Not investing through your 30's

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Keepcalm
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Not investing through your 30's

Post by Keepcalm » Sun Dec 24, 2017 6:48 am

I often trace the thought of holding off until 40 to begin investing in order to boost enjoyment through the 30's. I say this because it is often a time when one is getting their feet on the ground both professionally and also as a home owner. Thats a good chunk of change towards a home. For those who chose to travel and see he world this would also prove valuable as it is a good chunk of change to enjoy traveling and creating the memories.

I suppose my justification would be that once you hit 40 your income would be higher allowing you to invest more than you would through your 30's. In addition to this it sounds cliche but we do only live once. The thought of stashing away all this income to have when I'm 65 does not align with my thought process.

Maybe I'm off my rocker, I'm just thinking out loud here.

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simplesimon
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Re: Not investing through your 30's

Post by simplesimon » Sun Dec 24, 2017 7:16 am

Very common thoughts by people in their 20's and 30's especially if income is modest relative to cost of living.

This is a good read about how your retirement savings can be accessed before age 59.5 without penalty: https://www.madfientist.com/how-to-acce ... nds-early/

It's true that now would be a better time to travel when you have little to no obligations and you have your health.

You only live once, but then you get to age 65 and then what? What is your plan for when you don't want to work or can't work anymore? And how will you get there?

TravelGeek
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Re: Not investing through your 30's

Post by TravelGeek » Sun Dec 24, 2017 7:26 am

Doesn't have to be either/or. Save some, spend some.

The foundation of my financial independence was set in my late 20s/early 30s when I started investing after grad school. 8th wonder of the world is what Einstein called it.

https://www.bogleheads.org/wiki/Importa ... ving_early

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DaftInvestor
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Re: Not investing through your 30's

Post by DaftInvestor » Sun Dec 24, 2017 7:31 am

You make it sound like folks advocate saving every penny. You should drive to do both - enjoy life and save for the future. Many experts advocating saving 10% of your income towards retirement. Does saving 10% of your salary mean you have nothing left to enjoy life?

stoptothink
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Re: Not investing through your 30's

Post by stoptothink » Sun Dec 24, 2017 7:38 am

TravelGeek wrote:
Sun Dec 24, 2017 7:26 am
Doesn't have to be either/or. Save some, spend some.

The foundation of my financial independence was set in my late 20s/early 30s when I started investing after grad school. 8th wonder of the world is what Einstein called it.

https://www.bogleheads.org/wiki/Importa ... ving_early
Seems pretty simple. Saving/investing isn't an all-or-nothing thing. If it is possible, and IMO in this country it is for all but those below the poverty line, it is extremely beneficial to begin investing as soon as you begin having gainful employment, no matter how little the amount. And...when did this conversation switch to the 30's? Not enough "living" in your 20's that the YOLO mindset needs to be maintained another entire decade?

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Re: Not investing through your 30's

Post by BogleBoogie » Sun Dec 24, 2017 7:41 am

TravelGeek wrote:
Sun Dec 24, 2017 7:26 am
Doesn't have to be either/or. Save some, spend some.

The foundation of my financial independence was set in my late 20s/early 30s when I started investing after grad school. 8th wonder of the world is what Einstein called it.

https://www.bogleheads.org/wiki/Importa ... ving_early
This...

livesoft
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Re: Not investing through your 30's

Post by livesoft » Sun Dec 24, 2017 7:41 am

We invested a large percentage of our income through our 30's and 40's which allowed us to travel extensively in our 50's when early retired.

But we also travelled extensively in our mid 20's when our income was quite low. I was a post-doc and my spouse was not working in her profession while we lived overseas. We had no money, so we had to travel extremely cheaply.

So I would say that one can travel and keep investing. The problem is the amount of time that one has and not really the money.
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simplesimon
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Re: Not investing through your 30's

Post by simplesimon » Sun Dec 24, 2017 7:46 am

stoptothink wrote:
Sun Dec 24, 2017 7:38 am
And...when did this conversation switch to the 30's? Not enough "living" in your 20's that the YOLO mindset needs to be maintained another entire decade?
Giving most of them the benefit of the doubt...the job market is flooded with fresh college grads each year trying to fill more openings than there actually are...they either take low paying jobs or go to grad school or both, thus delaying the fun they were supposed to have in their 20's.

tic
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Re: Not investing through your 30's

Post by tic » Sun Dec 24, 2017 7:52 am

Keepcalm wrote:
Sun Dec 24, 2017 6:48 am
The thought of stashing away all this income to have when I'm 65 does not align with my thought process.
You say this as if 65 is old. If you are 30 and healthy, you may be older than 60 for more than half of your remaining life. You may be old for a very long time.

Moderation in savings? Sure. But, I suspect the 70-year-old you would curse the 30-year-old you if you don't start saving anything now.

ImUrHuckleberry
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Re: Not investing through your 30's

Post by ImUrHuckleberry » Sun Dec 24, 2017 8:04 am

If you start saving when you're really young, you can save a lot less annually and let the power of compounding interest work for you.

I didn't save anything until roughly my early thirties, and then in my early forties lost my job and took 2 years to find another. Ended up wiping out a good chunk of my retirement savings and also ended up with some student debt on top of everything. (Got a grad degree in order to make myself employable again.) Now we are saving about 40% of gross while still paying down debt until we catch back up to where we need to be.

If you wait until you're older and have some bad luck you could end up working harder and a lot longer before you can retire.

Keepcalm
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Re: Not investing through your 30's

Post by Keepcalm » Sun Dec 24, 2017 8:07 am

I invested 12K this year, I make 60K.

Not a single dime went into "I want to stop renting at some point" fund. All 12K right into Vanguard.

I feel like I'm a miser. I do not make a lot but its all relative. You can make 30K a year and still be a miser. I try to hoard it. I stare at Quicken. I stare at YNAB. I constantly read about it in books and I feel like its taken priority over my life instead of enjoying it.

It almost feels like a disorder.

Loandapper
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Re: Not investing through your 30's

Post by Loandapper » Sun Dec 24, 2017 8:29 am

Keepcalm wrote:
Sun Dec 24, 2017 8:07 am
I invested 12K this year, I make 60K.

Not a single dime went into "I want to stop renting at some point" fund. All 12K right into Vanguard.

I feel like I'm a miser. I do not make a lot but its all relative. You can make 30K a year and still be a miser. I try to hoard it. I stare at Quicken. I stare at YNAB. I constantly read about it in books and I feel like its taken priority over my life instead of enjoying it.

It almost feels like a disorder.
That's 20% of your income.

If you dropped to 15%, that'll leave you with $3,000/year for vacations and other YOLO stuff. You can have plenty of fun with that. You just have to budget it. And you should - it sounds like you could use a vacation.

As others have said, it doesn't have to be all-or-nothing.

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Re: Not investing through your 30's

Post by AlmstRtrd » Sun Dec 24, 2017 8:39 am

Keepcalm wrote:
Sun Dec 24, 2017 6:48 am
I suppose my justification would be that once you hit 40 your income would be higher allowing you to invest more than you would through your 30's. In addition to this it sounds cliche but we do only live once. The thought of stashing away all this income to have when I'm 65 does not align with my thought process.
I think it's a huge mistake to assume that whatever work skills you have now are guaranteed to still be in demand by the time you hit your 60s. For many workers there is a finite amount of time that their skill sets align with a good economy AND the demand for those specific skills. Without going into too much detail my personal opportunity for really saving money was from ages 32 to 50. Before age 32 I was still learning my craft. At age 50 (2008) the economy hit a really rough patch. At about the same time my skills were being, at least indirectly, automated away.

To be clear, I have worked for 40 years, but only in about 18-19 of those years did I make enough money to really be able to invest a significant amount.

epictetus
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Re: Not investing through your 30's

Post by epictetus » Sun Dec 24, 2017 8:42 am

i think that would likely be a big mistake. losing a whole decade of time in investing is losing a lot.

you will have to save more and more the later you start to get to the same point that you could have gotten to by saving less but starting earlier.

if you have a 401/403 make sure you are withholding enough to get the match.

consider an IRA.

as others have mentioned it doesn't have to be all or none.
Focus on what you can control

staythecourse
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Re: Not investing through your 30's

Post by staythecourse » Sun Dec 24, 2017 8:45 am

Most folks in life do not have the financial resources to do whatever they want. They don't have the ability to enjoy their youth not caring about saving and then just decide to save at 40 something and then save enough before many time forced ER to have a comfortable life from 50's to 90 something.

Life is all about tradeoffs. I can GUARANTEE you will be trading one off for the other. You have to choose what is more important because you won't be doing both. I give you a hint and ask anyone in their 50's now what the decision should be and they will all say the same.

Good luck.

p.s. If you need any more pushing just google the usual chart on how much money you need to save each year to get to 1 million at 60 (or whatever) to see the effects of compounding or lack there of.
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Re: Not investing through your 30's

Post by GoldenFinch » Sun Dec 24, 2017 8:54 am

You’re not “stashing it away until you’re 65.” You are saving a bit now so you don’t have to save EVERYTHING when you’re 48 or 54 and realize you haven’t saved anything. Scale back your savings a bit to 15% or even 10% if you feel overburdened, but stopping saving altogether just pushes off the pressure to later.

My advice is keep savings set on automatic and switch your focus away from finances to enjoying or developing extracurriculars in your life. Extracurriculars is probably the wrong word, but I mean fun things to do outside of work, and they don’t have to cost a lot of money.

sambb
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Re: Not investing through your 30's

Post by sambb » Sun Dec 24, 2017 9:00 am

I do believe in living in the moment, but in ones 30s, i would sock away as much as you can. Expenses creep up massively (home expense,kids, taxes, etc.). If you spend, you will like the things you buy. But you will regret it when you look at your bank balance.
The US has had entire decades when stocks did not move much. What happens in one's 40s if that happens? You have time on your side now. Save as much as you can and develop good money habits.

Exception: you know in advance that you will never get disabled, divorced, lose your job, inflate your lifestyle, AND you decide to work until 75. If that happens, then you could consider making your 30s into your 20s.
Last edited by sambb on Sun Dec 24, 2017 9:14 am, edited 1 time in total.

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ClevrChico
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Re: Not investing through your 30's

Post by ClevrChico » Sun Dec 24, 2017 9:11 am

What happens if your career stagnates at 40 and you can never catch up? I've seen it happen multiple times due to bad luck. And, there's always injury, illness, or something as simple as throwing out one's back.

Giving up twenty years of investment growth seems foolish.

RRAAYY3
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Re: Not investing through your 30's

Post by RRAAYY3 » Sun Dec 24, 2017 9:16 am

I don’t spend a dime Monday - Thursday

(Coffee, meals all eaten / prepped at home, etc) then spend whatever I want on the weekends (I give myself a $1000 “fun fund” each month allowance)

After bills, I’m usually able to save/invest a third of my net income while very much enjoying life

It’s the little things people waste money on that add up - I can’t even imagine what people in my office waste on Starbucks / ordering lunch 5 Days / week

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Re: Not investing through your 30's

Post by H-Town » Sun Dec 24, 2017 9:23 am

Keepcalm wrote:
Sun Dec 24, 2017 6:48 am
I often trace the thought of holding off until 40 to begin investing in order to boost enjoyment through the 30's. I say this because it is often a time when one is getting their feet on the ground both professionally and also as a home owner. Thats a good chunk of change towards a home. For those who chose to travel and see he world this would also prove valuable as it is a good chunk of change to enjoy traveling and creating the memories.

I suppose my justification would be that once you hit 40 your income would be higher allowing you to invest more than you would through your 30's. In addition to this it sounds cliche but we do only live once. The thought of stashing away all this income to have when I'm 65 does not align with my thought process.

Maybe I'm off my rocker, I'm just thinking out loud here.
Do whatever make you happy. Have principles on personal finance and live your life on those principles and with conviction.

You won't have much money save. Your chance to be financial independence in your 40s and 50s is very slim.

But think about this: a lot of people don't have to sacrifice their 30's in order to save. I save from my very first paycheck when I was a freshman in high school until now and keep saving, rain or shine. I don't think you have "pay yourself first" principles in your thought process. And this is the biggest hurdles preventing you from being financial independence. There are many people out there who got trapped in the rat race and live paycheck to paycheck: do you want to be one of them?

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jadd806
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Re: Not investing through your 30's

Post by jadd806 » Sun Dec 24, 2017 9:53 am

Keepcalm wrote:
Sun Dec 24, 2017 8:07 am
I feel like I'm a miser. I do not make a lot but its all relative. You can make 30K a year and still be a miser. I try to hoard it. I stare at Quicken. I stare at YNAB. I constantly read about it in books and I feel like its taken priority over my life instead of enjoying it.

It almost feels like a disorder.
Are you new to saving and investing? If so I'd say it's relatively "normal".

I started 2.5 years ago. For the first year or so I felt the same. I was constantly checking my Mint account, playing with my budgeting spreadsheet, reading about investing on the internet, etc.

One of the benefits of the Bogleheads way is to simplify investing as much as possible such that one doesn't need to spend all of that time thinking about it. Nothing you are doing is "actionable." Put the finances on autopilot and spend your time doing other activities that you enjoy. Limit yourself to monthly reviews of your finances.

stoptothink
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Re: Not investing through your 30's

Post by stoptothink » Sun Dec 24, 2017 10:07 am

simplesimon wrote:
Sun Dec 24, 2017 7:46 am
stoptothink wrote:
Sun Dec 24, 2017 7:38 am
And...when did this conversation switch to the 30's? Not enough "living" in your 20's that the YOLO mindset needs to be maintained another entire decade?
Giving most of them the benefit of the doubt...the job market is flooded with fresh college grads each year trying to fill more openings than there actually are...they either take low paying jobs or go to grad school or both, thus delaying the fun they were supposed to have in their 20's.
I'm mid-30's myself, and spent literally all of my 20's in school (finished my PhD at 31) or putting someone else through school (putting ex-wife through undergrad and dental school). I managed to have plenty of fun before I hit 30 while learning my biggest investing lesson (lost 6-figures in real estate market crash), personal lesson (divorce, which again cost me a lot of money), and still managed to save/invest a bit and I was never remotely high-income. Now in my 30's I am actually making it count. If you don't see the point in investing in your 20's it is going to be a little more difficult in your 30's, and probably really difficult in your 40's. Start small, maybe just focus on getting a 401k match early on and it becomes progressively easier to progressively ramp it up. On the other hand, lifestyle creep is real; it is really hard to cut back once you are accustomed to certain things.

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CyclingDuo
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Re: Not investing through your 30's

Post by CyclingDuo » Sun Dec 24, 2017 10:33 am

Keepcalm wrote:
Sun Dec 24, 2017 6:48 am
I often trace the thought of holding off until 40 to begin investing in order to boost enjoyment through the 30's. I say this because it is often a time when one is getting their feet on the ground both professionally and also as a home owner. Thats a good chunk of change towards a home. For those who chose to travel and see he world this would also prove valuable as it is a good chunk of change to enjoy traveling and creating the memories.

I suppose my justification would be that once you hit 40 your income would be higher allowing you to invest more than you would through your 30's. In addition to this it sounds cliche but we do only live once. The thought of stashing away all this income to have when I'm 65 does not align with my thought process.

Maybe I'm off my rocker, I'm just thinking out loud here.
http://www.businessinsider.com/amazing- ... est-2014-7

One of my favorite graphs that I share with my own children (ages 22 and 24 who both started saving a few years ago):

You Can Pay Me Now, Or You Can Pay Me Later!

Image

My 22 year old daughter went into her new job with a bare minimum target of saving $416.58 per month (between her contribution and the employer's contribution). She has averaged a combined contribution of $465 a month in her employer sponsored plan this year (Vanguard Target 2060 Fund). On top of that, she is stashing away $458.33 per month into her Roth IRA.

That won't stop her from traveling and enjoying the world in her 20's and 30's as she has made the choice to build it into her budget to save in the 15-22% range as well as enjoy life. We did the same, as you only get one shot at this journey. Enjoy and save.

As examples of the married filing jointly crowd who never really crawled out of the middle of the 25% tax rate in terms of our salaried income...

After 32+ years of working, traveling, vacationing, sending two kids to college we find ourselves utilizing our empty nest situation (and the lowered expenses that provides us) to boost our savings per the graph above for a 55 year old (maxing out our 403b's, maxing out Roth IRA's, mandatory pension contributions, and saving an additional $400 per month into the slush fund/vacation fund). We were not able to save at this kind of level on our dual income with two children the past 23 years, so it is nice to utilize the strategy for our final working years. At least for those of us who have spent a career where our income never crawled above the 25% tax rate, owned a home, maxing things out were not very feasible during the kids at home years. Our history included the strategy of saving early and often from age 22 - 35, then living the family life to the fullest once we had kids (where we were still saving all along the journey, but not at maximum levels), and now super boosting with the years we have left.

Could we have saved more in our very early years? Sure. Are we attempting to pass on what we have learned to our own children about the power of compounding and saving early? Yes.

Although the 6% may be conservative in the graph above, here is how much you would have to save at various rates of return.

Image

http://www.businessinsider.com/compound ... 6xcEI1dWVh
Last edited by CyclingDuo on Sun Dec 24, 2017 2:05 pm, edited 4 times in total.
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snarlyjack
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Re: Not investing through your 30's

Post by snarlyjack » Sun Dec 24, 2017 10:39 am

Keepcalm,

Representing the FIRE community (Financial Independence/Retire Early).
I can show you literally "ton's" of people who have accumulated enough
money in their 30's to retire early.

I suggest you check out:
1). Rock Star Finance.com
2). Mr Free At 33.com
3). Mr Money Mustache.com
There must be a 100 different web sites for you to enjoy & learn.

Best of luck to you...

aristotelian
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Re: Not investing through your 30's

Post by aristotelian » Sun Dec 24, 2017 10:46 am

If you max a Roth IRA at age 20 and let it grow for 40 years your expected return is something like 100k. You get more bang for your buck the earlier you start. Personally I would love to retire now at age 42 and spend more time with my kids.

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Watty
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Re: Not investing through your 30's

Post by Watty » Sun Dec 24, 2017 11:20 am

Keepcalm wrote:
Sun Dec 24, 2017 6:48 am
I often trace the thought of holding off until 40 to begin investing in order to boost enjoyment through the 30's. I say this because it is often a time when one is getting their feet on the ground both professionally and also as a home owner. Thats a good chunk of change towards a home.
Investing enough to get any employers 401k match is the simplest choice you will ever have and should start in as so as you access to a match even if you are only 18 and start your first job right out of high school.

With the home ownership in mind you might change your statement from "investing" to "building net worth" which should start as soon as you have your first job even if start out with student loans and a negative net worth.
Keepcalm wrote:
Sun Dec 24, 2017 6:48 am
I suppose my justification would be that once you hit 40 your income would be higher allowing you to invest more than you would through your 30's.
If you have kids your expenses will also likely be the highest in your 40's and 50's. I actually cut back on my retirement savings when my kid was in college so that I could pay for some of the college expenses out of my cash flow.

It will vary by what field you are in but in many fields your peak earning years are in your late 40's and early 50's and after that your inflation adjusted wages tend to decline.

https://en.wikipedia.org/wiki/Peak_earning_years

When I went through my 50's I was lucky but I also saw a lot more people than I would have expected run into major health problem, the death of a spouse, career problems like getting laid off, etc. You really can't count on being able to work until you are 65.
Keepcalm wrote:
Sun Dec 24, 2017 6:48 am
Maybe I'm off my rocker, I'm just thinking out loud here.
Two things I did when I was about that younger that worked for me.
1) I had about 2% of my paycheck automatically deposited to a seperate account which was my travel and fun fund. This helped me budget my money so I could pay for the things I wanted and not just decide, "I deserve a trip somewhere."

2) I committed to myself to save half of any raises that I got. This made the additional saving painless since I was not use to the money and I still had half the raise to spend. This made getting to the point where I was saving 20% if my income painless.
Keepcalm wrote:
Sun Dec 24, 2017 6:48 am
For those who chose to travel and see he world this would also prove valuable as it is a good chunk of change to enjoy traveling and creating the memories.
When you are relatively young and don't have kids traveling really does not need to be all that expensive so you might want to research how to travel frugally. It does not need to be a budget buster and can be more of a trade off like you would rather cut some other expense like driving a real modest car so you can afford to travel more.

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Re: Not investing through your 30's

Post by KlangFool » Sun Dec 24, 2017 11:23 am

livesoft wrote:
Sun Dec 24, 2017 7:41 am
We invested a large percentage of our income through our 30's and 40's which allowed us to travel extensively in our 50's when early retired.

But we also travelled extensively in our mid 20's when our income was quite low. I was a post-doc and my spouse was not working in her profession while we lived overseas. We had no money, so we had to travel extremely cheaply.

So I would say that one can travel and keep investing. The problem is the amount of time that one has and not really the money.
+1000.

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Nate79
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Re: Not investing through your 30's

Post by Nate79 » Sun Dec 24, 2017 11:34 am

Not sure why you would want to be like the financially ignorant masses who are broke, in debt up to their ears and then find out in their 40s they dug themselves into a hole and no way out.

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Re: Not investing through your 30's

Post by TIAX » Sun Dec 24, 2017 11:46 am

Nate79 wrote:
Sun Dec 24, 2017 11:34 am
Not sure why you would want to be like the financially ignorant masses who are broke, in debt up to their ears and then find out in their 40s they dug themselves into a hole and no way out.
Right. See, for example, this article re compounding. You'll need to save much much more due to the decreased time for compounding. No one here is arguing you shouldn't travel but, surely, you can do both.

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whodidntante
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Re: Not investing through your 30's

Post by whodidntante » Sun Dec 24, 2017 11:47 am

You are on to something I think. Some people I know well seem to view retirement as a cliff. Meaning you save and save, and then you stop working and do all the things you really wanted to do with your life. Invariably, this includes "travel." When you are old and getting feeble, and would probably rather just stay home more often than not.

But there is also the time value of money aspect and their will always be limits to your resources and your cash flow can only support so much investment. It's much easier to get there if you start young.

To me, a balanced approach is more sensible than either extreme. Save "enough" each year, around 15% including the match. But take the trips while you are young, buy a house, whatever. Accelerate as you are able. Probably the main advice I would give to the young is to invest in yourself. Financial goals are more difficult if you never make a good income, and it's more likely you will make a good income if you have a strategy to get there.

RootSki
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Re: Not investing through your 30's

Post by RootSki » Sun Dec 24, 2017 11:53 am

Miss out on a decade of growth?

No thanks. :oops:

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CyclingDuo
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Re: Not investing through your 30's

Post by CyclingDuo » Sun Dec 24, 2017 11:58 am

aristotelian wrote:
Sun Dec 24, 2017 10:46 am
If you max a Roth IRA at age 20 and let it grow for 40 years your expected return is something like 100k. You get more bang for your buck the earlier you start. Personally I would love to retire now at age 42 and spend more time with my kids.
I am trying to figure out where the figure of $100k came from?
Last edited by CyclingDuo on Sun Dec 24, 2017 12:14 pm, edited 1 time in total.
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Ron Ronnerson
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Re: Not investing through your 30's

Post by Ron Ronnerson » Sun Dec 24, 2017 12:08 pm

Compound interest is powerful. Small savings early on can grow into large sums. There isn't one formula to success but just be aware of the trade-offs. Save a little now or a lot more later. Either way will work.

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Kenkat
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Re: Not investing through your 30's

Post by Kenkat » Sun Dec 24, 2017 12:14 pm

I would say one of the single best financial moves I ever made was to start saving in my early 20’s. That money has grown and grown and has given me a lot of flexibility later in life when it may not be as easy to save due to children, etc.

Keepcalm
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Re: Not investing through your 30's

Post by Keepcalm » Sun Dec 24, 2017 12:16 pm

This thread really put things into perspective for me. Cheers.

WL2034
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Re: Not investing through your 30's

Post by WL2034 » Sun Dec 24, 2017 12:23 pm

As with many things in life, balance is key. Would definitely not recommend waiting until 40 to start saving for retirement. What if you burn out and want to retire early? What if you get sick and can't work? What if your skills aren't in demand and you are chronically under-employed or unemployed?

Also, would definitely not recommend waiting until a certain age (40, 50, 65) to start traveling. Decide where and how you want to travel, how much it costs, and decide how to make it work.

The travel / saving balance depends on your travel goals, tentative retirement age, and income.

If your goal is to rent an RV and drive to national parks for 2 weeks each summer, you want to retire at 60, and you make $200k/yr -- you're in great shape!

If your goal is to take a luxury trip around the world in your 30's, you want to retire at 50, and you make $35k/year -- obviously something will need to be adjusted.

SundayMorning
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Re: Not investing through your 30's

Post by SundayMorning » Sun Dec 24, 2017 12:24 pm

OP, I am your future self if you choose that course. Take a good look at that graph above. In my late forties, I am swimming up hill against the current, with an anchor tied around my waist. :oops:
If I had only invested 15% from my first "real job" in my 20's, through run ups and crashes. I might be cruising more comfortably now with the wind at my back and some significant compounding horsepower.

Still possible to fully reach my FI goals, but I am having to do it the very hard way. It's now a race between my FI and when Mega Corp either automates or off shores my job to irrelevance. AI is already threatening my service line.

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rocket354
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Re: Not investing through your 30's

Post by rocket354 » Sun Dec 24, 2017 12:29 pm

A couple things:

1) Einstein most likely never said anything about compound interest being the eighth wonder of the world.

While financial salesmen (that many on this site abhor) have latched onto and continue to propagate this popular myth in order to make more sales and seem more important, I would hope a site like this wouldn't have the quote in their wiki without performing a little more in-depth research than blindly trusting in the industry it tries to disrupt.

(Summary: Einstein died in 1955, and the given quote has many forms and cannot be found anywhere before 1983, and never has any context. As well, anyone who has read or knows anything about Einstein the person would be immediately skeptical of the quote--he was wise and succinct, but not much of one for financial matters or for hyperbole, in general)

2) I used to teach a section on basic financial math to college freshman. I would always do an example of two people: person A and person B. Person A starts saving for retirement at $400/month for 10 years, from 25-35, then stops saving and lets the amount compound for another 30 years until age 65 (I usually assumed a 7% rate of return). Person B saved nothing from 25-35, then saved $400/month for thirty years, from 35-65, at that same 7%. Who has more money? Person A, of course, despite only actually saving for 1/3 the time as person B.

Moral: start early and save as much as you can. Kids, jobs (or lack thereof), health issues, divorce, other unexpected calamities, and so forth, can all throw a wrench in your plans to start saving at 40, or being able to save enough--your margin of error is much smaller.

Don't treat saving as an all or nothing deal. The options are not either "travel" or "save" it's a balance between how much you do of each.

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Re: Not investing through your 30's

Post by aristotelian » Sun Dec 24, 2017 12:42 pm

CyclingDuo wrote:
Sun Dec 24, 2017 11:58 am
aristotelian wrote:
Sun Dec 24, 2017 10:46 am
If you max a Roth IRA at age 20 and let it grow for 40 years your expected return is something like 100k. You get more bang for your buck the earlier you start. Personally I would love to retire now at age 42 and spend more time with my kids.
I am trying to figure out where the figure of $100k came from?
Just a simple calculation of $5,500 compounded annually at 8%. 10% gives $250K.

Portfoliovisualizer actually says $270K as the 50th percentile outcome but I just use $100k as a conservative back of the napkin number to impress new investors with the power of compounding.

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CyclingDuo
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Re: Not investing through your 30's

Post by CyclingDuo » Sun Dec 24, 2017 12:47 pm

aristotelian wrote:
Sun Dec 24, 2017 12:42 pm
CyclingDuo wrote:
Sun Dec 24, 2017 11:58 am
aristotelian wrote:
Sun Dec 24, 2017 10:46 am
If you max a Roth IRA at age 20 and let it grow for 40 years your expected return is something like 100k. You get more bang for your buck the earlier you start. Personally I would love to retire now at age 42 and spend more time with my kids.
I am trying to figure out where the figure of $100k came from?
Just a simple calculation of $5,500 compounded annually at 8%. 10% gives $250K.

Portfoliovisualizer actually says $270K as the 50th percentile outcome but I just use $100k as a conservative back of the napkin number to impress new investors with the power of compounding.
Ah, now I get it. You were talking about a one time only $5500 investment. I was thinking along the lines of an annual $5500 Roth IRA investment (plus the current law catch up of $6500 per year beginning at age 50).
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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rocket354
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Re: Not investing through your 30's

Post by rocket354 » Sun Dec 24, 2017 12:55 pm

aristotelian wrote:
Sun Dec 24, 2017 12:42 pm
CyclingDuo wrote:
Sun Dec 24, 2017 11:58 am
aristotelian wrote:
Sun Dec 24, 2017 10:46 am
If you max a Roth IRA at age 20 and let it grow for 40 years your expected return is something like 100k. You get more bang for your buck the earlier you start. Personally I would love to retire now at age 42 and spend more time with my kids.
I am trying to figure out where the figure of $100k came from?
Just a simple calculation of $5,500 compounded annually at 8%. 10% gives $250K.

Portfoliovisualizer actually says $270K as the 50th percentile outcome but I just use $100k as a conservative back of the napkin number to impress new investors with the power of compounding.
I like this idea, and think it can be a very powerful tool for explaining the power of compounding. I like to think of my contributions as multiples in retirement--the earlier you start, the more you have. As an example, if you assume 6% real return, $5500 at age 25 will be around $56,000 at age 65, for a multiple of about 10x. So for every dollar you save, your corresponding multiples are (by age 65, and rounded):

25: 10x
30: 8x
35: 6x
40: 4x
45: 3x
50: 2.5x
55: 1.8x
60: 1.3x

So any dollar you put off saving from 25 to 35 costs you 4x that amount in value. Spending that extra $3000 at age 25 is really spending $30,000. Thinking of it that way really makes one think more carefully about each dollar. (If I had a dollar for every time someone said "but doing x is only an extra few bucks! Don't sweat it!" I'd already be able to retire...)

aristotelian
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Re: Not investing through your 30's

Post by aristotelian » Sun Dec 24, 2017 12:58 pm

CyclingDuo wrote:
Sun Dec 24, 2017 12:47 pm
aristotelian wrote:
Sun Dec 24, 2017 12:42 pm
CyclingDuo wrote:
Sun Dec 24, 2017 11:58 am
I am trying to figure out where the figure of $100k came from?
Just a simple calculation of $5,500 compounded annually at 8%. 10% gives $250K.

Portfoliovisualizer actually says $270K as the 50th percentile outcome but I just use $100k as a conservative back of the napkin number to impress new investors with the power of compounding.
Ah, now I get it. You were talking about a one time only $5500 investment. I was thinking along the lines of an annual $5500 Roth IRA investment (plus the current law catch up of $6500 per year beginning at age 50).
Exactly. Just trying to make sure OP understands the value of starting early as an investor, so the question is what would be the value of one year's Roth contribution with 40 years of compounding.

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Re: Not investing through your 30's

Post by Toons » Sun Dec 24, 2017 1:27 pm

Invest You Must.
As Soon As Possible.
The clock is ticking.
The economy is humming along
Every second ,minute,hour ,day etc.
You have a "finite" amount of time on this earth.
Put the compounding machine to work for you while you are "here".
Time NOT Timing
:mrgreen:
"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: Not investing through your 30's

Post by snarlyjack » Sun Dec 24, 2017 1:45 pm

Keepcalm,

Here is a short list of FIRE bloggers that you might find interesting.
Physician On Fire is a Boglehead & is very educational.
I would also suggest that you read JLCollins.com web site (it's super good & he's a Boglehead with Vanguard).

Enjoy...

https://www.financiallyalert.com/10-pro ... must-read/

http://jlcollinsnh.com/stock-series/

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bligh
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Re: Not investing through your 30's

Post by bligh » Sun Dec 24, 2017 2:07 pm

Keepcalm wrote:
Sun Dec 24, 2017 8:07 am
I invested 12K this year, I make 60K.

Not a single dime went into "I want to stop renting at some point" fund. All 12K right into Vanguard.

I feel like I'm a miser. I do not make a lot but its all relative. You can make 30K a year and still be a miser. I try to hoard it. I stare at Quicken. I stare at YNAB. I constantly read about it in books and I feel like its taken priority over my life instead of enjoying it.

It almost feels like a disorder.
I think you are doing great. I empathize with your situation and sometimes feel the same way. Seeing as I can identify with your personality (it sounds a little like mine), the following may be helpful to you...

If I were you, I would set concrete goals or milestones, and then treat myself with having met them.

Do you have a 6 month emergency fund? Once that is done, the next 3-5K can go towards a vacation or some other reward.

Did you contribute enough to your 401K to get the full company match this year? The next grand you save can go into your "fun account"

Did you max out your Roth IRA this year? The next grand you save can go into your "fun account"

The "fun account" can be spent on whatever you like. Travel, toys, gifts, .. completely guilt free spending.

Yes, this turns it into a game. It would let me balance my responsibilities to save with my desire to enjoy life right now. It lets me spend knowing that I am meeting my financial goals. It also nudges me to penny pinch on the things that matter less to me (by encouraging me to save aggressively), while spending guilt free on the things that matter more to me.

Hope this helps. Keep up the excellent work you did this year. I will echo what rocket354 and others have described so well, every $1 you save now, will mean having to save $3 less in the future.
Last edited by bligh on Sun Dec 24, 2017 2:34 pm, edited 1 time in total.

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catdude
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Re: Not investing through your 30's

Post by catdude » Sun Dec 24, 2017 2:08 pm

I'm one of these folks who didn't start investing till I was 40. Dumb! :oops: I didn't make much money in my 20's & 30's, but I could've saved something... In my 40's & 50's I had to save 35-40% of my income to make up for lost time. And I never really caught up. I live fairly modestly -- which is OK, I'm a Boglehead, I don't need all that much to be happy. But my standard of living would be higher if I'd started saving and investing sooner.
catdude | | All generalizations are false, including this one.

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Re: Not investing through your 30's

Post by Dottie57 » Sun Dec 24, 2017 2:15 pm

Keepcalm wrote:
Sun Dec 24, 2017 6:48 am
I often trace the thought of holding off until 40 to begin investing in order to boost enjoyment through the 30's. I say this because it is often a time when one is getting their feet on the ground both professionally and also as a home owner. Thats a good chunk of change towards a home. For those who chose to travel and see he world this would also prove valuable as it is a good chunk of change to enjoy traveling and creating the memories.

I suppose my justification would be that once you hit 40 your income would be higher allowing you to invest more than you would through your 30's. In addition to this it sounds cliche but we do only live once. The thought of stashing away all this income to have when I'm 65 does not align with my thought process.

Maybe I'm off my rocker, I'm just thinking out loud here.

Do much of what you want but in a less expensive and more thoughtful way. Maybe if you want to travel, join thr Foreign Service. Work in places you want to create memories in. Travel - stay in hostels , or small hotels.

Making memories does not need to cost a lot of money.

My opinion -saving for your retirement should be automatic. You won't be very happy with yourself in 30 years unless you win the lottery.

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Re: Not investing through your 30's

Post by 3CT_Paddler » Sun Dec 24, 2017 2:26 pm

I always find it odd that the two choices presented are to live like a miser or travel the world on expensive vacations. Some of the best vacations I have been on were not the most expensive or exotic or distant. They included people I cared about. There is adventure and a life worth living to be had without seeing exotic locations.

Some on here take saving to an extreme... take a balanced approach in your 30s (save 10%) and beyond.

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Re: Not investing through your 30's

Post by randomguy » Sun Dec 24, 2017 3:06 pm

3CT_Paddler wrote:
Sun Dec 24, 2017 2:26 pm
I always find it odd that the two choices presented are to live like a miser or travel the world on expensive vacations. Some of the best vacations I have been on were not the most expensive or exotic or distant. They included people I cared about. There is adventure and a life worth living to be had without seeing exotic locations.

Some on here take saving to an extreme... take a balanced approach in your 30s (save 10%) and beyond.

People are drawn to extremes. The moderate approach of saving 10-20% fits mosts people's needs better but it will not generate web traffic like saying save 50%. There is money to be made in selling fear (save 50% in case you can't get a job at 45) or happiness (you only live once)

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Re: Not investing through your 30's

Post by getthatmarshmallow » Sun Dec 24, 2017 4:28 pm

Keepcalm, I completely get where you're coming from, in my late 30s. What's challenging about being responsible as millenial/xennial is that it feels like the so-called rules keep changing: parents tell you to go to college so you can get a good job, and economy crashes as you graduate. Be responsible and live at home to save money and then read endless articles whining about how you haven't launched. And it starts to feel like you never get to see the results of working hard.

But, it's worth it. I started saving while in grad school and investing at 31, and I'm not rich by this board's standards or anyone's really (but I'll be financially independent at 60, maybe earlier if I go superfrugal .) But I paid off my minimal student loans as soon as I finished, bought at house at 31, kept a decent emergency fund, and put my spouse through college for a career change three years ago, during which time we bought two cars and had two kids. And I make less than you. Savings bought me flexibility.

That said, I think you can probably find the wiggle room that you need. It sounds like you want to save for retirement, save for a house, and be able to travel. If I were you, I'd keep socking away the 15-20% toward retirement (including the match), and then look at your other expenditures to find the money for travel/savings. If you're single, travel can be cheap, especially if you can afford to be flexible on timing. So it might be the kind of thing where you finance your yearly vacation by eating out a few times less per week, or get a roommate to cut rent in half and put the change toward a house.

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