Now that we Amis have a nice tax cut, how to reduce spending to cover it?

[Japher]

Who ever said deficits are always a bad thing?

I am going to die in debt, just to make my kids mad

Actually, if you truly understood how wealth is created and looked at the back stories of those 5% you would realize that the way to create a billion is to start your own corporation or real estate empire.

Yup. The Millionaire Next Door only discussed spending habits of the rich, it didn't really go into how these people go that way. Not many books do, that is a secret. However, I think it is a rather ironic trend that most of these people are "financially savy", have "high salaries", and are somewhat "frugal".

Yet, what was missed is how these are all interrelated. Start frugal so you can save your money to become financially savy (buisness owner, real estate investor, etc.) so that you can have a high salary.

These traits are not something that just happened to them, or that the inherited in a trust, it is something they worked for and demanded of themselves. Then, once they got those nice salaries they were unable to shake those traits... I remember the average salary was around $400,000/year. That's nothing compared to some of these guys out there! Why were they only paid that much? Because they were paying themselves, the rest went into their buisness to make more money and to avoid taxes... I guess being financially savy also means being buiness savy, and with that comes a lot of power.

[JohnT]

Originally posted by gsmoove23
If we're talking about the wealthiest 5% in the US we're not talking about millionaires and I think its quite clear that most of them are born wealthy.

Another "fact" that isn't.

US Population: 280,000,000

5% of that: 14,000,000

Lowest income (US 1040 AGI) one needs to be in the "richest" 5%, 2000: $128,000

Lowest income (US 1040 AGI) one needs to be in the "richest" 1%, 2000: $313,500

6.4 million people filed a tax return that put them in the top 5%. These people paid a total of $553,670,000,000 in personal income taxes, or 56.7% of all personal income taxes paid in the USA (a little less than $1 trillion.)

[JohnT]

"You're talking about people who have plenty of money already. They have the luxury of diversifying. If I get a loan from the bank to start up a business I have to pour everything I have into it. I can't afford to diversify."

Michael was talking about investment strategies, but if you look at the Forbes 500 you will find the exact opposite - that they are largely undiversified, that the majority of their wealth is in one or two holdings.

[JohnT]

Originally posted by Kidicious




It's tax money that subsidizes those loans though

That in no way counters Imrans point.

[St Leo]

Now that we Amis have a nice tax cut, how to reduce spending to cover it?

/me bangs head against wall

[JohnT]

Originally posted by Kidicious


Ok, he's biased just like the rest of us. What does that have to do with the points he brought up?

No, he isn't biased "like the rest of us". While we are the ones receiving dividends, he's the one paying them out. Big friggin' difference if you ask me!

[Dinner]

Originally posted by Odin
Most rich people are either lucky or inherit the money. The American dream is a bunch of capitalist propaganda, if it was true my parents would be millionares, we make $25,000 per year. it's all luck, Bush Jr. wouldn't of went to Yale if his daddy wasn't rich, he wasn't good enough in school to normally go to Yale. If an idiot like him gets to go to yale I should too!

To add to everyone elses' denunciation of this post I'd like to share my family's story. My grandparents emigrated to the US from Scotland with my father and aunt in 1947 (my mother's family has been here since before the revolution) and they literally didn't have two nickels to rub together in their pockets. Luckily my grandmother's older brother had come over the year before and so my dad's uncle helped them out for the first few months.

Back in Scotland my grandfather's family had been quite poor (it was the depression when he was growing up) so the day he graduated from high school in the morning he attended the ceremony and by lunch time they sent him down into the coal mine to help earn money for the family. After he got married he decided he didn't want his sons to have to be coal miners like he (and all the other males in his family) was so he packed everything up and moved to America. He got lucky and landed a job as an aircraft painter at Convair's Long Beach, CA plant. He worked there for twenty years, retired with a full pension, then decided at the age of 43 to start his own painting contracting business. He ran that business for 18 years at which time he sold it.

He's pay never amounted to more then a normal middle class amount but through hard work and thrift they were able to not only buy their own home but also two apartment complexes and a rental home. My grandparent's saved and invested so at 61 he was able to retire comfortably wealthy and never had to worry about cash again. They were able to spend a good four months a year traveling to different parts of the world (mostly Europe but also Asia, Australia, Latin America, and once to South Africa).

If that's not the American dream then I don't know what is. Everyone should have an opportunity to go from growing up poor to having the financial freedom to travel whenever they like.

[JohnT]

[whine]Yeah, but he got "lucky" in landing an actual job! Not everybody is that lucky!!!!![/whine]

[Japher]

Oerdin:

but how are you suppose to do that on Welfare? Its just not fair...

Life is not fair

novel concept

[Dinner]

Originally posted by JohnT
Warren Buffet has a serious vested interest in keeping dividends low... being the owner/controller of a number of companies, any dividends paid will essentially come out of his pockets. Right now, Buffet is able to keep his empire because he is a very effective business manager (i.e., he's not just a passive investor looking for a passive gain, he's an active official in all the companies he owns). A dividend cut would cut into his efficacy by emphasizing and increasing stockholder demands for cash that he wants to use for his purposes.

The very fact that Warren Buffet (as an investor & the world's 2nd richest man) will benifet so much from this tax cut yet is still coming out against it on the grounds that it is bad for the country and won't do what the Bushies claim it will (create jobs and stimulate the economy) speaks volumes about Buffets good character.

[Japher]

Nope, Buffet will be hurt more so than he wil be helped

[Kidlicious]

My family was thrifty too. That is until the baby boomer generation. None of them work full time, and none of them have educated themselves. They just spend all the money that would have been mine

[MRT144]

cut military by 50%
eliminate corporate welfare
end the drug war
tax churches

churches chicken that is

[JohnT]

Originally posted by Oerdin


The very fact that Warren Buffet (as an investor & the world's 2nd richest man) will benifet so much from this tax cut yet is still coming out against it on the grounds that it is bad for the country and won't do what the Bushies claim it will (create jobs and stimulate the economy) speaks volumes about Buffets good character.

In a post just above this one, I explain how Buffet will be harmed by the dividend tax cut and will not benefit from it. Check it out.

Edit: Wait... you were responding to my post. Now I'm ....

Well, let me say it again: Warren Buffet's personal and business interests will NOT be helped by an dividend tax cut. His coming out against the tax cut is about as "good character"-driven as the CEO of SCO denouncing the Linux community.

[MichaeltheGreat]

Originally posted by Kidicious
I'm not sure how you started up your business, but starting up a business that could possibly make you a millionaire takes a lot of resources. If you can pour those resources into your business and still hedge against your business failing you are already rich.

I still have a day job - my normal consultancy work. Depending on how you assess value, (intellectual property rights sale, vs. potential market and market penetration), the software/system product I'm currently developing on should have a net realizable value between 10 and 50 million. 10 being the relatively quick sale of rights and moving on to something else, 50 being about the potential market penetration.

The two initial installations I'll have in the next 9 months are contracted at $200,000 each, and $5,000 a month for the project life (ten years plus right to renew in one case, seven years in the other). About 40% of that is hardware and hard external costs, the rest is development cost (my pay, but I'm still working the day job, so it's really retained earnings to be used for forward development, marketing, etc.), overhead and profit. On the monthly side, about 30% will be fixed out the door expenses, plus another 30% allowed for replacements and outside services.

My borrowed capital is zero, my outside venture capital is zero, and my operating capital so far has been out of pocket, a little here, a little there.

My initial "sweat capital" is about nine years of on and off effort, learning about the target market, the needs that aren't being met, the technology required to adequately meet those needs, regulatory and marketing strategy issues, etc. Nine years. In 1994, the hardware and software tools weren't there. SCADA existed before that, but it's all pretty much halfassed, and only addresses engineering type operating issues, not commercial issues.

In that nine years, other people (existing controls companies, etc.) adapted SCADA for small power plant operations, but they never thought beyond SCADA to the entire business operation, and they've mostly saddled themselves with an early 90's codebase on early 80's hardware standards. Rather than try to compete head up with that crap (it's crap, but they have big advertising staffs, relationships with equipment manufacturers, and lots of mediocre ANSI C programmers), I looked at what they didn't provide, and how they didn't provide it. I also spent a lot of time looking at the customer perspective firsthand - something you can't do with studies or consultants, and something which most would be businesspeople ignore). After getting the customer's view of what would be nice in a perfect world, I mixed in the views of related parties - the customer's end users, lenders, auditors, regulatory authorities, etc., to see what would be useful to both sides in their relationships with the customers of my product. (Herein lies the marketing strategy).

From all that, I refined the target market to third-party developers of cogeneration and small independent power plants. Why? Larger cogenerators (whether end user or third party owned) have an economy of scale such that you can afford to have an on-site operating staff, while the smaller ones don't. Most industries with one to six or so megawatt electrical loads don't want to invest the capital in having their own cogen plants, since it's ancillary to their line of business. Most third party developers either starve and die if they do those small plants, because there's a lot of overhead in operating them (or contracting operations), so they avoid that market and all look for the bigger fish, or they suffer with the inefficiencies. In any case, there's literally a few thousand potential sites in California where that type of generation (~500 kw to ~6MW) project could be done, but large developers don't want to bother, and small ones bog down on operating cost and infrastructure.

Provide that infrastructure and a way to virtually operate and monitor everything, and I mean everything, from billing, to spare parts pools, to maintenance scheduling, to lender's audits, purchase orders, permit renewals, monitoring plant status, etc. - the whole commercial and technical side of operating the plant, and you make several hundred of these generation projects feasible that wouldn't be feasible, otherwise.

The main lesson here is that there's intellectual and sweat capital you can invest, as well as monetary capital. You may not be able to save tons of money, but you can educate yourself and look to create market opportunities.

What I've described so far isn't the be all and end all, either. It's marketing initially into a niche that nobody else is looking at, but one which I've researched and established is a good potential market. So I get off the ground in a relatively protected marketplace, to prove and fine tune the technology. The real kick is that what I'm doing is (a) almost infinitely scalable, you could literally run an entire utility system off of it; (b) almost infinitely adaptable to other industries, particularly once I author the configurations tools, report writers, and all the second generation stuff that I'll be working on between the prototypes and getting any real industry attention (and wakeup calls to pseudocompetitors); (c) on average, a decade or so ahead of the hardware and code base of prospective competitors; (d) nothing of it's kind exists yet, so a huge number of intellectual property rights can be secured (several are already in process).

When I get to the point of wanting/needing outside capital, I'll have about two and half years of self-sustaining, profitable operating history, a fairly mature product with a lot of locked up IP rights, a scripting language and toolset so it is completely adaptable and portable, and next to no visibility to prospective competition.

Other than deferring toys and nonessential purchases, this hasn't affected my other investments at all, and it will produce enough income that the effort through the end of 2005 will be self-sustaining, and pay me enough extra money that my outside unrelated investment portfolio should increase substantially in that time period, rather than get sucked into supporting the core business.

So there's a hell of a lot more ways to go about it than being born with a silver spoon in your hand, or getting lucky with your life savings.