Millionaire - RICH or Middle Class?

Personal Finance
7yFollow

Millionaire - RICH or Middle Class?

Shiloh LundahlPro Member
Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes

I have had a interesting discovery recently. At the end of last year, I was finishing updating my financials and I realized that my networth had reached over 1 million dollars. That had been one of my financial goals over the last couple of years but last week I had a sad, disappointing realization. 

I posted a question on the forums asking if there was a shortcut to wealth. Many people on the forums said yes and a few suggested I read the book The Millionaire Fastlane by MJ DeMarco. I started listening to that book on Audible and it basically stated that 1 million dollars today is not worth what it used to be and that you would really need 5 million today to live a millionaire lifestyle that I saw when I was a kid.

Unfortunately, I think there is a lot of truth to this perspective. 

As my networth has gone up, I have relaxed a lot on my spending habits. I signed my kids up for music lessons, sports, and other activities without considering the cost because in my mind, I am a millionaire and millionaires are wealthy and that is what wealthy people do. When I would eat out I would think more along the lines of what do I feel like eating rather than comparing the prices of each meal and then asking myself, “how much do I want to spend on lunch.” Each month when my wife and I would do the budget, we were over spending by $500 - $1000 and I would need to pay myself more by transferring more money into our personal account from my business accounts. I was getting confused and frustrated at this. If I was a millionaire then why was I still feeling strapped financially?

DeMarco explaines in his book that the millionaires are not really wealthy but are considered the middle class or the upper middle class. And that if you spend like you are wealthy, you will ultimately become poor. So now I am back to budgeting more strictly and living more frugally - darn it! I thought that I had arrived just to find out I am only one-fifth the way there.

Have any of you come to the realization that what you thought was wealthy today isn’t really as wealthy as you thought? 

480-206-1209Podcast Guest on Show #287
57Reply
805 views

Most Popular Reply

Erik W.
Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
7y

For decades, I've heard people saying, "$1 million isn't a lot these days."  I wonder how many of those are broke people living paycheck to paycheck, spouting off statements like this make them feel better about their (lack of) drive and accomplishment?

Let's state the obvious: Inflation is a booger!  It's a "silent thief" that drives down our purchasing power every year.   "A loaf of bread was 10 cents and gasoline was 15 cents a gallon when I was a kid..."  Yes, yes...I get it.

But...a personal computer in the 1980s used to cost $2000 and couldn't do more than run DOS games. Today, the $50 Trak Phone from Wal-Mart can run circles around that ancient PC!

Most people's quality of life has also vastly improved.  Think about basic things such as central HVAC and indoor plumbing.  The wealthiest emperor 200 years ago couldn't make it 70 degrees inside on a 100 degree day.  You and I can with the touch of a switch or the turn of a dial (or just tell Alexa to set the NEST t-stat for us!)  You and I can travel coast to coast in 2-3 days in a car, or fly in 5 hours.  Could Dale Carnegie?   Nope.  How many multi-millionaires died on the Titanic?  Today, you and I would just hop over the Atlantic via Delta coach class and get there with far less risk (though admittedly with less comfort)...easy peasy!

Value and wealth are always relative to the time and place in which one lives.  Does that make sense?  We can't just say, "$1 million aint what it used to be".  That's a given.  But a wise person asks, "What IS $1 million today?"  I live in a medium size Midwest town.  $1 million will purchase 2-3x the assets you can buy for the same million in some high cost of living locations.  So is $1 million "a lot" in my town but barely "middle class" in San Francisco bay?

Over 98% of the world has less than $100,000 net worth.  I made that stat up, so don't bother Googling it, but I'd says it's fair since we know over half of American's can't handle a $400 emergency.  That is a real stat you can Google.  So if a person who has $1 million USD net worth today isn't wealthy, I don't know who is.  Is that person hyper-consumptive rich?  No, probably not....but is hyper-consumptive rich a true picture of what it means to be "wealthy?"  I don't think so.

In conclusion: Daddy Warbucks (movie Annie, set in the year 1933) stated, "I made my first million by the time I was 23 (around 1910)....that was a lot of money back then!"

Just for some perspective on how people view their personal wealth, always have, and probably always will.  ;-)

67Reply
See this reply in the discussion

208 Replies

Jump to latestLatest
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Dan Z.:
    Originally posted by @Jay Hinrichs:
    Originally posted by @David Zheng:

    I used to resonate with this feeling a lot. For example... at first I was like I'll just have 1 super car but now I'm telling myself why can't I have a bmw i8 with my lambo.

    the answer I found wasn't to spend less. that's hard once you've inflated your lifestyle. in my mind the only way to do it is to make MORE. its more motivating to try and chase something than give up what you have.

    for myself I never compared wealth to what other people thought or any static number. I compared it to what I wanted. private jet charters, yachts, beach houses. I'll track these prices and as inflation/price goes up, so do my monthly cashflow goals.

    I was waiting for Mr. Young entrepreneur Lambo owner/driver to comment.. its interesting from someone of your age and success to learn your thought process.

    AS for Jets  maybe try the Jetsmarter app I have that one.. I have not activated it yet but tempted.. . you can get rides on G 4 one way from Vegas to NYC for as little at 2500.. I am going to try it once and see how it goes.. now my thought process is this is where a lot of millionares will be and B C grade entertainers.. give me 4 hours and they cant get away from me and see if I can come up with some great contacts.. Just think of all the people on this site .. who say HOW do I attract private money.. well thats one way..  :) let you know how it goes.

    While I certainly am not the Lambo owner/driver like @David Zheng, and maybe not qualify for "Mr. Young entrepreneur" either as I already turned 30 one month ago... I concur the idea that without craving for fast cars & lux lifestyle, maybe we'll just set ourselves low and be like our "Poor Dad" thinking stocks & mutual funds in the 401(K), our primary house, and SSI (although not sure if there'll still be anything left in 3 decades) are what we rely on for retirement.... 

    With that being said, I still feel like I need another $1M to convince myself to switch my 718 Cayman GTS to that lizard green GT3....

    BTW I'll have my first sabbatical early next year!  Did your daughter take the shorter one 1 mo or the longer 2 mo?

     This one is two months last one was 4 months.  There is benefits working for the man.  She loves her job

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Taylor Chiu
    Real Estate Agent · Salt Lake City, UT · Member since 2014 · 473 posts · 230 votes
    7y

    @Shiloh Lundahl Congrats on reaching millionaire status! Sure, it's not what it used to be, but you are still far ahead of most people in the US. 

    I'm sure you've mentioned it elsewhere, but why don't you move your family to AZ where you spend half of your time? I imagine it has something to do with the lifestyle / nearby family. 

    I saw your goal is 20k/mo eventually, so that you can have enough for your expenses + enough to invest further. 

    Maybe just getting to 12k/mo would do the trick though? 10k/mo for expenses (just guessing here), 2k for more investments. Which might not seem like much for investments, but:
    • you won't have to work your normal job, which will free up time to find no-money-down deals
    • equity buildup from your existing portfolio will allow you to invest more
    0Reply
  • Jerry W.Pro Member
    Moderator
    Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
    7y

    @Shiloh Lundahl, congratulations.  One of the few good things about doing taxes and yearly corporation renewals for the state is you can look at your outstanding debt on your portfolio and your book value at the local county assessor at the same time.  While it was gratifying to see the net worth of my main company top the $1 million mark in actuality it was meaningless from a lifestyle viewpoint.  I have taken out about $4000 in income off of my real estate investments over the last 20 years.  I don't use it to buy lunches or new trucks or nice cars or go on vacations.  I use the income to buy more houses and fix up the ones I have.  Where it makes a difference is that as of last month I went from working at the office about 50 hours a week to about 30 hours a week now.  I lost my main job, and while my private job has increased a bit to help offset the loss, the fact is my lifestyle allows me to live pretty well for not a lot.  My wife and I eat out about 6 or 7 times a week, sometimes more.  We paid cash for my wife's new vehicle, a 6 year old SUV with 50K miles, we spend a lot on Christmas presents for kids and grand kids, We take off when we are needed to babysit or go on shopping trips.  It is the freedom from worrying about retirement anymore or having to look for a full time job to make monthly payments that makes that number important.  While my work truck in 27 years old it has new tires and only 89K miles, it runs like a champ.  I will probably replace it, but it may take awhile.  The thing is I can write a check if the transmission blows out or something like that.  I am not one ruined tire from missing my rent payment.  My house is paid for, all my vehicles are paid for, none of my kids left college owing any loans.  That is what net worth does for me.  Freedom from worrying about the smaller things, that can become scary things if you lost your job.  Next year after I turn 60 I plan to cut back to 20 hours a week and do more traveling after I begin receiving 2 small pensions that will make me able to pay all incidental expenses except  health insurance without really working much.  Volunteer fireman pension, etc. 

    Don't forget the peace of mind that comes from wealth, not just the big cars or houses.

    10Reply
  • Adam Peacock
    Rental Property Investor · Member since 2019 · 48 posts · 38 votes
    7y

    Just saw this thread and still reading through Page 1 but will share my thoughts quickly:

    First and most importantly, I'm genuinely proud of your achievement sir - reaching that milestone takes sacrifice and real world discipline.

    As a side note, when folks hear I'm a business owner, half say/tell me 'wow you sound very well off' and the other half act/say resentful things because I enjoy a level of success they don't. Achieving things like money or status in life showed me that folks change how they treat you based on their perceived level of success. But experiencing that forced me to consider how I perceive success. Eventually I ended up characterizing my goals to whether I wanted to drink from a bucket or drink from a faucet. It changed how I defined wealth.

    What I notice is that some feel that being in the 1% means you have money in the bank or net worth that reaches a certain threshold and you fund your lifestyle essentially by drawing dividends from it. This is what I call the bucket - water that sits in a container from which you draw. The problem, as others indicated, is that the water in that bucket starts to lose value the second it drips into the bucket. It will cost more water to quench thirst 10/20/30 years from now.

    In contrast, the faucet analogy, my adopted strategy, is akin to drinking new water pouring from a faucet. Instead of drawing 100k from a bucket and seeing the balance decrease year after year, receive $100k pouring from a constantly-renewing faucet. I don't know if this analogy is used by anyone else but it helped me stay focused on how I wanted to handle retirement.

    Anyway. Something I really appreciate about real estate is it appears to be the great equalizer in terms of ensuring that money invested appreciates in value in line with with inflation. I buy a home for $500k today, it will likely be worth more later (whatever market value is 25 years from now). Putting $500k in a bank account starts the losing cycle from the moment it's deposited and its purchasing power is guaranteed to decrease the longer you hold onto it..

    Really really commend you for your efforts thus far brother. Huge props. I truly hope you land in a place that ultimately provides security for your family and the ability to enjoy life in your golden years free of 'what do I need to sacrifice to make rent this month' at 70 years old taking the bus home from a part-time job at McDonald's. :)

    //adam

    1Reply
  • Eric Schultz
    Investor · San Diego, CA · Member since 2016 · 265 posts · 305 votes
    7y
    Shiloh Lundahl Glad to see you took the book recommendation. DeMarco definitely made his millions but it didn’t come without a lot of sacrifice. He gave up more than most are willing to do to achieve more than most ever will. Most of the middle class remains in the middle class because they are satisfied with just being comfortable. The burning desire to set and crush goals is too uncommon. Millionaires are so common these days, especially in a state like California. It’s a great milestone to hit, but it doesn’t necessarily pencil out to financially free for the long term. On a positive note. The second million should come easier than the first million did. Cheers!
    1Reply
  • Jeff C.
    Real Estate Broker · Bakersfield, CA · Member since 2018 · 269 posts · 597 votes
    7y
    Originally posted by @David Zheng:

    I used to resonate with this feeling a lot. For example... at first I was like I'll just have 1 super car but now I'm telling myself why can't I have a bmw i8 with my lambo.

    One of the few indefensible luxuries I've allowed myself is a McLaren that mostly sits in the garage. It always feels a bit like I'm driving someone else's car when I take it out, but man I do love that thing. I remember having posters of Testarossas and Countaches on my wall in grade school. There's something to be said for laying a dream that you've had for decades to rest.

    3Reply
  • Adam Peacock
    Rental Property Investor · Member since 2019 · 48 posts · 38 votes
    7y
    Originally posted by @Jeff C.:
    Originally posted by @David Zheng:

    I used to resonate with this feeling a lot. For example... at first I was like I'll just have 1 super car but now I'm telling myself why can't I have a bmw i8 with my lambo.

    One of the few indefensible luxuries I've allowed myself is a McLaren that mostly sits in the garage. It always feels a bit like I'm driving someone else's car when I take it out, but man I do love that thing. I remember having posters of Testarossas and Countaches on my wall in grade school. There's something to be said for laying a dream that you've had for decades to rest.

     I collect cars and if it were not for the occasional release of the proverbial pressure valve, I would utterly burn out. I actually require occasional personal rewards as incentive to keep going. Completely agree with you!

    +1 as a fellow MP4-12C owner

    3Reply
  • Timothy Paul R.
    San Marcos, TX · Member since 2018 · 42 posts · 17 votes
    7y

    @Shiloh Lundahl I think this is all perspective. You’re right that 1M isn’t what it used to be. At the same time if you’re in my position, paying my way out of debt making the avg salary of 60k. To have 1M net worth would feel rich. Also, to literally billions of people having 1M is considered hugely wealthy. Definitely a fantastic milestone, congratulations but remember how many people are living off a couple dollars a day and hopefully you will feel very blessed.

    1Reply
  • Shiloh LundahlPro Member
    OP
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    7y

    @Jerry W. Thanks for your comment.  It's nice that even when you lost your main job you were able to continue with the side hustle and not have much of an overall effect.  

    I'm excited for you to be able to drop down to 30 hours a week.  Next year I am planning on starting that Mastermind that we were talking about and with more time on both of our parts, it may work out.

    480-206-1209Podcast Guest on Show #287
    1Reply
  • Sam B.
    Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Real interesting discussion here, one of the best I've read on BP in some time.

    A super personal discussion though and certainly one size doesn't fit all - a 30 year old single person with $1mm in assets and $80k/annual passive income is a whole lot different than a married couple with three kids and those same assets/income.

    I'd even ask the question...are the married folks that posted about achieving the $1mm in assets...does that count?  Isn't that a shared asset, not really yours?  Should you not split that in half?  

    Aka, you need a joint account of $2mm to say I'm a millionaire?  Or correct the statement and state my wife and I achieved this goal.  

    Food for thought.

    Fun to see all the petrol heads come out of the woods.  It's hard for some to understand the joy of a well engineered, fast, connected vehicle...albeit expensive.  Yet some of those same folks have no issues procreating and taking on a high risk endeavor such as raising a family.  Different strokes for different folks!

    I'm done stirring the pot.  Some car content @David Zheng  @Dan Z.  @Jeff C.  @Adam Peacock  

    And of course, that's a manual 991.2 GT3, right @Dan Z.  ??  :)  Prices finally starting to drop a bit.

    4Reply
  • Shiloh LundahlPro Member
    OP
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    7y

    @Eric Schultz One of my bigger realizations was when I was looking for a new home in Arizona that fits the criteria that I want.  Most of these homes are over a million dollars.  I thought, well I should be able to get a house like that considering my net worth.

    Then, when I was going over the costs, I realized that in order for me to responsibly afford the home that I want, I would need to have a take home income of around 20k a month and I'm not there yet.  This was one of the thoughts that made me realize that 1 million in net worth really wasn't enough to help me get some of the things that I wanted.  

    480-206-1209Podcast Guest on Show #287
    0Reply
  • Shawn M.
    Investor · New Haven, CT · Member since 2012 · 285 posts · 175 votes
    7y

    @Irina Belkofer @Joe Splitrock, 

    The point of the OP is talking about the concept of being a millionaire and how just being a millionaire on paper means nothing about your spending power and actual ability to have money. Thats why i'd rather have 15K/mo in cashflow than 3mm in net worth. 

    1Reply
  • Glenn R.
    Cornelius, NC · Member since 2016 · 104 posts · 51 votes
    7y

    "Spending like a millionaire."

    That's a funny phrase.  Because "spending" won't make you a millionaire.  

    "Saving & investing like a millionaire" is a much more accurate phrase.

    I know a lot of "spenders".  They're all still working!   And they all "wish" that they'd saved more.  

    1Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y
    Originally posted by @Irina Belkofer:

    @Joe Splitrock I was exaggerating because we are talking about $1M net worth.

    If we get real life examples for real people, there is plenty of net worth millionaires because they have paid off houses, 401-K's etc - they worth a lot but no cash flow.

    Off course, capital gains count too, in Cali it's a major consideration, but no cash flow.....and with all that net worth people have to live and work and keep saving in 401-K.

    My second part is about controllling assets which is not really your own net worth: for example, if I have $300K in debt with today's worth $450K of real estate (also including my primary residence, which is not income producing), but I have cash flow of $5.4K per month after expenses, it's still better than $150K sitting in bank and producing nothing.

    Net worth is like a balance: it shows only today's net worth. If market crashes tomorrow, it will drop to 40-50% today's number. Cash flow is like income statement: rents won't disappear over night, people do live somewhere. It might decrease as well as vacancies, but it still will support your living expenses.

    Small real life example doesn't connect to %%, terms etc but it shows the same: net worth alone doesn't tell you the whole story, it needs your P&L as well as cash flow statement, to estimate who is wealthy and who's rich in paper only.

    BTW, definition of accredited investor includes not only your net worth(excluding primary residence) but also your income.

    I understand your point, but cash flow isn't guaranteed either. In your example of 200 houses that had little equity, imagine if those 200 houses were owned in Michigan in 2009. All the sudden you are hit with massive vacancy (people move when the jobs disappear). Now you struggle to make the loan payment. On top of that, your property values dropped 40%. Since you had 200 properties, they are not on 30 year fixed term loans, they are commercial loans and the bank calls the loans. They will refinance, but they want to see 20% equity based on current value. Although you had $1M in equity, you are now underwater $7M on your loan. Compare that to the person in California and their home value drops 40%, so now their net worth decreases to $600K. Which choice is better in this situation? 

    To paint a full financial picture you need net worth and income. Cash flow is only one form of income. Jobs produce income, royalties, stock dividends and company ownership are all forms of income. The third factor is personal expenses. Subtract personal expenses from income and whatever is left adds to your net worth. High income individuals gain net worth over time, unless they have high personal expenses or make bad investments.  

    An accredited investor can have either high net worth over $1M (excluding home) or high income over $200K per individual or $300K per household. If your household income is that high, you are in the top 3% of wage earners, so we are talking about highly skilled individuals. The purpose of accrediting is to ensure someone is financially sophisticated. Gaining net worth takes money management skills and discipline. High income requires high skill, whether that is being a doctor, sales or professional model. Of course there are accredited people who are not sophisticated. A lottery winner will have high net worth or a high wage earner who has reckless spending, could be accredited but not financially sophisticated. In general this is a decent filter criteria.

    I get your underlying point and agree with you. Having income producing assets is better than personal assets (home, boat, cars, planes, etc). Generally speaking, you don't find ultra high income individuals without high net worth, unless they have reckless spending or make bad investments. 

    6Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y
    Originally posted by @Shawn M.:

    @Irina Belkofer @Joe Splitrock, 

    The point of the OP is talking about the concept of being a millionaire and how just being a millionaire on paper means nothing about your spending power and actual ability to have money. Thats why i'd rather have 15K/mo in cashflow than 3mm in net worth. 

    You could easily argue the opposite, that having $15K/mo cash flow says nothing about your ability to save money and gain net worth. Income (cash flow) and net worth (wealth) are two different measures. High income should lead to high net worth, if money is handled property. On the flip side, high net worth should be invested to produce high income. 

    3Reply
  • Vinay H.
    Cambridge, MA · Member since 2017 · 268 posts · 247 votes
    7y

    You are rich when you can change another person's life.

    You are rich when you can actually give money away to charities etc

    You are rich when people, politicians  and organizations actually approach you to make donations and you are solicited as a commencement speaker.

    You are rich when you can influence society around you.

    Every other asset or income bracket is a personal goal which varies. The Farmer in a third world country with 1 acre and 3 oxen can feel rich since that allows him to sustain his lifestyle. Someone who is retired in Costa Rica can feel rich with 2k monthly draw down of retirement assets.

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y

    @Sam B. I agree net worth needs to be put in perspective of age. A 30 year old single person with $1M net worth is impressive in my opinion. A 40 year old married couple with three kids and $1M net worth is "on pace" at best for paying their kids college and retirement.

    Automotive enthusiasts are just enjoying a hobby no different than any other passion. You have to enjoy life.

    As far as kids, nobody looks back on their death bed and says, "I wish I had a faster sports car when I was younger". I have known countless people who regretted not having a family. All I can tell you is that until I had a child, I had no concept of how amazing or fulfilling that was. 

    Of course you can have both, so no reason to choose. 

    5Reply
  • Shiloh LundahlPro Member
    OP
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    7y

    @Vinay H. I wish that were the case in Costa Rica. Maybe 20 years ago. I lived there for a couple of years (99 - 01) and that may have been the case back then. I was able to live off of $400 a month as a single person with roommates. You could get a pretty good meal for $3 back then when it was 300 colones to $1. Now it is 600 colones to $1 and the average meal is between $6 to $10. For a family of 7 that wouldn’t work, but for a single person or for a small family maybe.

    I talked with the lady who owned and ran an AirBNB in Atenas where I stayed a year ago with my daughter for a mini vacation. The sales price of her home would be around $600,000. That included the main house about 2000 sq ft, 2 little apartments (2/1 and a 1/1) a groundskeeper quarters and a yoga studio. It was on 1-2 acres nestled in the side of the mountain. 

    480-206-1209Podcast Guest on Show #287
    1Reply
  • Dan ShelhamerPro Member
    Realtor · Mesa, AZ · Member since 2015 · 163 posts · 99 votes
    7y

    @Shiloh Lundahl that is an awesome accomplishment, congrats! While Net Worth is a great indicator of wealth, I feel like cash flow is a more important thing to focus on.

    A “millionaire” with a paid off $500,000 house and $500,000 401K returning $20,000 a year based on the 4% rule isn’t too well off.

    Whereas, I’d rather be worth $500,000 with $100,000/year in passive income.

    I think we’re all too guilty of chasing that “millionaire status”, myself included, when really it’s not what we’re truly after as Real Estate Investors.

    1Reply
  • David Zheng
    Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes
    7y

    Originally posted by @Jay Hinrichs:
    Originally posted by @David Zheng:

    I used to resonate with this feeling a lot. For example... at first I was like I'll just have 1 super car but now I'm telling myself why can't I have a bmw i8 with my lambo.

    the answer I found wasn't to spend less. that's hard once you've inflated your lifestyle. in my mind the only way to do it is to make MORE. its more motivating to try and chase something than give up what you have.

    for myself I never compared wealth to what other people thought or any static number. I compared it to what I wanted. private jet charters, yachts, beach houses. I'll track these prices and as inflation/price goes up, so do my monthly cashflow goals.

    I was waiting for Mr. Young entrepreneur Lambo owner/driver to comment.. its interesting from someone of your age and success to learn your thought process.

    AS for Jets  maybe try the Jetsmarter app I have that one.. I have not activated it yet but tempted.. . you can get rides on G 4 one way from Vegas to NYC for as little at 2500.. I am going to try it once and see how it goes.. now my thought process is this is where a lot of millionares will be and B C grade entertainers.. give me 4 hours and they cant get away from me and see if I can come up with some great contacts.. Just think of all the people on this site .. who say HOW do I attract private money.. well thats one way..  :) let you know how it goes.

     Hahah! I'll pipe up on posts like this because then I get all hype to do more for myself especially when I see there are other people like me. It feels like a competition and I thrive in that environment. But in reality Jay, I'm just trying to catch up to you first ;) Please do share that experience when it comes (with pics). Can always use inspiration!

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @David Zheng:

    Originally posted by @Jay Hinrichs:
    Originally posted by @David Zheng:

    I used to resonate with this feeling a lot. For example... at first I was like I'll just have 1 super car but now I'm telling myself why can't I have a bmw i8 with my lambo.

    the answer I found wasn't to spend less. that's hard once you've inflated your lifestyle. in my mind the only way to do it is to make MORE. its more motivating to try and chase something than give up what you have.

    for myself I never compared wealth to what other people thought or any static number. I compared it to what I wanted. private jet charters, yachts, beach houses. I'll track these prices and as inflation/price goes up, so do my monthly cashflow goals.

    I was waiting for Mr. Young entrepreneur Lambo owner/driver to comment.. its interesting from someone of your age and success to learn your thought process.

    AS for Jets  maybe try the Jetsmarter app I have that one.. I have not activated it yet but tempted.. . you can get rides on G 4 one way from Vegas to NYC for as little at 2500.. I am going to try it once and see how it goes.. now my thought process is this is where a lot of millionares will be and B C grade entertainers.. give me 4 hours and they cant get away from me and see if I can come up with some great contacts.. Just think of all the people on this site .. who say HOW do I attract private money.. well thats one way..  :) let you know how it goes.

     Hahah! I'll pipe up on posts like this because then I get all hype to do more for myself especially when I see there are other people like me. It feels like a competition and I thrive in that environment. But in reality Jay, I'm just trying to catch up to you first ;) Please do share that experience when it comes (with pics). Can always use inspiration!

    Keep in mind I have been on this silly roller coaster since 1975 and lived through some very hectic and tough market conditions. 

    If I had it all over to do again growing up in Cupertino I would have hired on with High Tech and got into sales..  get my stock options in the late 80s and be long ago retired..  but no just slogged out this real estate game..... 

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Jeff C.:
    Originally posted by @David Zheng:

    I used to resonate with this feeling a lot. For example... at first I was like I'll just have 1 super car but now I'm telling myself why can't I have a bmw i8 with my lambo.

    One of the few indefensible luxuries I've allowed myself is a McLaren that mostly sits in the garage. It always feels a bit like I'm driving someone else's car when I take it out, but man I do love that thing. I remember having posters of Testarossas and Countaches on my wall in grade school. There's something to be said for laying a dream that you've had for decades to rest.

    could be regional but growing up in CA... and in sales we always had our dreams cut out of magzines and posted on the pin up board I did not pin up pictures of beat up houses in the HOOD :).. I put up a jet , cars,  fancy island locals,  other things to strive for  LOL  that was pretty normal then.. I guess some will do it with dollars goals but it helps to have goals.. be it money goals or Items to purchase. its why we do this right ?

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Joe Splitrock:
    Originally posted by @Irina Belkofer:

    @Joe Splitrock I was exaggerating because we are talking about $1M net worth.

    If we get real life examples for real people, there is plenty of net worth millionaires because they have paid off houses, 401-K's etc - they worth a lot but no cash flow.

    Off course, capital gains count too, in Cali it's a major consideration, but no cash flow.....and with all that net worth people have to live and work and keep saving in 401-K.

    My second part is about controllling assets which is not really your own net worth: for example, if I have $300K in debt with today's worth $450K of real estate (also including my primary residence, which is not income producing), but I have cash flow of $5.4K per month after expenses, it's still better than $150K sitting in bank and producing nothing.

    Net worth is like a balance: it shows only today's net worth. If market crashes tomorrow, it will drop to 40-50% today's number. Cash flow is like income statement: rents won't disappear over night, people do live somewhere. It might decrease as well as vacancies, but it still will support your living expenses.

    Small real life example doesn't connect to %%, terms etc but it shows the same: net worth alone doesn't tell you the whole story, it needs your P&L as well as cash flow statement, to estimate who is wealthy and who's rich in paper only.

    BTW, definition of accredited investor includes not only your net worth(excluding primary residence) but also your income.

    I understand your point, but cash flow isn't guaranteed either. In your example of 200 houses that had little equity, imagine if those 200 houses were owned in Michigan in 2009. All the sudden you are hit with massive vacancy (people move when the jobs disappear). Now you struggle to make the loan payment. On top of that, your property values dropped 40%. Since you had 200 properties, they are not on 30 year fixed term loans, they are commercial loans and the bank calls the loans. They will refinance, but they want to see 20% equity based on current value. Although you had $1M in equity, you are now underwater $7M on your loan. Compare that to the person in California and their home value drops 40%, so now their net worth decreases to $600K. Which choice is better in this situation? 

    To paint a full financial picture you need net worth and income. Cash flow is only one form of income. Jobs produce income, royalties, stock dividends and company ownership are all forms of income. The third factor is personal expenses. Subtract personal expenses from income and whatever is left adds to your net worth. High income individuals gain net worth over time, unless they have high personal expenses or make bad investments.  

    An accredited investor can have either high net worth over $1M (excluding home) or high income over $200K per individual or $300K per household. If your household income is that high, you are in the top 3% of wage earners, so we are talking about highly skilled individuals. The purpose of accrediting is to ensure someone is financially sophisticated. Gaining net worth takes money management skills and discipline. High income requires high skill, whether that is being a doctor, sales or professional model. Of course there are accredited people who are not sophisticated. A lottery winner will have high net worth or a high wage earner who has reckless spending, could be accredited but not financially sophisticated. In general this is a decent filter criteria.

    I get your underlying point and agree with you. Having income producing assets is better than personal assets (home, boat, cars, planes, etc). Generally speaking, you don't find ultra high income individuals without high net worth, unless they have reckless spending or make bad investments. 

    EXACTLY JOE  I know its soup de jour right now to talk about massive amounts of properties all leveraged to 80% or as high as you can get them.. but like was mentioned from Mr. Buffet  you get a decent sized correction and those folks 20% equity will be toast its no equity and its really negative..  So there is balance in my mind.. 

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    2Reply
  • Ty Ottaberry
    Rental Property Investor · Gilmer tx · Member since 2018 · 87 posts · 21 votes
    7y

    @Shiloh Lundahl. I have not read the other comments only what you have posted I'm sure someone has mentioned. But if you really want a wealthy mindset ,Rich Dad Poor Dad by Robert Kiyosaki is by far the best book for the wealthy minded .he specifically shows the cash flow charts, difference between the poor,middle class and the rich .

    0Reply
  • Christian Hutchinson
    Investor · Detroit, MI · Member since 2014 · 360 posts · 354 votes
    7y

    until you are $5M liquid you are not rich

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free