When I started investing, I too read many such blogs and articles to educate myself as much as possible. You are bound to read fake or exaggerated stories on the web. When I was still unsure I decided to get in touch with a portfolio management company (megacoinwealth.com) , talked to a portfolio manager for a much clear understanding and knowledged. Helped tons!
As usual, my point of view differs with the group think. I’ll share it and I encourage rebuttal. Here are a few points: - being a millionaire is not a big deal in 2018 and it will be difficult to live off, for most people - people who are careful spenders can have a really good life with about $2M - it isn’t difficult to aquire a net worth of $1M in a lifetime, for anyone making about $50K/year and up Consider this: Couch potato is most common self-investment technique, as far as I know. The generally accepted safe withdrawal rate for couch potatoes is 4%. If you save $1M, you can have a retirement income of $40K per year. A decent value investor can average over 10% returns. It doesn't take Warren Buffett to make these returns but you have to be objective. The safe withdrawal rate for a value investor is 8~10%. A good value investor can withdraw a lot more. That means, the value investor can do as much with $400~500K as a couch potato can do with $1M. It took me 18 months to learn value investing. By “learn”, I mean have the techniques internalized with a few thousand financial statements read and analyzed. I had been trading stocks for decades, when I learned value investing. I unwittingly programmed myself for pattern recognition so I could see value at a glance, where it was once a mystery with long calculations to gain insight. If I had taken every odd-job, overtime, side income, opportunity that came along in those 18 months, I would not have made an extra half million. What’s more, the value investment training will return over a lifetime, not just 18 months. So, if you’re a GIC ladder, couch potato, mutual fund investor, $1M will seem like pie in the sky. If you’re a value investor with a long investment horizon and a good saving program of $1000/mo or more, you will get to $1M in well under 20 years and probably under 10.
@TomB16 I agree with most of what you say above. I would emphasize controlling expenditures more, not that you ignored it entirely: But I feel like a LOT of people have no idea how much compounding works for $ not spent, just like it does for $ saved/invested. Live super frugal in your 30s and 40s, and it will be super easy to live off very modest income thrown off from investments in your 50s when you drop out of the workforce [and, in my case, sell the house for purposes of becoming a fulltime wanderer. Well, that is my model anyhow].
This is where, for me, it all goes south very fast! The idea that people can live super frugal at that age makes no sense for 90% of the population. 1) most people start having kids around , lets say, from 25-35. So between 30 and 40 (even up to 50) you invest a shitload of money into your kids. Not sure how you manage to save up lots of money then unless you already make a shitload of money (and you will have no problem later on in general money wise) 2) most people buy they own house around that age as well (again: you do not have a lot of money to save extra, I agree: the house itself is also a way to save money 3) I realize that most of those stories about saving money are linked to USA based blogs however in my country (and I think in many other countries) the big buck are being made when you are 40 + (in many countries the salary increases with experience and age (I admit: the idea that you have to make more money just because you are aging, is stupid, but ..) 4) Drop out of the workforce at age 50? I think this is hardly realistic. We are (especially in Europe) getting older and older and realizing we need to work longer (up to 65-68). Perhaps it is different in the USA but I am pretty sure that only a small minority of the lucky few can retire around 50.
Spooks, you make a good point about having a family and spending in your 30s. Family is more important than saving, during those years. I live in Canada and I am 51. I'm currently retired, sort of. I no longer have a career but we have some real estate that requires work. If you want to retire, you have to be able to consider alternative ideas. Instead of pouring every cent into a house, how about building a rental suite? Let the house carry all or most of itself. Instead of buying a mutual fund to take care of your retirement, how about spending a ton of time studying companies and the market? These are not what 99% of the population does but this is how you have to think and act, if you want to retire at a young age. Also, if you want to live off investments for 40 years, you need to solve the inflation problem. I completely agree with Three Eyes. Frugality is a key component of an early retirement. When you're at CostCo, you have to consider how much you need that 4K TV. Would you prefer to retire a month earlier or would you rather upgrade your 1080p flat panel to a television that won't provide a noticeable improvement over your present set but will make your friends envious? How badly do you need to replace your 4 year old car? The amount of money we waste is a matter of perspective but to someone who can live frugal, harnessing that money is the key to financial freedom. The key point here is that, if you're going to follow the herd, you're not going to be retiring early.
A few remarks: 1) you state you have some real estate that requires work, do you mean real estate as in that you own some houses that you have on the market and are renting them out? So your income is the rent you get with those? 2) I also agree that frugality (and investing money is the key issue here, but it isn't going to make you "very rich") 3) The tv argument: you are preaching to the wrong person here... I live a very sober life style and I am able to save money. However the reason why I am also able to do this is because I a highly educated and make a nice salary (but not a top one either) + I have a very low rent. I am also single and have no family (saves a ton on money as well) I however like the fact you are putting up here: "The amount of money we waste" In my opinion many people do waste too much money and their (bad) financial situation is the consequence. People tend to want too much (things they can't afford). However: the above is something differently from the "millionaire " discussion because I also do not believe that it is realistic for 95% of the population to reach or aim for being one. You need a lot of luck as well (often never mentioned by those "self made ones" that talk at TED events for example). What I strive for is a "safe" financial situation in which money is not a key issue. A situation in which you do not have to worry if you go out buying groceries or paying your rent. This is for me what people should strive for, not the decadent millionaire crap you see or read about.
Three Eyes didn't mention that learning to live with less materialism is also learning to be happy. Materialism is background noise on the road to happiness. Disconnecting from materialism is a learning journey of pure joy. I share your point of view. 99% of the population do not have the will power to reduce spending or the desire to put time into learning to invest. Totally disagree. I've lost my net worth twice. Each time, I assumed I'd never have money again. Each time, I worked hard and recovered financially more quickly than the last. It doesn't take luck. It takes work, self control, and some knowledge. Spooks, be careful to not fall into the trap of deciding it can't be done and then selling yourself on any negative idea that justifies your position. There is a very key difference between being critical/skeptical and being negative. Let me be direct: It wasn't that hard. See my post on inflation in the investing forum. It's a long read but it will give you some ideas.
It is not just that they do not have the desire or will power to reduce it. Many are just too naive/dumb or are just not able to do so because of other reasons they can not control. I am not saying hard work isn't a factor, but luck is most definitely a big factor that people often forget. Let me already start by saying you were also lucky.... you might not realize it but I am sure you did not end up on the street, homeless, alone.. did you? I can even go more into an extreme view: you were already lucky to be born on a certain content, in a certain family situation.... I never said you can not achieve something and save money. What I am stating is that people need to be more realistic. Becoming a multi- millionaire (which is what people always talk/dream about) is not that realistic for 99% of the population. This is something that should be accepted and stated.
When I was young, my parents could not afford to feed us. We used to frequently eat at my aunt's house. It wasn't until I was in my 30s, I realized what was happening. In 2nd year University, I left home to live with my girlfriend of the time. She was not making a go of it on her own and would have had to return home. We just barely made it together. It took me almost a decade to pay off those loans. One of my net worth resets was two years in hospital soaking up chemo therapy while my net worth drained away. If I were in that position again, I would sell my home a lot sooner. This has not been an easy ride for me. It's not easy for almost anyone. You plan. You troubleshoot. You end up somewhere you didn't expect but, hopefully, is still a good place. Spooks, I agree your chance of becoming wealthy and being able to support yourself without a formal career is pretty limited. I recommend you disregard investing and focus on your disposition and objectivity. You have far more potential gains in these areas. I wish you much success.
I have no idea what you actually mean by this. What is a "formal" career? Also: not sure what you mean with disregard investing ?
Great thread. Becoming a self-made millionaire is not easy, one has to be focused and have a great plan. The most important thing is having patience and always be motivated to doing hard work.
