being frugal/saving vs investments
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ShokWaveRider
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I have always been on the Savings bandwagon. Frugal yes, but not so as it deprives you of life's pleasures.
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REWahoo
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Isn't this a bit like asking which of your children is your favorite? 
Unless you are in a truly unusual position, you can't have meaningful investments without LBYM.
In our case, investments have been huge addition--but LBYM came first, and enables us to retire with far from enough to spend 80% (or whatever) of our present income (no matter how measured).
In our case, investments have been huge addition--but LBYM came first, and enables us to retire with far from enough to spend 80% (or whatever) of our present income (no matter how measured).
Senator
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I have saved a LOT more than my investments ever returned. If I was not LBYM, I would not have been able to save as much, nor be able to leave my job.
My siblings have spent years discussing that same question.Isn't this a bit like asking which of your children is your favorite?
LuckyDog
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We have always been very big on LBYM without being cheap and always saved the max in 401K plus other savings.
But we were also invested in 100% stocks throughout all of the 80's, 90's, and 2000's (except when we pulled out before the early 2000's crash and got back in just before the recovery) until retirement.
The returns were great, but without the savings, the compounding would never been possible.
But we were also invested in 100% stocks throughout all of the 80's, 90's, and 2000's (except when we pulled out before the early 2000's crash and got back in just before the recovery) until retirement.
The returns were great, but without the savings, the compounding would never been possible.
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Savings is the key., investing is the door the key opens.
We could always save quite a bit if we chose. 10% of our salary was typical in early years, 40% or higher in later years.
Couldn't control return on investments but probably got 5-10% on average per year over the years. As savings pot grew larger, the absolute value of the investment gain was more important than our yearly savings but it never would have gotten there without the ongoing savings.
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We could always save quite a bit if we chose. 10% of our salary was typical in early years, 40% or higher in later years.
Couldn't control return on investments but probably got 5-10% on average per year over the years. As savings pot grew larger, the absolute value of the investment gain was more important than our yearly savings but it never would have gotten there without the ongoing savings.
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travelover
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Parents always love their children equally.My siblings have spent years discussing that same question.
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Bamaman
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We've always lived the frugal life in one way--and not frugal in others.
For example, my wife worked and she always took her lunch and drank water. I don't like anyone to help me do anything, including cutting grass and doing home and auto maintenance. If I don't know how to do something, I can learn on UTube.com. We seldom hire anyone to do anything for us.
We only eat out 1x most weeks, and even then it's at very inexpensive places. This one item allows us to travel to Europe most years--vs. what most people spend eating out. Small money saving measures really add up over time.
One of our close friend and his wife's whole social life was centered around going out to eat--mostly to medium priced restaurants. Money that they should have been putting into IRA's and saving for a rainy day was going into their stomachs. Fred's MegaCompany went bankrupt and liquidated, and he wasn't fiscally prepared for unemployment. Then he had a brain aneuryism and was off work 6 mos. or longer. They had to cash out 401K's prematurely, and now Fred's unprepared to ever retire. He does look at all his savings daily--when he tries to see his feet.
For example, my wife worked and she always took her lunch and drank water. I don't like anyone to help me do anything, including cutting grass and doing home and auto maintenance. If I don't know how to do something, I can learn on UTube.com. We seldom hire anyone to do anything for us.
We only eat out 1x most weeks, and even then it's at very inexpensive places. This one item allows us to travel to Europe most years--vs. what most people spend eating out. Small money saving measures really add up over time.
One of our close friend and his wife's whole social life was centered around going out to eat--mostly to medium priced restaurants. Money that they should have been putting into IRA's and saving for a rainy day was going into their stomachs. Fred's MegaCompany went bankrupt and liquidated, and he wasn't fiscally prepared for unemployment. Then he had a brain aneuryism and was off work 6 mos. or longer. They had to cash out 401K's prematurely, and now Fred's unprepared to ever retire. He does look at all his savings daily--when he tries to see his feet.
Frugal but balanced
We have always lived as savers, lived fairly frugally, but also balanced. We have taken some of the most expensive vacations with family in the past ten years, but also not had the most expensive cars to drive. We set our retirement goals with a combination of saving and predicted (hopeful) investment returns and kept living our lives to the fullest. We never wanted to save and scrimp so much that we had regrets later on for what we missed. On track to FIRE late this year.
But I was a saver decades before I was an investor, so there....
We have always lived as savers, lived fairly frugally, but also balanced. We have taken some of the most expensive vacations with family in the past ten years, but also not had the most expensive cars to drive. We set our retirement goals with a combination of saving and predicted (hopeful) investment returns and kept living our lives to the fullest. We never wanted to save and scrimp so much that we had regrets later on for what we missed. On track to FIRE late this year.
But I was a saver decades before I was an investor, so there....
You may want to put this in separate thread....
Anyway, we do. Reduces debt on the balance sheet. And serves to reduce future spending.
DrRoy
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I think it really requires both. You need to be frugal to have money to save, and to be able to live off of your own means without a paycheck. You also have to invest to build on your savings. Of my current financial assets, 3/8 of it is what I saved and 5/8 is return on that over time.
FI by 2024
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Saving > investing in most cases.
Take two people each earning 100K. Assume for the purposes of this example both put their money away on Jan 1st each year and don't add another dime all year.
Person A saves 20% and gets a modest 7% annual return = $21,400 at the end of the year.
Person B saves 10% and gets a nearly-impossible-to-achieve 100% annual return = $20,000 at the end of the year.
Saving more gets person A a higher total than person B.
A more realistic example of DCA and variable returns will result in different end of year totals, but the concept is the same. Saving more is generally more important and more likely to result in higher totals than the best investors in the world can hope to achieve.
Take two people each earning 100K. Assume for the purposes of this example both put their money away on Jan 1st each year and don't add another dime all year.
Person A saves 20% and gets a modest 7% annual return = $21,400 at the end of the year.
Person B saves 10% and gets a nearly-impossible-to-achieve 100% annual return = $20,000 at the end of the year.
Saving more gets person A a higher total than person B.
A more realistic example of DCA and variable returns will result in different end of year totals, but the concept is the same. Saving more is generally more important and more likely to result in higher totals than the best investors in the world can hope to achieve.
Sojourner
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Being frugal and saving a large chunk of your income is obviously a major part of getting to FIRE, but it's pretty unlikely you'll be able to do it without making sound investments along the way. For example, someone who's 25 y.o. and whose household income is $100K might decide to save 30% of their income every year. (I'm ignoring taxes for simplicity, but the principle is the same.) So, each and every year they put away $30K into their retirement nest egg and live off the remaining $70K. This, in itself, is a pretty aggressive savings plan, one most people would have trouble pulling off. Yet, if they don't invest that $30K/year wisely, then by age 55 when they might be thinking of early retirement, they will have only amassed around $900K. Considering they have been living at a $70K/year standard for many years, this $900K will only provide about 12-13 years of living expenses. Not exactly what most people would consider a rosy or secure retirement outlook.
So, moral of the story is you need to save aggressively and make sound, consistent investment decisions to get you where you want to be. The only exception to this would be if you're making a ginormous income (say, $500K/year) and can save like 90% of that and live off the remaining 10%. If you can do that for 30 years, then investment is probably less of a factor.
So, moral of the story is you need to save aggressively and make sound, consistent investment decisions to get you where you want to be. The only exception to this would be if you're making a ginormous income (say, $500K/year) and can save like 90% of that and live off the remaining 10%. If you can do that for 30 years, then investment is probably less of a factor.
Big_Hitter
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agreed
ESRwannabe
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I'm not 100% FIRE yet, I'm like 75% of the way there. Anyway brute force saving has been the most important so far. Investment returns take a long time to ramp up. Now my investment returns are finally significant, but it took about 10 years of saving to get to this point.
I live on less than 50% of my w-2 income and my investment returns are now almost equal to what I am able to invest from savings.
I live on less than 50% of my w-2 income and my investment returns are now almost equal to what I am able to invest from savings.
dunkelblau
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For me the answer depends on the basis for making the comparison. My savings rate ramped from about 30% of pretax income three decades ago to about 60% now, during which time my net worth CAGR was about 10%. If my net worth CAGR had been 3%, today it would be about 40% of what it actually is, so from this perspective investments had a somewhat larger impact dollar-wise. But since the S&P500 CAGR over this timeframe (including dividends) was also 10%, my investment return was only average and it was my elevated savings rate that set it apart.
I think because my actual savings rate combined with average stock market returns (at a typical 50:50 asset allocation) would have far outrun a typical savings rate combined with my actual investment returns, I would say the bigger impact for me was from savings.
We did something similar, but in a different order.
When we got married (late), we knew we wanted children and we may need to live on one salary for awhile. So we set our living standard on just the one salary, the other was saved/invested for two years until first son was born.
We then had a custom built home done, 2700 sq ft. We decided we didn't want a mortgage hanging over our heads so paid cash for the construction. Wife stopped working/retired. We were both engineers.
Two more years later I was offered an early retirement package. The pension was about the same as we were accustomed to living off of (we were still saving 20% of my salary as no mortgage to service).
So not having a mortgage and LBYM lifestyle enabled me to accept the early retirement offer at age 50 with a 3 and 1 year old boys (hence my handle).
Fast forward 16 years, net worth is 2 and half time what is was, boys are finishing high school, I've been the soccer dad for all of my retirement (with minivan).
The savings and LBYM early have fed investments to the point where we have been very comfortable.
FIREd_2015
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Definitely investments. Without the savings and being frugal I would not have had the money for the investments but without the investments I would not have been able to FIRE. I did a quick calculation and my lifetime investment returns to date are about 4 times greater than my lifetime salary earned.
Dog
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DH and I have lived pretty frugally. We have never deprived ourselves or DD, but never felt compelled to have the biggest, latest, greatest either. I was in sales for about 10 years of my career and had some substantial bonus checks during this time that we saved/invested rather than buying a new car, upgrading to bigger home, diamond jewelry, designer clothes, etcetera. We do our own maintenance and chores rather than hire someone to do it (there is satisfaction there). We are now retired (both 58), have no debts and have a sizable nest egg thanks to being frugal and saving. I think being frugal was the key to our early retirement.
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Isn't this a bit like asking which of your children is your favorite?
LOL, whichever one was not driving me crazy at the time.
for hubby and I it was lbym and investments. since he started his own business and I was a stay at home mom, there wasn't much saving going on until the kids got into school and i went back to work, which was around our 30's
I also think there is a comfort level to take in consideration, many folks won't retire until they pay off their mortgage. that wasn't a requirement for me.
As far as spending, some life tragedies have cured me of that.
2013 wonderful husband died at 55
2014 awesome baby brother dies at 50
april 1 2016 best friend jo, dies of massive heart attack. 56 years
I can't take it with me so I no longer feel guilty when I fly first class or stay in a luxury hotel. My new car, yep it's a luxury car. now I got a great deal and I'll keep the car for at least 10 years but I don't feel guilty anymore for spending the money.
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old woman
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I started late but saved about half and got investment returns of about half. In the future all investment returns since it is supporting me now.
