At what NW do I have disposable income?

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michaeljc70
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Re: At what NW do I have disposable income?

Post by michaeljc70 » Sat May 18, 2019 7:27 pm

I commented above, but after thinking about it some more, disposable income is what you have after essential expenses. Savings is not one of them in my view. Savings comes out of disposable income.

Pomegranate
Posts: 91
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Re: At what NW do I have disposable income?

Post by Pomegranate » Sat May 18, 2019 7:35 pm

B4Xt3r wrote:
Sat May 18, 2019 4:49 pm
DonIce wrote:
Sat May 18, 2019 4:36 pm
B4Xt3r wrote:
Sat May 18, 2019 4:25 pm
I'm unsure I agree. In this moment I would say that, until you can also meet these basic needs (shelter, food, etc.) in retirement, you do not have fully disposable income.
People on this forum are often worried about poverty in their retirement. And so they live very frugally and save a lot for retirement. But the reality is that anyone who worked a decade or two at a decent income in their life and knows how to be frugal, could have a perfectly fine retirement from social security alone. Most Americans retire with barely any retirement savings or pensions of any kind besides social security. The median savings that people have going into retirement is ~$100k, or enough to provide about $300/month at a 4% withdrawal rate, small compared to the average social security check which is ~$1500/month. Most of these people have perfectly fine retirements on that amount.

If you save and invest 10% or more of your income regularly, you'll be just fine.
Yes, this is true. Please note that I have made a personal choice to not rely on a future tax policy that future workers might not wish to continue.
Well, future workers/politicians can decide to tax your IRA/401k/SS distributions at 95% level. What's next :confused

The Wizard
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Location: Reading, MA

Re: At what NW do I have disposable income?

Post by The Wizard » Sat May 18, 2019 9:03 pm

greg24 wrote:
Sat May 18, 2019 6:09 pm
You should save at least 80% of your income until your NW is over $5M.

Until then, you have zero disposable income.
Yes.
This is the winning answer!

And that's 80% of GROSS income...
Attempted new signature...

KandT
Posts: 82
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Re: At what NW do I have disposable income?

Post by KandT » Sat May 18, 2019 9:25 pm

MnD wrote:
Sat May 18, 2019 1:18 pm
It seems that frugal/cheap/miser types that spent their entire working lives prioritizing above all else building huge cash mountain for 100% financial independence commonly find themselves unable to spend any of it when reaching retirement. By their own admission they commonly state here they now view their portfolio for "financial security", derive little or no enjoyment from spending and expect most or all to go to heirs/charity after they pass. So if that's the road your choosing - I'd say you'll never have disposable income.
Yes I have seen this happen. Literally someone died from a heart attack right as they were getting ready to retire into a mountain of money. He had taken me aside and told me how he did it about 6 months before. He was mentoring me.

Now we can all have bad luck but part of this story is the care he took of himself. He was way overweight and any doc could see this one coming. So to me, part of this retirement stuff is keeping my body healthy. Hopefully my mind stays with me!

NotWhoYouThink
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Re: At what NW do I have disposable income?

Post by NotWhoYouThink » Sat May 18, 2019 9:28 pm

The Wizard wrote:
Sat May 18, 2019 5:22 pm
Net worth has little to do with discretionary income, during working years or in retirement.

I used to save ~20% of gross for retirement and spend the rest with wild abandon.

Now in retirement, I spend even more.

It has to do with your level of income compared to Basic Expenses. If your Basic Expenses are $50,000 per year and your income is $100,000 per year, then you have a lot of discretionary income.
End of debate...
This about sums it up.

OP, you propose a term which you may have just made up, called "disposable income." Then you propose that you don't have any of this until you save enough to support your family through a retirement that starts at some indeterminate time at some indeterminate age with some indeterminate standard of living. And then you ask posters to confirm that your proposition is correct.

What are you asking, and what kind of advice would you even consider accepting? If you want to live like a miser so that you can stop working and live like a pauper, go for it. If you then want to not stop working but keep working and either saving more or spending more, go for it.

But if you have a real question buried in here that you want people to give considered answers to, you need to find a different way to ask it, because it's kind of a muddle so far.

chevca
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Re: At what NW do I have disposable income?

Post by chevca » Sat May 18, 2019 10:35 pm

B4Xt3r wrote:
Sat May 18, 2019 4:51 pm
chevca wrote:
Sat May 18, 2019 4:31 pm
B4Xt3r wrote:
Sat May 18, 2019 4:28 pm
MnD wrote:
Sat May 18, 2019 1:18 pm
It seems that frugal/cheap/miser types that spent their entire working lives prioritizing above all else building huge cash mountain for 100% financial independence commonly find themselves unable to spend any of it when reaching retirement. By their own admission they commonly state here they now view their portfolio for "financial security", derive little or no enjoyment from spending and expect most or all to go to heirs/charity after they pass. So if that's the road your choosing - I'd say you'll never have disposable income.
My opening post is essentially unrelated to people who spend their entire working lives prioritizing saving above all else.
Really? That's not the way it's reading to everyone else. Maybe you can explain more what you mean?
Clearer now?
I believe so. It seems to me you and your wife don't see eye to eye on this, and you came here to bring it up in hopes of finding some back up from BHs to bolster your thoughts on it. Sorry you're not getting that.

Find a balance between your thinking and your wife's thinking on this. There's the simple answer to your problem.

JGoneRiding
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Re: At what NW do I have disposable income?

Post by JGoneRiding » Sat May 18, 2019 11:28 pm

mmmodem wrote:
Sat May 18, 2019 1:53 pm
Call me cheap.

Disposable income or fun money begins after I've maxed out all tax advantages accounts. That's 38k for me. (6k his Roth, 6k her Roth, 19k 401k, and 7k HSA). Like paying AMT, I would love to have the problem of too much money. I would much rather have issues spending it than not having enough and burdening others with my retirement or convalescence. I am grateful that my parents sacrificed everything to allow me to be where I am today. Now I have to fund their retirement. My kids will have it one step better by not having to take care of their parents in retirement.

I don't use NW as a metric as it requires a retirement target. My goal is early retirement.

I am able to gather considerable enjoyment out of activities that are free or low cost. I'm hiking in the woods with my family at the moment. Cost is maybe $0.50 to drive over there in my 10 year of hybrid.
I have found hiking to be more expensive than advertised. $60 a year for passes maybe more, boots run $200 plus but we get 10 years return typically. Broke one pole that seems to be an eoy expense right now 20 to 50. Packs are really pricey! But we haven't had to replace any yet. Then the Dh always wants a bunch if snacks this tends to involve a fast stop so always about $20 to 30? (That we could so better on) and more often then not we are tired and stop to eat on the way home. If we do the ".mountain" that's another pass so another $30ish.

Yeah more than generally expressed!

On the maxing out for some people what they could max exceeds any sane "need" as it is more than the average Us yearly household income. For others its 6 to 12k for an IRA and that is all they have access to and clearly should save more. Though I would argue if you max an IRA to the limit every year after school you will have an ability to retire (not extravagant but above average)

So the OP. Pay your self first 10 to 15% starting at age 25 or before and never raid that money and invest it in a broad based index fund and never day trade and don't sell low and buy high. Every thing else after bills is disposable and should be enjoyed.

Topic Author
B4Xt3r
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Re: At what NW do I have disposable income?

Post by B4Xt3r » Sun May 19, 2019 6:42 am

Turbo29 wrote:
Sat May 18, 2019 7:07 pm
B4Xt3r wrote:
Sat May 18, 2019 4:49 pm
DonIce wrote:
Sat May 18, 2019 4:36 pm
B4Xt3r wrote:
Sat May 18, 2019 4:25 pm
I'm unsure I agree. In this moment I would say that, until you can also meet these basic needs (shelter, food, etc.) in retirement, you do not have fully disposable income.
People on this forum are often worried about poverty in their retirement. And so they live very frugally and save a lot for retirement. But the reality is that anyone who worked a decade or two at a decent income in their life and knows how to be frugal, could have a perfectly fine retirement from social security alone. Most Americans retire with barely any retirement savings or pensions of any kind besides social security. The median savings that people have going into retirement is ~$100k, or enough to provide about $300/month at a 4% withdrawal rate, small compared to the average social security check which is ~$1500/month. Most of these people have perfectly fine retirements on that amount.

If you save and invest 10% or more of your income regularly, you'll be just fine.
Yes, this is true. Please note that I have made a personal choice to not rely on a future tax policy that future workers might not wish to continue.
What if future workers decide to tax your mountain of retirement savings at an extreme rate?
I'll be hungry, most likely.

Topic Author
B4Xt3r
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Re: At what NW do I have disposable income?

Post by B4Xt3r » Sun May 19, 2019 6:45 am

Pomegranate wrote:
Sat May 18, 2019 7:35 pm
B4Xt3r wrote:
Sat May 18, 2019 4:49 pm
DonIce wrote:
Sat May 18, 2019 4:36 pm
B4Xt3r wrote:
Sat May 18, 2019 4:25 pm
I'm unsure I agree. In this moment I would say that, until you can also meet these basic needs (shelter, food, etc.) in retirement, you do not have fully disposable income.
People on this forum are often worried about poverty in their retirement. And so they live very frugally and save a lot for retirement. But the reality is that anyone who worked a decade or two at a decent income in their life and knows how to be frugal, could have a perfectly fine retirement from social security alone. Most Americans retire with barely any retirement savings or pensions of any kind besides social security. The median savings that people have going into retirement is ~$100k, or enough to provide about $300/month at a 4% withdrawal rate, small compared to the average social security check which is ~$1500/month. Most of these people have perfectly fine retirements on that amount.

If you save and invest 10% or more of your income regularly, you'll be just fine.
Yes, this is true. Please note that I have made a personal choice to not rely on a future tax policy that future workers might not wish to continue.
Well, future workers/politicians can decide to tax your IRA/401k/SS distributions at 95% level. What's next :confused
I'd be hosed.

Topic Author
B4Xt3r
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Re: At what NW do I have disposable income?

Post by B4Xt3r » Sun May 19, 2019 6:48 am

michaeljc70 wrote:
Sat May 18, 2019 7:27 pm
I commented above, but after thinking about it some more, disposable income is what you have after essential expenses. Savings is not one of them in my view. Savings comes out of disposable income.
I think I agree with this. I suppose what I am trying to say is that, of that discretionary income, shouldn't a vast supermajority of it go towards savings until I have secured for myself the basic living necessities should I become unable to work? (For the time being, I'm proposing that I at-least have a projected future networth at retirement age requisite to fund myself at the federal poverty level.

student
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Re: At what NW do I have disposable income?

Post by student » Sun May 19, 2019 6:50 am

chevca wrote:
Sat May 18, 2019 12:24 pm
Sounds pretty miserable to me.

Pay yourself first, pay your taxes, pay the bills, keep food on the table, gas in the car, save a little more, and spend some on yourself. No need to be miserable now for your future self. Who knows... you may not even make it to future self. Live below your means, save/invest, and you will be fine.
Agree. Great post.

Topic Author
B4Xt3r
Posts: 407
Joined: Thu Sep 29, 2016 5:56 am

Re: At what NW do I have disposable income?

Post by B4Xt3r » Sun May 19, 2019 7:16 am

MnD wrote:
Sat May 18, 2019 7:06 pm
B4Xt3r wrote:
Sat May 18, 2019 4:28 pm
MnD wrote:
Sat May 18, 2019 1:18 pm
It seems that frugal/cheap/miser types that spent their entire working lives prioritizing above all else building huge cash mountain for 100% financial independence commonly find themselves unable to spend any of it when reaching retirement. By their own admission they commonly state here they now view their portfolio for "financial security", derive little or no enjoyment from spending and expect most or all to go to heirs/charity after they pass. So if that's the road your choosing - I'd say you'll never have disposable income.
My opening post is essentially unrelated to people who spend their entire working lives prioritizing saving above all else.
I think you're just trolling but if not, numerous statements you've made such as "I derive current joy in the present by providing for my future self via saving" refute your position above.
I do often give the impression of trolling, but I don't intend to.

My position, perhaps more precisely clarified to you is that I assume the attitude of the frugal/cheap/miser type that you mentioned, for the period of time required to save a base minimum NW, but not longer.

Topic Author
B4Xt3r
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Re: At what NW do I have disposable income?

Post by B4Xt3r » Sun May 19, 2019 7:18 am

Watty wrote:
Sat May 18, 2019 6:05 pm
B4Xt3r wrote:
Sat May 18, 2019 5:44 pm
For lack of a better assumption, I have assumed that I'll continue working until roughly 65.
It is the part about also assuming that you will not save anything that I think is a problem.
I haven't assumed that, but I do understand what you wrote. It should also be restarted that I'm not holding this position until FI, but rather just until I won't have to eat cat-food for the rest of my life, lol.

Topic Author
B4Xt3r
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Re: At what NW do I have disposable income?

Post by B4Xt3r » Sun May 19, 2019 7:20 am

chevca wrote:
Sat May 18, 2019 10:35 pm
B4Xt3r wrote:
Sat May 18, 2019 4:51 pm
chevca wrote:
Sat May 18, 2019 4:31 pm
B4Xt3r wrote:
Sat May 18, 2019 4:28 pm
MnD wrote:
Sat May 18, 2019 1:18 pm
It seems that frugal/cheap/miser types that spent their entire working lives prioritizing above all else building huge cash mountain for 100% financial independence commonly find themselves unable to spend any of it when reaching retirement. By their own admission they commonly state here they now view their portfolio for "financial security", derive little or no enjoyment from spending and expect most or all to go to heirs/charity after they pass. So if that's the road your choosing - I'd say you'll never have disposable income.
My opening post is essentially unrelated to people who spend their entire working lives prioritizing saving above all else.
Really? That's not the way it's reading to everyone else. Maybe you can explain more what you mean?
Clearer now?
I believe so. It seems to me you and your wife don't see eye to eye on this, and you came here to bring it up in hopes of finding some back up from BHs to bolster your thoughts on it. Sorry you're not getting that.

Find a balance between your thinking and your wife's thinking on this. There's the simple answer to your problem.
The reason that I posted this was to stimulate an intellectual discussion about a topic that I find interesting. I'm not seeking marital advise.

international001
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Re: At what NW do I have disposable income?

Post by international001 » Sun May 19, 2019 7:48 am

politely wrote:
Sat May 18, 2019 6:11 pm
My spouse and I started our lives together with six figures of student debt. We eventually added six figures of mortgage debt. Not taking vacations and the occasional luxury during those early years because of our negative net worth would have been sad. We still talk about those early travels with fondness, and they have a special place in our relationship and shared memories. Coincidentally, we reminisced about one of our trips last night. Once we had kids, travel wasn't the same.

I think planning is important, but in our 20s and 30s, we could not have predicted our future income, assets, or spend - never mind the changes in careers, the kids and other major life events. The further you're out from retirement, the less accurate the numbers. Projecting forward with assets you actually have is hard enough, and I think most would agree that even that is still just an act of faith or hope.

Also, starting out, I would not have targeted the poverty line as my end-game or even baseline. Unless your income and future prospects are such that these numbers are aspirational, why would you start here? And if these are aspirational, perhaps a better use of your efforts and time may be in trying to change your future prospects?
+1

The general math problem is to maximize utility across your lifespan. This means having the same income while you work and when you are retired.
If you are single and work from 25 to 65 , if you save just 10%-15% of your after-tax you'll be fine

But things can happen later you cannot insurance your way out. You only mentioned a few. You also may get laid off, taxes may increase later, you may start hating your job and look for an earlier retirement. Things may become better than expected as well. So it becomes more of an heuristic problem you have to keep constantly adapting to.

If you are reasonably happy now, think it in terms of asymmetric risks. Saving a bit extra (let's say 30%) will not decrease your happiness now by much but *may* increase it a lot in the future.

cherijoh
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Location: Charlotte NC

Re: At what NW do I have disposable income?

Post by cherijoh » Sun May 19, 2019 8:48 am

B4Xt3r wrote:
Sat May 18, 2019 12:09 pm
Hi all,

I am wrestling with the question, at what NW do my wife and I have disposable income?

My only reply in this moment, is that I don't "really" have disposable income until I have at-least saved enough that my future retired selves at age 65 have a 4% withdrawal rate that could sustain the federal poverty level type income. Using 5.5% real growth, at age 30, this would require a networth of about 65k. At age 40, about $115k. At age 50, about $200k.

Perhaps after my future self will be beyond the federal poverty limit, I have some ability to dispose income towards other purposes. The actions that this analysis will influence is, for an example, how often and how extravagantly my wife and I travel.

I'm curious for other peoples answers for when disposable income begins. Thanks!
I have to ask, is your wife on the same page as you are? If not, you may be setting yourself up for an expensive adverse future event - divorce!

One issue that I have with your approach is that it is dependent on the valuation of your retirement savings at any given time (which is outside your control) rather than being based on your savings rate (which is fully within your control). This does not make a good metric. If the stock market is doing well, you may take the foot of the gas too soon; if the stock market is tanking, you may be unneccessarily worried about your current progress towards your goal.

I consider myself a somewhat frugal Boglehead. But my perspective has always been live below your means but not as though I were a totally broke graduate student. As a young investor, my target was to save 15% of my income in my workplace retirement plan (which at the time was the maximum allowed in the plan). I would set aside a small amount of each paycheck in my "fun/vacation" fund and use it when I was invited out for a fun activity or to budget for a vacation which I'd take when I knew I had enough money saved. (I don't carry credit card balances). As my salary increased through my 30s and 40s, I bumped up my savings to include IRAs (when they were introduced) and after-tax investing. But never to the point where I had no discretionary income.

One caveat is that I graduated without any college debt and a degree that was in high demand at the time. I was not scrambling to pay my monthly expenses. If you have to dig yourselves out of a hole of debt, then you might need to live like broke graduate students.

Xrayman69
Posts: 175
Joined: Fri Jun 01, 2018 8:52 pm

Re: At what NW do I have disposable income?

Post by Xrayman69 » Sun May 19, 2019 9:18 am

politely wrote:
Sat May 18, 2019 6:11 pm
My spouse and I started our lives together with six figures of student debt. We eventually added six figures of mortgage debt. Not taking vacations and the occasional luxury during those early years because of our negative net worth would have been sad. We still talk about those early travels with fondness, and they have a special place in our relationship and shared memories. Coincidentally, we reminisced about one of our trips last night. Once we had kids, travel wasn't the same.

I think planning is important, but in our 20s and 30s, we could not have predicted our future income, assets, or spend - never mind the changes in careers, the kids and other major life events. The further you're out from retirement, the less accurate the numbers. Projecting forward with assets you actually have is hard enough, and I think most would agree that even that is still just an act of faith or hope.

Also, starting out, I would not have targeted the poverty line as my end-game or even baseline. Unless your income and future prospects are such that these numbers are aspirational, why would you start here? And if these are aspirational, perhaps a better use of your efforts and time may be in trying to change your future prospects?
I agree and proceeding in a similar fashion. Started out with significant student debt, which was not a bad thing as that debt was seen as a major investment in ourselves. That investment in ourselves has subsequently shown to be similar to investing in a unicorn start up that is now and continues to pay off. Start ups start out only losing money and hopefully with reinvestment eventually pay off and hit the jack pot.

Early on when the net worth was negative and acquiring more debt in loan accrual and interest there was “joy” in the process and “hard work”. When the debt accrual was no longer being added (other than the continued interest) there was “joy” in now utilizing the results of the debt (education) early on to improve the value and practicality. Albeit the compensation was low there was still the application that spending a little on ourselves had value in refreshing the human spirit and diversifying our experiences beyond work. This spending such as a vacation or splurging on a night out at a dinner and show with others was investing in our continued “joy” of life and thus would translate into being a more well rounded individual who could relate and share life experiences with others. As a result job promotions and higher compensation continued to follow. Slowly but surely debt shrank and eventually reversed to positive.

When the net Worth became positive It was mainly the result of higher income and ability to save at high absolute number (as opposed to percentage of income). Shortly after having had a higher income and ability to save higher absolute numbers then the power of compound interest kicked/kicks in. Increasing income was CRITICAL in how our net worth was able to escalate. Our ability to increase income was directly related to our ability to project and truly feel joy in our daily personal and professional activities. Other people like people who have joy, passion, and can relate to others without preaching or being “know it alls”.


So I say to the the OP, hopefully you and your spouse have good health (mostly luck). After that be responsible in your spending lives. What percentage you save is based upon your personally unique situation. 15-30% is a good rule of thumb as prior post note but you also see within these numbers is a 100% range difference. Invest in yourselves, which includes refreshing the human spirit. This could mean a vacation once in a while or even that cup of Starbucks coffee as a reward for something well done. Your joy and happiness if true and relatable will translate into better relationships at work and in your community. This in turn may make your job or occupation or business be perceived in a better light and therefore may increase income.

Turbo29
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Re: At what NW do I have disposable income?

Post by Turbo29 » Sun May 19, 2019 10:11 am

B4Xt3r wrote:
Sun May 19, 2019 7:18 am
I haven't assumed that, but I do understand what you wrote. It should also be restarted that I'm not holding this position until FI, but rather just until I won't have to eat cat-food for the rest of my life, lol.
And if you do, you want it to be Fancy Feast instead of regular Friskies.

crossbow
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Re: At what NW do I have disposable income?

Post by crossbow » Sun May 19, 2019 10:27 am

B4Xt3r wrote:
Sat May 18, 2019 12:09 pm
Hi all,

I am wrestling with the question, at what NW do my wife and I have disposable income?

My only reply in this moment, is that I don't "really" have disposable income until I have at-least saved enough that my future retired selves at age 65 have a 4% withdrawal rate that could sustain the federal poverty level type income. Using 5.5% real growth, at age 30, this would require a networth of about 65k. At age 40, about $115k. At age 50, about $200k.

Perhaps after my future self will be beyond the federal poverty limit, I have some ability to dispose income towards other purposes. The actions that this analysis will influence is, for an example, how often and how extravagantly my wife and I travel.

I'm curious for other peoples answers for when disposable income begins. Thanks!
Net worth fluctuates if you're invested in the market. I learnt this last year. We hit our target NW ahead of time and splurged on a few luxury items to celebrate. At the end of the year, the market dipped and we had fallen wayyyyy short of where our 2018 NW was supposed to be. All of a sudden, our celebratory splurges felt incredibly dumb. In the past month, our NW has swung above our ANNUAL 2019 goal. We are not buying anything this time, but we'll rebalance and "lock in" some of that profit. So my takeaway is that NW is not a good indicator of how loose you can spend your money. Perhaps if your NW is mostly cash, yes. But if not, don't do it!

Also, you need to consider where you're located when you consider poverty limits. $65K in a VHCOL area might still render you homeless in a blink of an eye.

smitcat
Posts: 3415
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Re: At what NW do I have disposable income?

Post by smitcat » Sun May 19, 2019 10:45 am

mmmodem wrote:
Sat May 18, 2019 1:53 pm
Call me cheap.

Disposable income or fun money begins after I've maxed out all tax advantages accounts. That's 38k for me. (6k his Roth, 6k her Roth, 19k 401k, and 7k HSA). Like paying AMT, I would love to have the problem of too much money. I would much rather have issues spending it than not having enough and burdening others with my retirement or convalescence. I am grateful that my parents sacrificed everything to allow me to be where I am today. Now I have to fund their retirement. My kids will have it one step better by not having to take care of their parents in retirement.

I don't use NW as a metric as it requires a retirement target. My goal is early retirement.

I am able to gather considerable enjoyment out of activities that are free or low cost. I'm hiking in the woods with my family at the moment. Cost is maybe $0.50 to drive over there in my 10 year of hybrid.
"I am able to gather considerable enjoyment out of activities that are free or low cost."
That has also been true with us all these years,
But we also gather great enjoyment from activities and experiences that have moderate and expensive costs.
I would really not want to have missed any of these in the past or in the future.

jj
Posts: 219
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Location: Texas

Re: At what NW do I have disposable income?

Post by jj » Sun May 19, 2019 11:14 am

It seems to me that you are yearning for financial independence. Unfortunately, you have to walk before you can run. It is very difficult to become financially independent in your thirties without help from an inheritance or a stock-option windfall. It can be done with a healthy income and a super-frugal lifestyle.

Most people figure that building up an emergency fund of 6-12 months of living expenses for potential job loss is sufficient to help them take away the anxiety of potential destitution. Calculating that the emergency fund would tide them over in the event of un- or under-employment. If this fund needs to be higher for you, make it 18-24 months' expenses.

After that, save a minimum of 15% salary (could be 50%+) for (early) retirement and spend the rest. It is not a race... life is to be lived.
...it is madness to risk losing what you need in pursuing what you simply desire. Warren E. Buffett

basspond
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Re: At what NW do I have disposable income?

Post by basspond » Sun May 19, 2019 10:44 pm

nolesrule wrote:
Sat May 18, 2019 4:32 pm
B4Xt3r wrote:
Sat May 18, 2019 4:25 pm
basspond wrote:
Sat May 18, 2019 1:05 pm
When your income exceeds payments for shelter (only basic phone and internet, no streaming services or cable), food (at home), taxes, medical, basic transportation, 15% retirement savings, giving, and adequate insurance. Our non disposable income would be roughly 1/2 of our total income. Then multiply that yearly amount by 30 (minus the 15% savings). Anything above that your portfolio generates I would consider disposable.
I'm unsure I agree. In this moment I would say that, until you can also meet these basic needs (shelter, food, etc.) in retirement, you do not have fully disposable income.
Sounds miserable.
I am just saying that any spending over basic necessities is disposable and not not to spend disposable. I agree that would not be fun. We spend a lot of disposable.

Grt2bOutdoors
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Re: At what NW do I have disposable income?

Post by Grt2bOutdoors » Mon May 20, 2019 6:23 am

Pay your bills, whatever is leftover is your disposable income.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Topic Author
B4Xt3r
Posts: 407
Joined: Thu Sep 29, 2016 5:56 am

Re: At what NW do I have disposable income?

Post by B4Xt3r » Mon May 20, 2019 6:55 am

Grt2bOutdoors wrote:
Mon May 20, 2019 6:23 am
Pay your bills, whatever is leftover is your disposable income.
In one sense, I agree with this. In another sense, I view some base necessities later in life almost nearly the same as a bill that needs to be paid from the discretionary income first.

MathWizard
Posts: 3386
Joined: Tue Jul 26, 2011 1:35 pm

Re: At what NW do I have disposable income?

Post by MathWizard » Mon May 20, 2019 7:00 am

B4Xt3r wrote:
Sat May 18, 2019 12:09 pm
Hi all,

I am wrestling with the question, at what NW do my wife and I have disposable income?

My only reply in this moment, is that I don't "really" have disposable income until I have at-least saved enough that my future retired selves at age 65 have a 4% withdrawal rate that could sustain the federal poverty level type income. Using 5.5% real growth, at age 30, this would require a networth of about 65k. At age 40, about $115k. At age 50, about $200k.

Perhaps after my future self will be beyond the federal poverty limit, I have some ability to dispose income towards other purposes. The actions that this analysis will influence is, for an example, how often and how extravagantly my wife and I travel.

I'm curious for other peoples answers for when disposable income begins. Thanks!
I'm surprised that others are disagreeing with you. You are correct. Until you are financially independent, you are dependent, by definition. I've heard thatdescribed as being a wage slave.

However, short of being born as a "trust baby" , you are in the same shape as everyone else.

I started saving 15% of gross for retirement, then after we had 20% down for our house school loans were paid off, started increasing the percentage, putting half of all raises (net of taxes) towards savings.

For most of my career, this still meant we were spending 70 to 85% of our income. This still allowed me some spending for non necessary spending, but I did recognize that this meant that I would need to work a little longer.

I could retire now and meet base expenses including health insurance and taxes, but this is 30 years into my career.

Bacchus01
Posts: 2746
Joined: Mon Dec 24, 2012 9:35 pm

Re: At what NW do I have disposable income?

Post by Bacchus01 » Mon May 20, 2019 7:17 am

Grt2bOutdoors wrote:
Mon May 20, 2019 6:23 am
Pay your bills, whatever is leftover is your disposable income.
That is a very basic view of it and is correct.

I think the OP is looking for a guideline that states "Pay your taxes, pay your bills, save X, and then blow the rest."

That simply doesn't happen that way and to answer that question is really, really personal. Even the elements of each of those are personal. Are your bills truly required, or are some discretionary? Is the Netflix bill part of your living expenses, or is it disposable income? Hmmm. Is paying $750/month on that SUV your living expense, or is it disposable income? Hmmm.

Others here would suggest that if you aren't putting away 75% of your net income that you are frivolous.

mmmodem
Posts: 1593
Joined: Thu May 20, 2010 1:22 pm

Re: At what NW do I have disposable income?

Post by mmmodem » Mon May 20, 2019 7:34 am

Bacchus01 wrote:
Mon May 20, 2019 7:17 am
Others here would suggest that if you aren't putting away 75% of your net income that you are frivolous.
I don't read that suggestion at all. :shock: The most extreme recommendation that I come across on this forum is Klangfool's which is to save 100% of your yearly spending as a goal. Depending on your taxes, that's saving about 1/3 of your income. Some do save more than 1/3 of their salary but they don't put that out as a recommendation. It's a humble brag.

Bacchus01
Posts: 2746
Joined: Mon Dec 24, 2012 9:35 pm

Re: At what NW do I have disposable income?

Post by Bacchus01 » Mon May 20, 2019 9:11 am

mmmodem wrote:
Mon May 20, 2019 7:34 am
Bacchus01 wrote:
Mon May 20, 2019 7:17 am
Others here would suggest that if you aren't putting away 75% of your net income that you are frivolous.
I don't read that suggestion at all. :shock: The most extreme recommendation that I come across on this forum is Klangfool's which is to save 100% of your yearly spending as a goal. Depending on your taxes, that's saving about 1/3 of your income. Some do save more than 1/3 of their salary but they don't put that out as a recommendation. It's a humble brag.
What? It gets brought up all the time. Read more threads.

sailaway
Posts: 744
Joined: Fri May 12, 2017 1:11 pm

Re: At what NW do I have disposable income?

Post by sailaway » Mon May 20, 2019 9:24 am

Bacchus01 wrote:
Mon May 20, 2019 9:11 am
mmmodem wrote:
Mon May 20, 2019 7:34 am
Bacchus01 wrote:
Mon May 20, 2019 7:17 am
Others here would suggest that if you aren't putting away 75% of your net income that you are frivolous.
I don't read that suggestion at all. :shock: The most extreme recommendation that I come across on this forum is Klangfool's which is to save 100% of your yearly spending as a goal. Depending on your taxes, that's saving about 1/3 of your income. Some do save more than 1/3 of their salary but they don't put that out as a recommendation. It's a humble brag.
What? It gets brought up all the time. Read more threads.
It gets brought up as something ridiculous that is talked about on extreme sites, rather than something a reasonable boglehead would do.

smitcat
Posts: 3415
Joined: Mon Nov 07, 2016 10:51 am

Re: At what NW do I have disposable income?

Post by smitcat » Mon May 20, 2019 9:37 am

mmmodem wrote:
Mon May 20, 2019 7:34 am
Bacchus01 wrote:
Mon May 20, 2019 7:17 am
Others here would suggest that if you aren't putting away 75% of your net income that you are frivolous.
I don't read that suggestion at all. :shock: The most extreme recommendation that I come across on this forum is Klangfool's which is to save 100% of your yearly spending as a goal. Depending on your taxes, that's saving about 1/3 of your income. Some do save more than 1/3 of their salary but they don't put that out as a recommendation. It's a humble brag.
"The most extreme recommendation that I come across on this forum is Klangfool's which is to save 100% of your yearly spending as a goal. Depending on your taxes, that's saving about 1/3 of your income. Some do save more than 1/3 of their salary but they don't put that out as a recommendation. It's a humble brag."
These numbers and ratios are all variable due to personal income and many other variables - hardly valuable to compare % and ratios without any other data. And the 'humble brags' that do occur are at many levels which also serve no function for a reader.
And this ..."The most extreme recommendation that I come across on this forum is Klangfool's which is to save 100% of your yearly spending as a goal."
….is not nearly the most extreme - and that is the problem with ratios and %'s.

smitcat
Posts: 3415
Joined: Mon Nov 07, 2016 10:51 am

Re: At what NW do I have disposable income?

Post by smitcat » Mon May 20, 2019 9:38 am

sailaway wrote:
Mon May 20, 2019 9:24 am
Bacchus01 wrote:
Mon May 20, 2019 9:11 am
mmmodem wrote:
Mon May 20, 2019 7:34 am
Bacchus01 wrote:
Mon May 20, 2019 7:17 am
Others here would suggest that if you aren't putting away 75% of your net income that you are frivolous.
I don't read that suggestion at all. :shock: The most extreme recommendation that I come across on this forum is Klangfool's which is to save 100% of your yearly spending as a goal. Depending on your taxes, that's saving about 1/3 of your income. Some do save more than 1/3 of their salary but they don't put that out as a recommendation. It's a humble brag.
What? It gets brought up all the time. Read more threads.
It gets brought up as something ridiculous that is talked about on extreme sites, rather than something a reasonable boglehead would do.
Reading posts for a while now has me understanding that there are plenty of 'extreme' Bogleheads.

The Wizard
Posts: 13332
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: At what NW do I have disposable income?

Post by The Wizard » Mon May 20, 2019 9:50 am

Bacchus01 wrote:
Mon May 20, 2019 7:17 am
Grt2bOutdoors wrote:
Mon May 20, 2019 6:23 am
Pay your bills, whatever is leftover is your disposable income.
That is a very basic view of it and is correct.

I think the OP is looking for a guideline that states "Pay your taxes, pay your bills, save X, and then blow the rest."
Correct or Incorrect?

I did a road trip in March that generated decently large CC bills for gasoline, lodging, and meals.
I claim those bills were at least 90% discretionary expenses. It's not 100% since I'd eat something even if I stayed home the entire time...
Attempted new signature...

IntangibleAssets
Posts: 63
Joined: Wed Sep 07, 2016 11:06 am

Re: At what NW do I have disposable income?

Post by IntangibleAssets » Mon May 20, 2019 10:58 am

This reminds me of a thread I was reading a few weeks ago(note it was tongue-in-cheek)

Poverty FIRE - "....In 2018 the US the poverty level for a single individual was $12,140. With a 4% SWR that means if you have $303,500 in savings/investments then you're essentially set to live the rest of your life at the poverty level..."

:sharebeer

kaudrey
Posts: 1008
Joined: Fri Nov 22, 2013 2:40 pm

Re: At what NW do I have disposable income?

Post by kaudrey » Mon May 20, 2019 3:52 pm

I considered us to have "extra" money, which I think is similar to what you are calling "disposable" income, when my retirement spreadsheet showed that if I stopped saving money (outside of maxing my 401(k), which I would never stop), I would still have less than a 4% withdrawal rate when I retired based on my projected retirement expenses.

As a result of that analysis, in 2007 my now ex-husband and I bought a cabin in the mountains. We used it on weekends for 10 years, it was my oasis. I sold it when we got divorce, but the point is that I loosened the purse-strings because I saw that money as "disposable".

Apropos of nothing, I am now happily married at 50 to a man who wants me to retire now (he's a little older). I'm still wrapping my head around that idea.... :happy

ohai
Posts: 621
Joined: Wed Dec 27, 2017 2:10 pm

Re: At what NW do I have disposable income?

Post by ohai » Mon May 20, 2019 4:02 pm

OP, are you saying you live a life with no discretionary spending at all? Have you eaten a $10 Chipotle burrito this year? Why not have cup noodles for every meal? Do you live in a room greater than 100 square feet? Do you have a phone that costs more than $100? Even at the US poverty level, you would have a better standard of living than most humans on the planet.

HornedToad
Posts: 942
Joined: Wed May 21, 2008 12:36 am

Re: At what NW do I have disposable income?

Post by HornedToad » Mon May 20, 2019 4:28 pm

It's silly to look at NW for disposal income instead of current cash flow.

It also requires either re-defining disposal income or leaving extremely miserable.

More importantly, I fail to see why it's desirable to live like a miser when you are ~20 years old to guarantee your 65 year old self can live at the poverty level.

If it's a mental trick to convince yourself to save money, so be it but it's an extreme one

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