Financial Planning Talk

[Derek Sutton]

Originally Posted by bizaro86

I won't make your eyes bleed with another table, but if you assume a 5% return, this fictional "below AB median wages family" would need to save 12.5% of their income every year to end up with a $1MM nest egg at age 66.

The only "thing" I see here is that very few look at saving 10% of their pre tax income. But even if you save 10% of your net income you still end up miles ahead by the time you are 60 then most people. Parents need to save themselves and teach their children how to save. My parents always taught me 5% to charity, 10% savings and the rest you do with what you have to, this started when I received an allowance as a kid I have done my best to continue this. I'm very thankful that they instilled this in me and I truly believe in budgeting like this.

It is also important to distinguish between saving money for retirement and saving money for a trip or expensive purchase. A trip or new car has to come out of your 85% that is left over.

[shermanator]

I find it ironic that the poster who was recently advertising "sportcoats starting at $900" as a steal is giving advice on how to be frugal. And having taken that shot at said poster, I would agree with their advice.

[ranchlandsselling]

Originally Posted by OMG!WTF!

Sell one now. Use that 15k for something productive.

Why? I've got other savings set aside as "productive" a substantial sum that is comparable to my current pension. I just count it as not guaranteed as it's not the type that is pension/low risk stuff. Could be wiped out by the current economic climate or other economic turmoil. I don't think so and long term it will hopefully make my retirement vs. break.

Plus the $25,000 vehicle (auction value) has utility beyond a daily driving vehcile that I place value on and has already had it's major deprecating years.

[peter12]

Originally Posted by shermanator

I find it ironic that the poster who was recently advertising "sportcoats starting at $900" as a steal is giving advice on how to be frugal. And having taken that shot at said poster, I would agree with their advice.

Yeah, but those were the days of $110/bbl. In many ways, I think this recession, while painful in the short-term, was a very good thing for my financial maturity in the long-term.

[polak]

Originally Posted by saillias

I'm too lazy to even try and read it with the formatting as it is, so I assume I'll be paycheque to paycheque for life.

I feel like as long as I'm single income, I'm just going to roll with it. My priority is to live life. Eff the rest.

Bankruptcy is off your record in 7 years. Easy.

[guzzy]

Why doesn't someone start a financial advice/planning for the 1% thread instead of talking about it in here?

[ranchlandsselling]

Originally Posted by guzzy

Why doesn't someone start a financial advice/planning for the 1% thread instead of talking about it in here?

Well the 1% came in here and blabbed about how easy it was to be the 1% so being laid of at 50 shouldn't be a problem because everyone should be a 1%. Using the $1.5 million figure it's probably more like the 0.75% that we should all be because it's soooo easy.

Or at least that's how it read.

[bizaro86]

Originally Posted by ranchlandsselling

Well the 1% came in here and blabbed about how easy it was to be the 1% so being laid of at 50 shouldn't be a problem because everyone should be a 1%. Using the $1.5 million figure it's probably more like the 0.75% that we should all be because it's soooo easy.

Or at least that's how it read.

I apologize if that's how I came off (although I wasn't the $1.5MM by 50 guy, as that requires materially above average income). For me, extra frugality/saving is how I'm dealing with the very real possibility that I could lose my job at any time. Aside from being a retirement plan, it's also my "if I lose my job contingency fund."

[ranchlandsselling]

Originally Posted by bizaro86

I apologize if that's how I came off (although I wasn't the $1.5MM by 50 guy, as that requires materially above average income). For me, extra frugality/saving is how I'm dealing with the very real possibility that I could lose my job at any time. Aside from being a retirement plan, it's also my "if I lose my job contingency fund."

Nope, not you.

[Hack&Lube]

I'm on the first quarter "young" side of Bizaro's table. I don't have any savings, it's all being re-invested into other businesses on a constant basis. I was an idiot in most of my 20s and basically made no money or have anything left from those years but I was able to catch up very well in a span of 3 years. Today, I try not to ever leave anything in the bank sitting idly. You don't need a "rainy day fund" if you have the ability to move money in and out of a line of credit. I would recommend that vehicle to a lot of people as long as they still have consistent income. When I have money I can pay it down, when I need money, I can take it out.

However, I suspect that many unemployed people are weathering the oil & gas downturn by relying on EI and lines of credit in the low interest rate environment and it's going to get worse very soon.

[ranchlandsselling]

Originally Posted by HockeyIlliterate

We must travel in different circles. I can't imagine not having $1.5 million saved up by age 50, and I'd be shocked if most of my friends didn't think likewise. And that's all I'm going to say about that because I don't want to say too much.

But on the spending matter---I track what I spend every month (and have for years), and $40k a year with no rent/mortgage payment would sustain, in my view, a very nice lifestyle. It won't allow for first class flights every week to Paris, but it will allow for plenty of travel and you won't go hungry. Besides, there is only so much stuff that you really need (or, honestly, want) to buy after a while.

As for the tax matter, in the US, if the $40k is from dividends/capital gains, there won't be any federal tax to deal with. As far as the federal tax code is concerned, earned income is for chumps.

This was the $1.5 million by 50 living off of $40 k a year because you don't need 1st class tickets to Paris every week.

But not only should $1.5 million be saved by 50 (I mean, you're a pretty bad "professional" if you haven't), but you should also have your house completely paid off too because that's how the $40k a year is do-able.

Although he/she mentions US taxes, which if a US resident maybe they forget that Canadians can't write off interest on our mortgages which is a huge savings.

[Hack&Lube]

Okay, to continue where the other thread left off about having $1.5 Million saved by retirement, what does that even mean to people? Does equity count?

[Peanut]

Was it you in the other thread who mentioned that professionals by age 50 should have $1.5M saved up? Can you elaborate on that? For example, how have the people you know managed to achieve that (lifestyle, investment strategy, etc.).

[habernac]

Originally Posted by ranchlandsselling

So we've got 6 replies that include 5 non-retirement solutions and one lottery win. Impressive.

Inheritance!!

[Sliver]

Originally Posted by Peanut

Was it you in the other thread who mentioned that professionals by age 50 should have $1.5M saved up? Can you elaborate on that? For example, how have the people you know managed to achieve that (lifestyle, investment strategy, etc.).

It wasn't him. It was hockeyilliterate and it's an absolute fantasy to think that's achievable for anything other than a very small minority.

[ranchlandsselling]

Originally Posted by HockeyIlliterate

This probably isn't the right thread for this, but how much money do you really need in order to live a decent life?

I figure that, with a paid off house and no kids, something around $40,000 is enough. Assuming you want a 2.75% or 3% withdrawal rate, something around $1.5 million in savings should be sufficient.

And, respectfully, I'd expect most professionals to have at least that much saved up by 50 years of age.

nm

[Peanut]

Oh. Well maybe that guy will swing by to enlighten us.

[ranchlandsselling]

Originally Posted by HockeyIlliterate

We must travel in different circles. I can't imagine not having $1.5 million saved up by age 50, and I'd be shocked if most of my friends didn't think likewise. And that's all I'm going to say about that because I don't want to say too much.

But on the spending matter---I track what I spend every month (and have for years), and $40k a year with no rent/mortgage payment would sustain, in my view, a very nice lifestyle. It won't allow for first class flights every week to Paris, but it will allow for plenty of travel and you won't go hungry. Besides, there is only so much stuff that you really need (or, honestly, want) to buy after a while.

As for the tax matter, in the US, if the $40k is from dividends/capital gains, there won't be any federal tax to deal with. As far as the federal tax code is concerned, earned income is for chumps.

nm

[Peanut]

Hockey illiterate kind of reminds me of Mr. Money Moustache. I get the concept in principle but I can't seem to achieve the spending level MMM advocates (I think like sub-$20k/yr?).

[Red]

Here’s my contribution to this thread. Assuming this is not specific continuation from the layoffs thread.

Don’t wait till 65 to collect CPP, start at 60 at reduced rate.
The 5 extra years of receiving CPP far outweighs the little higher amounts of money you’d otherwise get starting at 65.
If you are still working after 60, put the CPP money in RRSP to lower your taxes. Or get that Corvette you have always wanted.

Good idea? Bad? Hope our resident financial gurus can comment.