Personal Finance Milestone: 20 Times Annual Expense

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KlangFool
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Personal Finance Milestone: 20 Times Annual Expense

Post by KlangFool »

Hi,

As of this Friday, my investment had reached 20 times my current annual expense. There is a light at the end of the tunnel. And, it is not a train. It had been a long and hard struggle over the last 10+ years but it looks like I will make it.

10+ years ago, Telecom bust wiped out 50% of my investment. And, it took away my job security. My wage had stayed stagnant. I went through multiple rounds of quarterly and annual laid off. I was unemployed for more than 1-year multiple times. But, I survived on many jobs long enough to grow my investment.

Now, my Financial Independence is fully funded. I am coasting on asset grow to get to my number. My annual savings is going toward paying my kids' college education.

I survived!!

KlangFool
PFInterest
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by PFInterest »

congrats! :sharebeer
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ruralavalon
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by ruralavalon »

Congratulations :) :) .
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dbltrbl
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by dbltrbl »

Congratulations! :happy Your hard work paid off despite setbacks along the way. Enjoy the rest of way :sharebeer
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xystici
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by xystici »

Klangfool,
I am not surprised you survived. You know a lot on personal finance so this makes you very resilient.
Congratulations! I enjoy your posts!
Xystici
Trust yourself, Break the rules, Don't be afraid to fail, Don't listen to naysayers, Work your butt off. "It is in your moments of decision that your destiny is shaped. Choose now and well"
paper200
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by paper200 »

Congrats klang! Your words of wisdom in the board is always helpful.
Having freedom, food and roof is being 90% lucky in life and so is index investing. So, don't let the remaining 10% bother you.
tomd37
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by tomd37 »

Congratulations on your success! Was the telecom bust you refer to Nortel? :annoyed
Tom D.
honduranhurricane
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by honduranhurricane »

Congrats and I agree with prior posters,,,thank you for you contributions to this board. I do not post much, but I lurk,,and I always pay attention to your posts, along with others. Congrats and thanks again.
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BolderBoy
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by BolderBoy »

KlangFool wrote:I survived!!
Wow. What a ride. Outstanding and congratulations!
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
VAslim16
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by VAslim16 »

Awesome Klang. Very pumped for you. Looking forward also to reading more of your thoughts on here...
Topic Author
KlangFool
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by KlangFool »

Folks,

Thank you.

I made many mistakes. But, in spite of my incompetence, I did one thing right. I lived on a very simple but hard to live rule.

Save 1/3, spend 1/3, and pay 1/3 in tax.

I saved 30+% of my gross income and live on 1/3 of my gross income. That helps me to recover from my big mistake of gambling on Telecom stocks. Plus, I was lucky enough to survive on many jobs long enough. Many of my peers in the 40s and 50s are permanently under-employed and unemployed. Now, I could only hope that I survive on my current job for a few more years. Then, I am done.

KlangFool
aristotelian
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by aristotelian »

Awesome, man. Glad you are sharing the wisdom that has worked for you. Always appreciate your perspective on these threads.
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bligh
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by bligh »

KlangFool wrote:Folks,
Save 1/3, spend 1/3, and pay 1/3 in tax.
I agree.. I think this is the key to your success. Living a simple, low expense life has the double impact of increasing your savings while decreasing the expenses you will need to support from those savings. To a huge extent, the very act of saving more reduces the final size of the savings goal you need to reach!

Anyway, congratulations KlangFool, 20x expenses is indeed an amazing milestone. You are now so close, you can see the finish line. Time for the final sprint! :)
Topic Author
KlangFool
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by KlangFool »

aristotelian wrote:Awesome, man. Glad you are sharing the wisdom that has worked for you. Always appreciate your perspective on these threads.
aristotelian,

Thank you. But, I would not use the word, "wisdom" for myself. I am just a guy that made a lot of mistakes. I just hope that my lessons from my failures could help some folks. I am just trying to succeed in spite of my own many limitations. For example, I would not be able to "Sleep Well at Night" (SWAN) without knowing that I could survive unemployment lasting 5 years.

KlangFool
lostdog
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by lostdog »

Congratulations! :sharebeer

Are you comfortable sharing your numbers?
Brokerage: VTI+VXUS || Retirement: VTWAX || Short-Term: Cash+BSV || 33x Expenses
Thesaints
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by Thesaints »

"1/3" is a lot of tax !
Topic Author
KlangFool
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by KlangFool »

lostdog wrote:Congratulations! :sharebeer

Are you comfortable sharing your numbers?
lostdog,

1) For those that want to know my number, they could do a simple search on some of my threads. Then, they will know my current annual expense. After that, it is a simple multiplication to get the number.

2) My FI number is 25 times my current annual expense.

KlangFool
rojas65
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by rojas65 »

That reminds me of the question, "What is the difference between experience and wisdom?" Experience is learning from your own mistakes. Wisdom is learning from other peoples' mistakes.
Congratulations on the milestone, your efforts will continue to pay off for the rest of your life, and your legacy will continue through your family's lifetimes! :happy
Topic Author
KlangFool
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by KlangFool »

Thesaints wrote:"1/3" is a lot of tax !
Thesaints,

On the average, it is about right if you add up Federal, State, Social Security, Medicare and so on.

KlangFool
Thesaints
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by Thesaints »

KlangFool wrote:
Thesaints wrote:"1/3" is a lot of tax !
Thesaints,

On the average, it is about right if you add up Federal, State, Social Security, Medicare and so on.

KlangFool
Medicare yes, but it is only a couple % at most. Social security is paid back to you, so I don't consider it a "tax", but a mandatory retirement/insurance program.
I live in Cali (and of course don't know how much you make), but an effective rate of 33% sounds large. I don't know, maybe adding real estate taxes... I mean, AMD rate is 28%, but it comes with an exemption.
MrNewEngland
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by MrNewEngland »

Why did I think you were poor?
coupleofcents
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by coupleofcents »

This is inspirational. 20x is awesome. I actually just realized we're at 5x, never really thought about where I'm at until now, just that we need to save, save, save. Congrats again.
Dottie57
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by Dottie57 »

KlangFool wrote:Hi,

As of this Friday, my investment had reached 20 times my current annual expense. There is a light at the end of the tunnel. And, it is not a train. It had been a long and hard struggle over the last 10+ years but it looks like I will make it.

10+ years ago, Telecom bust wiped out 50% of my investment. And, it took away my job security. My wage had stayed stagnant. I went through multiple rounds of quarterly and annual laid off. I was unemployed for more than 1-year multiple times. But, I survived on many jobs long enough to grow my investment.

Now, my Financial Independence is fully funded. I am coasting on asset grow to get to my number. My annual savings is going toward paying my kids' college education.

I survived!!

KlangFool
Applause!
Dottie57
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by Dottie57 »

KlangFool wrote:
aristotelian wrote:Awesome, man. Glad you are sharing the wisdom that has worked for you. Always appreciate your perspective on these threads.
aristotelian,

Thank you. But, I would not use the word, "wisdom" for myself. I am just a guy that made a lot of mistakes. I just hope that my lessons from my failures could help some folks. I am just trying to succeed in spite of my own many limitations. For example, I would not be able to "Sleep Well at Night" (SWAN) without knowing that I could survive unemployment lasting 5 years.

KlangFool
The key is you learn from your mistakes. That is wisdom.
Topic Author
KlangFool
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by KlangFool »

MrNewEngland wrote:Why did I think you were poor?
MrNewEngland,

I always live on 1/3 of my gross income. So, I was never poor.

KlangFool
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Tyrobi
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by Tyrobi »

Congrats! Keep up the good work on your way to FI.
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Topic Author
KlangFool
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by KlangFool »

Thesaints wrote:
KlangFool wrote:
Thesaints wrote:"1/3" is a lot of tax !
Thesaints,

On the average, it is about right if you add up Federal, State, Social Security, Medicare and so on.

KlangFool
Medicare yes, but it is only a couple % at most. Social security is paid back to you, so I don't consider it a "tax", but a mandatory retirement/insurance program.
I live in Cali (and of course don't know how much you make), but an effective rate of 33% sounds large. I don't know, maybe adding real estate taxes... I mean, AMD rate is 28%, but it comes with an exemption.
Thesaints,

That is my general philosophy of living over 30+ years of working. At this moment, my effective Federal Income Tax rate is less than 5%. I do not count real estate tax.

KlangFool
runner540
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by runner540 »

Congratulations, what a milestone. I appreciate your notes of caution when folks want to commit to an expensive home.
Topic Author
KlangFool
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by KlangFool »

Folks,

By any objective measure,

1) I earned above average income.

2) I saved above average portion of my income.

3) I am a lousy investor.

On the average, I saved one year of my annual expense every year. I did this over 25 to 30 years. Now, I am at 20 times my annual expense. I have a negative real return on my investment. So, it is kind of embarrassing to say that I am any good at finance. It is more accurate to say that I learned that I am lousy at investing. Hence, I stop myself from losing more money.

I am just glad that I make it so far in spite of my own incompetence at finance.

KlangFool
FedGuy
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by FedGuy »

Thesaints wrote:"1/3" is a lot of tax !
That's funny: having lived so much of my life in New York City, I use 50% as my rough approximation of total taxes.

Congrats, Klang!
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Phineas J. Whoopee
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by Phineas J. Whoopee »

Congratulations.

As I've repeatedly posted I think an age-based asset allocation approach, and you didn't mention asset allocation in your OP so I'm the one bringing it up, will be far more practical for most investors.

Here's what I did, and a couple of years later I answered some questions about it.

20x annual expenses certainly is a milestone. Congratulations once again.

PJW
dharrythomas
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by dharrythomas »

Congratulations! Saving 1/3 is quite impressive.

I've also made multiple errors and continue to do so, don't feel alone. I've have been amazed at how well it turned out in spite of me. We've been blessed.

Good luck.

Harry
Grt2bOutdoors
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by Grt2bOutdoors »

Congratulations! :sharebeer
I never had any doubt that you would not reach your goal, I've read all of your posts. :)
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
MutualEdge
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by MutualEdge »

Congrats! Your story is full of hope for us younger folks who will without a doubt undergo more bumps along the way. As someone relatively new to the board, I've learned a lot from your contributions so thank you for sharing your wisdom. Cheers! :beer
teddykgb55
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by teddykgb55 »

Congratulations!

Let me add to other posters who are grateful for the advice you share in threads. It's great to have a reminder to be conservative with what you've earned so that you can handle life when finances take a turn for the worse.

You might be a touch too conservative for my tastes but your POV is very valuable. Well done!
mindboggling
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by mindboggling »

Congratulations!

Your posts provide a welcome counterpoint to the equity cowboys who seem to crowd this forum.
In broken mathematics, We estimate our prize, --Emily Dickinson
Lynette
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by Lynette »

runner540 wrote:Congratulations, what a milestone. I appreciate your notes of caution when folks want to commit to an expensive home.
+1

Congratulation Klang and thanks for your posts.
Topic Author
KlangFool
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by KlangFool »

runner540 wrote:Congratulations, what a milestone. I appreciate your notes of caution when folks want to commit to an expensive home.
runner540,

Too many of my peers were financially destroyed by their 500K to 600K houses.

KlangFool
Tamales
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by Tamales »

Congrats on being within range of your 25x target.

Would you mind providing a little detail on what factors and analysis tools you considered in persuading yourself that 25x expenses was the right number for you? What age are you using as your age at death, and what age do you plan to begin collecting SS benefits?

Why not 30x, or more?

I wish I could convince myself to be comfortable with 25x, but I'm at 40x as my target. Or at least that's what it works out to when I back out from terminal portfolio value simulations using the assumptions I'm comfortable with.
Topic Author
KlangFool
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by KlangFool »

Tamales wrote:Congrats on being within range of your 25x target.

Would you mind providing a little detail on what factors and analysis tools you considered in persuading yourself that 25x expenses was the right number for you? What age are you using as your age at death, and what age do you plan to begin collecting SS benefits?

Why not 30x, or more?

I wish I could convince myself to be comfortable with 25x, but I'm at 40x as my target. Or at least that's what it works out to when I back out from terminal portfolio value simulations using the assumptions I'm comfortable with.
Tamales,

Social security income could cover 50% of my expense. So, 25X my current annual expense is the same as 50X my annual expense after I start withdrawing social security.

Complete and detailed discussion at the following thread.

viewtopic.php?f=2&t=220234

KlangFool
hmw
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by hmw »

Klang,

Congrats!

It is interesting that you noted that you were a lousy investor and you have made many mistakes along the way. Do you mind sharing when you started investing in a BH approach?
Topic Author
KlangFool
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by KlangFool »

hmw wrote:Klang,

Congrats!

It is interesting that you noted that you were a lousy investor and you have made many mistakes along the way. Do you mind sharing when you started investing in a BH approach?
hmw,

About 10 years. It took Telecom bust and 50% lost to wake me up that

1) 100% stock is a bad idea.

I do not have the

A) Need

With 30+% gross saving rate, I can get there with 0% real return.

B) Ability

I have no job security. I could be permanently unemployed or under-employed any year.

C) Willingness

Why bother taking the risk when I do not need the return?

2) I do not know how to invest. I stick with Wellington fund and Lifestrategy Moderate Growth Fund for many years until I switch the Life Strategy Moderate Growth portion to 3 funds.

KlangFool
bayview
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by bayview »

Congratulations KlangFool!
Thesaints wrote:
KlangFool wrote:
Thesaints wrote:"1/3" is a lot of tax !
Thesaints,

On the average, it is about right if you add up Federal, State, Social Security, Medicare and so on.

KlangFool
Medicare yes, but it is only a couple % at most. Social security is paid back to you, so I don't consider it a "tax", but a mandatory retirement/insurance program.
I live in Cali (and of course don't know how much you make), but an effective rate of 33% sounds large. I don't know, maybe adding real estate taxes... I mean, AMD rate is 28%, but it comes with an exemption.
Sure, but in a discussion of what you live on, rather than an effective tax rate, it's 1/3 vacuumed out of gross pay. I find it a very useful measure.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri
yellowgirl
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by yellowgirl »

Thesaints wrote:
KlangFool wrote:
Thesaints wrote:"1/3" is a lot of tax !
Thesaints,

On the average, it is about right if you add up Federal, State, Social Security, Medicare and so on.

KlangFool
Medicare yes, but it is only a couple % at most. Social security is paid back to you, so I don't consider it a "tax", but a mandatory retirement/insurance program.
I live in Cali (and of course don't know how much you make), but an effective rate of 33% sounds large. I don't know, maybe adding real estate taxes... I mean, AMD rate is 28%, but it comes with an exemption.

It is a tax because you won't be able to count on it until you are at least 62. For younger person like myself, it may not be there when it is my turn to retire but still have to pay in the mean time.
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Kenkat
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by Kenkat »

Congrats KlangFool! I've read a lot of your posts here and you deserve this as much as anyone. You always give solid advice from a "regular guy" perspective and it is much appreciated.
Boglegrappler
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by Boglegrappler »

Not happy about uttering a discouraging word here, but........

Being able to save half of your after-tax pay requires either stunning austerity, or a rather high income. It does, however, put you in a position to be independent and also to live from your assets income rather than consuming it and worrying about running out. Nice job.
Topic Author
KlangFool
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by KlangFool »

Boglegrappler wrote:Not happy about uttering a discouraging word here, but........

Being able to save half of your after-tax pay requires either stunning austerity, or a rather high income. It does, however, put you in a position to be independent and also to live from your assets income rather than consuming it and worrying about running out. Nice job.
Boglegrappler,

<<Being able to save half of your after-tax pay requires either stunning austerity, or a rather high income.>>

Or, none of the above. I came from a country/culture where the average gross rate for the whole country is 30+%. It is how we live. It is part of our culture. And, that is not the only country in the world with that level of gross saving rate.

KlangFool
dellfanboy
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by dellfanboy »

Klang,

I don't know you but I love you. You are like my personal financial guru grandpa (no offense!). Your post are so sound and Challange the spend spend spend type of mentality. For some of us younger (or young at heart) folks in the board, I can't thank you enough.

Thank you for sharing your experiences. Thank you for being the voice of reason. Thank you for taking the time to weigh in on so many posts. Thanks for being you.
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celia
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by celia »

KlangFool wrote:My annual savings is going toward paying my kids' college education.
I'm sure your struggles have been an education in itself for your whole family. I hope they were paying attention and noticed they couldn't have eveything they wanted. Our kids also learned from us what it is like for BOTH parents to be unemployed for a long time. It made them more willing to start saving from their first job. May yours also benefit from your lessons. I'm sure you will make sure they contribute to an IRA as soon as they work full time. :sharebeer
Topic Author
KlangFool
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Re: Personal Finance Milestone: 20 Times Annual Expense

Post by KlangFool »

celia wrote:
KlangFool wrote:My annual savings is going toward paying my kids' college education.
I'm sure your struggles have been an education in itself for your whole family. I hope they were paying attention and noticed they couldn't have eveything they wanted. Our kids also learned from us what it is like for BOTH parents to be unemployed for a long time. It made them more willing to start saving from their first job. May yours also benefit from your lessons. I'm sure you will make sure they contribute to an IRA as soon as they work full time. :sharebeer
celia,

1) I am contributing to their Roth IRA accounts for their summer jobs since high school. I plan to do this again if I am employed next year.

2) They had saved about 10K each from childhood. Their investment is worth about 10K to 20K each. Their rich uncles and aunties gave them a few hundred each every year.

KlangFool
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