I think a ton of it depends on when you bought your home. Disposable income is really what makes someone feel rich or not. If a home was bought 9 years ago, then disposable income would be much higher than buying the same home today. It’d take a far higher income to buy in the same neighborhood and equal the disposable income of your neighbor that bought 9 years ago. The further you go back the bigger the difference.
But don’t people borrow anymore (equity) to buy lavish cars and things, thinking they are rich due to all that equity? Did they learn their lesson?
Then they’ll increase their payments and decrease their disposable income.
But, but housing prices keep going up here…
Their monthly income isn’t go up as fast as housing. So there’ll be a limit of how much equity they can borrow. Once their max out their DTI then they are done borrowing. That’s probably when they’ll feel poor again.
Totally agreed on the “disposal income” observation. And so I feel that the latest trend of “Everything as a Service” - whether it be transportation, cars, music, razor blades, renting (housing as a service) ---- all this does is to increase disposable income by trading off asset ownership.
The EaaS model assumes that a person’s cashflow will always remain constant or increasing, and does not take into account for big life changes. For example, having more kids than expected, having a divorce, having family members get sick, having yourself get sick etc.
Not owning the asset at the end is a huge kicker that EaaS proponents do not wish to think about — because they are too busy “enjoying life in the moment” with their disposal income.
What assets really matter though? Owning a home is key, since it appreciates. Investment assets matter, since they provide financial security. One could argue all the other assets in our lives depreciate (sometimes rapidly). The EaaS model protects us from that depreciation, since depreciation isn’t calculated into the cost of the service. Why not let someone else eat the depreciation? I think where most people go wrong is they spend the savings on other stuff instead of saving and investing it.
Rich should be defined as whether you need to work. If you need to work to finance your lifestyle, you are not rich. Only when you have the freedom to not work, you become rich.
Rich = No longer care about prices of good & services, don’t know your net worth at any point of time.
Well off = FIRE
Working class = Everyday talks about investment and RE.
About housing and living, economists use Cost of Living, Purchasing power 
You would feel good if purchasing power = aggregate income (disposable income + passive income) / (aggregate prices of goods & services that you desire) is increasing.
I don’t know anyone that doesn’t worry about the prices of things. Most people that are rich were extremely frugal for a period of time. You have to be super frugal starting your own business. All your money goes back into growing the business, and it’s years before they start living off the income of the business. Frugality is part of their nature, and they don’t just shut that off. That’s why they maintain their rich status. Lack of frugality is why most people that become suddenly rich will blow the money.
Don’t care about prices of goods and services don’t imply not frugal.
Incorrect deduction.
Other than being frugal, rich people also never stop working. So being rich means
- Being frugal when you don’t need to.
- Working when you don’t need to.
Being rich is really saving money and making money when you don’t need to. Most of the rich people don’t stop working and enjoying life at all cost, except the drug addict or alcoholics which are a state of mental disease anyway
You can be frugal at 1M expenses and liberal on $200 expense
Isn’t this in contradiction with your previous statement? Are you just typing whatever comes to your mind?
Work implies not doing what you love right? Or where your contributions is compensated is called work?
Need to agree with the definition before further discourse.
Also need to define frugal. Buying what you need only is ok right? Not frugal means buy something that is of better quality (and hence more expensive) than what you need is not frugal, right? Buy something you don’t need is not frugal for sure
Definition of frugality changes as your net wealth changes. If you are living paycheck to paycheck, flying coach is not a frugality. However, once you become a billionaire, it would definitely be.
As your networth increases, it’s still frugal if your spending increases but increasing at the lower speed. If you used to spend 10% of your networth, you’ll most likely spend only 2% when your networth increased by 10x. That’s only a double of spending with a 10x networth increase.
I don’t think you can be frugal and not care about prices. How would you know if a price is wasteful if you don’t care about price?
Investing own fund is not work, it’s passive and you can treat it as a hobby. Clicking on stock symbols casually and managing your PM is not work.
Work means that you need to step into an active role daily. All wage earners are working. A landlord without a PM is also working. A flipper is working. A day trader is also working. An active CEO of a startup is a super worker.
You care about price of expensive things, don’t care about inexpensive things.
It’s basically a question of your time value. If your time value is $1000 per hour, you won’t care about price of a $200 or $300 haircut. If your time value is $15 per hour, you need to care about a McDonald promotion.