My husband and I are both 29, making over $75K/year each, and we both max out our 401Ks, Roth IRAs, and save (together) another couple thousand a month on top of that. Our savings rate is over 50% of our income. We live in L.A., so cost of living isn’t low, but we share a rented house (much nicer than what we can afford, for about half of what the mortgage would be on what we could afford to buy, in a better neighborhood – though we’re looking at buying a home and renting out rooms to friends), cook at home a lot (we both love to cook), and drive 10+ year old cars we bought for cash, used. We still travel, entertain our friends by throwing parties, and generally don’t feel limited by much – and we pay cash for all of it. We both deliberately chose degrees and jobs that suited our talents and would make money (mechnical engineering for me, computer science for him), and now choose to spend less on cars, clothes, entertainment, and housing than most of our coworkers or others in our income range. I could, easily, pay cash for a Porsche right now – I love sports cars. But you know what? That extra hundred grand now means I can retire 5 years earlier, or take off a work for few years when we decide to have kids, and driving back and forth to work every day in one would just get old. But anytime I want, I can go down the street and go for a test drive, or rent one for the weekend, and the thrill is still there. I’ll take that extra security, peace of mind, and freedom over going out to eat, living alone, or having nicer cars any day.

I realize not everyone can save this much – I’ve worked fast food and retail and my husband has as well, and we know how broke you can be trying to live off of it – so we’re taking advantage of the current security and stability of our jobs to save as much as possible so that not only can we retire earlier if we’re lucky, but we won’t be stuck having to declare bankruptcy if one or both of us gets laid off because we bought expensive cars with loans or a house that’s underwater that we can’t sell and can’t afford to pay on the mortgage.

I guess everyone makes choices, but ours is stability and, hopefully, freedom.

Thanks for posting! There is so much truth in what you have written. One does not need things to be happy, one just has to decide to be happy, in order to be happy. Continue being happy while practicing being destitute.

Thank you for your service.

David M

The first goal is $100,000, then $250,000, then $500,000, then $1,000,000, then more. It’s just really fun, and I encourage everybody to shoot for these milestones! You’ll experience a world of freedom you never new existed, and will become more daring!

So what if most people don’t save 10%, does that mean that smart people shouldn’t save 10%, or what about the couple who dream of early retirement and save more than 10% towards their dream. Enjoy the journey but think of your future as a senior.

Its not fun to be poor as an older man or older woman. I don’t want to be one of those WalMart greeters, no thanks, that’s not for me. Its one thing to be broke in your 20s, but its quite another to be broke in your 80s.

I don’t believe in deprivation but I know how much is “enough” for me. I don’t need Christian Louboutin shoes because I find high heels really hurt my feet, I don’t wear high heels anymore, but I can’t wear cheap $20 shoes either, they hurt. If I need to shop, I shop for midrange items. I know you were trying to have a balanced article but honestly it seems like you were judgmental of those who saved more than 10% of their income.

I don’t think people are as deprived as you seem to think they are. Maybe some have found their “enoughness” in life. What’s wrong with that? Maybe the people who save more than 10%, had had their fun being spendthrifts and after awhile realized that all that stuff they spent, wasn’t fun in the end, maybe they wanted to save for the future now and not be foolish.

Maybe they found the number of items they wanted in their life and that it was enough for them. Maybe they decided hey I don’t need to go to that Mexico resort each weekend, I can take 5 trips in a year from now on. Or maybe they go in a field that allows them to travel and achieve their goals another way.

Human nature being what it is, humans can’t go long with self-denial, we tried that in the middle ages and it didn’t work. Most of us try to find a happy balance. Its like when a person goes on a diet, if they go too long without sugar and sweets they cave in and forget their diet. The successful person that loses weight, eats healthy but allows themselves a treat or two each week or rewards themselves another way at the end of the month or at the end of the week.

It seems easy to understand why the people next door drive a car that must be 14 years old, dress quite plainly and don’t much if anything on landscaping. He is a sell-employed carpenter and she is an assistant in a doctor’s office. Neither has a college education. But, each of their three children went to an Ivy League undergraduate college and then on to an Ivy League business, medical and law school. One of the children mentioned to you how grateful they were to have left school without a cent of debt. When you’ve spoken with either of the parents over the years, they’ve never complained about their children’s educational expenses or indeed about anything to do with money. How can this be? Their combined incomes can’t be over $100,000, yet it seems they may have paid over a half million dollars in educational expense for their children. Your annual household income is $250,000 but you live paycheck to paycheck.

The main difference between you and your neighbors is that they are sitting on a stock portfolio worth $4 million, throwing off more than $120,000 per year in dividend income. You couldn’t raise $10,000 if you had a month to do it. How in God’s name did this come to be? Neither of the neighbors inherited anything.

Here’s what happened. In the early 1970’s, when your neighbors and you were in the early 20’s, they realized they would probably not make great incomes so they decided to live beneath their means, utterly to ignore advertising, to buy used cars, stay out of bar rooms, restaurants and malls, and to invest what little they could spare in the stocks of companies that sold things to other people, such as you.

They bought shares in what was then Philip Morris, and of Johnson & Johnson, Colgate Palmolive, Procter & Gamble, GE, Wal-Mart, Coca Cola, William Wrigley, and Abbott Laboratories. They got into Microsoft in the late 1980’s at 10 cents per share. They had the broker deliver the shares to them so that they could reinvest the dividends and buy more shares without paying brokerage commissions. Over a period of some 35 years, your neighbors invested maybe $200,000 of their own savings plus all the dividend income. While you were going through your considerable income buying new cars, running up big credit card balances shopping at Burberry’s, Barney’s and Brooks Brothers, Neiman Marcus, and Bloomindales, eating out 5 times a week, ordering drinks made with premium priced liquor and leaving money on the tables of Indian-run casinos, your neighbors were reserving against their future obligations and for a time when they might not want or indeed be able to work. While you were unable to separate your wants from your needs, your less well educated neighbors had no trouble doing that for themselves. The result is that capitalism turned your income into your neighbors’ principal. One not so small consequence was that their children could apply to Stanford, Princeton and the University of Chicago without requesting a cent of financial aid. If you don’t think that sways the minds of top college admission committee members, think again.

Now, your neighbors love their jobs, in large part because they know they don’t need them and could cease working on any given day. You and your spouse hate your jobs because you know you have to keep them and maybe to work until you are 70 or older. You might want to continue to be most cordial to your neighbors’ children. When you end up looking for a job, one of them might give you a reference.

Oh, wait…you suddenly awaken from the horror of this wretched scenario and discover it was but a dream and a nightmare at that. You are still only 28 and what has been written above is but one possible outcome. Fortune has favored you and given you a second chance. If you are comfortable with the future outlined above, keep doing what you’re doing and you’ll get it. Keep spending all your income on consumer junk and trying to live as if you were a person with money and be sure to plan to work for a high school kid when you are 70, maybe parking cars.

If, on the other hand, you want to be able to live more or less without financial worry, curb your spending now and begin investing. Sure, driving a flashy car, having $50 lunches and $100 dinners, drinking martinis made with Grey Goose vodka and buying $500 Jimmy Chu shoes seems stunningly enjoyable now, but, I assure you, it won’t come up to having $4 million when you are 60.

Personally, I believe in moderation in everything.

Your vacation sounds like an excellent way to enjoy life without a huge expenditure.

But moderation in all things is usually a good guideline. If nothing else, it will keep you sane.

Because we do not have all the “necessities” of most Americans, we have much more money to save than other Americans and also have much more money for the “Dream Vacation” people are talking about above.

Each year we take a 6 week vacation were we stay in hotels and eat 3 meals a day in restaurants. These are our “Dream Vacations” and the cost is not that much. We go to south east asia, vietnam, cambodia, Laos, Malasisia. Hotels are $10 a night and meals are $2.

What I’m trying to say is, you can have all you currently want (or at least more and maybe most) and save a lot, if you make some changes to how you look at “necessities” and “dreams”.

We have to live which means we must spend but does fun, learning and enjoyment mean spending a lot? Surely not!

For my 2cents – if you count the pennies, save in all the little areas you can, work efficiently, stay productive, and avoid the big mistakes, you can afford the occasional splurge, smell the roses along the way and still get to the end with enough to make it all worthwhile.

DO NOT sacrifice the now in hopes of this great retirement of your dreams later. Put enough away that you will be able to continue to live the life you want, which should be what you are living already.

Choose a an age, and walk away. Enjoy life! He who dies with the most money in the end, LOSES!

Flexo, pls feel free to read: “Knowing When To Walk Away: Financial Planning For An Unknown Ending” It goes more in depth with your topic here.

FS

It’s important to set financial priorities and make every attempt to meet them. For example our priorities (in order) are: mortgage payment, private school tuition, retirement savings, 529 plan contributions, and travel. We will not devote money to a lower priority unless the higher ones are already taken care of. After our children complete college, then hopefully we will be able to travel more and afford some other luxuries.

As mentioned above, it’s a delicate balance of living in the moment while preparing for the future. However, the thought of working after I turn 60 is a great motivator to keep up the retirement savings. A fear of mine is being one of those elderly workers commonly seen at WalMart or Target nowadays. I doubt they are there because their job is enjoyable and fulfilling.

Thanks for the insightful post!

Flexo – you are right on. The obsession some have to rid themselves of a mortgage or other low interest debt has them living so far below their means that I wonder what the tradeoff is. I’m reminded ever now and then when I pass on a purchase and my daughter (11) says “dad, you know you can afford that.” I can deprive myself of some fun for a year to retire a week earlier at the back end? Seems a bit silly at times.
Joe

Are there some assumptions in those numbers? You betchya.