Complex Numbers

Again with the Millions

One meeeeelion dollars.

*starts to touch pinky to lips, remembers coronavirus, shrugs*

https://www.thecut.com/2020/03/im-a-secret-millionaire.html

‘I Inherited Millions and I’m Hiding It From Everyone’

So far, smart. People find out you have money, they'll try to find ways to part you from it.

But for the wealthiest 5 percent of American households, the average inheritance is $1.1 million, according to a 2014 report from the Federal Reserve.

I can't be arsed to click on that link, but "the wealthiest 5 percent" covers a really broad range of net worth. I'd be interested in how they figured that average, except it's too much work. Whatever. Let's round that down to One Meeeelion Dollars for the sake of argument.

But unlike most heirs, she hasn’t touched the money at all — or told anyone about it.

You know how you're always reading about heirs and/or lottery winners who blow through the windfall and end up broker than when they started? That's because smart people a) don't blow through the windfall b) don't tell too many people about it and c) aren't usually interesting enough to have articles written about them. Fortunately, this one's a (c) exception. Well, she's still not very interesting, but she had an article written about her, so there's that.

I was raised to not flaunt money. My parents always told me it was a stupid thing to do, and we lived a very middle-class lifestyle.

"Middle-class" covers a wide range, too. If you're talking lifestyle, it could be anything from a modest three-bedroom house and a Ford Fuckus to a 7 bedroom, 5 bath McMansion with 3 SUVs in the garage.

The problem is, most people think that the latter indicates greater wealth than the former. It does not. It often indicates higher debt.

They were both self-employed — my dad worked in alternative medicine, and my mom ran a daycare business.

"...and our Housefinders budget is $3.2 million."

My parents left me a seven-figure inheritance, in cash.

Another potentially misleading statement. There is a huge, enormous difference between whether those seven figures start with 1000 and if they start with 9000. The former will yield a safe withdrawal rate of about $40K a year (how much you can pull out, while allowing the principal to continue to grow to keep up with inflation). And that's nice; a lot of people live on that. The latter is closer to $360K a year, which would fund some truly epic vacations.

But, okay, elsewhere it's implied that it was closer to One Meeelion Dollars, so again, I'm going to stick with that.

I made all of my investment decisions on my own, without an investment adviser, from research I’d done while managing my own personal portfolio.

That's great if you have the aptitude and desire for it. I'd venture that most people don't. While there's no shame in hiring a financial adviser, be aware that their fees cut into gains. But if the alternative is "no gains," then yes, you come out ahead.

By the time I inherited money, I already had six figures in my portfolio that I’d accumulated independently.

And for the third time: this is misleading. 100,000 is an incredibly different number than 900,000.

But fine; that's how people talk sideways about money, instead of coming right out and saying "I had a portfolio worth 250K," they'll just say "six figures," even when they're being anonymous like this person is. It's really remarkable. People will talk about their hemorrhoids, but not their money.

But I don't talk about mine, either, so I suppose I can't be too surprised.

I’ve now had this money for three years. It was a lot to handle at first, and there was a steep learning curve, but I’ve already grown the portfolio by 50 percent.

Obviously, this was written (if not dated) before the current pandemic and its associated recession. Fifty percent in three years is pretty good at any time, but pick any three years of the teenies' bull market and you could probably achieve that by picking stocks at random. As a general rule of thumb, money fully invested in the stock market can double every nine years or so - of course, that depends on whether there's a recession in those seven years or not, but on average, that's been the case.

Everyone has different things — what I lost, many other people still have.

And this is important. Money is good, but some people seem to value family more.

My parents had a non-flashy, stealth-wealth lifestyle, and I’m the same way. I don’t even have a car. I don’t wear any labels. I ride a bike everywhere. I make my lunches. Nothing I do would elicit people to think, “How does she afford this?”

I'm of the opinion that those who do flaunt wealth generally don't actually have it; they just want to promote the appearance of having it. Like I said above. I guess it's all about what's important to you, and for me, money is more important than perceived social status.

That doesn't mean I'm not going to buy quality stuff (it's cheaper in the long run), but the only "label" I wear is Levi's.

I think the biggest thing I’ve learned from this experience, and working for over ten years now, is that your job doesn’t have as much of a relationship to your net worth as many people think.

This is really important, I think. It doesn't matter if you make "six figures" in a year if you spend "six figures" plus x, where x is any number, as per algebra. You end up with more stuff, maybe, but come the coronapocalypse, you found yourself just as broke as someone who was scraping by on rideshare tips.

But I see it conflated in articles all the time. A "millionaire" is someone with at least a One Meeelion Dollar net worth, not someone who takes home that amount in a year. The latter person might well be spending most of it on hookers and blow, and wasting the rest, instead of building net worth.

And why is net worth important? Because as we've seen over the last couple of months, your job - your entire industry - could collapse at any moment, and it's clear that significant government handouts are reserved for the likes of airlines and banks, not their customers. Meanwhile, we were encouraged to spend every cent we made, and then some (by going into debt), to fuel the economy. But people with some money saved up are weathering this crisis much better than the rest of us.

And if they're smart, they're not bragging about it.