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Old 08-02-2011, 09:58 PM   #81
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Originally Posted by Gerbil Wheel View Post
When I see those types of threads I just close them and move on...something psychological about feeling behind I guess ...but I suppose trying to keep up with the savers is better than trying to keep up with the spenders...
I wouldn't recommend trying to get in too big a hurry anyway. There's a big element of diminishing returns when it comes to trying to save more and more to get rich as fast as possible. For instance, at some point retirement vehicles get full, so you eventually lose tax advantaged savings. Also, dropping the compounding of time effect from, say, 25-30 years to 15-20 has an exponentially negative effect on the amount you have to save, not a linear one.

If that story my mom told me long ago was true, I believe it was the tortoise that beat the hare. Also, all fun and no play makes Jack a dull boy.
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Old 08-03-2011, 09:10 AM   #82
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My story is similar to others here. I graduated from business school deep in debt. During grad school, I met my future wife while she was in law school and she, too, had debts. So in our mid 20s, we were well educated, had reasonable incomes (mid $60K each), but were deep in debt.

We spent the rest of our 20s digging out of that debt and maxing out our 401k accounts. We rented because we couldn't afford the 20% down payment needed (at that time) to buy a house.

In our 30s, we had a couple of kids, our incomes kept accelerating, our debts kept dwindling, and we bought a home. By our mid 30s, we paid off all our school loans, all car loans, all credit card balances, and had only a first mortgage on our primary residence. My wife continued to work through this time period and we basically started saving and investing 100% of her after tax income (and a small portion of mine).

Like many, I thought I was smart and therefore ended up losing a bundle in the tech crash of the early 2000s. I learned from that experience, found forums like this, and converted everything to an index fund program at Vanguard. We began to plow a lot of cash into this program after we fully funded our 401ks.

Also, my wife made partner at her firm and this allowed her to invest an additional $25K (on top of the employee $15K a year) in her 401k from the employer side of the equation. (I'm fuzzy as to how that works but it has been an essential ingredient to our success as she has maxed out on that for about a decade and contributed $400K to our overall net worth through her retirement account). We basically accepted significantly lower take home pay for immediate tax savings and long term retirement savings growth.

We passed $1MM in our late 30s and are now in our early 40s. I estimate our total net worth to be $2.5MM (which includes home equity). My wife may stop working soon but I'll keep going. We do spend $$ on nice cars/vacations but we buy those cars once every ten years and with all cash. We do those vacations every other year and use frequent flyer miles and hotel program credits.

Even today, we save as if our next bonus is the last one we'll ever receive. We try and invest as much as we possibly can. It makes us feel good to write checks to our investment accounts. We have also ramped up our charitable contributions.

Thanks to all on this board and other like it for helping reform my thinking along the way!!!
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Old 08-03-2011, 09:39 AM   #83
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Originally Posted by slazenger View Post
I wouldn't recommend trying to get in too big a hurry anyway. There's a big element of diminishing returns when it comes to trying to save more and more to get rich as fast as possible. For instance, at some point retirement vehicles get full, so you eventually lose tax advantaged savings. Also, dropping the compounding of time effect from, say, 25-30 years to 15-20 has an exponentially negative effect on the amount you have to save, not a linear one.

If that story my mom told me long ago was true, I believe it was the tortoise that beat the hare. Also, all fun and no play makes Jack a dull boy.
As someone who saves over half my gross income, I disagree with this.

Cutting your expensives both lets you save more AND reduces the amount you need to save. It is hugely productive, as long as you get past the idea that rich is a number. When it comes time to spend, the less you need, the lower your tax rate as well.

The compounding magic looks a lot less magic, once you account for inflation. You could easily hit a decade with zero or even negative real growth:

S&P 500: Total and Inflation-Adjusted Historical Returns

Quality play time can be had for almost no money.
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Old 08-04-2011, 03:11 PM   #84
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This 49 year old is starting to wonder how much longer he will be a millionaire....oh well...at some point, equities are a bargain.
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Old 08-04-2011, 10:08 PM   #85
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As someone who saves over half my gross income, I disagree with this.
You're certainly entitled to do that, and to be of that opinion. TBH, I try to approach the question from a "quality of life" standpoint, with full realization of both the present and future value of money and how it can enhance my life during those periods. I (and most people I know) would think saving 50% of gross is overkill unless you're clearing at least 150K annual, and undervalues compounding, to say nothing of how it could affect others that depend on you and perhaps enjoy the pleasure that money can bring in the present more than you do.

Quote:
Cutting your expensives both lets you save more AND reduces the amount you need to save.
True, but the variable you're adjusting by your actions is time (T) needed to retire and/or be financially independent. My original point was the harder you try to lower T by saving more, it will require exponentially more effort. TBH, I don't feel the obligation to debate something that can be demonstrated mathematically. Also, if you and I were bound to only be able to invest in the S&P 500, I would be willing to entertain the discussion of potentially not being able to keep up with inflation. More to your particular concern about inflation, are you familiar with TIPS, by chance?

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When it comes time to spend, the less you need, the lower your tax rate as well.
I admit you lost me on that one. Tax rate is based on income, not how frugal you are.

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The compounding magic looks a lot less magic, once you account for inflation. You could easily hit a decade with zero or even negative real growth:
Well I, and Mr. Einstein, still think compounding is pretty great, and my personal plan is for it to do the majority of the work for me. And if my investing strategy is reduced to 100% S&P 500 all the time, I might have something to worry about.
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Old 08-04-2011, 10:53 PM   #86
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I admit you lost me on that one. Tax rate is based on income, not how frugal you are.
You are aware you get taxed on your distributions from your tax deferred accounts.

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Old 08-05-2011, 09:13 AM   #87
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I agree there is wall where it's not worth it to save anymore. For me, that's about $26k a year, including payments on a 15 year mortgage. Once that's paid off, it'll be about $11k a year. I live in a nice area, have a car, eat well, take a trip in the US every year or two, have pets, etc.

I think this point is highly personal, but may be lower than people expect. Without testing one's limits, you don't know where the point is. IMO the question is not "how much can I consume" but "at what point does conusmption cease to make me happier."

Reduction of expenses does reduce time to FIRE. It carries a more immediate benefit though - flexibility. The less you need, the longer you can go without work and the broader the range of jobs that are financially viable. Alternatively, if there is something you want, the more readily you can buy it.

To be clear, the numbers above are my personal expenses. My wife and I manage our money seperately. We split household costs, with me paying about 60%, due to a higher salary. We neither have nor want kids, a decision that has nothing to do with the cost.

With respect to taxes during retirement - each additional dollar consumed is taxed at a progressively higher rate. Income taxes are the big one. Sales and property taxes can also be significant.

My personal opinion is there is a big luck component when making investments. One can try to skew it in their favor, but nothing is certain. There are a number of qualitative assumptions embedded in the math that proves an investment strategy works. I'd rather be working with margin for error, since some assumptions will prove incorrect.
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Old 10-11-2011, 05:52 PM   #88
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What a joy to feel the kinship with all the posters here. We reached $1MM of liquid assets at 39. At age 30, we got married as penniless but well educated romantics. Wife and I have lived very much below our means, and crossed the 1MM mark about 8 months ago. Simple formula really: focus on savings, live below our means, enjoy simple pleasures.
It is a joy to feel kinship with all the posters here. Wife and I lived below our means. I'm 46, she's 53. We have been able to save 3.6 MM in 17 years. house is paid off and we are still working. Very conservative with $3MM in CD's. Our friends keep on spending.
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Old 10-12-2011, 07:56 AM   #89
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Everybody on this blog has been fairly smart, each in your own way. For me, I've been lucky, originally, I focused on how much I made, today, I focus on how much I can keep and grow what I have. So, I'm diversified, mostly index funds and trying to give back, to charities not the government. Others, because of health, job loss or whatever haven't been as lucky as me and my family. One friend has a quadlapegic 14 uear old grandaughter, another has a down syndrome little boy, cute but needy. So, I have far better choices on howto "give back" than giving more to the tax man.

Sorry for the ramble, but I do enjoy reading how "smart" people have put their good plans together........I learn a lot. My thanks to all of you!
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Hard Work
Old 10-12-2011, 10:44 AM   #90
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Hard Work

For me I got out of college got a low paying job for $9,500.00 per year in 1978. By the time I was 30 I had save $70,000.00. I then quit my job and started my own small business, got burned twice in other businesses, but by the time I was 52 had saved and invested moderately accumulating $2,000,000. over the next few years saved another $800,000.00 and then lost 300,000. in 2009.

It just takes hard work, a willingness to forgo the boats, cars, etc. live under your means. Oh! Don't get divorced if at all possible, and be sure to marry someone with your same goals.

You will also appreciate what you have much more.
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Old 10-12-2011, 10:48 AM   #91
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Follow up

I forgot to mention it helps to have a wife who will work! Mine just played at it and never made much money. Out of 30 years of working she worked about 10 and decided to retire at 51, while she encorraged me to keep on working.

Before you get married pick out a good one, don't just let it happen.
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Old 10-12-2011, 01:02 PM   #92
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Great thread - very interesting to see the common themes and techniques. I'm going to encourage my children to read it for advice and inspiration as they are just beginning to start their independent financial lives.

For our part, we had a large family, and my wife taught the kids at home through eighth grade. With one income and a strong tendency to spend all of it, we accumulated only modest retirement savings (~$300K) by age 48 (2010).

Along the way, my father started a successful consulting business after a 30-year career with the Federal government. My parents decided to use some of the extra income to fund the lion's share of the kids' expenses for in-state college educations. Without their support, we would have had a hard time making ends meet from 2007 on.

Late last year, a large, illiquid, 12-year-old stock position in my employer became liquid due to the sale of the company, and we instantly became financially independent. (I'm still working on the integration and expect to retire next summer with a 26-week severance sendoff from the acquirer.)

While there were some elements of skill at play, I recognize after reading a number of books as well as the material here and on Bogleheads that we made some big mistakes and got pretty lucky along the way and in the end. So now as my kids leave home, I find myself advising them to "do as I say, not as I did!"

Fortunately for them, they are thoughtful people who really want to do what's in their own best interest.
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Old 10-12-2011, 01:15 PM   #93
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Originally Posted by Marc1962
Great thread - very interesting to see the common themes and techniques. I'm going to encourage my children to read it for advice and inspiration as they are just beginning to start their independent financial lives.

For our part, we had a large family, and my wife taught the kids at home through eighth grade. With one income and a strong tendency to spend all of it, we accumulated only modest retirement savings (~$300K) by age 48 (2010).

Along the way, my father started a successful consulting business after a 30-year career with the Federal government. My parents decided to use some of the extra income to fund the lion's share of the kids' expenses for in-state college educations. Without their support, we would have had a hard time making ends meet from 2007 on.

Late last year, a large, illiquid, 12-year-old stock position in my employer became liquid due to the sale of the company, and we instantly became financially independent. (I'm still working on the integration and expect to retire next summer with a 26-week severance sendoff from the acquirer.)

While there were some elements of skill at play, I recognize after reading a number of books as well as the material here and on Bogleheads that we made some big mistakes and got pretty lucky along the way and in the end. So now as my kids leave home, I find myself advising them to "do as I say, not as I did!"

Fortunately for them, they are thoughtful people who really want to do what's in their own best interest.
Well if you don't mind Marc, I am going to send my 18 year old daughter to your house and you can try to pound some life planning financial skills into her head, as I have gotten nowhere with her. She seems to think needing money is optional to survive in her adult years. The more I suggest about pursuing a career with financial and employment opportunities, the more she wants to be a starving artist type person. Telling her I'm buying her a one way ticket to Key West so she can be a full-time beggar without the worry of freezing to death in the winter didn't seem to help the cause much either
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