Investment returns are real!

[dougules]

Let's move this to a new thread so we don't hijack this one: 
    Investor Alley » Realizing Earnings (Side thread from "Investment returns are real!")

So much for trying to head off the thread hijack. 

[BTDretire]

Let's move this to a new thread so we don't hijack this one: 
    Investor Alley » Realizing Earnings (Side thread from "Investment returns are real!")

So much for trying to head off the thread hijack.

 Nuff Said?

[Tyson]

I have realized that investment returns are real for a long time, but only recently have I actually sat down to calculate how much I make per year just on dividends alone without ever touching the principal. After accounting for all taxes, margin interest, leverage, and tax exempt municipal bond distribution I came up with about 13 dollars per hour 40 hours per week is what my yield is paying me. I consider this to be barebones FI, for if something were to happen to my other income streams it would provide me enough money to pay my bills, and eat and maybe put gas in my car, but not much else. I was reading an article a while back, and it had some really solid points that I'm sure a lot of Mustachians already realize, and that is that even if you don't want to FIRE and like your job, once you reach a high enough net worth, you could actually be losing money through time and opportunity cost by working a 9 to 5 gig. At a high enough net worth, if you were to simply spend your time at Starbucks daily poring over business articles, balancing investments, looking for new business and growth opportunities, finding ways to decrease your tax liability, working on ways to decrease cost of living, focusing on business start up ideas etc., you could actually have a higher return at that point by efficiently utilizing your time vs. wasting it to contribute a small amount more to your stache that the 9 to 5 job would give you. Anyways food for thought, I'm always interested in stories or comments and ideas related to this topic.

This reminds me of what MMM was saying in his Great News - Early Retirement Doesn't Mean You'll Stop Working post:

I find that when people earn their freedom from money constraints, they usually don’t stop working. Instead they start doing their best work. Looking at many of society’s highest achievers right now, the world leaders and founders of the most productive companies, I see mostly people who have already made it. And yet are still working because it means something to them.

Being FI and RE give you 2 things that allow for really meaningful work - TIME and RESOURCES.  Of these 2, I think time is the most important and most valuable.  For exactly the reasons you outline.

[arebelspy]

Assuming 7% returns,  we essentially have a better than minimum wage salary being generated every year going forward... Amazing!

Indeed!

You may want to check out this thread:
https://forum.mrmoneymustache.com/welcome-to-the-forum/what-are-your-soldiers-(dollars)-paid-per-hour/

:)

[Bateaux]

I've been thinking of how incredibly crazy it all is.  Our balance had dropped a bit but then roared back with a vengeance.   In fact this week there was over $20,000 in movement.  As of now were $10,000 higher than any previous high point.  Yes, a 10k gain over any previous high in a week.  Our soldiers are paid about $20 an hour on a 24 hour day.  They never rest.

[FI4good]

Sure is a nice feeling to see the dividends roll in,

keep on keeping on :)

[nawhite]

At my first job before MMM, I had a 401k that I was doing the max match of 8% and when I left there, I had about $65k that I rolled over into a 401k. I found MMM right afterwards and so have been maxing the new 401k out at 18k/year but it amazes me that my new account can't seem to catch my old one because of the returns, despite contributing so much more to it.

I've now been at the new job for 4 years now and just hit about $75k in the new 401k but in that time the old account has climbed to 90k! I feel like I'm going to keep playing occam's razor with that account forever, always slightly behind, never quite catching it.

[JayKay]

Actually, I'm starting to feel the opposite.  Paying my bills through money that doesn't come from my job is maybe still something I'm getting used to.

But, the whole experience is devaluing money in my mind.  It's becoming more abstract numbers and less about actual dollars, especially since everything is getting more and more electronic and online.

It's also starting to devalue the job that I do too and I'm really starting to see that I'm working for value tokens.

[WildJager]

It's also starting to devalue the job that I do too and I'm really starting to see that I'm working for value tokens.

Fiat currency has always been value tokens.  Tokens who can expand (bank loans) and subsequently lose value (inflation).  Or the tokens can suddenly gain relative value (market crash) or suddenly lose relative value (foreign trade currency differences).  The people who lose out are those who think their dollars bills have unchangeable intrinsic value and decide to keep their stash under their mattress (or in a savings account).  Even worse is when their leveraged with debt, which drives their relative net worth exponentially down, not just linearly down with inflation.  If you're not riding the wave of change via investing, your tokens' value is ever decreasing in the fiat world (low inflation considered stable and all that).

In the end it's just the big banks trying to keep the little man down by shedding the fair and standard currency backing of an arbitrary, though rare, metal.  ;)

[scottish]

^^^   I like this analysis.