Which is more important to be a true Mustachean?

[iris lily]

Which is most important, building the stache or investing it?

MMM wannabe #1: He keeps a high % of his income, but it's under his mattress. He earns nothing from it. He can save it, but he cannot grow it.

MMM wannabe #2: She doesn't save as much but she is on top of investing. She pays attention to her investments. She is disciplined and makes good, conservative choices that will likely grow.

They end up with the same net worth at age 45. Who is the better Mustachean?

I ask because I am MMM#1. I can save, but I don't pay attention to investing.  Even though I know intellectually that dollar cost averaging into an index fund is probably the best way to go in the stock market, I only started up my index fund some months ago. I pretty much put the same amount of money into retirement fund (spread over 3 -4 vehicles, none of them index funds)  and turned my back on it for 10 -18 years. Sure it grew. It also crashed in '05 - 08. Now it's back up as all of these investments are.

Meanwhile DH is better than I am at saving. And he takes care of our investments which means he has a better grasp on our holdings, he talks a couple of times each year with our bank and Ed Jones. He checks to see that we are reasonably diversified in our investments, which we are. (The $$$ that is not invested is another story.)

Anyway, I was thinking today about the life skills of "keeping it" and the life skills of "making it grow." In my case they are 2 separate things. I like the challenges of frugal living. I am barely motivated to learn about investing.

Comments?

[Eric]

I'm not even sure how you can build your stache without investing it.  I mean you can, but man is that going to take a long time.

If you want to separate them out, it's the investor.  Because without investing your money, you'll need such a low withdrawal rate that you'll never be able to retire prior to collecting Social Security without running out of money.

[Ziggurat]

Anyway, I was thinking today about the life skills of "keeping it" and the life skills of "making it grow." In my case they are 2 separate things. I like the challenges of frugal living. I am barely motivated to learn about investing.

I understand what you are saying; I was that way for a long time too. But the trick is to be motivated by the results, and the evidence is on the side of the investors.  And 'learning about investing' is almost covered in your earlier paragraph about investing into index funds. That, plus diversification and some allocation to non-stock is about all there is.

I was about 80% wannabe #1 for a number of years, and it was a mistake.  You need the money working for you, either through growth or dividends, etc.  Especially in tax-sheltered accounts where the government is effectively forgiving/delaying tax on the growth (or at least you keep the difference in your tax brackets putting in and taking out).

[samburger]

Well, I'd say you're due some face punches:

If you're not investing, you're just mindlessly hoarding. You say that you intellectually understand that you should invest--you also need to realize that investing is intellectual. You don't have animal instincts that deal with investment strategy, so your gut will never want to invest. Put more faith in your head and invest the rest of your money.

[iris lily]

Well, I'd say you're due some face punches:

If you're not investing, you're just mindlessly hoarding. You say that you intellectually understand that you should invest--you also need to realize that investing is intellectual. You don't have animal instincts that deal with investment strategy, so your gut will never want to invest. Put more faith in your head and invest the rest of your money.

You are right that face punching is in order.

I won't even tell you about the 3 "hobby houses" we have that earn 0 income. I can't take that much pain.  :)

[frugalnacho]

I'd say #1 because it is far easier to put it into an index fund than it is to change your lifestyle and reduce spending.  So #1 should be able to rectify the problem much sooner and grow a bigger fuller stache in the long run. 

[iris lily]

I'd say #1 because it is far easier to put it into an index fund than it is to change your lifestyle and reduce spending.  So #1 should be able to rectify the problem much sooner and grow a bigger fuller stache in the long run.

That's what I think, those frugal habits will carry over well into FIRE.

[La Bibliotecaria Feroz]

Why are you asking which is more important? It sounds like you are almost competing with your husband and feeling wounded because your hobby, being frugal, pays only the same amount as his hobby, smart investing. Isn't it all "couple" money? So... he's lucky to have you setting the example of frugality and saving the household a lot of money while you're lucky to have a spouse who's so much more interested in investing when you find it dull?

[iris lily]

Why are you asking which is more important? It sounds like you are almost competing with your husband and feeling wounded because your hobby, being frugal, pays only the same amount as his hobby, smart investing. Isn't it all "couple" money? So... he's lucky to have you setting the example of frugality and saving the household a lot of money while you're lucky to have a spouse who's so much more interested in investing when you find it dull?

It's fairly theoretical, my question. On a scale of 1 to 10 we both are good savers (8) and are ok at investing (me:  5 - 6 and he is 7 - 8 on the scale) and yes it all is one stash, it's just that I have retirement funds that are independent of his control and he has the same. But jointly, we've got the big stash.

[matchewed]

You need both skills to pull it off. Keeping it and making it grow.
Assume 30k in expenses and a 60k income a good solid number and savings rate. Under the mattress we'll say earns .5% annually and we're looking for a 4% SWR.
http://networthify.com/calculator/earlyretirement?income=60000&initialBalance=0&expenses=30000&annualPct=0.5&withdrawalRate=4
23.6 years with rough math.

Now let's take a look at a more spendy person who can invest better.
Assume 40k in expenses and a 60k income a 34% savings rate way better than the average American but probably meh for a Mustachian. Invests for a 7% return and is also looking for a 4% SWR.
http://networthify.com/calculator/earlyretirement?income=60000&initialBalance=0&expenses=40000&annualPct=7&withdrawalRate=4
21.9 years with rough math.

Now because the world isn't a dichotomy and that we know to do both is truly the better path than to pick from two arbitrary options we'll just run it for the good saver but who goes with index funds.
http://networthify.com/calculator/earlyretirement?income=60000&initialBalance=0&expenses=30000&annualPct=7&withdrawalRate=4
15 years with rough math.

I know what path I'd take. And this tells me that neither one nor the other is more important. Both are.

[Eric]

You need both skills to pull it off. Keeping it and making it grow.
Assume 30k in expenses and a 60k income a good solid number and savings rate. Under the mattress we'll say earns .5% annually and we're looking for a 4% SWR.
http://networthify.com/calculator/earlyretirement?income=60000&initialBalance=0&expenses=30000&annualPct=0.5&withdrawalRate=4
23.6 years with rough math.

Except 4% isn't anywhere near a safe withdrawal rate if you're only making .5% on your money.  According to cfiresim.com there's only a 13% success rate (30 years) assuming inflation adjusted withdrawals.

[matchewed]

You need both skills to pull it off. Keeping it and making it grow.
Assume 30k in expenses and a 60k income a good solid number and savings rate. Under the mattress we'll say earns .5% annually and we're looking for a 4% SWR.
http://networthify.com/calculator/earlyretirement?income=60000&initialBalance=0&expenses=30000&annualPct=0.5&withdrawalRate=4
23.6 years with rough math.

Except 4% isn't anywhere near a safe withdrawal rate if you're only making .5% on your money.  According to cfiresim.com there's only a 13% success rate (30 years) assuming inflation adjusted withdrawals.

True I did ignore success rates. My criteria was just time to FIRE not success of FIRE.

[warfreak2]

http://www.mrmoneymustache.com/2011/04/26/why-hardcore-saving-is-much-more-powerful-than-masterful-investing/

[arebelspy]

wf2's link is a good one.

I'm having a hard time picturing how they could actually be equal by age 45.

IMO, what is much more likely is that the saver hits FIRE much earlier but then is * pretty quickly, because inflation will kill them and they will have a drastically decreased real purchasing power within 20 to 30 years.

The investor will FIRE later, however their retirement will be sustainable.

Saving is vastly more important to get to FIRE, but investing is more important for making it last. 

To address your situation personally, keep it simple. Buy some broad market index funds, contribute regularly, and forget about it. You and up doing very well.

[quilter]

Saving is vastly more important to get to FIRE, but investing is more important for making it last. 

So true. My BFF, who is way more mustachian than I am, got  about 100,000 inheritance and put it into money market funds. At about the same time I rolled over a 92,000 401 into a vanguard ira into Wellesley and index fund. We were talking this Christmas and I quickly passed her amount and four years later have over 1.5 her total. Even if the market drops half I will have way more than her.

[Peony]

Edward Jones? How much is *that* costing you?

[mjb]

Curious is OP has read this:

http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/

[arebelspy]

Edward Jones? How much is *that* costing you?

I thought the same thing, along with the consulting with the bank.  Curious how that jibes with the stellar investor idea mentioned in the OP.  We don't have enough data to make a judgment, of cours, but I'm immediately skeptical of stuff like that.

mjb's link is a good one, and regarding the above I'd specifically look at the link in step two:
 http://jlcollinsnh.com/2012/06/06/why-i-dont-like-investment-advisors/

Regardless, the question I think is being discussed as a hypothetical, in a vacuum.

I do think it may benefit the OP to start an investing discussion thread around her situation to optimize it...

[iris lily]

Edward Jones? How much is *that* costing you?

I knew that would bring a face punch. You guys are too easy to  bait.

No seriously, you are right. My mom left some money in an Ed Jones account when she died. Ennui has kept it there.

[iris lily]

Curious is OP has read this:

http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/

That's a decent article. So maybe I will adjust my self-evaluation of investor to 2 -3 from 5, using the new MMM scale.