Angry Face

You got something to complain about?

… today’s post is hot off the presses from our hotel room in Osaka, Japan, thanks to an unexpected surge in blog traffic.  Warning: contains a healthy dose of sarcasm…

On a hot and steamy summer day 41 years ago, a young woman gave birth to a strikingly handsome and moderately intelligent baby boy. (That was me :P ) My Mother was 16 years old. High school is a luxury that few single mothers can afford.

A few years later my Mom got her GED, finished night school for nursing, and got married. 3 more beautiful and intelligent children followed. That is a lot of mouths to feed when the economy is down and it is hard to find work. I remember my teacher calling the class one-by-one to the front of the room so she could fill out a survey on parental employment. I barely managed to mutter “unemployed” from under my breath.

While I was doing my walk of shame, my future wife was watching her parents’ marriage fall apart. Divorce in 1980s Taiwan was much like divorce in 1950s America, and the burden fell heavy on women and children. Winnie would spend the next 2 1/2 years living in an orphanage while her Mom worked to get their life put back together. To this day, nobody knows where her father disappeared to.

Fast forward to high school graduation. Nobody in my extended family had been to college, but it seemed the ticket to a better life. I graduated 4 years later with ~$40k in debt. The second half of my Senior year I used credit cards to buy ramen.  Adjusted for inflation and interest rates (my loans were 7-8%), in 2015 I would be in the top 5% of all graduates for debt burden.

What does childhood on the edge of poverty and burdensome student loans have to do with anything?  If two kids with the odds stacked against them were able to overcome life’s challenges, then most anybody can.

Allowing that background to define our future would have been about as ridiculous as the mess happening in the comments of this recent Business Insider / Yahoo Finance article.

There is no need to read the comments, I’ll summarize them for you here

“The math doesn’t make sense! This is all bull$hit!”

To be fair, the article does include some inaccuracies.  I’ll clear those up.  But those are dwarfed by the magnitude of the complaining.  I’ll address that too.

But before we get started…

I’m no philosopher, but if posting angry comments about why you can’t get ahead financially, on a random Yahoo article about two people who have… If that is your idea of a good time, might the two be related?

It seems that pausing and asking questions might produce a better outcome.  This post is for those who are pausing and questioning. Welcome.

Saving Multi-Millions

In the aforementioned article, it states that we saved multi-millions in 10 years.  That isn’t 100% true.  It took 5-6 years to get out of debt, 10 years of saving like crazy, and another 3 years of being retired during a bull stock market to get there.  Those last 3 years of post-college work (out of a total of 16) I was depositing my whole paycheck into the brokerage account.

When we started our 10 years of saving, net worth wasn’t zero.  I had paid off student loans a year or so prior, and also had home equity and a 401k.  While we presently spend about $4k per month, while working we were spending half that.  Correct these assumptions, do some basic math, and boom… multi-millions.  There is even a graph in this older post.

I have shied away from discussing net worth in the past because at best it is a distraction.  (Note our absence on the Rock Star Finance Blogger net worth page.)  It doesn’t really matter if our net worth is $2 million or $2 billion, our core annual spending can be sustained by ~$1 million (based on the 4% Rule.) You either have enough investments to fund your desired lifestyle or you don’t.  This is what is important.

But then Farnoosh Torabi interviewed us in incredible Barbara Walters fashion, and I talked about net worth instead of just having enough.  Good interviewers get you to open up.  The BI / Yahoo article quoted this interview without speaking to us directly, and like the telephone game some info was lost along the way.  But… focusing on this minutiae completely misses the point.

Saving a High Percentage of Income

To save a high percentage of income, we did unconventional things.

For years, my main form of transportation was a bicycle I bought on Craigslist for $50.  I later sold it for $60.  Owning a car sucks.

We lived in a walkable neighborhood.  That wasn’t an accident.  We will be renters for life.

Winnie could win Master Chef (Gordon Ramsay, if you are reading this…) Some of the best food in town comes from her kitchen.  Case in point.

Not interested in doing unconventional things?  Then math isn’t the problem.

None of this was ever a sacrifice. Why would we spend all of our money to buy a lot of versatile solutions for modern living when we could be buying our freedom instead?

Take this same approach and apply it to every expense category, and saving a high percentage of income is the natural and repeatable outcome.

For more on this philosophy, I recommend reading Your Money or Your Life. It is available for free from every library, and can be purchased for as little as $0.01 on Amazon. (I also have a list of recommend books.)

The Miracle of Compound Interest

Saving a high percentage of income is only half the battle.  You can’t just put fat stacks of cash under your mattress and expect to get rich.

Those fat stacks of cash are best exchanged for assets that produce an income that has the potential to grow over time.  For example, businesses.  Just like Warren Buffet.  But for better or worse we don’t have enough money to buy whole businesses all at once, so we buy just a small part.  That is what stocks are… partial ownership of real living and breathing companies.

Historically, American businesses have grown by an (oversimplified) 10% per year.  More some years, less others.  Stocks have fluctuated in value up and down by a much greater amount, but that is just the nature of a dynamic market place.  Just like television, it is best to completely ignore it on a daily basis. The businesses themselves continue to innovate and strive for growth, and in the long run the owners of those companies do well.

How well?

Awhile ago my friend J Money invented a metric called the Lifetime Wealth Ratio. It even made an appearance in the NY Times.  In short, the ratio is your net worth divided by total lifetime income.

Earlier this year I downloaded my Social Security statement and calculated our LWR, adjusted for taxes. The results surprised me

Even after 3 years of walking the Earth and making babies, 100% of every paycheck we’ve ever earned since the age of 15 is sitting in our bank accounts.

Every dollar spent on food and rent.
Every dollar lost forever to interest on a mortgage and student loans.
Every loss trying to invest in Real Estate and individual stocks.

It has all been returned to us through the ownership of businesses.

Here is another way to look at it

We could return to Seattle today and buy a house, fill it with furniture and flat screen TVs, buy a new Tesla to drive our baby to soccer practice and piano lessons, eat out for dinner a few times a week, and we would still be retired.

What would you do if every dollar you ever spent was magically returned to you?  Would you still spend it the same way?  Would you still be complaining in Yahoo comments?

That is the miracle of compound interest.

Investing is scary or confusing? You don’t know where to get started?  This blog and others like it can help.


Here are a few of the complaints that popped up.  Perhaps these aren’t complaints so much as excuses.

You got lucky

If by lucky you mean we didn’t spend all of our money on trifles and instead bought index funds, you are correct.

They must have gotten some kind of inheritance

This is true.  We both inherited a love of reading and learning, a streak of independence, and a desire to never again be poor.  I also inherited US Citizenship.

They were able to graduate without student loans

Nope, not true.  My student loan debt burden would put me in the top 5% of graduates today.  Winnie’s debt burden was more modest because Taiwan has a more sane education system, but salaries are also much lower.

I used 0% credit card balance transfers to help accelerate my student loan payoff. An interested person could do the same today.

Check out the 0% APR credit card offers available now.

They make money from their blog!

Yup.  In 3 years of blogging, we’ve managed to earn less than half of the minimum wage on an hourly basis.  That ain’t nuthin to aspire to, yo.

But maybe start your own blog.

But taxes!

It is possible to legally withdraw funds from your 401k before Age 59.5 without penalty, and tax laws are friendly to early retirees.

They want me to read their blog!

The horror! I bet JK Rowling wants you to read her next book too.  Hopefully our example can help you gain your financial independence.

Last time you said you have only $1 million

Not really. We only need ~$1 million to support our lifestyle.

Speaking of last time, you complained about that too. Is this a pattern?

If you’ve made it this far, you probably aren’t a complainer.  Welcome! I look forward to hearing about your journey to Financial Independence.

…Thanks for reading.  Next week when we get back from our Travel Trial in Japan (it is going great!) we will return to our regularly scheduled program and normal level of sarcasm…

Questions?  Let’s hear ’em

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