My FIRE cliffnotes

[audreyh1]

I hear this a lot. Not really clear what it means exactly. If it’s LBYM makes sense. Is it something else?

I thought it meant to automatically put something aside from your paycheck into savings or retirement before the rest gets spent on everything else.

Yep - that's what Investopedia says: http://www.investopedia.com/terms/p/payyourselffirst.asp

 

[UnrealizedPotential]

Learn about investing in every way you can. Looking back when I was 30 , which was 17 years ago, I thought I knew a lot. The reality is that I knew very little. You can't learn everything in a short time. Some will learn faster than others. Learn and get better over time.

Learn how to take advantage of opportunities. Learn how to recognize an opportunity when it presents itself and then act swiftly because good opportunities don't come along often or last too long. It's harder to do this than it sounds, but if it works the rewards are tremendous.

 

[Onward]

Plastics.

 

[Danmar]

I thought it meant to automatically put something aside from your paycheck into savings or retirement before the rest gets spent on everything else.

Yep - that's what Investopedia says: Pay Yourself First

So basically LBYM? Why they would come up with something as obtuse as Pay yourself first” is beyond me. Sells more books I guess.

 

[Totoro]

Small difference: it's about putting aside money before you start spending in that month. It is a way to enforce LBYM more easily.

It sounds better too vs. : of every paycheck put some amount in savings first.

 

[travelover]

So basically LBYM? Why they would come up with something as obtuse as Pay yourself first” is beyond me. Sells more books I guess.

I think the "first" part is critical for the undisciplined. I know many who will start saving "when they have a little extra". They never have a little extra.

 

[Gumby]

1. Work hard. You can start by just showing up every day and staying until quitting time. Many people can't or won't.

2. Make your own luck. You need to actively look for opportunities to improve yourself and be prepared to seize the ones that come along.

3. LBYM. Always be aware of your spending and make sure it is less than your income, however large or small that may be. Keep saving more and more as you earn more. Avoid lifestyle creep.

4. Invest boringly. As in baseball, on base percentage matters more than hitting home runs. Go for boring, no-load, balanced mutual funds. Buy on a regular schedule no matter what the market is doing. Don't sell until you retire.

 

[audreyh1]

So basically LBYM? Why they would come up with something as obtuse as Pay yourself first” is beyond me. Sells more books I guess.

Perhaps. But there is more to it then just LYBM. It's enforcing it at the very beginning by making that chunk set aside invisible. A way to manage lifestyle creep I suppose. I think there are folks who can't discipline themselves without such a mechanism.

 

[brett]

Think outside the box. Don't always follow the crowds and do not be afraid to go against the norms.

Be brave. Stretch yourself wherever possible. Do it sensibly. Don't remain in your safe zone. Grow into opportunities. And bring others along with you. Never stop learning and apply those learnings. And never be shy to admit that you don't know something.

Don't be afraid of failure or rejection. It is a learning experience.

Trust but verify. In God we trust. All others pay cash.


That, plus everything that others have said.

 

[Meadbh]

I hear this a lot. Not really clear what it means exactly. If it’s LBYM makes sense. Is it something else?

The concept is very well explained in David Chilton’s The Wealthy Barber. Basically, you determine how much you can save every month and set up automatic transfer of that amount to savings/investments. You do this before spending any of your monthly income. That way, you will never miss it.

 

[sheldon cornped]

Use it up.

Wear it out.

Make it do.

Or do without.

Oh, and save regularly.

 

[Danmar]

The concept is very well explained in David Chilton’s The Wealthy Barber. Basically, you determine how much you can save every month and set up automatic transfer of that amount to savings/investments. You do this before spending any of your monthly income. That way, you will never miss it.

Thanks and to others as well. I don’t read those kind of books so I guess I missed out. Makes some sense although I don’t really see how that is “paying yourself”. But nevermind.

 

[ocean view]

Start saving with your first job.

Don't spend those savings on temporary gratification.

Increase your savings percentage with every pay increase.

+1

And set up direct deposit to savings as well as checking.

 

[pb4uski]

Live Below Your Means.... I did always pay myself first when I was young... I had savings programmed and felt free to spend the rest.

Save and invest regularly... in no-load, low cost equity index funds... remember, slow and steady wins the race.... if the SHTF don't panic... stay the course.

Increase your savings for 1/2 of any raises or bonuses... spend the rest if you wish to.

Even if you're "only" an employee, think and act as an owner... you bosses will appreciate it and the rewards will follow.

 

[Meadbh]

Thanks and to others as well. I don’t read those kind of books so I guess I missed out. Makes some sense although I don’t really see how that is “paying yourself”. But nevermind.

As a banker, you were not the intended audience for Chilton’s book. It was aimed at people starting out who wanted FIRE but didn’t have a lot of financial expertise. I read it soon after it was first published in 1989. It was fun to read and at that stage in my life, it was quite helpful. I lent my copy several times. It has sold over 20 million copies, so obviously others find it helpful too.

 

[timemoveson]

1) Understand your spending
2) Understand your income streams (SWR, SS, Investments, Other Income)
3) Learn all you can about investing
4) Be flexible and realistic in your planning
5) Keep checking-in to this forum (seriously)

If you get #1 nailed down, everything else falls into place with simple math.

You nailed it

 

[Danmar]

As a banker, you were not the intended audience for Chilton’s book. It was aimed at people starting out who wanted FIRE but didn’t have a lot of financial expertise. I read it soon after it was first published in 1989. It was fun to read and at that stage in my life, it was quite helpful. I lent my copy several times. It has sold over 20 million copies, so obviously others find it helpful too.

Yes, I know and agree. But I am always surprised that so many people are so clueless about financial topics that I find obvious and self evident. I guess that’s why I was such a good banker?

 

[Totoro]

Most people can't do basic algebra, let alone understand the %-function.

That's understandable too: our brains primarily have a social and mobility function, not a calculating function. Engineers, bankers, mathematicians, programmers etc .. are byproducts of nature in my view.

 

[Sittinginthesun]

Yes, I know and agree. But I am always surprised that so many people are so clueless about financial topics that I find obvious and self evident. I guess that’s why I was such a good banker?

Danmar I read his book in my early 20's. I was a clueless college dropout who wasn't getting anywhere financially. The whole "pay yourself first" rang clear with me and I started putting 10% of my very meager paychecks into bank mutual funds. Quite a few things from that book changed the way I thought about money.

Fast forward 25 years and I am a self-made multi-millionaire who will earn about $700k this year who still credits that book and "pay yourself first" for getting me started.

 

[Danmar]

Danmar I read his book in my early 20's. I was a clueless college dropout who wasn't getting anywhere financially. The whole "pay yourself first" rang clear with me and I started putting 10% of my very meager paychecks into bank mutual funds. Quite a few things from that book changed the way I thought about money.

Fast forward 25 years and I am a self-made multi-millionaire who will earn about $700k this year who still credits that book and "pay yourself first" for getting me started.

That’s great. Congrats. Obviously ii was a worthwhile book for you. Are your high earnings from employment or investments?

 

[nash031]

Someone else mentioned it, but in addition to LBYM and investing, having a plan for raises or bonuses has helped me. Every raise and bonus, I’m committed to increasing savings by at least half of the value. This adds up over time, increases your savings rate over time, and helps control lifestyle creep.

 

[Sue J]

Most important - LBYM and SAVE the extra.

Be content with what you have (and can pay for) rather than wanting what everybody else has.

Stay out of debt.

 

[l8_apex]

The only thing that I can add is that I've been really surprised at the number of people in their 40s-50s who have no idea how much money they'll need in retirement. I'm referring to people in Silicon Valley - people with high paying jobs who also have enough equity in their home (1 mil, 2 mil) to fund most of their retirement. They won't sit down and figure out when their retirement budget would be, they seem to prefer to just work until 62. This is despite telling me that they're jealous that I retired early.

So I'd just say the key is an awareness of current/future spending and saving. That awareness helped me bump up my savings for the decade prior to ER

And... developing a savings/investment/spending/taxes spreadsheet to run simulations of different investments. That convinced me to go along a route similar to 97guns - buy residential rental properties to achieve ER. Despite the stock markets strong performance, my real estate has vastly outperformed it (due to being able to use mortgages/refis to leverage purchases)

 

[Meadbh]

Yes, I know and agree. But I am always surprised that so many people are so clueless about financial topics that I find obvious and self evident. I guess that’s why I was such a good banker?

There was a reason they paid you the big bucks, eh!

 

[Danmar]

There was a reason they paid you the big bucks, eh!

I guess. I always had a good head for financial stuff. I realize this isn’t a universal trait.