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Comment by ColanR | Hacker News Reader

From what I understand, that penny pinching is often why the rich are rich (excluding those born into more wealth than they can spend).

Edit: I'm getting the impression that a large subset of people replying ignored my parenthetical comment.

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Penny Pinching does not make people rich and is not "often" why they're rich. This is a horrible misconception.

It's not the sole cause, true. But it'd definitely a differentiator. Sort of how like practice isn't the only contributing factor to being skilled, but talent without practice is useless too, soo...

It sounds like you may hold the misconception. Only ~12% of millionaires inherited their wealth. The remainder are "self-made", in that they lived below their means, and saved.

No I'm not saying most millionaires inherit their wealth. I'm saying that penny pinching isn't how you create it. Most people create wealth via entrepreneurship.

The amount you can create via saving is minuscule compared to starting a business, investment banking, being a lawyer etc. Work creates wealth.

Side note, many of the people I know who are wealthy enjoy spending it which is the antithesis of penny pinching.

There are two ways to becoming wealthy:

1. Have wealth given to you.

2. Live beneath your means (aka save part of your income)

I get "penny pinching" can mean being cheap or something. But ultimately, saving is what makes you wealthy. And it's a much more accessible and in your control than winning the lottery of life by starting a successful business, or being some hotshot lawyer.

Side note: Warren Buffet enjoys not spending his wealth, which is exactly penny pinching ;-)

https://www.scmp.com/magazines/style/people-events/article/2...

Live beneath your means (aka save part of your income)

This is where your premise breaks down. There are millions of people who do this who are not “wealthy”. They’re just “retired”. Acquiring real wealth requiring vastly more then your means to the point where the ratio of income to expenses doesn’t really mean much.

Even if you consider Buffet a penny pincher that’s not how he created his wealth.

I guess it depends on your value of wealth. I'd pin it somewhere around the "never needing to work again" level. Sounds like your definition is quite a bit higher.

Funny enough, though, Buffet got started working a pretty regular job, saving over a million in inflation adjusted dollars before starting his business.

There's a difference between spending below one's means and penny-pinching. Penny-pinching is refusing to tip the waiter, it just makes you an asshole.

Millionaire doesn't mean too much these days considering you can take a long road there with fairly conservative investing and a decent income.

That's a myth. Most people are rich because their parents were. Most of the rest is rich because they were/are lawyers or medical doctors. (For the super-rich, business and finance becomes more important. But for your average "middle-class rich", lawyers and doctors just dwarf their numbers. Business also has highly unequal outcomes).

As to why this myth persists, I guess it goes well with American puritanical roots. Many possibly don't belief in a strict correlation, if not causality, of everyone's financial situation and their individual moral character, but still promote the idea. See also: prosperity gospel, Ayn Rand.

Fidelity found that only 12 percent of millionaires inherited at least 10 percent of their net worth-- 88% are self-made.

https://money.usnews.com/money/blogs/on-retirement/articles/...

But the parent doesn't say that.

It says that most people are rich because their parents are rich. Not because they inherited their wealth. Stable home life, good schools, good network, good attitude and a financial backstop in the event of disaster (which allows a higher risk appetite) are all things that correlate positively with becoming rich. Your parents can give these without a penny of inherited wealth.

> It says that most people are rich because their parents are rich. Not because they inherited their wealth.

Fair enough. It's an astute observation, but it's misleading to say the first sentence, yet not imply the second, since most people aren't going to read into it that deeply. You'd just say: "Most people who are wealthy are so due to their stable home life, good schools, good network, good attitude and a financial backstop in the event of disaster". Why would you lead with parent wealth? It pre-supposes inheritance without additional context.

I guess it depends on the definition of "rich". "Stable home life, good schools, good network, good attitude" usually attributed to somebody being in the "middle class" and is not necessarily considered "rich".

That statistic sounds highly suspect: if I inherited $5M 30 years ago and am now wort $50M, do I count as "not having inherited my wealth"?

They say the first million is the hardest, so I imagine getting that for free makes the rest of it much easier if nothing else.

Nobody ever got anywhere without at least some luck involved. I think people deserve credit for any wealthy growth above and beyond what you'd expect for the asset they started with.

“Being rich because your parents are rich” can happen by a lot more ways than inheritance. In addition to gifts at death, there are gifts throughout the parents’ lives, equity gifts (you can buy one of the family houses for cheap or live in it for free), fully paid Ivy League education, prep schools, the parents can finance a startup, provide low interest loans, etc. I wouldn’t consider any of these as “self made” but they are not inheritance.

And?

You can pay for someone's top university education (~$250k) and pay their food and rent for the first 10 years since they graduate (another ~$240k).

Notice how there's no direct contribution to their net-worth.

A top university education isn't essential to becoming wealthy. Saving habits likely have more influence. You can go to Harvard, and then secure a well-paying job, but if you're going to spend your income on a penthouse in Manhattan, you're not going to be saving anything. Is it a leg up? Sure. I hate to use anecdotal evidence, but I went to a virtually no-name CS school, and ended up in the top ~5% of the income distribution 4 years after graduating.

Having a high income doesn't make you rich if you just spend it all... By definition, being rich requires spending much less than you make, unless you inherited it. Whether that counts as "penny pinching" is a different matter, but the ability to live within your means is certainly accessible to most people if they're willing to delay gratification.

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