Monday, February 05, 2024

Discussing the hypocrisy around inherited money


For a meaningful discussion, I'd point you to this lovely comic strip by the Woke Salaryman on inheriting nothing. While I do not fully agree with this strip, I am a loyal fan and want to put in some additional points of my own on the issue of inherited wealth.

Before I begin, I want to remind readers that Vicki Robin, who invented FIRE, was heir to great wealth and was somewhat of a hippie.

a) You will always inherit something, whether you like it or not.

One major problem with modern society today is the non-recognition of non-financial capital. Some folks think it's uncool to inherit wealth from their parents. Still, it's ok to inherit conscientiousness and high intellect from professional parents who engaged in assortative mating. In some other cases, folks who inherited the social and cultural capital from their parents still have the gall to call themselves self-made men.   

I don't think you can ever disentangle yourself from your parents. In my case, I've prepared myself to manage my family's money since I was a kid - it was obvious, I had no siblings and lived in landed property. 

But I don't feel bad because I inherited diabetes as well and need all the help I can get. 

b) Wealth itself can change a person's mindset, and it's not always for the worse.

When I was an undergrad, as an only child, my parents let me use $600 every month. That was a princely sum 25 years ago and my dad kinda made sure I knew it. In those days, I was quite bad with my money, but  I always spent it to make myself more competitive. I bought all my engineering textbooks first-hand and I was too lazy to zap the books in the NUS library. I paid excess cash for certification exams and got my MCSE and various Toastmasters awards in my final year of Engineering school, which was helpful in those days and this discipline made it easier to tackle the CFA a year later. 

But truth be told I had no savings then. 

Here's the thing about the magical $600 my mom would give me every month. I felt comfortable spending all of it and knew I was spoilt. So when I started work, I felt no inclination to spend above $600, so I lived like a spoilt undergrad rather than an insecure status-conscious young professional. In fact, when I discovered my personal version of FIRE in my mid-20s, all I needed was $120,000 to get me $600 a month on 6% dividends. And if I just spent $600 a month, it would be super easy to get there with a few increments. 

Then, becoming a millionaire would be easily achieved if I saved every cent I earned at work. 

c) Wealth paradigms upgrade with every added digit to your portfolio

I'm clearly not for disinheriting my kids. I intend to do the opposite and give them a reasonable-sized portfolio to play with when they are still young and dynamic. 

This is because I'm well aware of the kind of mindset when dealing with sums of money and don't want my kids to start a "low level" in this MMORPG called Singapore Life. 

  • Until you hit $10,000, you tend to think more like a gambler; some of you make momentum trades to make a decent amount to buy maybe a better meal, or you keep your cash in a fixed deposit. A lot of crypto bros start at this level. 
  • At $100,000, a 4-6% dividend flow becomes meaningful enough for you to commit to a proper stock portfolio to at least get a dividend income. $400 a month is consequential. This is why I believe that a $100,000 "bribe" to get kids to pass the CFA III exams is something every parent should consider if they can afford it. 
  • At $1,000,000, you will gain enough incentive to operate using different asset classes and may become more interested in volatility and standard deviation. At least because it's painful to lose your millionaire status.
  • I suppose beyond $10,000,000, you will expand your horizons towards more private equity or look into wealth preservation through fixed income. Philanthropy probably also starts here. 

All this being said, I can still sympathise with folks who glorify their lack of a financial inheritance. 

I grew up in a landed property estate and spent my childhood being bullied and shot at using plastic air rifle pellets by ACS boys. I suspect the animosity against inherited wealth comes from meeting assholes who stand to inherit plenty of money. In my case, my bully had a wealthy newscaster/publisher, Doyenne's mum, who could buy him a foreign degree.   

But also, like the Woke Salaryman, I guess bullying from ACS boys has also made me more resilient.

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