
How Rich People Spend Their Time - nickb
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/22/AR2008062201859.html
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qaexl
The major flaw with this article/study is that it defines wealth in terms of
income rather than net worth. It would be interesting to see how much time
high-income/low-net worth people spend their time in comparison to low-
income/high net-worth, and high-income/high net worth. It may also be further
intersting to see if there is a correlation between spending less time doing
things you enjoy, and how much of the income is earned (as distinguished from
passive income, such as royalties and dividends).

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noonespecial
_His fever is nearly 102! Thats dangerous right? Should I take him in? If I do
there is no way we'll make rent, and probably not the car payment either.
Maybe if I just give him extra Tylenol, it will break by morning. Dammit, how
much is too much?..._

The extra happiness that comes from being wealthy does not come from more
leisure.

~~~
daniel-cussen
So true.

Being rich means you can give your kids:

a better education better healthcare, and a backup plan if they become
disabled, among others.

All this without having to depend on the state.

There are some very compelling reasons to be rich.

~~~
mickt
I guess you missed this article claiming that couples w/o children are happier
than those with. Which could imply; not having kids means working less and
having more leisure time?

<http://news.ycombinator.com/item?id=231236>

But surely isn't the point in having kids is make them productive adults who
can fend for themselves and not have to rely on their parents wealth?

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randallsquared
This didn't match my own experience. I spent the last few years being poor,
and I felt like I had to be working all the time. If I wasn't doing something
that could potentially bring money in, I felt guilty. Recently, I moved to the
DC area and got a salaried job. Even though I've had a 4 hour (total) commute
each day, I actually feel like I have more free time and am more relaxed than
I did when I was making one third to one fourth as much, mostly because I'm
not freaked out about money at all times.

That's probably much of the reason that people report being happier: if you've
made less than 10K so far in 2008, and don't know when your next check will
come in, or from whom, your life is going to be pretty stressful. If you have
a steady >50K job, any monetary problems are pretty optional.

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dkokelley
I believe another flaw of this article is that $100,000 is considered wealthy.
My family's household income is above this but my dad provides for a family of
6, children. Of course he spends most of his time working.

I'd like to see a study done on people either who have a high net worth (like
qaexl said) of say over $1,000,000 not including their primary residence. Then
we could see what they do with the money they already have. Either that or
people who have an income of over $250,000.

The issue with the study is that there are a ton of middle class people making
over $100,000, but not many who can build it up, compared with the relatively
few people with much higher actual net worths. The problem is that these two
categories get counted together, and those barely breaking 6 figures vastly
outweigh the others.

The other thing to consider is that those who are significantly well off may
tend to enjoy pushing themselves (which is how they got their in the first
place). PG doesn't have to do YCombinator. I'm sure Viaweb set him up for
life. He probably just enjoys the industry and prefers to spend his time
productively, just like many other wealthy people.

~~~
qaexl
Going off topic for a bit, my major financial goal has always been financial
independence, as defined by having enough passive income to exceed my monthly
expenses. Or put in another way, income from rents, leases, royalties,
dividends ... subscription fees from web apps ... etc. stuff I don't have to
trade time for pays for all of my expenses. Now, whether that means I have
extra money to purchase luxuries is a different set of metrics. However, at
that stage, I have _time_ to pursue things, whether they are life-long
passions, or a startup, or investing full-time.

That's why your typical middle-class earning $100,000 or more have difficulty
building up the net-worth; that income is earned income, it is taxed much
higher than passive income, and there's not enough time. I find it ridiculous
to go for a 2 hour commute -- that is 4 hours each day, 5 days a week, or 20
hours. 20 hours of time spent in a car -- that's a part time job. A part time
job you spend money, waste time and get nothing. (Even if you like driving, do
you _really_ enjoy driving during rush hour?) It gets worse when both couples
in the family work, as now you're adding in greater expenses for working (a
second car, clothes, lunches, and so forth). But the wage earners of families
commute because they want their kids in good, suburban schools. Without time,
there are very few investment vehicles available.

Contrast that with someone who have income-generating assets (high net worth
-- primary residence is _not_ an income-generating asset, and neither is the
car, the SUV, or the boat) that meets/exceed expenses. If you don't want to
stop working, you can keep working. Until your boss pisses you off, or you're
asked to do something unethical. You don't have to commute unless you want to.
If you want to go into real-estate as a landlord, you can focus on that
without having to worry about meeting the next month's living expenses. If you
want to do a software startup, you don't have to worry as much as burn rate --
just start coding. This appears to reinforce the cliche, "it takes money to
make money", but it isn't. As mentioned in the previous paragraph, having
money but little time means you're not going to be able to build up your net-
worth.

And if you're pursuing a life-long passion, it doesn't matter if it is
"active" leisure or "passive" leisure. It doesn't matter if it is stressful or
not. The basic living expenses are covered. The lower parts of Maslow's
heirarchy of needs are covered. The fact is, you're pursuing a dream. That's
wealth to my eyes. That's liberty and pursuit of happiness, right there.

~~~
mxh
_it is taxed much higher than passive income_

Could you elaborate on this a little bit? The passive/active divide is a
little fuzzy to me, especially since you apparently include "subscription fees
from web apps" in the "passive" category. It seems to me that such fees will
either be taxed as ordinary income (if they're coming into a pass-through
entity such as an S-corp or some LLCs) or 'double-taxed', first at a corporate
rate, and then at a 2nd personal rate when you transfer them from the company
to yourself. (The combined effective tax rate generally seems higher than the
pass-through rate.)

I can see the lower effective rate being justified a couple of ways:
considering the effects of FICA/Medicare taxes, restricting consideration to
cap gains (e.g. appreciation in publicly-traded stocks) or tax-free
securities, etc. But I'd be interested in where you draw the line between
"earned" and "passive" income, and how you conclude that "passive" is taxed at
a "much" lower rate.

~~~
qaexl
Hmm, I put my foot in my mouth on this one.

"Passive income" for me is defined in terms of how much time I have to spend
for the income. If I have to spend a lot of time, that's active income.

My statement, "it is taxed much higher than passive income" is a broad
generalization, something I shouldn't have written. I put in the internet
subscription fee in there because I don't have to trade time for it, and I
assumed it would flow through a sensible business entity. If so, legitimate
business expenses are deducted before they hit the personal tax returns.

Going to a job and taking a salary on a W-2, the costs for earning the salary
includes a car (usually car payments), automobile insurance, car maintenaince,
fuel, toll fees (if applicable), parking fees (if applicable), lunches,
daycare (sometimes), business-appropriate attire, grooming supplies, etc. Few
employers will reimburse an employee for those expenses, so all of that it is
coming out of pocket, money _after_ earned income taxes.

In contrast, the costs for obtaining the internet subscription fees includes
server hosting, development equipment, office supplies, books, sometimes
travel/commute ... and just to make sure this isn't merely a rosy picture --
accounting fees, legal fees, state fees, state taxes, county taxes, health
care, amortized office furniture, office leases ... you get the idea. A number
of these expenses can be paid straight out of the income generated from
internet subscription fees. You're taxed on what's left over, meaning that
your _personal_ income from the business is lower, you're taxed on a lower
tax-bracket than you otherwise would have, even though you can do a lot more
with the money. As a disclaimer, I'm not describing or encouraging a "tax
shelter"; it isn't sensible to sacrifice profits just to be able to cut the
amount of taxes you have to pay.

You're right about the corporate double-tax. If you're not actively involved
in the corporation, then a dividend is not bad considering the time spend in
it, even if it is double-taxed. I'm sure you're also aware that if the
corporation compensates you through a W-2, say as a director or as a
consultant, then there isn't a double-tax. You just have to spend more time.

So to conclude this, I shouldn't have said that earned income is taxed much
higher than passive income. Instead, I should've said that bigger chunks of
your earned income gets taken away than from your passive income. But my guess
is that you already know this. The important thing about passive income is the
time you free up, not the taxes you may or may not save.

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antiform
I wonder why they are publishing this now (well, last Monday). I read about
this paper in an Economics class about two years ago. Naturally, the paper
itself is a lot more interesting than the news blurb.

"Would You Be Happier If You Were Richer?"
[<http://www.princeton.edu/~ceps/workingpapers/125krueger.pdf>]

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jacobbijani
Interesting. I guess the article is sort of just saying that the rich people
were already working hard, which is what GOT them rich in the first place?
People who aren't rich stay not rich because they sit around all day watching
TV.

~~~
PStamatiou
I think it depends on how the person got rich.. working their asses off, or
making it big after a hot music single, etc. Not that musicians don't work a
lot, but there are some songs where I wonder how that crap ever got on the
radio.

~~~
byrneseyeview
I think the average income of people _trying_ to make it big on one hot single
puts them firmly in the <$20K category.

The rich people I know work incredibly hard when they have to.

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hugh
I'd be more interested in knowing how the _really_ rich spend their time. Not
the $100K+ folks -- a group which is mostly composed of plain ol' hard-working
types with good jobs, but the people who are rich enough to retire but young
enough to work.

There's plenty of anecdotal evidence about these folks, but I'd be interested
to hear the statistics.

Gee, people who make under $20K a year spend a lot of time watching TV? Who'd
have thunk it?

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zach
So people basically see rich people as doing what they themselves would do if
they had lots more income appear magically.

Yeah, so, turns out that's not how it happens. And yet, that would seem to be
the cause of many popular misunderstandings of wealth and the rich.

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PStamatiou
"Money can buy almost everything, and the things that it can't buy are free
anyway."

Once said by an interesting Danish millionaire.

------
edw519
_Money doesn't buy happiness; it just helps you arrive in style._ \- Tony
Robbins

Once you eliminate low outlying cases (people who can't afford the basics), I
have witnessed little correlation between money and happiness. I know lots of
people of ordinary means who are thrilled with life and are a pleasure to be
with. OTOH, I dread spending time with many people I know that do have more
money than most. They seem like they've lost focus on what really is
important. (I don't want to hear you complain about people who work for you
and I certainly don't care who you're suing; did you call your mother today?)

Just my experience. I suspect others have witnessed the same.

~~~
dangoldin
Your quote reminded me of this goodie:

"Money can't buy happiness, but neither can poverty" - Leo Rosten

~~~
wallflower
"Work doesn't necessarily make you happy, but it may give you the money to do
the things that make you happy" - from HS valedictory address by a smart kid
who I knew when he was wee tall

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gibsonf1
When you are rich, you can delegate. You can have people organize for you,
cook for you, clean for you, do errands for you, etc. You get to decide what
you spend your time on.

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wallflower
True wealth is how long you can live and maintain your preferred
lifestyle...without working (e.g. having a job vs multiple streams of income)

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swdesignguy
"Dear George: Remember- No Man is a Failure who has Friends", writes Clarence.

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time_management
$100k/year isn't really "rich", and most people in this category are going to
be middle-class, so this doesn't really establish much about how "the rich"
spend their time.

Also, the amount of time that someone spends in "compulsory" activity does not
necessarily indicate poor fortune. A good job is infinitely more rewarding and
fun than watching TV. People are happiest when they're busy, but have a great
deal of autonomy in what they are busy with and how they do it.

I'm not one of "the rich", but I live in New York and can offer my perspective
on their lifestyles. I've noticed that sons and daughters of wealth tend to be
shiftless, unhappy people. They lack discipline on account of never having had
to learn it, and the absence of structure characteristic of their lives, as
well as those of most of the underemployed <$20k people, leads them to low-
utility activities (goofy hipster parties for the trust-fund kids, TV for the
poor) and a collapsed sense of purpose.

