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Tag Archives: Net Worth
There is definitely a MINIMUM for basic money smarts.
Say what you want, but it kind of goes like this:
- Don’t go into consumer debt for stupid, unnecessary items that you’ll inevitably forget about
- Save 10% of your income (whether you choose to read that as gross income or net, is up to you)
- Don’t spend more than what you make and live a lifestyle you can’t afford
- Make as much as you can (negotiation-wise, not necessarily taking on more jobs)
- Don’t be a parasite on others especially those who can’t afford it – pay your fair share, you weasel
That’s about it.
I know you’re thinking:
WAIT THERE IS MORE. You’re lying.
There is SO MUCH MORE than just those things for money smarts.
But that’s really it at the base of it all.
All the rest that I, and other PF bloggers talk about, are just variations on the theme.
Some want to save more than 10% of their income (I do, anyway) for instance.
However if you have been a PF blogger for a long time (for me, 6 years and counting, on my end!), you will start to realize we all fall into different, weird little camps.
Kind of like factions.
We rail against each other, have our own (sometimes) petty arguments, and communities within what is a larger community.
If you’re a first-time reader of PF blogs, none of this will be apparent.
You’ll just all think we’re #$*&#% weird because we’re arguing over whether or not to save 10% of our gross or net income, and what falls under “Housing/Shelter” in a budget.
All of the above are all just opinions of individuals, in the end.
The only facts will be what actually happens with the money.
WE’RE ALWAYS GIVING OPINIONS, AREN’T WE?
What WILL be apparent is we are always complaining about any one of the given topics:
- Bloggers are being stupid because they are not clearing their debt 100% (even student debt)
- Bloggers being stupid by going on vacations, or buying frivolous things without being debt-free
- Bloggers who are dumb because they WANT to upgrade their lifestyles & are against being frugal
- Bloggers are being cheap and ridiculous in an effort to save what are fractions of pennies
- Bloggers being short-sighted and focusing only on saving money but not on making more money
- Bloggers wanting to do fun stuff with their money, and getting judged by the PF community
- Bloggers who save, but then are berated for spending it (umm WTF Is money for anyway?)
- …and it goes on and on and on, about all the things that everyone else is doing wrong, with their own money!!!!
We’re all a bunch of petty, annoying, hotheaded bloggers sometimes.
(Myself, included. But not you. You’re probably a nice blogger and reader if you’re reading this.)
What I think we all fail to step back and recognize sometimes, is that priorities are what matters.
What you decide to do with your money, is where you have decided to put your priorities.
It’s as simple as that.
From that, we each have different limits and thresholds, and if we were all the same, it’d be a pretty boring world to live in.
THOSE WHO DON’T WANT TO LIVE LIKE MISERS
Sure, I may not personally agree with spending $5000 on a vacation when someone is $50,000 in debt, but if they’ve decided that going to Hawaii is something that they want to save for, in lieu of clearing their debt and paying less interest, by all means GO FOR IT.
I am certainly not going to encourage them to go on that vacation over paying their debt, but that’s MY opinion, but I’m not going to barge into their home and start berating them for spending $5000 to go on a vacation when they are paying 18% interest or $9000 a year on their $50,000 debt.
Their priority is to have that vacation, and continue paying their debt for a year longer.
What’s another 365 days anyway?
They should only know what that vacation is costing them in terms of lost time, a longer debt horizon, interest payments, and be aware of it if they aren’t already.
Other than that, it’s their money.
This is where the distinction comes in: IT IS NOT MY MONEY.
It’s your money, and for this reason, I don’t give a damn because I don’t have to give you anything.
THOSE WHO WANT TO LIVE LIKE MISERS TO BECOME RICH
I may not personally agree with living in a cardboard box under a bridge like a troll, just to save on rent, wearing some flour sack that I’m trying to belt to make it look chic while I try to make this trolling-for-tolls thing work, but hey, if you want to go ahead and do that.
GO FOR IT!
If you set your priorities to give up basic pleasures of shelter, warm showers and eating something other than ramen and the small fish that you are able to catch under the bridge, it’s your deal, not mine.
Then if you decide to blog about this as “HOW I TROLLED MY WAY UNDER A BRIDGE TO $1 MILLION IN UNDER 10 YEARS” and you end up making a ton of money off it, I couldn’t suddenly be envious and jealous that you became a millionaire.
I didn’t want to live that life, and I didn’t choose to.
You chose to do it, and in doing so, you worked for it, and I couldn’t be happier for you.
(Seriously. Troll hair and all.)
You set your priorities, and you made your own goals a success (and possibly getting gut rot and nutritional deficiencies), but I am sure as heck not going to try and replicate that life for myself.
(I enjoy warm showers, eating fancy food, and at least sleeping in a slightly heated room a little too much.)
I AM SOMEWHERE IN BETWEEN THOSE EXTREMES
I am not one, nor the other. I am both, at different times.
THE MISER IN ME
I can’t believe when I was getting out of $60,000 of debt, just how cheap I became at the end.
Actually, not cheap. Super. Duper. Miserly Frugal.
I only spent money on train tickets, food, rent, and that was it.
Take for instance the fact that my pants were getting too big for me, so I just pinned them tighter and wore a belt.
I didn’t want to spend a single cent on anything.
I went pretty far, now that I think about it, but to me at the time, all I could see was clearing that debt to $0.
THE FRIVOLOUS SPENDER IN ME
I didn’t work for most of 2011 and 2012 because I didn’t really want to.
Everyone is screaming bloody murder at this point because HOW CAN YOU NOT WORK for 2 years!?
Well, my priorities were traveling (before kids is always best), figuring out where I wanted to permanently live, and taking the time that I never had as a kid.
(Me, chilling in Paris)
I hadn’t stopped working either part-time, full-time or doubly full-time since the age of 7 when I had my first paper route on the weekends.
2011 and 2012, were the first years I had taken it easy in terms of “work” for the first time in a long while.
Then I held 2 jobs — I created a consulting business at the age of 16, alongside working part-time in a fast food joint.
At 19, I continued my consulting business, moved out, and decided I had to live for cheap (I had no choice), so I took on taking care of a building to subsidize my rent in return.
I also decided I needed another job (because I wasn’t busy enough) and took on a third job part-time on campus, all while attending business school full-time, and graduating with honors.
I found my career at 22, had to give up the building job (I wasn’t around enough, as I was traveling for work), but continued freelancing on the side, because I could do it on weekends when I was back.
Then I quit that career, turned into a freelancer full-time and now I have my perfect work-life balance.
It makes me self-punish sometimes out of guilt in between contracts, but that’s my problem, not yours.
I can only be aware that I’m doing it to myself, and try not to freak out.
MY PRIORITIES CHANGED TO HAVING A BETTER WORK-LIFE BALANCE
Now I work when I can, live on less so I don’t have to worry or work so much, and chill out in the downtime.
It’s not that I can’t work hard or that I’m lazy. On the contrary, I work very hard when I am on a contract to be the best consultant they’ve ever had.
It’s just that I choose not to run on all cylinders all the time.
It was my choice, even though I pretty much gave up 2 years of making a lot of money (maybe I lost out on $200,000, who knows?), and took the time for myself instead.
Why? Because I could.
Why else? Because I wanted to. So STFU.
With my savings well over the 6-figure mark, at the age of 27, I decided that I could live a little, enjoy my life a bit more and stop trying to do everything and keep myself busy 24/7.
So I did.
I still have my whole life and my career ahead of me to work. I don’t need to work like crazy, and then die of a heart attack at 45, surrounded by a pile of money I didn’t even really plan on spending in the first place.
As a result, I definitely afford everyone else the same luxury and benefit to be able to do whatever the hell they want with their money and their lives.
BELIEVE IT OR NOT, MONEY IS NOT THAT IMPORTANT
Money doesn’t mean the same thing to everyone, and it certainly doesn’t mean the world to me. I care about it, but not obsessively.
Isn’t it all kind of relative anyway?
Have we all forgotten that billionaires are jealous of other billionaires who have more than they do?
If you recall, there was a German billionaire who committed suicide during the downturn of markets because his net worth dropped. He still had millions, but the loss of that money on paper overnight, caused him to mentally snap and hang himself.
Money didn’t change a damn thing for him and his perspective. He dropped in status, and that made him suicidal.
PF BLOGGERS BLOG IN A MICROCOSM AND WE AREN’T “NORMAL”
It’s the same thing online, reading all these PF blogs, just with less 0′s tacked on at the end.
You have to understand that this PF world is a small, abnormal community. We are not the norm, we are the exception.
So what we do, is relative to each other.
Earning $100K in a small town where people earn $20K, makes you feel like a queen.
Earning $100K in a city like NYC where people earn that in a day, makes you feel like a pauper.
In reality, all I want, is for everyone to learn more about their money, and to not make stupid, easy-to-fix mistakes like being lazy and refusing to walk to your bank’s ATM, so you get slammed with a $1.50 fee to withdraw cash (or more!).
Once you’re fully out of debt, and saving on a regular basis, your net worth becomes a number, after a while, and it doesn’t change how you feel inside or how others see you.
If you’re already an unhappy, lonely person, with a million dollars in your bank account, you’d still be an unhappy, lonely,person but now you just have a million bucks more.
Some people don’t want to sacrifice everything to have lots of money, they’d rather sacrifice a little, and be in debt longer, and they feel good about that choice.
Others, want to sacrifice it all in the short-term to see the rewards in the long-term, and they feel good about their choice as well.
Either way you want to be or you want to act, I don’t really care.
How much you have as a net worth doesn’t affect me at all.
I’d definitely wish and encourage you to have a positive one, but otherwise, if you’re going to turn into a jackass because of it, I’d rather you stay poor and awesome.
YOUR money is YOUR responsibility, and I can’t claim to (honestly) care any more than that.
(Unless of course you pay me to care or have otherwise written me into your will.
For the record, I offer a wonderfully random Money Caring service at about $150/hour if you’re interested.)
So can we all just STFU and let everyone do what they want?
You can always tweak and do more to improve your situation, but with each tweak, comes a changing of priorities and sacrifices to some extent.
If you aren’t willing to prioritize your debt over your life, that’s your choice, not mine.
If you are willing to give up a lot of fun things in your life to save money, that’s also your choice, not mine.
To me, if you are out of debt, and/or on the way to being out of debt, aiming to retire with a decent chunk of money instead of a pathetic $100,000 (which comes from 40 years of saving less than 4%), and you aren’t on welfare and bitching about it, I’m happy for you.
If you are funemployed, and decided to take some time off to travel around the world while you’re young without going into debt, (and are able to accept almost any kind of living condition of hostels abroad), I’m happy for you.
If you decided to take on a minimum wage job or two to pay for your bills and debt, while you wait for something better to come along, I’m happy for you.
(And kind of proud too, if truth be told; your pride is a hard thing to swallow when you take a job you think is beneath you — it’s honest work and nothing to be ashamed of.)
Whatever it is, do it for you.
It’s your money and life, after all.
Do you ever wonder what the point of all this is? What the purpose of our lives are?
Personally, I believe we all have a purpose in life, and that’s to live.
Breathing in one breath and out, sleeping, eating, waking, and other bodily functions.
That’s living at its core if you think about it from a purely physical standpoint.
Ah but there’s more! The emotional.
Our purpose as human beings is really not to hoard money like some Scrooge, but end up all alone (perhaps divorced) and regretting all the moments you missed out in life because you were sitting on your great big pile of money.
I know, it sounds so strange with a PF blogger saying this, but it really isn’t the whole point or motivation of why I save money.
Our only purpose is to live in the Today, and in the Now.
I’ve already long accepted that I set my own little human-sized goals to reach $250,000 in net worth, and eventually a million before I retire, but ultimately, it is actually an insignificant accomplishment if I were to drop dead the day before I go to use that money.
But wait — it’s also not an excuse I can use to say:
Hey living in the Now means I get to go on a big shopping spree like the world is about to end tomorrow.
I still have to consider and plan carefully for the other very real possibility — that I will live beyond my retirement age, and perhaps well into my 90s.
IT’S NOT DEPRESSING IF YOU ALREADY DO WHAT YOU WANT
So is this depressing that you would have to save your whole life, but then imagine you die before you get to use that money?
It isn’t to me, because I’m already doing what I want to do today, and that includes saving enough for my (high) probability of living well into my 90s.
I couldn’t imagine a happier overall existence for myself, all things considered.
Sure, some days really suck and I wish things didn’t happen, but it’s just one day in the grand scheme of my life.
It’s like saying you’re angry for 3 seconds because you didn’t have any milk for your tea this morning, and it ruined your entire WEEK.
Now doesn’t that sound ridiculous?
PEOPLE SPEND THEIR WHOLE LIVES WAITING FOR THEIR LIVES TO BEGIN
The other day BF and I sat around talking about what happens after people win the lottery.
I won’t bore you with the details, but we came to the conclusion that many people probably spend their whole lives:
- going into debt
- dreaming of hitting it big in the lottery
…all so that they can finally start living their dream life.
Reality Check: You won’t get another life.
This is already YOUR DREAM LIFE that you have been dealt with, and the longer you put it off, the longer your Older Self will regret it.
The writing is on the wall. Photograph I took in the Beijing Museum of old Chinese characters.
Seeing as the odds of winning the lottery are extremely slim (it’s so slim, I can’t even see it), it’s sad to imagine that we’re all putting what we want to do on hold before we can start doing what we want.
All because of money? How ridiculous is that?
You can change your situation, because it’s YOUR life and you are in control.
Start budgeting, track your expenses, and get your ass into gear to do what it takes.
Or if you tell yourself: I’d love more free time so I can travel, and read books which is why I work so hard, so that I can have a secure financial future to do those things.
Are you kidding me right now? Go read a book NOW.
You’re probably wasting time reading this blog when you could be immersed in your dream activity, instead of waiting for the right or the best time to do it.
WHAT WOULD MORE MONEY CHANGE FOR ANYONE?
Then we turned it back onto ourselves as a self-reflection after we thought about people who win the lottery:
What would we do if we won the lottery?
BF said he’d have grand plans for that cash, and it would involve…… wait for it…. putting it into the bank and waiting for the best day to use it.
Not only is it extremely boring as a grand plan, but I realized that I would do exactly the same thing.
So then we asked:
What’s the best day then, to use the money?
For that, we had no answer.
Most people would quit, and find that to be the “dream of a lifetime”, but I can tell you that from my past 3 years, there’s no way I’d go back to just sitting around all day long, doing jack squat, and being bored out of my skull.
Quitting your job or having a job where you don’t need to work a lot, and doing NOTHING ALL DAY is not all it’s cracked up to be.
It really isn’t.
I for one, am extremely excited to go back to work, no matter how politically-incorrect that may sound.
I am excited to challenge my brain again, make money (yes, it gives me great satisfaction to make a lot of money), and to have something to fill the empty hours of the day of what I have as a life.
So then we talked about perhaps opening a business.
Or doing something that would occupy our time and our empty hours that we’d enjoy.
Open a restaurant. No, too much work, and it’s hot in there.
Okay, open a store.
A business. But selling what? What could we sell??
We sat that racking our brains for a good half hour of ideas before I said:
But if we wanted to do something other than what we’re doing now…
… shouldn’t we go and do it today so that we’re happy NOW?
And that ended the discussion because we realized that we are already doing what we want to do with our lives.
I ONLY HAVE ONE THING I WANT TO DO: VISIT JAPAN
I only have ONE thing on my list for the rest of my life, and it’s to visit Japan.
I know everyone tells me that the radiation is not a problem, and I even agree with reading the studies (rationally speaking). I KNOW I just have to stick to Tokyo and other areas far away from the radiation…
….but I’m a very young Worrying Wendy, I don’t want to screw my chances of living to a long ripe age just because I can’t wait 20 years or so to go see a country.
Nor do I want to screw my chances of not being able to have kids.
Or worse, passing anything toxic on to them.
In addition, I’ll be closer to death (theoretically speaking), and radiation won’t be that much of an issue for me by that time.
But it is something I get to look forward to when I get older. I almost can’t wait for 20 years to pass!
SO ASK YOURSELF:
ARE YOU LIVING THE LIFE YOU WANT TO LIVE, TODAY?
WHAT WOULD YOU CHANGE?
I’ve always wondered what the benchmarks were for saving, net worth and retirement numbers by age.
It can be so hard to judge all of that, seeing as our income varies over our lifetime, and we don’t know how long we’ll live or how much we will really need.
According to Fidelity, here are some numbers they tried to pony up for us:
By age 35, your goal is to save an amount equal to your annual pay.
By 45, you will want to have saved about three times your salary, rising to five times your salary by 55.
Typical wage earners should aim to save at least eight times their final annual pay to be sure they can afford basic living expenses in retirement.
Naturally, this is assuming that you will eventually get promotions and climb that proverbial ladder to earn $75,000 by the time you’re 55 or so.
Let’s say you get a 3% raise per year as an average, and you started working at 24 for about $30,000 a year.
Here are your numbers:
35: Saved $41,527 as your net worth (1 time)
45: Saved $167,426.51 as your net worth (3 times)
55: Saved $375,012.05 as your net worth (5 times)
65: Saved $806,375.74 as your net worth (8 times)
These numbers are not terribly realistic, as not many people at 65 will reach $100,000 as their annual income, but they’re a start for people to see where they’re at.
So if I made a chart for myself, it’d look like this:
- 35: Saved $221,377
- 45: Saved $750,000
- 55: Saved $1,250,000
- 65: Saved $2,000,000
(Adjusting for: 1) I’d DEFINITELY max out at around $250,000 a year for an income, and 2) my average income has actually been around $75,000, accounting for the fact that I’ve been working 2 out of the 5 years.)
I’m on track then.
I am also aiming to save $1,000,000.
I don’t think I need $2M, and it’d be nice to have, but I’m not going to kill myself for it.
What about you? What do you want to have saved by the time you retire? Are you as freakily obsessed about having enough money at retirement as I am?
Disclaimer: This will not work for everyone, but this is how I got out of debt.
I was $60,000 of debt when I graduated from college (all tuition), with no consumer debt (I’ve never paid a red cent in credit card interest). I cleared it in 18 months.
I only realized I was in a big financial hole when I started paying attention to how much interest they were charging me on my debt (5% and 7.5%), now that I was no longer a student and it was no longer interest free.
I decided I wanted to get out of debt, but not having managed or handled money in an intelligent manner my entire life, I figured I needed a crash course in Money 101.
I started reading as many articles that had the word ‘money’, ‘finance’, and ‘budget’ as I possibly could, which included blogs, books and articles in magazines.
After I got the gist of what I had to do by budgeting and tracking my expenses, I started paying down my debt and I finished it in 18 months.
So how did I do it?
Looking back, this is what I think helped.
DECIDING TO GET OUT OF DEBT
If you earn $10,000 or a million, if you are in debt and comfortable with that hanging around your neck, it won’t matter whether you are in debt or not.
You have to make a DECISION to get out of debt, and not to be comfortable with owing people money.
DECIDING TO CLEAR IT IN 5 YEARS
My plan was to get rid of it in 5 years. I didn’t want to keep paying it for the rest of my life, and the loan period was going to be about 10 years before I would clear anything!
STARTED CARING ABOUT MY OWN MONEY
I started caring about MY money. Rather than “someone else’s debt”, it was MY debt.
I started caring about my income, my debt, my expenses, my obligations and basically.. my money.
I really wanted to do things right, financially and stop having to care or worry about where my cash would go each month.
By the end of 6 months, I had a routine down pat, where each paycheck would hit my bank account, and it would be allocated to each category down to the penny.
STARTED A BUDGET AND TRACKING MY EXPENSES
That was the time I created my budgeting and tracking expense tool.
It has been proven time and time again that if you make a budget, track your expenses and stick to your financial plan, you will become debt-free and wealthy.
You do not need to make a high income to be able to save or to get out of debt, you just need a change in lifestyle and in your mindset.
People who make 6-figure incomes and spend every penny of it, are no better off than those who make a fraction of that, because they don’t save anything.
In fact, people with high incomes who don’t save, tend to feel like they deserve to spend more than what they earn, and may end up with bigger debts than someone with a lower income.
EARNING A GOOD INCOME
I graduated from college and got a job at $65,000 a year.
I obviously worked hard to get to the level where I could get a job that paid that kind of money, but it was also not during a recession and the general economy was quite good.
As a result, my fairly high income for a new college grad, allowed me a net income of about $3200 each month after taxes to spend.
HAPPENED TO BE A CONSULTANT
I also entered into a profession (consulting) that offered me a lot of benefits, such as:
- Lots of expenses to pay for that would be reimbursed – this gave me credit card points to use towards groceries and other living expenses
- Ability to travel and live where the project was – this was cheaper than flying me back each week, so I gave up my apartment and lived in each project city, with shelter and food paid for 100% by the client
For the first year, I paid for an apartment and realized I hadn’t really lived there for most of the year, and it was $1500 out my net income each month.
So I gave up my apartment, and my net income was freed up by not having an apartment hanging over me.
I was able to put up to 90% of my net income towards my debt each month (but it doesn’t necessarily mean that I did).
BECAME VERY EXPENSE-CONSCIOUS / CRAZY
Even though I had the ability to put 90% of my net income towards my debt, it didn’t mean that I did it regularly all the time in the beginning.
I was more in the mindset of: Great! I have all this money, now I can pay my debt comfortably to be out in 5 years, and spend the rest.
It wasn’t until I realized how silly that was, that I slowly started increasing my net income payments towards my debt.
Near the end of my debt ($15,000 left to go), I was counting pennies to try and hit my target of 90% of my net income towards my debt.
I didn’t go out to eat let alone eat! I ate less, and I kind of went nuts. It was kind of obsessive compulsive and I was told I was really going too far off the deep end.
I even briefly toyed with the idea of NOT putting money into my retirement fund (100% employer matched), just to have that extra cash each month towards my debt. Luckily I didn’t do it, but it did cross my mind.
QUIT MY JOB AND FREELANCED
Near the end of my $15,000 it was about the time I got sick of my company, quit and started freelancing.
I quadrupled my income, and cleared the last $15,000 with the money I earned.
Even without quitting my job and freelancing, I was on track to finish off my debt by the following year, a good 2 years less than my estimated 5 years.
I already had fairly good money habits in place, I was already putting a lot of my net income towards my debt, and I was being very careful with my expenses, all of which helped.
This is NOT a story that everyone can replicate fully. My situation is different.. even unique, and I just made the most of the opportunity I was given.
I absolutely acknowledge that not everyone could and SHOULD do this, but the main parts that are still relevant to everyone getting out of debt are highlighted in red.
- Decided to get out of debt
- Decided to clear it in 5 years
- Started caring about my money (and my debt!)
- Started a budget and started tracking my expenses
- Earned a good income
- Happened to be a consultant (in the right profession to save money)
- Became very expense-conscious / crazy
- Quit my job and freelanced
And that’s how I did it!
Net Worth. Everyone keeps talking about it, no one thinks they have enough and everyone is worried that everyone ELSE has more.
Frankly, you shouldn’t care about anyone’s net worth other than your own, and stick to the golden rule of: Save as much as you can of your own money.
However, you still want to know what the benchmarks are, right?
(I do too)
Here’s a summary of all the different ways you can benchmark your net worth in terms of age and income:
- Classic ‘Millionaire Next Door’ Calculation
- Realistic Classic: Taking into account your student debt
- Net Worth Calculators by Age or Income
- Net Worth IQ
- Other Bloggers