Author Topic: What if there is no money to save?  (Read 61589 times)

RyanAtTanagra

  • Handlebar Stache
  • *****
  • Posts: 1316
  • Location: Sierra Mountains
Re: What if there is no money to save?
« Reply #50 on: January 08, 2015, 01:58:55 PM »
I work with a lot of college kids and it is a common story here. There are students in the flight program that are on track to graduate 150K or more in debt. My own kid who lives with us and has a lot of his bills paid for will have 20K in debt after two years in college. If you search the internet you will find an abundance of article regarding this situation.

You say this like 150k in school debt was the only path they could take in life.  If that's what you want that's fine.  But don't lament how it's impossible to be debt free and retire early after taking on $150k in debt for a $18k/yr job.  That's the (bad?) choice taken, if early retirement was the goal.  If it's not the goal, then it doesn't matter.

nereo

  • Senior Mustachian
  • ********
  • Posts: 17499
  • Location: Just south of Canada
    • Here's how you can support science today:
Re: What if there is no money to save?
« Reply #51 on: January 08, 2015, 02:04:52 PM »
Quote
Obviously.  It's a much higher savings percentage.  That doesn't invalidate that the same savings percentage gets you to FIRE at the same rate. 
I think what often gets conveniently ignored is that - very often - people in the wealth accumulation phase have lots of expenses (expenses for kids, a mortgage, a larger home, job-related expenses) that they simply won't have later on.  The 'traditional' retirement media even allude to this by having the vague "you'll need 80% of your pre-retirement income" (which in itself is stupid). What I'm getting at is that two people, one making 30k and another making 100k, might have the same savings percentage (say 25%), but 15 years later they won't even be in the same ballpark relative to what they have and whether it can support them.  Which was the point I was making:  it's not about your savings rate.  It's about how much you can save (in absolute $s), and what you will need when you are FI

Johnez

  • Handlebar Stache
  • *****
  • Posts: 1102
  • Location: Southern California
Re: What if there is no money to save?
« Reply #52 on: January 08, 2015, 02:06:52 PM »
Obviously.  It's a much higher savings percentage.  That doesn't invalidate that the same savings percentage gets you to FIRE at the same rate.

Ain't no law saying ya gotta retire on your savings rate now. In fact I think that's the premise of the blog-live below your means by saving wads and retire sooner. If you want to retire on $20,000 a year, it'll take 5 years on $80,000 saved a year versus 13.5 years on $20,009 saved a year. Speed boat versus tug boat, vastly different.

netskyblue

  • Pencil Stache
  • ****
  • Posts: 637
  • Location: Midwest USA
Re: What if there is no money to save?
« Reply #53 on: January 08, 2015, 02:09:34 PM »
Percents are all well and good, but the reality comes down to hard dollars.  Say it takes $20k/year to live a frugal, but still comfortable, middle-class lifestyle.  Both now, and in retirement. 

For ease of math, all our hypothetical employees pay no portion of their health insurance premiums, and they live in Iowa, same town as me (because that's the only place whose taxes I'm familiar with).  They are all 30, single, filing as head of household, and already have an emergency fund in place, so they can stick every remaining cent into a 401k, pre-tax.  None of their employers match funds.  They live in the same apartment building, pay the same rent, shop in the same places, etc.  All of these salaries are fairly common in my area, depending what job you do.

Jim makes $30,000/year. He needs $20k to live on, so that money must be taxed. He owes $2352.50 in Federal taxes, and $1648.89 in state taxes.  Since 401k contributions are still taxable by FICA, he owes $1860 in social security taxes and $435 in medicare taxes.   That's $20k to live on, $6296.39 in taxes.  So, Jim can contribute $3,703.61 per year to his 401k (12.34% of his gross income).  It takes Jim 38 years of working to acheive >$500k in his retirement account.

Ed makes $40,000/year. He also needs $20k to live on.  His federal & state taxes are the same as Jim, but he owes $2480 in social security taxes, and $580 in medicare taxes.  So his tax bill is $7061.39. He can contribute $12,938.61 per year to his 401k (32.34% of his gross income).  It takes Ed 20 years of working to acheive >$500k in his retirement account.

Sam makes $60,000/year. Just like his less fortunate friends, he needs $20k to live on.  He can do something they can't - he can max out his 401k.  AND max out a Roth IRA.  AND have money left over to invest otherwise.  (Note, it might be a good idea for him to contribute to an HSA for further tax benefits, but he's not going to do that).  Sam owes $5652.35 in Federal taxes, $4313.55 in state taxes, $3720 in social security, and $870 in medicare.  His tax bill is $14,555.90.  He puts $5000 post-tax into his Roth IRA, $18,000 into his 401k, and has $2,444.10 left to invest in taxable accounts.  That's $25,444.10 that he invested, or (42.40% of his gross income).  It takes Sam 13 years of working to acheive >$500k in his retirement accounts.

Moral of the story: Sam can retire almost 3 times sooner than Jim, while making 2 times as much money. 


(Disclaimer: this story does not take into account inflation, lifestyle changes, or raises/promotions)

Eric

  • Magnum Stache
  • ******
  • Posts: 4057
  • Location: On my bike
Re: What if there is no money to save?
« Reply #54 on: January 08, 2015, 02:18:18 PM »
Obviously.  It's a much higher savings percentage.  That doesn't invalidate that the same savings percentage gets you to FIRE at the same rate.

Ain't no law saying ya gotta retire on your savings rate now. In fact I think that's the premise of the blog-live below your means by saving wads and retire sooner. If you want to retire on $20,000 a year, it'll take 5 years on $80,000 saved a year versus 13.5 years on $20,009 saved a year. Speed boat versus tug boat, vastly different.

Again, you're changing the savings percentage, so again, I'll say it's obvious that you'll get there faster.  The same boat comment refers to the same savings percentage.

Eric

  • Magnum Stache
  • ******
  • Posts: 4057
  • Location: On my bike
Re: What if there is no money to save?
« Reply #55 on: January 08, 2015, 02:23:08 PM »
Quote
Obviously.  It's a much higher savings percentage.  That doesn't invalidate that the same savings percentage gets you to FIRE at the same rate. 
I think what often gets conveniently ignored is that - very often - people in the wealth accumulation phase have lots of expenses (expenses for kids, a mortgage, a larger home, job-related expenses) that they simply won't have later on.  The 'traditional' retirement media even allude to this by having the vague "you'll need 80% of your pre-retirement income" (which in itself is stupid). What I'm getting at is that two people, one making 30k and another making 100k, might have the same savings percentage (say 25%), but 15 years later they won't even be in the same ballpark relative to what they have and whether it can support them.  Which was the point I was making:  it's not about your savings rate.  It's about how much you can save (in absolute $s), and what you will need when you are FI

Why would you assume that only the high earner would have expenses that could be lower in FIRE?  Surely the same scenario could apply to both.

Johnez

  • Handlebar Stache
  • *****
  • Posts: 1102
  • Location: Southern California
Re: What if there is no money to save?
« Reply #56 on: January 08, 2015, 02:25:39 PM »
Perhaps I belabored the point and apologies if I seem a bit dense, but I'm not sure of the usefulness of rates and percentages when hard numbers seem to show a pretty clear picture.

Cromacster

  • Handlebar Stache
  • *****
  • Posts: 1695
  • Location: Minnesnowta
Re: What if there is no money to save?
« Reply #57 on: January 08, 2015, 02:33:53 PM »
Perhaps I belabored the point and apologies if I seem a bit dense, but I'm not sure of the usefulness of rates and percentages when hard numbers seem to show a pretty clear picture.

Using MMM chart, where it only takes into account savings rate.  Your argument is invalid because you are comparing different points of the spectrum.  Of course if spending is equal the person earning more will retire sooner. But if the person earning 60k is spending 30k, it would take about the same amount of time to accumulate the required NW to retire as the person earning 40k spending 20k.


netskyblue

  • Pencil Stache
  • ****
  • Posts: 637
  • Location: Midwest USA
Re: What if there is no money to save?
« Reply #58 on: January 08, 2015, 02:37:31 PM »
[quote author=Cromacster link=topic=29453.msg510754#msg510754 date=1420752833
Of course if spending is equal the person earning more will retire sooner. But if the person earning 60k is spending 30k, it would take about the same amount of time to accumulate the required NW to retire as the person earning 40k spending 20k.[/quote]

I think the point is, though, that the 60k earner has no NEED to spend 10k more than the 40k earner, assuming their location and lifestyles are the same.

Eric

  • Magnum Stache
  • ******
  • Posts: 4057
  • Location: On my bike
Re: What if there is no money to save?
« Reply #59 on: January 08, 2015, 02:38:03 PM »
Perhaps I belabored the point and apologies if I seem a bit dense, but I'm not sure of the usefulness of rates and percentages when hard numbers seem to show a pretty clear picture.

Here's the hard number picture I'm looking at.  Where are we off?  Lets assume a 7% annual return.

$40k earner spends $20k and saves $20k per year, a 50% savings rate.  After 15 years, he's saved $537K.  He retires with a 3.72% WR
$100k earner spends $50k and saves $50k per year, a 50% savings rate.  After 15 years, he's saved $1344K.  He retires with a 3.72% WR

Now obviously the larger earner has more money, but he had to work the same number of working years and has the same withdrawal rate.  This is why I considered them both to be in the same boat.

Skyhigh

  • Bristles
  • ***
  • Posts: 404
Re: What if there is no money to save?
« Reply #60 on: January 08, 2015, 03:24:39 PM »

I work with a lot of college kids and it is a common story here. There are students in the flight program that are on track to graduate 150K or more in debt. My own kid who lives with us and has a lot of his bills paid for will have 20K in debt after two years in college. If you search the internet you will find an abundance of article regarding this situation.

$40,000 for 4 years, yeah makes sense. Good on you for supporting your kid. $150,000???!!! And I bet they spend their free time looking for that loan forgiveness program Obama promised... I hope you are guiding these kids right the hell out of flight school. One cannot possibly pay off a debt like that on your salary.

Yea, my kids know better that to attempt a flying career or anything else that is frivolous for that matter. I would like to point out that the incomes I mentioned were as a pilot. Since then my situation has changed.

Skyhigh

  • Bristles
  • ***
  • Posts: 404
Re: What if there is no money to save?
« Reply #61 on: January 08, 2015, 03:27:59 PM »

In my experience buying investment real estate should be heavily considered in addition to saving in order to achieve FIRE.  People who earn more are able to buy more investment real estate sooner. Banks like to see ample surplus income and a well established nest egg before they approve a loan. Earning a healthy salary while still young is an important element.

Skyhigh

  • Bristles
  • ***
  • Posts: 404
Re: What if there is no money to save?
« Reply #62 on: January 08, 2015, 03:30:17 PM »
Another thing to consider is that while 20,000/year might support a single person. If you have a family it will take considerably more.

http://www.usatoday.com/story/money/personalfinance/2014/07/04/american-dream/11122015/

Starting investing and saving before children is essential.

The government calculates that the "essentials" for an average family of four is $58,491.
« Last Edit: January 08, 2015, 03:31:54 PM by Skyhigh »

deborah

  • Senior Mustachian
  • ********
  • Posts: 15967
  • Age: 14
  • Location: Australia or another awesome area
Re: What if there is no money to save?
« Reply #63 on: January 08, 2015, 03:41:33 PM »
My mother is in her 80s. A female friend of hers was at least 20 years older than mum - let's call her FF. Anyway, in those days, a woman's wage was a minimum of 25% less than a man's. And FF was on the minimum wage. She bought a house (actually her mother and FF bought a house - a single woman couldn't get a mortgage, but her mother who was a widow with no money could), and they lived in one room and rented out the other rooms. Soon they owned 2 houses...

This is long ago, when wages were a lot less than the cost of living compared with now.

If she had believed in early retirement, she could have retired very early - even on the very minimal wage she had. There is always a way.

netskyblue

  • Pencil Stache
  • ****
  • Posts: 637
  • Location: Midwest USA
Re: What if there is no money to save?
« Reply #64 on: January 08, 2015, 04:16:18 PM »

Here's the hard number picture I'm looking at.  Where are we off?  Lets assume a 7% annual return.

$40k earner spends $20k and saves $20k per year, a 50% savings rate.  After 15 years, he's saved $537K.  He retires with a 3.72% WR
$100k earner spends $50k and saves $50k per year, a 50% savings rate.  After 15 years, he's saved $1344K.  He retires with a 3.72% WR

Now obviously the larger earner has more money, but he had to work the same number of working years and has the same withdrawal rate.  This is why I considered them both to be in the same boat.

That's not entirely right... Correct me if I'm totally misunderstanding taxes...

3 earners living off 50% of their income.

A 100k earner putting $13k/year in a 401k (and no other tax shelters) would owe a $35,873.44 total tax bill, no?  Assuming Iowa state taxes, and if the earner is single, head of household.

$87k taxable income

$16,162.5 Federal taxes
   $1295 in the 10% bracket
   $5467.50 in the 15% bracket
   $9400 in the 25% bracket

$12,060.94 state taxes
   Iowa tax bracket: For earnings over $67,230.00, you'll pay 8.98% plus $4,248.34

$6,200 social security
$1450 medicare

That's $100k - $50k expenses - $35,873.44 taxes - $13k retirement savings = $1126.56 left over  savings ....total annual savings $14,126.56  (of course they could live off 20k and save $44,126.56)

100k dude - 50% spending, 35.87% taxes, 14% savings

(or 20% spending, 35.87% taxes, 44.13% savings, if he lived off 20k)


A 60k earner putting 12k/year in a 401k would only owe a $17,417.57 tax bill.

$48k taxable income

$6552.50 Federal taxes
   $1295 in the 10% bracket
   $5257.50 in the 15% bracket

$6275.07 State taxes
   Iowa tax bracket: For earnings between $44,820.00 and $67,230, you'll pay 7.92% plus $2,473.47

$3720 social security
$870 medicare

That's $60k - $30k expenses - $17,417.57 taxes - $12k retirement savings = 582.43 left over savings ....total annual savings $12,582.43 (of course they could live off 20k and save $22,582.43)

60k dude - 50% spending, 29.03% taxes, 20.97% savings
(or 33.33% spending, 29.03% taxes, 37.64% savings, if he lived off 20k)


A 40k earner putting 9k/year in a 401k would only owe a $10,628.05 tax bill.

$31k taxable income

$4002.5 Federal taxes
   $1295 in the 10% bracket
   $2707.50  in the 15% bracket

$3565.55 state taxes
   Iowa Tax Bracket: For earnings between $29,880.00 and $44,820, you'll pay 6.80% plus $1,457.55

$2480 social security
$580 medicare

That's 40k - 20k expenses - $10,628.05 taxes - 9k retirement savings = $371.95 left over savings .... total annual savings $9,371.95

40k dude - 50% spending, 26.57% taxes, 23.43% savings.

Eric

  • Magnum Stache
  • ******
  • Posts: 4057
  • Location: On my bike
Re: What if there is no money to save?
« Reply #65 on: January 08, 2015, 04:30:04 PM »
Hi NSB,
I was just using net numbers for simplicity.  As you point out, it gets more complicated if you want to use gross.  Did you factor in standard deductions?  I only looked at your first example, but the taxcaster with $87,000.00 in taxable wages has the Fed taxes at $15,075.00 instead of $16,162.50

sheepstache

  • Handlebar Stache
  • *****
  • Posts: 2417
Re: What if there is no money to save?
« Reply #66 on: January 08, 2015, 04:36:45 PM »
Perhaps I belabored the point and apologies if I seem a bit dense, but I'm not sure of the usefulness of rates and percentages when hard numbers seem to show a pretty clear picture.

Here's the hard number picture I'm looking at.  Where are we off?  Lets assume a 7% annual return.

$40k earner spends $20k and saves $20k per year, a 50% savings rate.  After 15 years, he's saved $537K.  He retires with a 3.72% WR
$100k earner spends $50k and saves $50k per year, a 50% savings rate.  After 15 years, he's saved $1344K.  He retires with a 3.72% WR

Now obviously the larger earner has more money, but he had to work the same number of working years and has the same withdrawal rate.  This is why I considered them both to be in the same boat.

Why can't Mr. 100k choose to spend $20k is the question. Why would you assume he would spend more.

I fully understand the argument from savings rates, but I get the point about hard numbers. The higher earner has the option to retire earlier. There's no reason to assume the higher earner has to spend more, and that's what the savings rate argument assumes.

WYOGO

  • Stubble
  • **
  • Posts: 165
  • Location: Salt Lake City
  • Great Basin
Re: What if there is no money to save?
« Reply #67 on: January 08, 2015, 04:49:18 PM »

Here's the hard number picture I'm looking at.  Where are we off?  Lets assume a 7% annual return.

$40k earner spends $20k and saves $20k per year, a 50% savings rate.  After 15 years, he's saved $537K.  He retires with a 3.72% WR
$100k earner spends $50k and saves $50k per year, a 50% savings rate.  After 15 years, he's saved $1344K.  He retires with a 3.72% WR

Now obviously the larger earner has more money, but he had to work the same number of working years and has the same withdrawal rate.  This is why I considered them both to be in the same boat.

That's not entirely right... Correct me if I'm totally misunderstanding taxes...

3 earners living off 50% of their income.

A 100k earner putting $13k/year in a 401k (and no other tax shelters) would owe a $35,873.44 total tax bill, no?  Assuming Iowa state taxes, and if the earner is single, head of household.

$87k taxable income

$16,162.5 Federal taxes
   $1295 in the 10% bracket
   $5467.50 in the 15% bracket
   $9400 in the 25% bracket

$12,060.94 state taxes
   Iowa tax bracket: For earnings over $67,230.00, you'll pay 8.98% plus $4,248.34

$6,200 social security
$1450 medicare

That's $100k - $50k expenses - $35,873.44 taxes - $13k retirement savings = $1126.56 left over  savings ....total annual savings $14,126.56  (of course they could live off 20k and save $44,126.56)

100k dude - 50% spending, 35.87% taxes, 14% savings

(or 20% spending, 35.87% taxes, 44.13% savings, if he lived off 20k)


A 60k earner putting 12k/year in a 401k would only owe a $17,417.57 tax bill.

$48k taxable income

$6552.50 Federal taxes
   $1295 in the 10% bracket
   $5257.50 in the 15% bracket

$6275.07 State taxes
   Iowa tax bracket: For earnings between $44,820.00 and $67,230, you'll pay 7.92% plus $2,473.47

$3720 social security
$870 medicare

That's $60k - $30k expenses - $17,417.57 taxes - $12k retirement savings = 582.43 left over savings ....total annual savings $12,582.43 (of course they could live off 20k and save $22,582.43)

60k dude - 50% spending, 29.03% taxes, 20.97% savings
(or 33.33% spending, 29.03% taxes, 37.64% savings, if he lived off 20k)


A 40k earner putting 9k/year in a 401k would only owe a $10,628.05 tax bill.

$31k taxable income

$4002.5 Federal taxes
   $1295 in the 10% bracket
   $2707.50  in the 15% bracket

$3565.55 state taxes
   Iowa Tax Bracket: For earnings between $29,880.00 and $44,820, you'll pay 6.80% plus $1,457.55

$2480 social security
$580 medicare

That's 40k - 20k expenses - $10,628.05 taxes - 9k retirement savings = $371.95 left over savings .... total annual savings $9,371.95

40k dude - 50% spending, 26.57% taxes, 23.43% savings.

I would be saving more to avoid those outrageous state taxes. Hell I'd save the 12K for my escape, it would cost me less than that to head for the nearest income tax free state.

Eric

  • Magnum Stache
  • ******
  • Posts: 4057
  • Location: On my bike
Re: What if there is no money to save?
« Reply #68 on: January 08, 2015, 05:23:13 PM »
Perhaps I belabored the point and apologies if I seem a bit dense, but I'm not sure of the usefulness of rates and percentages when hard numbers seem to show a pretty clear picture.

Here's the hard number picture I'm looking at.  Where are we off?  Lets assume a 7% annual return.

$40k earner spends $20k and saves $20k per year, a 50% savings rate.  After 15 years, he's saved $537K.  He retires with a 3.72% WR
$100k earner spends $50k and saves $50k per year, a 50% savings rate.  After 15 years, he's saved $1344K.  He retires with a 3.72% WR

Now obviously the larger earner has more money, but he had to work the same number of working years and has the same withdrawal rate.  This is why I considered them both to be in the same boat.

Why can't Mr. 100k choose to spend $20k is the question. Why would you assume he would spend more.

I fully understand the argument from savings rates, but I get the point about hard numbers. The higher earner has the option to retire earlier. There's no reason to assume the higher earner has to spend more, and that's what the savings rate argument assumes.

He can spend the same, sure.  But then his savings rate would be higher.  We're all in agreement that it's easier if you make more money.  The assumption of the same savings rate is from earlier in the thread, when others seemed to believe that having a lower income was more detrimental to FIRE even at the same savings rate.

kpd905

  • Handlebar Stache
  • *****
  • Posts: 2029
Re: What if there is no money to save?
« Reply #69 on: January 08, 2015, 05:39:37 PM »
Another thing to consider is that while 20,000/year might support a single person. If you have a family it will take considerably more.

The government calculates that the "essentials" for an average family of four is $58,491.

Is this a joke?  I feel like I am in the wrong forum right now.

fields

  • 5 O'Clock Shadow
  • *
  • Posts: 83
Re: What if there is no money to save?
« Reply #70 on: January 08, 2015, 05:39:58 PM »
How do you file as head of household if you're single?

WYOGO

  • Stubble
  • **
  • Posts: 165
  • Location: Salt Lake City
  • Great Basin
Re: What if there is no money to save?
« Reply #71 on: January 08, 2015, 05:44:56 PM »
How do you file as head of household if you're single?

You must have a disabled dependent parent or other qualifying relative for which you provided more than half the cost to help maintain their home for the year in question if they do not live with you.
« Last Edit: January 08, 2015, 05:49:31 PM by WYOGO »

MrsPete

  • Magnum Stache
  • ******
  • Posts: 3505
Re: What if there is no money to save?
« Reply #72 on: January 08, 2015, 06:01:53 PM »
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. 



Skyhigh

  • Bristles
  • ***
  • Posts: 404
Re: What if there is no money to save?
« Reply #73 on: January 08, 2015, 06:12:07 PM »
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?

MsRichLife

  • Pencil Stache
  • ****
  • Posts: 539
  • Age: 46
    • Living My Rich Life
Re: What if there is no money to save?
« Reply #74 on: January 08, 2015, 06:15:59 PM »
Quote from: LalsConstant link=topic=29453.msg510106#msg510106
Home ownership is something people on sub 100k incomes generally can't do in many areas, at least not pre-retirement!
I would disagree with this sentiment.  I bought my first house in 2012 at age 20, while working part time making $12.50/hour.  It was $18,500.  Not the Taj Mahal by any means, but it did the job (<500 square feet, 1 bedroom, 1 bathroom, in between a nice area and a getting-scary area, but closer to the nice area).

It's not easy, but anything's possible.  Creativity is king.  You either pay with money or creativity, and when you don't have as much money, you compensate with creativity.

+1

I bought my first investment property when I was 23 and earning about $40K per year. The house wasn't pretty, and was therefore reasonably cheap. I did a quick, low cost cosmetic renovation and then rented it out by the room to University students. It was a lot more work to manage than a single family home, but much more lucrative. I earned enough to get the bank to lend me more money to do it again. Within 18 months I had 4 investment properties rented out to students and the increased cashflow helped me to pay down the loans pretty fast.

I completely concur that you can compensate for lack of money with some creativity and a positive attitude.

Skyhigh

  • Bristles
  • ***
  • Posts: 404
Re: What if there is no money to save?
« Reply #75 on: January 08, 2015, 06:23:14 PM »
Quote from: LalsConstant link=topic=29453.msg510106#msg510106
Home ownership is something people on sub 100k incomes generally can't do in many areas, at least not pre-retirement!
I would disagree with this sentiment.  I bought my first house in 2012 at age 20, while working part time making $12.50/hour.  It was $18,500.  Not the Taj Mahal by any means, but it did the job (<500 square feet, 1 bedroom, 1 bathroom, in between a nice area and a getting-scary area, but closer to the nice area).

It's not easy, but anything's possible.  Creativity is king.  You either pay with money or creativity, and when you don't have as much money, you compensate with creativity.

+1

I bought my first investment property when I was 23 and earning about $40K per year. The house wasn't pretty, and was therefore reasonably cheap. I did a quick, low cost cosmetic renovation and then rented it out by the room to University students. It was a lot more work to manage than a single family home, but much more lucrative. I earned enough to get the bank to lend me more money to do it again. Within 18 months I had 4 investment properties rented out to students and the increased cashflow helped me to pay down the loans pretty fast.

I completely concur that you can compensate for lack of money with some creativity and a positive attitude.

I did the same thing earning a pilots wage. If one is single and debt free you can live on a shoestring.In my case I would buy a house, fill it with pilot roommates/ tenants then replace myself and buy another house to do the same. I would have been much farther down the trial to FIRE had I been able to earn more because once the wife and kids came so went the frugality. Another issue is that lending is much more difficult now. Back then all I needed was a few thousand to buy a house.

sheepstache

  • Handlebar Stache
  • *****
  • Posts: 2417
Re: What if there is no money to save?
« Reply #76 on: January 08, 2015, 07:01:45 PM »
Perhaps I belabored the point and apologies if I seem a bit dense, but I'm not sure of the usefulness of rates and percentages when hard numbers seem to show a pretty clear picture.

Here's the hard number picture I'm looking at.  Where are we off?  Lets assume a 7% annual return.

$40k earner spends $20k and saves $20k per year, a 50% savings rate.  After 15 years, he's saved $537K.  He retires with a 3.72% WR
$100k earner spends $50k and saves $50k per year, a 50% savings rate.  After 15 years, he's saved $1344K.  He retires with a 3.72% WR

Now obviously the larger earner has more money, but he had to work the same number of working years and has the same withdrawal rate.  This is why I considered them both to be in the same boat.

Why can't Mr. 100k choose to spend $20k is the question. Why would you assume he would spend more.

I fully understand the argument from savings rates, but I get the point about hard numbers. The higher earner has the option to retire earlier. There's no reason to assume the higher earner has to spend more, and that's what the savings rate argument assumes.

He can spend the same, sure.  But then his savings rate would be higher.  We're all in agreement that it's easier if you make more money.  The assumption of the same savings rate is from earlier in the thread, when others seemed to believe that having a lower income was more detrimental to FIRE even at the same savings rate.

Okay. There was a documentary about beavers on in the next room so I may have lost the thread. It seemed like people were using the savings rate argument to argue that ER is equally easy for everyone regardless of income.

Indexer

  • Handlebar Stache
  • *****
  • Posts: 1463
Re: What if there is no money to save?
« Reply #77 on: January 08, 2015, 07:05:37 PM »
Saving money at my current income is a lot easier than in the past, but I did have jobs where I made less and I STILL saved over 20% of income.  Currently closer to 46% savings rate, and still improving on that.  The biggest thing hurting me now is that I live by myself.

Please top this one...
In college I was the night manager for a fast food restaurant.  I made more than minimum wage, but still less than $10/hr.  I paid my rent, cell phone bill, car insurance, etc.  I did eat a lot of my meals at work for free.

I had a two bedroom $500/month apartment we split 3 ways, one guy paid us $100/month to live on our coach.  No cable/internet.  I would use the internet on campus and just download everything to my ipod that I needed to take home to work on with my own computer.  It was also a VERY cold place to live.  We kept the heat around 60 and just wore warm clothing.  Cell phone was bare bones as well. 

I didn't drive.... really ever.  I had an old mustang and most of the year it sat under a tarp.  I used it to drive to other cities, but most of the time I just walked places or took the free public transportation.  The car was old and had pleasure use only insurance on it so it cost me like $40/month.

I never actually did the math before... I made 18k.  I managed to SAVE in a banking account 5k my senior year*.   Thats a 28% savings rate at 18k a year!!!     I was Mustachian before I even knew it!  :)   And I still wasted money on way too much beer, liquor, and girls(I was in college)!  I will agree you probably are going to have a hard time getting to a 50% savings rate at 18k unless you live like a homeless person.  If someone can save 28% at 18k a year you can save over 50% at 42k a year.  Obviously!

*I remember because my graduation present to myself was a 2 month vacation where I travelled to see a lot of friends so I did a lot of tracking as that 5k eventually dropped to about 2k before I started my first job out of college.

It can be done.  Stop being a complanypants!!!

pachnik

  • Handlebar Stache
  • *****
  • Posts: 1894
  • Age: 59
  • Location: Vancouver, BC
Re: What if there is no money to save?
« Reply #78 on: January 08, 2015, 07:31:44 PM »
Lol, what if there is no $ to save or time to save it for ER? 

I got here at 48 years old making the median wage but I've never been happier in my financial life than I have the past year and a half.  Because of this community/forum, I am saving 33-35% of my wage.  Can't retire early because I got here too late.  But I will be able to retire in better financial shape than if I'd continued on my old track.  My husband is also inspired by what I am doing and is paying off his car aggressively.  I really believe there is something for everyone here.  Not to mention, I just love not being a consumerist sucker!

anisotropy

  • Pencil Stache
  • ****
  • Posts: 681
Re: What if there is no money to save?
« Reply #79 on: January 08, 2015, 07:52:17 PM »
But I will be able to retire in better financial shape than if I'd continued on my old track. 

I think this is key, sure we may not all be "well-off" but we can try to be in better financial shape even if it's hard.

All we have to decide is what to do with the time that is given us - Gandalf?

franklin w. dixon

  • Bristles
  • ***
  • Posts: 283
Re: What if there is no money to save?
« Reply #80 on: January 08, 2015, 09:29:50 PM »
@r3dt4rget - sorry but I just gotta disagree here.  As much as the "shockingly simple math*" may suggest, FI is about what you can save and how much you will need to spend once you get to FI. Someone who earns $30k/year and needs $25k both now and in the retirement will likely take at least 33 years to get there, saving 18% of income.  But there are plenty of people here and on the boards who earn $100k but spend $83k because they have 3 kids and are funding college, etc.  They save the same 18% of their income but because the won't need nearly as much in retirement they can get to FI more than twice as fast.  They have the advantage of needing far less in retirement than someone who's already pretty bare-bones to begin with.  No college expenses.  Sell the large 4 bedroom house and buy a new place with cash (plus $xxxk leftover)...

*I get what MMM was trying to do with that post, but I think it's one of his worst.
You aren't really disagreeing, you are just pointing out that the high earner has much more flexibility and will get to retirement sooner. It doesn't change the fact that someone making $30k a year and living off $20k can retire early. It's not easy, they won't have the same lifestyle as a high earner, but that isn't my point.

I've always been a fan of spending now what you plan to spend when you retire. Lets not forget that kids and lifestyle inflation are choices, not default options in life. When I talk about scenarios I assume the person is single or married in a double income household without kids. It would be pointless to add in a bunch of variables like kids or other dependents without analyzing on a case-by-case basis.
First assume that all the earners are perfect spheres of equal mass and density moving in random directions at a constant speed. Now as you can see from the figures *beep boop computer noises* ah yes! As I thought! All the spheres are SPENDTHRIFT WASTRELS losing energy to something called "in troopy." Please consult your field guides, class!

franklin w. dixon

  • Bristles
  • ***
  • Posts: 283
Re: What if there is no money to save?
« Reply #81 on: January 08, 2015, 10:20:16 PM »
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.
That's why I live on just fifty calories per day. Thrift! Puritanism!

franklin w. dixon

  • Bristles
  • ***
  • Posts: 283
Re: What if there is no money to save?
« Reply #82 on: January 08, 2015, 10:34:01 PM »
The whole "saving rate as a percentage" thing is almost as problematic as the way anti-Mustachians budget by percentage, for example allocating 30% of salary to rent, 20% to car, etc. There's no reason that having more money should mean you have to spend more -- so percentage budgeting is fundamentally at odds with the principles of the blog.

Similarly, when it comes to savings rate, it's really the absolute dollars per year that matters. $100k saved per year is a lot more than $20k saved per year, even if those are both 50% of a $200k and $40k salary respectively. Trying to suggest those are the same is the same anti-Mustachian mistake as budgeting by percentage.

As has already been pointed out, somebody earning $200k can also spend $20k and therefore save radically more as a percentage, but even if we ignore that, they're still going to get to financial independence faster even saving 50%, because expenses come in the form of absolute dollar values, not percentages.

In other words, suppose you are using the bare 4% rule for your $20k budget, so you retire at $500k in savings. Now suppose something terrible happens that costs you $50k. You just lost 10% of your entire net worth, seriously reducing the chance that your early retirement remains successful. You may have to go back to work.

On the other hand, using the bare 4% rule with a $100k budget involves retiring with $2.5 million in savings. Now that same $50k expense is far less likely to threaten your early retirement, because $2.5 million is just a lot more in absolute dollars, making the margin of safety far bigger.

This isn't to say that you can't retire on a low wage. I'm sure you can. But retirement planning should involve absolute numbers, not just percentages of your takehome pay, assuming you want things to work out well.
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. Everyone here thinks that they're an heroic iconoclast and the first person in history to consider "keep ur muny so u can use that muny later on" but it turns out that high earners are not in fact dunking every cent in the garbage and are completely secure financially by traditional retirement age, if not before. Of course it's possible to cut far further, but one might say that they lived a comfortable and happy life commensurate with their values. On the other hand one might say those SPENDY FUCKS bought a NEW CAR and are therefore morally inferior to me, King Mustache of Gondor.

The trouble is that you get stuck in a tight spot where you're either saying to rich weirdos: "hey! you don't need to throw away a bunch of money on crap!" to which they respond "that's true, but I don't care!" or you're moralizing to the poor that they need to eat raw potatoes and go about in sackcloth in order to by the power of pure Christian virtue attain the savings rates that high earners can achieve without even trying.

Roland of Gilead

  • Handlebar Stache
  • *****
  • Posts: 2454
Re: What if there is no money to save?
« Reply #83 on: January 08, 2015, 10:36:33 PM »
Not to chime in for SkyHigh, but for those talking about cutting his budget, consider that he's married with 6 boys, as I recall from another post -- and I don't recall if his wife works. A maximum income of $40k isn't going to go terribly far in those circumstances.

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.

Having said that, if someone made $30,000 a year in the USA and managed to save $5,000 in a Roth, they would get a saver's credit of an additional $1,000 each year.   $6,000 compounded for 25 years at 5% real is $300,000 in future dollars.  If you also have social security it may be enough to retire moderately early (50's) on a $20,000 to $25,000 budget.  Your SWR would be about 7% to 8% for 10 years then drop to 3% when SS kicks in.  It might work.

If you get any type of 401K match the numbers look a lot better.

innerscorecard

  • Pencil Stache
  • ****
  • Posts: 589
    • Inner Scorecard - Where financial independence, value investing and life meet
Re: What if there is no money to save?
« Reply #84 on: January 08, 2015, 10:40:09 PM »
There is always money to save.

I see and interact with motorcycle delivery drivers, construction workers, janitorial staff and more in Shanghai. A lot of them are sending money home to their parents. If they can save money on their salary of USD 600 per month in this expensive city you can save money too in the most prosperous and opportune country on earth, the US.

LalsConstant

  • Bristles
  • ***
  • Posts: 439
Re: What if there is no money to save?
« Reply #85 on: January 09, 2015, 06:21:06 AM »
Quote from: LalsConstant link=topic=29453.msg510106#msg510106
Home ownership is something people on sub 100k incomes generally can't do in many areas, at least not pre-retirement!
I would disagree with this sentiment.  I bought my first house in 2012 at age 20, while working part time making $12.50/hour.  It was $18,500.  Not the Taj Mahal by any means, but it did the job (<500 square feet, 1 bedroom, 1 bathroom, in between a nice area and a getting-scary area, but closer to the nice area).

It's not easy, but anything's possible.  Creativity is king.  You either pay with money or creativity, and when you don't have as much money, you compensate with creativity.

+1

I bought my first investment property when I was 23 and earning about $40K per year. The house wasn't pretty, and was therefore reasonably cheap. I did a quick, low cost cosmetic renovation and then rented it out by the room to University students. It was a lot more work to manage than a single family home, but much more lucrative. I earned enough to get the bank to lend me more money to do it again. Within 18 months I had 4 investment properties rented out to students and the increased cashflow helped me to pay down the loans pretty fast.

I completely concur that you can compensate for lack of money with some creativity and a positive attitude.

But again none of this is creativity, rather the intelligent seizure of a unique opportunity.

I am only glad for people who defy the odds but exceptional circumstances do not invalidate the general trend.

gecko10x

  • Bristles
  • ***
  • Posts: 418
    • SawyerPF
Re: What if there is no money to save?
« Reply #86 on: January 09, 2015, 07:25:18 AM »
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

Melchior

  • 5 O'Clock Shadow
  • *
  • Posts: 34
  • Location: The End of Time
Re: What if there is no money to save?
« Reply #87 on: January 09, 2015, 07:48:10 AM »
Some of these complaints that FIRE is too hard or simply impossible for you seem like reaching for excuses for inaction. It's as useful as air above you in unpowered flight.

whammer33024

  • 5 O'Clock Shadow
  • *
  • Posts: 20
Re: What if there is no money to save?
« Reply #88 on: January 09, 2015, 08:08:27 AM »
DW and i make a total of 65k gross a year.  we are both 30 and have a 1 year old child.  we have no debt besides our mortgage.  we don't really have any retirement savings outside of my wife's pension from being a teach which i don't count into retirement calculations.  we just found MMM this year so are just beginning the path to FI. 

i have 50 circled as my age for possible FIRE.  while that's not really early compared to some here, its quite early compared to my peers.  i also don't make much so any raises/different jobs i take in the future just bumps that number even closer

Eric

  • Magnum Stache
  • ******
  • Posts: 4057
  • Location: On my bike
Re: What if there is no money to save?
« Reply #89 on: January 09, 2015, 08:10:08 AM »
In other words, suppose you are using the bare 4% rule for your $20k budget, so you retire at $500k in savings. Now suppose something terrible happens that costs you $50k. You just lost 10% of your entire net worth, seriously reducing the chance that your early retirement remains successful. You may have to go back to work.

Ha!  Yes, if aliens invade and you have no choice but to purchase the Death Ray Gun 8000 to escape enslavement, then it will be money well spent even if you have to pick up some work in the future.

dandarc

  • Walrus Stache
  • *******
  • Posts: 5457
  • Age: 41
  • Pronouns: he/him/his
Re: What if there is no money to save?
« Reply #90 on: January 09, 2015, 08:18:10 AM »
Some of these complaints that FIRE is too hard or simply impossible for you seem like reaching for excuses for inaction. It's as useful as air above you in unpowered flight.
This - reminds me of the poor are victims thread a bit.  Sure we can acknowledge that it may be more difficult (which most have), but that doesn't do anyone in the situation right now any good.

nereo

  • Senior Mustachian
  • ********
  • Posts: 17499
  • Location: Just south of Canada
    • Here's how you can support science today:
Re: What if there is no money to save?
« Reply #91 on: January 09, 2015, 08:19:10 AM »
In other words, suppose you are using the bare 4% rule for your $20k budget, so you retire at $500k in savings. Now suppose something terrible happens that costs you $50k. You just lost 10% of your entire net worth, seriously reducing the chance that your early retirement remains successful. You may have to go back to work.

Ha!  Yes, if aliens invade and you have no choice but to purchase the Death Ray Gun 8000 to escape enslavement, then it will be money well spent even if you have to pick up some work in the future.
Really?  Aliens are attacking and you're going to go with a Death Ray Gun 8000?  I'd have chosen the BFG-9000 myself.  I think you can buy them used for under $50k, too...

matchewed

  • Magnum Stache
  • ******
  • Posts: 4422
  • Location: CT
Re: What if there is no money to save?
« Reply #92 on: January 09, 2015, 08:25:21 AM »
One word...

Complainypants

In all seriousness of course if you make more money you can save more. But unless you are trying to make more money you can only work with what you have. What use is there to complain about not having enough unless you're doing something about it? And if you're doing something about it, how about be specific and look for ways to improve either your earning potential or saving ability? Just stating there is no money to save is defeatist and lame. Take some responsibility for your life and figure out how to answer that question for yourself. Coming onto a forum to ask it to the air doesn't help you. Asking specific questions which relate to your specific circumstances can help.

Stlbroke

  • 5 O'Clock Shadow
  • *
  • Posts: 49
Re: What if there is no money to save?
« Reply #93 on: January 09, 2015, 08:34:13 AM »
If there is no money to save, then why don't people get second jobs for savings?

Most people want to sit in front of the tv at night and do not want to give up their precious weekends.  At least this is how my poor friends are. 

DoubleDown

  • Handlebar Stache
  • *****
  • Posts: 2075
Re: What if there is no money to save?
« Reply #94 on: January 09, 2015, 08:53:58 AM »
Not to chime in for SkyHigh, but for those talking about cutting his budget, consider that he's married with 6 boys, as I recall from another post -- and I don't recall if his wife works. A maximum income of $40k isn't going to go terribly far in those circumstances.

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, absolutely. Unless you have a Magic PenisTM that will impregnate your wife no matter what birth control or abstinence measures are being used, then it is completely a lifestyle choice and you should understand the trade-offs and not whine about how hard it is to get ahead with a large family.

I only brought it up because several posters way back in the thread were starting to throw out suggestions to the OP on cutting costs and using their own single-with-no-kids status as examples of how they're able to save 50-60% even though they earn around $40k.

In full disclosure, I do have a magic penis, but not that brand name, trademarked kind that can impregnate no matter what.

Kaminoge

  • Bristles
  • ***
  • Posts: 348
  • Location: Buenos Aires, Argentina
Re: What if there is no money to save?
« Reply #95 on: January 09, 2015, 09:05:05 AM »
Some of these complaints that FIRE is too hard or simply impossible for you seem like reaching for excuses for inaction.

Speaking for myself, I'm not complaining. I have no problem saving quite nicely - I just recognise that it's not as easy for everyone. I can save bucketloads more than my cleaner for example (yes I have a cleaner... not only that but my house isn't even dirty... I pay a cleaner JUST BECAUSE I CAN). Not because I'm more mustachian or cleverer or more diligent but largely based on the fact that she was born into a communist regime, had no chance to acquire any assets earlier in life and is now pretty much stuck in one of the poorest countries in Europe. I on the other hand was fortunate enough to be born in a relatively wealthy country, I'm white (and yes, in my line of work that makes a difference), a native English speaker and am pretty much free to live anywhere in the world I want. To top it all off I was fortunate enough to buy my first piece of property (with only $7000 downpayment) right before the property market took off. Sheer dumb luck there.

Most people could probably do better than they are in terms of savings but trying to make out that it's some sort of level playing field or that everything is down to choices really is rather silly. You can mess with % all you like but it doesn't change the fact that a person earning $200,000 a year has a lot more choices about lifestyle and savings than a person earning $40,000.

nereo

  • Senior Mustachian
  • ********
  • Posts: 17499
  • Location: Just south of Canada
    • Here's how you can support science today:
Re: What if there is no money to save?
« Reply #96 on: January 09, 2015, 09:05:55 AM »
Quote
In full disclosure, I do have a magic penis, but not that brand name, trademarked kind that can impregnate no matter what.
where can I buy one?  Used, of course, because... well, this is the MMM forum and I wouldn't want to be a consumer sucka and loose lots on depreciation.

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4929
Re: What if there is no money to save?
« Reply #97 on: January 09, 2015, 09:27:30 AM »
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.
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. The only difference is the amount of money you get to spend each year. Sure, the person making $100k can live the same as you on $20k and get there quicker, but the point is that all you need to do is save a majority of your income for a long period of about 10-20 years.

It's all about expenses. I make under $50k and my non-debt spending is under half that. You have to adjust your spending to your income. The basic cost of living which includes shelter, food, and basic supplies like clothing, is very cheap. There are people doing it under $10k, more comfortably at $20k. There really isn't any excuse for why you spend over half your income. It's a choice people make.
That really is not true.

nereo

  • Senior Mustachian
  • ********
  • Posts: 17499
  • Location: Just south of Canada
    • Here's how you can support science today:
Re: What if there is no money to save?
« Reply #98 on: January 09, 2015, 09:31:09 AM »
I think what often gets conveniently ignored is that - very often - people in the wealth accumulation phase have lots of expenses (expenses for kids, a mortgage, a larger home, job-related expenses) that they simply won't have later on.  The 'traditional' retirement media even allude to this by having the vague "you'll need 80% of your pre-retirement income" (which in itself is stupid). What I'm getting at is that two people, one making 30k and another making 100k, might have the same savings percentage (say 25%), but 15 years later they won't even be in the same ballpark relative to what they have and whether it can support them.  Which was the point I was making:  it's not about your savings rate.  It's about how much you can save (in absolute $s), and what you will need when you are FI

Why would you assume that only the high earner would have expenses that could be lower in FIRE?  Surely the same scenario could apply to both.
I'm not assuming that only a high earner would have expenses that could be different in FIRE.  The crux of my point is that a person's savings rate is not what really matters.  It's how much (in absolute $s) they can save now, and how much they will need.  As you pointed out, if the lower-income earner had different expenses in FIRE it would change the equation just as much as if the higher-earner changed their expenses. 
Saying "save 50% of your income and you'll be FIRE in 17 years" as the Shockingly Simple Math does is meaningless whenever someone's spending in ER is different than it is during their earning years. From what I've read, the majority of people have much different spending rates in retirement than in their working years.  Some will even increase their spending as they travel more - I think this is arebelspy's plan.

Melchior

  • 5 O'Clock Shadow
  • *
  • Posts: 34
  • Location: The End of Time
Re: What if there is no money to save?
« Reply #99 on: January 09, 2015, 09:40:15 AM »
It sounds like you, Kaminoge, are cognizant of your spending and it's in line with your values and that's admirable. In my case, climbing out of student loan debt in a high COL area with mediocre but sufficient salary has been tough but if I stay objective, own up to the decisions that got me here and keep working a plan then I'll be okay. For others, I'm sure, they can be in much more dire straits but I think the principles are the same. Comparing yourself (general you) negatively to others who may have started with a leg up will only breed bitterness and resentment. You may miss some great lessons in the comparison.

I feel like the other arguments going on in this thread are ignoring that the Shockingly Simple Math could also be called the Shockingly Simplified Math.

BTW, I wouldn't go with a BFG-9000. Too hard to find ammunition.
« Last Edit: January 09, 2015, 09:42:16 AM by Melchior »