4 ms·
While investing is important (personally it's 50/50 stock index fund and US treasuries), another important thing to do is reduce your expenses. 1. The lower yo
by itamarst 10y ago
While investing is important (personally it's 50/50 stock index fund and US treasuries), another important thing to do is reduce your expenses.
1. The lower your expenses the less money you need on an ongoing basis. This means you need less savings to fund your lifestyle.
2. The lower your expenses the more money you have left over to save and invest.
The combination means you have more money and it lasts longer. This is pretty important career-wise because it makes it much easier to find a better job: when you need to quit or lose your job you have much longer to find a good job, you don't need to take the first one you find.
Expanded version here: https://codewithoutrules.com/2016/08/08/living-below-your-means/ https://codewithoutrules.com/2016/08/08/living-below-your-me...
- ryanwaggoner 10y agoYou missed an important benefit: expenses are mostly post-tax, so reducing your expenses by $1 may reduce the amount you need to earn by $1.50 - $2. Also, 50% in treasuries seems overly conservative for most investors, especially if they're young. That's basically just going to match inflation. You may have your reasons, just wanted to point that out :)
- itamarst 10y agoOh, huh, good point re post-tax benefit of expenses, hadn't thought of that. I'm pretty conservative regarding investment, yes. Been through two massive bubbles+crashes so far :)
- the_gastropod 10y agoAND the lower your expenses, the lower your 25x* expenses number is, so the less you need to save to be financially independent. * If you are going by the 4% rule http://www.investopedia.com/terms/f/four-percent-rule.asp http://www.investopedia.com/terms/f/four-percent-rule.asp
- adviceadam 10y agoIf you're interested in being financially independent, I would take a look at the following article: https://earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/ https://earlyretirementnow.com/2016/12/07/the-ultimate-guide... They look at the 4% rule, what it's based on, and see if it's actually valuable for those looking into early retirement.
- carsongross 10y agoBeing 50% in treasuries right now is not particularly conservative. The Schiller P/E ratio was only higher in 1929 and 1999: http://www.multpl.com/shiller-pe/ http://www.multpl.com/shiller-pe/ So, broadly, equities look like a pretty bad deal right now.
- the_gastropod 10y agoThe Schiller P/E has historically been pretty useful, but it's not a great tool for comparing pre 2001 and post 2001 market valuations because of changes in GAAP. Check out http://www.philosophicaleconomics.com/2013/12/shiller/ http://www.philosophicaleconomics.com/2013/12/shiller/ for a more in depth explanation.
- carsongross 10y agoThanks for the link, interesting read.
- itamarst 10y agoThere's also q, which has same result as Shiller P/E 10 but is calculated very differently: http://smithers.co.uk/page.php?id=34 http://smithers.co.uk/page.php?id=34
- ryanwaggoner 10y agoI don't time the market. Studies are really clear that people suck at it. You may be convinced you're the exception. I'm convinced that I'm not :)
- carsongross 10y agoThat's certainly a reasonable position.
- ryanwaggoner 9y agoI'm going to start responding to people who disagree like this :)