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Old 10-21-2014, 09:03 AM   #61
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Interesting to hear the same echo of my own thoughts here on a particular issue: raise your hand if you plan for the worst possible outcome. This might be just my own mental issues playing out or it might be an industrial disease of someone who spent years dealing with junk credit, but I almost always spend far more time plumbing the downside than the upside. In most cases, I try to figure out a reasonable worst case scenario and how to hedge against it in the most cost effective way. Once I have done this, I am usually pretty risk tolerant of anything but the ugliest outcomes as long as there is substantial potential reward.
I frequently get called a pessimist for planning for contingencies. I don't plan for the worst possible outcome but arrange things based on credible scenarios.

In investing, the worst possible outcome is that the US collapses/loses a major war wiping out all stock and bond values. If I planned for that, I'd have chests of gold and silver buried in my back yard and all available space in my house filled with canned goods and MREs.

Instead of this, I have a conservative asset allocation and have levels of cost reductions already evaluated in case returns are poor.
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Old 10-21-2014, 09:24 AM   #62
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It's not intelligence. I know some brilliant people who had salaries bigger than mine, who struggle to save for retirement.... or to manage their investments.

I think pb4uski nailed it the best on the first page of this thread - it's about LBYM - which is not related to luck or intelligence.

My in-laws were born in the depression. FIL would have spent every penny that came into the house if he could. MIL didn't let him. He had a blue collar factory job, she went to work as a file clerk for the IRS when the youngest kid went to grade school. Neither had big salaries. They had 6 kids that they sent to private school (Catholic, so not super expensive, but still an outflow of cash.) They managed to pay off their house in 10 years. They paid cash for cars. MIL made sure they socked money away, despite 6 kids and low income. Even today - she lives on about $18k/year - which is covered by her pension and SS income. She has enough savings, and a paid off house - so if she needs to go into long term care (which is coming soon), she'll have the means to do so. She's not brilliant. She wasn't lucky being born into the depression, having her sisters and brother split up as children into fostercare because her mom was ill for 2 years, she never went to college - worked at a bank as a teller while attending high school at night. She *was* determined to have an emergency fund.

A former coworker took me to lunch last week. He was picking my brain about the 401k options, whether to roll our old 401k to the new 401k, and what to do with out pension lump sum options from the original (several acquisitions ago) company. This guy is MUCH smarter than me. He was my boss in the past, and made quite a bit more than me. But he never dug into weeds of the 401k plan options, or the pension options. He knew I had - so he asked my opinion (and good questions about why I'd reached my conclusions.) We talked about the retirement thing - and he conceded I'd "worked my plan" for a long time - brown bagging, paying down the mortgage, maxing the 401k... He recognized that my choices had paid off. FWIW - he wasn't born in the US - he was born in India. He has fairly significant asthma that would probably qualify him for disability if he chose to go that path. But - that "luck" didn't impact his not being able to retire early - his less aggressive savings had the impact.
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Old 10-21-2014, 09:54 AM   #63
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... he wasn't born in the US - he was born in India...
I have also seen first-generation US citizens from 3rd-world countries who are big spenders. You would think they know to practice the LBYM philosophy.
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Old 10-21-2014, 12:46 PM   #64
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For those of you who say it is luck, what is your advice to a 20 year old who doesn't want to work until they are 65 or older? Do you tell them it doesn't matter what you do, you just need a lucky break or two, or do you tell them to LBYM along with some relevant career and investing advice? Or do you look at their environment, and tell the urban youth to forget it, it'll never happen, and the kid from the upper middle class not to worry, he's got it made?
I'd tell them the best way to reach their goal is to LBYM and try to make saving a priority over needless spending. But I'd also tell them not to waste time comparing themselves to others who seem to have accomplished what they want in life. It doesn't mean that those people are necessarily smarter, harder working or "better" in some way. It may just mean those people were lucky to have good health, parents who emphasized saving etc. You can't control the "luck" factor, but you can do your best to create the most opportunities for yourself and to make the most of the opportunities you have.
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Old 10-21-2014, 01:12 PM   #65
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I have also seen first-generation US citizens from 3rd-world countries who are big spenders. You would think they know to practice the LBYM philosophy.
I was told by an Indian engineer that was retiring that many Indians and Pakistanis culturally want to show off their success with fancy cars and houses. He said he didn't buy into that and that was letting him retire.
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Old 10-21-2014, 01:18 PM   #66
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I think LBYM is an innate trait that some people have, and some don't. I have the impression that background or upbringing does not have much to do with it.
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Old 10-21-2014, 01:18 PM   #67
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I don t know why some people get defensive about being lucky because its just part of what life gives you.
Probably because I know a whole lot of people who have had all the same "luck" and advantages that I had and aren't FI.

I also know a few people who have had some of the bad luck you listed and still overcame it to be FI.

And it's not just luck that I was never laid off, nor that I got into a dotcom company with good stock options. I saw signs on the wall that the first mega corp I worked for was heading for trouble, and my skills weren't that well suited to go elsewhere. I figured out what I was lacking and worked on getting more marketable skills, and a year or two later those skills got me a job at a smaller company that took off. Some luck involved there, but I made a good choice and worked hard to put myself in position for that luck.

And you didn't answer my question, would you advise young people that it's mostly luck, or that there are actually useful things they can do to put themselves in much better position to FI?
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Old 10-21-2014, 01:22 PM   #68
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I know folks who make a ton of money and cannot save a dime. Many of these are considered "intelligent" people but their skills at money management are poor. In other areas of their lives, they have a lot of discipline, but when it comes to money, they don't.
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Old 10-21-2014, 01:24 PM   #69
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I have also seen first-generation US citizens from 3rd-world countries who are big spenders. You would think they know to practice the LBYM philosophy.
I have seen it too. There are 2 factors that I think may be driving this. Firstly, it could simply be that once they arrive in a country where the option for liberal consumption exists, their basic psychological make-up takes over and determines whether they take advantage of this "opportunity" in a way that it couldn't in their home country, as their options for consumption were limited there.

Also, for some first-generation immigrants from poorer countries, conspicuous consumption is a way of showing they "have made it". I have been in a number of conversations with first-generation immigrants who have told me that many Americans don't appreciate what they have, are lazy, and don't work hard enough. I interpreted this as meaning that these Americans they speak of are fully acclimatized to living in a first-world country and don't necessarily equate the acquisition of nice, shiny consumer goods as being an indicator of success in the same way that some new immigrants do.

Note that I am painting with broad brush strokes. I hope no-one reads my comments as a slight against any group of people.
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Old 10-21-2014, 01:25 PM   #70
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I agree with the majority here, it is mostly attitude. You can't be real far sub-normal intellectually, but if you avoid occupations where you just do not have the mental horsepower to compete, the rest boils down to attitude. And much of this is like many others have said, the most important thing is that you have resistance to social/consumer memes. There is a lot of truly horrible advice and assumptions floating around among people and the media.

Doesn't hurt to have a degree of arrogance, so you can just continue on your own way, as long as it seems to be working.

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Old 10-21-2014, 01:29 PM   #71
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I know folks who make a ton of money and cannot save a dime. Many of these are considered "intelligent" people but their skills at money management are poor. In other areas of their lives, they have a lot of discipline, but when it comes to money, they don't.
There are likely many reasons for this.
  1. They could be making up for certain insecurities (i.e., nerds wanting to show they are finally successful)
  2. They could be spreading their financial wings after keeping them tight for 7+ years of post-high school education
  3. They could be living the lives they were denied growing up (i.e., came from a poor background)
  4. They could have spouses who are spendthrifts and they just can't say no.
  5. They could be so dedicated to their careers/professions that everything else, including money, spouses, children, etc... take a back seat
I could go on and on, but the simple fact is that for most people it's very hard to LBYM. In theory, LBYM sounds easy, but in reality...well....just look around you.
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Old 10-21-2014, 01:34 PM   #72
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I agree with the majority here, it is mostly attitude. You can't be real far sub-normal intellectually, but if you avoid occupations where you just do not have the mental horsepower to compete, the rest boils down to attitude.
I'll disagree with the "lack of mental horsepower" keeping people out of lucrative occupations. Assuming "normal" intelligence, desire and willingness to apply oneself is much more important. I once dated a girl that had flunked out of UT Austin in her freshman year majoring in English. She was working as a file clerk in a bank and said she wished she could make the kind of money an engineer makes. I said why not be one? She had only had Algebra I (grade of C) in high school. I said I could teach her the basics of calculus in a week. She accepted and within a week she could do simple integration and differentiation. She enrolled in a local junior college for a year and a half. She disappeared off to college and got a mechanical engineering degree. Motivation trumps IQ.
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Old 10-21-2014, 01:42 PM   #73
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I'll disagree with the "lack of mental horsepower" keeping people out of lucrative occupations. Assuming "normal" intelligence, desire and willingness to apply oneself is much more important. I once dated a girl that had flunked out of UT Austin in her freshman year majoring in English. She was working as a file clerk in a bank and said you wish she could make the kind of money an engineer makes. I said why not be one? She had only had Algebra I (grade of C) in high school. I said I could teach her the basics of calculus in a week. She accepted and within a week she could do simple integration and differentiation. She enrolled in a local junior college for a year and a half. She disappeared off to college and got a mechanical engineering degree. Motivation trumps IQ.
Normal intelligence is an IQ of 100 by definition. I don't think this will work for an engineer, or many other intellectual occupations. You friend had greater than normal intelligence, but got off to a bad start in college. If you can have someone doing differentiation and integration in a couple of weeks, she is way beyond normal. Many of us have grown up in intelligent families, in upscale suburbs or city districts, gone to quality suburban or city magnet schools. What seems normal to us is way beyond normal; which after all means "the norm". This board is full of highly intelligent people. Look at the abstruse arguments found here!

Also, IQ too low for many occupations does not preclude considerable financial success or ER. Keep the nose to the grindstone, angle for a government pension, don't overplay your hand and keep grinding on.

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Old 10-21-2014, 01:47 PM   #74
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Lack of planning and budgeting, which doesn't really equate to intelligence.

Add to it consumerism. Eat, live and play well. A little planning goes a long ways.

The more I have been in investing its interesting to hear the ideas others in my circle of friends have about investing...they range greatly but I do notice most of there ideas are hampered by realistic debt or spending problems.

A good engineer friend of mine out on the West coast said to me "I quit tracking my budget when I realized I spent too much on booze."
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Old 10-21-2014, 01:58 PM   #75
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... You friend had greater than normal intelligence, but got off to a bad start in college. If you can have someone doing differentiation and integration in a couple of weeks, she is way beyond normal...
IQ is important, but without some formal education one cannot live up to his full potential. And it takes some discipline to go through school for that formal education.

Here's a real-life example. I knew a guy who worked as a programmer at megacorp. He was smart, but never finished college (ADHD?), and I was not sure how many years he had. Still, he was good at what he did. But having that chip on his shoulder, he proved his mental ability by joining the Mensa society and told us all about it.

He left for another job at another corp. I met him some years later, and he was still doing programming. I did not know how this subject came up, but in his new job he had to do some scientific computing, and he admitted to running into some problems because he was not familiar with floating-point computations. Now, I was not a CS type, but I knew about "machine epsilon", which a programmer like him should know.

A guy of his intelligence could read and learn all about that too, but I guess the problem was that without a formal education he did not know that he did not know. He had problems finding work the last I saw him, and I wonder if his lack of formal education could have something to do with that.
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Old 10-21-2014, 02:19 PM   #76
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For me, I think that determination is the key. Achieving FIRE requires a strong commitment and discipline over many, many years.
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Old 10-21-2014, 02:25 PM   #77
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Intelligence, determination, luck, work ethic and life experiences. Grew up in a middle class household. Watched my Father work hard. We lived a comfortable but not extravagant lifestyle. Moved out in my lost and irresponsible late teen years and learned it wasn't fun eating egg noodles and tuna for dinner. Got lucky and got a job for a good company that has good benefits. Worked hard, lived well below my means, saved and now knocking at the door of FI. Easy
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Old 10-21-2014, 02:34 PM   #78
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Also, IQ too low for many occupations does not preclude considerable financial success or ER.

Ha
I am reminded of the story of the guy his high school class voted "least likely to succeed". Twenty years later he is the owner of a successful local chain of upscale restaurants. Asked how he did it he said "Easy. I buy a steak for $10 and sell it for $20. That way I always make fifty percent."
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Old 10-21-2014, 02:40 PM   #79
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... he said "Easy. I buy a steak for $10 and sell it for $20. That way I always make fifty percent."
Darn! That's just as easy as my plan of buying stocks low and selling high.

No, mine is easier. I can do it from a keyboard, while this guy has to grill his meat. Well, at least until he can hire some guys to flip the steaks.
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Old 10-21-2014, 02:49 PM   #80
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Intelligence, determination, luck, work ethic and life experiences. Grew up in a middle class household. Watched my Father work hard. We lived a comfortable but not extravagant lifestyle. Moved out in my lost and irresponsible late teen years and learned it wasn't fun eating egg noodles and tuna for dinner. Got lucky and got a job for a good company that has good benefits. Worked hard, lived well below my means, saved and now knocking at the door of FI. Easy
This is my story to a T - right down to the tuna casseroles!
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