Remembering the Big Picture

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As I’ve been frantically trying to finish multiple projects before my planned Labor Day road trip, I haven’t spent as much time online. I think this has allowed me to sit back and remember the Big Picture. In truth, the one thing I’ve learned since starting this blog about striving for financial freedom is that it’s actually pretty simple.

1) Save at least 10% of your income. 15% is better than 10%. And so on. Try to make it tax-deferred in an IRA or 401(k).

2) Invest it into low-cost index funds. Let capitalism work for you. For the simplest portfolio, buy the lowest cost Target-dated retirement fund you have access to. There are tons of books on why and how.

That’s it. You don’t need random free money or try to optimize your portfolios or even play credit card tricks. I find it fun and profitable, but #1 and #2 are still by far my top priorities. In fact, you don’t even need to read this blog (gasp!). But I’d prefer it if you did 😉

Added: I’ve added a counter-post about the why I choose to do the little things too and how much I make from them.

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  1. Ok, I’ll add a #3 – If you are planning to stay somewhere longer than 5 years, try to own your home. Make sure you can afford it while still doing #1 and #2.

  2. 3) Slash costs.

  3. I’d add as #0 – maximise your income (invest in yourself ie. continuing education)

    While it’s good to save 10%+ of your income, it’s important to maximise your income. If you don’t get caught up in keeping up with the Jonses, then any increase in your salary or other income streams will boost your savings rate.

    This is most important when you start out – once your investment portfolio returns are more than your gross salary this will be less important.

  4. Great site. Always enjoy reading it. My wife and I follow a Christian based budget system 80-10-10. Live on 80 % including mortgage, save 10% (401K, Roth IRA, cash savings) and give 10% to Christian ministry work mostly through our church. Regardless of a person’s faith, I think putting aside 10% for charitable work is very satisfying. In the long run, people remember you for your generosity and not how much you have in your bank account.

  5. samerwriter says


    I think much of the talk about making an extra buck here or there through some convoluted process serves to scare people away from “doing the right thing”, which as you point out above, is really very easy to do.

  6. Have you guys seen the Asian-based saving rate? In countries like China and Japan, the average saving rate is over 30%. I know some people save up to 60% of their income. Of course they only take one or two extended tour/trip each life. Middle class Japanese, on the other hand, take on average one foreign trip each year. Men go to Thailand, others go to Hawaii.

  7. Your two points have really hit the nail on the head. There are many people that get caught up in chasing the high performing funds or stocks and end up always being the person left holding the bag.

    By saving as much as possible while living below your means, using index funds can be very fruitful and not cause you sleepless nights. My only caution would be that the target funds may have too much bond exposure for some people, myself being one of them.

  8. how much money do you make on all the side bonuses? is it worth it?

  9. “how much money do you make on all the side bonuses? is it worth it?”

    Good question – My answer

  10. The best thing is to get a higher paying job and convince your partner to do the same. Then saving 10%+ of income would be much easier 🙂

  11. umm, i am looking into index fund but really don’t have a clue on how to start. Any information for newbie into index fund , Jon?

  12. One of the best tips for finance that I’ve received was from my boss at a previous job (before downsizing me a few months later, sigh). This applies to when you do get a raise at where you work, or if you go to a new job with a higher pay. Live on your previous salary and save up the extra money. Let’s say you’re making $300/wk and by whatever means you’re now making $400/wk. Have that extra $100/wk go straight into a savings (most businesses will let you split up direct deposits to do this). So as far as you are concerned, you’re still making $300/wk but now have an extra $100/wk or $5,200 going into you’re savings, that you never miss. Then, next pay increase it goes from $400 to $500, you can then give yourself $400 and still put $100 in a savings.

    Even if you want/need the extra money, try not to give yourself all of it. Perhaps just give yourself 50% of your raise for cost of living increases and such. It also may be beneficial to take the extra money and funnel it into paying off other debt

  13. John,

    You don’t have to know much about index funds to invest in them. You might want to start by assessing your appetite for risk. My favorite index fund family is Vanguard, and they offer a quiz about that. Of course there are all different kinds of index funds. I started with funds that invested in the stocks of large American companies, then with one that invested in bonds (a little less risky), then with one that invested in smaller American stocks, and then with those that invested in foreign stocks.

  14. Hey guys, this is probably way out of the subject but I’d like some feed back if possible. I currently have a full-time job, on my junior year in college (part-time). I have 10% of my income going into a 401k, I keep all my credit cards, loans, etc as low as possible. Everything I do is thinking about the future, but what about the present? although for my age (21) making 40k a year is very nice, with all my expenses combined plus saving 10%, I only have about 2% to enjoy. That’s nothing! so I’m trying to see what I could do to save money for the future, but at the same time be able to buy a new car, travel more often, etc. Any Ideas? I’ve been doing reasearch on getting a part-time job, but there arent many good paying part-time jobs that you can make your own schedule, plus that would be killing myself = no life. So, what can I do to keep caring about my future finances but also have some luxuries today?

    Appreciate your comments!

  15. Frugality is the best and sure way to riches.. 😛

    Todd..your idea is marvelous. It is a good psychological trick to save more money.

    Bigmouth..yeah..Asian countries save more than 50% of their income. Nevertheless, i think that we still should enjoy/indulge life once in a while on our hard earn money..:P

  16. Hi Jonathan.

    When you say “income” above are you talking gross or net? I’m a full-time student, working 15 hrs per week, I make $1260 gross $1049 net/mo. I want to move most of my regular savings account to an IRA and keep contributing as much as I can. So if I wanted that contribution to be %10 of my income, would that be $126 or $105 per month?

    Thank you I know its an old post but I wanted to be clear about this.

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