there has to be a limit somewhere.

1. http://blog.dupontregistry.com/celebrity-cars/bill-gates-ame...

I don't know how much he spent on lobbying. A low milage 959 is a 1.4 million dollar car. 9% rate of return?

edit

I get what you're saying. I just don't see the millions thrown away into nothing. Drugs, parties, wrecked cars, pissing away cash. Mike Tyson was worth $400,000,000. now he has nothing. It's easy to find people that got rich and lost it all. Lottery winners and pro athletes are prime examples.

Granted, spend one dollar less than you earn, and you're winning. He just seems like the kind of guy that has a hard time parting with cash for any reason.

Insurance, and inflation eat into that return. So, no it's not good ROI as a 30 year treasury bond from 1987 beats it let alone the stock market.

The real difference is often positive vs negative investment returns. Most sports stars lose more money from poor investments than they do spending.

Yep, it's the "keeping up with the Jones" and the Hedonic Treadmill.[1]

The $500k lawyer isn't going to just drive a Honda. He has to have the BMW 7 Series ($130k) -- and he wants a brand new one every 2 or 3 years. Instead of getting a mortgage that consumes a tiny fraction of his income or buying a cheap house free & clear, he'll take on a mortgage up to the max credit limit allowed by the bank. Hence he has a $2+ million dollar estate in a gated neighborhood. Does he have kids? Well then, it must be private school. The most desirable private schools in NYC cost $40k tuition per student per year. 3 kids means $120k/year. Basically, you do the arithmetic and $500k/year is abject poverty -- uh I mean -- middle class.

[1]https://en.wikipedia.org/wiki/Hedonic_treadmill

I know a lot of people in that income bracket. I don't know anybody with a 7 series or an estate in a gated neighborhood. They're comfortable, but more like Audi A3 than 7 series.

Few lawyers (or consultants or bankers) can make $500k in Iowa City (or even Seattle for that matter). Someone with a household income of $120k can easily afford a 2400 square foot house (that's the national average for a new house) within 30 minutes of work in a good school district near Des Moines. I'd estimate same combination takes an HHI of around $300k in the DC metro area. Jump to $500k (at that bracket you're losing almost half in taxes), and you're wearing nicer suits and saving better for retirement and your kids' college, but saving $100k per year isn't going to let you quit your job and live off interest any time soon.

Eh, taxes and other expenses add up. I don't think it would be very comfortable to stop working. 500k today isn't what it was just a decade ago.

And a 100k isn't what it was a decade ago either. While I understand your underlying point (and somewhat agree with it), how you got there was a bit bizarre. We are talking about making 500k this year, which would be obviously less a decade ago when adjusted for inflation.

500k is still over 20 years of working full time at target.

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