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#1 User is offline   intotheblackhole 

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Posted 19 September 2005 - 12:51 PM

I am wirting this as a request from some fellow RN'ers that came as a result of another post. I hope that my experience can be of some value to someone. It is not a heroic story by any means and not all people can live this type of life. But maybe there is someone that will see the wisdom in this and will make some life adjustments to make it all happen.

Besides if everyone did this we would bankrupt the world. The US economy is based on 2/3 consumer spending so those that don't follow my advice are the reason that I make so much money. And for those I say keep doing what you are doing. You are funding my retirement and my trust fund for generation of my family for decades to come.
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First off it is important to think different about money. There is a saying that you can have money work for you and most will nod in agreement but few really understand it and even fewer actually make it work.

I didn't get to this point overnight and it took years of scrimping, saving, paying off bills and overall retreating from a very consumer oriented life style.

My salary is 60k a year and with that I save about 30k of it. My wife make 30k and saves 10k.

For years I was in the buy mode and had all the toys and was leveraged to the hilt. I HAD to work to stay afloat. I HAD to work OT to get extra money to go on vacations and do projects around the house. I felt trapped at work in that I hated my job becasue I HAD to be there to survive.

At age 40 I had finally had enough. It was time for a change.

I sold everything that I owed money on that wasn't needed. My ATV's, PWC's, travel trailer, and so on. I paid off the balance owning by working OT (and lots of it) By the end of 3 years I was out of debt for those things.

Next on the list was our car payments. I sold one car and paid off the balance with cash. The other truck I paid it down as fast as I could. In the mean time we were a one vehicle family and I decided to start riding my bicycle to work. I have been doing that for 12 years now. I do in the rain, sleet, snow, heat. The only thing that stopped me was an arm injury at work and I was off for 3 months.

I started having some "extra" money around. Rather than spend it I put it in my 401k. My wife di the same. I did lots of research on the mutual funds in our plan and found several that would give us good returns. I figured that since I had so little I would go for broke.

My research paid off and I have been making an average of 18% for the last 12 years. Even the recession was not the death notice I expected and I stuck with the plan.

When the interest rates came done I refinanced. We increased the amount of the loan and took the rest of the cash and bought a rental. My wife is a real estate wiz and has always wanted to get more property. She has a degree in business but works in mental health (go figure that one out).

The rental has been rented every month since we bought it and is now paid off. All the rent is now extra cash for us.

Then the interest rates started to drop even more and we did another refinance and got some extra money. We also went from a 30 year to a 15 year. With the extra money we bought another rental and it has been rented and is almost paid off. Soon it will be ours and will be extra money.

My wife totaled her can and instead of buying a new one we bought a used one. It is a 1985 one owner BMW with 104,000 on it. Everything runs great. We paid cash for it and it gets 30 mpg. I sitll ride my bike to work but recently we decided we needed a truck to haul all the building supplies for our house remodel. I got a 1994 GMC one owner for 5k and the only thing that needs to be fixed is the windshield wipers. It has all the bells and whistles and is 4wd. I don't drive it much and still ride my bicycle to work (12 miles one way for those interested)

With the used rigs we don't carry collision and being that I don't drive to work I get recreational only rates. I pay $60 a month for both vehicles.

Our life style is at a point where we can live off of either my salary or my wife's. Work is fun again as I go there because I want to and don't feel forced to have to work.

We pay cash for everything which has had a negative impact on my credit. Because the only loan I have is the house they somehow think that I can't manage money. Just the opposite is true of course.

Because I am over 50 I can put in 18k in my 401k this year and will be able to put in 20k next year. My wife is putting in her maximum which is 14k. My maximum has been reached for this year already and now we are maxing out our IRA's. After that is reached I will put the extra in some stocks that I use for short term emergency fundsl. Total savings this year is projected to be 44k between me and my wife.

Our total expenses for just our house is 1600 per month. Almost all of that is paid for from the rentals. Our checks are for extras and we are in the process of a huge remodel.

It has been a long hard journey to get to this point. Some ask me if was worth it. To me and my wife it was. Life is so much better now that it was when I wanted everything and had to work my butt off to get it.

My message to the younger set is not to get involved in the mass consumerism that so many fall prey to. I had one young co-worker ask me about the 401k (management sends them to me as I know so much more about it than they do). He is single and lives with his parents.

My advice to him was to work as much as he could for 5 years. Max out his 401k which would be 29k in 2 years. After that put in just $100 per paycheck and get he company matching. With an average interest rate in the stock market of 12% over 70 years he would have over 4.5 million for retirement adjusted for inflation.

Then for the remaining 3 years save up for a lage downpayment on a reasonable sized house. Most people buy way to much house and this hurts long term saving and put you in that trap of HAVING to work to make ends meet.

Once his retirement is secure and he has ownerhsip in his home then he can look to getting some "toys" but only if he pays cash or pays them off in 12 months.

This kid followed my advice and is almost done with the first 2 years of his 5 year plan. He has over 35k in his savings now and is ready to start on his home downpayemt. He will turn 22 next month. By the time he is 25 he will have a 200k house with a payment of 650 a month and will own it in 15 years. I have projected him to be a millionaire at 35.

His friend who I gave the same advice has a nice new truck, a nice new motorcycle, goes to Mexico everyyear on vacation, has 2 nice PWC's and an ATV. He rents a huge house with several friends.

He also works lots of OT to pay for all this stuff and contributes enough in his 401k ot get the company match. He is 25 and so far has very little.

My projections are modest. I will have over 5 million when I die and be able to leave my wife and kids a trust fund that will give them over 2500 per month for the rest of their lives. The fund will grow as they will not ba able to get any more that 10% of the earnings in any given year. If the fund does not make any money in a given year they will get nothing. This will assure that the fund will continue for many generations. At the current level of growth it will be worth 50 billion in less than 100 years adjusted for inflation.

And to think it was all started by a cheap a$$ guy and his wonderful wife just working 9-5 jobs and rejecting the consumerism life style.

Anyhow that is my story and my advice.
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Modifyed the following:

Our life style is NOT at a point where we can live off of either my salary or my wife's. Work is fun again as I go there because I want to and don't feel forced to have to work.

to this.

Our life style is at a point where we can live off of either my salary or my wife's. Work is fun again as I go there because I want to and don't feel forced to have to work.

This post has been edited by intotheblackhole: 19 September 2005 - 02:03 PM

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#2 User is offline   Willie Tubbs 

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Posted 19 September 2005 - 01:11 PM

I've never really understood the whole "slave and sacrifice and don't spend money until you are old" creed. You gotta enjoy life when you live it too.
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#3 User is offline   Jax 

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Posted 19 September 2005 - 01:12 PM

intotheblackhole: My hat is off to you. You've used your noggin, and you are, indeed, letting your money work for you instead of the reverse. I'm going to print this out and save it and read it and re-read it. Because even though I *get* what you're saying (and have heard some of it before), I still haven't put it into action. I live comfortably, but I have debt. And I do fall prey to consumerism fairly easily. I know I need to rethink the way I handle my finances, and your post has given me the kick in the butt I need. Thank you!!!!! :blink:
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#4 User is offline   Dublin5 

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Posted 19 September 2005 - 01:14 PM

WOW! Very cool! Thanks!!!! :blink:

Quote

We pay cash for everything which has had a negative impact on my credit. Because the only loan I have is the house they somehow think that I can't manage money. Just the opposite is true of course.


All I have is a check book and cash. No credit cards/ATM/check cards. People look at me like I stepped off the Moon when I tell them I don't have credit cards. And you're right. It does reflect negatively on credit. All I have is a home loan and a car loan.
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#5 User is offline   Jax 

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Posted 19 September 2005 - 01:16 PM

Dublin5, on Sep 19 2005, 01:14 PM, said:

WOW!  Very cool!  Thanks!!!!  :blink:
All I have is a check book and cash.  No credit cards/ATM/check cards.  People look at me like I stepped off the Moon when I tell them I don't have credit cards.  And you're right.  It does reflect negatively on credit.  All I have is a home loan and a car loan.
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I have great credit.....but I also have great debt! :blink:
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#6 User is offline   Wag-a-Muffin (D) 

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Posted 19 September 2005 - 01:19 PM

"interest"

Them that understands it, gets it.

Them that don't, pays it.
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#7 User is offline   Siren 

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Posted 19 September 2005 - 01:20 PM

Jax, on Sep 19 2005, 02:16 PM, said:

I have great credit.....but I also have great debt!  :blink:
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I have great credit and minimal debt.

I put the maximum allowed into my 401K plan at work because of the company match.

I had read somewhere that each year, when you get a raise (provided you get one), you should take that amount and put it into savings (whether a 401K, mutual fund, etc). Basically, the philosophy is that you are used to living without the extra money anyway. I never did it when I was younger but the past two years (the first I had gotten an increase since 2001) I have put the extra into my 401K.
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#8 User is online   Martin 

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Posted 19 September 2005 - 01:21 PM

Black Hole, you wrote, "I started having some "extra" money around. Rather than spend it I put it in my 401k. My wife di the same. I did lots of research on the mutual funds in our plan and found several that would give us good returns. I figured that since I had so little I would go for broke.

My research paid off and I have been making an average of 18% for the last 12 years. "

I'm curious about what investments you have been in during this time which have averaged 18% per year. Can you identify or describe them without disclosing anything too personal?
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#9 User is offline   Jax 

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Posted 19 September 2005 - 01:22 PM

SLP, on Sep 19 2005, 01:20 PM, said:

I have great credit and minimal debt. 

I put the maximum allowed into my 401K plan at work because of the company match. 

I had read somewhere that each year, when you get a raise (provided you get one), you should take that amount and put it into savings (whether a 401K, mutual fund, etc).  Basically, the philosophy is that you are used to living without the extra money anyway.  I never did it when I was younger but the past two years (the first I had gotten an increase since 2001) I have put the extra into my 401K.
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I'm maxed in my 401(k), but due to recent changes in living circumstances, relied on the old cc's to help me get by. My car is paid off right now. My goal is to have the cc's paid off in the next 18 months. *Tightening Belt*
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#10 User is offline   Renwaa 

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Posted 19 September 2005 - 01:23 PM

Love the post. My husband and I have basically the same philosophy as yours. About 6 yrs ago, the DH read "The Millionaire Next Door" and it reinforced what he already wanted to do with our finances.

In 2 yrs (2000-2002), we managed to save over $80,000. We started sharing a car once one broke down and repairs were too high to justify paying. We think new cars are the worst investment--unless you plan on keeping it forever. However, we are breaking our number one rule and are buying our first new car ($16,900 for 2006 Toyota RAV). The hubby's company bought it with the 20 others they're buying for the ex-pats who get a car in their contract so we saved about $2500 off of the price PLUS the company will contribute $250/month (and we'll add $500) as part of our contract. There wasn't a better time to ever buy new which is why we did it.

We didn't have kids, payed $1100/mo in rent, but took advantage of good salaries to get a head start on our retirement savings. (I started this at 28 yrs old, he was 24).

Heck, we were even able to take a 3 month fabulous round-the-world trip and pay for it and our living expenses in cash. We planned it to go just before the high season in most places and stayed in 3 and 4 star hotels for 1/4th the prices.

When we moved to DK, and all the problems with residency/no work permit, we had to live on just his salary. It was tough NOT to dig into savings for day-to-day living, but we did it. Even having to be diciplined (and we added a baby), it was wonderful going to sleep at night knowing we had a nest egg in both stocks and savings.

I lived hand to mouth in my early 20s eating only generic pancake mix where you add only water and mac-n-cheese minus the butter. No one gave either of us anything in life (meaning about money).

My girlfriend and her husband are over $45,000 in debt. She keeps refinancing her house to pay for things like refinishing the basement. They also have student loans (her master's degree and his law school). She has no problem with the re-refinancing because she says that they're so far in debt, it doesn't matter anymore. How you can borrow on the equity on your house when you just bought is frightening to me and can't imagine living like that. :blink:

We hope to retire with a little apartment or house in Phuket, Thailand or area around there with a nice bundle of savings.

edit: added a bit more

This post has been edited by Renwaa: 19 September 2005 - 01:31 PM

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#11 User is offline   intotheblackhole 

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Posted 19 September 2005 - 01:27 PM

mollywog, on Sep 19 2005, 10:19 AM, said:

"interest" 

Them that understands it, gets it.

Them that don't, pays it.
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Very good. I like it.

Kind of like the lottery is a game for those that don't understand the laws of probability.
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#12 User is offline   Renwaa 

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Posted 19 September 2005 - 01:28 PM

Willie Tubbs, on Sep 19 2005, 08:11 PM, said:

I've never really understood the whole "slave and sacrifice and don't spend money until you are old" creed.  You gotta enjoy life when you live it too.
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Well, children are all about what feels good now. Makes sense you'd say that.

Why don't you try to entertain thoughts that aren't from one extreme to another, 'kay?

Just because one saves, doesn't mean you have to live as a miser. :blink:
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#13 User is offline   Bill Lies 

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Posted 19 September 2005 - 01:32 PM

Good stuff. I will say that you can go overboard with this, but the principals here are rock solid.

ALWAYS spend less than you make! That's my financial rule of life. I only put 10% in my 401K, but save outside of retirement, so that I have money in case of emergency. I know some people who put 15% in 401K, but have no other savings. That to me doesn't make sense.

There are though, things that I do spend some money on. Like vacations, to me the experiences on vacation add so greatly to the wealth of your life.
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#14 User is offline   intotheblackhole 

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Posted 19 September 2005 - 01:35 PM

Martin, on Sep 19 2005, 10:21 AM, said:

Black Hole, you wrote, "I started having some "extra" money around. Rather than spend it I put it in my 401k. My wife di the same. I did lots of research on the mutual funds in our plan and found several that would give us good returns. I figured that since I had so little I would go for broke.

My research paid off and I have been making an average of 18% for the last 12 years. "

I'm curious about what investments you have been in during this time which have averaged 18% per year.  Can you identify or describe them without disclosing anything too personal?
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I have several funds that are open to me in my 401k. My main choices are the following:

http://finance.yahoo...SSGPX&quicken=2
http://finance.yahoo...RSPFX&quicken=2
http://finance.yahoo...EUROX&quicken=2
http://finance.yahoo...NBGEX&quicken=2

I am divided among them pretty evenly.

My wife is in FSELX and FLPSX. I took her out of FSELX in late 1999 and put all hers in governemnt bonds. I knew the end of the dot bomb was in sight. I put her back into FSELX in late 2001 which has been a good move.

For a guy who is nearing retirement I am still playing risky. I watch the market and will move to bond funds if needed. I figure I can live off SS and the rental money just fine so I am comfortable with this level of risk.

After all I was 40 and had very little and made this change in 16 years which ain't all that bad.
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#15 User is offline   intotheblackhole 

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Posted 19 September 2005 - 01:42 PM

Bill Lies, on Sep 19 2005, 10:32 AM, said:

Good stuff.  I will say that you can go overboard with this, but the principals here are rock solid.

ALWAYS spend less than you make!  That's my financial rule of life.  I only put 10% in my 401K, but save outside of retirement, so that I have money in case of emergency.  I know some people who put 15% in 401K, but have no other savings.  That to me doesn't make sense.

There are though, things that I do spend some money on.  Like vacations, to me the experiences on vacation add so greatly to the wealth of your life.
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Good start but let me share one thing with you.

A 401k is pre tax. If you max it out you get an immediate savings of your current tax rate. For most that is around 30%. If you take that as income you will only have $0.70 of every dollar to invest. It will take you almost 5 years to get that $0.30 back. By then I will have made almost double what I invested.

There is some logic to going to a Roth IRA as all the money earned will be tax free from that account. The 401k will be taxed at the retirement tax rate.

But I do both. I put in 40% of my check to the 401k (maximum allowed by my company) and max out in August or early September then I do the Roth IRA. My wife does 50% till she maxes out.
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#16 User is offline   intotheblackhole 

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Posted 19 September 2005 - 01:46 PM

Newly, on Sep 19 2005, 10:41 AM, said:

intotheblackhole:

do you want to adopt me?  :blink:
Seriously...WOW you really worked hard for this, you should write a book. (and dedicate it to me of course :blink: )
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I appreciate that comment. When I talk finances to my co-workers I get that a lot. I coould have a very large family.... ;)

In my other post I was going to be on Good Morning America as a super saver. The day of the shoot they cancelled after I had taken the day off and had notified all my friends and relatives.

They picked a lady in Utah that baked bread. She might save a few bucks every month. I lost more money not going to work that day than she would save in a whole freakin year.

I don't get the MSM.
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#17 User is offline   Iriemon 

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Posted 19 September 2005 - 01:49 PM

intotheblackhole, on Sep 19 2005, 12:51 PM, said:

I am wirting this as a request from some fellow RN'ers that came as a result of another post. I hope that my experience can be of some value to someone. View Post



I salute your thrift, enterprise and wisdom. And for earning an average of 18% for the last 12 years, I salute your brilliance, luck, or both. That is a fabulous return -- few have been or will be able to match it. But even earning a more common 10-12% (long term stock market return) following your advice can lead to a comfortable retirment.

If folks start thinking this way, like your friend, when they are 25, instead of 40, they will be able to retire earlier, more comfortably, and by saving less. At 10%, your money doubles every 7 years. By waiting 15 years, you lose at least 2 double, or 4 x your potential savings. I too tell kids coming out of school to put a little aside now, if you wait till you are 40, you will be behind the curve. But better later than never.
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#18 User is offline   intotheblackhole 

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Posted 19 September 2005 - 01:53 PM

Renwaa, on Sep 19 2005, 10:28 AM, said:

Well, children are all about what feels good now.  Makes sense you'd say that.

Why don't you try to entertain thoughts that aren't from one extreme to another, 'kay?

Just because one saves, doesn't mean you have to live as a miser.  :blink:
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I don't really live as a miser. I live will within my means and have about $1000 per month of disposable income.

We have a vacation home in the Oregon desert that we like to go and play around in. I am buying a log load of logs that my brother in law and I are going to mill up. I will use that to build my new vacation home and sell (or rent) the other one.

We just did a remodel and it cost about 6k and I paid cash (actually credit card and paid off at the end of every month with an electronic payment from my home equity loan which is paid off from savings. This way I get to use other people's money for almost 3 months and can keep my money in savings earning interest. Am I cheap or what????).

So I live pretty good. I could live better but would have nothing for retirement.

Once I retire I want enough money to stay retired. Too many run out and have to go back to work at 75.
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#19 User is offline   MADGestic 

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Posted 19 September 2005 - 01:56 PM

intotheblackhole, on Sep 19 2005, 01:51 PM, said:

… With an average interest rate in the stock market of 12% over 70 years he would have over 4.5 million for retirement adjusted for inflation…

Minor point but don’t you mean an average RETURN rate? One does not earn interest on stocks.
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#20 User is offline   intotheblackhole 

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Posted 19 September 2005 - 02:00 PM

Iriemon, on Sep 19 2005, 10:49 AM, said:

If folks start thinking this way, like your friend, when they are 25, instead of 40, they will be able to retire earlier, more comfortably, and by saving less.  At 10%, your money doubles every 7 years.  By waiting 15 years, you lose at least 2 double, or 4 x your potential savings.  I too tell kids coming out of school to put a little aside now, if you wait till you are 40, you will be behind the curve.  But better later than never.
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I heard that exact same thing when I was a kid. Never listened till I hit 40. Then I had to work my a$$ off to get where I am today. I took a lot of risk and I admit to some luck. But it was still hard work and a massive reworking of my finances.

There were times when my wife was not happy. But we stuck it out and now it is paying off. It was a hard 10 years but the last 6 have been getting easier and easier.

My daughter agrees. We loaned them 12k for their first house.

Unfortunatly my son doesn't share in any of this. He has schizophrenia and lives on the street. He denies we are his parents. But he is in the trust fund if he ever comes around for which we hope and pray.
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