Suze Orman show...??

[deleted310399]

I am very much interested in saving for retirement , increasing my net worth and that kind of stuff.
I recently caught the Suze Orman show on TV and liked it and started watching it on the internet.
There is a segement on the show where callers ask her how they are doing .... they just lay their finances out and she then judges them and gives them a grade and answers their questions if any. Pretty simple stuff.
What I find interesting and perplexing is that some callers have WAY more money in retirement and investments and even their emergency funds than what their income would indicate. For example this Lady - http://www.cnbc.com/id/100033415.
I saw another couple - 25 and 26 who had like 150, 000 $ saved up with only 200 $ to spare each month ??
How are these people doing it ? Am I missing something here .. ? Are these people BSing everybody by just making up hypothetical financial situations ..?
I am just very surprised.

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[Celiac Plexus]

It is possible that people have inheritances or have received gifts from their families. Perhaps they are savvy real estate speculators, or lucky option traders. There are any number of reasons why young people have more money that you think they would/should. I met a guy in his early 50s whose parents bought him 10,000 dollars worth of Coke stock when he was born, and he is worth millions because of that one investment. You never know. I mean, just look at silicon valley and all of the twenty-somethings who have cashed in on options/buyouts. 100K is chump change for them.

 

[NICUfello]

I used to watch the show 10+ years ago. Caught a few episodes on CNBC recently.

My favorite is "hi I hae 80K in checking account, 500K in retirement, but I want to buy a $400 purse, can I afford it?"

 

[deleted310399]

A nice inheritance seems likely especially since their net worth cannot be explained by their income by a long shot. Plus some exaggeration is also likely. There was a 20 year old who called and said he wanted to buy a 51000 $ BMW x5. Dude had an income of 9500 $ per month after taxes with expenses of about 1000 as he was staying with his parents , was a full time college student and claimed he was making this money selling real estate. Had 120,ooo $ in liquid savings and she approved him. Kinda made me revaluate my whole life...LOL.

 

[sazerac]

The way me and my friends did it is through ownership of the company we worked for. Stock options granted at hiring, which lead to stock ownership when they mature. Your day-to-day salary income might be modest, yet you wind up owning a significant amount of capital anyway.

I've tried explaining in the Allo forum a couple times about how doctors are so fixated on income, income, income that they are clueless how other professions are compensated. But it's a hopeless cause. I hope they enjoy those W-2 forms.

 

[krl7044]

It is really not that hard. If your goal is to save as much as possible, it can be done, since many people with marketable degrees graduate with little or no debt and can hit the ground running. This is not something possible for doctors and dentists, but the upside is that you make up the ground quickly. The reliance on income can be explained - the only way a doc can catch up is by growing their income because of high debt and high taxes. But even that can be hard with lots of children/mortgage/practice loans/student loans. So yes, a tiny number of people can and do save high six figures (sometimes with their parents' help), but this is a slow and steady process, and there isn't much margin there. An older doctor can save $1M in 5 years with a Cash Balance plan and retire relatively young, while most other people spend their entire lifetimes saving this much. This is why the emphasis should be on saving vs. investment returns, because early on most docs will not have a ton of money to spare, and the money saved later on will not have the benefit of compounding. Nothing terrible here, just a different way of thinking.

 

[Perrotfish]

I am very much interested in saving for retirement , increasing my net worth and that kind of stuff.
I recently caught the Suze Orman show on TV and liked it and started watching it on the internet.
There is a segement on the show where callers ask her how they are doing .... they just lay their finances out and she then judges them and gives them a grade and answers their questions if any. Pretty simple stuff.
What I find interesting and perplexing is that some callers have WAY more money in retirement and investments and even their emergency funds than what their income would indicate. For example this Lady - http://www.cnbc.com/id/100033415.
I saw another couple - 25 and 26 who had like 150, 000 $ saved up with only 200 $ to spare each month ??
How are these people doing it ? Am I missing something here .. ? Are these people BSing everybody by just making up hypothetical financial situations ..?
I am just very surprised.

The best book on this subject is "the millionaire next door". It was written by two guys at a market research firm who were hired to survey millionaires, to figure out their demographics for a wealth management firm. The results were so surprising (to both the researchers and the wealth managers) that it generated several more studies and a series of best selling books.

I would recommend reading the whole thing, but the basic message is that accumulators of multi-million dollar wealth are mostly people with normal to normal-high incomes who are very frugal. They mostly have never received a sizable inheritance or other windfall, very few of them have 1 percenter incomes (not counting their investment income), and they don't have any secret stock market tricks. The trick to having money is not spending money, and then letting the money that you don't spend grow steadily in the stock market. The researchers also discovered that people who have those financial advantages are not particularly likely to be wealthy. Windfall income like an inheritance, in particular, is almost always squandered if it is given to someone who was not an accumulator of wealth in the first place. Even worse are regular scheduled cash gifts (like if your family gives you 10K every Christmas) which actually dramatically decrease the amount of wealth that the average recipient of such a gift has at retirement, relative to people who never recieved any such gifts.

BTW they also discovered that doctors in particular are some of the worst accumulators of wealth relative to their income, even taking into account their student loan burdens and late start accumulating wealth. White coat investor has a pretty good book he just published with some theories as to why that is, and some possible solutions if you want to be the exception to the rule.

I used to watch the show 10+ years ago. Caught a few episodes on CNBC recently.

My favorite is "hi I hae 80K in checking account, 500K in retirement, but I want to buy a $400 purse, can I afford it?"

The fact that she is asking this question is the reason she has 580K in liquid assets.

 

[deleted310399]

The best book on this subject is "the millionaire next door". It was written by two guys at a market research firm who were hired to survey millionaires, to figure out their demographics for a wealth management firm. The results were so surprising (to both the researchers and the wealth managers) that it generated several more studies and a series of best selling books.

I would recommend reading the whole thing, but the basic message is that accumulators of multi-million dollar wealth are mostly people with normal to normal-high incomes who are very frugal. They mostly have never received a sizable inheritance or other windfall, very few of them have 1 percenter incomes (not counting their investment income), and they don't have any secret stock market tricks. The trick to having money is not spending money, and then letting the money that you don't spend grow steadily in the stock market. The researchers also discovered that people who have those financial advantages are not particularly likely to be wealthy. Windfall income like an inheritance, in particular, is almost always squandered if it is given to someone who was not an accumulator of wealth in the first place. Even worse are regular scheduled cash gifts (like if your family gives you 10K every Christmas) which actually dramatically decrease the amount of wealth that the average recipient of such a gift has at retirement, relative to people who never recieved any such gifts.

BTW they also discovered that doctors in particular are some of the worst accumulators of wealth relative to their income, even taking into account their student loan burdens and late start accumulating wealth. White coat investor has a pretty good book he just published with some theories as to why that is, and some possible solutions if you want to be the exception to the rule.



The fact that she is asking this question is the reason she has 580K in liquid assets.

You just read my mind...!!

 

[NICUfello]

The fact that she is asking this question is the reason she has 580K in liquid assets.

I would think a person with 580K liquid asset, don't need to call Suse Orman to decide if she can spend $400 on a purse.

I imagine she saved the 580K without Suzes help, and can make a decision on a purse?

Millionaire Next Door was required reading in our home at age of 15> We had to do a book report on it for my parents.

 

[The White Coat Investor]

I would think a person with 580K liquid asset, don't need to call Suse Orman to decide if she can spend $400 on a purse.

I imagine she saved the 580K without Suzes help, and can make a decision on a purse?

Millionaire Next Door was required reading in our home at age of 15> We had to do a book report on it for my parents.

You are a lucky man. My parents passed on lots of good example kind of stuff, but pretty much no financial teaching.

 

[NICUfello]

You are a lucky man. My parents passed on lots of good example kind of stuff, but pretty much no financial teaching.

I didn't think I was lucky back then. Having to buy stocks with our money we got during the holidays, while my friends bought new games...and toys.

Looking back I appreciate it. My mom was a CPA, and my dad was a CPA turned Pediatrician....

 

[Perrotfish]

I would think a person with 580K liquid asset, don't need to call Suse Orman to decide if she can spend $400 on a purse.

I imagine she saved the 580K without Suzes help, and can make a decision on a purse?

Maybe, but people need encouragement now and then to stay on track, or alternatively to figure out if they're being neurotic by worrying about something. I have these kinds of conversations with my wife/parents/colleagues/friends all the time about all kinds of goals: financial, academic, research, diet, whatever. You can give the simple, reassuring answer and not be wrong: 'the world will not end if you spend that cash, skip those practice questions, put off that IRB, or eat that ice cream cone'. However its usually better to ask why that particular cheat is special. If you have really just wanted that one purse forever, then by all means buy the f-ing purse, you can afford it. If you want it because your boss was a dick to you and you really need something to feel better and you saw a great ad for it, well then, are you really sure your boss won't be a dick next Tuesday too?

 

[NICUfello]

Can't believe we are talking about purses....

 

[mgdsh]

I've never thought of her to give any useful advise. Watched the show a few times, felt like I got dumber