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Spend less and Save more. If you save ~18-20% starting in your early 20's you can stop caring what the stock market does. Basically plan for 4.5% ROI and deal

Spend less and Save more. If you save ~18-20% starting in your early 20's you can stop caring what the stock market does. Basically plan for 4.5% ROI and deal with it. If you happen to be able to retire at 50 great, if not your still going to be ok. Don't go to an expensive school and get someone else to pay for grad school. Also don't skip out on insurance because cheap does not mean good. PS: An Indian friend of mine saved 20k over a year while making 42k and living in an expensive area. He had no car, never eatout, and had a lot of roommates, but he wanted to save up for his sisters dowery. You can still splurge a lot more than that and still build a nest egg quickly.

carbocation 15y ago
Wasn't the ROI of the S&P 500 over the past decade roughly 0?
- onemoreact 15y ago
  Only if you ignore dividends.
rprospero 15y ago
Where are you getting the 4.5% ROI? It's obviously not the stock market, if you're not caring what the market is doing. Is it in bonds? Several cities and states are looking at defaulting on those. Even if they're corporate bonds, you're right back to being tied into the stock market again. Perhaps you have it all in CDs. Probably a 20 year Cd if you're getting 4.5%. Fifteen years from now, the bank elects a new president whose new investment strategy is Beanie Babies. There months later, the bank goes under and you're praying that the FDIC steps in to bail you out. If you're getting any ROI, there's risk involved and you can get wiped out the same way that the boomers did.
- justincormack 15y ago
  Well the 30 year treasury is yielding 3.5%. Nominal. So you are not getting 4.5% in anything risk free. But as a long term return in shares, historically that has been the case. Whether it will be looking forward is another question.
jonnathanson 15y ago
Your friend's approach is all well and good if you're single, living with a bunch of roommates, and have no financial obligations other than to yourself. What happens when you get older, marry, and have a kid or two?
- khafra 15y ago
  There's little financial difference between having children and buying Lambourghinis. The cultural difference is that only one of these is blameworthy if you get into financial trouble later. Perhaps both of them should be.
  - yannis 15y ago
    Maybe better neuter yourself? This is the most selfish statement in this thread.
    - khafra 15y ago
      Thanks for the demonstration of the mindset I'm talking about. Some people want children, other people want pets, other people want houses, other people want cars, other people want jewelry. All of these things cost money, none of them are charitable, but it's somehow less ok to get in financial trouble over them, the further you move toward the end of that list. Why?
  - tsunamifury 15y ago
    Your parents took that risk so you could have life. It seems extrodinarily arogant to belittle them for it.
    - khafra 15y ago
      My parents didn't have kids until they could afford them. They were in their mid-30s when I was born. If I'd been raised in poverty because they had kids at 18 and dropped out of college, I would be entirely within my rights to question their judgement.
lionhearted 15y ago
Extremely good comment, just a minor important point here - > Basically plan for 4.5% ROI Warren Buffet notes that a nation's ROI overall basically can't exceed its GDP growth for an extended period of time. So if your country has a 1% to 3% growth rate and you're investing in an unsophisticated way, then 4.5% might be optimistic. (It's still a thoroughly good idea to do the rest of your comment. I'd save most of my income even if my ROI was -10%, because money is more useful in large quantities, especially when you break certain thresholds like "can take 2-3 years off work when it's a good time to do so" and "can mix cash and and labor when joining a company to get a big equity stake" and "can buy tools and gifts without even looking at the cost if there's a productivity benefit" - cash is more useful/leverageable in large numbers than small for most middle class-ish people.)
- rayiner 15y ago
  1-3% is real GDP growth rate, net of inflation. With inflation at 2-3%, then planning for 4.5% growth, not adjusted for inflation, is not unreasonable.
jpdoctor 15y ago
> Spend less and Save more. What?! Be frugal and spend beneath our means?! This man is a subversive. He and his kind should be hunted down and silenced.

carbocation 15y ago

Wasn't the ROI of the S&P 500 over the past decade roughly 0?

onemoreact 15y ago
Only if you ignore dividends.

rprospero 15y ago

Where are you getting the 4.5% ROI? It's obviously not the stock market, if you're not caring what the market is doing. Is it in bonds? Several cities and states are looking at defaulting on those. Even if they're corporate bonds, you're right back to being tied into the stock market again. Perhaps you have it all in CDs. Probably a 20 year Cd if you're getting 4.5%. Fifteen years from now, the bank elects a new president whose new investment strategy is Beanie Babies. There months later, the bank goes under and you're praying that the FDIC steps in to bail you out. If you're getting any ROI, there's risk involved and you can get wiped out the same way that the boomers did.

justincormack 15y ago
Well the 30 year treasury is yielding 3.5%. Nominal. So you are not getting 4.5% in anything risk free. But as a long term return in shares, historically that has been the case. Whether it will be looking forward is another question.

jonnathanson 15y ago

Your friend's approach is all well and good if you're single, living with a bunch of roommates, and have no financial obligations other than to yourself. What happens when you get older, marry, and have a kid or two?

khafra 15y ago
There's little financial difference between having children and buying Lambourghinis. The cultural difference is that only one of these is blameworthy if you get into financial trouble later. Perhaps both of them should be.
- yannis 15y ago
  Maybe better neuter yourself? This is the most selfish statement in this thread.
  - khafra 15y ago
    Thanks for the demonstration of the mindset I'm talking about. Some people want children, other people want pets, other people want houses, other people want cars, other people want jewelry. All of these things cost money, none of them are charitable, but it's somehow less ok to get in financial trouble over them, the further you move toward the end of that list. Why?
- tsunamifury 15y ago
  Your parents took that risk so you could have life. It seems extrodinarily arogant to belittle them for it.
  - khafra 15y ago
    My parents didn't have kids until they could afford them. They were in their mid-30s when I was born. If I'd been raised in poverty because they had kids at 18 and dropped out of college, I would be entirely within my rights to question their judgement.

lionhearted 15y ago

Extremely good comment, just a minor important point here - > Basically plan for 4.5% ROI Warren Buffet notes that a nation's ROI overall basically can't exceed its GDP growth for an extended period of time. So if your country has a 1% to 3% growth rate and you're investing in an unsophisticated way, then 4.5% might be optimistic. (It's still a thoroughly good idea to do the rest of your comment. I'd save most of my income even if my ROI was -10%, because money is more useful in large quantities, especially when you break certain thresholds like "can take 2-3 years off work when it's a good time to do so" and "can mix cash and and labor when joining a company to get a big equity stake" and "can buy tools and gifts without even looking at the cost if there's a productivity benefit" - cash is more useful/leverageable in large numbers than small for most middle class-ish people.)

rayiner 15y ago
1-3% is real GDP growth rate, net of inflation. With inflation at 2-3%, then planning for 4.5% growth, not adjusted for inflation, is not unreasonable.

jpdoctor 15y ago

> Spend less and Save more. What?! Be frugal and spend beneath our means?! This man is a subversive. He and his kind should be hunted down and silenced.