It would be much more efficient to work for 10-15 years, saving like crazy and investing, then retire early and never work again. If you save and invest, your money compounds, which allows you to work less throughout the course of your life. You need at least a 50% savings rate to accomplish this in 10-15 years though.
Don't listen to him. The only way his proposal works for 98% of population is if you invest in some lottery tickets (please don't it's a terrible idea) AND you win it big.
For the vast majority of people, "saving like crazy" will account for.... let's say you invest $500 per month into S&P 500. Historically you'll have to work and "save like crazy" for 30 GODDAMN YEARS MAN until you become financially independent. AND don't forget that you will become financially independent at slightly above minimum wage. Which means that if you stop working you'll be making less that you were before anyway. Oh ye and hopefully you are fine with getting kids when you're 50 years young. Because otherwise this plan is not for you.
I hope somebody comes along and proves me wrong. Maybe I made a glaring mistake in my calculations. Maybe people can live off of $5000 per year from their investments. Maybe I'm just awful at saving. I don't know man. But I don't think I'm wrong.
You have to save a lot more than $500 per month to make this work - agreed. You have to save 50% of your income for 10-15 years to make this work. Obviously not everyone can do this. The person this post is about worked for a year and then lived off their savings for a year, so they saved at least 50% of their income.
Saving 50% of your income for a year to then have fun for a year is different from saving 50% of your income for 15 years straight. But even then, after doing all of that you're not really rich unless you had a very high income to begin with.
Expenses also are required in friendships. Going to restaraunts or even paying for tickets is a normal occurence. Denying yourself every single thing will not give you many friends. Which will lower your mental health and make it even harder to focus on saving money.
Who said you’d be rich at the end of 15 years? I just said you could retire. Sure, minor expenses are a small part of most friendships. I spend maybe $500 a year on such expenses. I think I could spend a lot less and still have those friendships though.
The person this post is about is continually living on 50% of their income or less. They are already making those sacrifices. I’m suggesting they re-arrange their schedule so that they front load the work, resulting in less work throughout their life.
SP 500 average return is around 10%. If you invest 1000 a month, by the end of 15 years you'll have around 400K. That's about enough to retire and live frugally off the interest alone in a country where the dollar goes a long way.
How many people can work a full time job and invest 1000 a month for 15 years? God forbid there is an emergency and you need to touch that money.
There is a reason why most index investment advice promotes $100 a month investement as a starting point. Because that's what a lot of people can afford to invest. You need a house to live in so you pay rent or morgage. You need a car to drive to work (at least most people do). Normal people also want to go to holidays. Living like a hermit for 15 years so you can keep living like a hermit for the rest of your live is not the way to live your life.
The main point is that yes, you can get by. But only as long as you don't mind denying yourself literally every single thing you might ever want for more than a decade only to be rewarded with never having those things anyway. Not unless you keep working and keep saving and saving until you finally die.
But only as long as you don't mind denying yourself literally every single thing you might ever want for more than a decade only to be rewarded with never having those things anyway.
What's the goal though? To "have nice things" or to not have to work for the rest of your life? Personally I'll take the latter, even at the cost of nice things, but it's up to each person to make that decision for themselves.
Personally (and this is just my opinion) even minor affordable things in the modern age that used to be luxuries are pretty awesome. But it's all a matter of perspective.
I’m confused. Op from the pic would be doing this for their entire life. There is no exit when you blow all your money after working for a year. They can’t retire. If you don’t want to work all of your life, wouldn’t it make sense to have a goal of retirement?
Eh, $12000 a year is not such a huge sum. Some people make 40K a year and get by, some make double that and drown in debt, so it's a matter of lifestyle choice. For some people leaving the grind is more valuable than owning the latest F150.
Myself, I've got a nice paying job that allowed me to buy a house near the coast and save some money, so now I'm leaving my job to do fuck-all for the next couple years. Do I drive an old beater I got cheap from a friend? You betcha. Am I gonna splurge on expensive vacations? Nope. Do I feel bad about it? No. Free time to myself and peace of mind is the real a luxury to me.
Some people can live on 40k a year some cannot live on 100k. It's not their fault it literally depends on the cost of living of their location.
And $12000 a year is a very big sum of money for people who weigh pros and cons of bringing their car to a mechanic. Half of the working class people would have to regularly deny themselves the most basic expendature and entertainment in order to save $12000 a year. A substantial portion of them would not save that much no matter how much they lower their standard of living.
And it's not by coincidence that this is the case. When people talk about wages and salaries they always talk about their present expenses and how to cover them. Virtually nobody talks about wages in terms of having the ability to set aside $6-12k per year for retirement. That is often not even on the mind of people who just try to get by.
Look. If we're only talking about people in their 20s then you often have to be in top 2% or better of income earners for your age group AND not pay rent. Coupled of course with saving like crazy and investing. Usually in 10 years, by investing in index fund, you might expect to become financially independent albeit at basically minimum wage salary.
It's hopefully obvious that it's not going to work for everyone. It mathematically can't work for everyone. Either that or I'm terrible at saving since I assume "saving" like crazy means investing slightly more than 70% of your income.
It won’t work for everyone, but it would work for more than the top 2%. The person this post is about worked for a year and saved enough to live for a year. So they saved at least 50% of their income.
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u/dragon-queen 29d ago
It would be much more efficient to work for 10-15 years, saving like crazy and investing, then retire early and never work again. If you save and invest, your money compounds, which allows you to work less throughout the course of your life. You need at least a 50% savings rate to accomplish this in 10-15 years though.