Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 01-21-2011, 12:28 PM   #21
Thinks s/he gets paid by the post
 
Join Date: Dec 2009
Location: Alberta/Ontario/ Arizona
Posts: 3,157
My situation was quite different from most on this forum.. Most of my compensation wre option and deferred stock grants. So for me LBYM meant not cashing anything out. Was able to live nicely on the cash portion of comp. When I retired I started cashing things out (still a ways to go). In the end things turned out very well. Obviously different paths to the same place.
__________________

__________________
Danmar is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-21-2011, 12:41 PM   #22
Full time employment: Posting here.
 
Join Date: Dec 2010
Posts: 746
Quote:
Originally Posted by MasterBlaster View Post
Metrics aside - don't let the numbers keep you from accelerating your savings. Paralysis by analysis as they say.

Based on a number of threads, you'll find that quite a number of us here are super-savers. For a number of us blow-hards die-hards, saving in the range of 50% or somewhat more of our gross income is common. In my opinion, the actual method of how a savings rate gets counted is less important than the will and the implementation of a serious savings plan.

Perhaps when saving up to buy a house, or just after that the oppressive mortgage limits savings. But as the mortgage becomes manageable savings can accelerate.

Once you decide that you don't really need the newest car, the designer clothes, and all the other useless crap things, your savings can accelerate.

really, what you need to decide for yourself is that the cost of all that stuff is your lost freedom, lost peace of mind, and lost life satisfaction. And that cost just may be way too high.
Wise words, Obi-Wan. I suspect there is a large group of people who don't realize the "easy button" is only in commercials.
__________________

__________________
East Texas is offline   Reply With Quote
Old 01-21-2011, 12:47 PM   #23
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
Quote:
Originally Posted by East Texas View Post
Wise words, Obi-Wan. I suspect there is a large group of people who don't realize the "easy button" is only in commercials.
well as Elvis says - Than you vera much.

- Check out my new Avatar !
__________________
MasterBlaster is offline   Reply With Quote
Old 01-21-2011, 01:00 PM   #24
Thinks s/he gets paid by the post
Fireup2020's Avatar
 
Join Date: Feb 2007
Posts: 1,186
Not a stat person...so, as long as I save $XX,000 per year (both TSP and regular savings/investments, I do as I please. I consider that LBYM - plus I do a number of "frugal" things to ensure I get the biggest bang out of my travel and fun fund. Meeting personal retirement goals and enjoying the ride along the way are very important to me. Comparing savings notes to see who saves the most each year to "one-up" each other is of no interest to me. As others have stated, it's too personal to "metricize."
__________________
Make no mistake, my friend, it takes more than money to make men rich. - A. P. Gouthey
Fireup2020 is offline   Reply With Quote
Old 01-21-2011, 01:19 PM   #25
Full time employment: Posting here.
 
Join Date: Oct 2009
Posts: 943
This question is all about context and so reminds me of Potter Stewart's quote on pornography applied to the OP's question:

"I shall not today attempt to define... LBYM...and perhaps I could never succeed in intelligibly doing so. But I know it when I see it..."
__________________
LARS is offline   Reply With Quote
Old 01-21-2011, 01:35 PM   #26
Thinks s/he gets paid by the post
Katsmeow's Avatar
 
Join Date: Jul 2009
Posts: 3,399
It has been interesting to me that on financial related boards I see people talking about LBYM - living below your means and about someone (hopefully someone else) living beyond their means.

It is like those are the only two categories. Yet, don't some people simply live within their means?

Let say you earned $X a year, saved $Y for retirement (say 10%), saved $Z for your emergency fund (if not fully funded) and then spent every penny that you had. I would suggest this is living within one's means. It is neither living below your means (since I think some amount of retirement savings is a necessary expense) but isn't beyond one's means either. Let's say you earn $1,000,000 and have a fully funded emergency fund and you save $100,000 for your eventual retirement and spend the other $900,000 that seems to be living within one's means.

Now, let's say you earn that same $1,000,000, save $100,000 for retirement and then spend $400,000 that year and save/invest the rest. That person is living below their means.

To me living below your means fundamentally means living as if you earned less than what you actually earn.
__________________
Katsmeow is offline   Reply With Quote
Old 01-21-2011, 01:35 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
OK, I just read 24 posts in the thread and I cannot fathom why you would care to define any of this. Who the hell cares? Save your pennies and get out of the rat race. There is no immutable law lurking here.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 01-21-2011, 02:53 PM   #28
Recycles dryer sheets
 
Join Date: May 2010
Posts: 131
I think the only indicator you need is your savings rate. If it's positive you're LBYM. Then the question becomes how far LBYM. It's moderately easy to show mathematically how to convert this savings rate into the number of years you need to work in order to become FI for the rest of your life.

Here's a link to one of my book reviews. It's a pretty good review, but just scroll down to the first graph.

Early Retirement Extreme Permaculture Research Institute of Australia

Here you can see how long you'd have to work given a real interest rate (nominal + inflation). A real interest rate of 3% is realistic, and somewhere between the red line and the green line in the graph.

So you can see the typical "early retiree" of this forum defined as someone who retires between the ages 40 and 55 and thus works 20-30 years would need a savings rate of 40-50%. The normal retiree would work 40-45 years and thus needs a savings rate of 10-20%. Lower savings rates under 10% would mean working all your life. You can also see how extremely high savings rates, i.e. above 75% would allow you to FIRE within a decade(!) This either means putting your efforts into making a lot of money or putting your efforts into spending very little money or perhaps a combination of the two.
__________________
FI@30, ERE@33.
jacob is offline   Reply With Quote
Old 01-21-2011, 02:55 PM   #29
Full time employment: Posting here.
 
Join Date: Dec 2010
Posts: 746
Quote:
Originally Posted by MasterBlaster View Post
well as Elvis says - Than you vera much.

- Check out my new Avatar !
I can't quit laughing long enough to think of a clever retort.
__________________
East Texas is offline   Reply With Quote
Old 01-21-2011, 03:38 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
freebird5825's Avatar
 
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,017
I use a simple rule of thumb for LBYM...while w*rking, I made sure that

Net Income - (COL Expenses + TSP + Monthly DCA) = Money Saved

"Money Saved" made it possible to purchase large ticket items without financing any (pay cash), or worst case, no more than 25-50% of the cost of the item. Large ticket items (past) were a car, tag-along vacations, cruises, a new furnace, a new roof, remodeling the kitchen, etc.

Now that I am FIREd, I am in a completely different economy of scale as far as Net Income goes.
I still pay federal tax, of course. BUT...no more TSP, state income tax or the usual federal payroll deductions .
COL Expenses are what they are, a variable I cannot control completely.
I continue to save for my long term retirement, but this time I am using dividends from my muni bond fund to cover the monthly DCA.
__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
freebird5825 is offline   Reply With Quote
Old 01-21-2011, 04:05 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,451
Quote:
Originally Posted by jacob View Post

Early Retirement Extreme Permaculture Research Institute of Australia

Here you can see how long you'd have to work given a real interest rate (nominal + inflation). A real interest rate of 3% is realistic, and somewhere between the red line and the green line in the graph.

So you can see the typical "early retiree" of this forum defined as someone who retires between the ages 40 and 55 and thus works 20-30 years would need a savings rate of 40-50%. The normal retiree would work 40-45 years and thus needs a savings rate of 10-20%. Lower savings rates under 10% would mean working all your life. You can also see how extremely high savings rates, i.e. above 75% would allow you to FIRE within a decade(!) This either means putting your efforts into making a lot of money or putting your efforts into spending very little money or perhaps a combination of the two.
Your chart is similar to my rule of thumb when I was looking at state and local pensions. I said that a typical pension fund that allowed a person to retire at 55 with salary that 2-3% times the number of years worked needs a combined contribution (employee and employeer) in the neighborhood of 25-35% per year.

I think this rule of thumb also applies for folks in the private sector. You need to max out your 401K (12.5%) find an employer that contributes and additional 3-6%. Plus save at least 10% and preferably 20% in IRA and taxable accounts in a very tax efficient (e.g. index funds) manner. The other hidden benefit of LYBM in the accumulation phase if you are socking away 25%+ of your salary than collecting a retirement income in the 65-75% range of your base salary doesn't require a cut back in lifestyle.
__________________
clifp is offline   Reply With Quote
Old 01-21-2011, 04:27 PM   #32
Thinks s/he gets paid by the post
 
Join Date: Mar 2009
Posts: 1,437
Establish your priorities and go from there. At the bare minimum max out the 401K/403b and Roth's while building the other accts you desire. Meanwhile live your life
__________________
foxfirev5 is offline   Reply With Quote
Old 01-21-2011, 04:32 PM   #33
Full time employment: Posting here.
Ronnieboy's Avatar
 
Join Date: Feb 2008
Posts: 646
Quote:
Originally Posted by 52andout View Post
Some of them still didn't get it and someone actually said "I can't believe you still drive that old thing."

"That is why I am retired and not you "

Would have been my response.....
__________________
I don't want to spend my entire life at work. I deserve more. - Want2retire aka W2R
Ronnieboy is offline   Reply With Quote
Old 01-21-2011, 04:47 PM   #34
Recycles dryer sheets
 
Join Date: Jul 2010
Posts: 255
Here is the secret LBYM formula:



Or you can just do what works for you.
__________________
SunsetSail is offline   Reply With Quote
Old 01-21-2011, 05:00 PM   #35
Recycles dryer sheets
 
Join Date: May 2010
Posts: 131
Quote:
Originally Posted by SunsetSail View Post
Here is the secret LBYM formula:


LOL! I actually used to work with the general relativistic version of this momentum equation. The continuity equation is more what you're looking for when considering LBYM: money in - money out = money saved.
__________________
FI@30, ERE@33.
jacob is offline   Reply With Quote
Quite a range of responses - let me clarify
Old 01-21-2011, 05:12 PM   #36
Dryer sheet wannabe
 
Join Date: Dec 2010
Location: Boulder
Posts: 12
Quite a range of responses - let me clarify

People seem to have taken my original post in a number of distinctly different ways.

First, there are those who interpreted my post as a need for an estimate of how much I need--such as the posts suggesting that I try ES Planner or other calculations. While this is interesting, this is not what I am looking for in bring this up. These tools (including FIREcalc, FinancialEngines, and a range of others) are great--I developed one of the commercially available tools--but not my purpose.

Second, there are those who interpreted this as a request for advice. Clearly I did not provide enough information for that.

Many of you have read The Millionaire Next Door and will understand that one of the powerful things about the book is that it creates metrics that can help people figure out where they are and how other people achieve a specific goal. I am, by nature, analytical (I AM a member of Bogleheads forum--good call). I am interested in this stuff. I have previously written a book that focuses on the use of quantitative tools for long-term planning (I will not mention the name because I don't want to appear to be promoting a product here).

There are many ways to get to a state of financial security and I am interested in the common themes. We can surely just declare that we all need to live below our means and we can use estimates from some of the better calculators to figure out how to get there, but it is valuable and interesting to see how people *really* do this. Obviously more saving is better, but I don't think that most of the people here are the kind of folks who budget their toothpaste consumption. A lot of people here apparently own second homes.

I see the age-related issue. The younger you are, the less you probably save as a % of income. There is also the income level issue. Several of you have suggested that it is much harder to save 20% of your income if you are making $40K vs. $150K. Probably true--makes sense. Its hierarchy of needs. First you need to cover food, shelter, healthcare--then you can save.

If there are no generalities, so be it. If there are generalities (think Millionaire Next Door), this would be inspirational and potentially very helpful to a lot of people. We get our ideas from what we observe. That book helped many people to reconsider their choices.

Regards,
__________________
GeoffC is offline   Reply With Quote
Old 01-21-2011, 05:17 PM   #37
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
Quote:
Originally Posted by SunsetSail View Post
Here is the secret LBYM formula:



Or you can just do what works for you.

That would be the simplified version that applies only due to the assumption of spherical chickens.

The actual full-field LBYM equation(s) are listed below:



__________________
MasterBlaster is offline   Reply With Quote
Specifically to Jacob...
Old 01-21-2011, 05:24 PM   #38
Dryer sheet wannabe
 
Join Date: Dec 2010
Location: Boulder
Posts: 12
Specifically to Jacob...

I just checked out your blog. My guess is that you are are the far fringes of the FIRE socioeconomic choices. All well and good--someone has to be the extreme and its interesting to see how you do it. Most people who want to be FIRE do not want to live on $5000-$7000 per year (I think) and limit themseves to $300/month on housing. Perhaps I am wrong
__________________
GeoffC is offline   Reply With Quote
Old 01-21-2011, 05:25 PM   #39
Recycles dryer sheets
 
Join Date: Jul 2010
Posts: 255
Quote:
Originally Posted by MasterBlaster View Post
...the assumption of spherical chickens.
I find your lack of faith in spherical chickens disturbing.
__________________
SunsetSail is offline   Reply With Quote
Old 01-21-2011, 05:26 PM   #40
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
freebird5825's Avatar
 
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,017
Quote:
Originally Posted by MasterBlaster View Post
That would be the simplified version that applies only due to the assumption of spherical chickens.

The actual full-field LBYM equation(s) are listed below:
Hey, cut that out. I'm having Physics final exam flashbacks.

__________________

__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
freebird5825 is offline   Reply With Quote
Reply

Tags
living below your means, ybym


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
What ER means to me. e86s54 Life after FIRE 36 10-02-2010 08:05 AM
Why I Live Below my Means Culture FIRE and Money 80 03-23-2009 12:00 AM
Not sure what this means... SecondCor521 FIRE and Money 4 05-09-2008 12:39 PM
At, Below, or Above your means Sam FIRE and Money 27 03-30-2007 11:23 AM
Wonder What This Means? boont FIRE and Money 15 06-13-2006 10:45 PM

 

 
All times are GMT -6. The time now is 04:51 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.