The 4% Rule Use To Be THEE Rule But Now.....

IMO the biggest risk in all of this is our own bad behavior.

I've known several people that were not realistic about forecasting expenses, separating needs from wants, and balancing their fixed costs in retirement against their income.

Too many people keep nibbling away at their investments and promising themselves that they'll do better next year or YOLO until a couple of bad years cause them to start chasing higher yields and the whole thing goes into a downward spiral.
Bad investor behavior or poor spending habits is common all through life..

it is funny because we have all these rules and guides for investing but very little for spending .

all you hear is a useless unactionable mantra like live below your means , like that is a plan …

how much is living below one’s means ? A buck certainly qualifies ……

the real deal is you need a spending plan that breaks out discretionary and non discretionary spending …. It is all well and good you spend less then you take in but if push comes to shove and you have to cut back , you can’t when there is little discretionary spending in the budget or a savings rate in the budget .
 

Learned some secrets about the things people "think" they need to spend money on - like being over insured and the things they don't give any thought to. Its the day to day attitude of "I don't care, I'm retired" or the over doing it with penny pinching - that creates no joy in living to actually delude yourself into thinking you are going to take it with you. The happy medium is a rare commodity, like common sense.
 
Here is the fidelity spending plan

It leaves 30% for non discretionary spending and includes a savings aspect

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Learned some secrets about the things people "think" they need to spend money on - like being over insured and the things they don't give any thought to. Its the day to day attitude of "I don't care, I'm retired" or the over doing it with penny pinching - that creates no joy in living to actually delude yourself into thinking you are going to take it with you. The happy medium is a rare commodity, like common sense.
Many people sweat the small stuff …

as kitces said

"The inspiration for today's blog post comes from yet another article I read this morning - which out of kindness, I will not name - that advocates a wide array of spending tips to manage your finances. Eat at home more often; skip the morning Starbucks; bring a shopping list to the grocery store so that you do less impulse buying; clip those coupons; rent movies instead of going out. The list went on and on.

Yet as I looked at the list, I couldn't help but think... really? The key to my financial future is clipping $0.50 coupons for my morning cereal and making sure that I don't impulse buy any snacks in the checkout line? Yes, I realize that spending an extra $4/day x 5 days/week x 50 weeks/year means you could be spending $1,000 at Starbucks, which is no trivial amount. But overall, most of this seems like small potatoes.

Instead of doing so much to sweat this small stuff, I wish that we could do a better job focusing on what really matters - where we live, and what we drive. Because the reality is that for most people, our dominating expenses are actually not all this little stuff; it's our cost for shelter and transportation."


https://www.kitces.com/blog/worried...t-really-matters-and-its-not-the-small-stuff/
 
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Many people sweat the small stuff …

as kitces said

"The inspiration for today's blog post comes from yet another article I read this morning - which out of kindness, I will not name - that advocates a wide array of spending tips to manage your finances. Eat at home more often; skip the morning Starbucks; bring a shopping list to the grocery store so that you do less impulse buying; clip those coupons; rent movies instead of going out. The list went on and on.

Yet as I looked at the list, I couldn't help but think... really? The key to my financial future is clipping $0.50 coupons for my morning cereal and making sure that I don't impulse buy any snacks in the checkout line? Yes, I realize that spending an extra $4/day x 5 days/week x 50 weeks/year means you could be spending $1,000 at Starbucks, which is no trivial amount. But overall, most of this seems like small potatoes.

Instead of doing so much to sweat this small stuff, I wish that we could do a better job focusing on what really matters - where we live, and what we drive. Because the reality is that for most people, our dominating expenses are actually not all this little stuff; it's our cost for shelter and transportation."


https://www.kitces.com/blog/worried...t-really-matters-and-its-not-the-small-stuff/
A wise friend a generation above me never earned a lot of money but he accumulated plenty. He used to tell me, "if you watch your pennies your dollars will take care of themselves." So much truth in that statement.

In my experience, people who keep an eye on their small daily expenses are unlikely to splurge excessively on homes and automobiles.

Financial undoing can come from the steady drip-drip-drip of daily Starbucks habits, restaurant meals, and all manner of impulse buys. Or from overly expensive transportation and shelter. Usually both. People who are conservative in one area tend to be so across the board. Likewise, spendthrifts show little financial discipline in virtually all arenas.
 
A wise friend a generation above me never earned a lot of money but he accumulated plenty. He used to tell me, "if you watch your pennies your dollars will take care of themselves." So much truth in that statement.

In my experience, people who keep an eye on their small daily expenses are unlikely to splurge excessively on homes and automobiles.

Financial undoing can come from the steady drip-drip-drip of daily Starbucks habits, restaurant meals, and all manner of impulse buys. Or from overly expensive transportation and shelter. Usually both. People who are conservative in one area tend to be so across the board. Likewise, spendthrifts show little financial discipline in virtually all arenas.
I agree.

It has also been my observation that people who accumulate wealth slowly are better able to manage it than people who receive an inheritance or windfall.

"What comes easy won't last long, and what lasts long won't always come easy." - Unknown
 
I agree.

It has also been my observation that people who accumulate wealth slowly are better able to manage it than people who receive an inheritance or windfall.

"What comes easy won't last long, and what lasts long won't always come easy." - Unknown
watch the dollars instead of the pennies for bigger results.

where we live and what we drive are the biggest places a difference can be had
 
Perhaps the best investment DH & I ever made was our home. Over the years our monthly mortgage and interest would have roughly equaled what we would have paid in rent, particularly considering that since paying off the mortgage 7 years ago we've only paying taxes, insurance and upkeep.

It's a mighty nice nest egg to be sitting on. With escalating RE values it's currently worth more than seven times what we paid for it 35 years ago. Should DH & I decide to liquidate or downsize, the first $500,000 of profit will be tax free. Not too shabby a deal, if you ask me.

My in-laws and parents all died receiving slightly more monthly income from SS, investments (and in one case a small reverse mortgage) than they needed. Although they left some money and investments, the lion's share of the inheritances their children received came from the sale of their homes which were held in trusts (so no taxes).

@Aunt Bea, none of the siblings on either side has squandered these inheritances. Both sets of parents were financially conservative and instilled those values in their children. We have shared some of that inheritance with our own children who are likewise using it wisely.

4%, 3%, whatever. If I add even 50% of our home's value to our investment bucket we'd be on easy street for the rest of our lives.
 
Perhaps the best investment DH & I ever made was our home. Over the years our monthly mortgage and interest would have roughly equaled what we would have paid in rent, particularly considering that since paying off the mortgage 7 years ago we've only paying taxes, insurance and upkeep.

It's a mighty nice nest egg to be sitting on. With escalating RE values it's currently worth more than seven times what we paid for it 35 years ago. Should DH & I decide to liquidate or downsize, the first $500,000 of profit will be tax free. Not too shabby a deal, if you ask me.

My in-laws and parents all died receiving slightly more monthly income from SS, investments (and in one case a small reverse mortgage) than they needed. Although they left some money and investments, the lion's share of the inheritances their children received came from the sale of their homes which were held in trusts (so no taxes).

@Aunt Bea, none of the siblings on either side has squandered these inheritances. Both sets of parents were financially conservative and instilled those values in their children. We have shared some of that inheritance with our own children who are likewise using it wisely.

4%, 3%, whatever. If I add even 50% of our home's value to our investment bucket we'd be on easy street for the rest of our lives.
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shows how different every ones outcomes can be ... best thing we did is not buy a house .

instead, we rented and bought a share in a manhattan real estate partnership ... had we bought another house instead we would not have been able to take advantage of a once in a lifetime investment opportunity since the money would have been tied up in the house .

we sold off the business and can buy many homes like had with what we made .

today that money not only pays the rent but all our expenses for the year and is still growing itself despite the 6 figures a year we spend from it .

we did buy a 2nd home in the poconos but sold that too a decade ago .

we have no desire to own anything as of now .
 
shows how different every ones outcomes can be ... best thing we did is not buy a house .

instead, we rented and bought a share in a manhattan real estate partnership ... had we bought another house instead we would not have been able to take advantage of a once in a lifetime investment opportunity since the money would have been tied up in the house .

we sold off the business and can buy many homes like had with what we made .

today that money not only pays the rent but all our expenses for the year and is still growing itself despit the 6 figures a year we spend from it .
I never made money owning real estate, and I prefer to rent, but it has been a good move for many people.

The beauty for many is a small down payment can harness the potential increase in value of the entire home while providing a comfortable place to live. The downside is that many people are reluctant to cash out in retirement.

The important thing is to start saving/investing a portion of your income at an early age so time can do most of the heavy lifting.
 
I never made money owning real estate, and I prefer to rent, but it has been a good move for many people.

The beauty for many is a small down payment can harness the potential increase in value of the entire home while providing a comfortable place to live. The downside is that many people are reluctant to cash out in retirement.

The important thing is to start saving/investing a portion of your income at an early age so time can do most of the heavy lifting.
Well the problem with a house is you really can’t take advantage of the value while consuming it yourself as a place you live in .

in fact the only way you can access that value is by using the house as collateral and taking costly loans as a home is a one way funnel .even a reverse mortgage is a costly loan.

so selling it is really the only way you can gain access to your own money at which time it no longer is a place you live .

i can take an asset based loan too using other assets so a loan is a loan…it isnt your money you are accessing.


you have those who say you can’t live in a stock , but by the same token you can’t spend the hall closet at the supermarket either
 
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Hub is a project start up engineer...he built Anheuser-Busch breweries and wanted to build a house - we never had a mortgage on this big and I do mean big joint. We love living here, its part of us. We and my mother loved land and nature so that's how we wound up with 12 acres. The house is valuable, of course, but trust me, the land is where the real bucks are.

We've owned land for investment and the most money to be made is from undeveloped to developed land. The fire dept where hub is the fire commissioner just purchased 2 pieces of land for new buildings. We're talking many millions here and its rural land. Pick a growing place on or near a main road and just invest in land, my son. LOL!
 
Well the problem with a house is you really can’t take advantage of the value while consuming it yourself as a place you live in .

in fact the only way you can access that value is by using the house as collateral and taking costly loans as a home is a one way funnel .even a reverse mortgage is a costly loan.

so selling it is really the only way you can gain access to your own money at which time it no longer is a place you live .

i can take an asset based loan too using other assets so a loan is a loan…it isnt your money you are accessing.


you have those who say you can’t live in a stock , but by the same token you can’t spend the hall closet at the supermarket either
You misunderstood the intent of my post, but that's ok. Many times on these threads you've mentioned your aversion to buying a primary residence - and I'm sincerely glad that you're happy with that decision. The peculiarities of stringent NY rent control laws work strongly in your favor, but those kinds of laws are rarities in most areas of the country.

Anecdotally, my friends and family members who've paid off their their primary residences have found that route to be an emotional comfort and financial godsend during retirement years. Each of us chooses the path that makes us comfortable.

Do you remember the dotcom crazy stock market years when "investment specialists" frequently cold called in hopes of gaining new clients? I happened to be at my mother's house when she fielded one of those calls. The guy started to talk to her about how much money she could make by investing with him. Mom replied, "No thank you. I have enough money and don't need more." The caller was stunned at her lack of greed and continued to try to talk her into investing with his brokerage firm. She repeated that she really didn't need more money, politely wished him a good day and ended the call.

It was a good lesson for me. Mom, in her mid-70s at that point, was content with what she had and had no need or desire to chase more. We talked about about how the more we focus on money, the more money focused we become.

p.s. She lived to 92 and never came close to running out of money.
 
Starsong...your mother sounds like a wonderful person. So very true, what she said. To some there is never enough, always want more, everything they do is about money. The love of money can consume so much energy, it soon becomes all about the financial world and robs them of the ability to cultivate hobbies and to receive and share pure joy in their lives. My mother said "treasure each golden hour".

Think we were very fortunate to have such wise moms!
 
You misunderstood the intent of my post, but that's ok. Many times on these threads you've mentioned your aversion to buying a primary residence - and I'm sincerely glad that you're happy with that decision. The peculiarities of stringent NY rent control laws work strongly in your favor, but those kinds of laws are rarities in most areas of the country.

Anecdotally, my friends and family members who've paid off their their primary residences have found that route to be an emotional comfort and financial godsend during retirement years. Each of us chooses the path that makes us comfortable.

Do you remember the dotcom crazy stock market years when "investment specialists" frequently cold called in hopes of gaining new clients? I happened to be at my mother's house when she fielded one of those calls. The guy started to talk to her about how much money she could make by investing with him. Mom replied, "No thank you. I have enough money and don't need more." The caller was stunned at her lack of greed and continued to try to talk her into investing with his brokerage firm. She repeated that she really didn't need more money, politely wished him a good day and ended the call.

It was a good lesson for me. Mom, in her mid-70s at that point, was content with what she had and had no need or desire to chase more. We talked about about how the more we focus on money, the more money focused we become.

p.s. She lived to 92 and never came close to running out of money.
The problem is we don’t know how much is enough until we die ….

nursing home care can end up driving the stay at home spouse in to impoverishment ..

having more money can buy more choices ….being able to move closer to the kids if need be or have different choices in health care Options can be so important….even being able to afford to modify your home with what may be expensive modifications so you can stay in it if things become problematic and you need care or have trouble with certain tasks .

so I would never say i or anyone else can have to much of a buffer For the unknown ….

how much is enough is like asking how long is a rope
 
The problem is we don’t know how much is enough until we die ….

nursing home care can end up driving the stay at home spouse in to impoverishment ..

having more money can buy more choices ….being able to move closer to the kids if need be or have different choices in health care Options can be so important….even being able to afford to modify your home with what may be expensive modifications so you can stay in it if things become problematic and you need care or have trouble with certain tasks .

so I would never say i or anyone else can have to much of a buffer For the unknown ….

how much is enough is like asking how long is a rope
Mom could have lived to 102 and would still have had more than enough. If she'd run out of her own resources there were numerous safety nets strung beneath her - her children, grandchildren, friends, other family, and the government would have pitched in. Trust me, Mom wasn't going to wind up soloing under a bridge pushing a grocery cart with a few meager possessions.

Like most American children born in the early 1950s, I watched hundreds of hours of cowboy movies and TV shows. I can't tell you how much sleep I lost, first being terrified of, then planning escapes from: quicksand, flesh eating ants, being buried alive, and bandana wearing, six-shooter slinging, kidnapper bandits who tied up and hauled away their victims. They appeared to be commonplace occurrences.

As an adult I try to calmly examine whether it's reasonable to worry about something. Could I possibly run out of resources before my life ends? Of course. The question though is not one of possibility but rather of probability - and that's what determines how much of my life's energy I'll allow something to consume.

No longer victimized by a rampant childhood imagination, I've learned to temper my fears by accumulating data, separating what's very likely from what's very unlikely, taking appropriate action to mitigate the worst threats, and then letting it go.

The accumulation of money isn't one of my hobbies. I know some folks for whom it is a hobby... if you fit that description no disrespect is intended.
 
Bad investor behavior or poor spending habits is common all through life..

it is funny because we have all these rules and guides for investing but very little for spending .

all you hear is a useless unactionable mantra like live below your means , like that is a plan …

how much is living below one’s means ? A buck certainly qualifies ……

the real deal is you need a spending plan that breaks out discretionary and non discretionary spending …. It is all well and good you spend less then you take in but if push comes to shove and you have to cut back , you can’t when there is little discretionary spending in the budget or a savings rate in the budget .
"all you hear is a useless unactionable mantra like live below your means , like that is a plan …" I so agree MJ. I find much of the advice given doesn't seem geared for people living in the real world.
 
"all you hear is a useless unactionable mantra like live below your means , like that is a plan …" I so agree MJ. I find much of the advice given doesn't seem geared for people living in the real world.
The problem is much of the advice in mantras is not actionable …it sounds good but it’s useless when you get down to it .

live below your means is spewed all the time but really means nothing as stated .

means can change yearly as income and expenses change …

spending less then you bring in may mean nothing if it is not a big enough savings rate .

that ratio between discretionary and non discretionary has to be wide enough so when expenses soar in a particular year you have a place to cut back .

that means you need a real spending plan , not a bunch of words that tell you nothing
 
My mantras have served me well, and I will continue to spew them. :giggle:
Frequently reminding myself of the Depression era mantra "use it up, wear it out, make it do, or do without" helped pull me through financial rough patches. As did the practice of honestly assessing the difference between my wants and needs.

Don't get me wrong, I have great compassion for the truly poor and their increasingly dire situation.
 
Frequently reminding myself of the Depression era mantra "use it up, wear it out, make it do, or do without" helped pull me through financial rough patches. As did the practice of honestly assessing the difference between my wants and needs.

Don't get me wrong, I have great compassion for the truly poor and their increasingly dire situation.
We have very few actual needs …there is nothing most of us do that can’t get done cheaper .

all we really need is a tent in a warm climate and a lake to catch fish .

we don’t even need to live by ourselves as golden girling it certainly is option

sp pretty much everything above that is a want .

we all draw our line in the sand and anything below that line is just unacceptable to us .so we don’t realize that everything on the opposite side is not a need , it’s really a want.

so there is a fine line between real needs and wants
 


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