How do you set your saving goals and find a balance?

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BuckyBadger
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How do you set your saving goals and find a balance?

Post by BuckyBadger »

As my investing plan falls into place and be comes automatic, I find myself in a strange position. I'm not sure how to set goals for myself.

For 2012 we saved in investment accounts about $70k (maxed 2 401ks plus company matches, maxed 2 backdoor Roths, maxed an HSA account earmarked for retirement, and made a lump sum deposit into a taxable account). For 2013 I have a new job with a very generous company match, so without a ton of extra effort we'll be putting away $80k, all on autopilot except for the taxable chunk and the Roth chunks, which are already done for 2013. (At age 32 and 33 we are just cracked $300k in savings, and we are debt free except for a reasonable mortgage.)

We have an emergency fund and a house so we have no more big-picture things for which to save. No kids. We have a new car fund funded with the car payment we are no longer making. I am rounding up my mortgage payment, but have no desire to pre pay any more aggressively with my current rate. We have short term savings for things like big purchases and big vacations that we might take. This is funded with a biweekly automatic deposit from our checking account.

So everything is on autopilot, except for the fact that I kind of arbitrarily picked the $80k number out of the air. We could save more if we scrimped, but right now we live quite well, enjoy our free time, and have lots of cushion for emergencies, so I think we're happy with where we are.

Also, I know I need to increase our savings every year, so I've (again, arbitrarily) picked 3% as the amount by which our retirement savings contributions should increase every year. It seems like with this savings rate we should be on track to retire at about 55 years old with a nice chunk of (hopefully) health life ahead of us. Could we kill ourselves now to retire at 50 instead of 55? Maybe. But I don't think it's worth it -- we enjoy life now, and who knows what might happen to us before we turn 50. It would be a shame to not be able to enjoy the fruits of any herculean effort that we might do in our 30's and 40's.

So my questions are these:

1) Does my "$80k now, increase by 3% a year going forward" plan seem reasonable?

2) How do YOU guys set your goals, if you don't have any "obvious" goals?

3) How do you find a balance between enjoying your life right now, and saving for an enjoyable future?
The Wizard
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Re: How do you set your saving goals and find a balance?

Post by The Wizard »

I did something similar, back when I was in the accumulation phase.
I increased my "supplemental" tax-sheltered amount by 1% or 2% (of gross salary) per year until it maxed out.
I figured that saving/investing 20%+ of gross income over the years would be adequate and it was.
Last few years of employment, it got to be over 30%.

So yes, once your finances are on cruise-control, I'd focus more on healthy recreational pursuits, defining your lifestyle and preparing for early retirement, if that makes sense...
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hlfo718
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Re: How do you set your saving goals and find a balance?

Post by hlfo718 »

When I was 33 I had no plans and was just dumping money into 401k, IRA when in the mood, and some outside investments. I was fortunate that my investments went up by pure luck and accumulated a decent size net worth. But 2008 hit and lost my job but again was lucky to find another one within a month. But ever since then something has changed inside my head. I no longer feel "secure" working for large or small firms. But I still had no action plan.

But that changed in 2010 when I somehow found this forum. Ever since then my wife and I track our expenses in detail and set a goal to retire early, or at least have the financial backing to do so if we want to. So we determined to save at least 30-40% of our net pay, not including any bonus and 401k contribution. We have a 15 year plan to achieve a certain net worth. So far after two years, we have hit the savings goal and are very optimistic of hitting the :moneybag in 13 more years.

I think you should sit down with your other half and decide what you really want over the next 20 years. Once you have your goal then you can decide if 80k +3% is sufficient.
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bertilak
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Re: How do you set your saving goals and find a balance?

Post by bertilak »

You could get really quantitative about it. Do the following in current, nominal, dollars. Factor in inflation at the end:
  • Determine how much income you need to retire in the manner you would like to live.
  • Determine how big your nest egg needs to be to provide that income. I think it is OK to use the 4% SWR rule as a reasonable estimate.
  • Perhaps increase the goal for the nest egg to provide a legacy -- if not for kids then maybe for favorite charities.
  • Given how much you have saved now, figure out how much per year you need to save to reach that goal. You will need to use a spreadsheet or financial calculator to figure out the savings rate needed to reach that goal given some assumed rate of return on investments. That means you need to make that assumption.
  • Finally, factor in inflation -- that would give you the amount you need to increase your calculated savings rate each year.
  • Periodically re-check your situation and adjust as needed.
When you get near retirement, start looking into decumulation strategies. For example, decide how much of the expected income you want to lock in (guarantee) by annuitizing it and how you will keep up with inflation as you spend money in retirement.
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momar
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Re: How do you set your saving goals and find a balance?

Post by momar »

Target a percentage of either your gross or your spending, not an absolute amount. That's the more relevant number and it will automatically adjust for changing circumstances.
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MnD
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Re: How do you set your saving goals and find a balance?

Post by MnD »

We first set our big goals - home ownership, kids, retirement mid-50's when the kids would be out of college, all undergrad college costs paid for by us and zero debt for us by retirement time and zero debt for kids upon college graduation. I couldn't really see us "retiring" earlier than that when we had teenagers at home or with the kids in college with big college bills and them home for summers etc.

Next I figured out how much income we wanted for the type of retirement we wanted and from that it was pretty straightforward to set a savings amount rate including our various forms of savings, match, stock grants, etc. Also set a plan to ensure the mortgage was paid off by retirement. With current income minus savings we enjoy life to the fullest with what that net after-savings income brings us - travel, home improvement, dining out, pretty much whatever we want _within_ the constraints of that "available" income.

It seems that some people get obsessed with saving more and more without clear goals or life balance.
For example it's not necessary for us to do back-door Roth's or HSA's to meet our goals so we don't. This means we aren't maxing out our tax preference space - BFD.
Could we scrimp and save and do without and save a lot more? Sure but no thanks - I'll take two weeks on the beach next month over that.
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investingdad
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Re: How do you set your saving goals and find a balance?

Post by investingdad »

We're turning 40 this year and are doing what you're doing:

- maxing 401Ks
- maxing IRAs
- taking company matches
- investing some additional funds into taxable accounts

We're running just a little less per year than you are in total dollars, about 60K. I'd estimate our retirement accounts are being fattened up by ~30% of our gross salary when the company matches are included.

Working off of memory, 300K at age 33 is also about where we were. If you follow our arc, you should break through the 7 figure barrier by age 38 or so based on your savings rate.

We're doing this with no real hardship as our salaries are good enough at this point where we don't have to fret where the money will come from. For me, this IS the balance. We've been doing this for almost 20 years now and are riding the wave of an early start. So I have a comfort level with this approach. Our savings should go up in the fall as our second child starts first grade and full time daycare costs go away, our intent is to split the savings 3 ways (additional mortgage paydown, 529s, taxable investments for retirement).

We could cut to the bone and probably be able to retire 5 to 7 years younger, but I don't think I want to trade the vacations to Disney World each year with our kids while they're little and lose those fond memories just so I can leave my job a little sooner. Balance.
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Re: How do you set your saving goals and find a balance?

Post by letsgobobby »

I'm going to be completely open, honest, and self-disclosing.

Goal #1: to have $10,000,000. No particular reason, it just looks like a nice round number. It doesn't account for inflation. It's just a number. But I want it. Either on my net worth balance sheet, or in my investible accounts.

Goal #2: to have 40x annual spending in investible assets. I'll have a 2.5% SWR. I'll feel bulletproof then.

Goal #3: to comfortably afford paying out of pocket for 4 international business class seats each year (2 trips, 2 adults). In other words that ~$20,000 cost needs to feel like 'an affordable luxury' and not a 'unjustifiable splurge.'

Goal #4: to be richer than my parents.

Goal #5: to have $1,000,000 in 529 accounts.

I am nowhere near any of these goals yet. That's what keeps me going.
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Re: How do you set your saving goals and find a balance?

Post by Grt2bOutdoors »

I pick a realistic retirement number based on current spending patterns adjusted for some inflation. Haven't reached it yet, therefore I need to save/earn more. I have a figure in mind for my child's 529 plan - haven't realized that yet, either. The balance is being able to accomplish savings goals with being able to enjoy my life. For some, enjoyment comes in the form of taking an annual 3 week vacation to Tahiti, for others it's a week trip lakeside in the mountains away from the rat race, and yet for others it's staying home, cracking open a nice cold bottle of beer, the game is on, the phone is off, the watch is no where to be found and oh, yes, the kids are out playing with their friends. This year, I am foregoing my vacation, instead I will be upgrading my home - something I've planned for over the last 5 years (yes, that 5 years - Rome was not built in a day, and apparently neither was my home :wink:) No one size fits all.

At your age, you guys are doing great, so I wouldn't worry too much about not being able to enjoy your life. 80K is a tremendous amount of savings, I was nowhere near that at your age - for the exception of this forum, the amount of folks socking that kind of cash away is extremely uncommon. I've posted this once before, but please do not become like some of my relatives who scrimped,saved, denied themselves basic creature comforts with the hopes of retiring early only to have some very unfortunate health situation arise that ended all that and made their heirs very well-off. You can do both.
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BuckyBadger
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Re: How do you set your saving goals and find a balance?

Post by BuckyBadger »

We are very fortunate to be where we are right now. Both our families were able to send us to college debt free, and we then put ourselves through grad school as research assistants. But grad school did mean that he didn't start earning a real salary until he was 27 and I didn't until I was 29. As soon as we had the salary to support it we started saving about 30% of it. But my husband still frets that we got started late. I tell him that we've more than caught up to other people our age, but he still worries.
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Re: How do you set your saving goals and find a balance?

Post by stoptothink »

letsgobobby wrote:Goal #5: to have $1,000,000 in 529 accounts.
Do you have 10 kids?
Grt2bOutdoors
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Re: How do you set your saving goals and find a balance?

Post by Grt2bOutdoors »

BuckyBadger wrote:We are very fortunate to be where we are right now. Both our families were able to send us to college debt free, and we then put ourselves through grad school as research assistants. But grad school did mean that he didn't start earning a real salary until he was 27 and I didn't until I was 29. As soon as we had the salary to support it we started saving about 30% of it. But my husband still frets that we got started late. I tell him that we've more than caught up to other people our age, but he still worries.
Put me in your husband's camp - some folks are born worriers plus being on this forum can make one feel inadequate at times. On the other hand, this company of folks makes one want to aspire to higher levels, though $50MM in assets as some have acclaimed is not in my game plan. You asked about finding balance - my wife is my counter-balance and the main reason I am upgrading the home. :wink:
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Grt2bOutdoors
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Re: How do you set your saving goals and find a balance?

Post by Grt2bOutdoors »

stoptothink wrote:
letsgobobby wrote:Goal #5: to have $1,000,000 in 529 accounts.
Do you have 10 kids?
College costs more than $100K for 4 years these days. If you haven't read some of his prior posts, he expects his children to attend Ivy league undergrad and grad schools. By the time they are ready for college, given today's education inflation rates, he will need every penny of that money to pay for it.
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letsgobobby
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Re: How do you set your saving goals and find a balance?

Post by letsgobobby »

thanks grt2b - not 'expect' but 'hope' and 'would be happy to support' them attending the best schools that meet their needs. Also prepared to support if they are not Ivy material or simply not a good fit and a state school or smaller liberal arts school is more appropriate. I think the going rate for 4 years at a private school is currently about $270,000, and my kids are young, and those $1,000,000 are in nominal not real dollars - so you are right that I think we would need every penny of it!
investingdad
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Re: How do you set your saving goals and find a balance?

Post by investingdad »

Ivy League is all fine and good stuff.

I'd point out that my wife and I are State U grads and, well, you can read my post above about how things are going with our retirement savings.

Just a data point.
bigred77
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Re: How do you set your saving goals and find a balance?

Post by bigred77 »

Do your best to just limit your savings for the next 7 years to 80k/yr until you reach 40.

If able, bumb it up to 100k/yr. Hold constant until you reach 50.

If able, bumb it up to 120k/yr. Hold constant until you reach 60 or retire.

ENJOY the rest of your money and congrats on your success. If something happens where you are unbale to reach these savings goals in a given year... DO... NOT... WORRY... ABOUT... IT! If something changes and you have a significant life change, drop in income, or permanent rise in expenses, then re-evaluate. If we start seeing year in and year out 5,6,7% inflation then re-evaluate.

I wish you luck as your heading down the road to the exclusive 8 figure club if everything continues for you.
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Skinut
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Re: How do you set your saving goals and find a balance?

Post by Skinut »

This is a good thread, thanks BuckyBadger for starting it.

In similar camp to some, but well behind others :shock: , we maximize our tax deferred accounts (401k, Roth IRA, HSA - no ibonds yet), anything above that is for living. DW wants to upgrade current house and someday buy a bigger one, so that's where the majority of the "extra" goes each month.

I like the points around finding balance, I am one who would probably save/scrimp and forego many of lifes pleasures, I'm glad I have DW to help remind me we need to spend a little from time to time.

There was a recent thread on delayed gratification (teaching your kids I think), this goes a long way in balancing the save vs. spend issue many confront. I've found there are many cases where I need want something, but I wait to pull the trigger, then, a year or two down the road I decide to make the purchase, at this point I have a higher income and more saved, thus it takes less of my "extra" income to buy. This might be mental accounting to some extent, but, it usually allows me to keep my relatively high rate of savings while still enjoying life. :beer
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Re: How do you set your saving goals and find a balance?

Post by ruralavalon »

momar wrote:Target a percentage of either your gross or your spending, not an absolute amount. That's the more relevant number and it will automatically adjust for changing circumstances.
Best overall procedure in my view, esp. setting a percent of income.
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Bacchus01
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Re: How do you set your saving goals and find a balance?

Post by Bacchus01 »

I'm probably in the "oversave" category in that we invest about 60% of my net pay each year. I'd really like to "live" a bit more with the money, but we haven't really decided what we want to do with it in the meantime.
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Re: How do you set your saving goals and find a balance?

Post by bowest »

I aspire to #3 as well. Do you do much other travel? You could actually probably do a few domestic trips/mileage runs and even outright purchases of elite qualifying miles (EQMs) to get to 100,000 miles and 1K Status on United for a lot less than $20k. You'll get six confirmable international upgrades at 1K status (or platinum-plus equivalent on most airlines) plus a very high percentage of free upgrades on domestic trips.

Hopefully, the knowledge that you're able to pay out of pocket is enough.
letsgobobby wrote:I'm going to be completely open, honest, and self-disclosing.

Goal #3: to comfortably afford paying out of pocket for 4 international business class seats each year (2 trips, 2 adults). In other words that ~$20,000 cost needs to feel like 'an affordable luxury' and not a 'unjustifiable splurge.'
.
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Re: How do you set your saving goals and find a balance?

Post by letsgobobby »

bowest wrote:I aspire to #3 as well. Do you do much other travel? You could actually probably do a few domestic trips/mileage runs and even outright purchases of elite qualifying miles (EQMs) to get to 100,000 miles and 1K Status on United for a lot less than $20k. You'll get six confirmable international upgrades at 1K status (or platinum-plus equivalent on most airlines) plus a very high percentage of free upgrades on domestic trips.

Hopefully, the knowledge that you're able to pay out of pocket is enough.
letsgobobby wrote:I'm going to be completely open, honest, and self-disclosing.

Goal #3: to comfortably afford paying out of pocket for 4 international business class seats each year (2 trips, 2 adults). In other words that ~$20,000 cost needs to feel like 'an affordable luxury' and not a 'unjustifiable splurge.'
.
I used to be platinum on NW/DL but with kids comes a reduced travel schedule. Those were the days. We'll see where the AA/US merger takes the frequent flyer game. It is not what it used to be and this is probably my last year of elite status of any kind.

You are right though, in the future I may be able to get elite status again. But it's the feeling of being able to buy the tickets that I want.
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Re: How do you set your saving goals and find a balance?

Post by Juniormint »

Based on my current savings rate, I think I'm on track to save about 2m by the time I retire. I would like 3m but know that 1.3m is the absolute lowest I would need to have and be okay.

All of these figures and assumptions will change in the future once I get married, have kids, buy a house and the other things that come up along the way so I don't put much stock in trying to pin down a figure since I'm young and my future is still vastly unknown. I instead focus on my savings rate.
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Re: How do you set your saving goals and find a balance?

Post by stoptothink »

Grt2bOutdoors wrote:
stoptothink wrote:
letsgobobby wrote:Goal #5: to have $1,000,000 in 529 accounts.
Do you have 10 kids?
College costs more than $100K for 4 years these days. If you haven't read some of his prior posts, he expects his children to attend Ivy league undergrad and grad schools. By the time they are ready for college, given today's education inflation rates, he will need every penny of that money to pay for it.
I am well aware of how much college costs these days, I am 31 and my life as a student ended 1.5yrs ago. Seems absurd to me, but it's his money.
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Re: How do you set your saving goals and find a balance?

Post by letsgobobby »

I don't get what's absurd. We will qualify for zero financial aid. If my kids were so fortunate to get into an elite private school, are you saying that it would be absurd for them to go?
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Re: How do you set your saving goals and find a balance?

Post by WhiskeyJ »

Beware if you have kids, it's depressing to see your savings rate plummet as you spend $15k per child on daycare, but in the end it's so worth it. With a 2 and 4 year old the day to day life experiences are incredible. However with daycare (30k) other child expenses 10k, it's weird seeing your savings rate suddenly drop in half or more. For me, the excessive savings when I/we were single have made us worry a lot less about money and our reduced savings rate. Hopefully with good public schools we'll see it creep back up. If not, oh,well...
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Re: How do you set your saving goals and find a balance?

Post by investingdad »

letsgobobby wrote:I don't get what's absurd. We will qualify for zero financial aid. If my kids were so fortunate to get into an elite private school, are you saying that it would be absurd for them to go?
Lot of studies done that suggest elite schools offer very little extra value for the money...
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Re: How do you set your saving goals and find a balance?

Post by letsgobobby »

investingdad wrote:
letsgobobby wrote:I don't get what's absurd. We will qualify for zero financial aid. If my kids were so fortunate to get into an elite private school, are you saying that it would be absurd for them to go?
Lot of studies done that suggest elite schools offer very little extra value for the money...
are you also saying it would be absurd? There is more to college than dollars and cents.
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Re: How do you set your saving goals and find a balance?

Post by Grt2bOutdoors »

investingdad wrote:
letsgobobby wrote:I don't get what's absurd. We will qualify for zero financial aid. If my kids were so fortunate to get into an elite private school, are you saying that it would be absurd for them to go?
Lot of studies done that suggest elite schools offer very little extra value for the money...
Perhaps, and I'm not that big a fan of them either. I will say this...in certain fields going to the "right" schools resulted in more opportunity than going to plain State U. Now what do I mean by that? Well, if you want to go into investment banking and you didn't grow up in the money towns of Connecticut, Westchester or NYC then you want to set your sights on attending Harvard, Princeton, Cornell or Wharton (U of P). You could attend PennState as well, but Wharton by far opens doors quicker than Penn ever will. Now, to attend those schools you will have to shell out on average about $55K annually - today! Can you imagine what it will be in ten or twenty years?

On the other hand, you could attend a good regional or state school and target those same investment banking firms - but here's the thing, the chances of you even being considered for an internship or associates role without a "godfather" backing you is slim to none. Oh sure, you could get a job at those same firms, but likely the job will be one of support or what they call "backoffice" and they don't compensate nearly as well, and the hours are just as long. My point here is if your goal is to be in the game, if that's what you really want, then you may just have to pull out all the stops to get there, including spending obscene amounts of money in an effort to obtain that plum job, but there is no guarantee. I hear that this year only 2 out of 3 Harvard MBA's have found some sort of full time employment - that is a big wake-up call. Essentially, these days going to college has become the equivalent of entreprenurialship - you have to sell yourself to find employment whether it is self-employment or working for someone and with it comes the risk of failure.

What ever you select - make sure you can show the value to those you are selling to. Names these days while they may open doors for initial meetings are no guarantee of anything like the 80's or mid 90's were.
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Re: How do you set your saving goals and find a balance?

Post by letsgobobby »

I can understand, "That wouldn't be my choice." But "absurd"? :confused
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Re: How do you set your saving goals and find a balance?

Post by livesoft »

BuckyBadger wrote:...
3) How do you find a balance between enjoying your life right now, and saving for an enjoyable future?
We had kids when we were a few years older than you. That created a very enjoyable balance.

Now that's a controversial topic! :)
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jollystomper
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Re: How do you set your saving goals and find a balance?

Post by jollystomper »

We found our balance through budgeting. When we were young we learned that saving does make a difference, so we budgeted with a goal of saving/investing at least 20% of our income. This was based on our targets of wanting to retire someday, as well as pay for our kids education. We also built into our budget a "mad money" fund for each of us, an amount set aside each month that each of us could spend on whatever we wanted, no questions asked.

One way budgeting helped us was to better focus on our real "wants" vs. superfluous wants. Often we would decide we wanted something and would save towards it, and by the time we had accumulated the savings the item wasn't nearly as desirable, or we found that our true want for for another item that costs less.

As we got older and some of the goals appeared more realistic, we would choose to either slow down and enjoy things more, or to accelerate to make it happen faster. We also adjusted as financial surprises, both good and bad, occurred.

Finally, our balance was based on what we wanted, not on what others had, or what others told us we should have. That is probably the most difficult thing to do, as there is a lot of peer pressure to "keep up with the Joneses". But we just saw too many examples of folks who appeared to be well of whose lives collapsed quite quickly when trouble came by, due to it being a facade.
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backofbeyond
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Re: How do you set your saving goals and find a balance?

Post by backofbeyond »

You received some excellent rational advice. I'll try to give some that hasn't been mentioned.

1. Don't get divorced. It's one of the greatest wealth destroyers there are. Encourage your wife to spend money on what many women like to do, that is shop for clothes. Don't be so thrifty that she can't dress like a lady and feel sexy for her hubby. It's important. Spend some :moneybag on her, nice dinners out, surprised long weekend trips to Vegas/wine tasting, and splurge on that trip to Hawaii. Walks along the beach are romatic. In other words, keep the fire alive. It is much cheaper than the alternative.

2. Develop your own hobbies that you do alone or without the wife, and let her do the same. Will give you something to talk about long after you stop work. It also allows you to be your own person.

3. Don't have an affair. If you get that itch, then see above, put more thought in how you can keep your interest on your beloved.

4. Stay in reasonable if not excellent physical shape. Both of you will appreciate each other more if you are fit. You can also enjoy doing more things together, like dancing, scuba diving and hiking.

5. One repeat from what others said above, strive for balance. No good being misers stuffing all your :moneybag in investments, getting your jollies watching it grow while eatting cold soup.

6. For my SO and I, travel is the spice of life. Seeing how others live make us more open minded and at peace.

7. This will be controversial but if wealth is one of your primary goals, I'd forgo having kids. I know many many (most?) people say that raising kids was the high point of their life. That may be, but for my SO and I, it has been nothing but pain and heartbreak. You may luck out and have the best children in the world, but then again, you may not. Think long and hard before taking that plunge.

That's about all I can think about. But it looks like you are on a great path, best of luck.
The question isn't at what age I want to retire, it is at what income. - George Foreman
letsgobobby
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Re: How do you set your saving goals and find a balance?

Post by letsgobobby »

backofbeyond wrote:You received some excellent rational advice. I'll try to give some that hasn't been mentioned.

1. Don't get divorced. It's one of the greatest wealth destroyers there are. Encourage your wife to spend money on what many women like to do, that is shop for clothes. Don't be so thrifty that she can't dress like a lady and feel sexy for her hubby. It's important. Spend some :moneybag on her, nice dinners out, surprised long weekend trips to Vegas/wine tasting, and splurge on that trip to Hawaii. Walks along the beach are romatic. In other words, keep the fire alive. It is much cheaper than the alternative.

2. Develop your own hobbies that you do alone or without the wife, and let her do the same. Will give you something to talk about long after you stop work. It also allows you to be your own person.

3. Don't have an affair. If you get that itch, then see above, put more thought in how you can keep your interest on your beloved.

4. Stay in reasonable if not excellent physical shape. Both of you will appreciate each other more if you are fit. You can also enjoy doing more things together, like dancing, scuba diving and hiking.

5. One repeat from what others said above, strive for balance. No good being misers stuffing all your :moneybag in investments, getting your jollies watching it grow while eatting cold soup.

6. For my SO and I, travel is the spice of life. Seeing how others live make us more open minded and at peace.

7. This will be controversial but if wealth is one of your primary goals, I'd forgo having kids. I know many many (most?) people say that raising kids was the high point of their life. That may be, but for my SO and I, it has been nothing but pain and heartbreak. You may luck out and have the best children in the world, but then again, you may not. Think long and hard before taking that plunge.

That's about all I can think about. But it looks like you are on a great path, best of luck.
For some reason I think BuckyBadger IS a wife.
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Watty
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Re: How do you set your saving goals and find a balance?

Post by Watty »

At age 32 and 33 we are just cracked $300k in savings,


So my questions are these:

1) Does my "$80k now, increase by 3% a year going forward" plan seem reasonable?

2) How do YOU guys set your goals, if you don't have any "obvious" goals?

3) How do you find a balance between enjoying your life right now, and saving for an enjoyable future?
1) Does my "$80k now, increase by 3% a year going forward" plan seem reasonable?

For RETIREMENT savings it is likely overkill if you are planning on retiring anywhere near the normal retirement age. With $300K in the retirement savings already then even if you didn't contribute another dime and just let it grow for 32+ years until you are you are 65 then you would almost certainly have enough to cover your most basic needs in retirement.

That said maxing out all your tax advantaged retirement accounts likely makes sense no matter what since it does not seem to cause you much hardship.

2) How do YOU guys set your goals, if you don't have any "obvious" goals?

When I was your my plan was to increase my savings by one half of any salary increase each year. That way both my savings and spendable money increased each year.

I also have a spreadsheet that I update with my net worth each January 1st that shoes me the progress that I have made. That way even though my goals may change from say retirement saving to getting the house paid off, the net worth still increases by the same amount so in a lot of ways the goal is a more general one of increasing my net worth.


I enjoy travel, which I do on modest budget. Even though I can afford it I still find it hard to pay for it when it comes to writing the check to pay for it so what do is I have a separate checking account that is my travel account. I have a reasonable amount of money automatically deposited into from each paycheck. This adds up pretty quickly since with 26 paychecks a year even $100 a paycheck is $2,600 which is enough for couple to take a budget trip to Europe every other year. Paying for travel out of that is much easier to since they money will just sit there until we decide to take a trip.


3) How do you find a balance between enjoying your life right now, and saving for an enjoyable future?

Going to three funerals within a year a few years ago pretty much put things into perspective.

I not even retired yet but I already know at least a half a dozen people roughly my age that have died before retiring and about an equal number of people who have had major health issues.

I would think that you are about the age where your 15th high school class reunion should be coming up. If you went to a large high school it would be good to go back to for that if possible just to see how many of your classmates have already died or have had major life setbacks.
Default User BR
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Re: How do you set your saving goals and find a balance?

Post by Default User BR »

letsgobobby wrote:For some reason I think BuckyBadger IS a wife.
Available evidence would seem to support that.


Brian
RadAudit
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Re: How do you set your saving goals and find a balance?

Post by RadAudit »

BuckyBadger wrote:2) How do YOU guys set your goals,
bertilak's approach sounds like what I did when I was 40 and I was shooting for a retirement savings number - only, back then, I had to use the tables in the back of old college finance book. It worked for me; but I also had a DB plan so that made the number I was shooting for somewhat more achievable. Anyway, it seems to have worked. And I used a variation of that approach to plan for the kids' education expenses - although my guess on costs was low.

OTOH, momar's approach is the one I suggested my son use after he graduated from college and started work. The thought there was, with 40 years to go to retirement, he probably couldn't get a good handle on what his expenses would be in retirement and so it was more important to get in the habit of saving. And an upside would be that at least he would be use to LBYM by the time he got there. (And a rough back of the envelope calculation indicated that the rate he selected and the amount of money that worked out to given his current salary seemed to be a fair amount to live on using a 4% SWR and accounting for inflation.)
BuckyBadger wrote:How do you find a balance between enjoying your life right now, and saving for an enjoyable future?
You run the numbers, do your best and try to concern yourself with other things.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
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backofbeyond
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Re: How do you set your saving goals and find a balance?

Post by backofbeyond »

Default User BR wrote:
letsgobobby wrote:For some reason I think BuckyBadger IS a wife.
Available evidence would seem to support that.


Brian
:oops: Then maybe show my write up to the hubby? ha ha
Thanks for the catch lads!
The question isn't at what age I want to retire, it is at what income. - George Foreman
DoubleDraw
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Re: How do you set your saving goals and find a balance?

Post by DoubleDraw »

I'm pretty young at 30 and feel like as long as I am maxing out 401k and IRA while also paying down my 15 yr mortgage biweekly the rest is for me to do what with what I please. Been doing this for about 2.5 years now and have 60k+ in retirement accounts, which feels good. Hopefully, my income (55k) and thus savings will increase sooner than later but for right now I am happy with this rate of savings.

I want to enjoy my life as much as possible and for me that enjoyment comes from skiing, mountain biking and fly fishing so I spend a little bit of money on them since they are all gear intensive sports where things break and need replacing. I want to look back on my life and know that I often enjoyed the things that made me happy, not that I saved as much money as possible as soon as possible. That is my take on it, but I am still young and probably dumb so don't listen to me!
nyinca
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Re: How do you set your saving goals and find a balance?

Post by nyinca »

Goal #5: to have $1,000,000 in 529 accounts.

I am nowhere near any of these goals yet. That's what keeps me going.[/quote]

Not to tangent the subject matter, but is there a maximum you can accumulate in a 529 plan? Are you anticipating opening another plan in another state, Im still new to all of this and although Im not sure if I can accumulate that much, but would like to know if its possible.
letsgobobby
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Re: How do you set your saving goals and find a balance?

Post by letsgobobby »

Both an owner and a beneficiary can have an unlimited number of 529 plans/accounts. Also note the goal is in nominal dollars; the plan maximums increase annually with inflation. Utah's currently accepts contributions until balances reach $397,000 per account, so that's already $800,000 for two kids.
cherijoh
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Re: How do you set your saving goals and find a balance?

Post by cherijoh »

The key to a successful investment plan is to live well below your means and have an adequate cushion for emergencies. I think you have that covered, so I wouldn't sweat the details of whether a 3% annual increase in your savings rate is sufficient. :) It is really hard to predict where you will be in 20+ years, but at least you know that you are better prepared for retirement than most people your age - or even many years older!

When I first started out, I worked for an employer that offered a 401K that was was capped at 15% of salary and was matched 1:1 for the first 5% I contributed. (Anything above the IRS limit could go into the plan after-tax). I started ASAP at the 5% level to get the match and then increased it every time I got a raise until I reached the maximum. At that point, I started doing after tax savings. My philosophy was to earmark at least 50% of any raise or bonus towards retirement savings. The remainder of any bonuses went into my vacation kitty, which allowed me to take some great active vacations while I was still young enough to enjoy them. One thing I didn't do was to buy as much house as the real estate agent told me I could afford! Personally, I think that is where many people who earned a good salary but are currently struggling to prepare for retirement went wrong - along with leasing luxury vehicles, buying second homes, etc. Remember, the more you save, the lower the standard of living you will have to replace in retirement AND the closer you are to achieving the necessary nest egg!

I was well on my way to retiring comfortably at 55, when I hit a bump in the road and had to reevaluate my plans. I ended up going back to school for a masters while working only part-time - this was made possible by the financial cushion I had built up in the first 20 years of my career. I'm back to working full time, enjoying my second career, and again maxing out my retirement plans! I will probably be retiring closer to 60 than 55 (so that I will able to afford to travel the way I want), but I have the security of knowing that if I were to lose my job tomorrow I would still be able to meet my needs.
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