The mentality of becoming rich

[Beppington]

I'm reading a book about the mentality, or psychology, of becoming rich, & the author's main point is that a person needs to determine for him/herself exactly & precisely what it is they want, as far as riches/ money/ house(s)/ car(s) or whatever other material things you may want, so the goal is perfectly clear in one's own mind, & then focus all energies & thoughts on obtaining that goal. He states that the clearer the goal is in your own head, & the more of your energy you put toward it, the more likely you are to achieve it, & probably the sooner too.

This makes sense to me, so ... I'd like to try it: But what do I want?? I've always thought the idea of being independently wealthy sounds pretty darn good, but I'm not really sure what that means?? Would $1M in the bank do it? $2M? $5M or $10M? No debt? I think I'm already doing pretty good, but I don't feel independently wealthy. Maybe I just need to think it through more.

What would you focus on if you were to simply define for yourself exactly what you need to feel/ be "rich"?

[jIM_Ohio]

Financial Independence. When my money makes more than I do and/or when my money (investments) make enough to live on comfortably.

I suggest a person (when investing) goes thru stages

1) starting out
means your deposits are higher than account balance, or your deposits are a significant (at least 5%) of your account balance.
2) accumulation.
means your deposits are higher than annual return (for example a $5000 annual Roth IRA deposit is higher in dollar amount than the annual return of your portfolio)
3) growth
means your deposits are a small fraction of your portfolio value. For example if you have $500,000 already invested and that money earns 5% ($25000) in one year, that $25,000 is worth more than the $5000 annual IRA deposit.
4) stability
means the growth of the porfolio is worth more than the income you have from a job. If you earn $40,000 per year and have $500,000 earning 9%, the portfolio is stable because it earned $45,000 while you earned $40,000.
5) draw down
means you have to sell shares because the stable portfolio does not provide enough income to you through annual gains. If you need $50,000 and your porfolio of $500,000 earning 9% only generates you $45,000, you need to sell shares so you have $50,000 in income for the year. The following year you only have $495,000 earning 9% and you will need to sell more each year to meet income needs.

When you hit that stage of stability, that is "independently wealthy" IMO

[Beppington]

Financial Independence. When my money makes more than I do and/or when my money (investments) make enough to live on comfortably.

I suggest a person (when investing) goes thru stages

When you hit that stage of stability, that is "independently wealthy" IMO

How do you specifically define "enough to live on comfortably"?

This is what I'm getting at.

What dollar figures are you talkin'?

[Beppington]

Another twist. With no debt, I have enough of a nest egg now to quit working but live a pretty frugal life from now on, watching every dollar pretty closely, & barring disaster I would likely make it to the grave. If that's good enough for me, maybe I'm "rich" now.

But maybe I shouldn't be satisfied with a "frugal life" being my definition of rich? Maybe I should want more? So, how does anybody decided how much more, how much of a not-frugal life, or taken further how rich of a life, they decide they want to live?

I need to settle on specifics here, friends, if this guy's book is gonna work for me the way it's supposed to.

[jIM_Ohio]

How do you specifically define "enough to live on comfortably"?

This is what I'm getting at.

What dollar figures are you talkin'?

same level of expenses I have now

someone gives me 25X expenses that is enough
I could live on 20X maybe
15X would be frugal

[GREENBACK]

I quite honestly feel rich. I have the exact career I worked my whole life for. I can't imagine doing anything else. Yes, I have to work to live but so what. I'd likely work at any income level because that's just me. I really don't know how to define rich in terms of money. I know many people with much higher incomes than I who are somewhat miserable in their daily lives.

[Caoineag]

"Rich" is a constantly moving target. My goal is to be comfortable. Comfortable means 30x my expenses. Once I have that much, I can live life the way I want. That said, I like living in the now as well. I am not going to put my whole life on hold waiting to reach my target numbers. I have more than one goal in life and my life is about balancing all those goals with each other.

[Beppington]

"Rich" is a constantly moving target. My goal is to be comfortable. Comfortable means 30x my expenses. Once I have that much, I can live life the way I want. That said, I like living in the now as well. I am not going to put my whole life on hold waiting to reach my target numbers. I have more than one goal in life and my life is about balancing all those goals with each other.

I assume you mean 30x your monthly expenses? So if you're expenses are $2,000/ month, $600K in the bank is your target?

What if you get that much then decide you want to buy a big ticket item, maybe a beach house? Then you re-adjust your goal I guess?

But ... OK, that kind of goal could work. Anybody else?

[jIM_Ohio]

30X annual expenses
if expenses are 2k per month 24k per year, $720k would be enough to live on quite comfortably for 30-50 years.

[Caoineag]

...

What if you get that much then decide you want to buy a big ticket item, maybe a beach house? Then you re-adjust your goal I guess?

But ... OK, that kind of goal could work. Anybody else?

I don't do big ticket items on the spur of the moment. It just not in my personality. That said, if I was getting close to my goal and my goals changed, then so be it. Goals aren't written in stone, they change with your desires.

A new beach house would have to be weighed against my original goal and if the beach house mattered more, then I would work longer to have the beach house.

[EEinNJ]

I think before you can get to specifics of "how much is enough", you have to consider some external factors. Location and inflation come to mind. If you live in a high-cost, high tax state, you'll need a lot more. Even though inflation is supposedly practically flat, my bills tell me otherwise. So what seems like plenty of money now may only be half of what you need in 15 or 20 years.

[bjl584]

This reminds me of The Millionare Next Door. Basically all of the people profiled in that book had a mentality to become wealthy. Live below their means, save and invest, etc.

[maat55]

Another twist. With no debt, I have enough of a nest egg now to quit working but live a pretty frugal life from now on, watching every dollar pretty closely, & barring disaster I would likely make it to the grave. If that's good enough for me, maybe I'm "rich" now.

But maybe I shouldn't be satisfied with a "frugal life" being my definition of rich? Maybe I should want more? So, how does anybody decided how much more, how much of a not-frugal life, or taken further how rich of a life, they decide they want to live?

I need to settle on specifics here, friends, if this guy's book is gonna work for me the way it's supposed to.

I don't won't to pinch pennies when I retire. I also do not want to become ammaculated to unnecessary consumerism.

I want to take trips every year, eat out 2 or 3 times a week, have a golf membership. I do not care to buy expensive clothes and other junk.

I don't want a Lexus or a Pinto. Most of all, I do not want to need SS/medicare. If I'm self-sufficient without these, I'll know I'm there.

I will likely only get there by living frugal. I have already broken my taste for excessive consumerism.

You may not know what your expectations are until you get there, time will change your needs and wants.

[snshijuptr]

I think rich for me goes beyond just living comfortably myself. I also would want enough free money to invest in things I believe in such as charity, scholarships, and my own or other's research projects. To me rich is not worrying when I pursue a risky, but worthy investment.

[Mike75]

This is how the life goes. We all want to become rich but don't what being rich means. Everyone, from a person with just $100 in the bank to a person with $100 million in the banks is running around and "trying to become rich". It never ends!