Take Pride In Being Financially Different!

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Recently, I ran across an article called the 5 Steps to Early Retirement. Written by a couple who retired at 38, here are they are:

  1. Track your spending.
  2. Save a lot.
  3. Invest wisely.
  4. Put peer pressure into perspective.
  5. Keep your eye on the prize.

At first glance, these steps may seem obvious and common sense. However, I would say there is a lot of hidden wisdom in the 4th step, in which they explain:

Social pressure to spend can be subtle and pervasive, and it can divert you from your commitment to retire early. Marketing specialists tell you that if you only buy this new product, car, house, or membership, your lifestyle will improve. It’s reasonably easy to tune out that marketing message, but you have to handle your friends with a little more tact. Trying to match the spending of our peer group is a surefire way to derail financial goals. Decide now that you don’t have to keep up with their consumption to fit into the crowd. The choice is yours — not theirs.

In other words, if you want to be different from everyone else – have more savings, retire earlier, whatever – then you have to act differently from everyone else. Here’s a quick anecdote. A friend of my wife recently told her:

“You make good money, you should stop buying your dresses from Target… Check out my new Louis Vuitton purse!”

The same friend later in the same week said:

“How the *%& do you have $100,000 (20% down) saved up already for a house?”

She didn’t make any connection between the two events. 😉 I’m not saying everyone should buy dresses from Target, but I do think everyone should pick their battles and be proud of them. Maybe it’s not leasing that shiny SUV or brown-bagging the lunch more often. Maybe I’m weird, but I love it when people judge me by my outward appearance. One day, perhaps that same friend will say:

“What!? You’re only 48 and you’re retiring?”

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  1. Oh, yes. Peer pressure. Hong Kong is a bit strange in that respect. While it is a consumer orientated society and people do flaunt their wealth through consumer spending (cars and anything with a designer label in particular), the national savings rate is actually quite high as well. Whether you experience peer pressure to buy expensive consumption items really depends on your circle of friends. Fortunately, most of mine have a similar mindset to myself and my spouse which makes it easy to ignore.

  2. OK, first off this whole “retirement” concept is kind of bogus, but that point has been belaboured. Clearly in this case they’ve decided to make travelling and writing books / tapes into their new full-time job.

    Of course, that whole CD thing really worries me. If what you have to say about retirement planning fits into an hour of audio, you’re definitely skipping a few things. Their website is an unprofessional mess, which really makes you wonder.

    I’m also worried that there’s no real distinct story about their wealth creation or their net worth at time of “retirement” or their ongoing income sources so I’m basically left with this as the telling quote:
    In 1991, Fool contributors Billy and Akaisha Kaderli retired from the brokerage and restaurant businesses to a life of international travel.

    Without that info, I’m just gonna venture to guess that they both worked really hard while making well into the top 5% of combined incomes and then got out at the top when they struck it rich (probably on a great stock gamble + a sale of a good restaurant). I mean save 10% on top of your retirement savings? That’s like telling people: “here’s how to get rich, save at least 50% of each after-tax paycheque” while tacitly ignoring those people for whom saving this much is a non-reality. Might as well have added point #6: Makes lots of money! (broker and restaurant owner?)

    Truth is, I’m not really impressed: “life of international travel” doesn’t sound particularly purposeful, let alone really fulfulling, definitely not something that I’d like to do from age 38 to age 100.

    Thanks for the links anyways, just two more people to avoid on the road to happiness and financial success.

  3. Funny, I was one of those people who spent without care and criticized other because they didn’t dress like us and refused to eat out. Now I am one of those people.

  4. 48 and retiring? That’s pretty weak – I’d try to push it up another three years if I were you. You’ve got a good sense of self-control when it comes to finances, and if you invest wisely I wouldn’t doubt you being able to retire at 45.

    But yeah I agree 100% with you. Last summer I bought a shiny new surround sound system because my friends wanted one, but didn’t want to pay for it. It’s an awesome system, but it cost me a few hundred dollars. I’m now currently struggling to get by over in Europe (been living here for two months, am only here for another week…so then I’ll be back to earning money) and if I hadn’t purchased that, as well as a few other compulsory items that I didn’t really need, I’d have been living a lot more comfortably.

    Great advice

  5. Don’t forget to count family. I’m sure you could retire early if you didn’t intend to buy a house near your family for a half million dollars.

    You are able to put away in a month the kind of cash it takes me a year to save. But where the incomes are as high as that, so are the expenses. If you didn’t demand to live in the same expensive place your family lives, you could retire early to a community where the cost of living is a magnitude less. You could semi-retire even earlier.

    That’s not to say you’d be happy. It suppose happiness is always about choosing well. But when you look at your friend’s purse and think, “Those choices wouldn’t make me happy,” I look at your choices and realize they wouldn’t make me happy either. I like my rural Midwest life.

  6. I wonder if we can find someone who write a book that you finish your productive life at age of 28 and then retire and die at age of 40. Mozart?

  7. Target??? LOL.. It is too expensive for me and not stylish enough. I buy my dresses at $0.75 (yes, 75 cents) a POUND (and I am not kidding) at a local Goodwill “FINAL FINAL Everything must GO sale.” Most of my dresses are new with tags. (GO FIGURE).

    Then I go in my oh so stylish dresses to the most upscale events in town and all the ladies go UUHHH, OOOHHH … Where did you get THIS????? What can I say…

    And my shoes I buy at “ALL SHOES at $3.99 store” — Oh GOSH, I am the BADDEST when it come to FASHION STYLING for LESS… LOL…

  8. If you make a decent income and you can save, retiring early isn’t that hard. What I see in a lot of people is that they LOVE to spend every penny, even if they don’t have to. They figure if they have the money, they need to spend it. They go out and buy the fancy cars, houses, etc and complain why they are broke.

    I really think too many people have the “I don’t care, I’ll worry about it when I retire” attitude.

  9. Don – In my opinion, there has to be a trade off. What’s the point of retiring early just to live far away from friends and family? My goal is to be financially free without sacrificing the things in life that really matter. Sure, I may give up eating out for lunch in order put those funds elsewhere, but there are some things that are more important. I could probably retire today if I moved to Ethiopia.

  10. I just bought a top-of-the-line mac but do not feel guilty about it because I saved for it for about 6 months. I actually thought about putting the funds in my vanguard mf, and fantasized about the returns accrued ina a year. But i still bought the mac, because the present needs to be enjoyed as much as the future needs to be planned for. Retiring early is definitely a good idea if one can afford it, but many I know would not even if they had the option. Work is something they like to do, and cannot live without. I was wondering if that is some oriental fixation- people not being able to ‘retire’ themselves aka ‘stop working’ altogether- or is it that they feel insecure about living without income. After all, savings deplete fast in today’s economies.

  11. Talk about peer pressure…my friend and I went shopping at the mall the other day and she started trying on these expensive sunglasses. The last pair of sunglasses I purchased were $85 about 8 years ago. We (or she) decided that these $400 Gucci fitted me perfectly and these $500 Channel fitted her perfectly. She said that I should get them, and I said I’ll get them if she got them. Luckily we thought it over during lunch and decided that it would have been crazy had we went ahead with it. I was just thinking…had she really got those sunglasses…

  12. Joseph Sangl says

    I FIRED myself from Corporate America at age 33 all because I told myself “NO!” a whole lot …

    Most of my friends are still living unfulfilled lives doing crap work that they can’t stand doing.

  13. To me, retirement is freedom, and the power to do whatever you please regarding of other people’s opinions.

    Gates – The people on the site figured out what made them happy and if you read it their annual expenses are only $20,000 even though they travel all the time since they don’t live in the US. Who cares if what they did can’t be replicated perfectly by everyone? I for one am happy to read their story and extract what I find useful out of it. If you demand a perfect story, you’ll just be disappointed constantly.

    (By the way, judging a website by it’s cover is no different. If the content is useful, who cares? I’m sure they don’t.)

    Don – Agreed, it’s all about priorities. If my family lived in the Midwest, I’d be moving there too. But they don’t. 🙂 If someone’s true priority is to own a fast car to race on the weekends, then more power to them. Or owning horses. Or collecting Pez dispensers.

    irina – I don’t know about buying pants by the pound, but we have shopped at used clothing stores and Goodwill before.

    Retirement is freedom! Pick your battles, have clear priorities. Most of all already do this to some extent. My point here is not to be ashamed of your choices, or hide them, or make excuses for them. Be proud!

  14. I like the concept of retiring early. That way I plenty more time to better enjoy all the other parts of life – family, traveling, volunteering, trying out new things.

    Right now, people are becoming more and more materialistic – Christmas songs came on the radio before Thanksgiving was over this year in my area.

    I am not a penny-pincher and I do go out and buy a new wardrobe once a year. However, a pair of shoes or shirt that is not required for a purpose or work is basically worthless as soon as you buy it.

    I just think that it is awesome to be able to rewiring your own thinking and doing things your own way. People who follow a cookie cutter way to life aren’t living their own lives. I want to be in control of my life and the funds that will make my life enjoyable and stress free.

    Thus, I don’t mind saving now to be ahead later. I like to think of all this as a game. Saving here and making good decision goes a long way in this journey.

  15. Peer pressure can work in your favor, too. If you’re trying to save money, and your friend/significant other/neighbor is too, you can encourage each other…let the push be to save money instead of spend it! I think that there ends up being a critical mass of people who order vs. brown bag it at work…if enough people are not ordering in, then I’ll be more inclined to not order either!

  16. frugalwayofliving says

    I know when I first started saving and paying off debt and start using coupons and other methods to saving money it felt like I was the only person around me doing it. The only people I ever saw using coupons when shopping were old people, but I was in college and I never saw a college student use a coupon, but there I was using 15 coupons for the food I had and saved 80% off my bill. I used all that money I save towards my debt and savings.

    It was hard for me to start and feel like I was being different, but after years of doing it, now I just feel smarter than everyone who doesn’t use coupons and save money.

  17. Chris in Boston says

    I am now 42 and acutely aware of my goals, and what I must do to reach them. I feel I am well on my way to retirement by 48. $tick to the plan! is my motto. Funny about peer pressure, I have a staff of 9 guys at work all in their 20-30’s and none are saving, and in fact I had to lecture 2 on why the 401K was so important, even if you contribute the minimum to get out company match. I put pressure on each of them and my friends to seriously SAVE. I am probably the only person in their life that is pressuring the opposite of everyone else. Each has to have a high def TV, or an iPhone (Both of which I also own, but I have a financial plan and goals set that allow such frills from time to time. Each of them has the mentality that they must buy things NOW, they refuse to save until they can afford. My own brother is considering building a inground pool costing $38,000. When I explained to him the costs to operate it (Chemicals, maintenance, electric, etc) for the next 10 years he was shocked. People too often think in the HERE and NOW rather than how a decision today can affect their lifestyle in a short few years.

  18. I have bought all my clothes from Goodwill and the like. Great way to save, but I have noticed even their prices have gone up. Books used to be 99 cents for paperbacks and 1.99 for hardbacks no matter what. Now some of the books can be pushing ten dollars. Sometimes buying new can actually be as cheap. On retiring, I would be scared to retire at 48. What if you only make it to 72 and run out of money? I plan to work to at least 60.

  19. That’s why you have to have a good retirement plan and a strict retirement budget. Factor in your expected costs, put a buffer % on it, and then figure out how much of a nest egg you’ll need to live to a reasonable age – then you can determine how much you can take out each year. It’s tricky, but if you plan it well you won’t outlive your retirement fund.

  20. JJ – in your response to being afraid of retirement. Retirement is a point of transition. *I am going to retire for the night* It doesn’t mean that you are going to drop everything and become another person over night. Retirement means that a person will be taking on another role in life. They can still work if they want but the point is that transition is in the works.

  21. I take pride all the time in being financially different. I have a lot of friends who are amazed that my wife and I watch TV on a 27 inch screen, but have 2 late model cars paid off, and put 20% down on our home. I don’t even tell them that we both max out our Roth IRAs and come close to maxing out our 401(k)s. I’m not sure they would understand – it’s all about priorities. 🙂

  22. In this hyper-materialistic society, I agree that it’s important to be very clear about your goals and to be proud of the fact that they are different! If you aren’t focused on where you are going, it’s easy to be derailed. But the most helpful thing, I find, is having friends who really feel the same way about the importance of being financially savvy and yet still enjoying life. Talking to others with the same point of view really reinforces the fact that we can all be perfectly happy with a bit more planning and a bit less stuff.

    However, a number of my friends do not feel the same way about these things that I do. Some examples:

    – let’s go celebrate someone’s bday at a fancy restaurant and then all split the bill evenly (when I purposely skipped wine and ordered a less-expensive entree)
    – let’s go celebrate someone’s bday at a bar and spend the night in a swanky hotel afterwards and get a cake and champagne

    Situations like this are a fine line because I am lucky to have a number of wonderful friends and I absolutely want to support them (and of course I don’t want to be impolite or to hurt their feelings). However, I feel that in those situations my friends are trying to help me spend my money, and I get quite frustrated when this proposed spending is not aligned with my priorities.

    Ironically, if the same friends asked me to plan an international trip with them in the coming year, I would be really excited about it. Obviously travel costs way more than any birthday dinner, but the point is that instead of frittering my money away on things that don’t matter to me, I would so much rather save up for something that I am passionate about.

    My basic strategy is to gently and diplomatically opt out of situations where I will be pushed past my comfort zone. Right now my husband in grad school so I have the very true excuse that any extra $$ is going to tuition right now.

    Any other good ideas on how to opt out of situations where you are under direct pressure to participate in a social event, but are not comfortable with the “price of admission”?

  23. chu I don’t know where you are from, but in american colloquial english, retirement refers to moving on from working.

  24. @JJ, Chu has an excellent point here, this concept of retirement as some “end goal” is simply incorrect. It’s just kind of a marker for another phase. You’re basing your whole reasoning on the concept that you’re going to save like mad until you’re 60 and then not make any significant amount of money from then on.

    The problem with that mentality is that’s it’s quite narrow. This question:
    What if you only make it to 72 and run out of money?
    is quite important, but it’s no less relevant than this one:
    What if I make it to 95 and die with a million dollars in the bank? or this one
    What if I make it to 52 and die with a quarter million dollars in the bank?
    So you really have to look at it from both ends, I’m not trying to push any type of existential/materialistic viewpoint here, I’m just trying to flip the coin (it has lots of sides).

    Truth is, the answer to your original question is pretty easy, just get an annuity. The value of that money will drain over time, but at least you won’t run out of it.

  25. I don’t think that dying with money in the bank is a bad thing – it shows that you saved well (or died early) and you can leave it to family or friends (if you have no family) or me (if you have no friends or family).

    I don’t know about you, but I don’t feel like working a 9-5 job for 45 years of my life. I have things I’d rather spend my time on – thus, early retirement makes sense to me. Materialistic? Not really, just enjoyable. I’d rather travel or have fun in general than have to go to work.

  26. Yes, peer pressure to spend spend spend is big in the US. I know lots of people who don’t see the connection between having savings and being smart about spending.

  27. I guess its easy to read these blogs and get carried away with the though of changing your life and not spending to achieve an early retirement. My next door neighbour a man who has worked hard and saved all this life to benefit later on in life has found he has terminal cancer. Which has really made me think about my stop and think about my life. You cant take your money with you and you never know what’s round the corner. Life is a gift that you only get one go at.

  28. I love programming and would probably do it even if I was rich, just for fun. And it’s actually better to do it with a purpose, for people who need you (IMO). So your goal of retiring isn’t exactly the same as mine.

    My true goal is to have a super-flexible job where I could work part-time and when my daughter goes to school, have all of her holidays and summer vacation off too. Part time, like twice a week — maybe one day from home. And yes, this is a ridiculous fantasy, but that’s what I would want. Just telling people I’m retiring young wouldn’t make me feel prestigious necessarily. And all that free time — though I’d like some right now very much — I know that too much free time kicks up my neurotic tendencies. A little bit of structure is better for me.

    I would never buy “boutique” clothing and shoes and junk. Buying overpriced stuff like that makes me feel stupid, not in style. I really don’t see how anyone gets sucked into that stuff. Of course I have nothing against big screen TVs (and I’ve been researching them now for 6 years ;>). It’s against my nature to impulse buy and that includes keeping up with the Jones’.

  29. Used girl wrote: “My next door neighbour a man who has worked hard and saved all this life to benefit later on in life has found he has terminal cancer. Which has really made me think about my stop and think about my life. You cant take your money with you and you never know what?s round the corner. Life is a gift that you only get one go at.”

    Funny: this story reminds me to work/save all the harder! Wow, if I get diagnosed with terminal cancer before I have saved up for my offsprings’ college funds or my wife’s well-being, THAT would be a disaster…

    Maybe your neighbor LIKES working? (I know I LOVE my job, so my time at work is not wasted, as your post implies). Saving is fun, and by foregoing much I have more time to play with my children (as opposed to showering them with stuff from Stuff-Mart).

    But we each make our own decisions….

  30. Peer pressure can work both ways as many have said, just have to choose your friends wisely if possible.

    That said I work with two rabid mac users (even though we have no macs at work) and like Javed I spent a wad on a new mac (my first mac!). At least thanks to this blog I was able to get $100 back in Discover gift cards and the mall also threw in a nice porcelain Christmas ornament that was stickered for $43.

  31. #4 really hit home with me. This weekend I spent sometime with friends whose parents got lucky by investing several thousand dollars in a start up that turned into millions, post-IPO. My friends spent hours talking about how their newly rich parents were buying nice things for them. My friends aren’t exactly “set for life” but they know that they’ll have many of their expenses taken care of, even if they don’t work 80 hours a week. Listening to them made me develop a “keeping up with the Jonses” mentality, where I wanted to keep pace with their lifestyle, whether it be a bigger home, nice clothes, etc.

    On the flip side, websites like these provide positive peer pressure. I find a lot of encouragement from reading about like-minded individuals who share my goals of early retirement and financial independence. It sure helps keeps things in perspective. So thanks!

  32. Gates,

    Why is saving 10% of what you earn on top of saving for retirement not doable? If you’re earning minimum wage, I can see why that might be a challenge.

    If you’re making $30k a year, and save 10% for retirement and 10% non-retirement, you’re still left with $26k (over $2100 a month). I live off that amount very nicely (travel twice a year, dine out 2-3 times a week, and go to a movie/concert/sporting event every weekend).

  33. Jonathan – you ought to create a new thread inviting readers/posters to share what their “retirement” goals and plans are (when they plan to retire, what they plan on doing, how they plan on sustaining themselves and their income, etc.). The specifics would be interesting to read since it indirectly comments on their values and priorities. I’m relatively new to the site, so if you’ve already done this then I apologize.

  34. southcampus says

    death is inevitable whether it is at an early, mid or late stage in life. Do what you enjoy, if you like to save go for it and if you want to be a mass consumer, more power to you. I personally will stick to savings for now and sleep peacefully.

  35. Jonathan,

    I whole-heartedly agree with you over this topic. I don’t know if you have ever experienced this but most problems I encounter with saving money and managing budget gets me entangled with peer pressure. I have alienated 5-6 people whom I thought were friends but they turned out to be expensive luggage.

    I have been mocked and ridiculed for saving. I like going to the movies once a month or eating out at a new restaurant once every few weeks but not doing it on a regular basis. Lately, I have been labeled as Mr. Scrooge even though my colleagues and friends are laden with credit card debt and complain regularly how difficult their lives have become because they were unable to buy shoes, the latest Coach handbag, a brand new flat screen tv or Nintendo Wii at the mall.

    This Thanksgiving, I was the topic of humor at a friends party for not going to the mall. Simply because I cannot afford indulgent shopping just because it is Black Friday or its tradition. I do not judge anybody who is a regular shopper but I get tired of the constant whining that “I don’t make enough” when you make $110, 000 and live in the Midwest.

    I am curious if you’ve had to deal with this along the course of your accumulation. If so, what was your solution?

  36. Being able to retire at 48 and get some strange looks for retiring so early would certainly be nice. Keeping track of spending and investing wisely are probably the two most important things anyone can do.

  37. Perhaps one might consider the term ?Financially Independent? over the label of being ?Retired.?

    Most people would love to be financially independent because it brings with it the idea of being able to do what you want to do with your time — including volunteering. Retiring has traditionally meant more like unplugging from the working world only, without necessarily the freedom of choice that financial independence has.

    Before our website was instituted and our book was published, we volunteered for years in Mexico. We were living a life of financial independence for 15 years before we wrote our book — which, by the way is not audio, but rather it is text and photos on CD-Rom in HTML format.

    Answering correspondence from those who write to us via our website is a priority for our volunteer time now although that isn?t all we do. We do concentrate on giving a positive message on our site – there?s plenty of people out there already saying how it can?t be done. We know it can.

    We did it and you can too.

    We start our 18th year of financial independence in January, 2008

    Be well,
    Author, The Adventurer?s Guide to Early Retirement.

  38. .

  39. Akaisha: Perhaps one might consider the term ?Financially Independent? over the label of being ?Retired.?

    I love that terminology!
    (and I’m the jerk who wasn’t a big fan of the website)

    The Drake: Jonathan – you ought to create a new thread inviting readers/posters to share what their ?retirement? goals and plans are

    I love this idea too!

    Mr. Nickle:
    If you?re making $30k a year, and save 10% for retirement and 10% non-retirement, you?re still left with $26k (over $2100 a month). I live off that amount very nicely (travel twice a year, dine out 2-3 times a week, and go to a movie/concert/sporting event every weekend).

    There’s a well-known book here in Canada: The Wealthy Barber. In his case he talks about maxing out your retirement savings (which is ~18% here in Canada)? So 10% above retirement could easily be ~30%.

    Also, your math is kind of faulty here 20% of 30k = 6k, you have to add taxes here: 30k – 30% – 15% gives you a lot less than 2k month. A 4-person family, even in the relatively inexpensive Midwest, is going to have a very difficult time living on

    They’re also not going to make a lot of headway, even at 20%: Let’s say they start at 25 and end at 45 putting in the same inflation-adjusted 6k every year with growth of about 5% over inflation (pretty solid), at 45 they have: $224,235 (equivalent to today) That’s like 8 extra years of salary. Sounds great huh, this family’s can just quit tomorrow, right?

    Except there’s no money in there for kids education, they could never afford a mortgage, so they don’t have any property assets. And really, they can only replace their salary for 8 (maybe 10-11) years, so they’re not “financially independent”. It’s just not sustainable long-term.

    If you’re doing like Jonathan and saving 50% of 200k/year, then your asset base is growing very fast and you’re saving an entire professional salary every year. Even at 20 or 30% Jonathan could make enough to “reduce his lifestyle costs” and become financially independent at 45. At his rate of savings he could do it by the time he’s 40 🙂 But the key here isn’t just savings, it’s income. Jonathan benefits tremendously from his high income. Low-income earners (bottom 25%) simply can’t do what Jonathan & Akaisha & others have accomplished.

    Sure you can quote Derek Foster, except he made a 60k+ stock purchase (and some more on margin) and doubled his money, which is hardly reproducible.

  40. I want to thank you for your informative articles,
    and your generous nature to share your knowlege in your web site.

    I consider financial planning a day to day activity,
    and saving money is a part of it. Even saving an average of $10 a day, can result in ending up substantially richer over time… The $10 savings can be acheived by minor lifestlye changes such as … buying a used car instead of a new car, carpooling to work or taking a bus, skipping a couple restaurant meals per week, buying things on sale, online, or at yard sales, and by using coupons.

    People confuse making sacrifices or saving money with being cheap. I think being cheap is not being generous to
    your friends and saving money to the extent that it greatly affects your quality of life (in your own eyes that is!)

  41. “I want to thank you for your informative articles,
    and your generous nature to share your knowlege in your web site.”

    You are most welcome! and you have great ideas on how to make the most of your money on your way to becoming financially independent – buying used, at yard sales, etc. Using places like Craigslist or Freecycle for goods and services is also a great idea. For a list of forums and newsletters to join that have outstanding ideas in this department, including ideas for those with families, check out our Preferred Links Page. You can click on that button from the front of our Website at http://www.RetireEarlyLifestyle.com

    Be well, stay strong,
    Author, The Adventurer’s Guide to Early Retirement

  42. Gates,

    I guess it depends on your circumstances and the financial choices you’ve made to get you to where you are today.

    I paid down my mortgage over the last decade to a level where it is almost paid off, and my monthly payment is now tiny. Outside of our mortgage, we never carried any debt. We live in a small house that was relatively inexpensive and doesn’t cost much to heat/cool or maintain. My wife works, so my salary does not support the entire household. We both drive used cars, so there is no car note. After taxes and savings, we both live off of a combined total of $3000/month, though we have both gotten by on my $2000/month when she wasn’t working without sacrificing too much. I have occasionally picked up work on the side, but all of that money went into savings.

    We’re not funding education for kids, but no one funded our education either (we worked our way through school).

  43. Hey Nickle, thanks for the reply, but obviously, you had nothing to say about my numbers. I like your story, but this:
    After taxes and savings, we both live off of a combined total of $3000/month,
    would seem to indicate that you are bringing in ~45k/year and that you can actually afford a mortgage, which is totally different from the 33% of US households that bring 30k or less! (from 2006 numbers)

    Look I’m not going to deny that savings are not important, b/c they are, but at some income level no amount of savings will ever let you get ahead. Even that “8-year accumulation” that I talk about in my previous post is actually kind of sketchy, b/c it’s an additional 8 years of living at 30k! While that’s tons of money in say Thailand, that’s close to a minimum for a healthy family in the US.

  44. I think for someone on a modest income, it’s going to take longer than 8 years to reach financial independence. But saving just 3k a year, and investing it where you’d achieve a 10% average annual return (S&P500), compounded over 30 years, gives you over a million dollars.

  45. OK, Nickle, let’s try this math again:
    Go to this site: http://www.bls.gov/cpi/ and visit the inflation calculator. Punch in 30k from 1977 to 2007, that’s 30 years. So the calculator tells you that your 30k in 1977 is the same as $103,433.66 in 2007.

    OK so theoretically, you started at 30k in 1977 at age 25, and got “cost-of-living” raises your whole life. you dutifully saved 30k and managed to make 10% on your investments. Now it’s 2007, you’re 55 and you’re a millionaire, but your inflation-adjusted salary is now 100k+. So after 30 years of saving you effectively saved up 10 years of income at your current lifestyle. Great, you can now make do until you’re 65, maybe 70 with a little inflation and maybe some government support.

    Yeah, yeah, I picked a period noted for some really high inflation (80s), but it’s also a period where you could’ve reasonably earned 10% or more. And let’s face it, if everyone is making 10% then inflation is going to be high. As quoted from a previous Buffet article on this very site, the growth of the Dow Jones over the last century averages out to 5%/year! So you may be the lucky one who doubles that, but that’s a gamble, but you’re just as likely to go the other way.

    Look, the fundamental unit here is not dollars because one 1987 USD does not equal one 2007 USD. If you’re going to come back with numbers, you have to represent these number in “years or months of financial independence” or “years of equivalent current income”.

    I don’t want to start a flamewar here, but I can’t back or verify or even argue any of your statements b/c they’re all using undefined units of measure.

  46. The only point I was trying to make is that it does not have to be that painful to save 20% of your income unless perhaps you have a very low income, and that through compound interest, you can grow the money saved into a much larger sum than what you actually put into it. This was in response to what I thought you were saying about the practicality of saving 10% on top of your retirement savings.

    I don’t understand the point you are trying to make, now, with your calculations on inflation. Are you saying that due to inflation, investing is a futile effort? Or that achieving financial independence is unlikely because of it? If so, what do you propose someone like myself do instead?

  47. Peer groups can be a pain or a great boon.

    This is what my wife and I have chosen our own peer groups and are plotting and planning that our children form or join a proper peer group.

    If our heart and minds do not resonate in agreement with what the peer group is doing, then we are in the wrong peer group.

    We should move on.

  48. I think, no I know I am in love. Irina-marry me. You are the woman of my life-style. If only…

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