My brother Nick sent me this New York Times profile of Silicon Valley millionaires that shows exactly why enough money is never enough.
“You’re nobody here at $10 million,†Mr. Kremen said earnestly over a glass of pinot noir at an upscale wine bar here. ...Taxes have devoured about 40 percent of his stash, Mr. Barbagallo said, knocking that figure down to $2.2 million. Over the years, he has tried to live off his salary, but not always successfully. To limit their monthly expenses, he and his wife Catherine bought a ranch house far from Silicon Valley, in the town of Moraga, for $750,000 — by Valley standards a modest sum.
But they spent $350,000 on extensive remodeling — causing them, not for the first time, to dip deeply into their nest egg.
Today, he has roughly $1.2 million left in savings and another several hundred thousand dollars’ worth of home equity, Mr. Barbagallo said, with one child in college and a second on her way.
So he works as hard as ever, logging more than 70 hours a week at a San Francisco start-up.
“Poor Tony, he’ll never be able to retire,†Catherine Barbagallo said.
There are plenty of poorer people who seem to be much happier, no? At least the article mentions one guy wise enough to know when to quit.
That is what Mark Gage, 51, an engineer, and his wife, Meredith, did when they left the Bay Area in 2005 with $3 million or so in assets. They bought a house in Bend, Ore. — “a bigger, much nicer home with dramatic views†— and now Mr. Gage works only when the perfect consulting job presents itself.
The problem seems to be lifestyle inflation -- that is, a cost of living that rises faster than your income.
Silicon Valley offers an unusual twist on keeping up with the Joneses. The venture capitalist two doors down might own a Cessna Citation X private jet. The father of your 8-year-old’s best friend, who has not worked for two years, drives a bright yellow Ferrari. Temptations loom everywhere.“You see how much money you have in the bank,†Mr. Koblas, the computer programmer, said, “and your eyes get really big.†He described it as “upsizing your life to your cash flow.†...
“You look around,†Mr. Barbagallo said, “and the pressures to spend more are everywhere.†Children want the latest fashions their peers are wearing and the most popular high-ticket toys. Furniture does not seem up to snuff once you move into a multimillion-dollar home. Spouses talk, and now that resort in Mexico the family enjoyed so much last winter is not good enough when looking ahead to next year. Summer camp, a full-time housekeeper, vintage wines, country clubs: the cost of living bloats.
To Mr. Milletti, it all looks like a marathon with no finish line.
“Here, the top 1 percent chases the top one-tenth of 1 percent, and the top one-tenth of 1 percent chases the top one-one-hundredth of 1 percent,†he said.
That's no way to live, and I won't do it. That's why I moved to Missouri! (Not that I'm a millionaire, heh.)
You may not be a millionaire, but you can be a lot "richer" in St. Louis than you can in California. Your housing dollar certainly goes a lot farther.
I'm just happy that our net worth is positive!
T Harv Eker has a lot to say about this in his book Secrets of the Millionaire Mind. He says that people are programmed as children to gravitate toward a specific level of wealth, usually either imitating or rebelling against their parents. If they go over that programmed level, then they will overspend, make bad decisions, or otherwise find a way to get back down to the level of wealth at which they feel comfortable.
BB: I came to that same conclusion myself. Does THE have a name for that theory? Some sort of regression toward the mean, I guess.
He doesn't have a title for the theory, but he explains it in detail in his book. The core idea is that we don't acquire our beliefs through experience, as most of us imagine we do. Instead, we acquire most of our beliefs unconsciously as children, as we rarely re-examine them. So if you grow up being told that money is difficult to earn, and spending less is the primary economic virtue, then you will believe that as an adult, and you'll act as if it's true. If you grow up believing that rich people are evil or greedy, then you'll find ways to keep yourself poor no matter how high your income. If you think of money as primarily a way to keep yourself happy, then you'll never build up much wealth, because you see not spending money as preventing yourself from being happy.
Secrets of the Millionaire Mind is a short little book: fewer than 200 pages, and not very big pages. You can find a similar message, though presented in a very different style, in Robert Kiyosaki's Rich Dad, Poor Dad.
The message from both men is that people lives are determined mostly by their beliefs. If you think about money as poor people do, then you'll be poor. But if you think about money as rich people do, then you'll be rich. Both men examine the differences between the two belief sets and give ideas on how to change from one to the other.
BB: I agree that our beliefs largely shape how we handle money, but I'm not sure that I accept that those beliefs are set in childhood the way you describe. I have a very rich set of memories in sequence that explain (to me) my views of money, and they are almost all from adulthood.