<story><title>Climbing the Wealth Ladder</title><url>https://ofdollarsanddata.com/climbing-the-wealth-ladder/</url></story><parent_chain><item><author>hultner</author><text>I wouldn&amp;#x27;t fully agree with this, I&amp;#x27;d say income that non-linear to amount time spent it the highest driving factor.&lt;p&gt;Let&amp;#x27;s take an example.
I&amp;#x27;m going to use Swedish living conditions and salaries as an example as that&amp;#x27;s where I live but they are close to most European&amp;#x2F;western countries.
We have a frugal grocery store cashier who makes $2000 USD&amp;#x2F;month after taxes.
We have a high level executive in a medium-sized company who makes $5000 USD&amp;#x2F;month after taxes.&lt;p&gt;The grocery worked lives like a student (student loan&amp;#x2F;benefits in Sweden is about $1000 USD&amp;#x2F;mo) and saves the rest on the stock market (assuming average yearly yield with reinvested dividends at 8.5%), efficiently saving $1000USD&amp;#x2F;month for future non linear income.
The cashier plans to stop working early at 55, at a net worth of about $2 900 000 USD.
This allows for a safe withdrawal rate at about $10 000 USD&amp;#x2F;month.
At this level travling&amp;#x2F;vacation expenses isn&amp;#x27;t a problem for the cashier. Housing probably does but they can most likely live comfortably even if they decide to rent. They can also easily increase monthly spending allowance by 10% if they decide to continue working half time.&lt;p&gt;At the same time our executive have been burning through every pay-check, and have effectively no net worth at the same age, sure there&amp;#x27;s plenty enough to lease a nice car, don&amp;#x27;t care about restaurants bills but more expensive traveling will still be a setback and vacation time per year is certainly limited as income is still linear to time spent.&lt;p&gt;So in this example we have a cashier ending up as a multi millionear set for life at 55 with no need to work a day more and a high level executive who&amp;#x27;d be back at 0 without the job and a strictly linear income.&lt;p&gt;Sure salary increase does matter, but in the long run underspending matters more. 
With a longterm plan it&amp;#x27;s possible to become a multi millionaire with an entry level job, for instance there&amp;#x27;s a famous Swedish railroad worker who recently passed away who ended up with somewhere around $17 000 000 USD net worth at the time of his death, and achieved this by living under his expenses with a low salary and investing the rest, he initially turned to the stock market because he couldn&amp;#x27;t afford a house in his youth. Not Jay-Z levels for sure but well beyond what most people would consider very wealthy.</text></item><item><author>disintegore</author><text>I understand this isn&amp;#x27;t the point of the article, but it seems like a roundabout way of saying &amp;quot;don&amp;#x27;t overspend&amp;quot;. This part in particular bothers me :&lt;p&gt;&amp;gt; More importantly though, the best way to climb the wealth ladder is to spend money according to your level.&lt;p&gt;As far as I (a non-economist) can personally tell, any notion of climbing up some abstract wealth ladder is synonym with a salary increase for the vast majority of people. Other methods, whether they involve quantity of free time or already-available money, are intrinsically tied to the quality of your job or, failing that, the quality of your parents&amp;#x27; or partner&amp;#x27;s jobs.&lt;p&gt;Personal net worth, while definitely an important factor in this equation, is far less so than income in my opinion. A fiscally irresponsibly professional worker living from paycheck to paycheck has &amp;quot;grocery freedom&amp;quot; while a person with 10,000$ of accumulated wealth and no income whatsoever (let&amp;#x27;s say they are between jobs) is far more likely to buy the store brand margarine. Similarly, the former will most likely not achieve &amp;quot;travel freedom&amp;quot; without decades of hard work, of careful spending, of saving, investing, etc.&lt;p&gt;Simply put, no amount of &amp;quot;not carelessly booking flights&amp;quot; will turn you into Jay-Z, let alone into that small business owner across the street with the McMansion and the gaudy Christmas decorations. The undisputed &amp;quot;best way&amp;quot; to climb the wealth ladder is to receive large amounts of cash from some external source.</text></item></parent_chain><comment><author>AlexanderNull</author><text>No family? Also if we were talking about the US (which the article was) then you have to factor in healthcare, average of $200 a month for the insurance IF it&amp;#x27;s sponsored (mostly covered) by their employer. If the grocery worker is living in any major city then rent is bare minimum of $600 a month for the privilege of living with at least 2 other flatmates or around $1000 for a pretty small apartment. So this person&amp;#x27;s already out half their monthly income. Let&amp;#x27;s say transportation costs are low and that this person only takes the bus to get everywhere, that&amp;#x27;s an extra $100 a month (assuming lack of adequate transportation doesn&amp;#x27;t also ending up costing them their job due to frequent late starts). Now this person also has to pay at least some utilities depending on where they&amp;#x27;re living so a rough estimate would be around $120 a month for that. Now we look at food, average grocery costs per person in the US is $220 a month. This person also needs clothing obviously, if they go on the super low side they could get by on ~$100 a month over all. If this is it for their spartan life style, meaning no cell phone, no internet, no eating out, no leisure activities that cost money, no hobbies, no children, no trips to the doctor (where medical deductibles kick in), no car, no netflix etc. This person has potentially $460 a month to save.&lt;p&gt;That&amp;#x27;s 100% best case scenario living a lifestyle that basically consists of going to work, going home, eating food, sleeping on the floor of their apartment (we didn&amp;#x27;t budget for furnishings but w&amp;#x2F;e it&amp;#x27;s better for the back) using the public library and walks around the park for sole avenues of entertainment. ALSO: THERE&amp;#x27;S NO KIDS IN THIS SCENARIO. Some of those estimates I lowballed also (like food as that&amp;#x27;s average cost of groceries for people who also get calories from eating out at restaurants) so this is really not a realistic estimate here.&lt;p&gt;In reality though there&amp;#x27;s plenty of hidden costs that this person will incur and even assuming they do manage to stay kidsless they&amp;#x27;ll be lucky to put away $100 a month giving them a best case scenario of $250k in savings by 55. Not terrible for them, but not enough to retire on in the US when you think of medical expenses incurred later on in life.</text></comment>
<story><title>Climbing the Wealth Ladder</title><url>https://ofdollarsanddata.com/climbing-the-wealth-ladder/</url></story><parent_chain><item><author>hultner</author><text>I wouldn&amp;#x27;t fully agree with this, I&amp;#x27;d say income that non-linear to amount time spent it the highest driving factor.&lt;p&gt;Let&amp;#x27;s take an example.
I&amp;#x27;m going to use Swedish living conditions and salaries as an example as that&amp;#x27;s where I live but they are close to most European&amp;#x2F;western countries.
We have a frugal grocery store cashier who makes $2000 USD&amp;#x2F;month after taxes.
We have a high level executive in a medium-sized company who makes $5000 USD&amp;#x2F;month after taxes.&lt;p&gt;The grocery worked lives like a student (student loan&amp;#x2F;benefits in Sweden is about $1000 USD&amp;#x2F;mo) and saves the rest on the stock market (assuming average yearly yield with reinvested dividends at 8.5%), efficiently saving $1000USD&amp;#x2F;month for future non linear income.
The cashier plans to stop working early at 55, at a net worth of about $2 900 000 USD.
This allows for a safe withdrawal rate at about $10 000 USD&amp;#x2F;month.
At this level travling&amp;#x2F;vacation expenses isn&amp;#x27;t a problem for the cashier. Housing probably does but they can most likely live comfortably even if they decide to rent. They can also easily increase monthly spending allowance by 10% if they decide to continue working half time.&lt;p&gt;At the same time our executive have been burning through every pay-check, and have effectively no net worth at the same age, sure there&amp;#x27;s plenty enough to lease a nice car, don&amp;#x27;t care about restaurants bills but more expensive traveling will still be a setback and vacation time per year is certainly limited as income is still linear to time spent.&lt;p&gt;So in this example we have a cashier ending up as a multi millionear set for life at 55 with no need to work a day more and a high level executive who&amp;#x27;d be back at 0 without the job and a strictly linear income.&lt;p&gt;Sure salary increase does matter, but in the long run underspending matters more. 
With a longterm plan it&amp;#x27;s possible to become a multi millionaire with an entry level job, for instance there&amp;#x27;s a famous Swedish railroad worker who recently passed away who ended up with somewhere around $17 000 000 USD net worth at the time of his death, and achieved this by living under his expenses with a low salary and investing the rest, he initially turned to the stock market because he couldn&amp;#x27;t afford a house in his youth. Not Jay-Z levels for sure but well beyond what most people would consider very wealthy.</text></item><item><author>disintegore</author><text>I understand this isn&amp;#x27;t the point of the article, but it seems like a roundabout way of saying &amp;quot;don&amp;#x27;t overspend&amp;quot;. This part in particular bothers me :&lt;p&gt;&amp;gt; More importantly though, the best way to climb the wealth ladder is to spend money according to your level.&lt;p&gt;As far as I (a non-economist) can personally tell, any notion of climbing up some abstract wealth ladder is synonym with a salary increase for the vast majority of people. Other methods, whether they involve quantity of free time or already-available money, are intrinsically tied to the quality of your job or, failing that, the quality of your parents&amp;#x27; or partner&amp;#x27;s jobs.&lt;p&gt;Personal net worth, while definitely an important factor in this equation, is far less so than income in my opinion. A fiscally irresponsibly professional worker living from paycheck to paycheck has &amp;quot;grocery freedom&amp;quot; while a person with 10,000$ of accumulated wealth and no income whatsoever (let&amp;#x27;s say they are between jobs) is far more likely to buy the store brand margarine. Similarly, the former will most likely not achieve &amp;quot;travel freedom&amp;quot; without decades of hard work, of careful spending, of saving, investing, etc.&lt;p&gt;Simply put, no amount of &amp;quot;not carelessly booking flights&amp;quot; will turn you into Jay-Z, let alone into that small business owner across the street with the McMansion and the gaudy Christmas decorations. The undisputed &amp;quot;best way&amp;quot; to climb the wealth ladder is to receive large amounts of cash from some external source.</text></item></parent_chain><comment><author>bronco21016</author><text>I think you’re both right. The combination of multiplying income while also saving more and more of that income is the key to jumping wealth levels.&lt;p&gt;It’s certainly possible to live a comfortable life on the cashiers plan but if the executive spent just half of their career living like the cashier then he would quickly pass up the cashier on the wealth ladder.</text></comment>