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How do other VERY young dreamers plan?
Old 04-22-2007, 03:28 PM   #1
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How do other VERY young dreamers plan?

Just curious, how do the rest of you 20-somethings plan for retirement? If you're within 3-5 years of retirement, it's a lot easier to pick a date and start making preparations. It's a lot harder when you're just getting started.

When I first started w*rking a few years ago after school, I tried to plan my retirement down to the exact year I'd retire (about 20 years out at that time). I ended up depressed about how far away I was from reitrement and freedom. Since then, I've realized that it's nearly impossible to plan with precision that far out, and its frustrating to even try. There are way too many unpredictable (kids, long term market fluctuation, job changes, lifestyle changes, etc). Now, I just save every penny I can, invest it wisely, LBYM, and try to enjoy life as it goes along. I don't know if I'll retire at 35, 45, or 65, but I figure that if I am wise with my money as I go along, I'll be fine whenever I hang it up.

How do the rest of you young dreamers handle this?
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Re: How do other VERY young dreamers plan?
Old 04-22-2007, 06:28 PM   #2
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Re: How do other VERY young dreamers plan?

According to FIRECALC we think we'll be able to pull the trigger in 15 years (45 for me, 46 for DH). it may wind up being a few years longer for me if we decide to hang on for my pension for a bit of extra cushion--not a biggie as I enjoy my job and get plenty of leave. Our plan is to live on half our take-home, which fortunately is possible with our income and cost of living. once we get that process automated, our plan is to "save every penny [we] can, invest it wisely, LBYM, and try to enjoy life as it goes along." So I'd say we're doing the right things--or at least similar things. :-)
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Re: How do other VERY young dreamers plan?
Old 04-22-2007, 07:29 PM   #3
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Re: How do other VERY young dreamers plan?

save your pennies, live life and keep your eyes open. That's about all you can do. As you get closer you can start picking a date.
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Re: How do other VERY young dreamers plan?
Old 04-22-2007, 09:01 PM   #4
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Re: How do other VERY young dreamers plan?

Don't underestimate how quickly your frugal habits can pay off. I started planning our post-employment life before DH and I had even entered the workforce! We were both in grad school, with no debt but not much savings either. Our first jobs were in NYC, and we had what were low salaries by NY standards but unbelieveably high by our standards. We kept living a grad-school style life, rapidly accumulating savings. Bought a co-op in a gentrifying neighborhood, spending much less than we could "afford" (drove one agent crazy -- he eventually stopped calling when he realized he couldn't talk us into buying a more expensive place). Sold that apartment a couple of years later for more than double what we paid (unfortunately it is now worth 5x what we paid -- if only we had hung onto it!). Moved to China, lived on almost nothing, and now are weeks away from saying goodbye to working for others. Not quite ready to declare ourselves FI or RE-ing, but very close. Have a very large nest egg to nibble on as we figure out what the next few years will hold.

Total time to accomplish this? Less than eight years. Granted we have some unusual circumstances that others would be unlikely to run into, but the main thing was that we continued to live well below our means for the duration of our working lives.

Hang in there and hope to read your success story before too long!

lhamo
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Re: How do other VERY young dreamers plan?
Old 04-22-2007, 09:24 PM   #5
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Re: How do other VERY young dreamers plan?

Quote:
Originally Posted by lhamo
Don't underestimate how quickly your frugal habits can pay off. I started planning our post-employment life before DH and I had even entered the workforce! We were both in grad school, with no debt but not much savings either. Our first jobs were in NYC, and we had what were low salaries by NY standards but unbelieveably high by our standards. We kept living a grad-school style life, rapidly accumulating savings. Bought a co-op in a gentrifying neighborhood, spending much less than we could "afford" (drove one agent crazy -- he eventually stopped calling when he realized he couldn't talk us into buying a more expensive place). Sold that apartment a couple of years later for more than double what we paid (unfortunately it is now worth 5x what we paid -- if only we had hung onto it!). Moved to China, lived on almost nothing, and now are weeks away from saying goodbye to working for others. Not quite ready to declare ourselves FI or RE-ing, but very close. Have a very large nest egg to nibble on as we figure out what the next few years will hold.

Total time to accomplish this? Less than eight years. Granted we have some unusual circumstances that others would be unlikely to run into, but the main thing was that we continued to live well below our means for the duration of our working lives.

Hang in there and hope to read your success story before too long!

lhamo
Wow. Thanks for your story. The Cinnamon Girl and I do live a very frugal life, but probably not quite to the extent you did. She is four years out of grad school, and I am two out. We bought a house (which of course we couldn't do as students), but it is a very reasonably one (2 BR, 1 BA, less than 1/5 acre, etc.). We have not really splurged on anything, and, other than the house, still live similar to how we did as students. I don't imagine we'll be FIRE in 8 years, but who knows.

If I may, what unusual circumstances did you encounter??
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Re: How do other VERY young dreamers plan?
Old 04-22-2007, 09:47 PM   #6
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Re: How do other VERY young dreamers plan?

Well, moving to China is probably not high on most people's list of things to do to propel yourself toward early retirement! We were very fortunate in that our move to a radically less expensive location did not come with a salary cut. We kept earning our NY salaries, and even got a couple of raises, while our living costs dropped incredibly low (our average monthly spending has been around $2000/month for the last several years, but that includes $200 in insurance premiums, $200-300 in childcare costs, and several splurgey vacations a year). Our housing, utilities, insurance, and an annual trip back to the states for us and our two kids were all covered by the employer. Now it seems they will also be adding a schooling allowance. We live across the street from our office, in one of the nicest apartment complexes in town. Don't need a car. Childcare/housekeeping is incredibly cheap for what you get.

Oh, and most of our income is not subject to US income tax, due to the foreign earned income exclusion. We have not had to pay Chinese income tax yet for a variety of complex reasons I dont want to go into -- that is likely to change this year which is one of the incentives for leaving paid employment at this point.

We could not have done nearly as well if we stayed in NY. Childcare alone would eat up most of one of our salaries.

lhamo
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Re: How do other VERY young dreamers plan?
Old 04-22-2007, 10:18 PM   #7
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Re: How do other VERY young dreamers plan?

Quote:
Originally Posted by Niko
Now, I just save every penny I can, invest it wisely, LBYM, and try to enjoy life as it goes along. I don't know if I'll retire at 35, 45, or 65, but I figure that if I am wise with my money as I go along, I'll be fine whenever I hang it up.

How do the rest of you young dreamers handle this?
This is exactly what I do. The whole "how much do you need to retire" thing doesn't matter to me. I still vote in the polls, but when you have only 5 figures in your nest egg, there isn't much point in determining if you need 1mil to retire or 1.5. Just LBYM, and as you get closer, you'll learn more what you want out of life and what it takes to get there.

Btw, I'm about to go from your VERY young dreamer to Slightly young dreamer - 30 is right around the corner!
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Re: How do other VERY young dreamers plan?
Old 04-22-2007, 10:39 PM   #8
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Re: How do other VERY young dreamers plan?

Quote:
Originally Posted by NinjaPigeon
but when you have only 5 figures in your nest egg, there isn't much point in determining if you need 1mil to retire or 1.5.
Thing is though, all of a sudden it seems, you go from your stage to mine, early 40's, and you look at your account balance and realize that yes, yes, you're going to get there !! Finally the crest of that long hill you're pedaling up comes into view. It's still a little ways off, but at least you now know it's there.

Anyway to all you young dreamers, keep plugging away. Years down the road you're going to be 45,50,55, no matter what you do, so you might as well get to that point with a nice nest egg.

- John
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Re: How do other VERY young dreamers plan?
Old 04-23-2007, 02:58 AM   #9
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Re: How do other VERY young dreamers plan?

I max out all the roth accounts and try to save a little extra on the side. I also help my parents with their finances. At this point there's not too much else to do. You have to make it a habit and then one day you'll wake up and realize you've done very well for yourself.
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Re: How do other VERY young dreamers plan?
Old 04-23-2007, 06:51 AM   #10
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Re: How do other VERY young dreamers plan?

I wonder sometimes if it's best NOT to try to hone in on an exact date if you're still really far off. By that I don't mean to not plan for your retirement at all, but just don't try to work out every minute detail.

I'm about 9 years off, and have picked a tentative date of April 1, 2016, the day before my 46th birthday. However, if I try to focus on it too much, sometimes I'll get aggravated or depressed. So I just try my best to enjoy life along the way, save as much as I realistically can, but not sacrifice or wish away the present for a future that could very well be wiped out by death, illness, nuclear war, alien invasion, etc. :P
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Re: How do other VERY young dreamers plan?
Old 04-23-2007, 09:02 AM   #11
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Re: How do other VERY young dreamers plan?

Quote:
Originally Posted by lhamo
Well, moving to China is probably not high on most people's list of things to do to propel yourself toward early retirement! We were very fortunate in that our move to a radically less expensive location did not come with a salary cut.
How in the world did you luck into THAT (I'd be quite willing to move to china--just gotta convince DH)
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Re: How do other VERY young dreamers plan?
Old 04-23-2007, 11:11 AM   #12
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Re: How do other VERY young dreamers plan?

Am 26 and plan to retire at 28. Have already posted quite a comprehensive story at:

http://early-retirement.org/forums/i...?topic=12624.0

The keys to FIRE are maximizing income, minimizing expenses, maximizing investment returns.

All the best!
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Re: How do other VERY young dreamers plan?
Old 04-23-2007, 01:12 PM   #13
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Re: How do other VERY young dreamers plan?

Oh my this is funny. I just wrote a week long series of posts on my blog about trying to estimate retirement 16 years down the road.

Check out http://blog.canadian-dream-free-at-45.com and read the How Much Do I Need to Retire series Parts I to V.

It was written for a Canadian retirement, but the principles can be applied to any country. I know that it doesn't cover everything, but it at least puts the entire thing into the question "If I keep doing what I'm doing can I FIRE at 45, or do I have to push that back a few years."

At 15 to 20+ years out it is hard to predict anything, but ballpark numbers can be run to give you at least an idea.

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Re: How do other VERY young dreamers plan?
Old 04-23-2007, 01:27 PM   #14
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Re: How do other VERY young dreamers plan?

I'm not a VERY young dreamer anymore; I'm 38. But I still am a ways off from retirement.

The problem I'm having is that I have young kids (12, 7, 5). Child support and direct kid expenses account for well over 50% of my expenses. Mortgage interest expense and taxes take another third of the total easily. So roughly 17% of my expenses are just me, which I have enough in my FIRE stash to cover already.

If I save up until I can cover 100% of my current expenses, that will take me until I am about 50 or so. But by then my kid expenses and child support payments will be a lot lower, and my mortgage interest expense will be lower. So I will have over saved by a factor of maybe 2x.

So I can retire before 50, but by how much? I'll need a separate (logical if not physical) nut to cover my kid expenses for the years between FIRE and 50. If I FIRE all of my big expenses change in unpredictable ways, which could mean a 20-30% swing in what I need.

This is affecting me right now because I earn a decent living as an engineer but I don't like it any more. If it's only another six or seven years I might just smile, grind it out, and be motivated to build my FIRE stash even more. If it's closer to 11-13 years I might decide to switch careers into something I enjoy more but pays less.

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Re: How do other VERY young dreamers plan?
Old 04-23-2007, 01:36 PM   #15
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Re: How do other VERY young dreamers plan?

I'm 22, so I guess I'm a VERY young dreamer.

I don't have any specific dates, but I guess it will fall somewhere between age 35 and 45.

LBYM comes naturally to me, so I do it.
I try to learn as much as I can about finances and investments and I am aware of my money and how my decisions affect it.
I'm a soon to graduate Electronics Engineer, so I'll be bringing in a pretty high salary at a young age, saving most of it.
And I'm keeping my eyes open for entrepreneurship possibilities which can greatly speed my RE date.
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Re: How do other VERY young dreamers plan?
Old 04-23-2007, 02:11 PM   #16
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Re: How do other VERY young dreamers plan?

In my early 20s, I set FI goals, from "dream" to "very likely." The Dream goal was 30, and depended on dot com options, which didn't happen. In any case, I just keep saving. I've reduced my work load so working is as pleasant as it was in grad school.
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Re: How do other VERY young dreamers plan?
Old 04-23-2007, 07:31 PM   #17
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Re: How do other VERY young dreamers plan?

Quote:
Originally Posted by Niko
Now, I just save every penny I can, invest it wisely, LBYM, and try to enjoy life as it goes along. I don't know if I'll retire at 35, 45, or 65, but I figure that if I am wise with my money as I go along, I'll be fine whenever I hang it up.

How do the rest of you young dreamers handle this?
I made a spreadsheet and figured out I'd be FIRE in as little as 7 years (at age 33) with fairly average market returns, or with mediocre market returns, maybe 11-14 years. I have realized that I can't really narrow it down any more than that. All I can do is save what I can save, spend on the necessities and on things that bring value to my life, and let the automatic investments keep piling up.

The way I view expenditures now is pretty healthy. I've calculated that our net worth is increasing at a rate of $255 per day. In moderation, spending $10-20 on a toy (for me or my kids) or on a meal out really doesn't impact our net worth accumulation to a very high degree. If I spend an extra $100-200 per month on discretionary expenses that add the most value to my life, life goes from so-so to really enjoyable. The impact on my FIRE date is barely noticeable - maybe a few months? I'd rather have 7.314159 years working and enjoying life than 7 years living a less than enjoyable life and reaching my FIRE goal 0.314159 years earlier.
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Re: How do other VERY young dreamers plan?
Old 04-23-2007, 11:15 PM   #18
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Re: How do other VERY young dreamers plan?

Truthfully my advice would be to get some balance in your life rather than develop an obsessiveness about RE in your 20s.

I would say address your desire to LBYM, work out your financial plan, put it into operation then once a year do a review of your position. As you get closer to your goal check more regularly.

As someone who only has just over 12 months to go let me tell you it is a hard slog getting motivated on a day to day basis to go into the office so I would hate to be visualing 15-20 years ahead.

However, I applaud everyone in their 20s who has realised there is something better than working yourself into a grave and retiring at 65. I wish I had been that smart.

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Re: How do other VERY young dreamers plan?
Old 04-24-2007, 12:08 AM   #19
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Re: How do other VERY young dreamers plan?

I figured out at about 25 that I wanted to retire in my 40's. So I just LBYM and enjoy life along the way not scrimping but spending enough to enjoy while saving the max that I can and still live comfortably. It is a fine balance. I was constantly trying to think what exact age I could hang it up but now I am just trying to enjoy now and know that my 40's will be soon enough.
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Re: How do other VERY young dreamers plan?
Old 04-26-2007, 02:00 PM   #20
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Re: How do other VERY young dreamers plan?

Quote:
Originally Posted by eridanus
In my early 20s, I set FI goals, from "dream" to "very likely." The Dream goal was 30, and depended on dot com options, which didn't happen. In any case, I just keep saving. I've reduced my work load so working is as pleasant as it was in grad school.

I'm in a similar boat, just a little further down the road. I've been working full time for about 10 years and was exactly where you are now 8-10 years ago.
I've done analysis out the wazoo, but like you say, there are a lot of variables. The best thing you can do is sock it away as hard as you can right now. Make financially wise decisions, live simply and WELL below your means, and don't waste a dollar. Do all of that starting in your early 20's, and by the time you are married with kids, you will be well on your way.

That being said, perhaps one of the most useful exercise I have done was for an "investments" class I took in b-school. Basically projecting out wife, kids, college, cars, etc, along with the cost of living and inflation from now until death. It is hard to believe that a to maintain a $40,000/yr cost of living will cost $130,000/yr 40 years from now with just 3% inflation.

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