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Are you a wealth builder?
Old 04-29-2007, 02:12 PM   #1
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Are you a wealth builder?

http://www.citizen-times.com/apps/pb.../+FgzLL7ocs%3D

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Wealthy people understand the difference between a high-consumption lifestyle funded with passive income versus living such a lifestyle and having it consume most or all of their earned income. Wealth builders spend their earning years saving and investing and accumulating income-producing assets. They tend to live in smaller homes, drive older vehicles and forgo the showiness that many high-wage earners display. When they increase their standard of living, they are able to sustain it whether their earnings go up or not.
I though that this was a pretty well constructed piece that has some excellent aspects of LBYM.
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Re: Are you a wealth builder?
Old 04-29-2007, 03:34 PM   #2
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Re: Are you a wealth builder?

No arguments here. These are exactly the findings of the authors of "The Millionaire Next Door"
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Re: Are you a wealth builder?
Old 04-29-2007, 07:21 PM   #3
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Re: Are you a wealth builder?

Yet another reminder that it ain't rocket science! Good thing too!
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Re: Are you a wealth builder?
Old 04-29-2007, 09:05 PM   #4
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Re: Are you a wealth builder?

I don't agree with the article in that it states that you can replace your earned income with passive income in 10 - 15 yearsi fyou save 20% of your income. Take someone making 80K per year....that would require $2 Million in savings at a 4% SWR to match their salary. This is not doable in 10 years...15 is possible but it would require great returns and diligent saving.
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Re: Are you a wealth builder?
Old 05-01-2007, 06:19 PM   #5
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Re: Are you a wealth builder?

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Originally Posted by accountingsucks
I don't agree with the article in that it states that you can replace your earned income with passive income in 10 - 15 yearsi fyou save 20% of your income. Take someone making 80K per year....that would require $2 Million in savings at a 4% SWR to match their salary. This is not doable in 10 years...15 is possible but it would require great returns and diligent saving.
Yep, does not add up.

If I put away 20%/year, and assume 8% returns, I get about 6X my income in savings after 15 years. 10% returns about 7x. So even if I take out that 10% from my savings each year after that, I only get 70% of my original $ (keeping everything in todays dollars - which also means that 8 or 10% need to be *real* returns!).

Good concept, but I think he (or me) need to check the math.

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Re: Are you a wealth builder?
Old 05-01-2007, 06:52 PM   #6
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Re: Are you a wealth builder?

Well If you save 50% of your income, make 8% on your money, you will hit 50% of your salary after 15 years! You have been living off of 50% anyway so your homefree lol

Increase that return to 15% and you can do it in just over 10 years!

Anyone know how I can get 15% a year forever? :

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Re: Are you a wealth builder?
Old 05-01-2007, 08:01 PM   #7
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Re: Are you a wealth builder?

Quote:
Originally Posted by trixs
Well If you save 50% of your income, make 8% on your money, you will hit 50% of your salary after 15 years! You have been living off of 50% anyway so your homefree lol

Increase that return to 15% and you can do it in just over 10 years!

Anyone know how I can get 15% a year forever? :

Probably not legally


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Re: Are you a wealth builder?
Old 05-01-2007, 08:08 PM   #8
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Re: Are you a wealth builder?

Quote:
Originally Posted by trixs
Well If you save 50% of your income, make 8% on your money, you will hit 50% of your salary after 15 years! You have been living off of 50% anyway so your homefree lol
Hey, this is easier than I thought! Live off of 3% of your income for just ONE YEAR and you can have an SWR of a conservative 3% for the rest of your life! Now *that* is an ER!

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Re: Are you a wealth builder?
Old 05-02-2007, 09:52 AM   #9
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Re: Are you a wealth builder?

Quote:
Originally Posted by accountingsucks
I don't agree with the article in that it states that you can replace your earned income with passive income in 10 - 15 yearsi fyou save 20% of your income. Take someone making 80K per year....that would require $2 Million in savings at a 4% SWR to match their salary. This is not doable in 10 years...15 is possible but it would require great returns and diligent saving.
Throw in some real estate and some investments that move faster than the index funds and it is possible. We saved over 40% of pre-tax income in several years. Averaged about 30% savings. We moved up the housing scale through a couple of buy-live in-sell cycles and also in some land in a subdivision which we later sold for a profit. We also had some down years were we lost over 30% of NW.

It can be done but it also takes limiting taxes and expenses along the way. Defer as much as possible (max out retirement accounts) if you are in a higher tax bracket. Invest in a broad range of areas and keep your investment expenses low. Use discount brokerage houses and low cost funds. The rest will work itself out.
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