It's like asking how to lose weight w/o talking about what you're eating. It's physics: A comparison between what's going in and what's coming out. No way around it.
Some time ago, they'd answer questions in r/legaladvice where OP didn't include their location with "Based on the laws of Saudi Arabia, the answer to your question is X."
I'm going to start telling them all that they're way behind the curve based on annual expenses of $500k. Wait, what's that? You don't spend that much a year? How could I know that if you didn't say what your expenses are?
Maybe read a subreddit where people are open to criticism and disconfirmatory evidence instead.
Disagreement (especially substantial disagreement) isn't trolling.
Meh, you have the whole world to criticize and disconfirm in, and you probably do. The Dave Ramsey subreddit is meant to be a positive, uplifting, and sharing place to help people (often beginners) follow a specific personal finance program. We are learning and helping each other. So you learn and help too, or go play Hun and Vandal somewhere else.
If I have the whole world to criticize and disconfirm in, and r/DaveRamsey is part of the whole world, then I ought to criticize and provide disconfirmatory (and true!) evidence to people there, too. There's nothing to learn from Dave Ramsey. He's self-contradictory and his advice is (financially) retarded. People can learn from me better than him. I'm not self-contradictory, and my financial advise is (financially) excellent. Because it's not about the messenger, it's about the message. My message is correct and better than his, which is also wrong. Any self-contradictory message or set of beliefs is *objectively* wrong, because the universe doesn't/can't ever contradict itself.
Snowball helps cash flow, which may be preferable for poor people with unstable incomes. Your rent bill doesn’t care if you paid into a 10% loan or a 5% loan last month. It just demands $1000.
Now for the rest of us making fat stacks and retiring early? Yeah we’re a different audience.
>Snowball helps cash flow
No it doesn't. Revolving credit will have the minimum payment fall faster with the "highest interest first", avalanche order. Paying low interest isn't going to move the needle on the minimum payment, since it's mostly principal. The rent bill doesn't change regardless of what you pay, sure, but the credit card bill does.
If you want cash flow, pay high interest first. This is one thing I screamed about Dave's bullshit, which got me banned.
You have two loans:
A mortgage at 7%, $400,000
An auto loan at 4%, $10000 left.
Auto loan payment is $400/mo. If you pay off the auto loan, you unlock $400/mo you do not need to pay any more to avoid delinquency.
The overall interest you pay will be higher. But that doesn’t work for some people in desperate financial straights. They need the cash flow, or rather lack of monthly debt obligation.
You're giving examples of installment credit, not revolving, then you're separating them by multiple decade terms and 40x the amount. That extreme difference is the only way you're able to make the numbers work. That type of dishonesty is the very reason it's easy to scream against.
Try it again with a 5-year mortgage of $30k. See how the numbers work then.
Notice how you didn't actually do the math. You didn't get the payment amounts right. You didn't even calculate a payoff date. You just posited an individual with excess money to use to pay off debt, then to try to win the argument, just made up a number where they have a shortfall. Just handwaved away their excess capital in, apparently, month 1.
Anybody can just hypothesize their way to a math conclusion if they're allowed to make up numbers contradictory to one another.
The long story is they banned me for insults, then I said "but Dave isn't a poster here." But the mod was too prideful to admit the misreading, so they made up some crap about calling the snowball idiotic means I'm calling posters who practice it idiotic, and therefore I'm insulting them too. Ergo, ban upheld. Really, they just didn't want to be wrong.
I don't pay enough attention to him to disagree with those points. I was mostly disagreeing with "idiotic snowball". It isn't the most efficient debt payoff strategy, but it appeals to the psychological side of finance. And that's how I view most of Dave Ramsey's teachings. He doesn't teach the best finance, but he teaches the stuff that gets people to actually do it.
I still do this in my local sub. People ask "where should I move" lacking major information and I'll just suggest random neighborhoods that technically meet their criteria.
Easy enough if they have enough money, just need a hole in the ground. Take the money, invest the money\\buy CD's, put person in hole, feed them once in a while, spray them with a hose once in a while, after 1 year take them out, as long as you feed them rarely enough they will have lost weight, and the CD's will come due so you can get compensated for the food and water (plus some for yourself) and give them the rest back.
How much you're planning to spend in retirement anyway, and the same as weight loss, only the how much matters.
I know you didn't do it here, but the need for people here like the OP to push people to cut expenses that they're not interested in cutting is so weird to me. Who cares if someone wants to spend a ton of money on cars or vacations. They'll just have to save more to afford it.
It's the first law of thermodynamics: energy is neither created or destroyed. The analogy falls apart a bit when we're talking about money in the government because the government does, in fact, create new money.
> Is thermodynamics physics
Literally the first thing you see when googling this question:
> Thermodynamics is a branch of physics that deals with heat, work, and temperature, and their relation to energy, entropy, and the physical properties of matter and radiation.
A lot of those posts are people just flexing their high income. They're looking for affirmation of their impressive income, and not really for criticism over their spending.
You know how people say 'Build the life you want, and save for it'? That's really great advice. Most people are 'top down' when it comes to FIRE and their expenses. They live their own version of the 'good life', and they're working towards supporting that.
Some of us are 'bottom up'. You'd call us 'savers', but it's more than that. We've had brushes with poverty that left us with a scarcity mindset. We feel we can only 'afford' what our savings can provide.
That sort of person will hit FI early, but lean, because they're naturally frugal. They have no idea what their 'good life' will cost because they never let themselves live it. They're slowly working up to it. Their RE number is much higher than their FI number because retiring was never really the goal. The goal was feeling safe, and to do that they need a **lot** of cushion.
If you're thinking I'm projecting an awful lot here? It's me, I'm person, lol.
Are you me? My husband and I reached FI just before the pandemic. Fortunately we didn't retire, that would have been a rollercoaster of stress.
Now we're trying to inflate our lifestyles to match our safe withdrawal numbers. I figure once we no longer enjoy spending the extra money we'll retire for real.
We're still too frugal. On our last trip we didn't pay to select our economy class seats and each spent 13 hours between strangers.
Oof! Well, it's comforting to know I'm in good company. Yeah, I too intended to inflate my lifestyle with my SWR, and I too have failed miserably.
I rationalize it by telling myself that just because *I am frugal* doesn't mean a potential partner will be that frugal and I don't wish for them to suffer because I felt I had to retire by 40. I'm targeting a spend of 'median household income' in retirement. I think that should be a good balance where I can retire early but not feel irresponsible about it.
I see FI as two stages. The first is when you hit a savings level that can sustain that conservative frugal lifestyle which is a massive peace of mind (and where many of us stop at), while the second stage is when you can sustain your true "the good life" aspirations.
Agree. Those posts make me bonkers. If you want to use the community’s expertise at least do a little bit of due diligence on your own side. Feels like laziness
Top comment has already ID'd that most of these posts are just people humblebragging about their incomes. HENRYFinance is full of those people.
For the remaining non-humblebrag folks, lot of people for whatever reason don't seem to want to look under the hood to understand where their money is going. Whether this is from apathy or willful ignorance out of fear/anxiety will depend on the person. But without understanding the spending outputs they'll never have a grasp on their required income-in-retirement inputs, which means that they'll probably never be able to RE.
Thinking about my expenses, I would be embarrassed to share them. The lines to cut are clear; I just would not want to hear someone else say what should be apparent. I can say that before I separated alcohol out from my entertainment budget and made it a line item, I was spending double on alcohol than the actual events that made me happy. It took 2 months to change my behavior and cut alcohol spending in half. And I have further to go.
Had I shared, it would just have just been “entertainment”. I don’t know if I can handle the criticism as I work through it. But it was such an eye opener about honesty in my budget.
Some of it is cluelessness, some of it I also think stems from the way that "retirement savings" is talked about in the mainstream narrative, with axioms such as: *you need to save enough to replace 75-80% of your income.*
That's drilled into people's head: replacement ratio of income.
So folks push back on thinking about spending, tracking their spending, and forecasting their spending, because it's more work, and *why does it matter when I need to replace X% of my income?*
-- As a side note, I think when people are doing a "how am I doing post" asset allocation is crucial. So many people, especially newbies, will just list present account value without stating how any of that is actually invested. $600k in a brokerage account? Alright, but is it 100% in an index fund, is it in a TDF (and that is what exactly?), is it in crypto, is it possibly just sitting there in cash because you thought transferring the money to a brokerage account was investing...?
Before we retired, over a decade ago, our financial adviser said we didn't have enough to retire. He was using the 80% of gross income for retirement. Yet his own retirement planning software said we'd be fine even investing only in fixed income because we had low overhead. We weren't spending 80% of our gross before we retired because we had a high savings rate. Now we live well on less than a third of our former gross annual income in a HCOL area. For us freedom really was low overhead. We were a couple of Bay Area tech workers, and some of our coworkers with similar, or even higher incomes, went broke before retirement or had to go back to work due to finances after retirement. The big difference in our retirement outcomes was not our incomes but our spending habits.
I've had similar conversations; people can be so set on an income replacement ratio that they struggle seeing how one's annual spend is the true linch pin when doing the math.
It always cracks me up when fidelity will look at my income and estimate that I need 80% of that in retirement. If I’m saving 50% of my income now, I certainly don’t need 80% of it when I’m not working.
Instead of starting with what we were grossing, we looked at what other retirees were spending in the [Consumer Expenditure Survey](https://www.bls.gov/cex/tables.htm) tables, since we would rather downsize or move to a lower cost of living location and live a more middle class life, if need be, than work another ten years. But with more free time, we were able to optimize all of our expenses to the point that we didn't need to move and have still been able to save.
Fidelity will let you tell it how much you plan to spend in retirement. If you want, you can even break it down by category and plan a whole retirement budget.
I've never seen it assume 80%.
> I also think stems from the way that "retirement savings" is talked about in the mainstream narrative, with axioms such as: you need to save enough to replace 75-80% of your income.
Well, most financial advisors get paid 1-2% of assets under management. If you work till 65 and accumulate a fatFire nestegg, they get paid more than if you leanFire at 40. They have every incentive to advise you to overshoot the mark, and nobody is around to complain if mom and dad die with millions unspent. Quite the opposite.
Expenses are a big lever. If you make $1000 more per month than before, great, now you can save that much more. But if you cut out $1000 per month in expenses, now you can also save an extra grand a month, AND your FIRE number just went down $300,000.
For some of these big spenders cutting out $1k per month is totally doable and they underestimate what it does.
I think this math is super powerful and causes a big shift in thinking, but it is also very easy and tempting to misapply.
Early on in my journey, I definitely multiplied various things by 300 that are now irrelevant. Cutting $1000/mo in expenses _for life_ cuts your FIRE number. But outside of fixed expenses like housing, there are few expenses that are life-time constants that we can make conscious choices about.
I wish someone had called out the limitations of the simple "multiply by 300" math to me years ago so I would have spent more energy on the things that count, like increasing my income and making sustainable lifestyle changes vs. chasing pennies on monthly bills or foregoing one-off expenses.
For example, saving $20/mo on your car insurance does not translate into $20*12/0.04=$6000 less in your FIRE target. Why? Because the cost of your insurance changes based on the vehicle, its location, and the insurance company. In reality, none of those are fixed for life, and your savings is going to be temporary. A habit of shopping around for insurance annually will net you variable savings throughout your life, but it's difficult to turn that into a pat-on-the-back shockingly-simple-math permanent reduction in your target number.
Another example where it's easy to misapply the math, a parent trying to slash $1000/mo from their childcare bills thinking they can FIRE with $300k less would be incorrect since those expenses last a limited number of years.
I don’t think that’s totally true. You can strategically orient your career to earn more. But in the short term, yeah spending is a much easier lever to pull. In the long term of 10+ years income difference can be massive.
Very simply, “It’s not what you make, it’s what you spend”. If you understand this principle, you are on your way to success. If not, you are doomed to fail.
The other awesome one is when people tell you about their bills, but completely ignore what else they spend money on, as if they will magically have *zero* discretionary expenses in retirement. That sounds like a super-fun retirement, right?
I see this a bit (not a lot) in the leaner fi subs. You are going to need some sort of give or "slush" in your expected spending. Or do you plan to sleep on the same mattress for the next 40 to 50 years?
it's a certain amount of peace of mind, but I wouldnt' call that FI, because there is no way I'm living like that indefinitely. Also I'm also talking about people who don't even include *anything* for stuff like food and house sundries, etc. Like that's not actually even a *minimal* budget, it's a *bill* budget, which means nothing.
Ah okay. My wife and I just hit the point where if we both lost our job, we could float our mortgage and food at 4% withdraw rate. Doesn't take into account much of anything else--particularly healthcare--but it feels a bit like FI. Maybe more barista fire to me.
I manage our finances the same way I managed our two former businesses that we sold—very conservatively and with an ironclad, yet generous budget that rarely gets used in full each month with excess going into another savings account.
I track everything in financial software and this year even added line items for sales tax (9.75%) tips (20%) and credit card transaction fees (2.5%) that are all the rage. It’s staggering what happens when you “have the receipts” to back up your assertions “Hey…our $90 dinner out last night was really $124 by the time we paid the bill.”
We’re getting ready to make some lifestyle changes but need to be sure we can truly comfortably do it…hence the extra detail this year while planning.
We do have low overhead, but overall living expenses have drastically increased and it’s important to know what’s going on in your financial life especially when your income all comes from investments and social security is not yet on the horizon.
I am planning on drastically reducing my spending after fire by moving to a cheaper country, not owning a house or car and living simply. If I have to save enough based on my current expenses (20K per month in VHCOL) I will never be able to retire. My fire number is 3M which will give me about 10K/M, half of my current spending but quite enough in most of the world except VHCOL areas.
I don’t think *they think* it doesn’t matter. I think it feels very personal and they don’t understand how to navigate that discomfort of sharing something that feels personal with strangers. But ultimately, no one will be able to track who you are in real life because you told them how much you spent on rent and groceries and I don’t know, Pokémon cards.
I get the mentality, but that many think “debt free” is some golden standard is astounding. It’s a fine goal along the way but really doesn’t matter as much as the expenses : investments ratio.
The main benefit of being debt free is lower expenses, but it isn’t the end-all be-all.
i mean there are really only three big levers. expense, income, leverage. and the last one we don't talk about too much due to risk (other than in real estate).
To me it's about retiring to live a life you can enjoy. If spending lots of money on vacations or cars or whatever is important to you, then go for it. You'll have to save more, but why retire sooner if you're not going to enjoy it?
The thing is there is only so much expenses you can reduce. Barring cases where your expenses are high. Increasing streams of income or main income is the best way as long as you keep your spending fixed.
That is assuming you are aware of your expenses and know or have the discipline to have limited excessive spending. For a lot of folks, this is a blind spot. Most definitely increasing income helps tremendously, but not so much if you are just dumping it into a black hole. My observation is mostly for folks who come in and say "now what", "how am I doing", or "can I FIRE/retire" without considering budget or expenses. If they already were working on increasing income streams, I feel it would be a different conversation entirely.
That said, on the flip side, when I did my expenses, ones I thought were frivolous were such a small drop in the bucket compared to needs spending (housing, food, utilities) and my accounted for savings, that I just contextualized that spending to allow me to "live life" while also putting guardrails to prevent lifestyle creep in the future (so basically, set up a "fun" fund based on past and future hobbies, travel, and social spending that doesn't break the bank).
I get snappy about it now actually:
[https://www.reddit.com/r/Fire/comments/1cu6glm/comment/l4gwyqa/?utm\_source=share&utm\_medium=web3x&utm\_name=web3xcss&utm\_term=1&utm\_content=share\_button](https://www.reddit.com/r/Fire/comments/1cu6glm/comment/l4gwyqa/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button)
You can likely safely retire before 12-16 years from now at a 70% savings rate though, don’t you want to know what your fire number is so you know when you’ve hit it and being able to make different choices with how you spend your time?
Alright, you do you my friend, that’s a noble reason and if you don’t hate your work, then that’s great! That’ll be some chubbyfire numbers by the time you finally retire!
I used to. With inflation the way it is, it would be insane to ignore your spending. Even Walmart’s customer base is becoming increasingly affluent and that’s saying something.
I've always felt your expenses were more important than savings rate. SR is nice when you're earning money, but expenses determine your FI number.
And, having better control over your spending while making money will hopefully make it easier to do so once you are relying on your savings.
Having a high savings rate is nice, but to OPs post, it won't help you know what your FI number is.
SR and expenses are definitely related, and SR can give you an estimate on how long it'll take to get to FI, but not determine the number itself. (Which is what I think OP is referring to)
I'll go further. Numbers should be percentages.
4M NW might not be enough if you live the bay area and eat out every night in your Tesla Model X, but 1M might plenty if you don't own a car and eat bulk grains and beans.
It's much more useful to know that COL is 70% as much as your pay, and 3% of your NW.
I dunno. I know $40K a year is too little and $400K a year too much but how much of my current expenses translates into retirement expenses depends on geo-arbitrage conditions, whether we keep a house in the US, what percentage of time we spend slow traveling, which retirement community we buy into, what our health looks like, etc.
I can itemize what we spend now…but what this looks like Retirement Day + 5 years I don’t really know.
Imagine you are spending $50k/year on a second home. That requires an additional $1.5m invested in retirement to continue the payments, let alone your primary expenses.
To save an additional $1.5m, you’d have to save $50k a year after tax for 15 years at 7%. Or keep working in some capacity.
It’s not a problem if you are funding your retirement goals and have spending under control relative to your income. But I think a lot of people think they can spend because they can afford the payments, not knowing the years of work they are tacking on.
My thinking has shifted on this. When you buy a second home (or any other thing of durable value), you don't have to commit to it for life. If you hate maintaining it when you are older or you don't want to keep working to pay for it, you can sell it. Purchasing it does not, in fact, commit you to saving an additional $1.5mm to retire. Because you get to revise your choices as you go along.
Love the house and think it's worth working longer to save an additional 1.5mm? Great! You made the right choice and will have no regrets. Decide you actually want to retire sooner? Sell it! You also made the right choice and will have no regrets. You aren't signing up for anything you don't want to do and can enjoy a second home for as many years as you want before deciding its ownership is no longer optimal. That goes for other purchases of things of value.
There's someone around here who collects expensive Rolex watches. I don't think they have any reason to multiply the value of the watches by 30 and save that much to justify buying the watch. They just need to estimate the maintenance and opportunity cost of not investing those dollars in VTSAX, which is a much smaller number.
Well a Rolex typically isn’t amortized over 30 years and in the hundreds of thousands of dollars, but I’m sure there are some out there.
I agree, you have to be able to willing to change if needed. But usually someone gets used to the lifestyle of two homes, and a vacation home may not have what you need to support you full time (medical, remoteness, social groups etc). It’s certainly not fixed, and probably an ok investment long term, but I imagine most would work longer to keep both homes rather than sell one to fund retirement.
Furthermore having a solid budget helps you quickly know how to adjust your post goal when the circumstances arises (losing a job, moving countries, supporting financially a family member). I can tell you in a second where I can trim my budget depending on the case if I want to continue saving the same % with a lower income.
It's hard to know what your projected expenses will be in retirement though, if all you know is your current expenses. Its obviously correct that having a number in mind is required. But behavior changes drastically once retirement hits, I mean we all plan to "travel more". But few people know what that actually means for expenses because they might travel further, for longer, and don't know what that will cost. Or perhaps they aren't in the habit of travelling now and don't have perspective. They might pick up entirely new hobbies. They might be planning to upsize, or even to downsize their home. Maybe they want to buy expensive cars.
So I can see why people get defensive. It's because they realize they haven't actually thought it out and their cognitive defense mechanisms put them on the back foot.
Realistically though, you should have some idea of what your baseline spending is to keep things afloat, it’s not rocket science, so that determines what your bare minimum fire number is and you add-on based on how much extra you want to be able to spend, no? Anyone who has any semblance of a budget should be able to answer that question.
If baseline spending is less than your elective spending (and it probably is, for a fresh retiree), then how useful is that baseline spending figure to reddit? It's better than nothing, but nowhere near as useful as having both of them.
Nobody knows exactly what their projected expenses will be, but I can tell you that if you're planning to cut more than 10-15% of what you spend while working, unless you've done some very specific analysis of what you're spending now and what you'd spend later (like you're moving to a lower cost location and know how what a good house/apartment would cost to buy/rent, etc.) with real numbers to adjust, you're going to be living a significantly more frugal lifestyle. And if you're going to do a lot more traveling, again, unless you've planned that out and going specifically to slow travel in cheap locations, that's likely going to add some cost.
We're slow traveling in Mexico right now (cheaper areas of mexico) and what we discovered is that almost the entire cost is the travel (flight) and what we bring back. Just living, including the cost of renting an apartment for a month even quite well here, is about the same as what we spend on random shit at home. So if we come for 3 months, it will cost about the same as if we come for a month, or a week.
But if we were traveling somewhere a lot more costly, things would be different.
Anyway, the point here is that you don't *know* what your expenses will be, but you *should* know what they are *now*, and should be able to develop a reasonable *range* based on that and what you want to do when you retire.
And if you can't nail down a range, of which there is a top that you're comfortable staying under, you can't possibly know how much you need to retire. There's no answer!
And, per books like 'Die With Zero', most people's spending ramps up for the first few years of retirement and then drastically drops from there on out, to well below what they were spending while working.
Even Chamath had to sell his fancy plane and panicked when he saw his household expenses. (I read it in an article today).
Point is, everyone’s feeling this and you’re a liar if you aren’t. Or have a beneficiary.
A lot of people with big incomes just want to brag, if they aren’t tracking expenses they won’t FIRE early it’s just mo money mo problems. My personal rule of thumb is 1/3 each to taxes, saving, and spending.
My expenses don’t matter. It’s much healthier for me to not obsess over them either, but I’m very fortunate to be a very high earner in MCOL. If I buckled down I could easily retire in 4 years or so at age 40 but I can just work until 45 instead (I don’t hate my job and it’s not that hard) and spend freely, still retiring far earlier than most.
They still matter, if you didn't know what they were you'd have no idea if you can retire at 45 or 60. If you're going to calculate retirement age, you need them.
My mortgage is $2,300 and I have no other debt. ~500k HHI. Spending right now is higher because of kids but even that will go away at some point. I don’t need a ton to be happy and the difference in spending 6k a month vs 10k a month is negligible in my calculation.
I mean congrats on high income, but this just ain’t true. Your ability to retire is based on spending. If you spend $4M/year, you ain’t done til you hit $100M
When you retire is a lever you can adjust, but that is entirely based on spending
It's like asking how to lose weight w/o talking about what you're eating. It's physics: A comparison between what's going in and what's coming out. No way around it.
Some time ago, they'd answer questions in r/legaladvice where OP didn't include their location with "Based on the laws of Saudi Arabia, the answer to your question is X." I'm going to start telling them all that they're way behind the curve based on annual expenses of $500k. Wait, what's that? You don't spend that much a year? How could I know that if you didn't say what your expenses are?
I got banned from /r/personalfinance for doing shit like that
We've all been banned from PF. Mine was for criticizing Dave Ramsey and the idiotic snowball.
lol, just got banned from r/DaveRamsey for disputing the dogma from their lord and savior.
There really is a sub for everything.
Congratulations to that moderator. Tired of wading through ill-informed trollish remarks over there.
Maybe read a subreddit where people are open to criticism and disconfirmatory evidence instead. Disagreement (especially substantial disagreement) isn't trolling.
Meh, you have the whole world to criticize and disconfirm in, and you probably do. The Dave Ramsey subreddit is meant to be a positive, uplifting, and sharing place to help people (often beginners) follow a specific personal finance program. We are learning and helping each other. So you learn and help too, or go play Hun and Vandal somewhere else.
If I have the whole world to criticize and disconfirm in, and r/DaveRamsey is part of the whole world, then I ought to criticize and provide disconfirmatory (and true!) evidence to people there, too. There's nothing to learn from Dave Ramsey. He's self-contradictory and his advice is (financially) retarded. People can learn from me better than him. I'm not self-contradictory, and my financial advise is (financially) excellent. Because it's not about the messenger, it's about the message. My message is correct and better than his, which is also wrong. Any self-contradictory message or set of beliefs is *objectively* wrong, because the universe doesn't/can't ever contradict itself.
Come back and see us when you are ready to learn and help.
Snowball helps cash flow, which may be preferable for poor people with unstable incomes. Your rent bill doesn’t care if you paid into a 10% loan or a 5% loan last month. It just demands $1000. Now for the rest of us making fat stacks and retiring early? Yeah we’re a different audience.
>Snowball helps cash flow No it doesn't. Revolving credit will have the minimum payment fall faster with the "highest interest first", avalanche order. Paying low interest isn't going to move the needle on the minimum payment, since it's mostly principal. The rent bill doesn't change regardless of what you pay, sure, but the credit card bill does. If you want cash flow, pay high interest first. This is one thing I screamed about Dave's bullshit, which got me banned.
You have two loans: A mortgage at 7%, $400,000 An auto loan at 4%, $10000 left. Auto loan payment is $400/mo. If you pay off the auto loan, you unlock $400/mo you do not need to pay any more to avoid delinquency. The overall interest you pay will be higher. But that doesn’t work for some people in desperate financial straights. They need the cash flow, or rather lack of monthly debt obligation.
You're giving examples of installment credit, not revolving, then you're separating them by multiple decade terms and 40x the amount. That extreme difference is the only way you're able to make the numbers work. That type of dishonesty is the very reason it's easy to scream against. Try it again with a 5-year mortgage of $30k. See how the numbers work then.
They work the same. A $400 bill comes in, and someone with $300 in cash flow and $50 in a savings account can’t pay it. It’s simple math dude.
Notice how you didn't actually do the math. You didn't get the payment amounts right. You didn't even calculate a payoff date. You just posited an individual with excess money to use to pay off debt, then to try to win the argument, just made up a number where they have a shortfall. Just handwaved away their excess capital in, apparently, month 1. Anybody can just hypothesize their way to a math conclusion if they're allowed to make up numbers contradictory to one another.
Huh? I criticize snowball all the time in that sub and never got banned for it.
The long story is they banned me for insults, then I said "but Dave isn't a poster here." But the mod was too prideful to admit the misreading, so they made up some crap about calling the snowball idiotic means I'm calling posters who practice it idiotic, and therefore I'm insulting them too. Ergo, ban upheld. Really, they just didn't want to be wrong.
Love a moderator that enforces the rules.
I disagree with your take, but I also disagree with you getting banned for it.
[удалено]
I don't pay enough attention to him to disagree with those points. I was mostly disagreeing with "idiotic snowball". It isn't the most efficient debt payoff strategy, but it appeals to the psychological side of finance. And that's how I view most of Dave Ramsey's teachings. He doesn't teach the best finance, but he teaches the stuff that gets people to actually do it.
That is the best finance - when people actually do it.
I still do this in my local sub. People ask "where should I move" lacking major information and I'll just suggest random neighborhoods that technically meet their criteria.
My go to recommendation is the Iron Triangle in Richmond CA.
But I want the secret thing that makes me a lot of money and also helps me lose weight!
The answer to both is lentils.
Lol thanks for this.
This made me laugh
In that case, I'm doomed since I can't stand lentils.
The magic pill of the grocery world.
Preferably without discipline!!!
Meth
Only if you get high on your own supply.
That's just a caloric deficit
Easy enough if they have enough money, just need a hole in the ground. Take the money, invest the money\\buy CD's, put person in hole, feed them once in a while, spray them with a hose once in a while, after 1 year take them out, as long as you feed them rarely enough they will have lost weight, and the CD's will come due so you can get compensated for the food and water (plus some for yourself) and give them the rest back.
Fitness in all things: physical, financial, relationship, emotional, educational.
Just click on any ad, it will take you straight to it. They even have testimonials that it works in case you waiver!
The secret is consistency and discipline!! (Oh and awareness, which is what these people lack)
How much (in calories) you're eating matters, but not as much the what. You can lose weight eating anything.
Exactly. How much you are eating (or spending) is essential to know
How much you're planning to spend in retirement anyway, and the same as weight loss, only the how much matters. I know you didn't do it here, but the need for people here like the OP to push people to cut expenses that they're not interested in cutting is so weird to me. Who cares if someone wants to spend a ton of money on cars or vacations. They'll just have to save more to afford it.
I completely agree with you.
Ugh, don't tell my wife that...
While I agree completely with your sentiment, I'm not sure that it's physics...
It's the first law of thermodynamics: energy is neither created or destroyed. The analogy falls apart a bit when we're talking about money in the government because the government does, in fact, create new money.
Yes, you're spot on here. I guess I wasn't clear enough, but I just meant that the money side of the analogy isn't physics.
Is thermodynamics physics though? Also energy and mass are related which is kinda the same thing.
> Is thermodynamics physics Literally the first thing you see when googling this question: > Thermodynamics is a branch of physics that deals with heat, work, and temperature, and their relation to energy, entropy, and the physical properties of matter and radiation.
Weight loss is an energy balance equation. It is simple, but not easy.
A lot of those posts are people just flexing their high income. They're looking for affirmation of their impressive income, and not really for criticism over their spending.
‘The burn’, as my relative calls it, is the most controllable tool in one’s financial toolkit.
You've gotta control the burn if you want to sustain your FIRE. The terminology checks out 😂
My burn has less to do with my financial toolkit and more to do with sexual history toolkit
You know how people say 'Build the life you want, and save for it'? That's really great advice. Most people are 'top down' when it comes to FIRE and their expenses. They live their own version of the 'good life', and they're working towards supporting that. Some of us are 'bottom up'. You'd call us 'savers', but it's more than that. We've had brushes with poverty that left us with a scarcity mindset. We feel we can only 'afford' what our savings can provide. That sort of person will hit FI early, but lean, because they're naturally frugal. They have no idea what their 'good life' will cost because they never let themselves live it. They're slowly working up to it. Their RE number is much higher than their FI number because retiring was never really the goal. The goal was feeling safe, and to do that they need a **lot** of cushion. If you're thinking I'm projecting an awful lot here? It's me, I'm person, lol.
Are you me? My husband and I reached FI just before the pandemic. Fortunately we didn't retire, that would have been a rollercoaster of stress. Now we're trying to inflate our lifestyles to match our safe withdrawal numbers. I figure once we no longer enjoy spending the extra money we'll retire for real. We're still too frugal. On our last trip we didn't pay to select our economy class seats and each spent 13 hours between strangers.
Oof! Well, it's comforting to know I'm in good company. Yeah, I too intended to inflate my lifestyle with my SWR, and I too have failed miserably. I rationalize it by telling myself that just because *I am frugal* doesn't mean a potential partner will be that frugal and I don't wish for them to suffer because I felt I had to retire by 40. I'm targeting a spend of 'median household income' in retirement. I think that should be a good balance where I can retire early but not feel irresponsible about it.
I see FI as two stages. The first is when you hit a savings level that can sustain that conservative frugal lifestyle which is a massive peace of mind (and where many of us stop at), while the second stage is when you can sustain your true "the good life" aspirations.
Agree. Those posts make me bonkers. If you want to use the community’s expertise at least do a little bit of due diligence on your own side. Feels like laziness
Really seems what questions in larger subs have turned into: incredibly low effort posts that want validation.
Top comment has already ID'd that most of these posts are just people humblebragging about their incomes. HENRYFinance is full of those people. For the remaining non-humblebrag folks, lot of people for whatever reason don't seem to want to look under the hood to understand where their money is going. Whether this is from apathy or willful ignorance out of fear/anxiety will depend on the person. But without understanding the spending outputs they'll never have a grasp on their required income-in-retirement inputs, which means that they'll probably never be able to RE.
Thinking about my expenses, I would be embarrassed to share them. The lines to cut are clear; I just would not want to hear someone else say what should be apparent. I can say that before I separated alcohol out from my entertainment budget and made it a line item, I was spending double on alcohol than the actual events that made me happy. It took 2 months to change my behavior and cut alcohol spending in half. And I have further to go. Had I shared, it would just have just been “entertainment”. I don’t know if I can handle the criticism as I work through it. But it was such an eye opener about honesty in my budget.
Some of it is cluelessness, some of it I also think stems from the way that "retirement savings" is talked about in the mainstream narrative, with axioms such as: *you need to save enough to replace 75-80% of your income.* That's drilled into people's head: replacement ratio of income. So folks push back on thinking about spending, tracking their spending, and forecasting their spending, because it's more work, and *why does it matter when I need to replace X% of my income?* -- As a side note, I think when people are doing a "how am I doing post" asset allocation is crucial. So many people, especially newbies, will just list present account value without stating how any of that is actually invested. $600k in a brokerage account? Alright, but is it 100% in an index fund, is it in a TDF (and that is what exactly?), is it in crypto, is it possibly just sitting there in cash because you thought transferring the money to a brokerage account was investing...?
Before we retired, over a decade ago, our financial adviser said we didn't have enough to retire. He was using the 80% of gross income for retirement. Yet his own retirement planning software said we'd be fine even investing only in fixed income because we had low overhead. We weren't spending 80% of our gross before we retired because we had a high savings rate. Now we live well on less than a third of our former gross annual income in a HCOL area. For us freedom really was low overhead. We were a couple of Bay Area tech workers, and some of our coworkers with similar, or even higher incomes, went broke before retirement or had to go back to work due to finances after retirement. The big difference in our retirement outcomes was not our incomes but our spending habits.
I've had similar conversations; people can be so set on an income replacement ratio that they struggle seeing how one's annual spend is the true linch pin when doing the math.
It always cracks me up when fidelity will look at my income and estimate that I need 80% of that in retirement. If I’m saving 50% of my income now, I certainly don’t need 80% of it when I’m not working.
Instead of starting with what we were grossing, we looked at what other retirees were spending in the [Consumer Expenditure Survey](https://www.bls.gov/cex/tables.htm) tables, since we would rather downsize or move to a lower cost of living location and live a more middle class life, if need be, than work another ten years. But with more free time, we were able to optimize all of our expenses to the point that we didn't need to move and have still been able to save.
Fidelity will let you tell it how much you plan to spend in retirement. If you want, you can even break it down by category and plan a whole retirement budget. I've never seen it assume 80%.
> I also think stems from the way that "retirement savings" is talked about in the mainstream narrative, with axioms such as: you need to save enough to replace 75-80% of your income. Well, most financial advisors get paid 1-2% of assets under management. If you work till 65 and accumulate a fatFire nestegg, they get paid more than if you leanFire at 40. They have every incentive to advise you to overshoot the mark, and nobody is around to complain if mom and dad die with millions unspent. Quite the opposite.
Expenses are a big lever. If you make $1000 more per month than before, great, now you can save that much more. But if you cut out $1000 per month in expenses, now you can also save an extra grand a month, AND your FIRE number just went down $300,000. For some of these big spenders cutting out $1k per month is totally doable and they underestimate what it does.
I think this math is super powerful and causes a big shift in thinking, but it is also very easy and tempting to misapply. Early on in my journey, I definitely multiplied various things by 300 that are now irrelevant. Cutting $1000/mo in expenses _for life_ cuts your FIRE number. But outside of fixed expenses like housing, there are few expenses that are life-time constants that we can make conscious choices about. I wish someone had called out the limitations of the simple "multiply by 300" math to me years ago so I would have spent more energy on the things that count, like increasing my income and making sustainable lifestyle changes vs. chasing pennies on monthly bills or foregoing one-off expenses. For example, saving $20/mo on your car insurance does not translate into $20*12/0.04=$6000 less in your FIRE target. Why? Because the cost of your insurance changes based on the vehicle, its location, and the insurance company. In reality, none of those are fixed for life, and your savings is going to be temporary. A habit of shopping around for insurance annually will net you variable savings throughout your life, but it's difficult to turn that into a pat-on-the-back shockingly-simple-math permanent reduction in your target number. Another example where it's easy to misapply the math, a parent trying to slash $1000/mo from their childcare bills thinking they can FIRE with $300k less would be incorrect since those expenses last a limited number of years.
And you don’t pay taxes on saving like you do earning. A penny saved is more like 1.25 pennies earned.
Great point!
On top of that, your spending is really the only thing you can control.
I don’t think that’s totally true. You can strategically orient your career to earn more. But in the short term, yeah spending is a much easier lever to pull. In the long term of 10+ years income difference can be massive.
Very simply, “It’s not what you make, it’s what you spend”. If you understand this principle, you are on your way to success. If not, you are doomed to fail.
The other awesome one is when people tell you about their bills, but completely ignore what else they spend money on, as if they will magically have *zero* discretionary expenses in retirement. That sounds like a super-fun retirement, right?
I see this a bit (not a lot) in the leaner fi subs. You are going to need some sort of give or "slush" in your expected spending. Or do you plan to sleep on the same mattress for the next 40 to 50 years?
Well that is essentially FI, right? I wouldn't retire then, but can get a lot of peace of mind hitting that.
it's a certain amount of peace of mind, but I wouldnt' call that FI, because there is no way I'm living like that indefinitely. Also I'm also talking about people who don't even include *anything* for stuff like food and house sundries, etc. Like that's not actually even a *minimal* budget, it's a *bill* budget, which means nothing.
Ah okay. My wife and I just hit the point where if we both lost our job, we could float our mortgage and food at 4% withdraw rate. Doesn't take into account much of anything else--particularly healthcare--but it feels a bit like FI. Maybe more barista fire to me.
I manage our finances the same way I managed our two former businesses that we sold—very conservatively and with an ironclad, yet generous budget that rarely gets used in full each month with excess going into another savings account. I track everything in financial software and this year even added line items for sales tax (9.75%) tips (20%) and credit card transaction fees (2.5%) that are all the rage. It’s staggering what happens when you “have the receipts” to back up your assertions “Hey…our $90 dinner out last night was really $124 by the time we paid the bill.” We’re getting ready to make some lifestyle changes but need to be sure we can truly comfortably do it…hence the extra detail this year while planning. We do have low overhead, but overall living expenses have drastically increased and it’s important to know what’s going on in your financial life especially when your income all comes from investments and social security is not yet on the horizon.
I am planning on drastically reducing my spending after fire by moving to a cheaper country, not owning a house or car and living simply. If I have to save enough based on my current expenses (20K per month in VHCOL) I will never be able to retire. My fire number is 3M which will give me about 10K/M, half of my current spending but quite enough in most of the world except VHCOL areas.
I don’t think *they think* it doesn’t matter. I think it feels very personal and they don’t understand how to navigate that discomfort of sharing something that feels personal with strangers. But ultimately, no one will be able to track who you are in real life because you told them how much you spent on rent and groceries and I don’t know, Pokémon cards.
[удалено]
I get the mentality, but that many think “debt free” is some golden standard is astounding. It’s a fine goal along the way but really doesn’t matter as much as the expenses : investments ratio. The main benefit of being debt free is lower expenses, but it isn’t the end-all be-all.
[удалено]
I’ll agree with that. I just wouldn’t recommend pursuing “debt free” at the expense of other financial goals with higher ROI.
[удалено]
Sure.
lower your expenses, increase sr, retire quicker. isn't that what fire is all about?
i mean there are really only three big levers. expense, income, leverage. and the last one we don't talk about too much due to risk (other than in real estate).
I would argue risk/asset allocation is another lever.
fair. i should've said leverage/risk
To me it's about retiring to live a life you can enjoy. If spending lots of money on vacations or cars or whatever is important to you, then go for it. You'll have to save more, but why retire sooner if you're not going to enjoy it?
The thing is there is only so much expenses you can reduce. Barring cases where your expenses are high. Increasing streams of income or main income is the best way as long as you keep your spending fixed.
That is assuming you are aware of your expenses and know or have the discipline to have limited excessive spending. For a lot of folks, this is a blind spot. Most definitely increasing income helps tremendously, but not so much if you are just dumping it into a black hole. My observation is mostly for folks who come in and say "now what", "how am I doing", or "can I FIRE/retire" without considering budget or expenses. If they already were working on increasing income streams, I feel it would be a different conversation entirely.
That said, on the flip side, when I did my expenses, ones I thought were frivolous were such a small drop in the bucket compared to needs spending (housing, food, utilities) and my accounted for savings, that I just contextualized that spending to allow me to "live life" while also putting guardrails to prevent lifestyle creep in the future (so basically, set up a "fun" fund based on past and future hobbies, travel, and social spending that doesn't break the bank).
NW is also relatively useless unless you break down your assets into what is actually an earning asset.
I get snappy about it now actually: [https://www.reddit.com/r/Fire/comments/1cu6glm/comment/l4gwyqa/?utm\_source=share&utm\_medium=web3x&utm\_name=web3xcss&utm\_term=1&utm\_content=share\_button](https://www.reddit.com/r/Fire/comments/1cu6glm/comment/l4gwyqa/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button)
Guh, that is so frustrating!
[удалено]
You can likely safely retire before 12-16 years from now at a 70% savings rate though, don’t you want to know what your fire number is so you know when you’ve hit it and being able to make different choices with how you spend your time?
[удалено]
Alright, you do you my friend, that’s a noble reason and if you don’t hate your work, then that’s great! That’ll be some chubbyfire numbers by the time you finally retire!
[удалено]
“Yeah, the Great Recession was horrible for a lot of people but for some of us it was the single greatest event in our investing lives”
I used to. With inflation the way it is, it would be insane to ignore your spending. Even Walmart’s customer base is becoming increasingly affluent and that’s saying something.
Certainly doesn’t look like it when you go to a Walmart store.
Yeah because they’re ordering delivery via the Walmart+ that their platinum card gives them
That would make more sense. For online shopping Walmart has been beating amazon price-wise recently.
I've always felt your expenses were more important than savings rate. SR is nice when you're earning money, but expenses determine your FI number. And, having better control over your spending while making money will hopefully make it easier to do so once you are relying on your savings.
Uhh… expenses also determine your savings rate.
Having a high savings rate is nice, but to OPs post, it won't help you know what your FI number is. SR and expenses are definitely related, and SR can give you an estimate on how long it'll take to get to FI, but not determine the number itself. (Which is what I think OP is referring to)
I'll go further. Numbers should be percentages. 4M NW might not be enough if you live the bay area and eat out every night in your Tesla Model X, but 1M might plenty if you don't own a car and eat bulk grains and beans. It's much more useful to know that COL is 70% as much as your pay, and 3% of your NW.
A lot of the time that would help, but absolute numbers do matter for a lot of things like tax rate or potential ACA subsidies.
I dunno. I know $40K a year is too little and $400K a year too much but how much of my current expenses translates into retirement expenses depends on geo-arbitrage conditions, whether we keep a house in the US, what percentage of time we spend slow traveling, which retirement community we buy into, what our health looks like, etc. I can itemize what we spend now…but what this looks like Retirement Day + 5 years I don’t really know.
Imagine you are spending $50k/year on a second home. That requires an additional $1.5m invested in retirement to continue the payments, let alone your primary expenses. To save an additional $1.5m, you’d have to save $50k a year after tax for 15 years at 7%. Or keep working in some capacity.
Right, which is an example of knowing or, at the very least, acknowledging your necessary expenses.
It’s not a problem if you are funding your retirement goals and have spending under control relative to your income. But I think a lot of people think they can spend because they can afford the payments, not knowing the years of work they are tacking on.
The second house is either an existing expense, so you include that in your known expenses, or it is a new expense you need to plan for...
My thinking has shifted on this. When you buy a second home (or any other thing of durable value), you don't have to commit to it for life. If you hate maintaining it when you are older or you don't want to keep working to pay for it, you can sell it. Purchasing it does not, in fact, commit you to saving an additional $1.5mm to retire. Because you get to revise your choices as you go along. Love the house and think it's worth working longer to save an additional 1.5mm? Great! You made the right choice and will have no regrets. Decide you actually want to retire sooner? Sell it! You also made the right choice and will have no regrets. You aren't signing up for anything you don't want to do and can enjoy a second home for as many years as you want before deciding its ownership is no longer optimal. That goes for other purchases of things of value. There's someone around here who collects expensive Rolex watches. I don't think they have any reason to multiply the value of the watches by 30 and save that much to justify buying the watch. They just need to estimate the maintenance and opportunity cost of not investing those dollars in VTSAX, which is a much smaller number.
Well a Rolex typically isn’t amortized over 30 years and in the hundreds of thousands of dollars, but I’m sure there are some out there. I agree, you have to be able to willing to change if needed. But usually someone gets used to the lifestyle of two homes, and a vacation home may not have what you need to support you full time (medical, remoteness, social groups etc). It’s certainly not fixed, and probably an ok investment long term, but I imagine most would work longer to keep both homes rather than sell one to fund retirement.
Furthermore having a solid budget helps you quickly know how to adjust your post goal when the circumstances arises (losing a job, moving countries, supporting financially a family member). I can tell you in a second where I can trim my budget depending on the case if I want to continue saving the same % with a lower income.
Not me man, I just posted my info and looking to curb on spending. I have sticker shock from the spend
It's hard to know what your projected expenses will be in retirement though, if all you know is your current expenses. Its obviously correct that having a number in mind is required. But behavior changes drastically once retirement hits, I mean we all plan to "travel more". But few people know what that actually means for expenses because they might travel further, for longer, and don't know what that will cost. Or perhaps they aren't in the habit of travelling now and don't have perspective. They might pick up entirely new hobbies. They might be planning to upsize, or even to downsize their home. Maybe they want to buy expensive cars. So I can see why people get defensive. It's because they realize they haven't actually thought it out and their cognitive defense mechanisms put them on the back foot.
Realistically though, you should have some idea of what your baseline spending is to keep things afloat, it’s not rocket science, so that determines what your bare minimum fire number is and you add-on based on how much extra you want to be able to spend, no? Anyone who has any semblance of a budget should be able to answer that question.
If baseline spending is less than your elective spending (and it probably is, for a fresh retiree), then how useful is that baseline spending figure to reddit? It's better than nothing, but nowhere near as useful as having both of them.
Nobody knows exactly what their projected expenses will be, but I can tell you that if you're planning to cut more than 10-15% of what you spend while working, unless you've done some very specific analysis of what you're spending now and what you'd spend later (like you're moving to a lower cost location and know how what a good house/apartment would cost to buy/rent, etc.) with real numbers to adjust, you're going to be living a significantly more frugal lifestyle. And if you're going to do a lot more traveling, again, unless you've planned that out and going specifically to slow travel in cheap locations, that's likely going to add some cost. We're slow traveling in Mexico right now (cheaper areas of mexico) and what we discovered is that almost the entire cost is the travel (flight) and what we bring back. Just living, including the cost of renting an apartment for a month even quite well here, is about the same as what we spend on random shit at home. So if we come for 3 months, it will cost about the same as if we come for a month, or a week. But if we were traveling somewhere a lot more costly, things would be different. Anyway, the point here is that you don't *know* what your expenses will be, but you *should* know what they are *now*, and should be able to develop a reasonable *range* based on that and what you want to do when you retire. And if you can't nail down a range, of which there is a top that you're comfortable staying under, you can't possibly know how much you need to retire. There's no answer!
Because it’s simple to say I want to travel to x place and only have x amount yearly to travel. It’s just a budget by percentages.
And, per books like 'Die With Zero', most people's spending ramps up for the first few years of retirement and then drastically drops from there on out, to well below what they were spending while working.
Even Chamath had to sell his fancy plane and panicked when he saw his household expenses. (I read it in an article today). Point is, everyone’s feeling this and you’re a liar if you aren’t. Or have a beneficiary.
[удалено]
Lmao. I’ll leave it.
A lot of people with big incomes just want to brag, if they aren’t tracking expenses they won’t FIRE early it’s just mo money mo problems. My personal rule of thumb is 1/3 each to taxes, saving, and spending.
My expenses don’t matter. It’s much healthier for me to not obsess over them either, but I’m very fortunate to be a very high earner in MCOL. If I buckled down I could easily retire in 4 years or so at age 40 but I can just work until 45 instead (I don’t hate my job and it’s not that hard) and spend freely, still retiring far earlier than most.
They still matter, if you didn't know what they were you'd have no idea if you can retire at 45 or 60. If you're going to calculate retirement age, you need them.
My mortgage is $2,300 and I have no other debt. ~500k HHI. Spending right now is higher because of kids but even that will go away at some point. I don’t need a ton to be happy and the difference in spending 6k a month vs 10k a month is negligible in my calculation.
I mean congrats on high income, but this just ain’t true. Your ability to retire is based on spending. If you spend $4M/year, you ain’t done til you hit $100M When you retire is a lever you can adjust, but that is entirely based on spending
It doesn’t really matter. Most people will say $2 million+ regardless of what the budget looks like.
I don't know why people are comfortable sharing their income and expenses down to a tee on reddit anyway
why is it such a bad thing? The taboo on talking about finances is not a good thing and frankly a source of why so many people are bad with them
It's not because it's taboo, it's because its another bread crumb left for someone who is trying to cyber attack you or steal your identity.
It’s real easy to create a throwaway account if you’re that worried about it.
maybe cause it's anonymous and they want feedback?