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Old 07-20-2014, 02:56 PM   #21
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Everyone is wired a bit differently, but what worked for me in the early days was to >not< concentrate at all on my savings/investment balance, and to automate the savings. The money came out of my paycheck automatically and went directly into MFs, I never saw it. That worked great.

If the retirement money is largely in equities (which makes sense for most people in their 20s-50s) then there will be ups and downs daily, monthly and yearly. Concentrating on the balance or on net worth, etc just brings angst.

What I did concentrate on was how much each dollar I saved each month would grow to by the time I retired, assuming historical returns. I think I assumed 7% or 8% real at the time, which I now think is too high. But adding just 10 dollars to my savings every month (at 8%, for 20 years) results in over $5,800 in the account. Now, that disregards taxes and inflation, but it's pretty motivational for a young pup. I just concentrated on maximizing the monthly investments (especialy when I got a raise--about 50% of it would go into retirement investments, so we never got used to spending it) and trusted the market to do the rest.

Reading this board should help a person to stay motivated, along with finding was to fight the spending "push" of our society. Having "hobby/fun money" allowances for DW and I also helped us avoid feeling deprived. If I wanted something big, I saved up my "fun money" for some months rather than dip into the checking account/retirement savings. It didn't kill me.
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Old 07-20-2014, 04:47 PM   #22
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One other thing I'd add that I've seen repeatedly, including with myself. When you LBYM, there seems to be a positive self-reinforcing cycle that revs up and accelerates progress toward FI. When your expenses are low enough and your cushion big enough, you can take more risks that make the climb to FI nonlinear.

There have been at least a handful of times in my work in the past four years where I took a risk by standing my ground on something that indirectly or directly affected my income or expenses. Ten years ago (perhaps even five), I probably wouldn't have had the courage to stand firm which would have cost literally tens of thousands of dollars a year. Those dollars are now increasing my net worth even further, which further increases my ability to stand firm, which can lead to more dollars... You get the idea. The key is to have the patience while things get going initially.
+1

LBYM isn't about no risk taking. It's about creating a solid foundation from which to take intelligent, high pay off risks. I've done it four times. I've batted 2-for-4. Because I built a strong foundation the misses haven't been disastrous and the wins have been huge accelerators.

A lot of people wonder how I've gotten so far in my career at a young age. It's particularly frustrating for the people who are smart, have worked hard and are actually good at what they do...but "they just can't seem to get ahead." What they're all missing is the big risks...and they don't want to admit that they've built a lifestyle and personal balance sheet that hampers risk taking.

As I've told a number of people, if a risky job move implicitly puts your house at risk, your much less likely to take that risk. If you could fall on your face and be fine for a while, you can take a leap when it makes sense.

During one risk that didn't pay out, I wound up taking a 60% pay cut...but my wife and I ran our house cash flow break even for 6 months on 40% of my previous salary. It was hard, but we were able to do it because we didn't have a pile of fixed expenses.

One of the risks that paid out resulted in a 3x increase is salary over a 5 year period. And of course, I held my lifestyle constant during that income ramp so we were able to accelerate our retirement planning by many, many years.

To the OP -- Stay focused and prepare yourself financially so you can make the risky move when warranted. Good luck!
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Old 07-20-2014, 05:27 PM   #23
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Someone already mentioned it upthread, but tracking our net worth diligently really helped me stay focused and convinced me that if I stayed on course with LBYM that ER wasn't only a possibility, but almost a slam dunk.

I will admit that as a childless couple with good dual incomes we saved at an extremely good clip over a ten year span. Each net worth update showed a lot of progress - by getting into a routine of tracking net worth, it kind of became addicting to see the numbers grow. We would be bummed when we made a big luxury purchase (fortunately a rare occurance for us) and our net worth progress would stall for a month.

Deep down, I always knew that I desired ER more than any sports car, boat, or any other luxury item that I could purchase. I knew that as net worth grew, ER was getting closer... I think at some point I grew a bit obsessed with net worth tracking, but it was a helpful exercise to help me get to ER by 42.
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Old 07-20-2014, 07:30 PM   #24
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Keep in mind there are two advantages to staying on track with socking away money.
1) your nest egg grows from the contribution and compounding.
2) you learn to be happy with a smaller budget.

The latter was probably a bigger factor in my ER than the former. Talking to coworkers when I gave notice they were shocked I could afford to retire. I told them my budget and they were shocked that I lived on so little. I pointed out that I was comfortably middle class despite maxing out the 401k (and catchup past 50), making huge extra principal payments to my mortgage, and pre-funding big contributions to the kids' 529s. With all that I was living on well under 50% of my gross. When I explained it to them, I saw a few lightbulbs go off.
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Old 07-20-2014, 11:29 PM   #25
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Most people agree that you need at least 25x your expenses in your retirement account but we really don't follow the math all the way to its logical conclusion. This means that any time you want to buy a $100 bottle of wine in retirement you really need $2500 in assets to provide that $100. Now think of the money zombies that upgrade their phone every two years for $200 when their current phones still work. They will need $5000 to provide the $200. This makes you feel like a $200 cell phone is quite luxurious. lol.

Any time you think about buying something, do this exercise in your head and decide if it is really worth it. This keeps me from buying a bunch of crap I don't really need.

To give credit where it is due I got the idea from Everywhere Once | Independent Travel Blog .
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Old 07-21-2014, 09:42 AM   #26
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There are two great ways to stay motivated.

1) Find and follow people who've already done it. Like, um, us perhaps. We used to be regular visitors to the ER Forums in the years before we pulled the plug to travel full time. That was more than four years ago. We've been on the road ever since and now run the travel blog Retirementguy1 linked to above (the article he's referring to is actually this one). There are plenty of people like us out there to look to for inspiration and motivation.

2) What helped keep us on the straight and narrow was a clear understanding of what all those possessions our friends were acquiring really cost. Not in terms of monthly payments, but in how those costs impacted our financial freedom.

Here's an example. A $3 daily cup of coffee is a pretty affordable indulgence for a lot of middle class folks. But when you think about how much you need to save to maintain that habit in retirement it looks a whole lot less affordable ($3 * 365 * 25 = $27,000 in retirement savings needed for coffee.)

After awhile, we started seeing everything in that way. All of a sudden, instead of seeing a fancy car, or a nice house, or the convenience of house cleaning, we saw mind blowing price tags. Those price tags were so totally unaffordable over the long term that it became obvious to us that our friends were setting themselves up for some hard choices down the road. They'll either have to dramatically cut those expenses or they can try to work until they drop and hope that bad health dosen't eventually force them to cut those expenses anyway. That's about how it's going to work for most folks who don't have a good pension.

When you start to realize how badly out of whack the Jones' finances really are, the desire to emulate them kind of melts away.
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Old 07-22-2014, 05:44 AM   #27
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I like to think in years, not only $$. Like, my spreadsheet tells me that I might reach (very) borderline FI in 14 years, and I'm in year 7 of my plan, that means I'm 1/3 there! Of course that is not even remotely true in terms of money, since the big financial gains will come only in the last few years, when compounding has taken over and we have gotten rid of the mortgage. But that doesn't mean the effort I put in today is any less valuable. After all, today's earning, saving and LBYM'ing lays the foundation for the latter successes (or so I hope).
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Old 07-22-2014, 10:19 AM   #28
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Another thing: As I invested in MFs, I tried to keep in mind that I was buying shares in real companies, that each dollar bought a tiny incremental % of a lot of companies. The value of these shares might go up and down, but I still owned .000002% of Caterpillar, etc. And a portion of the earnings of these companies would be mine every year--the folks working at these companies were working to fund my retirement. These shares I was buying were like little money machines, and the value the market assigned to them day-to-day didn't matter very much (though in the long term the value does matter). Ignore the daily/monthly/annual variations, stay focused on the long term.
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Old 07-22-2014, 12:55 PM   #29
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Staying motivated can be tough at times especially if you're living a deprived life. Personally I don't go to the extreme savings anymore (after my divorce so I may be jaded). Don't get me wrong I save as much as I can (fully automated direct deposits from paycheck to investments to bill pays) but yet I live comfortably (not lavishly) and spend on things that I feel create a decent living experience for me and the family. For e.g. I have one hobby (exploring/camping with the family) and I spend on it as needed whether it's an upgrade to our 4x4 or camping equipment. I don't see that as a waste of money but rather an investment because of the lifetime memories it creates. In contrast I gave up my Starbucks lattes and buying expensive watches/clothes and cable TV. The point is life is short and unpredictable so live a little too.
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Old 07-29-2014, 10:09 AM   #30
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Make sure you have a balance. You can't spend your whole life feeling deprived just to reach an end goal. Life is a journey. If you find that balance for yourself, it will be easy to stay on target.

Also - STOP comparing yourself to your friends. I can honestly say I have never felt like I wanted a more expensive car because I have friends who drive BMWs, for example. Be happy with your own life, and your own choices.
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Old 07-29-2014, 10:41 AM   #31
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Everything you buy, think on how much that delays your retirement in terms of money you will need in 25 years or so.

Spend $1,000 now, that's at least a month longer you have to work. Spend $20, that's another day. And so on.

Keep the faith.
Exactly. Whenever I spent money on anything that wasn't budgeted or was over budget, I consciously made a choice.

This $2,500 vacation is costing $100 per year for the rest of my life. This $7 cold stone sundae is costing $0.25 a year for the rest of my life.

Well maybe I wasn't that much of a killjoy, but you get the idea.
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Old 07-29-2014, 11:52 PM   #32
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Great advice everyone, I truly appreciate it! I might need to clarify that I don't exactly deprive myself of fun, I do eat out a bit more than I'd like and buy a reasonable amount of "fun" stuff for myself each month. The people I associate with live in the city so of course they're going to eat out more than I do since there's just so many more options than what I have available by me. But for everything they do they really are great people. I get to enjoy the boating on the lake for free, stay at their apartments when I go out in the city, and have great times doing stuff with them. Basically they buy the nice things and I get to enjoy it from time to time for free, which is probably why I want those nice things.

I went ahead and organized my retirement accounts to track the monthly or quarterly progress for them like some of you had suggested. It really does help to see some of the percentages go up each month since I started saving. Now if I could just figure out what my final number would be I could get a percent towards goal calculation and really get that motivation going...
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Old 07-30-2014, 05:46 AM   #33
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I think it's tough to be focusing on ER in the early stages of your career. I always tell people to find a career they love since they will be spending so much time at it. I had no desire to ER in my 20's or 30's. It wasn't until my 40's that burnout began to take place. It's best to find a way to really enjoy what you do, and others have said, find friends who also support LBYM so that you can enjoy some fun times together without spending substantial amounts of money.
+1

Don't focus so much on "ER"; focus on a career you love and want to get better in, as that is how you increase your earning power. As your earning power grows always "pay yourself first" - grow your spending lifestyle at a much slower rate than your income growth and save/invest the difference.
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Old 07-30-2014, 11:46 AM   #34
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Automatic investments into mutual funds. Decide how much you can afford to save each month while allowing yourself enough money to be happy, and then automate the investment. All mutual funds have means to do this. Find a book that advocates index funds (like Bogle's) and follow a moderately aggressive AA (80/20?)

Then, just forget about it for a year or until your next raise - then adjust it again. Ignore all stock market related news.

Worked for me. All the best.
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Old 07-30-2014, 04:29 PM   #35
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follow a moderately aggressive AA (80/20?)
Actually LOL at 80/20 being *moderately* agressive. Different strokes for different folks, I guess.
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Old 07-30-2014, 09:09 PM   #36
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Actually LOL at 80/20 being *moderately* agressive. Different strokes for different folks, I guess.
Well, if the investor is in his early 20's that is about right if one is going by "Your age in bonds and the rest in equities".
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Old 07-31-2014, 03:37 AM   #37
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Well, if the investor is in his early 20's that is about right if one is going by "Your age in bonds and the rest in equities".
It may even be the optimal allocation, but I would consider that "really aggressive". And I believe the OP to be a few years older than early 20s. But whatevs, everyone's risk perception is different. For me, "moderately agressive" is something like "slightly more stocks than fixed income".
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Old 07-31-2014, 11:43 AM   #38
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Actually LOL at 80/20 being *moderately* agressive. Different strokes for different folks, I guess.
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Well, if the investor is in his early 20's that is about right if one is going by "Your age in bonds and the rest in equities".
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It may even be the optimal allocation, but I would consider that "really aggressive". And I believe the OP to be a few years older than early 20s. But whatevs, everyone's risk perception is different. For me, "moderately agressive" is something like "slightly more stocks than fixed income".
I guess I have a much different perspective, to me 80/20 is too conservative for a young person. Should be higher equities IMHO. Use some lower cost mutual funds, have diversity between large cap, small cap and international. Maybe throw in some value type funds, or specific sector funds even. But almost no bonds, unless the person is too risk sensitive. YMMV
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Old 07-31-2014, 01:13 PM   #39
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Studies have shown those who possess and develop the skill of delayed gratification are those who will succeed in life.

A study out this week showed that 1/3 of Americans are delinquent on their debt--that's one out of every 3 people you see on the street. Think about that. Would you rather be you, or them (with all their debt financed "toys" and "lifestyle")?

At your young age, with your self-discipline and self-control you are ahead of most in this country (see study just mentioned), and perhaps in the world. One way to stay motivated is to be rightfully proud of the kind of person you are and the fantastic future that you are sculpting, shaping, creating by your actions right now.
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Old 07-31-2014, 01:20 PM   #40
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A study out this week showed that 1/3 of Americans are delinquent on their debt--that's one out of every 3 people you see on the street.
I saw that. Stuff like that never ceases to amaze me. Okay, some are in dire straights - layoffs, uninsured medical expenses, stuff like that, but that can't be a third of people.

It would be hard for us to get behind on debt. We don't have any to get behind on.
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