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Old 06-23-2016, 09:57 AM   #21
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Do you count paying home mortgage early as part of your savings ratio? We live on my salary and send hubby salary to our mortgage.
We did something similar, but in a different order.

When we got married (late), we knew we wanted children and we may need to live on one salary for awhile. So we set our living standard on just the one salary, the other was saved/invested for two years until first son was born.

We then had a custom built home done, 2700 sq ft. We decided we didn't want a mortgage hanging over our heads so paid cash for the construction. Wife stopped working/retired. We were both engineers.

Two more years later I was offered an early retirement package. The pension was about the same as we were accustomed to living off of (we were still saving 20% of my salary as no mortgage to service).

So not having a mortgage and LBYM lifestyle enabled me to accept the early retirement offer at age 50 with a 3 and 1 year old boys (hence my handle).

Fast forward 16 years, net worth is 2 and half time what is was, boys are finishing high school, I've been the soccer dad for all of my retirement (with minivan).

The savings and LBYM early have fed investments to the point where we have been very comfortable.
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Old 06-23-2016, 10:15 AM   #22
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Definitely investments. Without the savings and being frugal I would not have had the money for the investments but without the investments I would not have been able to FIRE. I did a quick calculation and my lifetime investment returns to date are about 4 times greater than my lifetime salary earned.
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Old 06-23-2016, 10:16 AM   #23
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DH and I have lived pretty frugally. We have never deprived ourselves or DD, but never felt compelled to have the biggest, latest, greatest either. I was in sales for about 10 years of my career and had some substantial bonus checks during this time that we saved/invested rather than buying a new car, upgrading to bigger home, diamond jewelry, designer clothes, etcetera. We do our own maintenance and chores rather than hire someone to do it (there is satisfaction there). We are now retired (both 58), have no debts and have a sizable nest egg thanks to being frugal and saving. I think being frugal was the key to our early retirement.


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Old 06-23-2016, 10:21 AM   #24
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Isn't this a bit like asking which of your children is your favorite?

LOL, whichever one was not driving me crazy at the time.

for hubby and I it was lbym and investments. since he started his own business and I was a stay at home mom, there wasn't much saving going on until the kids got into school and i went back to work, which was around our 30's

I also think there is a comfort level to take in consideration, many folks won't retire until they pay off their mortgage. that wasn't a requirement for me.

As far as spending, some life tragedies have cured me of that.

2013 wonderful husband died at 55
2014 awesome baby brother dies at 50
april 1 2016 best friend jo, dies of massive heart attack. 56 years

I can't take it with me so I no longer feel guilty when I fly first class or stay in a luxury hotel. My new car, yep it's a luxury car. now I got a great deal and I'll keep the car for at least 10 years but I don't feel guilty anymore for spending the money.
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Old 06-23-2016, 10:26 AM   #25
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I started late but saved about half and got investment returns of about half. In the future all investment returns since it is supporting me now.
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Old 06-23-2016, 10:35 AM   #26
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Unless you are in a truly unusual position, you can't have meaningful investments without LBYM.

In our case, investments have been huge addition--but LBYM came first, and enables us to retire with far from enough to spend 80% (or whatever) of our present income (no matter how measured).
Exactly. You need to be able to put money aside first. Then investing wisely determines how long until the nest egg grows enough to retire. If it grows slowly, for whatever reason, it might take longer. If you're super lucky and hit the jackpot it might be short! But not if you weren't able to make the investment in the first place.
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Old 06-23-2016, 11:14 AM   #27
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Thank you all. I think we are on the right track (especially based on feedback given), but I need to be more diligent and learn more about the investment side.
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Old 06-23-2016, 11:54 AM   #28
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Do you count paying home mortgage early as part of your savings ratio? We live on my salary and send hubby salary to our mortgage.
Absolutely!!!! One of the main contributors to our current wealth.
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Old 06-23-2016, 05:13 PM   #29
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Definitely investments. Without the savings and being frugal I would not have had the money for the investments but without the investments I would not have been able to FIRE. I did a quick calculation and my lifetime investment returns to date are about 4 times greater than my lifetime salary earned.
I tried to edit my response but for some reason couldn't. Anyways due to my overly enthusiastic optimism I miscalculated my investment gains. It's only around 2.5x (not 4x) lifetime salary earned including equity gained from real estate. Excluding real estate, it's around 1.2x
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Old 06-23-2016, 07:18 PM   #30
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Savings had the larger impact because I was/am a lousy investor. I could have made about the same amount of money putting my savings under a mattress as into my investments. Fortunately being a saver also allowed me to pay off my mortgage in less than 20 years which has significant reduced my expenses. Working hard in my profession and achieving a good salary was important too as it increased my pension about $10K a year and helped compensate for the poor investments.
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Old 06-24-2016, 06:10 AM   #31
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LBYM and planning provides the opportunity to invest. It also provides the opportunity to retire, whether early or later, by establishing the foundation to lower your financial requirements to retire.

Cheers!
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Old 06-24-2016, 07:24 AM   #32
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DW and I started off by being frugal (but not cheap). As others had done, when we married we only lived off of one salary and tied our spending to that. As our income grew, we increased our lifestyle - but at a MUCH lower rate than our income growth. For example, a salary increase of 5% might only raise our spending budget by half a percent, if at all. If I received a bonus, we might splurge no more than 20% of it and save or invest the rest.

As we built up savings and then started to invest, I realized early in those personal finance years that I did have the time, patience, or knowledge to try to beat the market. I settled, in baseball terms, for trying to just make contact and hit singles instead of swinging for the fences. One result was shifting away from individual stocks into mutual funds, then index funds and index ETFs.

One result of combined savings and investing is that we don't need to try to beat the market to have a good financial year. We are happy to lessen our investment risk as we are still able to save 30-35% of our income (and in some years even more). In fact we have cut down our savings this year to spend one some hopefully one time home renovations, but should still end up saving at least a quarter of our income. Then we just invest a portion of that income in a diversified manner.

So I don't see it as being a "versus", for us starting with savings, then doing both in a balanced manner allows us to invest at the level of risk we are willing to take and still sleep at night. That helps us look at days like today, where the market will likely take a pounding, and not worry.
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Old 06-24-2016, 09:13 PM   #33
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Old 06-25-2016, 06:01 AM   #34
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I keep very accurate financial records and am not quite at FIRE but close with 94% of the FIRE wealth I'll need. Saving has so far contributed 68% and investing 32%. I started investing in late 2007.
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Old 06-25-2016, 09:27 AM   #35
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Money Magazine ran the numbers on this a few years back. I forget the exact results but absolute savings rate crushed investment returns as the source of wealth creation even over the long term.

Obviously these things go hand-in-hand but their point was that no amount of savvy investors can overcome a mediocre savings rate while a disciplined savings approach can compensate for a mediocre/lower risk investment portfolio.
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Old 06-25-2016, 08:40 PM   #36
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Money Magazine ran the numbers on this a few years back. I forget the exact results but absolute savings rate crushed investment returns as the source of wealth creation even over the long term.

Obviously these things go hand-in-hand but their point was that no amount of savvy investors can overcome a mediocre savings rate while a disciplined savings approach can compensate for a mediocre/lower risk investment portfolio.
I believe it. Plus, with a high savings rate one is keeping living expenses in check, so there is less of a portfolio needed to reach the point of FIRE. LBYM attacks the problem from both ends, shortening the timeframe needed.
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Old 06-26-2016, 08:47 AM   #37
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Savings gets you out of the door. Investments make sure you don't have to go back.

The younger one stops getting income, the more pronounced this becomes.
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Old 06-26-2016, 09:33 AM   #38
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Both.

LBYM built up savings and dwarfed investment returns when young. As investments grew, I saw that even at extreme saving was barely keeping up with investments. Investments had become a silent partner, matching what I was saving. I've quit working but still like seeing growth, admittedly slower now.

Without compounding, saving in linear growth would have taken forever. Compounding without enough to compound takes so long to start growing that it doesn't work either.
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Old 06-26-2016, 10:41 AM   #39
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LBYM and planning provides the opportunity to invest. It also provides the opportunity to retire, whether early or later, by establishing the foundation to lower your financial requirements to retire.

Cheers!
+1

Doing both is a far better approach than doing just one or the other, IMO.
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Old 06-26-2016, 06:20 PM   #40
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Saving > investing in most cases.

Take two people each earning 100K. Assume for the purposes of this example both put their money away on Jan 1st each year and don't add another dime all year.

Person A saves 20% and gets a modest 7% annual return = $21,400 at the end of the year.

Person B saves 10% and gets a nearly-impossible-to-achieve 100% annual return = $20,000 at the end of the year.

Saving more gets person A a higher total than person B.
Another year later person B has $40k and person A has $23k. Another year later ... A higher return gets person B a higher total than person A.
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