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Help?  Anyone relate?
Old 10-21-2004, 07:11 PM   #1
 
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Help?  Anyone relate?

SO glad I found this site!! After reading a lot of the messages here, I thought I'd post some info about my situation and see if any ER's have any suggestions on what I can/should do differently.

I am 29 years old. My wife and I both have Roth IRAs which we max out each year, 401ks which we each contribute to up to our employer's match limit, disability "wrap" policies, and life insurance (with cash value which we can borrow against later). In addition, I have a pension with my current employer. Two years ago we also bought a duplex which we live in while renting out the other half. We also have a money market fund where we stash extra savings (a bit slow the past 2 years since the duplex purchase) and I plan to roll that into a Vanguard index fund as the amount warrants.

As you can tell from the above info, we're doing our best... however, I can't help but feel like it's taking forever and lately have been wondering if I am a little crazy to think the ER thing can happen for us.

It has been a goal of mine to retire early since I was about 19 years old and discovered some articles regarding compounding interest. I was also motivated by watching family members work themselves to death by age 55.

The seemingly slow progress in addition to watching friends take huge trips, buy big houses, boats and new cars can be really discouraging at times. Sometimes it is tempting to say "screw it" and go get the big house and new boat... can anyone relate?

Neither one of us makes huge $$$, but we do live below our means as you can tell by our current savings plan.

Any advice for me? How does a person who's shooting for ER balance the "SAVE SAVE SAVE" mentality while still enjoying life and buying the occasional "fun" item like a trip or vehicle? How do you keep a good attitude while watching people get the things you want and COULD afford? Especially when ER seems so far away?

Thanks for reading this... I appreciate your time and any input you can offer.

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Re: Help? *Anyone relate?
Old 10-21-2004, 07:31 PM   #2
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Re: Help? *Anyone relate?

Quote:
How do you keep a good attitude while watching people get the things you want and COULD afford?
--by realizing they will probably be slaves to their "things" forever - and you won't
--by valuing freedom more than things
--by using creative ways to enjoy life without spending much
--by realizing that happiness is an "inside job" as described by yakers in another post

In short, you must be smart, creative, motivated, and fiercely independent. ER is not a game for sissies, and few actually do it. But it's worth it.
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Re: Help? *Anyone relate?
Old 10-21-2004, 07:44 PM   #3
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Re: Help? *Anyone relate?

Spoken like a true ER wannabe. You've got the main elements required to ER with attitude being the most important. I too wanted to ER when I was a teenager and I'm glad to see there are others like me out there. Sometimes you feel like you're all alone in the way you think since eveyone else around you is spending everything they make which gives the impression that they are richer than you.

It could be a little depressing in the beginning when you're driving around in a 10 year old car while your friends and neighbors are driving around in leased Mercedes. But don't despair. What I found is that there is a turning point where you start noticing those same people complaining to you that they can't manage to make ends meet while that is the least of your concerns.

The most important thing for you to do right now is to get a written plan in place. Make a budget, do a monthly liquid asset summary in Excel keeping track of value and ROI, do a projection of where you expect to be and where you need to be in every 5 year period, and read as many relevent posts on this forum as you can stand.
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Re: Help? *Anyone relate?
Old 10-21-2004, 07:51 PM   #4
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Re: Help? *Anyone relate?

>>The seemingly slow progress in addition to watching friends take huge trips, buy big houses, boats and new cars can be really discouraging at times.

The progress does seem slow at first, but staying out of debt, living well below your means, and the power of compounding do eventually put you on auto-pilot to ER. I very clearly remember when my very meager retirement/saving contributions each year were finally less than I was earning on the money I was already saving...that was one time it really sunk in that ER was possible. After giving up current consumption in order to save, now all of a sudden the contributions were minor compared to the earnings generated.

OH, and about everyone else driving new cars, living in big houses and having lots of expensive toys that you don't have...it doesn't go away even after you retire...it still bugs me once in a while, but then again in the last 3 years I have only set the alarm clock once and that was to get up early for a sheep festival out of state..on a saturday.

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Re: Help? *Anyone relate?
Old 10-21-2004, 08:02 PM   #5
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Re: Help? *Anyone relate?

Any advice for me? How does a person who's shooting for ER balance the "SAVE SAVE SAVE" mentality while still enjoying life and buying the occasional "fun" item like a trip or vehicle? How do you keep a good attitude while watching people get the things you want and COULD afford? Especially when ER seems so far away?

1. Patience. It takes a while for the exponential effect to kick in. Once it does you'll be amazed when you see your net worth going up by more than you've earned in a year, or when money piles up in the form of dividends and you realize you didn't really work that much to earn those dividends; the company earned them for you.

Some things that can help patience:

a. Plot out your financial future and realize that if you keep plugging away you'll get there.

b. Celebrate the small victories. When your net worth exceeds certain multiples ($10,000, $100,000, etc.). When you own your first 100 shares of XYZ corp. When you have more in investments than you owe on the mortgage. When you max out both your Roths and your 401(k)'s. Whatever intermediate goals you can set and measure.

2. Plotting things out and setting goals can help you measure how much those fun things that you want (trips, cars, whatever) will affect you. You may decide that you're ahead of plan and you get a bonus at work or something and for whatever reason you want the expensive thing now versus retiring 26 days earlier, or whatever. Or you may decide that those 26 days are more important. At least with a plan you can make intelligent trade-offs.

Personally our approach is to have really long range plans for retirement and the kids' college funds and then what we call "mid-range goals" where we put stuff like trips and cars. Every month we put money into retirement savings, college savings, and mid-range goal savings. Then every so often we evaluate how we're doing in each of the three areas and we can decide where best to put our lump sum monies and whether or not to change our contribution amounts.

3. Realize that those other people are buying things; you're buying freedom and choice and security. Every paycheck that goes by that I save, I have a little more of each of these. In 20 years you'll be in the position to buy a new luxury car with cash if you want to; the other people will be forced to be making their car payments for another 72 months. In 5 years, your wife could choose to stay home after she has kids; those others will be forced by those car payments and Mastercard minimum payments to put their kids in daycare. In 20 years, you won't have to worry if your company lays you off, because you could support yourself by working in a coffee shop if you needed to.

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Re: Help? *Anyone relate?
Old 10-22-2004, 07:52 AM   #6
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Re: Help? *Anyone relate?

Hey Puzzled, welcome to the site.

I'm very close to you in age, and find myselft working through similar struggles at times, ie, 'what's the use?' kind of thing...

All of the above posts/posters are very true and important to think about. I especially like Malakito's response to 'celebrate the small victories'. That is what I personally have to do. For instance, in 3 years, barely north of age 30, we'll finally have the house paid for and be completely debt free, which will kick ass. But getting there is a real struggle sometimes. But we have to keep up the good fight. The long term benefits are overwhelming. We just can't lose sight of them...
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Re: Help?  Anyone relate?
Old 10-22-2004, 09:22 AM   #7
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Re: Help?  Anyone relate?

Puzzled,

I have been through the same doubts that you expressed. One strategy that worked for me was to be a "generation" behind the Joneses. By that I mean I did not completely deny myself enhancements to my lifestyle while pursuing ER. I did, however, forego buying the latest model car, TV, stereo, computer, etc. Instead I waited until a newer version of an item became popular and then bought the older version for a fraction of what it would have costs when it first came out. I found I got just as much enjoyment out of my "not so new but improved" item as my friends seemed to get out of buying the latest and most expensive items. Since these items still represented an improvement in functionality over what I previously had, it didn't feel like I was making any sacrifice. A few years ago I bought a 4 year old Lexus as a certified used car. It was definitely a step up from the '95 Camry (which I had also bought as a three year old certified used car). The luxury car features were just as enjoyable to me (maybe moreso) knowing I paid a fraction of what "the Joneses" paid for their new one.

It is possible to ER without totally giving up the pleasures of life. Hang in there.

Grumpy
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Re: Help? *Anyone relate?
Old 10-22-2004, 09:28 AM   #8
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Re: Help? *Anyone relate?

Puzzled:

My fiance and I are also close to your age (30 & 31). We live in a 750 sqft condo while our friends are buying huge houses. We only have 1 (bought used) car (I take the train to commute to work so I really don't see why we need 2 cars) and we don't take big trips every year. The last big trip we took was 2 years ago to France and Italy. Instead, we go camping, hiking, mountain biking for "entertainment".

Granted, I do have a nice mountain bike (6 years old) and a nice snowboard (5 years old), and my fiance has nice computer systems (yeah more than 1 that crazy boy! ) and mountain bike (7 years old), but we paid all our toys in full when we bought them (and we maintain them well so hopefully they will last for a long time). Other than that we don't spend much on anything else. We live below our means and I myself, is too scared to live paycheck to paycheck. I would rather live in smaller homes, drive cheaper cars and never eat out rather than living paycheck to paycheck

What makes the saving to FIRE easier on some days are:
1. Knowing that we will be out of rat race long before our friends.
2. I make spreadsheet my friend and log in our networth every 2 weeks. Whenever I feel like I should be buying a big house and a new SUV, I look at my spreadsheet.
3. I would rather have my sanity, health and free time in (hopefully) my early 50's than a big house, a boat, a cottage etc.
4. I remove myself from "temptation". While my friends suscribe to some Home or women mags (those seem to make them want to buy more stuff), I go to the library and read finance mags. Great stuff! Makes me want to go home and look at my spreadsheet!

A story: last year there was a computer glitch and instead of having our paychecks deposited on the Friday, it was delayed and deposited on the Monday or Tues (I can't remember) Obviously I don't like computer glitches, but it was funny to see some coworkers wringing their hands wondering how they could make their mortgage payment (since they are living paycheck to paycheck). I am not worried since I have at least 2 months expense in my chequing account and another 3 months expense in saving account. It was priceless to see the worried looks all around me.

Jane

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Re: Help? *Anyone relate?
Old 10-22-2004, 10:40 AM   #9
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Re: Help? *Anyone relate?

Lots of insightful posts here.

I more or less used the one generation lag, but for me it meant something else.

It meant I would try to live more or less like my Dad had lived.

It was an overall helpful stance, but I also adopted his relatively high spending on food-in-the-home, and on partying.

The rest was easy though, as I had a template in my mind that felt very natural.

Of course, he came of age in the depression, so he was very frugal. This plan probably wouldn't work if one's parents were Boomers

Mikey
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Re: Help? *Anyone relate?
Old 10-22-2004, 10:48 AM   #10
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Re: Help? *Anyone relate?

Quote:
Puzzled:

last year there was a computer glitch and instead of having our paychecks deposited on the Friday, it was delayed and deposited on the Monday or Tues (I can't remember) Obviously I don't like computer glitches, but it was funny to see some coworkers wringing their hands wondering how they could make their mortgage payment (since they are living paycheck to paycheck). I am not worried since I have at least 2 months expense in my chequing account and another 3 months expense in saving account. It was priceless to see the worried looks all around me.
Good story. That's one measure that distinguishes the FI personality from other personalities. I've been in situations like that in my own life, like when my first car broke down and I was able to walk into the dealership the next day and pay cash.
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Re: Help? *Anyone relate?
Old 10-22-2004, 10:54 AM   #11
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Re: Help? *Anyone relate?

Quote:
Any advice for me? *How does a person who's shooting for ER balance the "SAVE SAVE SAVE" mentality while still enjoying life and buying the occasional "fun" item like a trip or vehicle? *How do you keep a good attitude while watching people get the things you want and COULD afford? *Especially when ER seems so far away?
You have to set a balance. *You might be able to live completely for the future for a few years but at some point you will crack. *You can't make it work for years stretching to decades. *Even if it were possible it would change you perhaps irreversibly into a penny pinching miser.

Build a budget and plan for the retirement but in that budget include money to enjoy life now. *There is no way that you can afford everything that you want but pick carefully the things that will bring you the most enjoyment. *My wife and I go on a large vacation roughly every other year and that's something we enjoy. *Maybe for you and your wife the "now" items will be something else - audio/video equipment, dinners out, etc.

Also, make sure that your budget includes some "free" money for each of you that has no strings attached. I get a set amount weekly for "pocket money" that is mine to do with as I please. *Some I spend on lunch once a week with some friends, some for my guitar stuff (strings, etc.), some for little things, and some of it is put aside for longer term personal goals (e.g. paying for a week long jazz workshop). *However, if I wanted I could blow it completely every week on donuts. *The choice is mine.

What makes it so hard is that we have no idea how long we have left. *I've got good odds (<1%) that I won't die during the next 25 or so years but there is no guarantee. *You have to enjoy yourself along the way.
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Re: Help? *Anyone relate?
Old 10-22-2004, 11:04 AM   #12
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Re: Help? *Anyone relate?

Quote:

Build a budget and plan for the retirement but in that budget include money to enjoy life now.
I have a line item for travel and entertainment in my budget that allows for 1 big vacation costing in the thousands and 2 smaller vacations costing in the hundreds each year.

A budget is like a diet. If you think you can lose weight in the long term eating only carrot sticks and soyburgers, chances are the diet won't last long. So build a realistic budget that allows you to have some fun along the way.
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Re: Help? *Anyone relate?
Old 10-22-2004, 11:40 AM   #13
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Re: Help? *Anyone relate?

I definately get tired of waiting sometimes, but usually it is because there are other things in my life that are making me bored and/or unhappy. Lately, I have been very impatient to see things progress FIRE-wise, but a lot of it has to do with work not being too rewarding at the moment. So the usual answer to me getting impatient is to figure out what is bothering me and fix it, or increase the amount of time and energy I spend doing things that are fun or fulfilling.

As far as the "buy a boat" side of things, I must admit that I don't get too mant consumerist urges that amount to large dollars. On the rare occasion this happens, I may allow myself to daydream, but when I think about the costs that it entails and how much pleasure I am likely to get out of it, I quickly lose my interest.

I think one of the secrets is to pick some things that are important to you and give yourself some leeway. I love to cook and am a bit of a foodie. I won't go out abd buy an $800 pan, but if I see a recipe I'd like to try that calls for pricy ingredients, I don't think twice about it. Usually it saves me a trip to a restaurant plus I enjoy the process of cooking. As another example, I am an avid homebrewer. Usually I will allow myself a gadget once a year. This year I bought a pH meter to play with. Upon occasion I will buy a big piece of equipment (two years ago I dropped $1500 on a custom made stainless steel brewing system), but this is infrequent and generally the stuff lasts 10 or more years.
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Re: Help?  Anyone relate?
Old 10-22-2004, 12:52 PM   #14
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Re: Help?  Anyone relate?

Try to have a balanced approach to saving. LBYM (Living below your means) includes some enjoyable aspects of "Living" as well as being economical. By local and national standards I am fairly frugal: paid off 1000 sq ft house, older cars, always looking for bargains. From what I read here a bunch of the posters save more drastically than I do. And that may suit their personalities and result in an earlier retirement than mine (I expect to retire in 2 or 3 years at 56-57). But I enjoy my work and I have a son in high school who attends a better school where I work rather than where I live and his going to that school is contingent on my employment in the area. Different issues will arise over your career and if you have a family. Work and saving are just parts of life.

What I would suggest is learning to like aspects of LBYM. See if you can do the things you want cheaper than the market price. I bought a new car, which was unsold in its model year. Great savings, new car for me and I still have it 11 years later. But the interesting thing is that I really love this car and still feel great driving it.

After 30+ years of work and 20+ years of LBYM I now find I can do most of what I want and what the neighbors are doing but I am paying with cash not hocking my future. It does take some patience and time but try to enjoy the process. I have gone through two weight loss processes in my life. The first time for my wedding I had Slim Fast twice a day and I made it work because I had enough discipline. But it didn't last and I didn't like it. A couple years ago I signed up to Weight Watchers and lost 35 pounds and it was easy. I made a food substitution game out of it. Rather than focusing on what I couldn't have I filled my life with what I could eat. And I kept most of the weight off.

Be happy, you're doing fine.
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Re: Help? *Anyone relate?
Old 10-22-2004, 02:45 PM   #15
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Re: Help? *Anyone relate?

Quote:
I made a food substitution game out of it. Rather than focusing on what I couldn't have I filled my life with what I could eat. And I kept most of the weight off.
Great post yakers. This is what psychologists call framing. What counts most not what is on your plate, but how you perceive it, compare it with other possibilities, etc.
Mikey
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Re: Help? *Anyone relate?
Old 10-22-2004, 04:06 PM   #16
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Re: Help? *Anyone relate?

(Previously started this thread as "Puzzled")

WOW... I can't overstate how stunned I am by the overwhelming responses. Good information, and it feels GREAT to know I am not the only person in the world who is attempting to ER, and that I'm not totally crazy... sometimes it feels that way.

So, thanks to ALL of you for the responses... I have registered and hope I can return the favor at some point. Extremely thankful I found this site.

Any more comments on my original post are welcomed!

Thanks again.
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Re: Help? *Anyone relate?
Old 10-22-2004, 06:50 PM   #17
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Re: Help? *Anyone relate?

Hi Puzzled,

I can't add anything philosophical to the great
responses you received, but I do have one piece
of practical advise ..........

Buy term life insurance instead of the cash value
kind and invest the difference.

You are on the high road to ER ..... just stay the
course.

Cheers,

Charlie
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Re: Help? *Anyone relate?
Old 10-22-2004, 11:20 PM   #18
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Re: Help? *Anyone relate?

Puzzled, I totally relate. I spent the last year living on a military base where everyone on my block made roughly the same salary. For a long time I wondered what the heck we were doing wrong, because no way could we afford the brand new SUVs and housefuls of new furniture that our neighbors had. It took a while for me to realize that most of them are up to their eyeballs in debt and not saving a penny. That made me feel better.

Still, it does get to me sometimes. It's hard to be completely immune from the consumerist monster. All of the advice given here helps. In fact reading this group frequently has helped a lot because seeing how much other people are enjoing their ERs is a huge motivation.

What also helped was actually running the numbers. I was desperate to save every penny until I actually started working the spreadsheets and realized that there is a little room to relax. Now we set specific goals rather than just aiming to "save as much as possible." We have started to bump up savings little by little and are waiting to see when it will start to pinch.

Quote:


Build a budget and plan for the retirement but in that budget include money to enjoy life now. *There is no way that you can afford everything that you want but pick carefully the things that will bring you the most enjoyment. *
This is great advice!

For us the attitude that we can have almost anything we want, just not everything we want has been a key to achieving balance. My husband and I drive very used cars and forgo a lot of little luxuries so we can afford a few big trips. For us bicycling Ankor Wat last year while still young enough to peddle 10 miles a day in 100 degree heat was worth trading a few months of ER. Driving a brand new BMW would not be. Know your priorities and know what its costing you and then decide if its worth it.
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