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Quote of the Day: Rich
“I am indeed rich, since my income is superior to my expenses, and my expense is equal to my wishes.” – Edward Gibbon
This year — or maybe last — I became rich. Not Bill Gates rich or Jeff Bezos rich, but rich by my definition of rich: If you can maintain the lifestyle you desire without having to work, you are rich. If not, whether you are earning $15,000 or $400,000 a year you are still among the working poor.
This is not a new belief on my part. I have held it since the 1980s – the early 1980s shortly after I graduated from college. That was a time when I was hearing stories about stockbrokers in New York City losing jobs that paid $400,000 a year (in 1981 dollars) and reduced to living out of their cars within six months. I don’t know if the stories were true, but I remember reading them in the news. (Doesn’t say much for their credibility, does it?) But there were a lot of people, including coworkers, who were really into leveraged lifestyles back then. I could see it happening.
Even if those stories were myths, like most myths, they revealed a greater truth. It was not how much income someone received annually that defined wealth – it was how much of that income remained after expenses were paid. If the cash flow was sufficiently negative, you were not really rich. Even if the cash flow in was a monetary Ohio River, if the cash flow out were a monetary mouth of the Mississippi, you would end up broke at some point. You could go from a condo in Manhattan to the back seat of your car in six months if you were sufficiently feckless.
On the other hand, if your investments and passive sources of income exceed your expenses – assuming you like your current lifestyle – and you can reasonably expect that situation to continue? I consider that being rich. Think about it. You can buy whatever you want and your bank balance still goes up every year – even if you don’t go to work every day or even any day. Once you reach that point, the only utility extra income offers is as a bigger reserve against contingencies. And like any other possession, the utility goes down with every extra unit.
One example: I now live by myself. Owning a car had a great deal of utility. Having a second car – even without a second driver – has some utility, but less than the utility of the first car. The second car is a backup if the first one breaks down. But a third or fourth car has much less utility than the second car. The cost of extra insurance and maintenance may easily outweigh the value keeping those cars. (I am not Jay Leno. I don’t collect cars.)
At some point in the last two years, I achieved that status. I don’t have to work to maintain a lifestyle that makes me happy. I have no debts beyond a vestigial balance on my mortgage. I have enough savings to buy the luxuries I desire. (Mind those luxuries are small ones – a backup generator to maintain electricity when the power goes out, a rehab of the master bathroom, spending more time with my adult children.) I can pay my monthly expenses (including a monthly reserve for emergencies) and still have a positive balance from my non-earned income. I can travel as much as I want to, buy the books I want to keep, and afford the food I want to eat.
Nor does it mean I will always be rich. Stuff happens. There were Russian aristocrats, wealthy beyond imagination even by modern standards, who were impoverished by the Russian Revolution. There are no guarantees in life, only risk management. But for now, I am rich.
Admittedly my wants and desires are not extravagant. I don’t see the need to buy a new car every year. If my 12-year-old car is reliable enough to take me on the trips I want to make, that is good enough for me. If my subdivision is closer to Tennessee Avenue than to Boardwalk and Park Place, well, I like it that way. If what I can get makes me happy, why should I want more than that?
That does not mean I will stop working. I like working. I like the work I do. Even if I am rich, prefer not to be idle rich. For me, work adds meaning to my life. Even if I bank it all, the income adds to my financial cushion.
Knowing I am free to walk away from my job is liberating. I do not have to accept conditions I find improper. I am at liberty to do the right thing – even if it costs me my job – because I am no longer a slave to it.
F. Scott Fitzgerald was correct when he said the rich are different. Just not in the way Fitzgerald believed; soft instead of hard, cynical instead of trustful, or even that they believe they are better than others. Fitzgerald, despite the money he made, was never rich – he was always among the working poor, kin to the stockbroker who could not lose that $400K/year job without going bankrupt six months later. He never understood what makes the rich different. Not the money – the freedom.
Published in General
Let it flow.
I’d revise that a little to say “if you maintain the lifestyle you desire without having to something you don’t want to.” I used to look forward to going to work. I’d think about what I wanted to get done the next day the night before. Something has changed. Maybe I’m just getting tired. I did finally talk my bosses into paying me by the hour rather than paying me a salary.
I’ve read an expression, which I can’t now find, that goes something like this: Income 20 pounds a year, expenditure 20 pounds 10 shillings a year, misery. Income 20 pounds a year, expenditure 19 pounds 15 shillings a year, bliss.
I’ll go with this. I’ve never quite been able to understand what is behind a desire to accumulate wealth at the level of a Gates or Bezos. Something more to that than just rich. If there is a major defect in the free enterprise concept I think it relates to that but I can’t describe it any further,
Charles Dickens. Don’t remember the title of the novel.
I still look forward to going to work each day. I just don’t have to. If I quit tomorrow it does not impact my lifestyle, independent of whether I like it or not.
The last few years I was working for the Shuttle program, I hated it, but I had to stay for the sake of my family. There was a big payout if I rode it to the end. Today? That 55 weeks pay probably would probably not motivate me to stay. That’s what I mean when I say I am rich.
David Copperfield, I believe. Mister Micawber.
Politics enters the picture when one has attained the status of “rich” as described. The issue becomes how to sustain that status. America has had a high standard of living relative to many other parts of the world and that has been a draw for people to emigrate. In most of America’s past the accumulation of wealth by individuals has been earned or at least done in ways that avoided being stopped because of illegality. Enter politics. Government thievery (taxes and inflation) and government thuggery (reductions in individual freedom) can change everything.
‘My other piece of advice, Copperfield,’ said Mr. Micawber, ‘you know. Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of days goes down upon the dreary scene, and—and in short you are for ever floored. As I am!’
— Charles Dickens, David Copperfield.
I’m rich enough to travel around the upper midwest by bicycle, though poor enough that we take a car when traveling to the coasts. If we were really poverty-stricken we’d have to fly. If I was filthy rich, I’d travel on foot, but it’s hard to even imagine attaining that level of wealth.
The book The Millionaire Next Door has a lot of information that I have found interesting, and many will find useful. The authors were studying the “modestly wealthy” (a few to several million dollar net worth), not the super-wealthy (Bezos, Gates, athlete or show business stars, etc.). One of the bits I remember from the book is the authors’ surprise at the relatively modest incomes upon which many of the study subjects built significant wealth. They just made sure to spend less than they made (drove modest cars, lived in the same (usually quite modest) house for many years (unless their route to wealth was fixing up houses while living in them and then renting out that house as they moved to the next project house), married to the same spouse, sensible wardrobes, etc.).
One time I got into a discussion in the company cafeteria check-out line with the clerk and another customer, both of whom were marveling that a sports celebrity who lived locally had filed for bankruptcy. “How could he go bankrupt? He got a [whatever million dollar] signing bonus and a [millions of dollar per year] salary.” I pointed out that if he spent just a little more than those millions of dollars, he’d be bankrupt. The other people couldn’t imagine spending millions of dollars, but I had seen some “wealthy” people do that, so I knew it was possible.
“Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness.
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery”
― Charles Dickens, David Copperfield
And these people are why government loves estate taxes; you can’t take it with you, you can’t give it to your kids. Instead, the state will distribute your ant savings to the benighted grasshoppers.
There is a story, possibly apocryphal, about a Soviet port agent whose job it was to stencil, “From USSR” in aid crates received by foreign countries.
Much like that agent, the state hands out the hand-outs in its name while officially disparaging the original source.
“Back in the USSR, boy, you don’t know how lucky you are, boy.”
Maybe the word “unbridled” has something to modify there.
Maybe I’m overthinking this, but bridling capitalism is partway to human bondage.
Bridled capitalism is the only kind that even works.
How’d he do that? Someone write this down.
We don’t have a list started for Best Comments of 2021 because ’til now we didn’t need one.
I was referring to people’s motivations.
I was going to quote perpetual debtor Mr. Micawber in David Copperfield, but I was beat to it.
Congrats, Seawriter
“Defect”? How many people do those two employ? Half a million? A million? They are super rich for sure; worked 30 plus years to get there. But made lots of money for lots of people. And saved million even more. Bezos came up with an idea to save people both money and time. No problem with that.
Tell it, Brother!
If all they want to do is hang around the basement playing video games, and the government will keep paying them for not working because of Covid, by your definition we sure have a lot of people newly rich in the last few years.
That’s probably the wrong word to describe what I find troubling. The issue I’m describing is exactly the focus of this post: Rich.
What exactly is the motivation driving someone to continue in a mode to eliminate any and all competition by any and all means after they have achieved the pinnacle of their endeavor? Don’t free market entrepreneurs recognize competition as a positive attribute of that drive?
An overwhelming, insatiable need to win that is never satisfied. The compulsive competitor never gets any closer to the pinnacle of his endeavor.
They think that the recurring existence of competition means there is someone else to beat.
Another interesting development in my economic outlook was meeting older coworkers at a large company when I started working for my first large company in 1985 (about 4 years after I started full time working, and during the days when company pensions were still the norm). Although several of these older workers hated their jobs, they felt they couldn’t quit until they reached the magic age 55 or 30 years’ service to get a company pension. Meeting them prompted me to save money like mad so that I would not be so tied to the company pension. That saving proved valuable to keep me from panic as the layoff-prone economy developed at the very end of the 20th century and into the 21st century, and I was twice laid off.
Much like the kid playing video games in the basement, he is down to PWN.
I’m a slave to my job for a different reason: I don’t want to damage the company by quitting.
If you care that much, your company is as much family as a job. My first rule of life is you don’t dump on friends or family.
That’s not slavery. That’s loyalty.