The Value of Savings

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dwade1109
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The Value of Savings

Post by dwade1109 »

Even with all the volatility of the market (and all my investments are down) savings are what matter. I just tabulated my current holdings in Excel and found that since 10/12/2010 I have gone from a net worth of 24k to 65k even with huge losses in the past 6 months. Doing it on a 50k salary the boglehead way. :D
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bobcat2
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Re: The Value of Savings

Post by bobcat2 »

dwade1109 wrote:Even with all the volatility of the market (and all my investments are down) savings are what matter. I just tabulated my current holdings in Excel and found that since 10/12/2010 I have gone from a net worth of 24k to 65k even with huge losses in the past 6 months. Doing it on a 50k salary the boglehead way. :D
Did you mean to write 10/12/2008 rather than 10/12/2010. Accomplishing what you claim since last October seems nearly impossible given the facts in the case.

BobK
In finance risk is defined as uncertainty that is consequential (nontrivial). | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.
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dwade1109
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Post by dwade1109 »

Work provides housing and food (I eat all my meals at work). I only pay money for gas, car insurance, and entertainment.
allsop
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Post by allsop »

You did not answer bobcat2's question, please do.
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dwade1109
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Post by dwade1109 »

I don't have the exact figures but:
16,500 a year in 403b
5,000 a year in Roth
350/week in taxablex52 weeks= 18,200
87.50/week in emergencyx52 weeks= 4,550

Total saved in a year: approximately 44,250.

There were some weeks I had to cancel automatic investments or pull money from my emergency fund.

The remainder goes towards personal expenses. I have been living like a hermit but I'd rather do that now than later.
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Post by Helloeeze »

So you live off less than 6,000 a year? Or less if you deduct income taxes, social security, Medicare. Do you live in a cardboard box?
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Post by Minot »

Helloeeze wrote:So you live off less than 6,000 a year? Or less if you deduct income taxes, social security, Medicare. Do you live in a cardboard box?
Read OP's 2nd post in this thread.
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PaddyMac
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Post by PaddyMac »

Well done. I wish I felt as good. We've saved $100K this year from earned income, and our portfolio is down $100K from end of April. Makes you wonder if it's all worth it sometimes. Fortunately a lot of the new contributions have been to Vanguard Wellesley where it just putters around the principal amount invested (give or take 1% down). Sad when losing 1% makes you happy.
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Post by letsgobobby »

sounds like a fun way to live.
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Post by JPH »

Way to go! I hope it pays big dividends for you in the future.
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dwade1109
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Post by dwade1109 »

letsgobobby wrote:sounds like a fun way to live.
I am a pretty frugal person to begin with as the things I enjoy doing don't cost any money (playing sports, going to the hospital gym, reading, writing). As a medical resident anyway my time is mostly eaten up by work (average right around 80hr weeks) and then reading outside of work. I figure if I can do this for the next 3 years until end of residency I will have a nice solid amount saved up to at least put a downpayment on a house and still have plenty left.

When I really want something (like an ipad2 which I am buying now) I feel perfectly comfortable spending out of my emergency fund since I know I will be replenishing it within a matter of weeks.

Thanks for the kind words everyone! This site has been a godsend for me.
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Post by dwade1109 »

PaddyMac wrote:Well done. I wish I felt as good. We've saved $100K this year from earned income, and our portfolio is down $100K from end of April. Makes you wonder if it's all worth it sometimes. Fortunately a lot of the new contributions have been to Vanguard Wellesley where it just putters around the principal amount invested (give or take 1% down). Sad when losing 1% makes you happy.
All about the long-term!
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Post by Howard Donnelly »

Here is an appropriate excerpt from Boglehead Michael LeBoeuf's book, The Millionaire in You:

"Every enduring financial fortune is built on a foundation of saving. Earning isn't going to make you a fortune if you don't save. Inheriting millions isn't going to keep you wealthy if you don't save. Winning a big lottery won't help if you don't save. Investing will get you there, but you can't invest what you don't save. The road to financial freedom runs straight through the heart of Save City. There's no shortcut. There's no bypass. Show me a self-made millionaire and I'll show you a dedicated saver."
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Post by mhc »

dwade1109 wrote:
letsgobobby wrote:sounds like a fun way to live.
I am a pretty frugal person to begin with as the things I enjoy doing don't cost any money (playing sports, going to the hospital gym, reading, writing). As a medical resident anyway my time is mostly eaten up by work (average right around 80hr weeks) and then reading outside of work. I figure if I can do this for the next 3 years until end of residency I will have a nice solid amount saved up to at least put a downpayment on a house and still have plenty left.

When I really want something (like an ipad2 which I am buying now) I feel perfectly comfortable spending out of my emergency fund since I know I will be replenishing it within a matter of weeks.

Thanks for the kind words everyone! This site has been a godsend for me.
Dwade. sounds like you are making some smart decisions in building up some savings. There were times in my adult life that I spent less than $20 in a month. I didn't live in a cardboard box. I lived in a metal can called an M60 Main Battle Tank. I did this so I could pay for my college. Keep up the hard work and don't forget to enjoy life.
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letsgobobby
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Post by letsgobobby »

it still makes no sense to me. $50k is going to cost you at least several thousand dollars in taxes. You saved $44,000. You're living on $100 per month? I reiterate that's no way to live. I did what you did when I was a resident, for a month or two at a time. But there is a point at which it is not enjoyable, and I am glad I saw the light.

When I started residency I had liquid (non-property) assets of less than $20,000. When I finished residency 4 years later I had liquid assets of $70,000. Eight years later and I have liquid assets twenty times that, even though I'm in a low-paying specialty. Do you think I care that I spent a few thousand bucks flying to Paris, or going backpacking, or going out to dinner with my colleagues? The point is, the money you are talking about now is not significant compared to the dollars we're talking about later. Your bank account and your future retirement do not depend on you saving 90% of your income; there is no point. There are things you can do with your time, especially between med school and residency and between residency and your first job, that you will not be able to do later in life when you have a family, a practice, or an academic career to sustain.

Don't be the example that proves the saying, "Youth is wasted on the young."
Last edited by letsgobobby on Sun Oct 09, 2011 2:36 am, edited 1 time in total.
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ram
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Post by ram »

I am surprised that I am saying this. But you are saving too much. Spend more. Enjoy life. As someone who will soon make about 200k/yr, I would suggest you put 5k in Roth and 16.5 K in 401K and spend the rest. ( I am a MD)
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Post by dwade1109 »

letsgobobby wrote:it still makes no sense to me. $50k is going to cost you at least several thousand dollars in taxes. You saved $44,000. You're living on $100 per month? I reiterate that's no way to live. I did what you did when I was a resident, for a month or two at a time. But there is a point at which it is not enjoyable, and I am glad I saw the light.

When I started residency I had liquid (non-property) assets of less than $20,000. When I finished residency 4 years later I had liquid assets of $70,000. Eight years later and I have liquid assets twenty times that, even though I'm in a low-paying specialty. Do you think I care that I spent a few thousand bucks flying to Paris, or going backpacking, or going out to dinner with my colleagues? The point is, the money you are talking about now is not significant compared to the dollars we're talking about later. Your bank account and your future retirement do not depend on you saving 90% of your income; there is no point. There are things you can do with your time, especially between med school and residency and between residency and your first job, that you will not be able to do later in life when you have a family, a practice, or an academic career to sustain.

Don't be the example that proves the saying, "Youth is wasted on the young."
This is true but I have not sacrificed much. It's not like I actively go around saying "Oh, I can't spend that much on that". When I go out I enjoy myself and I travel once a year (last year I went to Hawaii, this year I am going to India).

I guess I could ease off the taxable investing but I'm not really sure what I would do with the extra money at this point. To be honest I feel I will appreciate the extra spending ability more in a few years when my life is more complicated than it is now.
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Post by Nathan Drake »

letsgobobby wrote:it still makes no sense to me. $50k is going to cost you at least several thousand dollars in taxes. You saved $44,000. You're living on $100 per month? I reiterate that's no way to live. I did what you did when I was a resident, for a month or two at a time. But there is a point at which it is not enjoyable, and I am glad I saw the light.

When I started residency I had liquid (non-property) assets of less than $20,000. When I finished residency 4 years later I had liquid assets of $70,000. Eight years later and I have liquid assets twenty times that, even though I'm in a low-paying specialty. Do you think I care that I spent a few thousand bucks flying to Paris, or going backpacking, or going out to dinner with my colleagues? The point is, the money you are talking about now is not significant compared to the dollars we're talking about later. Your bank account and your future retirement do not depend on you saving 90% of your income; there is no point. There are things you can do with your time, especially between med school and residency and between residency and your first job, that you will not be able to do later in life when you have a family, a practice, or an academic career to sustain.

Don't be the example that proves the saying, "Youth is wasted on the young."
Is that twenty times the original 20k figure, or the 70k figure?

If the latter, you were able to save 175K per year in a "low paying specialty" even after all the debt of med school?

You'd have to make > 300+K per year, which would then be ~200K after tax, leaving about 25K in yearly expenses to get 175K per year. I wasn't under the impression that 300+K was a low paying specialty.
Last edited by Nathan Drake on Sun Oct 09, 2011 6:20 pm, edited 1 time in total.
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Post by SpecialK22 »

I wholeheartedly agree on the importance of saving, and you are definitely off to the right start. At some point though your new savings won't protect you from seeing your net worth drop during market declines (to state the obvious). I'm kind of experiencing this for the first time these last couple of months, and even though I knew it would happen at some point it still feels like it's too soon.

Even though you are saving what would appear to be an excessive amount to many others, it's all relative to what makes you happy. It's certainly possible to enjoy life without spending much money.
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Post by milestogo »

Been there-done that! You are too tired and busy to spend the money right now. It is great to save it and spend later when you have more time. I think you are just demonstrating good sense but when you have a week off please go somewhere you really enjoy and spend some of the money!!
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Post by letsgobobby »

Nathan Drake wrote:
letsgobobby wrote:it still makes no sense to me. $50k is going to cost you at least several thousand dollars in taxes. You saved $44,000. You're living on $100 per month? I reiterate that's no way to live. I did what you did when I was a resident, for a month or two at a time. But there is a point at which it is not enjoyable, and I am glad I saw the light.

When I started residency I had liquid (non-property) assets of less than $20,000. When I finished residency 4 years later I had liquid assets of $70,000. Eight years later and I have liquid assets twenty times that, even though I'm in a low-paying specialty. Do you think I care that I spent a few thousand bucks flying to Paris, or going backpacking, or going out to dinner with my colleagues? The point is, the money you are talking about now is not significant compared to the dollars we're talking about later. Your bank account and your future retirement do not depend on you saving 90% of your income; there is no point. There are things you can do with your time, especially between med school and residency and between residency and your first job, that you will not be able to do later in life when you have a family, a practice, or an academic career to sustain.

Don't be the example that proves the saying, "Youth is wasted on the young."
Is that twenty times the original 20k figure, or the 70k figure?

If the latter, you were able to save 175K per year in a "low paying specialty" even after all the debt of med school?

You'd have to make > 300+K per year, which would then be ~200K after tax, leaving about 25K in yearly expenses to get 175K per year. I wasn't under the impression that 300+K was a low paying specialty.
the latter. This is not due solely to savings; this is due to investing, compounding returns, company matches, etc. Until this year I never made over $225k, which is low-paying for medicine. I also pay nowhere near 33% in total taxes - I'm barely in the 33% bracket, so I really pay about 20% total. We defer $33,000, and use our deductions, etc. Point isn't any of this. Point is, even 'low-paid' docs end up dwarfing their early life savings and while good habits should definitely be established early, it is easy to lose sight of the forest for the trees. Like the OP I once spent $128 for an entire month as an intern, excluding housing. It's not worth it. There is more to life than saving for a rainy day. Of course it is a personal choice but it is a fact that if he is a diligent saver and good investor his future net worth will dwarf his current savings and he will have 'enough.' I also have enough and have let go of the inner Scrooge and life is better.
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Post by Nathan Drake »

Honestly your story sounds more implausible than his unless you lived incredibly frugally the past 8 years (nearly as frugally as he has). 20% taxes on a 200+K salary? Student loans? What are your living expenses like annually? The past decade for investment hasn't been kind, and I doubt compounding interest has made a huge difference.

Unless, of course, that figure includes the total liquid savings of your family's combined income.
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Post by letsgobobby »

Roughly $50k tax on $250k HHI. Save $100k per year, average. Leaves plenty for spending. Pleasant returns from a low-cost, diversified, tactically allocated portfolio. It adds up. I don't remember how much I saved my intern year but I definitely remember the week in Paris with 2 friends my 4th year in med school.
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dwade1109
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Re: The Value of Savings

Post by dwade1109 »

Just as a quick update and to keep myself motivated, just cracked the 6 figures mark in savings, still shy of my 24th birthday and no loans. Going to treat myself to something unusual this weekend, feel like I deserve it :)
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Re: The Value of Savings

Post by scouter »

dwade1109 wrote:Just as a quick update and to keep myself motivated, just cracked the 6 figures mark in savings, still shy of my 24th birthday and no loans. Going to treat myself to something unusual this weekend, feel like I deserve it :)
You're rockin' at 24! This will catch up to you in a few years, and in a good way.

I've learned that the best thing money can buy is freedom. Freedom to spend your time doing what you feel led to do. Freedom to live where you want to live. For us, the freedom to eat the healthiest, organic foods, to have time to exercise daily, to be able to take the time to nourish our spiritual selves, to have the time to help our family, friends, and neighbors when they are in need. The freedom to send our kids to the colleges they deserve to attend and have earned, instead of being limited by budget to a limited number of local schools.

You will eventually be able to run your own life, instead of having it run by a boss. You will be able to make your own budget, instead of letting the credit card companies tell you how much you can spend. You will have so many more choices in life when you have a healthy nest egg to back you up.
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Post by Curlyq »

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Re:

Post by market timer »

Nathan Drake wrote:Honestly your story sounds more implausible than his unless you lived incredibly frugally the past 8 years (nearly as frugally as he has). 20% taxes on a 200+K salary? Student loans? What are your living expenses like annually? The past decade for investment hasn't been kind, and I doubt compounding interest has made a huge difference.

Unless, of course, that figure includes the total liquid savings of your family's combined income.
He probably kept his student loans. Eight years ago, 2004, was the Golden Age of student loan consolidation. You could lock in 30-year fixed rates at 0.8% after lender incentives. Recent MD grads are in a much more difficult position from the start.
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Re: The Value of Savings

Post by Nathan Drake »

dwade1109 wrote:Just as a quick update and to keep myself motivated, just cracked the 6 figures mark in savings, still shy of my 24th birthday and no loans. Going to treat myself to something unusual this weekend, feel like I deserve it :)
In residency before age 24.

No loans.

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Re:

Post by yobria »

dwade1109 wrote:Work provides housing and food (I eat all my meals at work).
Do you work in a factory making iPhones by any chance? :)
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Post by market timer »

yobria wrote:
dwade1109 wrote:Work provides housing and food (I eat all my meals at work).
Do you work in a factory making iPhones by any chance? :)
I thought they only provided safety nets?
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dwade1109
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Re: The Value of Savings

Post by dwade1109 »

No, just extremely fortunate and surrounded by good people!

I splurge on weird things, going to upgrade by Settlers of Catan with multiple expansions :)
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Re: The Value of Savings

Post by Littlefinger »

get settlers for your Ipad - it's awesome!
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dwade1109
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Re: The Value of Savings

Post by dwade1109 »

Would need an ipad first. Is there an iphone version?
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Post by happymob »

letsgobobby wrote:sounds like a fun way to live.
Shrug... I spent multiple years living off of less than $500/month after food and rent were deducted. It wasn't fun, but at the time, $500 would have seemed like an unbelievable luxury. $17/day (minus gas, but I'm also assuming no commute to speak of) isn't so terrible.
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Post by stoptothink »

happymob wrote:
letsgobobby wrote:sounds like a fun way to live.
Shrug... I spent multiple years living off of less than $500/month after food and rent were deducted. It wasn't fun, but at the time, $500 would have seemed like an unbelievable luxury. $17/day (minus gas, but I'm also assuming no commute to speak of) isn't so terrible.
After rent/utilities and tuition, I am currently living off of ~$300/month(yes, that includes food, gas, insurance) and I do have a work/school commute. It's what I have to do to pay for all of my tuition out of pocket and max out my tax-deferred retirement savings. I was hardly able to put anything into retirement the past few years because(along with paying for my own education) I was also paying for my (now ex) wife's dental school almost completely out of pocket. I feel I have a lot of catching up to do. It'll all be done this fall as I complete my doctorate studies and therefore I'll be able to revert back to a normal standard of living, but I do not feel deprived at all. I have a GF and what I think is a normal social life. Maybe I am just too busy to think about it, as may be the case with the OP.
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Re: Re:

Post by stoptothink »

happymob wrote:
letsgobobby wrote:sounds like a fun way to live.
Shrug... I spent multiple years living off of less than $500/month after food and rent were deducted. It wasn't fun, but at the time, $500 would have seemed like an unbelievable luxury. $17/day (minus gas, but I'm also assuming no commute to speak of) isn't so terrible.
After rent/utilities and tuition, I am currently living off of ~$300/month(yes, that includes food, gas, insurance) and I do have a work/school commute. It's what I have to do to pay for all of my tuition out of pocket and max out my tax-deferred retirement savings. I was hardly able to put anything into retirement the past few years because(along with paying for my own education) I was also paying for my (now ex) wife's dental school almost completely out of pocket. I feel I have a lot of catching up to do. It'll all be done this fall as I complete my doctorate studies and therefore I'll be able to revert back to a normal standard of living, but I do not feel deprived at all. I have a GF and what I think is a normal social life. Maybe I am just too busy to think about it, as may be the case with the OP.
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Re: The Value of Savings

Post by dwade1109 »

24 now...but still going strong. Looking back increased my net worth by 60k in the past year...on a pretax salary of 50k. I did get a post-tax 5k inheritance during the year but still the savings are literally paying off!
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Re: The Value of Savings

Post by MrMiyagi »

How can you save 44k from a 50k salary? You don't pay any taxes at all?
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Re: The Value of Savings

Post by Rodc »

MrMiyagi wrote:How can you save 44k from a 50k salary? You don't pay any taxes at all?
While he is doing well, and he deserves at pat on the back as he is asking for, his opening post is a little self serving. $50k and most everything else paid for as well. That is the $50k, unlike for most people, is the gravy on top of just about all his living expenses. That is not nearly his total compensation.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: The Value of Savings

Post by MrMiyagi »

Rodc wrote:
MrMiyagi wrote:How can you save 44k from a 50k salary? You don't pay any taxes at all?
While he is doing well, and he deserves at pat on the back as he is asking for, his opening post is a little self serving. $50k and most everything else paid for as well. That is the $50k, unlike for most people, is the gravy on top of just about all his living expenses. That is not nearly his total compensation.
Ok even if all his living expenses are paid for...he is still going to be taxed on his 50k salary. How can he have 44k to even save? Seems to me that state, medicare/SSI, and federal taxes adds up to be more than 6k/yr...
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Re: The Value of Savings

Post by Rodc »

Curlyq wrote:I lived in a van for a year. Had the time of my life (I was in Europe). I spent about $6,000 that year for everything. I often think about how to go back to that kind of simplicity.
I did the same thing thought in the states one year. Great time. Also spent a couple of summers living on rice and beans and climbing all day every day.There came the time I wanted health insurance, a wife, some kids...

But those were good times.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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