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« Star Money Articles and Carnivals for the Week of April 7 | Main | How to Hold Down Your Day Job and Still Get Started in Real Estate Investing »

April 11, 2008

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This is very true. I personally have made it my quest to get ride of idle time this year as much as possible from my schedule. Although, I don't consider vacations, trips, and actually doing something as idle time. Work hard and play hard. What I consider idle time is plopping myself in front of the TV (and the internet to some extent).

Your facts amaze me , great inspiring post ,

Thank you ,

tracy ho
wisdomgettingloaded

The problem with articles such as this is that they appear to make the assumption that it's an all or none proposition. Either you live 'the high life' or you save a lot. It's not always that cut and dried.

It is possible both lead a very comfortable lifestyle and save lots money. I plan to retire before age 50 but I'm having fun along the way too. Why lead a spartan lifestyle in the hopes that one day you'll be around to enjoy the savings you sacrificed so much for?

Deceptive would be a kind description of this article. Family B would pay no taxes on their investment gains under the current system. If they used a Roth IRA account they could save $10,000 a year as a couple and all of their returns would be untaxed.

4.36% safe withdrawal rate? Even though that's probably *around* the right amount, that seems awfully specific. Where are those 3 significant figures coming from?

Savvy,
Well said. We are doing the same. People too often wait to "enjoy" life until they retire. I call this "half living". You live modestly during the work years and then you plan on being in a lower tax bracket when you retire. Accumulation doesn't lead to wealth. Utilization can.

This post only touches on "inflation" as being a problem with money. What most people don't realize is that inflation is only one of the eroding factors of money. There are other big factors like taxes, planned obsolescence, technology change, health care costs, market changes, interest-rate changes, etc. Take note of what banks do. They velocitize money and put it to work.

Sow - inflation *is* a tax, and a tax with no return to boot. Estimates right now place monetary inflation at about 16%, with most taxpayers paying about 18-19% in income taxes. Granted, the income tax is higher, but at least you are getting a standing army and some other pleasantries for it. Monetary inflation only helps the government spend more and does nothing for the citizen, who tends to only see price inflation as a result.

Also, bank velocitize currency, not money, and they have to do it to keep up with inflation to maintain a wealth base; banks are one of the few businesses out there that understand money, currency and wealth. Kiyosaki still hasn't learned the difference between the three.

Actually, currency is a paper medium of exchange. It is a form of money, which is really just an idea. And the banks velocitize and utilize it not only to maintain, but to create wealth. You're right, they are one of the few out there that understand how money works. Whether you like Kiyosaki or not, we can really learn from the bank!


While I agree the article oversimplifies things a bit, I do agree with the main thrust of the article, which I take to be that our government punishes those who are financially responsible and rewards those who are not. Moreover, another point in the article, that two different people with the same income can have dramatically different retirement outcomes, is well taken.

Interesting post. It never occured to me to view the rich and poor in terms of consumption, but the numbers are striking and make perfect sense in retrospect.

Sow - this is a hard concept to describe in the space of the comments section. No offense intended, but you're like most people out there in that you mistake money for currency and both for wealth, and understandably so - that's the way almost everyone, including the wealthy, think of wealth; it's the way wealth has been described to us in books, the media and by the culture at large. But, the three are not the same. Ask a Zimbabwean today if currency equals money. Ask an Argentinian 8 years ago if money equals wealth. Ask any of our forebears from the 1800's if currency equals wealth, and ask any French citizen from the late 1700's if wealth equals money. The US and most of the developed world are once again trying the ages-old experiment of creating wealth from nothing. Maybe they'll succeed and maybe they won't. Yes, you can get wealthy playing the game they are running, but be careful of the endgame.

Mixer,
No offense taken. I think we're talking about the same thing. I totally agree with you. Like Kiyosaki says, "You can be a millionaire by being cheap. But guess what, you're still cheap." Thus, the broke millionaire.

Wealth is a state of being, not having. And the more you can exchange value, the wealthier you will be.

that's a good article, makes sense to me. fmf, but, what about the rest of the main streeters who make a ton of bad choices, i.e. tremendous over consumption or no retirement savings, and then eventually are bailed out? the cities of america are littered with these types. what's the incentive to save? or keep from sapping ss when you can just consume? curious to know.

The only way family B can have an additional 1 million from saving an extra $100/month at 10% (compounded daily) is if they do so for 44.5 years in an account that is not taxed. Under current rules that has to be in a Roth IRA, individual stocks that are held and never sold during this time, or I guess, tax exempt municipal bonds, which probably won't yield 10%. Once they reach the 1 millon figure they will pay no tax if the money is in a Roth IRA, and will pay a 15% tax at the federal level only on the assets they choose to liquidate if they are not in a Roth IRA. In either case they will have enjoyed untaxed growth for 44.5 years.

I hardly think this is punishment for becoming rich.

Also, the average CPI increase over the last 17 years is 2.69%. So where does he come up with the figure that inflation is going to take 5% of your return? Or does he measure average inflation over a longer period?

ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

Spot on. The mortgage bailout is a prime example of individuals taking risks while others don't. If you can't handle the downside then it is a stupid risk and they should be responsible for their actions, yet it seems if things don't go well for them we bail them out. Taxes on consumption would revolutionize the way americans think and live for the better.

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