Why our kids expect to be rich...

[macallan25]

Originally Posted by Educatingblue

I was thinking the same thing. I know a lot of people in the area that I'm in are all about putting on a good "front."

My husband and I have been married almost 2 years and several of our friends have gone out and bought "McMansions" and have raging debt, no savings and still lavishly spending. It's amazing the people who question our decision to wait and get an affordable starter home and live within our means.

This reminds me of The Millionaire Next Door and the discussion in it about the difference between people with actual wealth and people that just have a high income. The authors make a distinction between Under Accumulators of Wealth (UAWs) and Prodigious Accumulators of Wealth (PAWs). Most of the millionaire households that they profiled did not have the extravagant lifestyles that most people would assume. This finding is backed up by surveys indicating how little these millionaire households have spent on such things as cars, watches, suits, and other luxury products/services. Most importantly, the book gives a list of reasons for why these people managed to accumulate so much wealth (the top one being that "They live below their means"). The authors make a distinction between the 'Balance Sheet Affluent' (those with actual wealth, or high net-worth) and the 'Income Affluent' (those with a high income, but little actual wealth, or low net-worth).

Really an excellent book.

[Educatingblue]

Originally Posted by macallan25

This reminds me of The Millionaire Next Door and the discussion in it about the difference between people with actual wealth and people that just have a high income. The authors make a distinction between Under Accumulators of Wealth (UAWs) and Prodigious Accumulators of Wealth (PAWs). Most of the millionaire households that they profiled did not have the extravagant lifestyles that most people would assume. This finding is backed up by surveys indicating how little these millionaire households have spent on such things as cars, watches, suits, and other luxury products/services. Most importantly, the book gives a list of reasons for why these people managed to accumulate so much wealth (the top one being that "They live below their means"). The authors make a distinction between the 'Balance Sheet Affluent' (those with actual wealth, or high net-worth) and the 'Income Affluent' (those with a high income, but little actual wealth, or low net-worth).

Really an excellent book.

Very good point! Thank you for the book recommendation, I ordered it today!

[summer_gphib]

It's amazing the people who question our decision to wait and get an affordable starter home and live within our means.

We are going through the same thing! It's so funny because the fact we don't want to do a 100 percent mortgage and actually HAVE A DOWNPAYMENT seems to be something many of our friends don't understand.

I'll be ordering that book as well. It's funny when I think about it. Many of the wealthiest people I know don't waste their money and shop wisely.

[AlphaFrog]

Originally Posted by summer_gphib

We are going through the same thing! It's so funny because the fact we don't want to do a 100 percent mortgage and actually HAVE A DOWNPAYMENT seems to be something many of our friends don't understand.

Heck, I can't figure out who in their right mind would get one of those Quicken Intrest-Only Mortgages that I see commerical after commercial for. Sure, your monthly payment may be 40% lower, and you might "save" thousands a year - but unless you're taking those thousands and investing in something with a higher % rate of return than your mortgage APR, you're actually LOSING money, that is, if you ever plan on paying off your house. If you're not ever planning on paying off your house, you might as well be renting - at least someone else is responsible for the repairs. How hard is it to understand that if you're only paying interest, your priciple is NOT going down?

[RU OX Alum]

some people sign onto loans, with or without interest only ones, and then flip the house and get bought out of the loan and then do that again.

i'm not entirely sure on the process, but it involves something along the lines of you made the payments, you have a nicer house than when you started but this nice house comes with debt so the house and all loans associated therewith are transfered upon sale of said properity

[AlphaFrog]

I can see it being useful for house-flipping...but that's not who those commericals are targeting. Those commercials target the same people who are like the guy on the lawnmower in the credit consolidation commerical saying "How do I do it? I'm in debt up to my eyeballs...someone help me please!".

[PiKA2001]

Originally Posted by macallan25

This reminds me of The Millionaire Next Door and the discussion in it about the difference between people with actual wealth and people that just have a high income. The authors make a distinction between Under Accumulators of Wealth (UAWs) and Prodigious Accumulators of Wealth (PAWs). Most of the millionaire households that they profiled did not have the extravagant lifestyles that most people would assume. This finding is backed up by surveys indicating how little these millionaire households have spent on such things as cars, watches, suits, and other luxury products/services. Most importantly, the book gives a list of reasons for why these people managed to accumulate so much wealth (the top one being that "They live below their means"). The authors make a distinction between the 'Balance Sheet Affluent' (those with actual wealth, or high net-worth) and the 'Income Affluent' (those with a high income, but little actual wealth, or low net-worth).

Really an excellent book.

I had to read that book for an english class my freshman year. The book was so true to my surrounding at the time, I lived and worked in Grosse Pointe, didn't know who really had money or who was just leasing the Porsche. My parents have a millionaire next door, and its just like how the author mentions it. My mom's reaction to them is classic, " they're loaded but they live in poverty".

[macallan25]

Haha, yeah. The best place, I think, to find people like that is in West and South Texas in the tiny old oil and ranching towns. Tons of old oil men that look like they couldn't afford a pack of gum. Wear work boots and jeans every day, drive old trucks, hunt, and eat at the same places every single day.

........then you find out that they own 30,000 acres and are worth millions and millions of dollars. Pretty funny.