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Tell your LBYM 'conversion' story here
Old 01-09-2013, 07:24 AM   #1
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Tell your LBYM 'conversion' story here

Was there a moment that you 'woke up' regarding the benefits of LBYM?

For me it was a bit of a process, but I can point to the moment it started.

I was 25 or so, and bought a new car - a Nissan Maxima, probably cost 20k+ back then.

A couple of weeks later I'm talking to my boss, who had just purchased the new Altima (next model down). He said he and his wife loved the Maxima, but couldn't afford it. He made about double what I did.

But for him 'affording it' meant writing a check and being comfortable parting with the cash. For me it meant being able to handle the monthly payments.

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Old 01-09-2013, 07:37 AM   #2
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Good story Jon. I recall one time buying a car and the staff at the dealership was befuddled because I wanted to write a check and they weren't quite sure how to process a cash purchase administratively since it was so rare. Or at least so they said.

I was raised in a family that lived well, but still lived below its means so much of it was in-bred.

Also, my maternal grandmother was the ultimate LBYMer. Her husband died in an auto accident ~ 1942 and she had 4 children to support but had not completed grade school. She worked hard in a steady minimum wage job and made the best of the situation. Her oldest son went to college and I recall my aunt stating that she didn't know they were poor until after she graduated from high school. I know for a fact that my grandmother gave her children more than $100,000 in her waning years - from a minimum wage job and social security!

When DW and I married in our late 20s we were interested in buying a condo and decided not to because we could not afford the $1,000 down payment. We thought that was ridiculous and so began our LBYM life. Two years later we bought a house and the LBYM journey continued to this day.

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Old 01-09-2013, 07:38 AM   #3
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I always practiced LBYM but my true epiphany came when I got 3 credit card bills in the mail that took me by surprise. I always paid in full but due to the surprise wasn't sure where I'd get the money from [things were tighter back then...]
One day later I put together my first budget and from then on formally practiced LBYM....including tracking all credit card charges to prevent future surprises. Some 30 years later it's worked like a charm, and we still stick to a budget.
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Old 01-09-2013, 08:09 AM   #4
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It's interesting to see what makes people get that click and realize they've been throwing their hard work away.

I was 19 and got my first car loan. It had a 14.5% interest rate for 4 years. I didn't think much of it first, but I had a statement come that the institution who my loan was through was being transferred to another company. They had all the details of my current loan in their final statement and when I saw that I had made a few months of payments and the principal amount on the loan barely changed I couldn't believe it. How could I pay 300 a month and yet I still owed the full amount? I dug deeper and began to actually comprehend what a loan was and how bad the interest rate was. It then became my main goal to pay off that loan. It was easy to do as I was still at home with mom at that point and I had very few other bills. I paid off the loan in just under 2 years. From that point forward I said no more debt. This of course leads to LBYM and saving. The saving just took off from there!
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Old 01-09-2013, 08:19 AM   #5
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I have always been frugal and a saver. So, there's no LBYM wake-up moment story from me.

I am right now more interested to read stories of people "kicking it up a notch" in their retirement. Woo Hoo! Cheapskates are slowly realizing they cannot take it with them. And the economy needs stimulation. Spend, spend, spend...
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Old 01-09-2013, 08:26 AM   #6
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For me it was being able to buy my first car and wihout a car loan (just barely). I was a few weeks shy of turning 23 and had been working full-time for only 9 months. I still had student loan debt so I did not want to take on a second type of debt.

A year later, I paid off the rest of my student loan debt (it wasn't a whole lot to begin with) and used my fast-growing salary to save up for the down payment of the co-op apartment I still live in today.
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

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Old 01-09-2013, 08:28 AM   #7
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I've shared all this before but it wasn't a moment for me, more a gradual process with several pivotal moments.
  • Thankfully DW and I both come from frugal families of modest means - that helped immensely and we never lived above our means, though maybe closer when in our 20's. We've never had any credit card debt, and the last car we financed was 1982 at age 28, all cash since. We paid off our 30 year mortgage in 16 years.
  • Literally started investing the day after the crash in Oct 1987, that Tues morning. I had been reading/preparing to invest but had not opened and account yet. When the crash hit, I contacted a friends broker and went all in with everything we had saved, and made a killing. Luck...
  • Reading Your Money or Your Life was pivotal for me, around 1994.
  • Having my pension frozen and losing retiree health care when my MegaCorp was sold to a private company offering neither, around 1995. It really made me realize that FI was entirely my responsibility - if there was a moment, that was probably it. It seemed 'unfair' at the time (though we didn't dwell), but they did me a big favor in retrospect. We went from saving 10-15% to 30-70% over the years that followed. Fortunately my income was rising rapidly thanks to promotions, so we didn't really have to sacrifice our lifestyle. We just maintained the same lifestyle we'd always enjoyed. My peers were all buying bigger houses, more expensive cars, luxury vacations and lots of toys. Of course they're all still working, all still trying to outdo each other and 'buy happiness with things...'
  • Reading The Millionaire Next Door, around 1996.
  • Reading The Four Pillars of Investing, around 2002.
I am sure there were other influences, but the above were the most memorable.

Funny aside (to me at least). My "plan" when I was single from age 22-25 or so was, never let my savings go below $2000 or above $4000. When savings reached $4000, I figured I was entitled to treat myself with something. When my savings were closer to $2000, I was not...
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
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Old 01-09-2013, 08:36 AM   #8
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No magic moment or wake up call for me. My mother impressed upon me the need to save at an early age and also passed along some of her thrift genes. Paying my own way through college meant working and saving while my mates were drinking and playing, and that led to a work and save ethic that was evident when we all started working in the professional world. The choices were always simple for me because I always had an strong aversion to debt. Just the thought of owing money made me feel as if someone had grabbed me by the testicles and wouldn't let go.
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Old 01-09-2013, 08:47 AM   #9
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Originally Posted by MichaelB View Post
... Paying my own way through college meant working and saving while my mates were drinking and playing, and that led to a work and save ethic that was evident when we all started working in the professional world. The choices were always simple for me because I always had an strong aversion to debt. Just the thought of owing money made me feel as if someone had grabbed me by the testicles and wouldn't let go.
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Old 01-09-2013, 09:13 AM   #10
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I'm also one of those who has always been very frugal and LBYM. When I was a very young and getting an allowance for things like taking the garbage out, yard work, etc. I would save almost all of the money. My sister would spend every cent she got. She would eventually come to me to lend her money. My mother and father both had depression era parents so I heard lots of stories. Again when I was very young, I remember having a conversation with my mother about interest on money and if you could save enough money, you could live off the interest. I grilled her on what she meant until I (kinda) understood. I was amazed by this.
When I was in college, I remember making a statement that I was going to retire at 45. Once I started w*rking, I enjoyed what I was doing, but started saving tons of money anyway, knowing one day I wouldn't love it as much. About that time I found the REHP (Retire Early Home Page) and the old Motely Fool board. I learned a TON about how to get out of the rat race young and started putting the plan in motion. Finding that page and board really showed me that it was possible to RE and how to do it, so that was very cool.
On a side note, in college I had a finance professor tell the class that when you are young you shouldn't put money into a 401k, instead you should be saving to buy stuff like your house and cars. Funny, I was working part time while in school and was eligible for the 401k at my work and I was contributing. When I got my first "good" job, I even rolled that $5k into that company's plan. Even the professors in some schools don't know what they are talking about!
When you walk in the shadow of insanity, the presence of another mind that thinks and acts as yours does is something close to a blessed event. -Robert Pirsig, Zen and the Art of Motorcycle Maintenance
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Old 01-09-2013, 09:18 AM   #11
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I think the magic moment for me was when my Granddad gave me a financial magazine..."Forbes" or "Money" or whatever. This was 1991. There was a mutual fund that was listed, 20th Century Ultra, that had returned 20% over the past year.

I ran a calculation on a calculator (didn't have a computer back then, or even know what a spreadsheet was) and figured that if you invested $1,000, and could keep up that rate, in 39 years you'd have $1M!

Now of course, nothing is going to return 20% year after year after year like that. But, it gave me something to strive for. And, I knew I'd be putting in more than $1000 over the course of my life. It really drove home the power of compounding, and how just a little sacrifice now, when I'm younger, could reap great rewards in later years.

As for that 20th Century Ultra? Well, I just looked it up on Yahoo finance (it's now American Century Ultra, TWCUX) From 9/91 to 1/2/13, looks like it's shown a return of about 83%. Not so hot. However, I think they're just taking the most recent share price, dividing by the share price on 9/91, and not accounting for dividends and capital gains. There have been years where it paid out 10-20%, just in capital gains.
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Old 01-09-2013, 09:22 AM   #12
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No singular event for me either, just an inherent dislike of debt and making payments. And I like having a largish amount in savings simply because stuff happens and that more than once has changed an "OMG! what're we gonna do?" event to "Oh damn".
I heard the call to do nothing. So I answered it.
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Old 01-09-2013, 09:24 AM   #13
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Mine was right out of college. I had amassed about $4K in credit card debt through college. It took me a couple of years to pay it off. I was really shocked at how long it took to pay off due to the interest being charged. I said 'never again'. Since then I've never carried a credit card debt. If I couldn't pay it off that month I didn't buy it. I think I only fell for the zero interest rate financing spiel once. After that I never allowed myself to be talked into them. I did pay the one off right at the end of the zero interest rate period but I didn't like having it hanging out there.

I bought a used 4 yr old Nissan Maxima with all the bells and whistles out of college. After the credit card debt was paid off I replaced it with a brand new no-frills baseline Nissan Maxima (had to take out a loan for it) because I was worried about reliability. In hind sight I could have kept the used car based on what I now know about the longevity of foreign cars. That car loan was the last car loan I ever had. I didn't replace it until I could pay cash. It was perfectly good so I probably should have kept it but I really wanted an SUV.

The next one was a Lexus that I've had for 14 yrs now. Still no problems with it so I've still got it. Every now and then I get an itch to look at the new ones but really, how can one replace a perfectly good luxury car? Nothing I could buy would be better, it would just be newer.

By my early 30s I had about a million in assets so stopped worrying so much about every penny I spent. However I get more satisfaction from saving money then I do spending it. I've adjusted a bit and I do buy more now, but I drag my feet until I decide I really need it.

Thankfully I now can part with the money with out worrying about it. Changing to the mind set that money was a tool rather than a security blanket has been a challenge. We still don't buy things we don't need like cable TV, drinks in restaurants, new cars etc. even though we could afford them.

It is important to indulge yourself a bit so our dogs have the best of everything which makes us feel richer than if we bought ourselves a bunch of junk.
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Old 01-09-2013, 09:28 AM   #14
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Mine is a combination of naturally being a tightwad, early childhood training and plain dumb luck. When I was around 8yo I lost my piano lesson money while browsing the music stacks waiting for my lesson to begin. Ended up getting the worst whipping of my life that evening. (Money was tight it seems. ) I think that made an impact. I can't remember NOT saving money no matter how much I made. When I started investing, I diversified for fear of something not turning out well. At one time I was so heavily leveraged in my real estate bucket that I was taking out personal loans from total strangers. Got lucky, and it all worked out.

But the absolute biggest factor was marrying a wonderful woman who shared (mostly) my desire to save and invest for the future. As I said, I've been lucky.
Can't you see yourself in the nursing home saying, " Darn! Wish I'd spent more time at the office instead of wasting time with family and friends."
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Old 01-09-2013, 09:38 AM   #15
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It's really hard for me to pinpoint a specific time, because it has been so gradual AND I come from a family where 2nd mortgage's to pay for useless crap, and maxing out rotating sets of credit cards was commonplace.

When I graduated college, my wife's (then gf) parents were retiring. He was a couple who was 53 at the time, the wife never really worked, the husband didn't have a very high profile job, and they lived a very modest lifestyle. I wondered how in the hell they could "retire". It got my googling started, and I ran across MMM, ERE, and this site.

Living in a high cost of living makes it a little harder, but my wife and I have gotten into a great groove of LBYM. My father's current "retirement" situation (60, laid off from Kodak, no retirement savings, no pension (they bought out the employees long ago and he lost it in the 2001 crash), and living on just SS) is a living warning sign for what I shouldn't do.
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Old 01-09-2013, 09:43 AM   #16
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For me, the pivotal moment occurred in 1998, when I accidentally caught "Escape From Affluenza" on PBS one day. It was extremely fortuitous that I did so, because I had just saddled myself with the biggest trapping of a middle class lifestyle the year before: a brand new $180k house (and everything that goes with it, including an 8.6% mortgage with PMI) on a $60k consulting job that required constant travel--which was starting to burn me out. It really opened my eyes, and made me realize that there was an alternative to a life of material consumerism. I borrowed "Your Money Or Your Life" (which was mentioned in the documentary) from the library and read it from cover to cover. The cogs in my brain started cranking, and I looked into cutting my expenses and increasing my income to fix the problem. Among other measures (such as canceling cable TV), I quit my job at MegaCorp Consulting Co and found a local contract position that paid $90/hour. Within two years, at the ripe age of 27, I had paid off my house and was completely debt free.

Here's a clip from "Escape From Affluenza":

I also noticed (while searching for the above clip) that the original documentary "Affluenza", which I've never seen, is available on YouTube. I'm going to enjoy watching them now.

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Old 01-09-2013, 09:48 AM   #17
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No LBYM moment for me either. Both my parents were frugal and I learned the art of delayed gratification from an early age. I was given an allowance every week (we called it "pocket money" when I was growing up in England) and part of my allowance went straight into the piggy bank. The piggy bank in question was actually one provided by the local Building Society and when it filled up, we took it to the local branch to deposit the contents in my savings account - which I wasn't allowed access to until I reached 18.

However, I didn't learn the LBYM lesson perfectly. By the time I was in my mid-teens, I had figured out how to use a knife to retrieve coins from the piggy bank so that I could afford to buy more records, and at the age of 19 when I had full access to the account, I closed the account down and used the entire contents to fund a month-long trip to Greece with my girlfriend.

When growing up, it was never really specified to me what the purpose of saving all that money was - it was just something I was supposed to do. For a while after raiding the piggy bank to buy records, and then using the remainder of the account for my Greek holiday, I felt rather bad for having done so. In retrospect though, it was good practice for later life because it did get the idea into my head that if I saved part of my income, I'd have the money for a rainy day (or in that particular case, records and a trip to Greece!)

I didn't save again until my late 20's, when I opened an IRA with my local bank. I didn't really know what it was, put all my contributions into a money market fund and had no idea why the balance wasn't growing over time. I wised up fairly soon though :-)

And that trip to Greece was money really well spent. We took a bus from London to Athens, then a 24-hour ferry to the island of Kos, where we camped on the beach for 3 weeks. Amazingly, a bunch of other Brits pitched their tents near us - and we thought we were so far from home! I still have the pictures of our group drunk on Ouzo, moon-shining the camera, as well as pictures and great memories of our time exploring the Acropolis and the various ruins on our particular island. I looked an awful lot better in a tan wearing Speedos than I do now......

Oh, was this thread supposed to be about LBYM? Sorry about that
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Old 01-09-2013, 09:49 AM   #18
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Mine was more of a LWYM (live within your means) life lesson which occurred in college. I participated in a "co-op" program at Georgia Tech which provided the opportunity to w*rk every other quarter (GT was on the quarter system back then). Making it through each quarter, living on the money saved from the previous w*rk quarter, instilled something in me that has endured. Since the co-op plan stopped in your junior year, I ended up borrowing money to finish, but the lessons I learned helped me pay my student loans off in 4 years.
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Old 01-09-2013, 09:51 AM   #19
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No "moment" for me either. As a kid I would always save more than I spent. I remember as a teen figuring out a little about interest. It made no sense for me to pay others to use their money when I could save a little longer and use my own.

Married a spouse that is the same way. Only debt we've ever had WAS a mortgage. We may not be high earners, but we play great defense.
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But you can hit'em upside the head a few times to make sure they are really out...
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Old 01-09-2013, 10:32 AM   #20
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I never had a conversion, I was born this way. Like some others who posted I had a sibling who was (and still is) the opposite of me and I saw her ways as being so wasteful and destructive. I have always needed to be "getting ahead" every month, even if it's just a small amount.

The best proof of this started when I was 20 (1975) and found a small, but decent enough apartment for $90/mo plus utilities. We got married the next year and the rent went up to $110. We stayed for almost 8 years, keeping our expenses low as our incomes increased. DH even left his job for 2 years to go to graduate school, but I was earning enough to cover our low expenses and still save something. In the later years the rent crept up to $140/mo but we were able to save plenty and when we left that apartment it was to buy a house with a 25% down payment.

Married, both 61. DH retired June, 2010. I have a pleasant little part time job.
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