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[EG] Microsoft Makes $5,200,000,000 Net Profit. - Page 11

post #101 of 104
Quote:
Originally Posted by Vagrant Storm View Post

Trouble is that if you raise wages...they will still expect to get net profits 98% larger than their payroll. Stuff just gets more expensive. Inflation. What I'd like to see happen is deflation in which people make less money and then things cost less. I would gladly take a $300 paycheck if I could live an upper middle class life style on that. Though, every economist and analyst out there will do nothing but say how destructive deflation is to an economy. I'd like to see it happen at least once though...all I've ever experienced is stuff getting more expensive.

Stuff is always going to get more expensive. The way the economy is designed where money is back on money, the only way to stop a depression is with more money. Only way to deflate this is that every so often you play Tetris and delete a useless row of zeros.

Matter of fact if we continue on this version of economy businesses will have all this money and no principle to use it with. They'll have confederate dollars by the time they are done ruining the world. For something to be of value it must be in demand.
Edited by SpeedyVT - 10/28/13 at 12:55pm
post #102 of 104
Quote:
Originally Posted by LancerVI View Post

LOL.....uh....no.

Have you seen interest rates. In fact, putting your money into a bank, CD or whatever right now, based on what they're paying would be, unwise. You may as well buy some real propery that will appreciate in value, because banks aren't paying squat, even for a cool million. (which is pocket change for them) If you got the going CD rate; which is hovering around 1.00% right now, that'd be 10k a year. I know there are other options but you'd need a 4-5% just to get your 40-50K gross and then there's taxes on that is interest income, unless you do it as a CD-IRA, but then that cash is unusable until you retire or draw at a HUGE penalty. So either purchase real property or a long term investment, which in either case, the money is, unusable for day to day living.

And the poster who said $1 million isn't a lot is absolutely correct. I don't think a lot of you have thought it through. I think 15-20years is a pretty accurate assesment based on the 50k model. Furthermore, as your lives get more complicated, (marriage, kids, health, whatever) that money can dissappear in a flash. I'm not saying you couldn't live well if you planned well, but you're still solidly in the middle class. I've made well over a million (gross) over the past 10 years, but saving for my kids education, retirment, taxes, buying a house and being prudent in general cost some cash.

If you're going to be single and live in a basement forever....yeah, you're set! thumb.gif Others, when you get that cool million, don't quit working quite yet.
I would agree that probably about 99% of people couldn't live off $1million. However, in that 1% you could probably get seasoned investors that would be able to manage that money and live a pretty decent life. Let's assume they grow it by 9% per annum on average, taking out 4% for living expenses and letting the rest grow.

I quickly developed a model to just show that they can grow their principal while also growing their "salary or living expense", thus increasing their quality of life year over year.

So in the beginning they certainly could not afford children, but they could after 15 years. Start investing by 21, have kids at 36 and still get richer while having kids. Not bad.

This model does not account for increases in income tax brackets or tax rates on investments/dividends(since each country has a different system and it would take me a lot longer to finish this), nor does it account for inflation. However I still believe it is plausible for three reasons:
  1. The person could get to a certain point where they are comfortable enough to not increase their salary (i.e. 70k) and just reinvest the rest.
  2. The ROE assumes 9% per year. I personally find that to be low because there are probably going to be years where they make over 23%, 33%, 41%.
  3. Since all you need is an internet connection to invest, you could move anywhere that has a very low cost of living and re-invest more money.
This also assumes that money isn't lost in any year, but again taking an average of 9% per year is still fair considering you can also make a lot more than 9%, therefore balancing out. I'm assuming the investor is good enough to not lose a lot like 20% in a year, but perhaps break even or lose 3% in a really bad year.



P.S. In our scenario the person is not working so they certainly have enough time to manage their own money.
Edited by SkillzKillz - 10/28/13 at 2:20pm
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post #103 of 104
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Originally Posted by SkillzKillz View Post

I would agree that probably about 99% of people couldn't live off $1million. However, in that 1% you could probably get seasoned investors that would be able to manage that money and live a pretty decent life. Let's assume they grow it by 9% per annum on average, taking out 4% for living expenses and letting the rest grow.

P.S. In our scenario the person is not working so they certainly have enough time to manage their own money.

Just because they are not working, it does not mean they know how to manage money....

9% return is quite generous.

You also have to account for highs and lows. If a person's portfolio does poorly for a few years, they have to dip into principal as well.

"Decent life" is relative to living expenses though.... $40K a year in the New York or San Francisco would be scraping by....
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post #104 of 104
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Originally Posted by DuckieHo View Post

Just because they are not working, it does not mean they know how to manage money....

9% return is quite generous.

You also have to account for highs and lows. If a person's portfolio does poorly for a few years, they have to dip into principal as well.

"Decent life" is relative to living expenses though.... $40K a year in the New York or San Francisco would be scraping by....

Yeah, I've got to agree. If you have a connection that would allow me to earn 9% or even 6% right now that is not an IRA or some other NON-DRAWABLE investment without pentaly. (I'll give you a hint...it doesn't exists unless you're a real savvy day trader) Sign me up! My deferred compensation is earning about 7% over the last 10 years. Problem is is that if I draw on it before retirment age, the IRS steps in. Take a guess on what they do.

That senario laid out above is, I'm sorry, pie-in-the-sky.
Edited by LancerVI - 10/28/13 at 4:35pm
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