Your Investment Road To FI

[ferco]

Just interested in knowing some of the investment roads others took to get to FI. Was it investing in stocks: buy and hold, day trading ; mutual funds, individual stocks. Real Estate. Very good paying jobs with good 401k investments over a long period ? And last but not least: Luck ??

What would be your advice to others starting in their 30's as a prudent investment roadmap, knowing what you know now.

[ziggy29]

As far as the FIRE through 401K route goes, pick an appropriate allocation, fund it as much as you can and let time work for you.

In your 30s, you still have time to find a public sector job with a pension that could provide a solid foundation for your retirement income in 20 years. Knowing what I know now, if I could turn back the clock 10-15 years I'd be doing that. Of course, there's no way to know the rules won't change in the future.

[wildcat]

Quote:

Originally Posted by ziggy29 As far as the FIRE through 401K route goes, pick an appropriate allocation, fund it as much as you can and let time work for you. In your 30s, you still have time to find a public sector job with a pension that could provide a solid foundation for your retirement income in 20 years. Knowing what I know now, if I could turn back the clock 10-15 years I'd be doing that. Of course, there's no way to know the rules won't change in the future.

Are you saying that b/c of the recent downturn or is that what have always thought since you've reached FIRE?

I don't disagree per se. My pop didn't save much but had 30+ years in with the Fed & retired as a G-14. He doesn't have many worries these days.

For me, I find mega corp incredibly dull so I have always been worried how much worse it could be in a govt position. May not be true but that's what I often hear.

[LOL!]

A well-paying job and a spouse that works. Our 401(k) plans have been mediocre, but we've always maxed them out. We also have been able to live off the salary of the lowest earner and invest the remaining after paying taxes.

No real estate gains, no pension, no killing in the stock market. But also no crises along the way either (unless you count the mere presence of 2 teenagers in the household). Just keep adding to the mutual funds and ETFs nowadays and plod along. We did pay attention to minimizing income taxes.

[ziggy29]

Quote:

Originally Posted by wildcat Are you saying that b/c of the recent downturn or is that what have always thought since you've reached FIRE? I don't disagree per se. My pop didn't save much but had 30+ years in with the Fed & retired as a G-14. He doesn't have many worries these days.

What I'm saying is that what seemed like the right choice 22 years ago doesn't seem like the right choice today when it comes to the quest for FIRE. But all we can do is make the best of the choices we've made, since we have no control over what was done way back then.

[gryffindor]

It's not just investments that will get you to FI ; in order of importance

Get a higher income by mastering a financially important skill
Keep your expenses low and "travel light"
Create a straightforward investment and savings strategy and stick with it

[OAG]

Quote:

Originally Posted by gryffindor It's not just investments that will get you to FI ; in order of importance Get a higher income by mastering a financially important skill Keep your expenses low and "travel light" Create a straightforward investment and savings strategy and stick with it

It is IMO "what you spend" that is the most important "part" of the deal. Many earn a very good income but if you "grow into your income" you may "learn" to spend more than is prudent (and LBYM). Live for today but save for tomorrow.

[hankster]

Quote:

Originally Posted by OAG It is IMO "what you spend" that is the most important "part" of the deal. Many earn a very good income but if you "grow into your income" you may "learn" to spend more than is prudent (and LBYM). Live for today but save for tomorrow.

Agree. My parents only earned between $25k and $35k/year for the past 20 years, yet they have managed to accumulate six figure savings using only bank savings accounts and CDs. They also paid cash for several vehicles during this period. A paid off home, simple tastes and LBYM have served them well.

[unclemick]

Buy a lifecycle fund for your age - max all tax deferred options via auto deduct. When you get old retire.

And for heaven's sake - don't read books or over study/watch investments.

Faith, time and inactivity are the best investment strategies availible.

Heh heh heh - of course I'm a Boglehead. Starting 1966 - I made every investment mistake in the book except commodities.

[W2R]

Quote:

Originally Posted by OAG It is IMO "what you spend" that is the most important "part" of the deal. Many earn a very good income but if you "grow into your income" you may "learn" to spend more than is prudent (and LBYM). Live for today but save for tomorrow.

This is so true.

I am the "poster child" for someone who made a LOT of mistakes in investing, but who muddled through anyway mostly due to LBYM. See below; I probably should have been investing money in taxable accounts from 2002-2006 instead of buying and paying off my house during that time, since the market was soaring. I also was an idiot to invest 100% in equity funds for several years, though a lucky idiot. I should have bought a Corolla instead of a Camry Solara. I could go on and on. Retrospect is great. But it is possible to recover from mistakes if you just LBYM and keep doing the best you can with the money you save.

For me, what worked in 10 years starting at age 51 was:

(1) Get a job with modest 5-figure salary but good retirement benefits in an affordable location and and start living "like a student", on as little as possible while maxing out retirement accounts (these three things needed to be in place from the start). I had other job offers with better salaries, but chose federal employment because I was seeking job and retirement security.
(2) Pay off and destroy credit cards and other debt, traded in my junker car (worth $200 ) for a new Toyota paid for in cash; save up down payment for house and start looking for a house. (first 2-3 years)
(3) Buy a modest house, and pay it off (years 3-7)
(4) Build taxable investment accounts (years 7-10)

By year 8 I was already FI (at the level of LBYM to which I was by then accustomed) and just waiting for retirement elegibility and building my investment accounts. I had joined the ER Forum by that time since retirement was definitely on my horizon. As everyone here knows, during year 9 I came into an unexpected and substantial windfall although I was already financially independant before that happened.

My investment accounts have been solely in mutual funds, mostly index funds but some other diversified mutual funds as well. Is that the way to go? I don't know, but I didn't know beans about investing and I thought that would be a good way to diversify and spread out my risk.

I started my retirement accounts during the tech crash, and my asset allocation was almost entirely equity funds during the first five years or so (I figured I had to have b*lls of steel and take some very uncomfortable risks if I was ever to have any chance of ER). I lucked out as the market rose substantially during that time.Then I gradually transitioned to a very conservative asset allocation by the time I reached year 8 or 9.

The point I am trying to make is that LBYM, putting everything you can towards your goal in some manner, and blind luck with the market can compensate for a LOT of investment mistakes. This is especially true if you make a sincere effort to read and study at least a half dozen books from this list in order to learn as much as you can about investing.

[CuppaJoe]

Grandpa, the banker, had a one-line mantra: "It's not what you make, it's what you keep."

[cardude]

Went to college and got business degree.

Graduated in 1988 and couldn't get a real job. I begged a commercial real estate firm to hire me. They would not pay me a salary-- only a draw against future commissions. Worked for them for a year and only sold a couple of small apartment buildings-- barely enough to break even on the $1000/month draw.

My dad called me and said he was ready to get out of the car business. I got a job selling cars in HoustonTX to get some experience and made $4500 the first month in late 1999 selling Oldsmobiles. I did this for a year.

Worked for my dad and his partner for two years and learned all facets of the business, then bought my dad's 1/2 interest out. Business started really rolling and I made lots of money and bought my dad's partner out two years later. Made even more money and lived cheap and we saved about 75% of what I made. I plowed all this savings into the stock market in individual stocks. Got really lucky and made some money on Microsoft, Cisco and Intel in the tech boom and sold before the bubble exploded. Pure dumb luck. Put the rest into more conservative stocks (that still fell 50%!), but I think they will come back.

Had plenty to retire 2 years ago but procrastinated. Business failed this year and I lost damn near 50% of my portfolio recently but I retired anyway. So far so good.

Obviously I got lucky having a dad in a business that I could buy into. I have always said owning a good business was the best way to get rich, but I think it will be harder for years to come due to over regulation, higher taxes and struggling consumers.

[FurBall]

Quote:

Originally Posted by OAG It is IMO "what you spend" that is the most important "part" of the deal. Many earn a very good income but if you "grow into your income" you may "learn" to spend more than is prudent (and LBYM). Live for today but save for tomorrow.

Well said. I think that is the fundamental difference between those friends who are able to FIRE and those who are continually struggling and say they will never be able to retire.

[Alan]

Quote:

My investment road to FI

1. Education. Family close to minimum wage meant fees paid plus hardship scholarships to University meant parents did spend a penny. Graduated in EE and got a good job.

2. Perfect Marriage. Met girl from similar background at college on same course and funding (only girl on course) - married at end of Sophomore year and we both worked for the same company. Now in our 33rd year of marriage.

3. LBYM. Never had any debt other than a mortgage. No car for first 2 years of marriage, then crappy ones for next 2 years until we'd saved enough to buy a decent one.

4. Career Moves. Even with 2 young children prepared to move long distances and switch careers to get high income.

5. Prudent investing, nothing unusual. Pensions should cover 2/3rds of needs

Full disclosure: not there yet, still got 42 weeks before able to RE with pension and health benefits. My company is a 50/50 JV and one of the owners has filed for Chapter 11 this last week so still a chance pension could fall through, be delayed etc. Still plan to RE next year or ESR and cut back expenses if there are pension problems.

[Kabekew]

I got to FI by not investing... I never contributed to 401K's because I wanted to stockpile cash to keep my options open. Then I saw an idea for a business, started it part-time, and after about 7 years it was doing well enough to get my first big contract, which I financed with my cash stockpile. Then I spent all the subsequent income on hiring people and was able to leverage my way up. It was all self-financed and credit-card financed except for a $20K loan from my father. Made several million.

[dex]

Work
LBYM
Save
Preservation of capital
++++++
Understand:
Maximizing income
Minimizing expenses
Budgeting
Financial projections
Cash Flow
LBYM
Preservation of capital
Goal setting
Opposing social pressures

[Independent]

Quote:

Originally Posted by dex Work LBYM Save Preservation of capital ++++++ Understand: Maximizing income Minimizing expenses Budgeting Financial projections Cash Flow LBYM Preservation of capital Goal setting Opposing social pressures

This list works for me. (I'm assuming that "maiximizing income" refers to income from work, not from investments.)

Bogle says the biggest difference in retirement accounts comes from how much people save, not from how they invest.

I think one big variable is how you define "early". Some people think that means 59, others think it means 39. It seems to me that "39" requires that you go to some extremes on the list above, or win the lottery on some big investment.

If you have children and a mortgage, and think that "59" is a reasonable goal, remember that those expenses will (should) end some day. So you don't need to buy into the 80% rule.

[Alan]

Quote:

Originally Posted by Independent I think one big variable is how you define "early". Some people think that means 59, others think it means 39. It seems to me that "39" requires that you go to some extremes on the list above, or win the lottery on some big investment.

Unfortunately you won't know if you RE'ed early until after the fact. My Dad RE'ed at 60 and is still alive and mentally alert at 84 but my mother died at 62 so he wishes he could have RE'ed earlier (couldn't 'cos of defined Pension he needed). Similar story with DW's parents.

[CyclingInvestor]

Learn to be comfortable investing in stocks. Most of my friends (engineers, managers) had way too much in cash equivalents over the decades because their stomachs churned when they had 1-2 quarters of poor returns. As a result they are nowhere near retirement today.

Only have kids if you really want them. Incredibly expensive.

Try to keep work stress low. I usually had jobs (programming) I could do in my sleep, and never felt any performance pressure. I knew I had no management skills, so I refused to be pushed up that path.

[ziggy29]

Quote:

Originally Posted by CyclingInvestor I knew I had no management skills, so I refused to be pushed up that path.

High-five for that one. I'm exactly where I want to be on the corporate ladder: the highest rung below management.

In truth, there is no One True Way to FIRE, I don't think. But there are several characteristics that are common: one is a saving/investing discipline that doesn't waver, and another is a commitment to a simple lifestyle. Yes, it helps to be able to put 25% of your pay into investments for 25-30 years, but it helps just as much to learn to be content with less stuff, to get out of debt and stay out of debt, and learn how to live as cheaply as reasonably possible given your own situation.