Where do Wealthy people keep their money ?

Albermarle

B0bbyEwing said:

km1500 said:

1 million is not wealthy

Behave yourself.

Having a Million can mean different things.

If a household ( not an individual) has £1M in assets, they are not really wealthy in most peoples understanding of what that means, and in fact at least 10% of the country is in this position. The number might sound 'wealthy' and for sure you have a comfortable position, but it could look something like this.

Couple age 55, kids left home.- mortgage paid.
3 or 4 bed semi in slightly above average price area- £450K
One works part time as a teacher with a pension built up for £5kpa - notional worth £175K
One works full time in junior/middle management role - DC pot built up £200K
Physical assets - cars; house contents, collections, jewelery - £50K
£30K emergency fund
£100K in S&S ISA's
= One Million Pounds but still will have to work for at least another 5 years to build up a good retirement pot.

Now if they had Two Million is assets between them, they would be in the Top 5% of the population.

If they had One Million Pounds in disposable cash to spend between them that would be out of the ordinary, and if they had a Million to spend each on top of assets then that would be definitely very wealthy.

Due to the above there is no actual agreed definition of what a  Millionaire is. Most definitions though tend to be more in line with the latter examples. That is having a Million pound of disposable income, in addition to assets like your house and pensions.

Eco_Miser

joesoap1264 said:

if the cash stays in the bank it’s not affected by inflation, only when you spend it, ! But inflation goes up and down, so does S& S. I remember when It was 20+ % .  And interest 17% .

The cash in the bank is affected by inflation, but you don't notice until you come to spend it.

The rate of inflation goes up and down, but inflation itself (nearly) always goes up; sometimes you lose value quickly, sometimes you lose value slowly, but nearly always you lose value, and the few occasions you don't there is something else nasty happening instead.

B0bbyEwing

Albermarle said:

Having a Million can mean different things.

I agree with you but purely going on the face of it - 1 million. You're well off.

Now in the outside world (as in outside of MSE), I could ask anyone I know - what do you think I mean if I said I had 1 million & they would all say 1 million cash ... which would be correct & is what i visioned when the guy said 1 million.

Now the MSE (this forum, not the practice) way is a little different. It's cryptic. It's trying to trip each other up, playing chess, saying you don't know what I mean, you think I mean this but I mean that. I'm not in for that. Generally if Joe Bloggs said he had 1 million then he's talking about in cash.

Unless he's a cryptic MSE-er wanting someone to assume he meant cash so he can get all giddy & go har-har, got you.


Someone could then conjure up all the scenarios in the world to suit their argument. You can earn £5 million per year yet not have enough to buy your tea in Nandos. Get the flashy house, a different super car for every day of the week & it soon erodes it.

All depends on how you want to manipulate the argument.

But at its most basic, 1 million & you're well off. You don't the fancy house, the flash holidays etc. 1 million puts you in a very comfortable situation. Give me 1 million now, I'm 40 next year. 80k left to pay off on my house which cost me about 6.0-6.5 times my yearly wage. I could quite easily pack in work now for the rest of my days.

If I wanted to buy a bigger house, buy some fancy cars, maybe that'd be a bit different.

More money just allows you more choice. 

Albermarle

Now the MSE (this forum, not the practice) way is a little different. It's cryptic. It's trying to trip each other up, playing chess, saying you don't know what I mean, you think I mean this but I mean that. I'm not in for that. Generally if Joe Bloggs said he had 1 million then he's talking about in cash.Unless he's a cryptic MSE-er wanting someone to assume he meant cash so he can get all giddy & go har-har, got you

Nobody is trying to trip anyone up, not me anyway. I was just trying to explain that saying 'I have a Million' can mean a lot of different things, depending on the interpretation. As this forum is about investments, pensions, when can I retire etc, then the focus is on how much you have got in assets in total, and often as a household, rather than individually ( unless you live alone of course). In this case a Million Pounds is a nice sum to have, but not that unusual, especially for older couples with a nice house and a decent pension. 

As you say the Man on the street, probably thinks in more simple terms, in that if you have a Million, it must be on top of other things and in the bank and ready to spend. This would be a rather more rare occurence, and would mean you definitely could be classed as wealthy.

Nothing cryptic about that as far as I can tell.

Chickereeeee

If you wander over to bogleheads.org forums, you will often find people asking for advice on what to do with their 8-figure portfollios: currently someone on the front page looking for guidance  for  $15M in retirement. OK , it is US-oriented in the main, but the principles are the same.

coastline

Mortgage free and a million in cash that would be me done with work especially at 50 yo and over. Didn't have anywhere near that when I took the plunge and never looked back since. Up to the individual so there's no answer.
The idea that cash in the bank is always underperforming inflation is not always true. 1955 to 1970 and 1980 to 2008 the base rate was above inflation ,CPI, that's the only records we've got. Green above blue on the chart and remember you can always get a bit more than the base rate. Even now. Not the answer of course but it crops up in many posts.

base-rates-vs-inflation.jpg (727×514) (netdna-ssl.com)

Most people pensions are set in default funds where over 50% is invested in gilts etc. 10 year performances in general have failed to beat inflation .  Again a period of poor retuns.

Chart Tool | Trustnet

Inflation isn't always kind to stock markets . 1966-1982. In general it's probably the best place to be over 20 years.

FNzuqw8XEAUsiRi (900×824) (twimg.com)

joesoap1264

Eco_Miser said:

joesoap1264 said:

if the cash stays in the bank it’s not affected by inflation, only when you spend it, ! But inflation goes up and down, so does S& S. I remember when It was 20+ % .  And interest 17% .

The cash in the bank is affected by inflation, but you don't notice until you come to spend it.

The rate of inflation goes up and down, but inflation itself (nearly) always goes up; sometimes you lose value quickly, sometimes you lose value slowly, but nearly always you lose value, and the few occasions you don't there is something else nasty happening instead.

I did say also, " there is no way to beat inflation ! "
You may short term , but all things are relative .

joesoap1264

talexuser said:

joesoap1264 said:

 if the cash stays in the bank it’s not affected by inflation, only when you spend it, 

If you never spend it so as "not to be affected by inflation", then you effectively don't have the money to spend, and any inheritance left behind is massively decreased over time. Seemingly the same argument as Harold Wilson's the pound in your pocket is not affected by devaluation. It is only affected when you come to spend it, but without spending it eventually that pound is not a lot of use just in your pocket.

He also said the " white heat of technology " and I  cannot even log in to Ns&I 
When one attains a certain level of wealth, inflation ceases to matter



 money is currency, a means to an end , just everyone end is different .
I think greed is the word !

joesoap1264

joesoap1264 said:

talexuser said:

joesoap1264 said:

 if the cash stays in the bank it’s not affected by inflation, only when you spend it, 

If you never spend it so as "not to be affected by inflation", then you effectively don't have the money to spend, and any inheritance left behind is massively decreased over time. Seemingly the same argument as Harold Wilson's the pound in your pocket is not affected by devaluation. It is only affected when you come to spend it, but without spending it eventually that pound is not a lot of use just in your pocket.

He also said the " white heat of technology " and I  cannot even log in to Ns&I 
When one attains a certain level of wealth, inflation ceases to matter



 money is currency, a means to an end , just everyone end is different .
I think greed is the word !

I. Prefer Mr Mcawber than Harold .

Albermarle

When one attains a certain level of wealth, inflation ceases to matter

That is a personal viewpoint that not everyone would agree with (of course no issue with having a personal viewpoint)  To see ones hard earned assets dwindling away in real terms, even if the effect on your lifestyle is minimal, is still quite painful for some. Plus inflation is bad for the country as a whole, and could even bring some public unrest/ serious economic instability that would affect everybody, even the wealthy.