What if there is no money to save?

[anisotropy]

JUST BECAUSE I CAN

man, this is awesome. high five !

[sheepstache]

There's a funny secret that people around these parts are really reticent to note which is that people with really high incomes do save a lot of money; the best information I've been able to find is that people earning 100k or more save a quarter of their income on average.

I thought this was interesting, so I did a quick search and found this:


Associated income data:
Top 1%: $380,354
Top 10%: $113,799

That is interesting. I wish they broke down the 90% more.

And if $113,799 and above is the 10% line it suggests those people profiled by nytimes and wsj who are barely scraping by on like $400k are outliers.

[anisotropy]

There's a funny secret that people around these parts are really reticent to note which is that people with really high incomes do save a lot of money; the best information I've been able to find is that people earning 100k or more save a quarter of their income on average.

I thought this was interesting, so I did a quick search and found this:


Associated income data:
Top 1%: $380,354
Top 10%: $113,799

nice graph, it does show that on average, the top 10 to 1% do only save about 10% more than the bottom 90%, which even the author admits that he found to be "surprisingly low".

What's more important (i think) is that the graph also shows the top 10% spends more money on "lifestyle choices" than the bottom 90%, and well when things go bad, the people on the top will lose more as can be seen on the graph between 1990 to 2009 in absolute terms. Or like whats happening right now in the oil patch.

key takeaway?

1. The more you have, the more you have to lose.
2. Get income to 113k by any means necessary to join the top 10% club?

[Luck12]

There's a funny secret that people around these parts are really reticent to note which is that people with really high incomes do save a lot of money; the best information I've been able to find is that people earning 100k or more save a quarter of their income on average.

I thought this was interesting, so I did a quick search and found this:


Associated income data:
Top 1%: $380,354
Top 10%: $113,799

Absolutely pathetic that the top 1-10% only saves 10-15% income based on past 30 years of data.   Holy fucking shitload of volcano of wastefulness!   That's why so many in this range complain about top bracket marginal tax increases of a few % points.  I can understand the bottom half not saving much or any money, but not people making 6 figures.   

So much for the right-wing mythology  that the rich are so much more thrifty and that's why they have a lot more wealth.  No, they have more wealth because they earn a lot more duh! 

[Roland of Gilead]

Absolutely pathetic that the top 1-10% only saves 10-15% income based on past 30 years of data.   Holy fucking shitload of volcano of wastefulness!   That's why so many in this range complain about top bracket marginal tax increases of a few % points.  I can understand the bottom half not saving much or any money, but not people making 6 figures.   

So much for the right-wing mythology  that the rich are so much more thrifty and that's why they have a lot more wealth.  No, they have more wealth because they earn a lot more duh!

Well to be fair the top % pay a shitload of taxes, especially now with the new Obamacare extra 3.8% tax.  Top rates are above 40% with that and if you live in a state with high state taxes, you could be over 50% with federal and state taxes.  Add in property taxes, sales taxes, etc. and suddenly saving 15% doesn't seem so incredibly bad.  You would have to live on $0 a year to save 45%.

But yes, the rich could save more.

Edit:  Think how bad the wealth inequality would be though if the rich lived like MMM.  There would be no jobs for the poor because the rich would never eat out and would do all of their own house/car repair.  The only jobs for the poor and middle class would be government jobs.  We need the really rich to spread that money around through spending or we are not going to keep our jobs.

[Cassie]

When we were young & poor I manned the home front & my hubby worked 2 jobs so we could save $.  That would not be possible as a single parent because you do need to see your child but for a couple it is doable.

[RyanAtTanagra]

I'm starting to see what the earlier poster meant by the trolling comment.  After 3 pages I'm not sure what the purpose of this thread was.  The OP has ignored everything suggested/offered and holds on to how impossible it is to retire early if you don't make a lot of money.  Yes it's harder to save with less money, but people do it all the time.  How?  They make choices that allow them to.  If someone's choice was to have 6 kids with a single income of $18k hell yes that's going to make it impossible to retire at 30.  That doesn't say anything about the principles of early retirement, it just says 'if every step you take is away from early retirement, then you're going to have a hard time getting there'.

[Luck12]

Well to be fair the top % pay a shitload of taxes, especially now with the new Obamacare extra 3.8% tax.  Top rates are above 40% with that and if you live in a state with high state taxes, you could be over 50% with federal and state taxes.  Add in property taxes, sales taxes, etc. and suddenly saving 15% doesn't seem so incredibly bad.  You would have to live on $0 a year to save 45%.

But yes, the rich could save more.

Edit:  Think how bad the wealth inequality would be though if the rich lived like MMM.  There would be no jobs for the poor because the rich would never eat out and would do all of their own house/car repair.  The only jobs for the poor and middle class would be government jobs.  We need the really rich to spread that money around through spending or we are not going to keep our jobs.

You make a good point in your edit.  I have to pt out though that the 3.8% tax you mention affects singles with AGI > 200K and marrieds w AGI > 250K. AGI is less than regular gross income.  So more than half of the top 1-10% is not affected.  No excuse for such high income people to not be saving at least 30% of gross income unless they have like 7 kids and live in NYC.

I'm in the top 7-10% income and it's no sacrifice for me to save 50-55% of gross income even in a pretty high COL city. 

[Goldielocks]

I'm starting to see what the earlier poster meant by the trolling comment.  After 3 pages I'm not sure what the purpose of this thread was.  The OP has ignored everything suggested/offered and holds on to how impossible it is to retire early if you don't make a lot of money.  Yes it's harder to save with less money, but people do it all the time.  How?  They make choices that allow them to.  If someone's choice was to have 6 kids with a single income of $18k hell yes that's going to make it impossible to retire at 30.  That doesn't say anything about the principles of early retirement, it just says 'if every step you take is away from early retirement, then you're going to have a hard time getting there'.

Okay, if we agree with OP that it is very hard to save without more income, and with other posters that 6 kids is a lifestyle choice, we are still missing the bigger (longer time horizon) picture.

When you have 6 kids and 2 adults under one roof, at some point the kids start to earn income.   Even 20 hours a week and minimum wage, each kid by 16 yrs old means can contribute for all their own clothing, food and school supplies, maybe a bit extra for utilities, and is virtually free.   Eventually the youngest is in school so even mom can work 20 hours+ per week (and the oldest are now old enough to run the home when she is working).

Short term goal is to get by if income is very low, and all expenses really have been minimized, but over time it only can improve from here.  I know a family with one income earner, single mom of 3 kids with 2 parents living in their 3 bedroom apartment.  the parents have a bit of social security coming in (but not much as they are foreign born), she makes $32k per year.  Once the kids we old enough to start making a bit of money at 14,  it helped tremendously... and by 16 they could provide about $400 per month over their personal money spending, which more than covered their food and costs.

[Roland of Gilead]

When you have 6 kids and 2 adults under one roof, at some point the kids start to earn income.   Even 20 hours a week and minimum wage, each kid by 16 yrs old means can contribute for all their own clothing, food and school supplies, maybe a bit extra for utilities, and is virtually free.   Eventually the youngest is in school so even mom can work 20 hours+ per week (and the oldest are now old enough to run the home when she is working).

When you come back from the 1950's time travel, let me know.

Nowadays kids would complain about working 2 hours a week and they would spend all of their income on a new smartphone + designer ripped jeans.

[rob in cal]

I've posted my story of being a pizza delivery driver with a family and a paid off house previously.  Suffice it to say, I'm pretty close to the OP in income from my work, but its my investments, plus having low living costs due to a paid off house which have been accelerating my financial success, such as it is.  Basically I've gradually expanded my passive income over the last 10 years (when I had paid off my house) and its now averaging about 25k a year.  I didn't start to achieve this passive income take off until I was in my late 30's.  I would have earlier had I not worked to pay off my house early.  The point is, with a modest income things are going to happen siginificantly slower than they can for a six figure income person.  But they are still happening.  I think one needs patience.  One is not going to achieve FI overnight, unlike those amazing six figure people who could conceivably hit FI over a six to ten year period.

[Goldielocks]

When you have 6 kids and 2 adults under one roof, at some point the kids start to earn income.   Even 20 hours a week and minimum wage, each kid by 16 yrs old means can contribute for all their own clothing, food and school supplies, maybe a bit extra for utilities, and is virtually free.   Eventually the youngest is in school so even mom can work 20 hours+ per week (and the oldest are now old enough to run the home when she is working).

When you come back from the 1950's time travel, let me know.

Nowadays kids would complain about working 2 hours a week and they would spend all of their income on a new smartphone + designer ripped jeans.

yeah, but I don't think that applies when you have a family with 5 siblings and not a huge family income...   I just don't see it in the large families around here (4+ kids).  Okay, I only know of three of these families, so maybe my pool is small.  What I see is a lot more pitching in.   Yes, kids start working so that they can afford a phone, or those jeans, but they do pay for it themselves, as no one else can do it for them....

[Cheddar Stacker]

When you have 6 kids and 2 adults under one roof, at some point the kids start to earn income.   Even 20 hours a week and minimum wage, each kid by 16 yrs old means can contribute for all their own clothing, food and school supplies, maybe a bit extra for utilities, and is virtually free.   Eventually the youngest is in school so even mom can work 20 hours+ per week (and the oldest are now old enough to run the home when she is working).

When you come back from the 1950's time travel, let me know.

Nowadays kids would complain about working 2 hours a week and they would spend all of their income on a new smartphone + designer ripped jeans.

yeah, but I don't think that applies when you have a family with 5 siblings and not a huge family income...   I just don't see it in the large families around here (4+ kids).  Okay, I only know of three of these families, so maybe my pool is small.  What I see is a lot more pitching in.   Yes, kids start working so that they can afford a phone, or those jeans, but they do pay for it themselves, as no one else can do it for them....

Roland, I'm with Goldie on this one. A parent is not required to give into their kids' every demand. Than can complain all they want, but if you give into that complaint it's your choice. Pressures from this generation may be stronger for whatever reasons, but pressures do not equal required spending by their parents.

I'm 15-20 years removed from living with mom and dad, but we have a huge family and we all did our part. Yes I begged dad for the cool shoes or another $1 for the arcade, but he just said no and stood his ground many times over. They just simply couldn't afford it if they wanted to.

Result - I had $1,500 in the bank at age 12 from delivering flyers, I had a lawn mowing business with 2 brothers and we'd shovel snow in the winters, I put myself through college other than maybe $500 dad kicked in once when I fell short, and I learned about work-ethic at a very young age which impressed the bosses enough to make me a boss in my career.

It taught me lessons then, and it's still paying dividends by giving me solid reasons to stand my ground with my kids.

[Roland of Gilead]

Maybe I am jaded being around softies.  All of the kids are pretty much spoiled brats who throw a tantrum if you get them the wrong color brand new car for their 15th birthday.

[COMO]

So if you make more money you can save more? I bet you can buy a house easier too.

Obviously making more money makes saving more easier. What I don't understand is why in most these equations we assume lifestyle is the constant. Its not in the real world. Almost evryone I know who has moved up the income ladder has inflated their lifestyle. Some do just just a little (guilty) some do a whole bunch. The arguments dont flow because eveyone is using a different constant. Geography is another example someone making 30k a year in myhome town in MO will probably retire long before someone making 60k in Manhattan. Different constant.

 Rough numbers
People with the same saving rate wanting to retire with the same lifestyle they currently have at the same withdraw rate will need to save for the same number of years regardless of income. This assumes they are not living the same life as each other

[TXBruiser]

It doesn't matter how much you make, just how much you spend. If you make $40k a year and save half, you are in the same boat as the person making $100k and saving half.

No, no you're not in the same boat.  The guy making $100k is still in a $50k boat while the guy making $40k is in a crappy $20k boat.  This means real quality of life differences such as the fact cheap areas tend to have worse shopping, higher crime, often including violent crime (which is hard to even quantify the effects of in dollars), bad schools, and on and on.  Do you have any family members that are genuinely poor?  I've seen what it's like to live on very low income and it's very different from living on middle income.  The gap from spending $20k to $50k is huge, especially for women and kids as they are the worst victims of crime and bad schools.

I had a hearty laugh at that nugget there. Definitely not the same boat. I would bet that if MMM had a 40k salary he'd not have written this blog. The hidden key to ER is most definitely a hefty salary. Not much fat to cut out when making 40k versus 100k. Get spending down to $20,000 which is feasable on both salaries, what's left over? $80,000 a year saved buys retirement much faster than $20,000 a year saved.

I disagree, the problem with your statement that "$80,000 a year saved buys retirement much faster than $20,000 a year saved" is that your saying the guy making $40k wants to retire like the guy who made $100k.  and the fact of the matter is that is not realistic.  the $40k guy should be realistic in his retirement goals.  Because based on your statement the $100k guy would be jealous with the guy who made $1 millon a year and only saved $500k.  clearly the guy making $40k and lives on $20k can retire at the same time as the other guy, but their standard of retirement will be different.... and why should it not be.  If you make $40k/yr and can life on $20k and be happy retirement then go for it... but if you want a better retirement and the same time frame... make more money!!! 

[minority_finance_mo]

What I did not see addressed is the reality of (seasonal) unemployment or underemployment, which the OP pointed out to be his/her situation.

What do you do in the off-season? Is it possible to pick up work in that time?

[ChrisLansing]

There's a funny secret that people around these parts are really reticent to note which is that people with really high incomes do save a lot of money; the best information I've been able to find is that people earning 100k or more save a quarter of their income on average.

I thought this was interesting, so I did a quick search and found this:


Associated income data:
Top 1%: $380,354
Top 10%: $113,799

Absolutely pathetic that the top 1-10% only saves 10-15% income based on past 30 years of data.   Holy fucking shitload of volcano of wastefulness!   That's why so many in this range complain about top bracket marginal tax increases of a few % points.  I can understand the bottom half not saving much or any money, but not people making 6 figures.   

So much for the right-wing mythology  that the rich are so much more thrifty and that's why they have a lot more wealth.  No, they have more wealth because they earn a lot more duh!

If we leave the right wing and left wing out of it (e.g. we only study flightless birds) then it's still true that the top 10% have more wealth because they save more (in addition to earning more).   10 to 15 percent of 113 K is 11,300 to 16,950.    That is significantly more money than 0-3% of what the bottom 90 make.   

10 to 15 % savings rate is pathetic (I'm saving more than that and I'm not even in the top 50%)  but the near zero savings rate of the bottom 90% is super-pathetic.   

Edit:  The top 10% of income earners were saving a larger % of income from the 1940s-1970s.   The trend is heading upward again, but nowhere near the levels of the past.   

[DarinC]

Absolutely pathetic that the top 1-10% only saves 10-15% income based on past 30 years of data.   Holy fucking shitload of volcano of wastefulness!   That's why so many in this range complain about top bracket marginal tax increases of a few % points.  I can understand the bottom half not saving much or any money, but not people making 6 figures.   

So much for the right-wing mythology  that the rich are so much more thrifty and that's why they have a lot more wealth.  No, they have more wealth because they earn a lot more duh!

Well to be fair the top % pay a shitload of taxes, especially now with the new Obamacare extra 3.8% tax.  Top rates are above 40% with that and if you live in a state with high state taxes, you could be over 50% with federal and state taxes.  Add in property taxes, sales taxes, etc. and suddenly saving 15% doesn't seem so incredibly bad.  You would have to live on $0 a year to save 45%.

But yes, the rich could save more.

Edit:  Think how bad the wealth inequality would be though if the rich lived like MMM.  There would be no jobs for the poor because the rich would never eat out and would do all of their own house/car repair.  The only jobs for the poor and middle class would be government jobs.  We need the really rich to spread that money around through spending or we are not going to keep our jobs.

I agree with Luck. As long as your employer's 401k allows you to self-match, you can contribute up to ~$50k there, $5.5k to an IRA (Assuming less than $118k gross income for a single individual), and $3.3k to an HSA. On top of that there's the ~$10k standard deduction, mortgage interest, and you may be able to write off healthcare expenditures.

Lets say an individual made $110k, all those contributions would put their savings rate at ~50+%, and their AGI would be around $30k-$40k depending on the deductions available to them. That still leaves ~$4k/year in tax liability they can take advantage of in terms of tax credits for various things. Taxes are only high if you spend a lot or if you make ~$120k+ individually, and ~$200k or whatever it is as a couple.

Even then, with all of these tax deferred expenditures, you wouldn't pass the 25% federal bracket until you made more than $170k as a single individual.

[DarinC]

I get the feeling that most people here hold high paying jobs and got into the habit of spending recklessly. It seems to me we are missing an obvious element. Much of the population does not earn very much and has little to save. As an airline pilot my best year was $ 42,500/year. An average was around $ 18,000/year. I was furloughed seasonally or laid off as companies went out of business. As a result my income was very inconsistent and not all that great. Acquiring a high paying job while still fairly young seems to be an essential component of the message here. In order to achieve FIRE one needs a massive income surplus to save and invest while young to get the financial momentum started.

My belief is that we all have a similar base line cost for substance. What we are able to earn beyond that is available for saving.  All the time I read about people here who are able to "save half their wages".  If one is in a profession that is chronically underpaid then no matter how many toothpaste tubes are flattened achieving FIRE is incredibly more difficult. In my situation I don't have to adjust my lifestyle. As a former pilot I am well versed on living cheap. My position is that an essential element of this concept is to acquire a high paying job first.

On one hand, I think many DINKs live in areas where a low end home is at least half a million, so even if they make six figures together, they still need to intelligently save, invest, and spend in order to have a higher standard of living. $50k in most places in middle America is great. $50k on the coasts can be a struggle.

Like you said though, if you don't make a lot of money it is harder to save. There are really only two paths, reducing expenditures and increasing your earnings, but on the plus side those can be simultaneous.

As frugal as most people are, most can be more frugal. I've read about H00gle engineers with six figure salaries living out of their vehicles in the parking lot in order to save up to buy a place sooner. It's about optimizing what you can do, how much energy you have, and how much time you have.

Your version of FIRE might take longer than a software engineer making six figures, but that doesn't mean that you can't transition to a job where make more than you do now and can FIRE earlier or that you're as frugal as you can be.

[MrsPete]

Several comments:

I'm mostly hearing whining here.  No matter how much you earn, someone else earns 50% of that . . . 80% of that . . . 90% of that.  Live like that person.

I suspect you're falling for the false idea of starting with your expenses -- most people do.  For example, most people say, "I need this apartment, I need X amount for utilities, groceries, etc."  The right answer is to figure out how much you CAN /SHOULD spend each month, and then figure out how you can live for that amount.  If the apartment is out of your reach, you need a roommate.  You may not be able to buy as many groceries as you'd like. 

Admittedly, you can only cut your expenses so far.  I mean, as someone else pointed out, a gallon of milk costs the same whether it's being paid out of your wallet or Bill Gate's wallet.  However, if your wallet can't buy as much milk as you want, you may have to limit yourself to smaller glasses, or you may need to be creative and look into cheaper sources or dried milk. 

The WRONG thing to do is to whine, "Oh, boo-hoo, poor me, I don't make enough to save."  42K a year may not be a high salary, but it is definitely a living wage.

To me the point is that if one holds the goal of attaining FIRE then it is important to earn a good living. 42K is a living wage but will it permit one to retire at 30? I don't think so. Two 60K incomes however could amass a considerable amount of resources in a short time when combined with frugality. My point is not to beat up on people because they don't have a good job but rather to consider employment options into their plan.

Is it better to save money or to invest in ones education in order to gain more beneficial employment?

Disagree.  I'd say the goal is to do the best you can with what you have -- not to compare yourself with others.  Maybe with a 42K wage you're shooting for retirement at 40 or 50 instead of 30.  Does that make you a loser?  Not even close.  It's still much better than the average American. 

Isn't that somewhat of a lifestyle choice?  Having 6 kids?  I know there are tax breaks and credits, but I have to think a single person making $40k is going to have more to save than a married couple with 6 kids and one $40,000 income.

Yes, lifestyle choices are going to affect your ability to save just as much as your salary. 

[FarmerPete]

Just over two years ago, I was making $45k a year.  I wont say we were "struggling" to get by, but saving enough for planned things (house/car maintenance) was fairly difficult.  We always hit our 401k match at my employer, and we lived a comfortable life.  I took a new job and just two years later, I'm looking at making $75k this year doing similar work.  I have better (cheaper) benefits, and a very stable job.  I'm planning on saving $15k-25k on retirement this year.  There is no way I could have come close to that when making $45k a year.  It just wouldn't have happened.

I'm not saying that everyone can switch jobs and get a 30k bump in pay, but I would start looking around.  Most of my coworkers at my old job are still there and barely making ends meat.  It took me 1-2 years of real looking to find a good replacement job.  I could easily still be sitting where I was if I hadn't taken the initiative to make my life better.  I'm still not on "easy street", and I don't know if I'll ever hit the savings rate of some of the people here, but 20-33% on gross, 30-50% on take home, and 46-77% on discretionary spending (net-fixed expenses) is pretty good.

[Skyhigh]

"It is not realistic to finance a 30-year retirement with 30 years of work. You can’t expect to put 10% of your earnings aside and then finance a retirement that is just as long."

John Shoven, Stanford University Professor of Economics

[matchewed]

"It is not realistic to finance a 30-year retirement with 30 years of work. You can’t expect to put 10% of your earnings aside and then finance a retirement that is just as long."

John Shoven, Stanford University Professor of Economics

Okay, what's your point with that quote? We all agree with that statement. If you self identify with only being able to save 10%, then what are you doing to move past that?

[Skyhigh]

"It is not realistic to finance a 30-year retirement with 30 years of work. You can’t expect to put 10% of your earnings aside and then finance a retirement that is just as long."

John Shoven, Stanford University Professor of Economics

Okay, what's your point with that quote? We all agree with that statement. If you self identify with only being able to save 10%, then what are you doing to move past that?

Point is: The first step to achieving FIRE is to earn a considerable income that produces a surplus well beyond what is needed to survive. 

[DoubleDown]

And honestly, based on just that quote, I'd argue that John Shoven sounds like one of the most retarded or ill-informed Economics professors I've heard of. If one saves 10% of a super-mediocre $50,000 income for 30 years (never, ever getting a raise) and obtains a 5% real rate of return, they will have amassed $332,194 and can withdraw $21,609 annually for the next 30 years. That alone should be adequate for anyone accustomed to living off a $45,000 pre-tax income, in their old age. Also, after 30 years in the workforce they will be eligible to withdraw significant Social Security earnings, probably raising their total annual income to somewhere around $35,000+. That is, they'd be right on par with their previous 30-year earnings.

So, John Shoven, you are wrong.

[Skyhigh]

And honestly, based on just that quote, I'd argue that John Shoven sounds like one of the most retarded or ill-informed Economics professors I've heard of. If one saves 10% of a super-mediocre $50,000 income for 30 years (never, ever getting a raise) and obtains a 5% real rate of return, they will have amassed $332,194 and can withdraw $21,609 annually for the next 30 years. That alone should be adequate for anyone accustomed to living off a $45,000 pre-tax income, in their old age. Also, after 30 years in the workforce they will be eligible to withdraw significant Social Security earnings, probably raising their total annual income to somewhere around $35,000+. That is, they'd be right on par with their previous 30-year earnings.

So, John Shoven, you are wrong.

You are assuming that you will be able live on that amount well into your 90's?  The future is unknowable. many believe that SS will be insolvent. The cost of healthcare is skyrocketing. All of us could retire at any time so long as we don't expect to live beyond our next paycheck. Much beyond that is speculation.

[RyanAtTanagra]

Point is: The first step to achieving FIRE is to earn a considerable income that produces a surplus well beyond what is needed to survive.

Wrong.  The first step is designing your lifestyle to spend considerable less than your income.  If you can't do this then more money won't help.  Just ask my buddy that's been broke his whole life, since working at a gas station 15 years ago to now making 130k.  You've failed to do this by having a lifestyle that costs more than, or as much as, you earn.  There are people making less than you that are saving more than you.  What's the variable?

[Sid Hoffman]

So much for the right-wing mythology  that the rich are so much more thrifty and that's why they have a lot more wealth.  No, they have more wealth because they earn a lot more duh!

If you want to talk about mythology, the real myth is that the high income earners are right-wing in the first place.  Stats prove otherwise: only the middle class vote conservatively.  Both the very poor and the very rich vote liberally, albeit for different reasons.

[Skyhigh]

Saving 10% of 300,000/year is better than 10% of 30,000/year. DINKS buy wasteful half million dollar homes that appreciate at 4% per year.

There is no argument that if one wishes to attain FIRE, as in to retire young, it is essential to start with a high paying job and low debt.

[Cheddar Stacker]

Point is: The first step to achieving FIRE is to earn a considerable income that produces a surplus well beyond what is needed to survive.

Emphasis mine. That right there is your problem. You have a definition of this right? For discussion purposes, let's say you think it's $25K.

There are people here, and at ERE, and I'm sure in many other places on the net and IRL that are purposely living on under $10K/year. And they're very happy.

"Needed to survive" can be wildly different, and a self-defeating limitation.

Consider this guy: http://forum.mrmoneymustache.com/journals/fetlock/
Once you get past the income he lists, and the first few months of the expenses he lists, he's living on like $700/month. Yes the income made the savings possible, but more importantly the savings (low expenses) made this lifestyle possible.

[Skyhigh]

Point is: The first step to achieving FIRE is to earn a considerable income that produces a surplus well beyond what is needed to survive.

Wrong.  The first step is designing your lifestyle to spend considerable less than your income.  If you can't do this then more money won't help.  Just ask my buddy that's been broke his whole life, since working at a gas station 15 years ago to now making 130k.  You've failed to do this by having a lifestyle that costs more than, or as much as, you earn.  There are people making less than you that are saving more than you.  What's the variable?

Frugal living helps but if there is little to save in the first place it holds a reduced impact.

[DoubleDown]

And honestly, based on just that quote, I'd argue that John Shoven sounds like one of the most retarded or ill-informed Economics professors I've heard of. If one saves 10% of a super-mediocre $50,000 income for 30 years (never, ever getting a raise) and obtains a 5% real rate of return, they will have amassed $332,194 and can withdraw $21,609 annually for the next 30 years. That alone should be adequate for anyone accustomed to living off a $45,000 pre-tax income, in their old age. Also, after 30 years in the workforce they will be eligible to withdraw significant Social Security earnings, probably raising their total annual income to somewhere around $35,000+. That is, they'd be right on par with their previous 30-year earnings.

So, John Shoven, you are wrong.

You are assuming that you will be able live on that amount well into your 90's?  The future is unknowable. many believe that SS will be insolvent. The cost of healthcare is skyrocketing. All of us could retire at any time so long as we don't expect to live beyond our next paycheck. Much beyond that is speculation.

I'm assuming nothing. I took John Shoven's statement at literal face value: His quote discusses financing a 30-year retirement, which is exactly the length of time I used to obtain an annual payout of $21,609 not including SS.

It doesn't matter what "many believe" about Social Security's solvency or "the future." Unnamed fear-mongers and doomsdayers are willfully uninformed and should be ignored like John Shoven, PhD in Economics.

[Eric]

"It is not realistic to finance a 30-year retirement with 30 years of work. You can’t expect to put 10% of your earnings aside and then finance a retirement that is just as long."

John Shoven, Stanford University Professor of Economics

Okay, what's your point with that quote? We all agree with that statement. If you self identify with only being able to save 10%, then what are you doing to move past that?

Point is: The first step to achieving FIRE is to earn a considerable income that produces a surplus well beyond what is needed to survive.

You've figured out the Super Secret 3 Step Program to FIRE!!  Step one, you have to make more than you spend.  Now that you've tackled step one, step two is to either increase your income, reduce your spending or both, since the greater the divide the faster you'll get there.  Step three is to stop whining about steps one and two.  Good luck.

[DoubleDown]

There is no argument that if one wishes to attain FIRE, as in to retire young, it is essential to start with a high paying job and low debt.

There is plenty of argument, as several pages of this thread attest. You're willfully ignoring the reality that people have achieved very early retirement without starting off with high paying jobs. Spartana is just one example, there are many others.

[Skyhigh]

Point is: The first step to achieving FIRE is to earn a considerable income that produces a surplus well beyond what is needed to survive.

Emphasis mine. That right there is your problem. You have a definition of this right? For discussion purposes, let's say you think it's $25K.

There are people here, and at ERE, and I'm sure in many other places on the net and IRL that are purposely living on under $10K/year. And they're very happy.

"Needed to survive" can be wildly different, and a self-defeating limitation.

Consider this guy: http://forum.mrmoneymustache.com/journals/fetlock/
Once you get past the income he lists, and the first few months of the expenses he lists, he's living on like $700/month. Yes the income made the savings possible, but more importantly the savings (low expenses) made this lifestyle possible.

I really don't think this is the formula that MMM is promoting. He lives a frugal but largely a middle class life. Everyone can live on less. My reference was from the articles I posted on what the government supposes as the minimum needed for an average family of four to "just get by". The number given was $56,000.

It is much harder to save your way into FIRE if you can not greatly exceed the minimum of what it takes to "get by".

[DoubleDown]

My reference was from the articles I posted on what the government supposes as the minimum needed for an average family of four to "just get by". The number given was $56,000.

It is much harder to save your way into FIRE if you can not greatly exceed the minimum of what it takes to "get by".

And again, you're purposely ignoring the whole point of the MMM blog. The "average family of four" (whatever that is) carries consumer debt, multiple vehicles per household, buys lots of toys (TV's, iPhones, boats, etc.). It's been demonstrated to you repeatedly that it is quite easy to "get by" on far less than the average, and thus save/invest a great deal, even without a mediocre or high income.

[Cheddar Stacker]

I really don't think this is the formula that MMM is promoting. He lives a frugal but largely a middle class life. Everyone can live on less. My reference was from the articles I posted on what the government supposes as the minimum needed for an average family of four to "just get by". The number given was $56,000.

It is much harder to save your way into FIRE if you can not greatly exceed the minimum of what it takes to "get by".

I really don't think MMM is promoting a defeatist attitude either.

Again, emphasis mine: Almost no one here would consider themselves "average." That's a dirty word. We are outliers who recognize average will get you no where in life, so we do something about it.

[dycker1978]

When you have 6 kids and 2 adults under one roof, at some point the kids start to earn income.   Even 20 hours a week and minimum wage, each kid by 16 yrs old means can contribute for all their own clothing, food and school supplies, maybe a bit extra for utilities, and is virtually free.   Eventually the youngest is in school so even mom can work 20 hours+ per week (and the oldest are now old enough to run the home when she is working).

When you come back from the 1950's time travel, let me know.

Nowadays kids would complain about working 2 hours a week and they would spend all of their income on a new smartphone + designer ripped jeans.

I am sorry this is not true of all kids.  It is all in how they are raised.  My kids have no issues working for what they want and have(15 and 12 years old) because we never gave them everything.  We have taught them to be self sufficient and thus will have an easier time of adult life because the people that they will compete for will not have any work ethic.

I hate it when people paint everyone with the same brush.  /rant over

[Skyhigh]

My reference was from the articles I posted on what the government supposes as the minimum needed for an average family of four to "just get by". The number given was $56,000.

It is much harder to save your way into FIRE if you can not greatly exceed the minimum of what it takes to "get by".

And again, you're purposely ignoring the whole point of the MMM blog. The "average family of four" (whatever that is) carries consumer debt, multiple vehicles per household, buys lots of toys (TV's, iPhones, boats, etc.). It's been demonstrated to you repeatedly that it is quite easy to "get by" on far less than the average, and thus save/invest a great deal, even without a mediocre or high income.

Still saving 25% or even 50% of $56k is not enough for a family of four to achieve FIRE. it also assumes that nessities are going unmet.

[Skyhigh]

I really don't think this is the formula that MMM is promoting. He lives a frugal but largely a middle class life. Everyone can live on less. My reference was from the articles I posted on what the government supposes as the minimum needed for an average family of four to "just get by". The number given was $56,000.

It is much harder to save your way into FIRE if you can not greatly exceed the minimum of what it takes to "get by".

I really don't think MMM is promoting a defeatist attitude either.

Again, emphasis mine: Almost no one here would consider themselves "average." That's a dirty word. We are outliers who recognize average will get you no where in life, so we do something about it.

Not a defeatist attitude but a realistic one. Perhaps the source of income needs to change first?

[Zikoris]

It's always funny when you watch a discussion between a Person A saying "X is impossible" and Person B saying "Actually, me and People C, D, and E have already done X".

Personally, my boyfriend and I will never hit exceptionally high income - at about 70K combined, we're right around average for our city, but since we only spend 26K we're in REALLY good shape for FIRE.

[nereo]

I really don't think this is the formula that MMM is promoting. He lives a frugal but largely a middle class life. Everyone can live on less. My reference was from the articles I posted on what the government supposes as the minimum needed for an average family of four to "just get by". The number given was $56,000.

Skyhigh - I went back and looked a bit closer at that article you linked earlier (http://www.usatoday.com/story/money/personalfinance/2014/07/04/american-dream/11122015/)  You're $58k isn't actually what the government supposes as the minimum needfor an average family of four to "just get by".  It's a hodge-podge of data snippets piled together to give a picture of what people's perception of a middle class lifestyle would actually cost.
For starters, this is based what a gallup poll considers a 'middle-class' lifestyle to include.  Then they use a wide range of data to calculate what the average cost of things would be across the US.  For example, SUVs are very common, so they calculate the average ownership of a purchased-new nad financed SUV to be $11,039 per year (data from AAA).  Every mustachian will tell you that's friggen insane for surface-street driving.  They also use data from US Ag. (presumably where you thought this was a government calculation) that the average family of four spends $1,054/month on groceries and pushed that into the equation.  The problem of course is that it's relatively easy to cut that by 30% without reducing the quality of food at all.

So - no.  Unless you are referring to something else entirely the US Government has never said a family of four needs $58k 'just to get by'.
In fact, the US Dept. of Health and Human Services does put out an official number on what it takes "just to get by" - it's called the poverty line.  FOr a family of 4 it sits at $23,850.  For a single person it's $11,670.   But as people here and on ERE have shown, it's possible to live very well even on these figures with some creativity and a basic distain for commercialized crap.

Still saving 25% or even 50% of $56k is not enough for a family of four to achieve FIRE. it also assumes that nessities are going unmet.

Saving 50% of $56k IS enough for a family of four to achieve FIRE in under two decades.  You would be living off of ~$28k, which is ~18% above the poverty line, and is much higher than many families spend in a year on this board and elsewhere.

[dandarc]

I think the OP, Sky high, doesn't "get" what the MMM forums and blog are about.

Or is just a troll.

[Luck12]

It's always funny when you watch a discussion between a Person A saying "X is impossible" and Person B saying "Actually, me and People C, D, and E have already done X".

Personally, my boyfriend and I will never hit exceptionally high income - at about 70K combined, we're right around average for our city, but since we only spend 26K we're in REALLY good shape for FIRE.

Congratulations, but how is this even remotely comparable to OP's situation?  Yeah, 70K for 2 people is far different from median income of 35K for 8 people. 

I don't see how OP is a troll.  To put this into a football analogy, ideally you would have a good offense and a good defense.  Right now, his offense sucks (at least in consideration of having 6 kids).   He needs to figure out a way to generate a lot more income to be able to FIRE at < 45 or even 50.     

   

     

[Beric01]

It's always funny when you watch a discussion between a Person A saying "X is impossible" and Person B saying "Actually, me and People C, D, and E have already done X".

Personally, my boyfriend and I will never hit exceptionally high income - at about 70K combined, we're right around average for our city, but since we only spend 26K we're in REALLY good shape for FIRE.

Congratulations, but how is this even remotely comparable to OP's situation?  Yeah, 70K for 2 people is far different from median income of 35K for 8 people. 

I don't see how OP is a troll.  To put this into a football analogy, ideally you would have a good offense and a good defense.  Right now, his offense sucks (at least in consideration of having 6 kids).   He needs to figure out a way to generate a lot more income to be able to FIRE at < 45 or even 50.

Start a family business and put those kids to work? With 6 kids that's a lot of available labor. ;)

[Zikoris]

It's always funny when you watch a discussion between a Person A saying "X is impossible" and Person B saying "Actually, me and People C, D, and E have already done X".

Personally, my boyfriend and I will never hit exceptionally high income - at about 70K combined, we're right around average for our city, but since we only spend 26K we're in REALLY good shape for FIRE.

Congratulations, but how is this even remotely comparable to OP's situation?  Yeah, 70K for 2 people is far different from median income of 35K for 8 people. 

I don't see how OP is a troll.  To put this into a football analogy, ideally you would have a good offense and a good defense.  Right now, his offense sucks (at least in consideration of having 6 kids).   He needs to figure out a way to generate a lot more income to be able to FIRE at < 45 or even 50.         

OP's position seems to be that securing a high income at a young age is necessary for FIRE as a general rule, not just in his specific case.

[londonbanker]

Airline pilots earn that little in the US? I'm genuinely surprised, in Germany (Europe?) pilots belong to one of the best paid professions around.

There is a huge, huge disparity between what pilots for the regionals (think German Wings and Ryanair) make and those working for the majors make.  Huge.  Most consider jobs in the regionals to simply be a training job while they wait o get picked up by the majors.  That's when they star making great money. So they are willing to take crap wages, which keeps hose wages at cap levels, because they consider it temporary.

Easyjet (low cost like ryanair) starting salaries for cadets is around £70k... You can expect making £100k after 4yrs... Not really your crappy wage, is it?

[Skyhigh]

I understand that a lot of people here are about the promotion of extreme frugality and saving. Topics include a lot of charts, toothpaste tube pinching, and equations. My position is that there are more facets to the concept of the achievement of FIRE to be considered. I believe that the model presented here by MrMM is that of surplus income, frugality, and investing, along with minimal employment and I agree with that model.

I believe that it is unrealistic to save a certain amount to a young age and then expect to be able meter out a financial dose for the next 50 years or so. Life is too fluid for that. Half a century is a long time for situations to change considerably. Unless one holds the name of Bill Gates it is risky to completely abandon all work activities and rely exclusively on passive income. 

In this thread my question was "what if there is not enough money to save"? Most people need cars, , shelter, insurance, food and healthcare. There is a floor to which most people can not cut the budget any further without seriously risking other categories; especially if they have a family in tow as with MrMM. If you decide to go without health insurance and develop an appendicitis it could easily wipe out all progress.

To me an essential element of attaining durable and lasting FIRE starts with considerable surplus income, then moves into investing into non-passive financial vehicles such as real estate or a business and then diversification into a means of self employment. When I read the blogs from MrMM it seems to me to be the formula that he is using and that I have used to achieve what most here understand as FIRE.

[RyanAtTanagra]

The OP is already FI but has chosen to keep working. He did it by becoming a self-employed business owner later in life and ending his lower paying pilot's career. His posts (I believe) are more directed to people here in general rather than at his own situation. He has said in this thread as well as some others, that he feels most everyone, regardless of their situation, needs to have a high income job at an early age in order to become FI at an early age.  Some of us disagree.

Thanks, didn't know this.  That paints this thread in a slightly different light.  I was taking it as the OP ignoring rationale in order to justify his inability to FIRE (it's not my fault, etc).  I still, however, disagree that it takes a high income to RE (it may to ERE), for all the reasons mentioned in the last 4 pages....