Everyone can be a millionaire

[MoralLibertarian]

An average 18 year old worker named Joe starts working a stable 6.00 job in an inflation-free economy (in a real world application, we would assume that Joe's wages and living costs go up by the rate of inflation, as does his estate). He works 40 hours a week and 50 weeks a year and makes 12,000 dollars. Let's assume he pays 600 in rent which comes to 7200, 250 dollars a month for food which comes to 3000 for the year. He spends another 1000 dollars on any miscellaneous costs, leaving him with 800 dollars.

Let's assume that Joe is able to save 800 a year and that he can find a mutual fund that gives him a rate of return of 8% every year. If he makes an 800 dollar payment to his mutual fund every year for 40 years, he'll have 207245.22 dollars in his account. If he waits till age 65 to retire, he'll have 362320.12 dollars!

Assuming that Joe retires at 65 and lives to 85, he'll be able to spend 18116 dollars every year assuming he takes all of his money out of his mutual fund, which is an improvement over his annual income of 12000. If he was fine with spending only his income of 12000 and still died at 85, he would have 122320.1217 in his account to pass on to whoever he chose.

But here's the real kicker. If, starting at the age of 65 until his death at 85, he keeps his money in his mutual fund but only withdraws 12000 dollars from it a year, at his death, his account would close at 1,139,614 dollars and 98 cents.

The only skill that Joe needed was the competence to keep his minimum wage job and frugality (I know that the latter is actually a lot harder than it sounds). Had he had the skills to increase his income steadily faster than the rate of inflation, even by a fraction of a percent, he'd be making even more money. If he were a semi-savvy investor and invested on ETFs or securities, he could double his money. Hell, if he were smart enough to invest in government bonds rather than mutual funds during bear markets, he'd have an even higher rate of return.

The point of this: anyone (perhaps not everyone) in this country has the potential to be a millionaire, even with tiny amounts of capital and basic skills.

[JoS]

And no taxes, or kids.

[MoralLibertarian]

People below the poverty line shouldn't pay taxes.

[Politics]

Well, someone just finished watching Oprah.

[fahrenheit]

God damn, where can you get 8% interest? If there is such a place then please tell me, I am only getting 3%.

[IllustriousPotentate]

At 10/15/06 08:53 PM, JoS wrote: And no taxes, or kids.

Well, if you're earning minimum wage, you more than likely won't pay more than a small amount of tax. Also, if you're working a minimum wage job, you shouldn't have kids.

Remember, part of frugality is making financial decisions based on what you can afford, the decision to have a child is one of those financial decisions.

[YHWH]

Exactly, ML, very well put. Even the idiots can be millionaires if they can stick to it.

I know this is nowhere near minimum wage, but here's my plan to make a lot of money:

I will serve in the Armed forces. Instead of having a house on post, I will buy a house. When I transfer base, let's say, every 3 years, I put that house up for rent to pay the loans on it. I buy a house at the next base, and rent it out when I leave. Repeat process numerous times. Then, when I retire, I sell all the houses, equaling to a shitload of money.

Assuming I don't die in the process

Post Edited by Peternormous at 10/15/06 9:03 PM

[MoralLibertarian]

At 10/15/06 09:00 PM, fahrenheit wrote: God damn, where can you get 8% interest? If there is such a place then please tell me, I am only getting 3%.

Mutual funds?

Good mutual funds can get you returns of up to 12-15% on good years, but they can also perform miserably during bear markets. In the last century, the average return on the stock market has been 11%, and since strong mutual funds generally beat the market, he would probably be making more. However, since the rate of inflation over the last two decades has been about 2-3% and we're talking about an inflation-free economy, I decided to subtract 3% from the annual return of the market to find the real rate of return on the market.

[JakeHero]

It's great to have you back, ML. This forum has been flooded with a bunch of pseudointellectual, socialist shits.

[IllustriousPotentate]

At 10/15/06 09:02 PM, Grammer wrote:

*smiles and nods*

bah, economics is the one thing about politics I try not to get involved in.

If this is true, it's a pity it would take one so long to become a millionaire. But hey, that's what we have wills for, right?

You have to remember, though, that's for someone making minimum wage. For someone making 2 or 3 times that amount, it ought to be even easier.

[JakeHero]

At 10/15/06 09:12 PM, IllustriousPotentate wrote:

At 10/15/06 09:02 PM, Grammer wrote:

*smiles and nods*

bah, economics is the one thing about politics I try not to get involved in.

If this is true, it's a pity it would take one so long to become a millionaire. But hey, that's what we have wills for, right?

You have to remember, though, that's for someone making minimum wage. For someone making 2 or 3 times that amount, it ought to be even easier.

Exactly, hell, I'm making more than minimum wage at my current job, and it's basically unskilled labor.

[MortifiedPenguins]

Because of course, everything in life goes completely to plan.

[MoralLibertarian]

At 10/15/06 10:11 PM, MortifiedPenguins wrote: Because of course, everything in life goes completely to plan.

This isn't a real argument, but I'll take the opportunity to bump the topic.

Actually, let's have some fun. Joe is doing very well and virtuously saving his money in mutual funds until disaster strikes. At the age of 40, he becomes deathly ill of cancer. He lives, but because he has no insurance, his medical costs cost him 3000 dollars (if Joe were a skilled negotiator, he could probably ask the Doctor to give him a special deal because he makes so little and his doctor would have granted him that, but that's neither here nor there). Fortunately, Joe has been saving and can take the 3000 from his mutual funds. How does this affect his account?

At 40, Joe has 44365.40 in his account. He withdraws 3000 for the extra expenses. So he has 41365.40 left. If he lets this grow and continues to deposit 800 dollars a year till he's 65, he'll have 341774.70 left. In retirement, he takes out 12000 a year and dies at 85. He'll have a total of 1043853.64 in his account to pass on.

So no, not everything goes to plan, but when you save you're better prepared.

[JoS]

I am quite sure that if he gets cancer tis gonna cost him alot more than $3000. Precriptions laone for a couple of months would proballye qual that, and depending onw hat stage of cancer treatment he is in, h emight not be able to work.

Cancer and other medical costs aside what happens if Joe loses his job through no fault of his own (company goes under for example or relocated to another country), or if there is a sudden change in price of say rent, nto equal to inflation, or an even mroe likley scenaior, what if Joes wages dont increase to reflect inflation? Minimum wage hgasnt chanegd in decades, but inflation hasnt stopped?

[wwwyzzerdd]

At 10/15/06 08:52 PM, MoralLibertarian wrote: (in a real world application, we would assume that Joe's wages and living costs go up by the rate of inflation, as does his estate).

Your logic fell apart right there. If Joe worked in an actual real-world enviroment, then minimum wage would be around $13-$14/hr (count the rate of inflation from 1968 when minimum wage was at it's highest in relation to average wages and inflation). You also failed to include such things as required payments (taxes, insurance[s], kids, unexpected expenses, etc.) although you may make a point that extra payments are those (they still don't add up though)

It may be theoretically possible to do it, but there's no practical way for this to happen. And if this was something said on Oprah, she obviously has never seen the show 30 Days.

[stafffighter]

So if we work without enjoying ourselves for 80 years we can have a largly cerimonial amount of money? Woo Hoo.

[goozebump]

wow sounds perfect. You seem to forget however, transportation to get to work and back. (esp. down in the south and suburban areas.) MIght need a car for that right? If you have a car, you need insurance. Don't forget to factor in the cost of gas. Public trans. you say, thats still going to cost you a pretty penny. How are you going to communicate with your job, you need a PHONE number for anything. thats another $25 minimum a month. Plus family, and recreational activites to not go crazy.(All work and no play makes jack shoot up his work.) How about the cost of having a gf? No gifts for her at christmas? I guess to you poor people don't deserve to have love. Capitalism must have jizzed in yur eye, becuase you are so blind its sad. How about a home, do you want them to rent for the rest of their life? You figure you'll want a decent size home in a relatively safe neighorbhood. I mean the middle class people get homes way above what they can afford so its only fair that u should too right?. Now L, can I call you that? What do you think will happen to our economy if everyone just spent money on necessities? We'll be communist thats what. Capitalism is built on buying shit you don't need. So if the economy drops and you lose your job, oh well right? I think you need to refine your theory a bit more. In fact, try it for yoruself. Get a minimum wage job and do exactly as you say. In 40 years, come post again and if you aquired million dollars you can publish your work in some economic journal and be regarded in the likes of Locke.

Yours Truly,
--Someone living in reality.

[EnragedSephiroth]

Joe must not live in the U.S. but instead in a beautiful magical world that pays 8% YTD and does not have an exaggerated cost of living where the lowest rent you can find is $800/mo. What a smart Joe would do (according to Rich Dad, Poor Dad) is either invest his money and get a return on it or take out a loan and begin his own business which he can later develop into a business system independent of his everyday presence. THEN he'd make that million quick.

[Gunter45]

At 10/16/06 01:50 AM, stafffighter wrote: So if we work without enjoying ourselves for 80 years we can have a largly cerimonial amount of money? Woo Hoo.

Well, somebody will get to enjoy that money, just not you.

[lapis]

So if I, hypothetically a simple minimum wage worker, live like a monk for 47 years of my life, with a measly 1000 dollars annually for all non-food and non-housing related costs, and if I manage to maintain nearly perfect health during the entire period, then I'll get a 50% income raise when I'm 65? Isn't 65 the age where you should start looking back at how much fun you've had in your life instead of finally starting to live it up? I mean, if you really care so much about money that your goal in life is to make a million dollars then it must be a real pain to live out your glory years without a car, having seen nothing of the world, walking around in cheap secondhand clothing and spending your evenings by enjoying the most basic cable TV.

And if he dies at 70 he'll have lived out a crappy life for nearly nothing. His children can inherit it I guess, wait a minute, we assumed he had no kids since if he did he wouldn't have had that kind of money in the first place. I think I prefer not being a millionaire. Maybe the thought of anyone being able to make a million dolalrs is nice, but realising how much the process of earning that amount of money sucks kind of ruins the dream.

[Elfer]

Sweet, I'm going to drop out of university and become the world's poorest millionaire.

[TommyGun]

At 10/15/06 08:57 PM, MoralLibertarian wrote: People below the poverty line shouldn't pay taxes.

In a country 8.2 trillion dollars in debt? not fucking likely sweethart. America needs to do one thing. Communism. Have 5 year plans, focus on the Industrial steel business and begin exporting. Use media moguls such a Rupert Murdich and the free trade agreement to take over other nations media buy using cheap american made media pieces such as news, cinema, television programming. Charge Multi company owners more on taxes, and in the new communist state find an appropriate ways to distribute cash. Elminating those who are useless such as the disabled and the elderly will increase cash flow. You realise how much money charities make? Imagine all that cash into the government. Partner Japan in technological advances as an investor and in 30 years when technology booms America shall blossom.

Simple

[MoralLibertarian]

The purpose of this post was to teach you that everyone with the knowledge and the frugality can become a millionaire by the time they die.

It's just what I expected from liberals to argue against it rather than tell people to embrace it.

[poxpower]

At 10/16/06 10:56 AM, MoralLibertarian wrote: The purpose of this post was to teach you that everyone with the knowledge and the frugality can become a millionaire by the time they die.

It's just what I expected from liberals to argue against it rather than tell people to embrace it.

so what's the point of becoming a millionaire with this method again?

CaseA : you don't have children because you're too poor. What do you do with the money??
CaseB: You have raised kids in near-poverty all their life to give them a cool mil once you die, when they're old enough to retire themselves. Hum..wow? Good for your grandkids?

Its a really great idea for, say, two generations after oneself.
Otherwise, its pretty much useless to give up all the cool shit during your good years so you can leave a rich corpse.

[Slizor]

He spends another 1000 dollars on any miscellaneous costs, leaving him with 800 dollars.

Let's assume that Joe is able to save 800 a year

What's the minimum he can save to achieve this pointless feat? It seems a bit random to put 1000 dollars as miscellaneous costs, what if it is was 1200? Could he become a millionaire then?

[stafffighter]

At 10/16/06 11:01 AM, poxpower wrote:

CaseA : you don't have children because you're too poor. What do you do with the money??

Give it to cure desises?The desieses you couldn't afford to get?

CaseB: You have raised kids in near-poverty all their life to give them a cool mil once you die, when they're old enough to retire themselves. Hum..wow? Good for your grandkids?

Not really. What if your kids followed your fine example?

Its a really great idea for, say, two generations after oneself.

For those people coming from a heritage of enforced poverty, use the money to buy every number combination possible in the lottery, only then will the curse be lifted.

[MoralLibertarian]

At 10/16/06 12:57 PM, Slizor wrote:

He spends another 1000 dollars on any miscellaneous costs, leaving him with 800 dollars.

Let's assume that Joe is able to save 800 a year

What's the minimum he can save to achieve this pointless feat? It seems a bit random to put 1000 dollars as miscellaneous costs, what if it is was 1200? Could he become a millionaire then?

If you'd like, plan for yourself. Get a financial calculator or a TI-83 and use the Time value of money function.

But to answer you question, the numbers were pulled out of my ass, and they are meant to signify the average rent costs in my area of MD. If he could only save 600 dollars a year, he'd end up with 271740 dollars by 65, which is much less.

[stafffighter]

At 10/16/06 01:16 PM, MoralLibertarian wrote: the numbers were pulled out of my ass, and they are meant to signify the average rent costs in my area of MD.

So our lives suck, the kids we leave the money to are sure to resent us, AND we have to live near you? No way are you invited to my million dollar funeral.

[MortifiedPenguins]

At 10/16/06 10:56 AM, MoralLibertarian wrote:

It's just what I expected from liberals to argue against it rather than tell people to embrace it.

The fact that your as idealistic as an hardcore liberal can also come into the argument.

Hey, when you seperate yourself from the real world and all it's problems, anything is possible, like making millions of dollars on a completely planned life at minium withough having to pay major taxes and your salary rising with inflation.

[Begoner]

In your calculations, do you assume that he walks to work butt-naked and without a car (without ever getting sick, of course, because he couldn't afford that)? What about gas and utility bills? Does he live in a shack without any sort of power or water? Get real -- seriously. You must be incredibly naive to assume something so extraordinary.