Make Hay While The Sun Is Shining! Advice for those starting out......

[2Birds1Stone]

I spend more time than I care to admit on various financial blogs, forums, and corners of the internet. A very common and recurring theme is folks with high incomes that base their lifestyle and plans around that income lasting indefinitely.

I learned the hard way, that the fire hose of money can quickly turn into a trickle. The best thing to do for your future self, especially while you're in the position to do so, is to save, save, and save some more.

It's easy to feel invincible in your 20's or even 30's, but between economic cycles, technological disruption, and many other personal factors that can limit your ability to earn a fat paycheck in the future......take every advantage to get yourself to at the very least a bare bone FI level.

Has anyone else taken a huge pay cut, not by choice? Did you squander more of your high income than you feel like you should have?

[Hula Hoop]

Yes, although I guess you could say that I made a choice.  I had a high paying job when I lived in the US but I moved to Italy for my husband and now make a fraction of what I used to make (around a third).  I was pretty frugal compared to my friends when I earned the big bucks but I did spend more than I should have on eating and drinks out (I was young and single after all).  Luckily for me, I saved on rent as I chose not to live in the fashionable part of town and had a room mate.  I saved a pretty substantial part of my income in Vanguard and it allowed me to walk away from my job when it became toxic and move here. 

[Bateaux]

We've always lived this way and preach it to others.  The well can dry up quickly ina recession.   Make that money and put it to work quickly.  Entire industries can disappear in a matter of a few years when disruptive technology or other unseating events occur. 

[slappy]

Yes, my husband is now a SAHD and it wasn't entirely by choice. Obviously it was his choice not to pursue a new job, but it wasn't his choice to lose the one he had. Luckily we saved as much as we could when we were DINKs, although still not as much as most on here. But I always said we should save when we could because we didn't know what could happen in the future. Especially when planning for kids, it's hard to predict what will happen. We never planned to have a SAHP, in fact we were totally against it, but we are glad we have one now. We save a little less now, but it's just a phase of life that will evolve into another phase where hopefully we can save more. I was very grateful that he could leave his job without stress about whether or not we could survive without his paycheck. I can't imagine adding that stress to him when he was already going through so much at the time.

[Moustachienne]

When DH and I were young' uns and it was still a bit unusual for middle clas women to work, we had the mantra "double the income means double the options not double the spending".  This served us so well!   Even though we didn't have children as planned (I intended vaguely to be a SAHM), we were able to build the buffer that let us change jobs and cities, weather bouts of unemployment, leave bad jobs, go to school for retraining.  As long as one of us was working, we were golden.  When we were both working, we slammed the savings. 

DH remembers talking to people at work who were worried about covering some expense or other and realizing that even though they made the same or more than him, they were living paycheck to paycheck. Just crazy!

[webguy]

I’m in a similar situation. I run my own business which is making a huge income right now but it’s in a field which could change very quickly. We’ve had a few scares lately which have shown me that income could fall dramatically very easily if things don’t go as planned. I’ve been saving diligently for the past few years in preparation for such an event and have just over $2m saved. This makes me more at peace with the fact that our large income could change as we haven’t blown it all in the process. I couldn’t imagine the stress if we’d based our lifestyle on our income and come to rely on it!

[Dances With Fire]

I spend more time than I care to admit on various financial blogs, forums, and corners of the internet. A very common and recurring theme is folks with high incomes that base their lifestyle and plans around that income lasting indefinitely.

I learned the hard way, that the fire hose of money can quickly turn into a trickle. The best thing to do for your future self, especially while you're in the position to do so, is to save, save, and save some more.

It's easy to feel invincible in your 20's or even 30's, but between economic cycles, technological disruption, and many other personal factors that can limit your ability to earn a fat paycheck in the future......take every advantage to get yourself to at the very least a bare bone FI level.

Has anyone else taken a huge pay cut, not by choice? Did you squander more of your high income than you feel like you should have?

I was let go from a job that I enjoyed when the business cycle started to slow. However, I was a saver and investor and could weather the storm for a couple of months. I credit my grandparents for teaching me the value of saving as well as growing up in a small town where there was little "wealth" compared to today. I also witnessed my dad being let go from Mega-Corp. when I was young and when money was much, much tighter.(Trust me on this.) The unemployment rate for example in 1982 reached 10.8% in the U.S. with some areas in Michigan and West Virginia reaching above 20%.
(2009 we saw some areas reach 10%)
 
So yes, by all means save, invest, and plan. But don't forget to enjoy the journey along the way and have some fun. (Today I watch as older friends and family face more and more health related issues, some HAD to quit working, so you never know...

Dances With Fire

[Greenback Reproduction Specialist]

Yep, so true this happened to us. I thought we had a decent amount of savings, but it went pretty quick. Now we have cash savings, assets that cashflow, somewhere we can live rent/mortgage free, and a backup plan for income in the event the well dries up. We have levels of fall back positions built from the ground up on a solid foundation. You cant plan for everything, but having contingency plans and putting away money for a rainy day is nice piece of mind. You will thank yourself later.

[Uturn]

I got in the IT job market in the mid 90's.  Money was easy!  I spent every dime and financed my toys.  I wasn't worried because tech will never go away and pay only rises.  Then the crash happened in 2001.  By mid 2002, I was living in a Ford Ranger.  I wasn't able to even get my negative net worth moving the right direction until 2005, finally hit 0 net worth in 2009.  My money views have changed much since those days.

[jpompo]

I think about this way more than I should. I'm a high earner with a significant portion tied to a bonus and a severe case of impostor syndrome in an industry that is about as boom/bust as it gets. Thankfully it has kept me focused on savings and not falling into common spending traps.

[Goldy]

Early in my career my company got hit hard by the GFC and laid off just over 50% of staff and 100% of contractors (10’s of thousands).  My wife and I both work for this company and both retained our positions but that experience cemented the importance of saving and is what lead me to focus on being FI.

[sui generis]

I never had to take a pay cut/job loss not by choice, but definitely squandered portions of a high salary at times.  I was into handbags for a while (never the super expensive ones, but I did pay more than $300 for one) and fancy restaurants (love the memory of those experiences, but I'm glad I'm past needing to do a lot more of them.  It's still a super occasional thing).

It helps to spend less time around people who are materialistic for sure.  Like here!

[calimom]

At age 25 in 2001, I married a 32 year old man who came equipped with an 8 year old daughter. He had a pretty high flying tech job and I'd been to school, travelled and worked in a variety of jobs and self employment opportunities. We had a little boy pretty quick and then he lost his job in the dot bomb bust of the early 2000s. By then I was working for an events company that held on through the crash and he did the SAHD thing for a bit till he landed a job at Apple. I continued in my position, we had our son in day care and daughter in an after school program. We saved and saved, he took advantage of employee purchase of AAPL stock and maxed out retirement accounts and CDs, hoping to purchase a house somewhere in Silicon Valley. Ha! He then joined a startup firm as a software developer and we were loving life. When friends wanted to meet up in the city for a $400 dinner we declined, but invited them over for a Sunday supper of chicken cacciatore and salad. Bring wine. They loved it.  In 2006 we had a surprise baby girl which we were thrilled about and I stopped working for pay for a bit All those kids! We moved to a bigger rental and  that was great.  Then he died in a car crash on his way home from work in the summer of 2007..

It was horrible, it was tragic and would have been much, much worse had we not had our careful savings and frugal ways. Thank you also life insurance from his job.

Life can go really well and it can take a 360 degree turn at any moment. It's really helpful to have $$ in the bank and a back up plan. Best case scenario you won't need it for an emergency. Best case scenario you will need it if you do.

[Taran Wanderer]

calimom - that is horrible. I’m so sorry.

I did a pretty good job of saving the first few years out of school, with a 50% savings rate of gross income.  Not great by mustachian standards, but pretty good. I married my frugal DW, and now we save a third, pay Uncle Sam a third, and live ridiculously off a third. We would be FIRE if we cut back, but we like the way we live.

Looking back, I would have done a few things differently. I would have been less concerned about buying electronics (nice tuner, Bose speakers, big TV) and grown up furniture. I would have traveled even more. I’ve driven my nice-but-used cars to 200,000 plus miles, a lot of that on the company dime (which paid for the cars), so I’d do the cars the same. Part of me wishes I had gone bigger on real estate, but what I did do ended up well with a good profit on a small house at the peak of the market in 2007, and a great home that we love right now, though perhaps we bought too much.  Going bug could have lost a lot in the GFC.

So for advice, I’d tell people to:

1. Get the best education you can.
2. Find a job where you have a culture that builds you up and allows you to perform, grow, and be rewarded.  This might be working for yourself.
3. Set savings goals and stick to them, whatever your savings rate is.
4. Put your money in index funds and stop thinking about it.
5. Keep yourself healthy. Eat right, exercise, sleep, make healthy choices. This doesn’t guarantee reduced health care costs, but it helps.
6. Buy appropriate insurance to protect your loved ones.
7. When you do do buy things, buy high quality and take care of what you buy. Focus less on what’s trendy at the moment, and look for designs that will last over time.
8. Rent or buy, but do it rationally and not emotionally. Go small.
9. Beyond the basics, use the discretionary spending you allow yourself to do the things that make your heart sing. You only live once, and I don’t mean that in a YOLO sense. You have one life. Optmizing your life doesn’t mean the same thing for everyone. Figure out what makes your heart sing and do more of that.