MMM, lots of people here and over at /r/personalfinance follow the "Throw as much money in index funds as often as possible and never look back" mantra, where market timing is looked down upon.
But I just finished "The Intelligent Investor" by Benjamin Graham, and saw that his guidance on value investing matches some of the stuff you said in the early days (How To Tell When the Stock Market is on Sale).
So the Question: Do you still shift your asset allocation as P/E ratios get higher or lower? Are you currently reducing equity exposure and increasing alternative assets (bonds, commodities, real estate equity, etc) since P/E's have gotten above 26?
>Really a demographic story more than a wealth story
Sounds to me more like an inflation story. The Millionaire Next Door was published in 1996. That 1996 millionaire is equivalent to $1.57M today due to inflation.
A million dollars ain't worth what it used to be...
A related book that just came out takes the same idea but for time: "Does the way we spend our time [particularly in the digital world] reflect our values?"
It's Digital Minimalism by Cal Newport. Definitely recommended.
The main issue a lot of people have with Kiyosaki is to him he writes "inspiration tales" but then tries to pass them off as more of an instruction manual.
His work is engaging and an easy read, but the principles he uses aren't too sound for todays world.
There's tons of get book recommendations over on the side bar (https://www.reddit.com/r/financialindependence/wiki/books)
The single best book, to me, is Your Money or Your Life.
I second what grumbleor said...
In addition to all the good stuff you said, though, the OP basically admitted to having no hobbies or interests outside of work...he admits that he works through the weekend. In other words, all our CEO friend knows is work and achievement...dude most likely lacks a concrete plan as to what he'd do if he didn't have a job to go to.
To the OP: If you see this, it's not every day I give advice to CEOs, but here goes -- you most likely have a copy of Tim Ferriss's The 4-Hour Workweek. You've most likely read it. If you don't have a copy, well, you can afford one. Read chapter 15 -- "Filling the Void," page 287. If you take it seriously, it's going to change your whole outlook.
Also, your kids are much more adaptable than you think...more so than you, most likely...not that you'd necessarily have to move out of Manhattan or the Bay Area or whatever HCOL area you live in, if you FIREd...I'm confident you could afford to stay put. Also, since you are considering your kids in all this, they'd probably like to spend more time with their dad...they're not going to be little forever.
Also, since you're a CEO, there's probably a clause in your contract about receiving a Golden Parachute upon separation from your company. You should read How to Engineer Your Layoff by Sam Dogen (Financial Samurai).
have you read "The Millionaire Next Door"?
you don't hear about the non-blogging FI-ers because they... aren't... blogging...
I'm also not sure what is "ideological" about FI, or what there is to be skeptical about.
if you save enough money you dont have to work any more. examples: every wealthy person who is retired
> Your Money or Your Life
thank you for tipping me off to this. Was not familiar with it, but after some research, this ends up exactly right. With an esier job, even if I make less, I will (hopefully) plan meals and cook for myself, thus lowering both fast food costs and future health care costs. De-stressing activities as work-related costs: also not a concept i'd considered, but definitely. My spending is much less disciplined when I am exhausted/stressed. Also, total work time = work hours + COMMUTE HOURS + HOURS NEEDED TO PREP CLOTHES/DRESSING + UNWINDING TIME!!!!
Mind = blown.
Thank you, this really changes the perspective on this decision.
Hey, I can understand how that frugality mentality can be tough to shake. I struggle with it sometimes too.
What I came here to say, though, was you can get a custom made mouthguard for like $150 on Amazon. It’s made by the same type of lab that your dentist would send it off to to get it made.
How do I know? My dentist wanted to charge me like $650 cause insurance wouldn’t cover a replacement after my first one was old and nasty. Frugal me said heck no and found one that was just as good for a fraction of the cost. FSA covered it too so it was more like $75 :).
Not sure if I can link to a specific product, but PM me if you want the name of it.
EDIT: I’ve gotten tons of PMs for the mouth guard I got from Amazon so I’m gonna say it’s the one by J&S Labs and hope that’s not against forum rules. Who knew mouth guards were so popular ����♂️?
There’s a lower and an upper guard you can buy. I got the upper.
Now we’re all a little closer to FI with perfect teeth to go with it ��.
The Millionaire Next Door came out in 1995, when the interest rate on a 30-year fixed rate mortgage was 8%. That rate is around 4% right now. So buying more house was comparatively twice as expensive back then as it is now as far as dead loss on interest goes. Adjusting the rule to current economic conditions, you end up with something closer to "Don't buy a house that's more than four times your income".
I recommend reading "The Millionaire Next Door", it goes it to more detail about the spending/saving/investing habits of the ~~average~~ most millionaires in America. Living in a culture that prioritizes spending it's not surprising those who do the best financially go against the grain, and are also frowned upon.
Can I recommend a book, "The Subtle Art of Not Giving a Fuck". It's an entertaining introduction to some of the concepts that helped me with these issues.
When I click your provided link; I get an expensive book.
But searching for Amazon on the same title, I came across this much less expensive version.
I think the following book basically goes to the point you are trying to make:
I've had mild depression and social anxiety much of my life. I found unhealthy ways around it for a long time and got to a mildly successful position, but I never felt fulfilled and I never felt true connections with other people. I thought I disliked other people, too. I can tell you with a mild degree of confidence that financial independence will not solve your problems, in fact, it's just another unhealthy way of trying to escape them that is socially acceptable (kind of). I found my entire view of my life and self worth improved when I read "Feeling Good" by Dr. David Burns and did all the exercises in "The Feeling Good Handbook" that you can get to accompany it. I also learned how to start making real connections with other people instead of superficial ones. I'm sure you can find a PDF online or pick it up at the library to stay FI about it.
Here’s what I recommend and it’s mainly personal relationship advice. Go through the book called 1001 questions to ask before getting married. Amazon link: https://www.amazon.com/dp/B005K8H0U0/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1
It’ll take a couple multiple hour sessions to get through and there are sections hat you can probably skip because it’s your first marriage and you guys aren’t felons. Anyways, you need to be on the same page with a lot of things and this book will help you get there. It will force you to have the difficult conversations you need to have to find showstoppers or things that need to be worked out now. Not everything needs to be resolved of course but it gets many issues out of the way so that you aren’t overwhelmed with issues during your first year of marriage. It is also serves as great practice to seeing if you guys can resolve conflict.
That said I think you know you can’t marry this person and i don’t think you can expect this person to change. You have financial goals that she will probably never understand. And it sound you aren’t completely out of the honeymoon phase of the relationship so you really should listen to what people are saying here. Her lack of work will lead to friction between you guys. It’s inevitable. I feel that marrying this person would be like marrying a child.
And what if you have kids. She doesn’t sound like someone who is going to go the extra mile for your kids if she can’t even hold down a normal job.
"Pay yourself first" is from one of the oldest wealth building books, The Richest Man in Babylon. This is the advice that I think helped me the most.
Start small and you won't even miss it. Increase bit by bit until it hurts. When you get a raise, increase your transfers, not your lifestyle.
sleeping with 5 blankets and jackets is brutal. I live in a cold climate and a couple years ago I bought an electric mattress pad. I put it on a wifi outlet and it comes on at 9pm and turns off at 5am. My home's heat drops down to 50 at night and comes back on in the AM.
This is amazing, it costs about $2-3 a month to power the heated mattress pad & you'll be nice and toasty all night. Makes no sense to heat the whole house while you're sleeping - but don't punish yourself either.
This is what I recommend: https://www.amazon.com/Biddeford-5902-908221-100-Electric-Heated-Mattress/dp/B000JI3GYU
I remember reading an article about FIRE a few years back, when I first read Your Money or Your Life. The author said something to the effect of
"Early Retirement may make you miserable. That's because right now you aren't chasing your dreams, and you can blame your job. Once that excuse is gone, will you really chase your dreams? Or will you be miserable because you've never really had dreams you wanted to chase?"
Small victories: A few months ago I was only contributing 6% to my 401k (up to the employer match) and spending $200/month in gas driving my car in to work. Today I've worked my way up to 15% contribution to my 401k, gearing up for 20% by the end of the year. I stopped driving into work and started taking the metro. My employer pays for half of my month long metro pass so I only pay $50 total for transportation each month. All the time I have sitting on the metro has given me an opportunity to read more. Instead of buying books, I've been checking them out from the library. So far I've read, "The Millionaire Next Door," "The Four Pillars of Investing," and "Your Money or Your Life." The past few months have been transformative and I feel like I'm getting on the right path and finally have a game plan.
> Is everyone who already retired early or is planning on retiring in say their 30's-40's still carrying health insurance?
Health insurance isn't really about saving a few bucks on a doctor's office visit or even a quick trip to the emergency room. It's for the stuff that can set you back hundreds of thousands of dollars. I don't know many people who can take that kind of hit.
Being FI does, however, mean that you can afford a higher deductible and save on those premiums. Lots of options on https://www.healthcare.gov.
Health insurance is just another expense. You aren't FI unless you can afford to pay for it along with any reasonable healthcare expenses.
No, I am more interested in privately holding properties in IN and my hometown in AL.
That one is still a work in progress. Getting very close to pulling the trigger on my first property, though.
One of the more useful books I've come across is:
I'm currently living in Kazakhstan. I do a little bit of part time consulting as a web developer. I only need to work a couple of days per month to afford a pretty nice apartment, groceries, internet, etc. Emergency care (ambulances) is free, going to a doctor is cheap and very good. I've experienced better care here, than I did in the US. The personal tax rate is a flat 10% for residents. Here's some more info about the cost of living.
You can definitely feel the difference between here and San Francisco, where we used to spend $3,200 / mo on a 1BR apartment.
Of course, it's not all positive. Here's a couple of the downsides, which you'll probably experience in other foreign countries. No english movies in theaters, so I have to wait a couple of months before I can see Interstellar and the Hobbit. Drivers are pretty crazy. Infrastructure is lacking - roads, sidewalks and buildings are generally in pretty bad shape. Seasons are brutal (down to -40F in winter, up to 104F in summer.) The government and police force are pretty corrupt, but you don't have to deal with them too often. Also, I'm from New Zealand, so I miss our beaches and forests.
But for someone who doesn't drive or go out too much, it's not too bad. It also makes it easy to save up and do a lot of travelling.
You'd probably enjoy the book Predictably Irrational by Dan Ariely. He touches on a lot of human behaviors and how marketers tap into them with things like this.
The one (similar) example that stuck out to me is that say a company sells blenders. They start with one model priced at $75. They don't sell many. Next they introduce another high end version for $140. They don't sell many of those either, but they start selling a lot more of the $75 because that automatically seems like a better deal. And then they add one at $85 that's slightly better. And since it's "only" $10 more than the low end model, they sell many more of those.
Probably poorly explained above. Read the book instead. :)
This subreddit FAQ, Your Money or Your Life and Millionaire Next Door.
I avoid MMM and ERE for new people because I find that telling people to suddenly increase their saving by 1000% just sounds crazy to them. If you save 5% of your income and feel like you are struggling someone telling you to save 50% sounds delusional.
I generally rarely talk about financial independence and more about financial responsibility. I helped few people at my work to set a plan to get rid of debt and then set emergency fund.
I think it's much easier to tackle FIRE one step at a time as people mind slowly opens.
It's a simple steps. Let's get rid of debt > since you have all that money flow now why not build EFUND > hey setting EFUND was easy why not contine to save a bit more so your retirement is better > saving is going great did you know that if you increase it a bit more you could actually cut few years of retirement?
Those are in my opinion best steps I look at FIRE a bit like looking at fitness.
FIRE is equivalent of going to gym 4 times a week running other 3 times a week and having perfect diet. When you have obese guy starting you just encourage him to take it slowly fix his diet and go for daily walk, when he stick to that you changet walk into a jog and then maybe a jog to they gym. You don't set fat guy for failure by expecting him to run marathon on day one. Neither should we set spenders for failure by expecting them to go from 0% SR to 50%+ in a space of a month.
I really like YNAB (https://www.youneedabudget.com/). It's a $5 a month budgeting tool, but also lets you add your investment accounts and track your net worth.
Do you budget right now? If not, it's really one of the best things you can do on your path to FI. YNAB will help you:
You'll basically set up a bunch of categories (groceries, rent, bars/restaurants, electric bill, etc) and when you spend money it goes against what you've budgeted for the month for that category. What's nice is that it's flexible, so if you overspend on one category you can just take money from another category to cover it.
What's really great is how it helps you save up for expenses that come every few months. Let's say your car insurance is paid every three months. You would set up a Car Insurance category and put 1/3 of the amount you'll owe for each of the three months leading up to when you have to pay it. This is really helpful and will make expenses like that hurt a lot less.
If you're interested, sign up for the free month trial, then watch a webinar or one of their videos on how to get set up. It will probably take an hour to two to get it going, then a few minutes every day to update and manage.
After using it for a bit, you'll wonder how you ever got by without it.
> reduce clutter in the house and trend towards r/minimalism
Please consider reading Marie Kondo's book "The Life-Changing Magic of Tidying Up: The Japanese Art of Decluttering and Organizing". Changed my life in terms of decluttering.
Honestly, it was the first thing that got me thinking of financial independence. The "rat race" is a great analogy.
Beyond that, I've not found it to be too useful. The story is widely debunked and the secondary marketing appears to be a scam.
I really recommend "The Millionaire Next Door" as a follow up.
Quote from The Millionaire Next Door:
"Have you ever noticed those people whom you see jogging day after day? They are the ones who seem not to need to jog. But that is why they are fit. Those who are wealthy work at staying financially fit. Bot those who are not financially fit do little to change their status."
Duane Jackson, the founder of KashFlow, went to prison for 5 years for drug trafficking before he founded the company and was later acquired. He wrote a book about it, I enjoyed it. It's called Four Thousand Days: My Journey From Prison To Business Success
https://haveibeenpwned.com will check if your data has been included in any stolen databases. They will also let you know each time it happens again. I’ve had my data stolen a few times (adobe, Dropbox and something else), however you often don’t know until years after the breach happens.
LeanFIMay birthday edition (34 as of a few minutes ago):
My expenses for May $1533 < my safe withdrawal rate $1776 ['murica] on 4% safe withdrawal (still working a job job so missing some costs like health, etc).
This is my second month in a row woo! Hat tip to this sub and all the great stories and recommendations. About to finish my first book in ages, "Your Money or Your Life."
TL;DR May expenses were less than safe withdrawal rate, and it's my birthday today.
I'm 31. I knew about saving and started right out of college by maxing my employer's 401k match. I started talking to my boss about personal finance and he let me read The Millionaire Next Door. He then convinced me to save 40% of my income. I laughed at him and thought he was crazy, but I did it anyway. A couple years later I got married and had to stop saving so much so we could aggressively pay off debt. That took us a year and then a few months to fund the emergency fund. Then we had kids. Right now I'm only saving 12%, but I'm hoping to get back to 15% with my raise this year.
The main point is that by saving so much at a young age I was able to get an awesome jump on FIRE. I am hoping to retire in my 40's. I'm in good shape. At 31 I have over a 300k net worth, so I feel like that's pretty good. Yes, there are some that have way more than me, but this is my path and I'm happy with it. My family has decided that we're good with our current lifestyle, so all future raises will go to savings.
from /u/aBoglehead in http://www.reddit.com/r/personalfinance/comments/27pn7o/books_for_every_stage_of_personal_finance/
I've had a lot of back-and-forth with /u/GraemeCPA on his book about FIRE, and I recently learned that it was out on Amazon. I haven't grabbed it yet, but Graeme has been a great contributor to the sub, and I wanted to make sure that people realized that this was out there.
I plan on checking it out and seeing if we can add it as a resource on the sidebar.
Building Wealth And Being Happy: A Practical Guide To Financial Independence
>Why does he pack his lunch if he's a millionaire...
I love that they just don't get it. He's a millionaire because he packs his lunch!
I had an accounting professor in college who tells the story of a fundraiser dinner at his old University to get the millionaires to donate to the school. Planning and wondering what to serve they bought champagne and caviar and fancy shit. The food went down, but nobody drank the bar and no one ate the caviar. He asked a group of them at the event why they didn't eat and drink the high expense party favors and they said "We don't like champagne. We like beer But we only drink two kinds - Budweiser and free". He loved to tell the story as a lesson about making assumptions, but it's relevant to me now that I'm pursuing FI!
(Edit: haha apparently my memory has done me a disservice and this story is an anecdote my professor told us from The Millionaire Next Door. My old professor was not the type of person to tell their story as his own, so that's my brain fart!)
I was kind of surprised that some acquaintances seemed upset when they found out we retired early. I could care less when people I don't know all that well retire or stay working. A couple that were into conspicuous consumption seemed shocked (we heard through a third party). I guess they didn't read The Millionaire Next Door book about how most millionaire next door types clip coupons, drive value type cars, shop at Costco and are generally pretty frugal.
Yes, tons of people have entered retirement like this, and you'll probably be fine -- especially if you're young. The Trinity Study provides recommendations and guidelines, not hard and fast rules.
I recommend that you read Bob Clyatt's excellent Work Less, Live More, which is all about what he calls semi-retirement. Like me, he retired early. Like me, he continues to earn money in a variety of ways. This helps to mitigate some of the risk.
Right now, the top comment on this post claims it'll be difficult to re-enter the workforce after retirement. This isn't true. Sure, it's possible you might not be able to re-enter your former field or regain your previous position...but why would you need to? If you've reached the level where you're FI -- or nearly so -- then you don't need a high-power, high-paying job. Or you shouldn't, anyhow. You can always get a job doing something you love, even if it pays poorly. Your only goal is to make a few extra bucks to fill in the gaps (while also doing some meaningful work).
Seriously, this isn't a big deal. Please do read Work Less, Live More. It addresses all these sorts of questions.
I found a used copy of The Bogleheads Guide to Investing at a used book store for 50% off. When I open the cover, the entire inside is filled with notes and references on where to find everything in the book. Not only do I save money on the book but this is definitely a value ADD to my purchase!
You can't use anyone else's number as a guess. It varies widely by age, location, and what level of plan you choose.
Assuming you're in the US, go to the ACA website at https://www.healthcare.gov/see-plans/ and walk through the questionnaire.
For me, the average costs are:
We do with a little bit more research! According to Motley fool, about 79% of American workers have access to a a 401K/403B type account, but less than half contribute anything. They parse the numbers and find just 32% of Americans contribute anything to a 401K.
Even if these are entirely separate groups, we're looking at just 40% of Americans taking advantage of any kind of retirement savings accounts. Since they're not entirely separate groups, less than 40% of Americans are contributing to standard, tax-sheltered retirement accounts.
I recommend reading the book The Life-Changing Magic of Tidying Up. It's an instruction manual on how to get rid of stuff around your house, but some of its philosophies would be great in this situation. Specifically, it says there's no room in your life for things that either make you feel guilty for not using them or things that don't bring you joy (ex: that christmas present from your mother that you hate, those items you registered for but haven't used in the 10 years you've been married, old hobby items that remind you of what you've outgrown). When getting rid of sentimental items, it says that you should appreciate it for the happiness that it gave you in past and come to terms that its purpose in your life has passed. Get rid of the old to make way for new possibilities.
I'm also a big fan of thinking of selling my items as storing them at someone else's house until I need them again: http://lifehacker.com/5830569/use-craigslist-to-store-your-unused-stuff-until-you-need-it
Guys, why are we acting surprised by this information? The savings rate in the US is currently 2.6%!
Americans are crazy bad savers in general. Not contributing to retirement accounts is par for the course for having a 2.6% savings rate. Only 32% of Americans contribute to 401Ks (less than half that are offered them) too, so this isn't a fluke statistic or meaningless factoid.
Americans are just bad at savings. This has been historically true for decades. That's why baby boomers are kinda in a bad place for their retirement.
"If your goal is to become financially secure, you’ll likely attain it…. But if your motive is to make money to spend money on the good life,… you’re never gonna make it."
--Thomas J. Stanley, The Millionaire Next Door.
Why are you hesitant? Do you feel like you're depriving yourself? If so, I think you're doing it wrong. Chasing Financial Independence should be liberating, not restricting.
I recommend thinking long and hard about what makes you happy and find the least expensive way of doing that. This may require spending a little more, but that's the reason you got a job in the first place, no?
I recommend reading Your Money or your Life as well as The Millionaire Next Door. Both should be available at your local library (the were for me).
Dan Ariely's book Predictably Irrational" talks about this a lot. He does studies on human behavior (his field is behavioral economics) that bear this out. Whenever taste-testing is done on two products that have different prices noted, the more expensive one is chosen as superior even when they are actually the same product.
I think a good bit of this phenomenon has to do with people's perception of themselves as "tasteful" and their own aspirations and notions of status. It's actually pretty amusing.
Can the mods clarify what is off-limits under the "no politics" rule, and specifically address whether the rule takes into account the difference between politics and policy?
I don't want to be argumentative, nor do I want to flout the rules. So, I want to make clear that I am asking because I believe there is a lack of clarity.
For example, are we allowed to discuss the effect that trade policy or tax policy or fiscal policy may have on the markets? I don't believe that such a discussion of policy is necessarily political, as long as it's not advocating for a specific position or trying to influence others to hold a certain view.
To give a concrete example, if tax policy changed and the USA abandoned progressive taxation and adopted a flat tax, would we be permitted to discuss the effect that change would have on our FI planning, as long as the discussion didn't veer into whether the change was "good" or "bad"?
Morningstar has published a 2017 "HSA Landscape" whitepaper that is freely available (just need to provide your email address). It's a good summary of the options out there.
First of all I recommend reading The Millionaire Next Door. Great book that goes into detail about what a "normal" millionaire looks like.
Also, you haven't factored compounding returns into your equation. Investing $12,000 a year for 30 years with 7% annual returns gives you roughly $1 million. Whether or not 7% returns after inflation are a reasonable expectation over the coming decades is another discussion, but you can substitute your own lower number if you prefer.
That's actually completely false. ~80% of millionaires are "first generation rich" while only ~20% of millionaires inherited their wealth. That's one of the takeaways from "The Millionaire Next Door".
My dad called and suggested we start reading a book simultaneously and discuss what was read at the end of every month.
"Like a manly book club?" you ask.
Yes, like a manly book club.
He asked if I wanted to dig into financial topics and mentioned "The Millionaire Next Door." What an awesome bonding topic to do with a dad that has never been good saver but wants to start. Better late than never--I'm thrilled.
Just want to give a shout-out to the awesome and totally free language-learning site DUOLINGO!
I can now add to my LinkedIn profile that I am 18% fluent in Spanish. LOL! :)
My mistake(s)? Not starting on the road to financial independence when I should have... I was too young & stupid to do so when I should have.
If you're old enough to read this: Don't make that mistake. You are old enough to pay yourself 10% of every dollar you earn NOW.
If you're a parent: Do not fail your children - make 'The Richest Man in Babylon' part of the stories you read to your kids and then FOLLOW THROUGH by teaching them the behavior.
Or end up like me... figuring it out in your 50's.
Don't know details, so it's tough to give specifics.
But I'd highly, highly recommend reading "The Millionaire Next Door" by Dr. Stanley. It's referenced in the sidebar. Long-and-short, anyone who makes an average or better salary in the U.S. (call it about $50k/yr) can retire a millionaire.
Does this mean fatFIRE before 30 to a private island and excessive consumption? No, absolutely not. There's a couple people on this sub who like to talk about it, but I'd argue that's actually the bigger dream.
Retiring a millionaire can be a reality for most (but not all!) people, but it may take 30 years of saving $5k/yr. Or it can take 20 years of saving $15k/yr, the math and the market can be brutal.
But it's definitely a marathon and not a sprint. It won't deliver instant results, and even people who run what I think are insane savings rates still take at least a decade to pull it off. Figure out the right balance for you, set up a plan, set it on auto-pilot, and live your life.
Hope this helped, even if only in a small way.
Today at work I interviewed somebody with more money than I can feasibly imagine. It was really interesting and he had a lot of insight.
If you folks have read The Millionaire Next Door... He had basically walked out of the pages of that book. Crazy stuff, never thought I'd be doing interviews like this as a part of my work.
To piggy back on your excellent post, I'm going to recommend anyone who hasn't read it, "The Four Pillars of Investing".
I learned an incredible amount from this book, NOT only related to asset allocation, but about investing in general. However, the book does talk a lot about AA, and if you are a beginner investor or interested in FI/real investing, you should pick this one up at the library...(It is long).
They have a big hat but no cattle. I would rather look dirt poor and have the cattle making money. The Millionaire Next Door talks about first generation millionaires and the techniques to get there. Advertisers have everyone convinced being a success is making 1 million a year and spending 1.5 million, but it's not; most first generation millionaires are blue collar business owners who continue to live like their employees.
PS; For every 217k invested into the market, it is like having a minimum wage full time slave earning money for you.
I was always been interested in finance as a kid. My dad gave me a few books to read like "The Millionaire Next Door" and "The Automatic Millionaire", and that was probably when I realized that it was pretty "easy" to become "rich".
I probably first found FI and RE stuff clicking around the links on the Personal Finance subreddit. I especially recall the Mr. Money Mustache blog and eventually Early Retirement Extreme.
I was always pretty "frugal" and even though I knew my family was pretty well off, I knew if I wanted something I would have to work for it. My parents would never buy me anything just because. However, if I wanted that cool Lego set, or new video game, there was a seemingly endless list of chores I could get paid a small amount for(mow the lawn, wash the car, pick weeds etc.) I would only get presents at Christmas or my birthday. It was probably then I realized that I didn't want to buy stuff all the time. There would always be the new "cool" thing but I didn't really care. I realized it was much better to buy things with lasting value. I ended up starting to build a collection of NES games, which I decide had more lasting value than some cheap "fidget spinners" or a Starbucks coffee.
I don't really find that it gets in the way of my life too much. I would much rather bike to my friends house and shoot hoops for free then go the mall and get lunch. Video games are probably what I spend the most on, but if I pay 45 for a game on sale, and play even 50 hours with friends online, I think that money was a lot better spent than 2 lunches at the mall.
There was a book I read not too long ago that had interviews with a bunch of families at all kinds of levels of net worth & income called Uneasy Street: The Anxieties of Affluence.
They found that whether a person's net worth was $100k or $10 million or whether their income was $50k/year or $500k/year: everyone referred to themselves as "middle class". The reason for that is because terms like "rich", "middle class", or "poor" come with a lot of political & emotional baggage. And people bend definitions so that they can convince themselves they are the middle.
It's a bit more constructive to talk about percentiles instead like "top 25% of net worth" or "bottom 25% of income."
The personality thing made me really rethink how important it is to meet the right partner to achieve FI. If your spouse just doesn't have the FI personality, does that mean you're not compatible long term?
Aiming for FI is just the default mode of living for many of us here but I would consider myself seriously lucky if I had a partner who was more frugal than myself. (Which apparently was the case for most of the millionaires interviewed in The Millionaire Next Door)
If you are not careful this can be a double edged sword. VPN providers can see your traffic just as easily as the patrons sitting next to you while using the cafe wireless. You need to trust your VPN provider - do your research before going for something cheap and easy just because it came up first in your search results.
For any who ask, I use ProtonVPN. I've also heard good things about Nord VPN. And there is always Tor for the perpetually paranoid.
But there are much fewer self-made millionaire women (according to The Millionaire Next Door), we frequently earn less and didn't receive the same financial education as men. I'm not OP but I would find it inspiring to read their stories and I guess OP too.
came here to say this. Broke is a "how not to do things" for people that come into windfalls.
basic investing: https://www.bogleheads.org/wiki/Video:Bogleheads%C2%AE_investment_philosophy
MMM audio podcast though: https://www.youneedabudget.com/blog/post/jesse-interviews-mr-money-mustache-the-full-transcript
I'd start by doing Linux from Scratch and seeing what parts of that you want to dig more into. http://www.linuxfromscratch.org/
Also consider checking out /r/homelab and building your own infrastructure for something interesting to you - maybe a Plex server, maybe hosting your own email server, that kind of thing.
This is relatively common, I think, although most people who do this aren't consciously considering FI. They simply reach a place where they no longer need to earn as much money, so they choose to do something less stressful and/or more meaningful with their lives. (These people are on the path to FI usually, even if they're unaware of the concept.)
Here's a "fer instance": My girlfriend met a woman in Arkansas recently who used to be a high-income professional. (I can't remember if she was formerly a lawyer, doctor, or what -- I just know she made a lot of money.) After a couple of decades, she decided to ditch that line of work and open up a retail store based on her passions instead. It doesn't provide anywhere near the income she used to make, but she doesn't need the income. Instead, she's doing work she loves in a much less stressful environment.
I think Bob Clyatt's book Work Less, Live More does a good job of covering this concept, by the way. He talks about "semi-retirement", reaching a place where you no longer have to make career decisions based on money, but can instead opt to work (or not work) based on your values...
I'd agree with this approach. The Your Money or Your Life exercise is a good one if you've never done that thought game, but if you're doing it you should all of both the pros and the cons. Cons: Driving to work, time spent working out of the office, etc. Pros: Vacation days, holidays, bonus, 401(k) match, healthcare, hsa contributions, etc.
Stream-of-consciousness for input from those who are so inclined.
Just visited my brother and his new wife, who live at quite a distance from my family. She's a middle-aged professor; he's a middle-aged college student working two different hourly-rate jobs.
They started asking personal finance questions. I was glad to learn that they're debt-free (except for a student loan; more below) and have $40K saved, but weren't sure if that was "good" or not. So I sent them a copy of Dave Ramsey's Total Money Makeover to give them some perspective. (Not really inclined to debate Ramsey's methods, though...my bro/sis-in-law aren't well-versed in the principles of personal finance so this is a basic thing for them to chew on and maybe reinforce what they're doing.)
Anyway, during the conversation we talked about why this subject isn't taught in schools and why it seems to be disappearing from family generational hand-me-down teaching. We couldn't settle on an answer. One thing that came up, though, was that the class name "Home Economics" is patent bullshit: cooking and cleaning might be taught, but economics aren't.
I'll say this: it's a frigging shame that two middle-aged people aren't more sure of themselves when it comes to family finances. Something somewhere has let them down, perhaps systematically. And it's not atypical. Again, my guess is that simply because they're debt-free they're doing better than most, but that's in terms of situation rather than knowledge.
Case in point: she's got (she thinks) a 1.5% student loan she's been trying to pay off early.
I guess that's all why I think it's a good thing this sub and /r/personalfinance are growing the way they are.
Let's start with the slam dunk decision - buy the house cash. That opens up houses you otherwise couldn't make an offer on (such as foreclosures) and will get you a significant discount on a property. Once you own the house, you can get a mortgage on it without issue.
Once you are sitting in your house, fully paid off, you'll begin to question the wisdom of taking out a very large loan in order to buy stocks. First, you can read the simple explanation or the complicated explanation of the issue at hand. Using a mortgage to invest adds the component of leverage which magnifies the ups and downs of your portfolio. It also carries interest which acts as a drag on the overall performance.
Your CFP and most people in this thread have completely glossed over the issue of risk and are focusing only on return. An intelligent investor attempts to have a portfolio that achieves the desired amount of return with a minimum of risk. If your stock/bond portfolio is fairly conservative, it makes no sense to leverage it to increase your returns. It would almost always be better to move your portfolio into higher return asset classes like small cap or value stock indexes. In fact, unless you are 90%+ invested in stocks, leveraging your portfolio is probably a bad idea. It's simpler, safer and easier to just rebalance into higher return investments.
I'm reading "Your Money or Your Life" and I'm finding that it makes me want to spend more money in a few categories, namely home improvement. I've never regretted any of the money we've spent on various projects fixing up our house, but my husband pushes back with "you said we couldn't afford that" or similar haha. He's a keeper.
Prepare for interviews using leetcode and apply for higher paying jobs. For the $180k+ salaries it's normally best to try and get into one of the FAANG (Facebook, Amazon, Apple, Netflix, Google) companies, but there are many others that pay well too.
I'd recommend So Good They Can't Ignore You by Cal Newport.
Basically, it argues that passion is over-rated and the majority of successful people got where they are by slogging it out in a field long enough to get good enough to get the autonomy to make their work interesting.
You're really asking two questions. One is about making more money, the other is about "finding your calling". These are not the same thing. You can make a lot of money in something that's not your calling, and you can have a calling that doesn't make a lot of money.
If you haven't read The Millionaire Next Door, I would suggest doing so. It goes into this issue a little bit as well, the important thing being, if your kids, and their kids, were never living the rough life/accumulation phase, living on less they earn, then it is a real issue where the wealth you built up gets lost in the next generation. Not saying that happens every time, but the statistics that were gone over in that book do bear that out in many cases.
For those of you who came straight to the comments because you couldn't be bothered clicking through, there is a read all button.
I did a combination of MMM and ERE. When I was single and chasing a traditional martial arts path, living a simple life made non-consumption easy. I found ERE, and it resonated. Later, I found MMM and picked up some things there. The Millionaire Next Door was important on my path. Funny thing though, I was doing each on my own before finding these bloggers/writers. They did help me to focus my resolve. I never learned to blog. Never wrote or sold a book, just worked, saved and played.
How? Relentlessly keeping expenses down. Saving up to 50% of my gross pay, having cheap entertainment to enjoy life. I found reddit later, about the time I FI'd.
Asset allocation worked, low cost funds worked, learning about IRA, Roth IRA worked, maxing 401Ks and Roth 401Ks worked very well and working long hours worked. Vanguard worked, learning more about investing and Fidelity works better for me, now.
Financial advisor/stock broker didn't work for me. I helped him FI, but I was breaking even.
This reminds me of Stoicism (which goes perfectly with FI thinking). It teaches negative visualization, or basically reminding yourself how much worse things could be and to be mindful of all that you have currently. There's a bunch of other stuff to it like living in the moment and living simply, which are all things that have helped me on the road to FI.
r/stoicism is the subreddit I think. I got into it by reading 'A Guide to the Good Life - The Ancient Art of Stoic Joy', which I'd saw rec'd somewhere on here.
I hit past $50k net worth today! Yay :)
One year ago today I was just beginning to read Your Money or Your Life, and finally educating myself and facing up to financial reality. I was also -$18k net worth at that time.
I'm also working from home today, and my plan is to do this twice a week as a response to the massive stress I've been having. So far no complaints, let's hope it stays that way (others work from home too so it should be okay). Honestly if something does go wrong I can quickly get another job in this market, and it wouldn't be a loss since I've basically been doing nothing at work for the past 3 months since there was a management change. I'm honestly considering going to a different job anyway, where I can bill by the hour to do real work instead of the office/e-mail/pretend to work type job.
Anyway thanks you guys, this community helps me stay on track and get my thoughts out there. Extremely helpful.
It's a lot lower of a percentage than a I thought: only 14% of American households have a negative net worth.
"Approximately 62% of Americans have no emergency savings.." meaning if they didn't get paid, they couldn't go waste their money this weekend. Wow. To me this is crazy. 2/3 people don't even have $1000 emergency savings? I can't live that way...
Kinda like this story on slashdot. 95% of workers plan on changing jobs? Oh, as reported by Monster.com. Okaaaay. . .
Well, my superfluous purchases of the month now include my Chemex coffee maker and now my new Baratza Encore coffee grinder, both of which I had been eyeing for some time. I'll report back how I won't be able to retire in the future because of purchases like these, but I'll do it with vigor.
I always valued my time and freedom, so I worked just enough to make ends meet and had loads of free time to do whatever. ~$15-20k/year working as a polo groom, arborist, barista, waitress, barmaid, plasterer, dairy farm hand etc etc etc. had a great time, moved around a bunch, tried out all kinds of things.
My then boyfriend (now fiancé), had the opposite mind set - make bank now, have freedom later. These two view points were the cause of much debate for ages.
At some point I read Your Money or Your Life and started feeling like FI was actually possible. I ran the numbers on total hours worked via both strategies and figured out how much if need to earn to break even on total number of hours of freedom. I wish I still had that spreadsheet...
I just hit my 18month anniversary as a software engineer making $120k and fiancé and I are on track to be FI in ~4-6years depending on the market and our ability to ramp our income up further.
I spoke few days ago about r/BettermentBookClub subreddit in which we read and discuss books focused in improving us as human being. Post got decent up voted and it was quite in a spirit of FIRE to always improved. I thought it would be of interest to quite a few folks in here as always improving is important for many of us, especialywith so much free time after FIRE it's good to know what we want from life as a person.
Anyway I promised to report when we vote on new book so here we are. Vote is up till 3rd of Feb and books of choice are:
Antifragile: Things That Gain from Disorder - Nassim Taleb
Zero to One - Peter Thiel
The Subtle Art of Not Giving a Fuck - Mark Manson
Deep Work - Cal Newport
Ego is the Enemy - Ryan Holiday
Now is the best time to join in vote on the book and take part in discussion.
"Vanguard" is Merriam-Webster's word of the day.
1 : the troops moving at the head of an army
2 : the forefront of an action or movement
Having a record let's you see patterns and may help psychologically to reduce waste. I'm by no means overweight, but I started counting calories because I was interested in my macros (protein, fat and carbs) and I ended up losing 10 pounds or so because I was aware of how many calories I needed and how many I had eaten.
In Your Money or Your Life, the author doesn't recommend budgets, but does recommend tracking spending. Psychologically it helps and it's fun to see how you're doing and when you'll likely be FI.
You may FIRE without it, but you'll be FI sooner if you track your expenses.
Edit: FWIW, I don't keep a strict budget, but I do check up on spending in Mint and have a loose budget there to help me track month over month spending.
The Millionaire Next Door: The Surprising Secrets of America's Wealthy
Category: Frugality/Wealth Accumulation
Don't follow the investing advice found in this book. That said, it's still a fantastic case study in building wealth and living below your means. Don't buy it online either as it can likely be found at your local library!
Insolvency of social security is a myth. It has trillions in reserve: https://www.fool.com/retirement/2017/07/24/5-social-security-myths-debunked.aspx
SS is projected to no longer be at a surplus and to have no more reserve by 2034. “Insolvent” means “unable to pay”. Even in the worst case scenario after 2034, it will pay 77% of current amounts, adjusted for inflation.
We could fix this shortfall by raising the income limit on SS contribution from $127,200 to ~~$165,195~~ *EDIT: more like $250,000, or get rid of the cap completely. Point remains, the shortfall goes away if you tax high earners. Of course, we’ll move even more of our income to capital gains and qualified dividends, which don’t pay social security taxes anyway...
Newer cars are also better at surviving small overlap crashes since the IIHS small overlap test is fairly new.
Here is a chart that shows how cars have gotten better: https://imgur.com/gallery/yQ2kZ
Grabbed it from a presentation here: https://www.slideshare.net/mobile/GlobalNCAP/a-brief-history-of-the-iihs-small-overlap-crash-test-adrian-lund-president-iihs-hldi
Same goes for the moderate overlap test, as you’ll see in one of the slides.
> All the gear and clothes can get acquired for free or cheap only used.
Toys too. My wife got hundreds if not thousands of dollars worth of things from the rich moms in the local mom groups / community groups. She got some sort of activity center that normally costs $125 for free. She got 3 of everything, either free or cheap so now we have one at each of the parents house.
The Millionaire Next Door was published in 1996. I stuck that into an inflation calculator:
> $1,000,000.00 in 1996 had the same buying power as $1,540,879.48 in 2016
Thought it was interesting. A million bucks isn't what it used to be, even though it still has a mystical appeal to it.
Well, HHS already limits Medical Loss Ratio (MLR) to 85% in the large group market and to 80% in the small group and individual market. That leaves 15-20% for insurance companies' overhead expenses, such as marketing, profits, salaries, administrative costs, agent commissions, etc.
Forming a co-op to negotiate with an insurance company would mean betting that the co-op can take over some of these administrative functions and do it more efficiently than the insurance company. Even if the bet is successful, it would save its members a few percent at most.
My boss just decided he's going to let me expense my standing desk. Originally I had asked and been denied but decided 10-12hr days sitting was getting really bad.
Amazon link below: https://www.amazon.com/gp/product/B07MNXTX4R/ref=ppx_yo_dt_b_asin_title_o04_s00?ie=UTF8&psc=1
I don't believe this for most. Advertisers have people brained washed that the way to success is through buying things. The Millionaire Next Door only sold because people didn't realize the googles they wore.
In the book, "So Good They Can't Ignore You", the author has a whole section about purpose. He argues that before you can "earn" a job with purpose, you need to be valuable. This means you need time to develop skills and ability which will undoubtedly lead you to a job with the qualities you admire, which in your case would be one with 'purpose'.
Do you feel that you need a job where everything is perfect? Or is it okay if it is lacking in some areas? Most importantly, are there ways for you to change your situation so that you find purpose, even if it is outside your job?
Best of luck to you, whatever you decide!
Unless your professor's name is Thomas Stanley or Bill Danko, they lied to you. That anecdote is straight out of The Millionaire Next Door, except the grizzled old millionaire claimed to drink "scotch and two kinds of beer - Budweiser and free."
As a public employee in a state the recognizes Patriots' Day, I spent my long weekend reading a book that's been on my reading list for some time now - The Millionaire Next Door by Thomas Stanley. I realize this might not be a terribly popular opinion, but am I the only one who was severely disappointed with this book?
For example, why was there an entire chapter on cars? Why the diatribe about the MSRP of various cars as a function of their curb weight? Anyone who knows even a little about cars knows that building a light car is more expensive. Did the authors not realize that the process of buying a car can be a hobby? It seems not, since they roundly criticized the collector who spent 60 hours a year doing this.
Maybe it's just because I didn't pick up the book expecting "millionaires" to necessarily spend their money on Veblen goods, but this book just didn't hit home for me. There were a few decent points, but on the whole I wish I would have chosen something else.
It's also recommended to allow 18 to 24 months between giving birth and conceiving again d/t associated risks like low birth weight, premature birth, and congenital disorders. Just an FYI. related link
Go to a variety of free or "donation" events in your community: lots of stuff going on at libraries and parks, also, gallery art show openings, open mic night, street fairs, etc...Also, volunteering at theaters and concert venues (you get to see the show for free in exchange). You'll start to see the same people repeatedly - they are the ones who are conscious of their spending, even if they're not FIREing. Strike up a conversation; you'll end up finding some new friends.
Also, check on meetup.com - there are a bunch of investment-related groups in my area. Or you can start a FIRE group.
Take 5% of your money and try something else but I advise you to read the Intelligent Investor first. Benjamin Graham has been right for the past century and will be right for this one too. I add individual stocks during market downturns but keep 90% of my money in index funds.
You are one wise 14 year old. This admittedly makes me extremely happy.
I recently gave my 13 year old cousin, also with an affinity towards money, a copy of "The Richest Man in Babylon". The Millionaire Next Door is probably easier to read, as it isn't written in ancient jargon. I'll send him a copy of that during the holiday season :). Thanks for taking time to reply.
p.s. I agree; video games are definitely a great bang for your buck, especially if it's a game you want to perfect.
If you've read The Millionaire Next Door, you'll find that accountants tend to be Under Accumulators of Wealth - i.e. having half the wealth or less compared to an average person of the same income. Living the "high life" will hurt you in the end...