An interesting quote from my second round of reading goes: To build wealth, minimize your realized income and maximize your unrealized income. This means that to build wealth, people need to be focussed on putting more of their money into "unrealized" income, which comes in the form of forms of capital appreciation. This section analyzed how people are too quick to spend their immediate, or realized incomes, which means more taxes. Studies show that the overwhelming majority of "millionaires" pay a much smaller fraction of their income in the form of taxes than people who aren't millionaires. To do this, rather than spending money, they allow their money to appreciate in the form of liquid currency. They allocate a large portion of their incomes to stocks and bonds, as well as other nontaxable municipal funds. Thus, the government is not able to take as much from high earners. Oppositely, people with much lower incomes who are quick to spend their money as a means of "escaping" from life as a lower-middle class person, are the ones who end up paying through the nose when it comes time for taxes.
Another interesting point made by the author is how people who don't feel that they have a lot of money, have many opportunities to change this, but are influenced by society to remain poor. An interesting example given by the author is based on an interview with a husband and a wife that he interviewed. They were poor, living paycheck to paycheck with no immediate assets. Between them they both smoked three packs of cigarettes per day. They smoked from forty-six years. This combined with the price of cigarettes means that they spend over $33,000 in their lifetime on cigarettes. Now had they invested that money in the stock market (index fund), they would have accumulated over $100,000. Had they invested this money in Philip Morris, after forty six years they would have accumulated over $2 million. This interesting study shows just how much of a difference seemingly minute purchases make, and how simply changing where that money goes can lead to huge capital gains.
Monday, December 15, 2014
Wednesday, December 3, 2014
C4E Update 12.1.14
This week in C4E we have begun working on our $200 project and the storefront project. For the $200 project our group has decided to begin a company that produces customized athletic socks that sport the new BHS Warriors logo on it, while for the storefront project we are developing a doggy day care.
Jack and I play numerous sports, and we are well aware of how much athletes value socks. To someone who doesn't play sports this concept seems a bit odd. To those who do, they understand the need for socks that not only provide exceptional wicking, but also sport the colors of their team. Our goal is to use our $200 completely to order as many pairs of socks as we can from an online distributer. From here we intend to sell our socks to both the basketball and lacrosse teams in our first round of sales. Both teams are looking to order team socks and the captains of both have said that they would use us as their distributor.
On the storefront project our group is creating a doggy day care. Our businesses largest asset we believe is it's location. Our goal is to provide a day care service for dogs who's owners drive down route 9 on a daily basis. If that person doesn't want their dog to be home alone all day, yet doesn't have the time to go out of his or her way to drop them off at another service, they can efficiently drop their dog off using our service, and don't need to be inconvenienced by changing their work commute. While I know that this is a hypothetical project, I feel that this could be an actual successful business should someone desire to install a doggy day care program there (assuming that they marketed it as a convenience for people commuting down route 9).
I like that we have begun working on projects of this nature, versus the projects that we were working on first semester. I feel that we have been given more concrete opportunities, directions, and help from teachers and guest speakers alike. I hope that we can continue to work on these ones.
Jack and I play numerous sports, and we are well aware of how much athletes value socks. To someone who doesn't play sports this concept seems a bit odd. To those who do, they understand the need for socks that not only provide exceptional wicking, but also sport the colors of their team. Our goal is to use our $200 completely to order as many pairs of socks as we can from an online distributer. From here we intend to sell our socks to both the basketball and lacrosse teams in our first round of sales. Both teams are looking to order team socks and the captains of both have said that they would use us as their distributor.
On the storefront project our group is creating a doggy day care. Our businesses largest asset we believe is it's location. Our goal is to provide a day care service for dogs who's owners drive down route 9 on a daily basis. If that person doesn't want their dog to be home alone all day, yet doesn't have the time to go out of his or her way to drop them off at another service, they can efficiently drop their dog off using our service, and don't need to be inconvenienced by changing their work commute. While I know that this is a hypothetical project, I feel that this could be an actual successful business should someone desire to install a doggy day care program there (assuming that they marketed it as a convenience for people commuting down route 9).
I like that we have begun working on projects of this nature, versus the projects that we were working on first semester. I feel that we have been given more concrete opportunities, directions, and help from teachers and guest speakers alike. I hope that we can continue to work on these ones.
Tuesday, December 2, 2014
The Millionaire Next Door: P. 1-40
I rarely read books. I know that this is really sad, especially for a senior in high school who genuinely loves to learn and aspires to go on to a good college, but it's the truth. Thus, when Mr. Fischer and Ms. Stevens presented to the class a reading project where we would have to read books on entrepreneurship, it's fair to say that I was less than excited to begin reading. Only forty pages into "The Millionaire Next Door" has completely changed my attitude towards this project.
The book is a review of over twenty years of research done by the author on who in America are actual millionaires. Going into the book my vision of a "millionaire" were celebrities, big time corporate CEOs, and doctors. Interestingly, this is one of the most common misconceptions regarding who in fact are actual millionaires. The majority of wealthy people in America are not the kin of multimillionaires, wealth in many cases is not passed down. This is another misconception that I had regarding millionaires in America. Over 80% of the millionaires in America are first generation millionaires, and the majority are not glamorous movie stars and CEOs. The majority in fact are your average business owner. Two thirds of the millionaires in America own their own businesses, many of these people are farmers, auto mechanics, contractors, etc. This book debunks the myths and misconceptions that we as a society have of the wealthy, and gives us a more realistic view of what a real millionaire looks like.
At first I didn't understand how people working in such absurd and random industries could have a lot of money. The answer in many cases lies in the notion of prudent spenders and big time money savers and investors.
An interesting concept or analogy used by a wealthy diesel engine repairman from Texas is the idea: Big Hat No Cattle. This symbolizes people who we would view as wealthy, for example, your average CEO living in Brookline, Massachusetts. This person probably makes a decent paycheck, but our society has created an environment where people don't view you as wealthy unless you dress the part. This CEO may drive a $100,000 car, wear $1000 suits, and have a $5000 watch. In addition this person pays heavily in taxes to live in an upscale neighborhood like Brookline. Say this person has kids and thus pays for them to go to a private school (55% of millionaires have their children in private school). This person makes a lot of money, but then spends that money on the things that society tells wealthy people that they need to spend money on. Despite a large paycheck, many of these people don't have appreciable assets. Oppositely, as the statistics from the study show, the majority of millionaires live in less wealthy neighborhoods, drive cheaper cars, more than half never spent more than $400 on their nicest suits or more than $140 on their nicest shoes. These people still make a good paycheck, but they don't spend as much. They aren't surrounded by other doctors and lawyers and CEOs and thus feel the need to "keep up with the Jonas'" and buy expensive clothes and goods. These people, form the overwhelming majority of millionaires in America.
The book is a review of over twenty years of research done by the author on who in America are actual millionaires. Going into the book my vision of a "millionaire" were celebrities, big time corporate CEOs, and doctors. Interestingly, this is one of the most common misconceptions regarding who in fact are actual millionaires. The majority of wealthy people in America are not the kin of multimillionaires, wealth in many cases is not passed down. This is another misconception that I had regarding millionaires in America. Over 80% of the millionaires in America are first generation millionaires, and the majority are not glamorous movie stars and CEOs. The majority in fact are your average business owner. Two thirds of the millionaires in America own their own businesses, many of these people are farmers, auto mechanics, contractors, etc. This book debunks the myths and misconceptions that we as a society have of the wealthy, and gives us a more realistic view of what a real millionaire looks like.
At first I didn't understand how people working in such absurd and random industries could have a lot of money. The answer in many cases lies in the notion of prudent spenders and big time money savers and investors.
An interesting concept or analogy used by a wealthy diesel engine repairman from Texas is the idea: Big Hat No Cattle. This symbolizes people who we would view as wealthy, for example, your average CEO living in Brookline, Massachusetts. This person probably makes a decent paycheck, but our society has created an environment where people don't view you as wealthy unless you dress the part. This CEO may drive a $100,000 car, wear $1000 suits, and have a $5000 watch. In addition this person pays heavily in taxes to live in an upscale neighborhood like Brookline. Say this person has kids and thus pays for them to go to a private school (55% of millionaires have their children in private school). This person makes a lot of money, but then spends that money on the things that society tells wealthy people that they need to spend money on. Despite a large paycheck, many of these people don't have appreciable assets. Oppositely, as the statistics from the study show, the majority of millionaires live in less wealthy neighborhoods, drive cheaper cars, more than half never spent more than $400 on their nicest suits or more than $140 on their nicest shoes. These people still make a good paycheck, but they don't spend as much. They aren't surrounded by other doctors and lawyers and CEOs and thus feel the need to "keep up with the Jonas'" and buy expensive clothes and goods. These people, form the overwhelming majority of millionaires in America.
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