View Full Version : Who saves more than 20% of their income? How do you do it?
Life_is_Simple
11-24-12, 12:54pm
Let's hear from those who save a big proportion of your income. Even those who save 15%+.
Also, are you a couple or a single?
Are there certain things you have cut way back on, in order to achieve this?
What is your secret?
How do you feel about your savings?
Inspire us! :+1:
iris lily
11-24-12, 1:02pm
We save this much and more, have been doing it for years. We are DINKS*, have never had a mortgage or other debt as DINKS, so it's not difficult to do. I know that this isn't very specific and perhaps not helpful, but we are old (late 50's) and have been doing this for so long that it's hard to remember specifics of when it was a challenge.
We do the usual stuff: drive old cars into the ground, shop thrift stores, buy only that which we really want, don't have cable or high end cell phones, have huge garden and "homebody" interests, etc (although we do like European vacations.)
The reason we don't have a mortgage is because we bought an old house that had been totally gutted (no plumbing, electricity, interior staircases--just 4 walls and some floors) and DH put it back together. We rented for one year while he made it basically habitable. But we lived for decades with it being unfinished after we moved in.
*Double income no kids
For a few decades we saved almost nothing. Raising 3 kids on one income .... I was just happy to stay out of consumer debt most of the time.
Now the kids are on their own. We save about 30% now.
Live 5 min from my job. In 650 sq ft apartment. Share one vehicle between the 2 of us.
We could live cheaper but choose not to cause there's some things we enjoy like eating out, movies, camping in our jeep. I figure if we save this much while still maintaining our condo out of state until the last kid finishes college next year ... We are doing fine. In a few years the condo will be sold, and we will save even more for retirement.
We save 50% + of take home, generally. We're DINKs as well, and currently rent - don't know if mortgage payments that apply to principal would be counted as savings or not. A large part of it is we both have fairly high paid blue collar jobs. The other part is we just don't really like spending money on most things. We hate shopping. We've never been big consumers. Part of it is luck, part hard work, part just natural inclination. We could care less about keeping up with the Joneses and are more interested in freedom/early retirement than buying toys. Though, we definitely have some toys. We spend a lot of money on food and technology and recently bought a new car. But we make big purchases last and only buy things we really want.
Our savings are awesome! We're 35 now and should be down to only part time work by age 45, fully retired, if we decide to by 50-55.
SteveinMN
11-24-12, 2:12pm
Until I left work in May, DW and I put away maybe a third of our income altogether. Our "secret" was good-paying jobs :laff:.
More seriously, we're just not that into "stuff". Neither one of us has a need to compensate for growing up in "poverty" or to look to others like we've arrived. In fact, I'd guess most people had no idea of our total income, and that was just fine with us. We paid ourselves first -- most of that savings percentage is in deferred comp and IRAs at work. And though we buy what we need, we don't need much. We have a cute but anonymous-looking 1800-square-foot rambler on a city lot. DW drives the newer car -- a 3-year-old Kia -- while I drive the 10-year-old VW and that's not likely to change for many more years. We wait for sales if we can, shop carefully (there's nothing so cheap it's worth buying twice), and take care of what we own. How do we feel about the savings? Based on what our financial planner has told us (and which we can verify), we should be able to retire with the same standard of living we have now, without worrying about inflation killing us, even if we live for another 30 years. Given that we're not scraping by now and that I know people who have burned themselves out royally paying for the big house and lots of "toys", I'm very happy about that.
Gardenarian
11-24-12, 2:28pm
I save about 25%. I wish it was due to careful budgeting and the like, but I just try to spend as as little as possible and avoid shopping.
We don't go to restaurants or out for coffee; I think a lot of money can leak away on that sort of thing. For impulse purchases we use cash, which reduces the impulse a lot.
We buy most everything used.
Food is bought at Costco, Trader Joe's (both within a couple of miles) or at the Farmer's Market (a couple blocks away.) We also take few trips.
Recreation is playing tennis, kayaking, hiking, walking the dogs, reading (from the library,) making music, gardening, crafting, getting together with neighbors.
Our biggest expenses are health insurance and property tax and insurance.
We used to save >50% at one point when we both had corporate jobs. We are DINKS as well. I started off saving nothing, and then every year when I got a raise I'd take that amount and put it into automatic savings (first 401k, then taxable accounts). I figured if I could live on that amount last year, I could likely live on that amount next year. Once in a while I gave myself a raise, but it wasn't often. After a number of years of saving my raise, it started to amount to some real money.
The biggest mindset change was just buying what we needed, rather than looking at a paycheck after the bills have been paid, as money "to blow". I see a lot of people who treat a windfall or other unexpected money as money to blow. We just banked it.
ApatheticNoMore
11-24-12, 2:42pm
Until I left work in May, DW and I put away maybe a third of our income altogether. Our "secret" was good-paying jobs
+1 My job is not that well paying, but if it was low paid I don't see much potential to do it as a single woman in California. But it's ok pay, not low pay, so I can. No DINKY luxery of two incomes, just a woman alone, trying to make it in the cruel cruel world :~) Was putting 18% in the 401k for a while, decided to try for 20% and only put 10% in the 401k and 10% in other things. Ok so far. Realized I could probably reasonably push it to about 21.5% or so, but not much more. That's of gross of course most of which I never see due to a decent tax hit (see the single decent paid person in California part). Not much more partly because I'm really attached to having some play money, also if I cut it too close I start going into emotional stress about not having enough money, not enough, not enough, scarcity, scarcity, scarcity ... when the scarcity was purely self-created because I got a bug in my ... about saving all my money. I guess you could consider some of the money I spend as "saved" since I take classes and so on, invest in me, but I don't count that as savings, I count it as spending (just not really the fun kind :|( - but kinda a necessary thing). I don't shop for pleasure, no cable, no fancy phone, older used car, good deal on apartment (for CA ok, it's a nice place in a nice neighborhood I've got for $1000 a month). Do spend money on other things though, buy whatever foody stuff I want, got a massage a few weeks ago, take vacations sometimes.
DINKs here as well. We used to save well over 50% of our income, back when we both had high-paying corporate gigs. When those gigs ended, we tried our hand at early retirement, but it didn't stick. So now we're both back in the game working for start-ups. Which means, one of us is paid entirely in sweat equity and the other is paid enough to cover our expenses with a little left over. We could certainly trim some fat and save more, but we don't feel compelled to do so at the moment. Our expenses are fairly low as we have no mortgage on our primary home (we do have a mortgage on our rental property); we have two cars, but no car loans; we cook most of our meals at home from fairly basic ingredients; we heat with wood and have solar electric and solar hot water; we have relatively inexpensive hobbies (trail running, martial arts, mountain biking); we don't have cable, but do have high speed internet; we don't take expensive vacations; we don't pay other people to do our yard work, clean our house, or walk our dogs.
I’m single, retired, and saving about 75% of my income, which comes from three sources: a pension, Social Security benefits, and investment income.
The chief reason I’m where I’m at now financially is reading YMOYL years and years ago and taking its lessons to heart. I bought an old house that needing fixing, paid cash for it, and then did the repair/remodeling work myself over the following years. E.g., I extended the kitchen by relocating the bathroom, doing all of the framing, roofing, wiring, plumbing, tiling and cabinetry myself, plus added a wood shop.
I don’t make a special effort to be frugal. If I want something, I buy it. E.g., at my kid's insistence that I needed a newer, safer car, I just bought a 2013 KIA Soul for cash. But, also, my wants are very simple: new bikes as needed, lots of books, and several good fishing/camping trips each year. The rest of the stuff most retirees spend money on --world cruises, home entertainment centers, frequent dining out --just don't interest me, and my health is excellent, so I don't have those types of expenses, and my kids are all well-established in their careers and don't need my help. So my money really is my own to do with as I please.
But $3 out of $4 income-dollars get put back to work in new investments, which how I spend most mornings in what amounts to a part-time job. In other words, once I reached the cross-over point described in YMOYL, it became easier and easier to build an increasing margin of financial safety. Though under my current projections, I do go broke at age 158 due to the ravages of inflation and the fact that costs of maintaining my modest, beer-and-bait life style will have crept up to over $1 million per year compared to its present, under $20k.
Charlie
awakenedsoul
11-24-12, 4:56pm
These are inspiring percentages...wow! I saved $3,000. out of $25,000. last year. I bought some used furniture and paid cash for some remodeling, so I plan to save more this year. I should easily be able to save 20%, hopefully more. I have an older home, so I also need to budget for things like termite work, a new roof in ten years, etc...
Today I went to Starbucks and ordered a cup of tea. I haven't done this in years! When I was spending all of my income, I used to go to Starbucks regularly. Now I buy Starbucks at Costco in bulk, and make it at home. Driving very little has saved me a huge amount. I ran into a mother and daughter at Starbucks and they were shocked that I had driven my car there. (They see me riding my bicycle around town running errands and exercising my dogs.) Yeah, so that was a huge splurge today. I spend a lot more time at home now, and have cheap hobbies like knitting, reading library books, growing food, writing letters to International pen pals, and doing yoga. I also rarely buy clothes anymore. I found a few things I really liked at the Salvation Army the other day, but I put them back. I'd rather wear what I have and keep my cash in the bank.
try2bfrugal
11-24-12, 5:40pm
Though under my current projections, I do go broke at age 158 due to the ravages of inflation and the fact that costs of maintaining my modest, beer-and-bait life style will have crept up to over $1 million per year compared to its present, under $20k.
Charlie
Just curious - Do you invest in TIPS or I bonds? Social Security, I bonds and TIPS would all be indexed to inflation. I think we actually come out ahead in our retirement planning under high inflation.
Laser_Cat
11-24-12, 5:43pm
Single here, and I save more than 30% of my income. (Currently though it's going straight towards paying off debt) I'd like to actually work towards saving 50% but I'll need to make a lifestyle change for that. Housing / utilities are just more expensive for us single people if you decide to live alone, so next year I might try to go back to sharing with a roommate if I can find someone cool to live with. (maybe also a frugal minded person, who doesn't leave lights and AC on when they're not at home =P)
The single biggest thing that contributes to me saving money is not owning a car. A monthly pass on public transit is around $65 and that's quite low to the $550 of car related expenses I was paying beforehand. Also I just am not a huge fan of shopping. I might be one of the few females out there who wears the same pair of boots every day and hates clothes shopping, so that helps. =) I think the one place where I've lost the frugal fight is gardening. I have trouble not spending money on "cool heirloom seeds" or "hey I want to build that trellis I saw online!" =P
We are older (58), married and with one grown child. We did not start saving seriously until dd was grown and on her own - about eight years ago. We are now saving 45% of our take home pay, ie my salary - just trying to play catch-up for all the years we did not save. We could save more if we tried. I was just discussing our finances with dd and she was blown away that we can save so much on very average salaries. How - she asked. I reminded her that I did not go buy a new car like she did and I still haven't replaced the sofa though it is looking a bit shabby. I don't eat out 5-6 times a week or have a closet full of clothes and shoes. We live pretty simply and save extra for things like vacations. Often, a nature walk around the neighborhood is our entertainment. I have an auto draft of $100 a month for the vacation fund. That is our splurge. When we get cash for something like selling a piece of furniture, I stick it in an envelope hidden away. Last time I checked, there was $600 in it. These days, I get mch more of a high from saving than spending. I just wish we had started much sooner.
Blackdog Lin
11-24-12, 6:20pm
We are much like pinkytoe. It has just been the stage of our life - 50's and empty-nesters - that allowed us to save 35% of our income the last 8-10 years.
No more (or very little) offspring expenses, got out of debt and stayed that way, got the vehicles paid for and kept driving 'em, learned to shop at home first for wants, and mostly realizing that we have too much crap around the place as it is, so definitely don't need any more. Makes saving a higher percentage of income easy. If we were younger it would be much harder. Frankly, I didn't get bit by the frugality bug till we hit our early 40's.
'Course we're now on a fixed income with my retirement, so no more saving 35%. Just enjoying living the frugality lifestyle, living on that fixed income.
Dual income couple with two young kids (11 and 7). We save about 50% of our gross income, which includes maxing out our 403b plans (including catchup contribution for DH), maxing Roth IRAs to the extent our earned US income allows, monthly contributions to DKs college fund, plus extra cash savings. If you add in the employer match we get on the 403bs (DH gets 2% of annual salary, I currently get 7.5% and will get 10% (:)) as of Jan 1), it bumps the percentage of gross income up a bit over 50%. MOnthly cash savings varies so that is another factor that makes the percentages a little wobbly.
DH and I both earn decent middle-management type salaries, and our expat status means we don't pay US federal income tax. We do pay a bit in Chinese income tax, but less than we would pay on comparable salaries in the US due to the way our employers are set up and our compensation is structured. We live a pretty luxurious life by most standards -- our cost of living here in Beijing is probably a bit higher than it would be in the US due to high housing costs (though DH does get a partial housing allowance that offsets the cost of our mortgage), the need for private schooling for the kids (which we pay a portion of after the allowance DH gets), and our very high annual travel costs (we typically visit my family in the US at least twice a year ($4000-6000/trip just for plane tickets) and DH's family 2-4 times a year (another $600-800/trip). There are definitely areas we could cut if we had to, but for now I think hitting a 50% savings rate is pretty good so we might as well enjoy our lifestyle and not feel too pressured to cut further.
DH will turn 55 in February, which means if his job situation were to deteriorate he could quit/retire and we could access his 403b funds penalty free. That doesn't seem likely to happen at this point, but nice to have the fall back if we need it, especially considering that given current market values we could sell our Beijing apartment, move to either his parents town or where my family lives in the US and pretty much be FI (not 100% sure, as we haven't lived in the US for awhile, but I think we could do it). For now we both are pretty happy in our jobs, so we'll probably just keep at it for a few more years at least and continue to build up the stash. Our net worth has been growing at impressive rates the past several years, so if that momentum continues we could be in very comfortable FI range in just a few more years.
lhamo
Just curious - Do you invest in TIPS or I bonds? Social Security, I bonds and TIPS would all be indexed to inflation. I think we actually come out ahead in our retirement planning under high inflation.
try2bfrugal,
IBonds and TIPS are NOT indexed to inflation, especially not 'inflation' as normal households experience it. I-Bonds and TIPS are indexed to the CPI, which is a very imperfect, highly-manipulated number whose chief purpose is to enable the US Gov't to continue borrowing at low interest-rates. In other words, I-Bonds and TIPS are a way to short the CPI. But they aren't an effective way to hedge against inflation as we ordinary people experience it.
Every household will differ in their expenses. But any household that tracks their expenses on a year-to-year basis can report to two decimal points exactly what their personally-experienced rate of inflation is. E.g., mine is currently running 4.67%, which I round up to 5% for planning purposes, and which I'll increase to 6% or 7% when I'm stress-testing my retirement assumptions. But it sure ain't the 2.1% that the CPI reports, much less the 1.7% that the Social Security Dept will use as their adjustment factor for 2013.
No, I do not buy I-bonds or TIPS, because only someone who wants to lose their purchasing-power would buy them. Run the numbers. First, pay taxes at ordinary-income rates any gains those bonds might offer. Then subtract a realistic rate of inflation from what remains. Then try to spend that amount at the grocery store. The clerk will ring up the bill and then tell you that you are still short.
For a bond to offer even just a break-even rate of return on an after-tax, after-inflation basis, it has to be offering at least a nominal 8%. I-bonds and TIPS don't offer even half of that, nor do CDs, nor do Agencies, nor do high-grade corporates or munis. But there is an area of the bond market where fat yields are still available, namely spec-grade bonds (aka, junk bonds), which most investors avoid, because they don't understand them. But when a portfolio includes a judicious weighting of junk, then the lesser yields of the higher-quality, fixed-income stuff can be tolerated. But I use 8% as my threshold, and over the past 12 years, that's close to my average gain across an all-bond portfolio. (Actually, 8.17% per year from Jan, 2001 to Dec, 2011. But who's counting, right?) In other words, I'm not trying to make money with my fixed-income investing. I'm just trying to move my purchasing-power forward against the time I might need it.
And, "NO!", you probably won't do well financially under high inflation unless you are a debtor trying to pay off your loans with cheaper money. Debtors will benefit from inflation, but no one else. For everyone else, inflation is a not-so-hidden tax that destroys income and wealth. The subject of inflation is one that Joe Dominguez didn't understand, just as he really didn't understand the bond market, either, nor how to use it effectively. So everything he says on those topics has to be discarded and replaced by the current realities of a Keynesian Fed whose policies will bankrupt this country if they aren't reversed.
Charlie
When DH and I were DINKs, we managed to save about 20% (pay off debt and stuff along the way, too).
Now we are one-income, one kid, and with our new business. we currently save about 10% of our income right now, and that's going to go up next year. we have two goals: to save 20% of our income, and then to earn a bit more (which will change the percentage) to improve quality of life.
That is, we have decided to look for a two bedroom place. LOL
Let's hear from those who save a big proportion of your income. Even those who save 15%+.
Also, are you a couple or a single?
Are there certain things you have cut way back on, in order to achieve this?
What is your secret?
How do you feel about your savings?
Inspire us! :+1:
We're a couple, we could easily save 95% of our income if we chose to realize the income, our secret is that we simply spend far far less than we can potentially earn because we already have pretty much everything we need, our expenses are mostly maintenance expenses and taxes at this point.
As to how I feel about our savings, I agree with Junkman, I think they are highly at risk, which is why I invest mostly in things that produce real cash flow, or that have use-value to me. (Good farm and timber lands, for instance...)
try2bfrugal
11-24-12, 11:59pm
And, "NO!", you probably won't do well financially under high inflation unless you are a debtor trying to pay off your loans with cheaper money. Debtors will benefit from inflation, but no one else. For everyone else, inflation is a not-so-hidden tax that destroys income and wealth. The subject of inflation is one that Joe Dominguez didn't understand, just as he really didn't understand the bond market, either, nor how to use it effectively. So everything he says on those topics has to be discarded and replaced by the current realities of a Keynesian Fed whose policies will bankrupt this country if they aren't reversed.
Charlie
Just to use a hypothetical example, if a person A had say a $1M portfolio in 2% TIPS, and 50K expenses, and inflation measured by the CPI went to 10%, then his expenses would increase by 5K to 55K, and the TIPS interest plus the inflation factor would be worth an extra $120K, for a net gain of 120 - 5 = 115, wouldn't they? I think he would be coming out pretty good. Even if real inflation is 20%, wouldn't he still be ahead $110K?
I think with TIPS the general consensus among most of the investors on the investment forums is to keep them in retirement accounts so you aren't paying tax on the interest or tax on the phantom interest from the inflation factor, and then just cash them in when you are in a low tax bracket in retirement, perhaps between when you stop working and before collecting Social Security payments. I think I bonds do not have interest reported until you cash them in.
I don't know what investments returns will be like in the future, so we just hold a mix of investments that each do well under different types of economic conditions. We even have some junk bond funds, too.
I also agree that the inflation indexes are understated, but there aren't very many inflation proof investments to pick from.
Just curious - Do you invest in TIPS or I bonds? Social Security, I bonds and TIPS would all be indexed to inflation. I think we actually come out ahead in our retirement planning under high inflation.
try2bfrugal,
IBonds and TIPS are NOT indexed to inflation, especially not 'inflation' as normal households experience it. I-Bonds and TIPS are indexed to the CPI, which is a very imperfect, highly-manipulated number whose chief purpose is to enable the US Gov't to continue borrowing at low interest-rates. In other words, I-Bonds and TIPS are a way to short the CPI. But they aren't an effective way to hedge against inflation as we ordinary people experience it.
Charlie
I am a happy investor in I Bonds. Much of what you say is true, Charlie. But comparing I Bonds to other fixed incomes with the similar maturities and risk, like say, 5 year CDs, I Bonds have done better. Your returns on bonds are admirable, but I seem to recall that you spend many hours a week studying and analyzing things. I also think, as opinion, that you may be exposed to some default risk and possibly NAV risk in a time of declining interest rates, relative to I bonds. Not that any of that is especially bad, but It might not fit into everyone's time and investment strategy.
In defense of I bonds, they are exempt from state income taxes and federal taxes are deferred until they are redeemed. Not a huge benefit, but better than CD's.
I have other investments including some bond funds, but am just saying that I bonds and possibly TIPs may have their place in a balanced investment portfolio.
Roger,
Each investor’s situation is different. What works for one person won’t work for another. I’m not rich enough to afford the low returns offered by I-bonds. (Well, actually I am. I just hate accepting such low returns.) Also, I’m trying to put more money to work than the yearly maximum of $10,000 that I-Bonds would permit. (I need to find places for about $125k to $150k per year.) Buying I-bonds would soak up a bit of that excess capital, but not enough to bother with.
As for ‘default-risk’, I don’t have exposure to just “some”, as you suggest. I have exposure to a lot of it, just as you do. Despite the putative guarantees attached to the debt obligations of the US Gov’t, they will default any time they choose to. They have done so in the past. They will do so in the future. Nothing is safe. In fact, they have been defaulting on their debt since the Federal Reserve was created in 1913. How? By depreciating the currency. Each dollar that you lend to the US Gov’t by buying their bonds is paid back to you in depreciated dollars. The $1.00 dollar that you lend to them this year is worth only about $0.78 cents a mere five years later. How is that not a default?
Yes, I spend a lot of hours each week playing in the securities casinos (aka, the stock market, the bond market, the commodities or currency markets). However, I can make a living twice over from that playing, and it’s a game I enjoy playing, which isn’t to say that I’d advocate that anyone else do the same. Each of us has our own path.
You ask if it is possible that I-Bonds and such have a role to play in a “balanced portfolio”? Yes, for sure, just as gold and precious metals might have a role, or commodities, or junk bonds. It all depends on one’s needs, purposes, means, and goals. But, by and large, most investors are not well-served by I-Bonds and such, because they are merely an expensive way to lose money (aka, purchasing-power). They seem to be risk-free, but they aren’t. They have tax-risk (albeit it that is slightly mitigated at the state level) and they have inflation-risk (though that is slightly mitigated by being indexed to the CPI). But overall, do those mitgations out-weight the disadvantages of the instrument? That’s something each investor must decide for her or himself.
Charlie
Try2b,
What is the median, household net-worth in this country? Something close to a mere $77k. Therefore, your example of a $1 million dollar portfolio is an outlier from which not much can be learned. Yes, accredited investors would be in a position financially to use TIPS if they chose to. But ordinary folk aren’t. They are working with very little capital, and they can’t afford the low returns that TIPS offer. They need to be making 10%-20% on their money, if not more.
Also, you might be willing to accept the risks that 10% inflation would bring to this country in terms of social disruptions. I’m not, nor will the government tolerate them. Martial law would be declared, and wealth would be confiscated. It’s happened before. It will happen again. The stresses created by high rates of inflation are Not A Good Thing. (Think Wiemar Republic, Zimbabwe, Argentina.) But, hopefully, the US economy will muddle long, and riots and civil war will be avoided.
Charlie
try2bfrugal
11-25-12, 1:21pm
Try2b,
What is the median, household net-worth in this country? Something close to a mere $77k. Therefore, your example of a $1 million dollar portfolio is an outlier from which not much can be learned.
I guess that is one of the main points, at least in my view, of YMOYL. A two income family with each person making 35K a year will earn $2.8M over 40 years, not including compounded interest, pensions, 401K matching, maybe some rental property income and appreciation, home appreciation or accrued Social Security benefits. $1M may be an outlier under current consumption and living styles, but a real possibility for many more households, at least in moderate to low cost of living areas, with simple living / sustainable living expenses.
try2bfrugal
11-25-12, 1:37pm
Also, you might be willing to accept the risks that 10% inflation would bring to this country in terms of social disruptions. I’m not, nor will the government tolerate them. Martial law would be declared, and wealth would be confiscated. It’s happened before. It will happen again. The stresses created by high rates of inflation are Not A Good Thing. (Think Wiemar Republic, Zimbabwe, Argentina.) But, hopefully, the US economy will muddle long, and riots and civil war will be avoided.
Charlie
Lots of countries have inflation rates over 10% every year. I don't know what percent declare martial law, but that seems like pretty uncommon event compared to high inflation. You can check the tables from the World Bank to see how common high inflation rates are.
http://data.worldbank.org/indicator/NY.GDP.DEFL.KD.ZG?page=6
The U.S. has had inflation over 10% a number of times over the years (http://www.usinflationcalculator.com/inflation/historical-inflation-rates/). Maybe I am missing something, but I have never heard of martial law being imposed to date in the U.S. over inflation - just stuff like hurricanes and Pearl Harbor (http://en.wikipedia.org/wiki/Martial_law#United_States).
Martial law? Come now.
Might be worth reading Rehnquist's quite decent treatment of the subject before buying too much tin foil...
http://i43.tower.com/images/mm100070133/all-laws-but-one-civil-liberties-in-wartime-william-h-rehnquist-paperback-cover-art.jpg
ApatheticNoMore
11-25-12, 2:10pm
I guess that is one of the main points, at least in my view, of YMOYL. A two income family with each person making 35K a year will earn $2.8M over 40 years
taxes will take 20-25% of that at least
not including compounded interest, pensions, 401K matching
I'm told these things exist, but I was also told that about Santa Clause once ....
or accrued Social Security benefits.
yea there is the hope for that ... though it's not much of a hope at present.
try2bfrugal
11-25-12, 2:36pm
taxes will take 20-25% of that at least
I'm told these things exist, but I was also told that about Santa Clause once ....
yea there is the hope for that ... though it's not much of a hope at present.
Even if SS funding is not changed benefits will still be payable at 75% of current levels.
Most households with that level of income would not pay an effective tax rate of 20 - 25% in overall taxes (ftp://ftp.bls.gov/pub/special.requests/ce/standard/2011/earners.txt).
Real interest rates in the U.S. have been well over zero for most of the past 40 years (http://data.worldbank.org/indicator/FR.INR.RINR), and more workers than not actually are covered by 401K plans (http://www.huffingtonpost.com/david-callahan/401k-a-perfect-failure_b_1574834.html).
I am not saying everyone can do it. Families at poverty level may not be able to save anything. But I think looking at how much money passes through your hands over your lifetime and being an outlier in terms of savings is the whole point of the YMOYL book.
miradoblackwarrior
11-25-12, 2:44pm
Hello--
Just wanted to pitch my two cents. Indeed, if I see two cents on the sidewalk, I pick it up!
I take almost 50% right off the top, without ever seeing it. Thank goodness for direct deposit! I'm still aspiring to get to a full 50%, but it would drastically cut into my already frugal lifestyle, and I am not in that place yet. I already gave up my car, rarely take the bus, work Saturdays and Sundays, and, well, my final indulgence is the cable TV. Since I don't see any vacations in my future, I give myself this one indulgence, as it actually comes out cheaper annually than even a camping vacation. I'm still thinking about this expense, but I have to do what works for me.
In the mean time, I am pretty frugal. I rarely buy clothes (just bought a pair of winter gloves in a discount pharmacy), prefering to wear my good ol' good ol's. I sold the car last summer for cash. I rent, and it's just me paying the bills. I keep the thermostat at 57 degrees, because the furnaces in my apartment building are just beneath my floor and I get the residual warmth (plus I got lots of blankets that I inherited from Mom). Food I buy at BJ's (like Costcos) and I use my freezer to break up loaves of bread into more manageable packages. I eat modestly, never go out, and am really not that interested. I also bring my lunch from home.
On the other hand, my savings strategy has grown VERY conservative. I just closed my ING account, because I didn't care for the company that bought it. I keep a basic savings account, an IRA, 403b, and multiple CD's and super-saver accounts.
Right now, I dread the Fiscal Cliff, because, since my money is stretched so tightly, any change will result in cutting back more on my already spartan lifestyle.
I am not suffering, nor am I complaining. I rather enjoy the austerity, as it makes any perks, like a job bonus, seem like great riches. I haven't had a raise since 2006, so some of these cuts were necessary. However, even if I do (hopefully, eventually) get a raise to match the cost of living, I still will continue this lifestyle. I would like to retire early, as I really am quite fed up with my job. However, I am also a realist, and I do what I can, where I can, with what I have. After all, isn't that the point of FI?
Susan
jennipurrr
11-25-12, 6:46pm
DH and I seem to be repeating the DINK theme in savings. I feel like the same financial benefits could be accomplished by having a room mate, but I guess most adults aren't interested in that.
I'm 30 and DH is 37. We both make decent IT salaries, but about seven years ago decided to work for a university in a college town rather than stay on the corporate track we were on. So, we make probably around 20 - 30 % less than if we had stuck with the corporate positions. However, we have a much better work/life balance and also job stability, which is worth it for us.
We have 10% of our salaries come out off the top for our 403b and pension. The 403b gets matched, but I won't count that since its not actually "our" savings. In addition to that, right now we are not "saving" more but paying down our mortgage. If I count the extra principal payments and retirement savings for last year we are saving about 40% of our gross income.
I am frugal, but not especially frugal compared to people on here for sure...people here are inspiring! We bought a small house close to the office in a working class neighborhood instead of buying into the bigger is better message. We drive our cars forever and don't have a lot of expensive wants or desires. Reading here and other blogs keeps the goals in focus. Our big thing was to pay off all our debt ASAP. DH had a lot of student loans from college so we were hardcore frugal while sent every penny to pay those off. We drove crap cars until we could afford a new (to us) car. Now we are working on our mortgage. The mortgage should be paid off next year, woohoo. I figure its much easier to have bigger savings when you don't have big payments required every month to live. Having a spouse on the same page helps a lot too. Aside from eating out, which is our big issue, we generally keep each other on track. I think if we have kids we will maintain a good level of savings, but it will certainly be a balancing act.
iris lily
11-25-12, 7:30pm
I guess that is one of the main points, at least in my view, of YMOYL. A two income family with each person making 35K a year will earn $2.8M over 40 years, not including compounded interest, pensions, 401K matching, maybe some rental property income and appreciation, home appreciation or accrued Social Security benefits. $1M may be an outlier under current consumption and living styles, but a real possibility for many more households, at least in moderate to low cost of living areas, with simple living / sustainable living expenses.
Agreed, you can get to 1M net worth with this kind of income. Start early.
Yeah, we save 30-40%, also DINKs. In prior years some of this was used for mortgage prepayment, and currently the house we live in is paid for. Childcare seems to be a huge issue, nearly the cost of a mortgage/rent in our area, though many factors besides that went into our decision to be childfree.
We save +/-50%; got both children educated and on their own. We really focus on our priorities as to "wants versus needs".
Ed
congrats to those people getting it done, wow!
Junkman, I'm a dunce on economic matters but was really interested in your statement below, about debtors benefiting from inflation. Could you elaborate on how that works?
-kitten
And, "NO!", you probably won't do well financially under high inflation unless you are a debtor trying to pay off your loans with cheaper money. Debtors will benefit from inflation, but no one else. For everyone else, inflation is a not-so-hidden tax that destroys income and wealth.
We're also dinks with good salaries. Isave a little over 20 percent amd SO about 15. I put 8 percent in 401k, 6 percent match from employer, 6 percent defined contribution pension from employer, $5,000 roth IRA, and about $5k invested elsewhere yearly. SO puts 15 percent
In 401k. We could do more but choose to spend a fair amount on bacations and eating out every friday. SO also likes to buy a fairly large amount if new Clothes.
One of the good things for us about saving a lot is when we truly have no income besides ssi, we'll be used to living on that much or less.
morris_rl
11-30-12, 8:22pm
I am a MONK (Me Only - No Kids). Accordingly, I strive to live like a monk, with certain exceptions: no scratchy woolen robes and no vows of silence and chastity, for instance. ;)
I save about 34% of my gross pay. My home has been paid off for the past 11 years.
I hope to retire next year at age 62. My net income should be roughly my current take home pay, without drawing early social security. If and when I opt to draw social security, my net income will will be more than my current take home pay. Happy dance!!! :cool:
ToomuchStuff
12-1-12, 1:38am
I am a little bit shy of 35% this year (really only restarted tracking this year). After once coming close to losing everything, and a failed marriage proposal, I am MONK also and quite comfortable with that.
awakenedsoul
12-1-12, 1:52am
I'm very impressed with these percentages!
Life_is_Simple
12-1-12, 1:39pm
Oh good! I now know what I am. I am a MONK! :cool:
I'm saving right around 20%, so maybe I can become more monk-like and save more. ;)
It's inspiring reading this thread. :+1:
One thing that makes me sad is that our neighborhood is now subject to the citywide "occupancy permit" law where a home must be ship and shape and done according to a bureaucrat's standards for our own safety. For decades my neighborhood was exempt from this ordinance. It allowed many urban pioneers to move into falling down structures and work on them. Now that opportunity is gone and it is really too bad. What does this have to do with building net worth? People will not be able to build substantial equity into their houses, all they will be able to do is paint and lay down new flooring and the like.
We lost an important freedom when the local gooberment stepped in to put us under its protective wing.
Not inconsequentially related to that former freedom, the strongest and best neighborhood in this city is mine. Compare it to all of the neighborhoods that have had protective occupancy permits for decades, Nanny regulations kept them mediocre or even ghetto. Way to go, Nanny G.
Thank you for allowing my rant of the day.
I have seen too many houses out here (often longtime rental properties or foreclosures/short sales) which have been "short-sheeted" in their maintenance. Too many where someone who wanted to save a few bucks left the repair to a "buddy of mine" who dabbled in the whatever had to be done -- and who glopped enough chewing gum and baling wire on the problem to get it past the tenant or the (rare) inspector or real-estate agent. Bad work, sometimes dangerous, often not up to code, and sometimes not even within the bounds of good sense. I'm actually glad the "gooberment" is taking that kind of danger out of housing. And I say this as someone who rents property and has to meet what seem sometimes like trivial little requirements. (I had to petition the City to accept an egress window that was three square inches short of current code, not the code in place when the house was built 80 years ago.)
I'm sure I'm branded as an incurable big-gooberment bleeding-heart liberal, but I kind of like the idea of people demonstrating competency in their field before they do dangerous things. Let the doctors and nurses pass their boards. Let the commercial kitchens show that they can keep and cook food safely. Let the guy collecting electrician's wages demonstrate that(s)he is not going to burn down his next client's house because he "kinda does a little electrical on the side". The free market has shown it is incapable of that kind of regulation; I guess that leaves it up to another entity. And if it happens to eliminate a revenue stream; well, so did outlawing adulterated meat and poisons in over-the-counter elixirs. It only takes a few bad apples to spoil it for the good folks.
...I'm sure I'm branded as an incurable big-gooberment bleeding-heart liberal, but I kind of like the idea of people demonstrating competency in their field before they do dangerous things. .... It only takes a few bad apples to spoil it for the good folks.
Well here's the thing, Steve: it is nice to have CHOICE in this. If you wish to live in Nanny G land, by all means--enjoy that world. You are not me. If your inspectors are citing a 3 inch fault in your egress window then you are living the dream, baby! :D
I repeat that having no occupancy permit requirement in this neighborhood did NOT keep it from progressing to be the best and strongest neighborhood in my city. Is there a causal relationship between not requiring occupancy permits and the strength of my neighborhood? I don't know, but I will tell you that I know a whole lot of strong independent people who moved here when it was ghetto and their independent spirits set this neighborhood in motion. Some of them also did crappy, amateur work on these houses that later had to be redone. Personally, I agree with you and the City's building division in that I want competent electricians wiring any house I live in and the plumbing and fireplace needs to be safe. But whether or not there is a banister on my staircase--that's my call. If I want to live without drywall for years--ok. These should be my choices.
rodeosweetheart
12-2-12, 11:09am
I just checked my figures and of gross pay, I save about 30% and give away about 6% to charity (tithe 10% on net income). Would like to get the savings up to 50%, to be preparing for retirement, and it just seems like good sense to live more frugally. We paid cash for our extremely modest cottage and live in very very cheap area. Kids are grown.
Could not do this when I had the kids and was working lots of parttime jobs to buy groceries, but hey, that was the situation then.
Lately have been very unfrugal--bought Ipad for Mom for Christmas, bought the kid stuff they wanted, husband traveling cross country to see his family, etc. But now have started budgeting family as a 10% line item on net, and that ought to help. We were paying it anyway, travel, paying off one's college loans, paying another's health insurance, so figured why not bite the bullet and admit that we were going to pay it and put it in the budget.
Your qustion about how to do it--the only thing that works for me is to look at the money coming in in terms of percentage and save and tithe the very first thing. The auto savings at my bank don't work for me because they want a number and I like to do percentages. But I could probably auto depost the number on the stable paycheck directly into a separate savings account.
If it is there in my checking account, I will tend to spend it, and go out to line with my budget. Embarrassing, but true.
Well here's the thing, Steve: it is nice to have CHOICE in this. If you wish to live in Nanny G land, by all means--enjoy that world. You are not me. If your inspectors are citing a 3 inch fault in your egress window then you are living the dream, baby! :D
I don't disagree with you in principle. Yeah, I was not looking forward to having to spend a bundle on installing a new window (that one in particular; it has some location "issues" and, having just bought the house, I was bleeding money). And I certainly had things I would rather have done than fill out the City's forms and wait for the official resolution.
Could the City have been more (pardon the expression) liberal in their interpretation of the law, considering the age of the law and the age of the house? I think so. I think the inspector should have dismissed the discrepancy from the get-go. I could see requiring a homeowner to meet the new code when new windows were installed but grandfathering in existing windows. I have some knob-and-tube wiring in that house, too, though it is no longer carrying current. k&t is against code now, too; fortunately I was not required to pull it out. That kind of leeway I can live with.
Personally, I agree with you and the City's building division in that I want competent electricians wiring any house I live in and the plumbing and fireplace needs to be safe. But whether or not there is a banister on my staircase--that's my call. If I want to live without drywall for years--ok. These should be my choices.
Maybe the difference is being able to choose to live with those deficits as a resident homeowner compared to a rental property. If you want to live without drywall for years and doing so does not leave electrical wiring or other hazards exposed, yes, that should be your prerogative. But I think it's a different matter in a property being offered for rental. There's that "choice" thing again. And if landlords do not want to offer a safe environment on their own (the presence of code indicating they do not), I do believe some other entity needs to make sure they do.
Maybe the difference is being able to choose to live with those deficits as a resident homeowner compared to a rental property. If you want to live without drywall for years and doing so does not leave electrical wiring or other hazards exposed, yes, that should be your prerogative. But I think it's a different matter in a property being offered for rental. There's that "choice" thing again. And if landlords do not want to offer a safe environment on their own (the presence of code indicating they do not), I do believe some other entity needs to make sure they do.
I think you've hit on the key distinction. If a homeowner wants to live in a building that doesn't meet the city's occupancy code that should be their right. However, they shouldn't be able to rent it out without meeting code, and any subsequent buyer should ask for the building's status and then proceed with appropriate caution if the building in fact doesn't meet standard since it might require expensive repairs.
SteveinMN
12-3-12, 12:07am
I think you've hit on the key distinction. If a homeowner wants to live in a building that doesn't meet the city's occupancy code that should be their right.
I still think some safety standards need to be met. I did not mention the banister from Iris Lily's post because I think a missing banister is not so much an esthetic concern as a safety concern. And I don't want the house next door setting mine on fire because someone's sometimes-sober plumbing buddy screwed up a gas line somehow.
However, they shouldn't be able to rent it out without meeting code, and any subsequent buyer should ask for the building's status and then proceed with appropriate caution if the building in fact doesn't meet standard since it might require expensive repairs.
I'm not sure what it's like where you are, but in the Twin Cities metro area, most places require a truth-in-housing disclosure be available at the time of sale. It covers what works in the house and what doesn't, as well as known major issues and/or their repairs. It's a good starting point for evaluating less-than-obvious problems and getting an inspector onto the property.
ApatheticNoMore
12-3-12, 12:32am
I'm sure I'm branded as an incurable big-gooberment bleeding-heart liberal, but I kind of like the idea of people demonstrating competency in their field before they do dangerous things. Let the doctors and nurses pass their boards. Let the commercial kitchens show that they can keep and cook food safely.
Oh you wouldn't like me, I've actively given money to get things like cottage food laws passed, letting people produce food out of their home :)
SteveinMN
12-3-12, 10:27am
Oh you wouldn't like me, I've actively given money to get things like cottage food laws passed, letting people produce food out of their home :)
What can I say? I'm just a big fan of competence.... :)
Let's hear from those who save a big proportion of your income. Even those who save 15%+.
Also, are you a couple or a single?
Are there certain things you have cut way back on, in order to achieve this?
What is your secret?
How do you feel about your savings?
Inspire us! :+1:
Now that 2012 is over, I can report my numbers for that year and answer the four questions.
I'm single (an empty-nester with grown kids), and I scrimp on nothing. But, also, I want very little for being a multi-decades believer in Voluntary Simplicity. My income for 2012 (from a combo of SSI, pensions, and investments) was $8k/month. My savings were $5k/month. In other words, my living expenses for 2012 were $3k/month. But of that, $15k was spent on a new car, and another $5k went toward quarterly, estimated tax payments.
If there's any "secret" to my 62.5% savings rate it is that I can live cheaply and happily on very little money for not wanting much and for never carrying debts. House? Wrote a check. New car? Wrote a check. Vacations? Wrote a check. Medical expenses? Wrote a check. It took me a long, long time to get where I am today. But inspired by reading YMOYL in the early '90s, I decided to "escape the rat race", and thanks in no small part to a roaring stock market in the '90s and a roaring bond market in the '00s, I was able to achieve the "cross-over" point described in YMOYL, where incomes exceed expenses. And once savings have gone from negative to positive, they just keep snowballing.
Charlie
Although we save a great deal of our income, expenses continue to rise and we will have to do some cost reduction to continue. As we are close to retirement age, some things are getting scary like
our property tax going up the allowed 10% - now over $6000 per yr.
I'm always interested in knowing the general area where people live because taxes and energy costs vary so much by location. We're saving about 20%. No kids, one full time job and one part-time seasonal job between the two of us. Our "secret" is that the house is paid off and we have no other debts. We've cut back quite a bit on recreational shopping and eating out. We've changed our mindsets to where saving money is a good thing. As bizarre as it sounds now, we didn't always think that way. I'm pleased at the progress we've made, but we should be saving more.
For 2012, we saved 23% of our income (for retirement) (maxed my deferred comp plan and husband's sep). Would have been higher but we purchased a more fuel efficient car this year and have been prepaying that car loan @ a rate of $1,000 month. The loan should be paid off in 2013; those funds will then be saved in ROTH IRA's once loan is paid which will increase our percentage in 2013 to 28%.
We are married empty nesters. Our children are grown but still in school so we still pay some of their expenses-family health plan, cell phone plan & auto insurance & some car repairs.) Son graduates in 2013, daughter graduates in 2014 so those expenses will be going away. All things going well with our jobs, we hope to increase our savings rate as those expenses decrease.
We do go on vacations but will probably cut down on travelling as we get older so that should increase our rate as well.
Our "secret", other than the usual frugal living stuff, is that we are mortgage free; we paid off our home in 2001. That enabled us to pay for our children's college education. I can see why there are so may DINKs replying to this thread as kids are so expensive...
Edited to add: We live in the northeast. Our property taxes are actually reasonable for our area, around $5500/year. Both my husband and myself have decent middle class/middle manager type jobs...(almost feel like it's bad karma to type that in the current fiscal environment), We have high heating costs which we try to contain my using a woodstove.
Interesting, we're near Boston but our property taxes are only $2400 a year. We do live in a very small (@900 sf) older house though. Still, it sounds like we're doing relatively well as far as property taxes go. And the small house is big enough for us.
awakenedsoul
1-1-13, 7:45pm
I'm in California, and my property taxes are $1,400. a year. I guess I'm really lucky. My house is only 567 square feet, but the lot is 7,400. I didn't realize how high property taxes were in some parts of the country. This thread has inspired me to try to save 50% of my money this year. Repairs may eat up some of that, but at least I won't be wasting money.
Now that 2012 is over, I can report my numbers for that year and answer the four questions.
I'm single (an empty-nester with grown kids), and I scrimp on nothing. But, also, I want very little for being a multi-decades believer in Voluntary Simplicity. My income for 2012 (from a combo of SSI, pensions, and investments) was $8k/month. My savings were $5k/month. In other words, my living expenses for 2012 were $3k/month. But of that, $15k was spent on a new car, and another $5k went toward quarterly, estimated tax payments.
If there's any "secret" to my 62.5% savings rate it is that I can live cheaply and happily on very little money for not wanting much and for never carrying debts. House? Wrote a check. New car? Wrote a check. Vacations? Wrote a check. Medical expenses? Wrote a check. It took me a long, long time to get where I am today. But inspired by reading YMOYL in the early '90s, I decided to "escape the rat race", and thanks in no small part to a roaring stock market in the '90s and a roaring bond market in the '00s, I was able to achieve the "cross-over" point described in YMOYL, where incomes exceed expenses. And once savings have gone from negative to positive, they just keep snowballing.
Charlie
That is how you do it; how much stuff do really need! As previously posted my wife and I save +50%; your post is right on.
Ed
Ed,
One’s savings rate (in the sense of consuming no more than “Enough”) isn’t the only factor to consider. Far more important to long-term financial survival is having a present savings rate that outpaces one’s personally-experienced inflation-rate.
Let me create an example.
Let’s say that a household has the nationally reported median income of $50,000 year. Let’s also make the counter-factual assumption that consumption levels will remain constant, i.e., that the household members will get sick and require medical attention no more than customary, that refrigerators, furnaces, roofs, and cars won’t require repair/replacement any more than is customary and that all of those repairs and replacements have been budgeted for, as they have to be. Let’s also say that the household has no more than the average reported savings rate of 5% of income. How long will it be before the household is running a deficit? If their personally-experienced inflation-rate is 5%, then in exactly 13 months, they are beginning to fall behind. But let’s say they are saving a commendable 20% of their income. How many months will it be --assuming a more realistic inflation rate of 6%-- before they begin to fall behind?
I love the book YMOYL. But it does a terrible job of dealing with inflation. In fact, Joe attempts to argue that inflation is a fiction that can be ignored. But inflation --aka, price increases-- are the reality most people confront when they go to the grocery store, or the filling station, or pay their property taxes, or renew their various insurance policies, all of which have jumped by 10% to 15% in just a year’s time.
It is simplicity itself to model the factors of ‘income’, ‘expenses’, and ‘inflation-rates’ in a spreadsheet and to run long-term projections. But few people do so, because they would be dismayed by what they find, namely, that they face imminent poverty if they don’t increase revenues and/or decrease consumption. That’s why present-day savings rates that might seem ridiculously high are needed, so that those savings can be moved forward to the future and drawn against when they are needed.
Let me say this in another way.
Everyone has heard of the “Rule of 72”, which is a fast means to estimate how soon one’s wealth will double at various rates of investment gain. That same “rule” can be used to estimate how soon one’s expenses will double. E.g., if one is currently content with a modest, beer-and-bait lifestyle that is fully paid for by an equally modest income of $24,000 per year, how much of an income will be needed in 24 years if one’s personally-experienced inflation rate is 6%? Obviously, one will need every penny of $96,000. Ouch! That’s serious money. If one doesn’t have the present skills to be making more than $24,000 a year now, do you really think they will be pulling in $96,000 a year down the road?
What were “middle-class” incomes in the ‘70s? What are they today? Obviously, people are getting fatter paychecks these days. But study after study has shown that the wages have fallen behind inflation. I don’t care anything about the “middle-class”, and their fate is well-deserved. But I do care about the “working class” of this country who could do an end run around poverty if they’d only wake up and get their budgets together in the sense of dropping out of the chase for the illusion of moral merit through material consumption that is the religion of the middle class. In other words, whatever one’s circumstances (or class), less has to be spent than is available, and those savings have to be put to work, so they will grow and be available when they are needed.
Charlie
cleaningstories
1-3-13, 4:25pm
We save about 25% of our incomes. We are DINKS who rent (in a rent-stabilized apartment). We grow a lot of our own vegetables and harvest fruit from our friends' trees. We cook at home all the time--almost never eat out. We love to eat and buy good quality food products for cooking, but it is so much cheaper than eating out at a restaurant! Since my wife worked as a cook for many years, she developed valuable skills that she uses to feed us. One of our games is to imagine how expensive the meal we are eating would be if you were to buy it at a restaurant, compared to what we spent to make it. It is usually about 20 times cheaper to cook at home, and we live like queens. I read YMOYL many years ago, and my wife is just naturally frugal. One of our cars is 20 years old, the other is 15. We check out books from the library, rather than buying, whenever we can. I'm inspired by you who are saving even more!
Another "MONK" here. I currently save 46% of my active income into a 401k and a ROTH IRA. I'm maxing out these accounts, plus the 50+ catch-up allowance. I also have passive income from some business ventures. All-in-all, I have never really made big bucks, just a steady decent income.
Reading YMOYL, David Bach's Automatic Millionnaire, Stanley's "The Millionnaire Next Door," and reading about "The 60% Solution" budget on msn.com helped to form my savings methods. I've automated payment of my retirement, mortgage, taxes, insurance, vacations, emergency fund, and even a car-replacement fund. Beyond these measures, I never even think about budgeting, I just spend what's left over and not worry about it.
Wow, Charlie, I enjoyed your post. Lots to think about. My husband and I have a family of 4 and we are living a good, decent life. We have 2 boys that are 3 and 6. I keep thinking that once our daycare costs are down then somehow we will save and then of course, I realize that something else will take up that expense once its gone like higher insurance costs, property taxes, transportation costs etc. We need to just buckle down and get into a rhythm of saying "no" to new ways of consuming and spending (like higher cell phone bills etc.). Right now we are at a 16% savings rate for 2012 and not enough of that went into retirement. Most of it is for emergency savings and a new car. I feel like we need to build up some more cash before we increase our retirement again. Maybe that is dumb? Who knows. I am proud of saving as much as we do, but we used to save so much more. It is difficult with daycare costs etc.
rerun,
I’d argue that one’s absolute savings-rate isn’t as important as is planning to avoid the consequences of not having saved enough. In other words, throughout all of our lives, there are times when money has to be thrown at problems to make them go away, and one’s preferred savings-rate gets trashed. But what most Americans are counting on is for someone else to bail them out of their predictable retirement shortfalls. So, they spend too much, save too little, and they are full of foolish confidence that “things will work out”.
Well, maybe things will work out. But that’s not a gamble I’m willing to make. On paper at least, I don’t run out of money until age 137. That doesn’t mean to me that I can spend more. To me, it means that I can choose whether I want to spend or not. “Do I really, really want this?” Most of the time the answer is a clear ”No”. Yeah, I could afford it. But do I really, really need (or want) to afford it? Obviously, throughout our spending lives, mistakes get made in both directions. Sometimes, we spent when we shouldn’t have. Sometimes, we didn’t spend when we should have, and then we become more inclined to spend the next time. But if that ‘revenge buying’ is recognized for what it is, it can be suppressed and more detached evaluations be made.
The bottom line seems to be this. The future is unknowable. But if the past is a good-enough guess about how things will turn out, then this country is headed toward a depression that rivals that of the ‘30s, that rivaled that of the 1870’s, which rivaled that of 1830’s, etc. In other words, economic ups and downs are normal, cyclic events. They happen about every other generation, and we are over-due for ours after three plus decades of false prosperity fueled by credit expansion. I grew up listening to my parents' stories of their growing up in the 30's Depression and never imagined I'd see a repeat in my own lifetime. Silly me, right? But a constant theme of their stories wasn't that life had become impossibly hard, and that's the hopeful part. Just as winter follows summer and autumn, spring will come again. Meanwhile, get ready to make snowmen.
Charlie
Charlie - love that, thanks for your wisdom!
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