Law School Discussion

Home Ownership and Wealth Building

One Step Ahead

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Re: Home Ownership and Wealth Building
« Reply #680 on: June 28, 2007, 09:40:40 PM »

A.

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Re: Home Ownership and Wealth Building
« Reply #681 on: June 29, 2007, 03:49:11 PM »
umm wtf:
http://www.youtube.com/watch?v=jtYZZy6rTPA&mode=related&search=

did that answer the question?

Lol that had to have been one of the most bull answers outside of politics that I've heard in a while.

pikey

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Re: Home Ownership and Wealth Building
« Reply #682 on: July 04, 2007, 06:32:23 PM »
Retire at 40: Here's how

It's simple, but hard. Take 20% of your gross income every month, invest it in a balanced index fund and leave it there, then retire 20 years later with enough for a lifetime. Do you have what it takes?

By The Simple Dollar

A young, forward-thinking man wrote and asked this simple question:

Right now, I'm 20 years old. I am willing to take a large percentage off the top of my salary for the rest of my working life in order to be able to retire very young and live off of the proceeds of my investments and do volunteer work. How many years would I have to work if I saved 20% of my income?

He went on to name a number of other specifics about his situation, but they're really not important. If you were to take 20% of your annual income starting at age 20 and put it in a fund following the S&P 500 Index ($INX), that fund continued to grow at the long-term historical rate (12%) and you received a 4% raise each year, you could walk away from your job and live off the interest at age 41 matching your current salary -- or quit at 43 and be able to give yourself a 4% "raise" each year from the interest, which is probably the better plan because it combats inflation.

Raise the amount to 25% and you're done at age 38 and able to live in perpetuity at age 40.

Obviously, some people are going to balk at this and state that it "can't" be done. The truth is that it can be done if you have the willingness to live below your means and authentically behave as if 20% of your total salary doesn't exist.

It is challenging, don't get me wrong. Let's take the case of someone who makes about $60,000 a year. He brings home a paycheck every month in the amount of $3,200. In order to save 20% of his whole annual salary ($12,000), he would have to be willing to immediately take $1,000 of that take-home paycheck every month, put it straight into an investment and not touch it at all. This takes an amount of financial fortitude and will power that, quite honestly, most Americans don't have.

My advice to this young man is that if this is truly your goal, then it is achievable, and I offer the following points of advice:

Make that saving automatic. Figure out what exact dollar amount you need to remove from each paycheck to equal 20% of your total salary, then set things up so that amount is withdrawn automatically. Since you're planning on retiring so young, it will have to be placed into a non-tax-sheltered investment account, which is fine if you invest it right.

Buy and hold. Buy into a very broad-based investment, such as the Vanguard 500 Index Fund (VFINX), and just keep adding money to it and don't move it around. This will set you up to pay only long-term capital-gains tax when you withdraw it, meaning that your tax time in the future when you start liquidating it to live will actually be quite pleasant (just long-term capital gains tax, if that even exists then).

Learn to appreciate frugal living. With an e-mail like that, I'm already sure that you are more likely to buy a sturdy late-model used car than a new Lexus, but it's important to state just the same: You can easily save that 20% you're wanting to save by making good lifestyle choices. You'll find that if you've made the investments automatic, you'll easily learn to live on whatever is left over.
 
Good luck, and I hope to hear from you when you're 40 and retired!

http://articles.moneycentral.msn.com/RetirementandWills/RetireEarly/RetireAt40HeresHow.aspx

The Dukes

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Re: Home Ownership and Wealth Building
« Reply #683 on: July 04, 2007, 06:45:30 PM »
Ha! You people sicken and amuse us simultaneously. Carry on with your pitiful lives and your "wealth building" exercises. You people have no idea what the meaning of wealth is!

A.

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Re: Home Ownership and Wealth Building
« Reply #684 on: July 04, 2007, 07:46:53 PM »
Retire at 40: Here's how

It's simple, but hard. Take 20% of your gross income every month, invest it in a balanced index fund and leave it there, then retire 20 years later with enough for a lifetime. Do you have what it takes?


Interesting.  I'd be bored though, so I'd keep working anyway.

pikey

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Re: Home Ownership and Wealth Building
« Reply #685 on: July 05, 2007, 04:59:08 AM »
Retire at 40: Here's how

It's simple, but hard. Take 20% of your gross income every month, invest it in a balanced index fund and leave it there, then retire 20 years later with enough for a lifetime. Do you have what it takes?


Interesting.  I'd be bored though, so I'd keep working anyway.

But that gives you the freedom to do what you really love.  For me that would be to open a business such as a boutique/cafe or event planning, as well as have some flexibility to travel.

One Step Ahead

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Re: Home Ownership and Wealth Building
« Reply #686 on: July 05, 2007, 05:04:33 AM »
Retire at 40: Here's how

It's simple, but hard. Take 20% of your gross income every month, invest it in a balanced index fund and leave it there, then retire 20 years later with enough for a lifetime. Do you have what it takes?


Is this pre-tax? 

A.

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Re: Home Ownership and Wealth Building
« Reply #687 on: July 05, 2007, 05:23:03 AM »
Retire at 40: Here's how

It's simple, but hard. Take 20% of your gross income every month, invest it in a balanced index fund and leave it there, then retire 20 years later with enough for a lifetime. Do you have what it takes?


Is this pre-tax? 

In the article, it's post tax ($3200*12 = 38400), but I think it would depend on which you want to be your "income" at 40.

A.

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Re: Home Ownership and Wealth Building
« Reply #688 on: July 05, 2007, 05:24:22 AM »
Retire at 40: Here's how

It's simple, but hard. Take 20% of your gross income every month, invest it in a balanced index fund and leave it there, then retire 20 years later with enough for a lifetime. Do you have what it takes?


Interesting.  I'd be bored though, so I'd keep working anyway.

But that gives you the freedom to do what you really love.  For me that would be to open a business such as a boutique/cafe or event planning, as well as have some flexibility to travel.

I suppose that's true.  Maybe by then I will like something other than being a lawyer, although that's when I'd be at my best!

pikey

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Re: Home Ownership and Wealth Building
« Reply #689 on: July 05, 2007, 05:32:59 AM »
Retire at 40: Here's how

It's simple, but hard. Take 20% of your gross income every month, invest it in a balanced index fund and leave it there, then retire 20 years later with enough for a lifetime. Do you have what it takes?


Is this pre-tax? 

In the article, it's post tax ($3200*12 = 38400), but I think it would depend on which you want to be your "income" at 40.

No it's not.  It's 20% of your pre-tax income.  20% of 60k is 12k, which is what the article stated the man needs to save ($1,000 per month).