Hard to move from 50 to 60 percent savings rate

[VolcanicArts]

Hi I've been having a much harder time increasing my savings rate from 50 to 60 percent. I know I could do it, but don't want to give up my small comforts to get there i.e. Trip every 3 months to Vegas, Florida, Cosra Rica etc, eat out sometimes but healthy, fixing my garden etc. I don't really know if it's worth the comfort sacrifice and experiences from traveling to save 10 percent more as I'm already approaching 200 k NW with a high yield and calculate FI around 5 years from now anyways and I will still be relatively young then. Any thoughts on the matter I figure the extra 10 percent savings rate at most would decrease my time to FI by less than a year if that but would affect my current level of comfort. Any thoughts on this?

[Sydneystache]

You've answered your question - happy at 50, miserable at 60.

Enjoy your 50% savings rate - you're doing better than most of humanity and general financial advice of saving 10-20.

[Khan]

Test yourself, and find your own comfort point. You've found it, keep looking but enjoy what you have and save what you can. FI is not the end point, the goal is being happy where you are. Maybe you want FI for the things you can be free to do when not tied down to a job for income, maybe you hate your job, maybe you enjoy it but enjoy playing games with savings rates...

You can check the cost/benefit on various efficiency improvements(solar, food/transportation, home upgrades[LED lighting, insulation]) etc, but as Sydney said, you're doing great.

[Dicey]

I agree with Syd. Perhaps shooting for 51-52% is more realistic. When you get raises or bonuses, you can slug the increases into your 'stache.

I would continue to travel, as life is short, and nothing is guaranteed.  Look for ways to do it a little more economically. Are you churning CC's to get hotel and airfare points? Travel hacking has never been easier.

I gotta say, I kinda smell a rat here. Not sure if you're for real or humblebragging. If you're a troll, please go away. If you're legitimate,  I wish you godspeed.

[Laura33]

Hi I've been having a much harder time increasing my savings rate from 50 to 60 percent. I know I could do it, but don't want to give up my small comforts to get there i.e. Trip every 3 months to Vegas, Florida, Cosra Rica etc, eat out sometimes but healthy, fixing my garden etc. I don't really know if it's worth the comfort sacrifice and experiences from traveling to save 10 percent more as I'm already approaching 200 k NW with a high yield and calculate FI around 5 years from now anyways and I will still be relatively young then. Any thoughts on the matter I figure the extra 10 percent savings rate at most would decrease my time to FI by less than a year if that but would affect my current level of comfort. Any thoughts on this?

I think you're asking the right question.  You need to balance present happiness with future happiness -- you don't want to blow everything now and then in 10 years feel stuck and be miserable having to work for 20 more years; but you also don't want to live for a miserable 10 years to have a fabulous retirement (when who knows, you could be hit by a bus before you even get there). 

So I think what you do is test what your limits are (because you won't know if you're really at the limit until you've gone past it).  Drop a trip or two, find some areas you can cut back -- maybe not to 60%, but 53-55%.  See how that feels.  If that was totally fine and comfortable, shoot for a few percent more next year, and then a few percent more after that, until you hit the point where you feel cramped and unhappy.  Now you know where your limits are.  So once you hit "unhappy," add a little bit back in until you are comfortable again, and stick there.  OTOH, if you cut too much out the first time, add one or two things back in next year to see how much is enough.

I don't think you should expect to get it right the first time.  Some things you will give up, only to discover that, damn, I didn't think that mattered, but it does; other things you think matter you'll surprise yourself by not missing at all.  That's all part of the journey.  You are not just cutting your lifestyle temporarily to get to FIRE; you are using this time to find the lifestyle that you will be happy in long-term -- because that is what is going to tell you what your 'stache needs to be. 

Tl;dr:  There's no one magic number.  The next few years is just practice so you can get it right when you pull the plug on your job.  Push your limits, try things, then try different things until you find the sweet spot.

[TheAnonOne]

The other side is always income. If you doubled your income overnight you'd have a 75% SR.

Other than that, yea, travel "hacking" might lower the costs for your vacations.

What is your HHI if you're making 200k and spending 100k, we are less than impressed. If you're making 40k and saving 20k, then we are extremely impressed (but good news is that small bumps in income work wonders on that side)

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[Guesl982374]

The other side is always income. If you doubled your income overnight you'd have a 75% SR.

Other than that, yea, travel "hacking" might lower the costs for your vacations.

What is your HHI if you're making 200k and spending 100k, we are less than impressed. If you're making 40k and saving 20k, then we are extremely impressed (but good news is that small bumps in income work wonders on that side)

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+1

[VolcanicArts]

Making low 6 figures now. So we could say make 100 k save 50k. I would have more stashed away nut I got caught in the last oil price collapse, and before that I was working crazy hours to pay off student loans. I'm not really worried about a market collapse right now as I've accounted for that with some 3x leveraged short options, so I can continue to collect a pretty high yield and sleep well at night. I've travelled a lot including overseas some of it very cheaply, but those experiences were awesome and well worth the money imo. The problem with traveling in the US is I've only found two really fun places that are worth going to, so I try to max out my work picking up extra shifts then go every three months. Other than Vegas and Miami/Palm beach area, I haven't really found any other places that seem that interesting. I haven't really been to Colorado so maybe there is a cool city to visit there. If anyone has any ideas let me know. Thanks.

[mcneally]

...having a much harder time increasing my savings rate from 50 to 60 percent...I'm already approaching 200 k NW with a high yield and calculate FI around 5 years...Making low 6 figures now. So we could say make 100 k save 50k

I think you may need to recalculate that. Maybe a 1 in front of the 5 years to FI.

[prognastat]

...having a much harder time increasing my savings rate from 50 to 60 percent...I'm already approaching 200 k NW with a high yield and calculate FI around 5 years...Making low 6 figures now. So we could say make 100 k save 50k

I think you may need to recalculate that. Maybe a 1 in front of the 5 years to FI.

I would say maybe not that much, however if the plan is to maintain similar spending in FI(RE) and no massive raises/bonuses during the accumulation phase then 10-12 more years is more likely. This could change a decent bit if the income is a decent bit over 100k or the spending is a little bit below 50k.

[2Birds1Stone]

Starting from a net worth of $0, the difference between a 50% and 60% savings rate is 4.5 years till FIRE.

[MrsPete]

You've answered your question - happy at 50, miserable at 60.

Enjoy your 50% savings rate - you're doing better than most of humanity and general financial advice of saving 10-20.

Yep, I agree.  50% is nothing at which to scoff.

[VolcanicArts]

...having a much harder time increasing my savings rate from 50 to 60 percent...I'm already approaching 200 k NW with a high yield and calculate FI around 5 years...Making low 6 figures now. So we could say make 100 k save 50k

I think you may need to recalculate that. Maybe a 1 in front of the 5 years to FI.

I still plan on working part time after the 5 year period, but at that point with consistent returns on principal I could theoretically pay all my bills without having a job and have a bit left over. I wouldn't be thriving or anything but it's a good safety net to have. I figure around ten years if things go smoothly then I could actually stop working altogether and still have plenty of fun money and some to reinvest. Also keep in mind the 200k NW is after taxes.

[human]

If I cut travel, gifts and charity I could increase my savings rate by 10% to just over 65%. I bet a lot of people that hover around that mark have the same issues. We get the big stuff down and stop blowing money on gadgets, clothes etc. but can't take that next step to stop spending on "experiences".

[Khan]

If I cut travel, gifts and charity I could increase my savings rate by 10% to just over 65%. I bet a lot of people that hover around that mark have the same issues. We get the big stuff down and stop blowing money on gadgets, clothes etc. but can't take that next step to stop spending on "experiences".

Some would call that... living. Being... human.

[VolcanicArts]

What are 3x leveraged short options?
[/quote]

They're a way to hedge against market risk but since they are leveraged 3x you don't have to put as much money in to buy them. A good example would be DUST it is a 3x short etf for gold mining. Let's assume you thought gold was too high right now and bought $1000 worth of DUST. Now let's say you held it for a year and gold dropped 30% in that year. Your 1000 would now be worth $1900 (1000 + ((1000x0.3)x3). A simple explanation of short plays are you sell the shares at present value and promise to give the shares back later, so if you sold at a high price now and the cost drops later you pocket the difference. Keep in mind shorting anything carries inherent risk as gains are limited but losses can be unlimited. It is really not as simple as the above example as 3 x short etfs can reset their base so it's possible to lose money even if the price of gold stayed the same for a year but had small fluctuations in between. Really they are only good for high probability short term plays or as a buffer against catastrophic loss if the market were to suddenly nosedive, however in order to prevent these future losses from occurring you have to be willing to give up some yield. Hope my explanation helps.

[triangle]

Isn't going from 50% to 60% more like increasing ones savings rate by 20% which is very hard to do when otherwise maxing out. Since most people who earn enough to save 50% are very likely have 1/3 of income first going to US+State+local taxes, maybe even a little more. So saving 50% means one is living on 1/6 of income.  ...Or maybe I read too much into what is meant by savings rate.

[2Birds1Stone]

Isn't going from 50% to 60% more like increasing ones savings rate by 20% which is very hard to do when otherwise maxing out. Since most people who earn enough to save 50% are very likely have 1/3 of income first going to US+State+local taxes, maybe even a little more. So saving 50% means one is living on 1/6 of income.  ...Or maybe I read too much into what is meant by savings rate.

That sounds right, though many of us with a 50% savings rate pay a bit less taxes than 1/3rd thanks to 401k, tIRA, HSA contribution.

Someone making $75k/yr and maxing their 401k/IRA will get their taxable income down to $51,500 and pay something like 8-13% effective tax rate depending on state.

[spots]

I agree with most of the other posters, but if you really want to get to 60%, I think you should at least think hard about your trips every three months.   Does traveling somewhere expensive four times a year in fact make you meaningfully happier than traveling somewhere expensive once or twice, and then doing something else fun and cheap for vacation twice a year (e.g., a camping trip, roadtrip to another state to visit old friends you haven't seen for a while)? 

[Davids]

50% savings rate is great. Starting at $0 NW if you Dave 50% you should be FI in 12.5 years, assuming sane expenses, is the stat I believe MMM has said.

[TheAnonOne]

50% savings rate is great. Starting at $0 NW if you Dave 50% you should be FI in 12.5 years, assuming sane expenses, is the stat I believe MMM has said.

50% = 16.6 years...
60% = 12.4 years...
70% = 8.8 years...

It's on an exponential curve to a degree. So 50 to 60 saves 4.2 years.

4.2 years is a REALLY long time. I would make every effort to strive for it. Even with plans to increase spending to current levels after FIRE could be achieved much faster.

50 to 70 is nearly a decade (7.8 years). 7.8 years ago it was 2009. Where were you in your life in 2009?




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[Khan]

I agree with most of the other posters, but if you really want to get to 60%, I think you should at least think hard about your trips every three months.   Does traveling somewhere expensive four times a year in fact make you meaningfully happier than traveling somewhere expensive once or twice, and then doing something else fun and cheap for vacation twice a year (e.g., a camping trip, roadtrip to another state to visit old friends you haven't seen for a while)?

Great suggestion.
Other alternatives, what is it that you do/enjoy about Vegas? If it's gambling, there's no hope for you lol...
But if it's shows or the night life or something, are there cheaper ways of going about it?
-Using reward points/memberships/off-Strip hotels and accommodations
-Finding cheaper ways to get into the shows, find a Vegas resident for local discounts or other methods
-Not being on the strip for gambling, can usually find lower cost tables and such at off-Strip locations I think, especially the Station Casinos

[TheAnonOne]

I agree with most of the other posters, but if you really want to get to 60%, I think you should at least think hard about your trips every three months.   Does traveling somewhere expensive four times a year in fact make you meaningfully happier than traveling somewhere expensive once or twice, and then doing something else fun and cheap for vacation twice a year (e.g., a camping trip, roadtrip to another state to visit old friends you haven't seen for a while)?

Great suggestion.
Other alternatives, what is it that you do/enjoy about Vegas? If it's gambling, there's no hope for you lol...

Obviously, the sky is the limit for how much you can spend here, but even on the strip, avoiding 6/5 blackjack and sticking to table games (craps, 3/2 blackjack) you can have a pretty good time and avoid massive losses.

For blackjack, about every other time you're going to win - the house edge of about 1%

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[dougules]

In the vein of testing yourself, try cutting out luxuries temporarily one or two at a time.  Cut out half your trips or cook next time you feel like going out.  Give yourself enough time to fully change your habits.  If you still do miss them after you've given it a real chance, you can pick back up right where you left off.  You might be surprised what you don't miss. 

We used to travel every 3 day weekend.  We cut a lot of that out and travel maybe twice a year now.  I do miss frequent travel a bit, but I don't miss weekend road trips because they were so rushed.  We also don't eat out hardly any more.  Not to brag, but my cooking has improved to the point where a lot of restaurants are a bit underwhelming. 

On the other hand, I did home haircuts for a while, but went back to paying for it.  It's worth it to me.

I guess the point I'm trying to make is that giving things up can just be a trial run.   

[Malum Prohibitum]

Isn't going from 50% to 60% more like increasing ones savings rate by 20% which is very hard to do when otherwise maxing out. Since most people who earn enough to save 50% are very likely have 1/3 of income first going to US+State+local taxes, maybe even a little more. So saving 50% means one is living on 1/6 of income.  ...Or maybe I read too much into what is meant by savings rate.

  Hmmmm . . . is savings rate the before or after tax number?

I thought most around here do it on after tax, so, for example, if you make 100k you look at your paycheck and the net.  Add back in your 401(k) deduction.  So it might be $80,000 instead of $100,000.

Am I wrong?

Also, many people here include principal payments in their savings rate, since it changes net worth.

[VolcanicArts]

I agree with most of the other posters, but if you really want to get to 60%, I think you should at least think hard about your trips every three months.   Does traveling somewhere expensive four times a year in fact make you meaningfully happier than traveling somewhere expensive once or twice, and then doing something else fun and cheap for vacation twice a year (e.g., a camping trip, roadtrip to another state to visit old friends you haven't seen for a while)?

Great suggestion.
Other alternatives, what is it that you do/enjoy about Vegas? If it's gambling, there's no hope for you lol...

Obviously, the sky is the limit for how much you can spend here, but even on the strip, avoiding 6/5 blackjack and sticking to table games (craps, 3/2 blackjack) you can have a pretty good time and avoid massive losses.

For blackjack, about every other time you're going to win - the house edge of about 1%

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I mainly stick to table games Ultimate Hold Em, Blackjack, and roulette every now and then. I play just for fun and take a set amount of money with a defined period of time and leave at that time whether I'm up or down. I haven't really won or lost a lot doing this but on the five dollar tables you can be there for a long time without losing a lot and every now and then you'll get a nice hand. For whatever reason the odds on hold em seem really balanced if you have any strategy at all,and are playing the cheap tables. The road trip does sound kind of fun Imwas thinking maybe Santa Fe sometime.

[Scortius]

50% savings rate is great. Starting at $0 NW if you Dave 50% you should be FI in 12.5 years, assuming sane expenses, is the stat I believe MMM has said.

50% = 16.6 years...
60% = 12.4 years...
70% = 8.8 years...

It's on an exponential curve to a degree. So 50 to 60 saves 4.2 years.

4.2 years is a REALLY long time. I would make every effort to strive for it. Even with plans to increase spending to current levels after FIRE could be achieved much faster.

50 to 70 is nearly a decade (7.8 years). 7.8 years ago it was 2009. Where were you in your life in 2009?




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The catch is that those calculations assume your spending will stay the same forever (adjusted for inflation).  Thus, if you approach it as temporarily cutting back on things you would like to experience in retirement, you're not actually shortening your time to FI by 4 years.  You should absolutely focus on living a frugal yet fulfilling and comfortable life, but pushing yourself past your lower limit is not what this site is about.

[Scortius]

I agree with most of the other posters, but if you really want to get to 60%, I think you should at least think hard about your trips every three months.   Does traveling somewhere expensive four times a year in fact make you meaningfully happier than traveling somewhere expensive once or twice, and then doing something else fun and cheap for vacation twice a year (e.g., a camping trip, roadtrip to another state to visit old friends you haven't seen for a while)?

Great suggestion.
Other alternatives, what is it that you do/enjoy about Vegas? If it's gambling, there's no hope for you lol...

Obviously, the sky is the limit for how much you can spend here, but even on the strip, avoiding 6/5 blackjack and sticking to table games (craps, 3/2 blackjack) you can have a pretty good time and avoid massive losses.

For blackjack, about every other time you're going to win - the house edge of about 1%

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I mainly stick to table games Ultimate Hold Em, Blackjack, and roulette every now and then. I play just for fun and take a set amount of money with a defined period of time and leave at that time whether I'm up or down. I haven't really won or lost a lot doing this but on the five dollar tables you can be there for a long time without losing a lot and every now and then you'll get a nice hand. For whatever reason the odds on hold em seem really balanced if you have any strategy at all,and are playing the cheap tables. The road trip does sound kind of fun Imwas thinking maybe Santa Fe sometime.

For Vegas table games, it's hard to beat Blackjack for value.  That said, you really need to make sure you know how to double and split properly as those situations will make up the bulk of your winnings.  If you do it wrong, you will be losing expectation very quickly.

Ultimate Hold 'Em was designed by David Sklansky, a notable poker player and author, to be reasonably fair, but once again, this is only the case if you adhere to optimal strategy.  If you don't do your research, you will be losing a huge amount of expectation.

The absolute best value in Vegas is the Pai Gow table.  You can even ask the dealer to help you play optimally.  The game moves slowly, and the odds are exactly 50/50 (you pay a 5% vig on a winning hand).  Half of the hands you play end up in a tie.

Another great one is to play the pass line (including behind odds) in craps (while avoiding place bets).  Craps is great because it's social, so everyone wins together.  It also has some of the best odds and doesn't require you to learn a strategy.

If you're into having a fun night at the tables, try going Downtown to Fremont St.  The tables are less crowded and the minimums are lower yet you still get the same experience.

[VolcanicArts]

Update on this thread. I just returned from my most recent Vegas outing. It was awesome tickets were cheap, hotel was great, met tons of cool people in my 4 days there, and came back with about 2500 profit, which I plan to buy a high dividend telecommunications stock that will use drip to continually add to my stache. My next planned trip will be less gambling and very low cost ( Costa Rica), I've never been but it's supposed to be great from what I hear and I've been practicing my Spanish a lot. For now I feel rejuvenated and will continue to focus on working as much as possible and picking up as many extra shifts as I can. Still around 50% savings rate from paychecks, but have a consistent dividend stream coming in as well as about to start some side projects selling hand made wooden arts and crafts at a traders village on my days off. Just an experiment for noe, but once the uniqueness, quality, personalization, familiarity, legal, and demand side, and efficient production are figured out, I could see a few hundred per month extra in income from this. Might create a separate thread for vending crafts to get some ideas later. Anyways, I'm on kind of a tangent here, but pretty happy I came back with a nice chunk of change from this "vice" lol, usually doesnt work that way.