To be truly rich, take stock of your life before investing

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Spectre
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To be truly rich, take stock of your life before investing

Post by Spectre »

Food for thought. I believe this is a realistic result to expect by following boglehead principles, not to get rich but to live comfortably.
So why bother to invest? Well, what investing really does is it makes your life a bit more comfortable. You’ll be able to go on a few more vacations, eat out a few more times, maybe buy a slightly bigger house, and help your kids reduce their college-education debt. Most retirement plan goals are designed around maintaining your preretirement standard of living — already a big challenge.

All of these are good and tangible improvements to your life but not quite the jet-setting, year-round yacht and Bahama resort lounging that comes to mind today when some people think of the word rich.
http://www.marketwatch.com/story/to-be- ... 2014-08-19
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VictoriaF
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Re: To be truly rich, take stock of your life before investi

Post by VictoriaF »

The article responds to an assumption that one invests to get rich. The author states this premise as follows:
J.J. Zhang wrote:So for those visiting this site and reading these articles: Why are you here and why are you investing in the stock market? For some, especially the younger readers, I suspect the answer is “to get rich.” I confess that I fell into the same line of thinking myself when I first started. I started investing, well speculating, at the tail end of the heady days of the dot-com bubble when stocks were doubling almost by the day. It seemed like a quick and easy way to get rich.
I don't think getting rich is the reason, or even a major reason, for investing. Investing enables one to accumulate assets for dealing with income discontinuities and for retirement. More and longer discontinuities result in a delayed retirement; absence of discontinuities enables one to leave the workforce earlier and take control of his time.

Enrichment-focused investing is highly risky. The survivorship bias, i.e., noting those who have spectacularly won and ignoring those who have spectacularly lost, makes investment-based riches seem much more likely than they really are.

Victoria
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Re: To be truly rich, take stock of your life before investi

Post by Meg77 »

This reminds me of the values exercises I have seen in some financial planning materials which make a distinction between goals and values. Linking your financial goals to your values helps you stay motivated to reach them. It can also encourage you to spend in line with things that really matter to you. That vacation could be just an expense, or it could be the achievement of a small financial goal which embodies your value of Family or Adventure.

First you brainstorm all your goals, however large or small, realistic or far-fetched. Then look at the list and come up with what values are represented. Goals like climbing a mountain, buying organic food, spending a week at a fitness/spa resort, etc would indicate a value for you is Health & Wellness. The same goal of saving $1,000 could represent Security (I can feed my kids without worrying from month to month) or Independence (I can move out of my parents' basement), depending on your situation. Same for the goal of accumulating $1,000,000 (I can get a divorce or quit my job without fear; or I can travel the world indefinitely).

"Getting rich" is a goal, but the value represented by that is most likely to be pride or ego related. Narrowing that down to what really matters to you (which, admittedly, could very well be Status or Prestige), will help you figure out how to use your resources in the most personally fulfilling way.
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MathWizard
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Re: To be truly rich, take stock of your life before investi

Post by MathWizard »

Investing and LBYM leads to financial independence, which means freedom.

It's as simple as that.
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Re: To be truly rich, take stock of your life before investi

Post by Toons »

"So Why Bother Too Invest?"
Well speaking for myself,it was to eventually put my spouse and myself in a position where we could choose to do want we wanted to do with "our time". :happy
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Re: To be truly rich, take stock of your life before investi

Post by Grt2bOutdoors »

It's all about options. Lack of financial flexibility severely hampers your choices on how to spend your time. The most valuable thing in this life is "time", they aren't making any more of it in any real substantial way. Best to spend it how you see fit.
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Re: To be truly rich, take stock of your life before investi

Post by The Wizard »

VictoriaF wrote:The article responds to an assumption that one invests to get rich. The author states this premise as follows:
J.J. Zhang wrote:So for those visiting this site and reading these articles: Why are you here and why are you investing in the stock market? For some, especially the younger readers, I suspect the answer is “to get rich.” I confess that I fell into the same line of thinking myself when I first started. I started investing, well speculating, at the tail end of the heady days of the dot-com bubble when stocks were doubling almost by the day. It seemed like a quick and easy way to get rich.
I don't think getting rich is the reason, or even a major reason, for investing. Investing enables one to accumulate assets for dealing with income discontinuities and for retirement. More and longer discontinuities result in a delayed retirement; absence of discontinuities enables one to leave the workforce earlier and take control of his time.

Enrichment-focused investing is highly risky. The survivorship bias, i.e., noting those who have spectacularly won and ignoring those who have spectacularly lost, makes investment-based riches seem much more likely than they really are.

Victoria
Good point.
We could just save 25% of our income in completely safe savings accounts spread among several bank over a forty year work span and retire on that sum.
But my retirement account shows a total accumulation that is 2.8 times my total contributions; hard to figure what it would be if I had put it all in CDs instead (a lot less).

And yes, there is still a mindset out there about investing in IPOs and scoring ten-baggers, which is not what most of us aim for...
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TareNeko
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Re: To be truly rich, take stock of your life before investi

Post by TareNeko »

If you save $10,000 for 40 years as cash, you'd end up with $400,000 which would worth about $130,000 of today's money if you assume 3% inflation.

If you save $10,000 for 40 years in an inflation protected asset of sorts, you'd end up with $400,000 (inflation adjusted).

If you invest $10,000 for 40 years in low cost index funds, you'd end up with ~$1,000,000 assuming 4% real return (inflation adjusted).

So I would say this enables you financial independence, but not necessarily makes you rich.
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Re: To be truly rich, take stock of your life before investi

Post by nisiprius »

The phrase "take stock of your life" instantly recalled to mind:

https://www.youtube.com/watch?v=HW5ykXDYcLk
Irving Berlin wrote:Taking stock of what I have and what I haven't
What do I find?
The things I got will keep me satisfied
Checking up on what I have and what I haven't
What do I find?
A healthy balance on the credit side
Got no diamond
Got no pearl
Still I think I'm a lucky girl
I got the sun in the morning and the moon at night
I got the sun in the morning and the moon at night...
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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siamond
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Re: To be truly rich, take stock of your life before investi

Post by siamond »

MathWizard wrote:Investing and LBYM leads to financial independence, which means freedom.

It's as simple as that.
Well said.
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Re: To be truly rich, take stock of your life before investi

Post by camptalcott »

Very interesting.

My thoughts.

So outside of this site, which I am new to, the other places I hang out at are mainly travel websites. I love to travel but I have noticed an very interesting phenomenon.

It seems that to say you want to be "rich" is viewed as a negative thing. I mentioned investing as a way to gain wealth on a popular vacation spot and somehow in the minds of others, it translating into me being some money hungry, possession craving person who neglects their family in the pursuit of money. Go figure.

I hear a lot of people who say they want to "be comfortable" in retirement and I think I'm the crazy person because I want to be more than "comfortable". Now I do understand that money does not equal happiness, believe me, I'm a recent widow, lost my husband of 28 years to cancer and I would give back every red cent to have found a cure for him BUT I'm also very pragmatic and know that financial security can determine a great many things in one's life.

question"? what does LBYM mean?
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Re: To be truly rich, take stock of your life before investi

Post by technovelist »

LBYM = "live below your means".
In theory, theory and practice are identical. In practice, they often differ.
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Re: To be truly rich, take stock of your life before investi

Post by RyeWhiskey »

camptalcott wrote: It seems that to say you want to be "rich" is viewed as a negative thing. I mentioned investing as a way to gain wealth on a popular vacation spot and somehow in the minds of others, it translating into me being some money hungry, possession craving person who neglects their family in the pursuit of money. Go figure.
I think what folks here are getting at, and one of the great undercurrents of this forum, is that there's a difference between monetary success (being rich) and quality of life. So when people say "I want to be rich," folks here may view that as ignoring the more important aspect of things: the quality of one's life. As to "comfort" in retirement, that can mean any number of things to any number of people. But since you brought it up: what does "being more than comfortable" mean to you? :beer
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Re: To be truly rich, take stock of your life before investi

Post by VictoriaF »

Meg77 wrote:This reminds me of the values exercises I have seen in some financial planning materials which make a distinction between goals and values. Linking your financial goals to your values helps you stay motivated to reach them. It can also encourage you to spend in line with things that really matter to you. That vacation could be just an expense, or it could be the achievement of a small financial goal which embodies your value of Family or Adventure.

First you brainstorm all your goals, however large or small, realistic or far-fetched. Then look at the list and come up with what values are represented. Goals like climbing a mountain, buying organic food, spending a week at a fitness/spa resort, etc would indicate a value for you is Health & Wellness. The same goal of saving $1,000 could represent Security (I can feed my kids without worrying from month to month) or Independence (I can move out of my parents' basement), depending on your situation. Same for the goal of accumulating $1,000,000 (I can get a divorce or quit my job without fear; or I can travel the world indefinitely).

"Getting rich" is a goal, but the value represented by that is most likely to be pride or ego related. Narrowing that down to what really matters to you (which, admittedly, could very well be Status or Prestige), will help you figure out how to use your resources in the most personally fulfilling way.
Meg,

You are right about the need to tie one's investment goals to one's values. However, the sticking point is the word "rich." First, the definition of "rich" is highly subjective. Second, the concept of "rich" is a moving target as one's assets are growing. Third--and that's the main point of the article--it's quite difficult to become "rich" from investing alone. The information about successful investors is distorted by the survivorship bias, and all aggressive investing approaches carry high risk.

Your examples, on the other hand, are good illustrations of financial security, which all are worthy goals.

Victoria
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Re: To be truly rich, take stock of your life before investi

Post by VictoriaF »

The Wizard wrote:And yes, there is still a mindset out there about investing in IPOs and scoring ten-baggers, which is not what most of us aim for...
By not being exposed to get-rich-by-IPO schemes, I am probably underestimating the prevalence of this mindset. If many people do, in fact, hope to become rich by buying IPOs and other lucky moves, that would explain both the Wall Streeters' incomes capitalizing on this human failing and the reluctance to invest by normal people who mistakenly assume that they must know how to get rich (instead of knowing how to ride index-based investing).

Victoria
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Re: To be truly rich, take stock of your life before investi

Post by VictoriaF »

RyeWhiskey wrote:
camptalcott wrote: It seems that to say you want to be "rich" is viewed as a negative thing. I mentioned investing as a way to gain wealth on a popular vacation spot and somehow in the minds of others, it translating into me being some money hungry, possession craving person who neglects their family in the pursuit of money. Go figure.
I think what folks here are getting at, and one of the great undercurrents of this forum, is that there's a difference between monetary success (being rich) and quality of life. So when people say "I want to be rich," folks here may view that as ignoring the more important aspect of things: the quality of one's life. As to "comfort" in retirement, that can mean any number of things to any number of people. But since you brought it up: what does "being more than comfortable" mean to you? :beer
It's a good response. I would add to it.

1. Responses one gets on Internet sites are somewhat random; they depend on who reads the post first, how a reader feels about the topic, and whether later readers want to agree with or object to earlier responses. It's conceivable that many readers of travel web sites want to accumulate enough wealth for unobstructed travel similarly to camptalcott, but don't comment.

2. Sometimes, money and life pleasures are presented as a contrast. Ultra-early-retirement blogs, such as MisterMoneyMustache, promote the idea that you don't need a lot of money to be happy. I agree with some of their logic. One can exit the rat-race and live well on much less than many people consider the minimum. However, money accumulation on one's own terms is equally prudent.

Victoria
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Re: To be truly rich, take stock of your life before investi

Post by MathWizard »

camptalcott wrote: ....
It seems that to say you want to be "rich" is viewed as a negative thing. I mentioned investing as a way to gain wealth on a popular vacation spot and somehow in the minds of others, it translating into me being some money hungry, possession craving person who neglects their family in the pursuit of money. Go figure.

I hear a lot of people who say they want to "be comfortable" in retirement and I think I'm the crazy person because I want to be more than "comfortable". Now I do understand that money does not equal happiness, believe me, I'm a recent widow, lost my husband of 28 years to cancer and I would give back every red cent to have found a cure for him BUT I'm also very pragmatic and know that financial security can determine a great many things in one's life.
My sympathies on the loss of your husband.
My wife and I have been married 32 years, and it would be devastating if I lost her.

As far as comfortable, that is just as ill-defined as rich.
I grew up in a house with no heat upstairs where I slept and a roof that seemed to always be leaking, and
of course no air-conditioning. My mother always had to watch every penny. So much so that when she did have
a little late in life, she couldn't really enjoy it.

For me comfortable is not having to worry
that the heat will be cut off,
whether you have enough money to pay for the groceries you picked up,
whether you can afford to turn on the A/C (or even have and A/C).

Like you, both my wife and I love to travel. We plan to increase our travel once we hit Financial Independence in about
4 years. We'll still be saving for extras in retirement, but will be able to devote significant dollars to "fun".
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Re: To be truly rich, take stock of your life before investi

Post by Wagnerjb »

siamond wrote:
MathWizard wrote:Investing and LBYM leads to financial independence, which means freedom.

It's as simple as that.
Well said.
I agree completely.

Nobody is going to get rich working for $60,000 for 40 years - even if you save every dime. The truly rich achieve their status through high earnings power, not through "saving their way to prosperity".

But we can all aspire to financial independence, which is a common goal that I believe all Bogleheads have.

Best wishes.
Andy
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Re: To be truly rich, take stock of your life before investi

Post by Fallible »

nisiprius wrote:The phrase "take stock of your life" instantly recalled to mind:

https://www.youtube.com/watch?v=HW5ykXDYcLk
Irving Berlin wrote:Taking stock of what I have and what I haven't
What do I find?
The things I got will keep me satisfied
Checking up on what I have and what I haven't
What do I find?
A healthy balance on the credit side
Got no diamond
Got no pearl
Still I think I'm a lucky girl
I got the sun in the morning and the moon at night
I got the sun in the morning and the moon at night...
Then again, maybe the sun and moon aren't quite enough? :P

"Anything you can do I can do better
"I can do anything better than you."

https://www.youtube.com/watch?v=WO23WBji_Z0
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iceport
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Re: To be truly rich, take stock of your life before investi

Post by iceport »

Spectre wrote:Food for thought. I believe this is a realistic result to expect by following boglehead principles, not to get rich but to live comfortably.
So why bother to invest? Well, what investing really does is it makes your life a bit more comfortable. You’ll be able to go on a few more vacations, eat out a few more times, maybe buy a slightly bigger house, and help your kids reduce their college-education debt. Most retirement plan goals are designed around maintaining your preretirement standard of living — already a big challenge.

All of these are good and tangible improvements to your life but not quite the jet-setting, year-round yacht and Bahama resort lounging that comes to mind today when some people think of the word rich.
http://www.marketwatch.com/story/to-be- ... 2014-08-19
This article reminded me of one of Jonathan Clements' very best:

Parting Shot: What I Learned From Writing 1,008 Columns

1. If you have money, you don't have to worry about it.
2. Money can give you the freedom to pursue your passions.
3. Money can buy you time with friends and family.
But while money makes all this easier, it clearly isn't a necessity. Disgruntled with your lot in life? My advice: Forget spending more money at the mall -- and instead spend more time with friends. Your bank account may still be skimpy, but your life will be far, far richer.
Both articles put things in perspective, each in its own way.

--Peter
"Discipline matters more than allocation.” ─William Bernstein
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Re: To be truly rich, take stock of your life before investi

Post by IlliniDave »

I took the easy way and defined "wealthy" for myself as having more than enough. I also examined "enough" and explored in detail what my floor is there. So it was very easy for me to achieve wealthiness through investing. :happy

I generally don't like to use the term "rich" because it has become perjorative in recent political squabbles.

As best as I can recall, I did have hopes of becoming "rich" when I first began investing. In part that was because I was naive. I ran the compounded return calculations and saw the large numbers 30-40 years down the road. But at the time I had not thought through what it might take to weather life's vagaries over the course of 2 decades or more without wage income. The universe was benign to me because my youthful blend of ignorance and greed has served to put me in a position where it is reasonable to look forward to a humble but secure future without having to depend on employment income.
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Re: To be truly rich, take stock of your life before investi

Post by Dandy »

For me it was always about securing our finances then maintaining/hopefully gradually improving our standard of living.

By securing finances mean able to weather things like jobs losses (had 2), serious costly illnesses (had 1), raising and educating children (had 2) and funding a long retirement without financial worry (should be fine on this count). Being able to live where we want and how we want in retirement. A life changing moment in my life was that my parents had to move to Fla and live in a mobile home when dad lost his job at 59. They missed out on a lot and so did we.

By gradually improving standard of living - easing up on living below our means - nicer/safer vehicle, nicer vacations, more entertainment, helping children improve their standard of living, more charitable contributions to improve someone else's standard of living. I have a long way to go on this front as frugal living habits are hard to break. But, slight improvements are noticed and appreciated - e.g. wife loves the heated seats in the new car.
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Re: To be truly rich, take stock of your life before investi

Post by protagonist »

MathWizard wrote:Investing and LBYM leads to financial independence, which means freedom.

It's as simple as that.

I completely agree with this.

The flip side is that so many people fail to take advantage of the freedom they have bought with their independence. They always want just a little more, and (due to raising the bar, addiction, fear, or who knows what) can't get off the train until they ultimately are left with neither freedom nor independence. All they are left with is stuff (whether in the form of material or financial assets) which is intrinsically not all that satisfying.
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Post by nisiprius »

The best, the very best thing I've ever read about this is:

"We act as though comfort and luxury were the chief requirements of life, when all that we need to make us really happy is something to be enthusiastic about."--Charles Kingsley.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: To be truly rich, take stock of your life before investi

Post by nmoon »

Spectre wrote:Food for thought. I believe this is a realistic result to expect by following boglehead principles, not to get rich but to live comfortably.
So why bother to invest? Well, what investing really does is it makes your life a bit more comfortable. You’ll be able to go on a few more vacations, eat out a few more times, maybe buy a slightly bigger house, and help your kids reduce their college-education debt. Most retirement plan goals are designed around maintaining your preretirement standard of living — already a big challenge.

All of these are good and tangible improvements to your life but not quite the jet-setting, year-round yacht and Bahama resort lounging that comes to mind today when some people think of the word rich.
http://www.marketwatch.com/story/to-be- ... 2014-08-19
Hello! Thanks for posting this, I'm actually the writer for it. I've been a lurker on bogleheads for years but not been tremendously active on it. I actually forgot my old login. But was surprised to see myself show up here.

I do want to address what a few others replied regarding the "rich" expectations. I feel that you guys don't always appreciate how different and enlightened(?) you are vs. others out there. You understand the concepts of cost importance, of goals, and the basics. There are many who do not and there's always new people coming into stocks that needs to learn. Is everyone investing in stocks doing it to get rich? Absolutely not. Is there nobody investing in stocks in hopes of getting rich? Absolutely not, hence why I qualified it by saying *For some*. Especially for young Gen Y's who are just starting to invest - this is actually a very big problem. I've met many many who thought this way. So this was for them and a reminder for everyone else to not obsess about money.
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Re: To be truly rich, take stock of your life before investi

Post by HomerJ »

IlliniDave wrote:I took the easy way and defined "wealthy" for myself as having more than enough. I also examined "enough" and explored in detail what my floor is there. So it was very easy for me to achieve wealthiness through investing. :happy
I agree with this...

Being comfortable and financially independent without ever having to work again seems like being RICH to me...

But it's just semantics... (And I'm always up for some antics)

I mean I call myself rich right now... even though I don't have yachts or jets and I still have to work... But I have almost no worries about money... And it seems to me that's a pretty good definition of being rich... If you don't have to worry about money, you must be wealthy right?

(Now I don't have to worry about money because my expenses are "low", but I'm still living better than 80% of Americans I'm sure)
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Re: To be truly rich, take stock of your life before investi

Post by Peter Foley »

Meg77 wrote:
Linking your financial goals to your values helps you stay motivated to reach them. It can also encourage you to spend in line with things that really matter to you. That vacation could be just an expense, or it could be the achievement of a small financial goal which embodies your value of Family or Adventure.

First you brainstorm all your goals, however large or small, realistic or far-fetched. Then look at the list and come up with what values are represented. Goals like climbing a mountain, buying organic food, spending a week at a fitness/spa resort, etc would indicate a value for you is Health & Wellness. The same goal of saving $1,000 could represent Security (I can feed my kids without worrying from month to month) or Independence (I can move out of my parents' basement), depending on your situation. Same for the goal of accumulating $1,000,000 (I can get a divorce or quit my job without fear; or I can travel the world indefinitely).

"Getting rich" is a goal, but the value represented by that is most likely to be pride or ego related. Narrowing that down to what really matters to you (which, admittedly, could very well be Status or Prestige), will help you figure out how to use your resources in the most personally fulfilling way.
Nice post Meg. I'm doing a retirement seminar at a conference. While a good portion of the seminar is financial, I am linking the financial to values. I will use some of what you wrote as an example.
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Post by Lynette »

.....
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Post by burt »

Toons wrote:"So Why Bother Too Invest?"
Well speaking for myself,it was to eventually put my spouse and myself in a position where we could choose to do want we wanted to do with "our time". :happy
+1
Time...we are not immortal.
Not looking for riches, looking for peace of mind.

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Re: To be truly rich, take stock of your life before investi

Post by Toons »

burt wrote:
Toons wrote:"So Why Bother Too Invest?"
Well speaking for myself,it was to eventually put my spouse and myself in a position where we could choose to do want we wanted to do with "our time". :happy
+1
Time...we are not immortal.
Not looking for riches, looking for peace of mind.

burt
:beer
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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Re: To be truly rich, take stock of your life before investi

Post by stonerolled »

I am very grateful for boglehead concepts such as LBYM and replace expenses not income one day.
The idea of financial independence and freedom is important to me. When and if this is achieved, a test of character will take place. Riches and achievements are giving way to comfort and opportunities as time goes on.
Investments seem to be like starting a fire and adding another log until it builds up and gives warmth, and then continues to give warmth even when a log or two are removed to put in the pan to warm the bed.
The concept of law and grace comes to mind as well. Under law, you achieve to earn blessing. Under grace, you achieve because you have been blessed. A landowner may have slaves and sons. Sons have a level of security unknown to slaves.
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