[Mr Tonka]

Originally Posted by Biorin

This. The amount of money that people spend on shit like going to bars 3 nights a week, getting manicures and pedicures every week, Starbucks coffee twice a day... it adds up in a big way.

Mani pedis and starbucks kill me. It's not that difficult to learn how to keep your nails looking presentable. Starbucks.... what a waste of money.

I just don't get it i guess.

[PoorLurker]

Originally Posted by Biorin

This. The amount of money that people spend on shit like going to bars 3 nights a week, getting manicures and pedicures every week, Starbucks coffee twice a day... it adds up in a big way.

Preach it sista! I don't make a lot of money so I need to stretch nearly every penny. I just can't wait to get a car that I love. It will be bougie as hell and something "someone like me" shouldn't own. However, it will be from years of sacrifice while they wonder why they have no money as they blow it on misc. "luxuries" that will be forgotten in a matter of days.

Originally Posted by Mr Tonka

Mani pedis and starbucks kill me. It's not that difficult to learn how to keep your nails looking presentable. Starbucks.... what a waste of money.

I just don't get it i guess.

I was admiring this tidiness seen below

[Mr Tonka]

^^ lol

[PoorLurker]

Woodsidecredit.com
144 month loans

20% of monthly gross for a car
This opens up a whole world of opportunities.

[jmg]

Originally Posted by PoorLurker

Woodsidecredit.com
144 month loans

20% of monthly gross for a car
This opens up a whole world of opportunities.

That's just batshit insane. 12 years to pay off a car?! If it's a really nice ferrari, maybe you could get your money back on a "classic", but you would have to keep the miles really low. The 20% figure is also supposed to include maintenance and insurance. Maintenance alone on a Ferrari is very expensive compared to a BMW.

On a $200,000 loan for 144 payments you are also paying $80,000 in interest and that DOESN'T include tax. Figure about $20k+ on tax. That's $100,000 total wasted. Your 12 year old classic ferrari would have to appreciate $100k just to clear the taxes and interest. Suckers are born every minute.

[NemesisX]

The way I define affordability is extremely simple and extremely stringent, and it's almost certainly a function of my background and the kind of household I grew up in.

You are W years old. You make $X/year. You have $Y in liquid assets. Your annual expenses are $Z per year, and you want to retire at the age of Q.

If, after spending $Z/year you save and invest enough money in the stock market ($X-$Z plus any money placed into tax-deferred (401k/403b) or tax-advantaged (Roth IRA) retirement plans) such that assuming a conservative 3% real annual compounded rate of return, a 3% withdrawal from your nest egg at retirement age + your annual pension + any guaranteed, passive income will generate at least $Z/year and ideally (1.5 times $Z)/year in perpetuity without eating into the principal amount, then you can afford whatever it is you want to buy at the moment. I don't care if it's a Starbucks coffee or a Bugatti.

Why do I suggest 1.5 times $Z and not just $Z? It's admittedly arbitrary, but health care costs skyrocket for most individuals around retirement age. The average person can expect to spend $300,000-$400,000 out of pocket in health care from age 67 to 87.

So as a rule of thumb, a $1 million nest egg will safely generate $30,000/year at retirement age. If you spend $60,000/year right now, you'll need either a $3 million retirement nest egg or a less than $3 million nest egg + a guaranteed pension + guaranteed passive income (e.g. rental income) to make up the difference. Doable, but it takes discipline. Under my conditions, one cannot make $90,000/year after tax and comfortably spend $60,000/year. You'd need more like $150,000/year after tax.

How many people actually save and invest enough money annually to meet these requirements? Probably less than 0.1%.

The facts (particularly in the U.S.) are pretty sobering. Having $1 million in liquid net worth not including primary residence puts you in the top 6%, and yet the entry point to top 6% for income is more like $150,000/year. There's a clear disconnect there. If you make $150,000/year and spend $100,000/year, it's unlikely that you're saving and investing enough money to meet the criteria listed above, and the problem simply gets worse as one moves down the income ladder to the point where it's completely infeasible for those near or below the median household income to come anywhere near fulfilling the requirements I posted above.

I'm fully aware that the criterion I've provided is extremely stringent, mostly due to four factors:

(1) my requirement of being able to generate 1.5 times your current annual expenses per year when most people assume that their expenses will decrease (often significantly) at retirement age

(2) the fact that I've only allowed for a 3% compounded real annual rate of return when historically the stock market over large periods of time has returned more like 4-6%.

(3) the fact that I've ignored social security [see recent headlines on Republicans planning to significantly slash benefits]

and

(4) the fact that I've implicitly assumed that one will stay in one's primary residence throughout retirement. In reality, many people sell their primary residence and downsize significantly to generate additional investment income and slash costs (on property taxes, among other factors).

[NemesisX]

Again I haven't really posted anything mind blowing. All it boils down to is doing the proper time value of money calculations with conservative estimates for rates of return/discount factors. Most people just don't do these calculations though and I don't understand why.

If you operate on extremely conservative assumptions, chances are your results will exceed your expectations and you'll be able to scale back (save less and spend more) appropriately once you've realized that you're well on track to shatter your retirement nest egg goals.

[RickFLM4]

Originally Posted by Mr Tonka

Starbucks.... what a waste of money.

I just don't get it i guess.

What's not to like about waiting in line behind a bunch of people ordering fancy individualized drinks for a cup of overpriced crappy coffee you need to prep yourself (i.e. cream and / or sweetener)?

I'll make mine at home or stop at Dunkin if I need to stop anywhere. I may stop by Starbucks once or twice / year and immediately remember why I don't stop there.

[Benedict1957]

My M3's quite a bit older (2008), but I'm a radiation oncologist. The M3 is my (personal) second car in 20 years and it's more or less still going strong. I had a 1994 Mercedes E series that I bought brand new for $38,500 prior to that which lasted 14 years. I received virtually nothing for it from private sale ($4000 and change). That's more or less what I expect and it's why I drive cars for at least 10 years after purchase.

Other than that I bought my wife a new 2012 Lexus RX 450h and my son (then 22 years old) a brand new 2010 BMW 328i coupe. His next car he'll be purchasing with his own money, and my wife's car should last at least another 15 years. She drives less than 7500 miles/year.

I haven't decided what my next car will be or when I will buy it.

[Benedict1957]

Our hospital recently replaced a local, relatively inexpensive coffee shop with a Starbucks. Why they did so is beyond me. I'm not a fan.

As a rule I try to keep my own personal net coffee purchase to <$3/day. Anything beyond that is wasteful.

[Nkc]

I don't own any of the cars listed either and would love to learn more about affording one.

Nemmy has once again blown my mind with his detailed analysis but I need something a tad more simple. How's your dining out budget lately? I'm genuinely curious if you've cut down over the years.

[SakhirM4]

Originally Posted by Benedict1957

Our hospital recently replaced a local, relatively inexpensive coffee shop with a Starbucks. Why they did so is beyond me. I'm not a fan.

As a rule I try to keep my own personal net coffee purchase to <$3/day. Anything beyond that is wasteful.

$90 per month for coffee???

[JasonCSU]

Originally Posted by 01101001

Heh... I feel blessed to hate coffee with a passion, and bars as well.
I don't drink alcohol or smoke.
Starbucks and their ilk can go eff themselves.

I certainly enjoy my beer, whiskey, and the occasional cup of coffee (I used to hate it until I tried certain ones). That said, there is no way I would have a daily spend on those things at bars and coffee shops. It's amazing how quick small but non essential purchases can add up. On that note, I'm surprised we don't have some sort of personal finance classes being taught in high school and college so kids can learn to set and manage a budget.

[NemesisX]

Originally Posted by Nkc

I don't own any of the cars listed either and would love to learn more about affording one.

Nemmy has once again blown my mind with his detailed analysis but I need something a tad more simple. How's your dining out budget lately? I'm genuinely curious if you've cut down over the years.

It's gone down out of necessity, although it's still probably egregious by most standards. I don't have the time. But it's gone down by a factor of 3-4.

How's the Lamborghini treating you?

[jmg]

Originally Posted by NemesisX

How's the Lamborghini treating you?

Well now I can't tell who's being sarcastic.

[Nkc]

Originally Posted by NemesisX

It's gone down out of necessity, although it's still probably egregious by most standards. I don't have the time. But it's gone down by a factor of 3-4.

How's the Lamborghini treating you?

That's great to hear. So you cook more now or got a woman that does the job for you? You could seriously feed a village with your monthly dine out budget.

Have parted ways with the bobo for some time now since I live in Vancouver full-time. That's more of a Hong Kong car. I've gone domestic lately. Kind of starting to see the appeal especially compared to what BMW has to offer lately.

[ASBSECU E93]

NemesisX - you've hit on something with post #94....

wealth is (can be) made via tangible R/E purchases (Ownership) on the X axis with Y representing the age of the property owner.

Z plots the curve and should effectively be bell shaped to represent the acquisition of wealth via assets, then the divesting of assets to shed risk and become liquid.

[NemesisX]

Originally Posted by Nkc

That's great to hear. So you cook more now or got a woman that does the job for you? You could seriously feed a village with your monthly dine out budget.

Have parted ways with the bobo for some time now since I live in Vancouver full-time. That's more of a Hong Kong car. I've gone domestic lately. Kind of starting to see the appeal especially compared to what BMW has to offer lately.

Ahh that's too bad!

And no, no time for dating/women

I stick to simple, crock pot recipes where I cook meat in bulk. I'll throw in Campbell's slow cooker crock pot sauces to make things easy as well. Other than that there are a couple of cafeterias on campus that provide reasonably priced meals, so that's been a staple of mine. I still eat out - just much less frequently. It's partly due to lack of time and partly due to feelings of embarrassment on what I'd define as conspicuous consumption with money that I have not earned on my own.

Nothing wrong with domestic! My dad's hitting 60 this upcoming year and I've told him to consider the CTS-V as an option.

[NemesisX]

Originally Posted by ASBSECU E93

NemesisX - you've hit on something with post #94....

wealth is (can be) made via tangible R/E purchases (Ownership) on the X axis with Y representing the age of the property owner.

Z plots the curve and should effectively be bell shaped to represent the acquisition of wealth via assets, then the divesting of assets to shed risk and become liquid.

Sounds right! You'd expect tails on both ends of the age spectrum, albeit for different reasons (young people don't have the collateral or financial capital to make large, non-primary residence R/E purchases; and older people (usually) don't have sufficient risk tolerance to keep them)

[Mr Tonka]

Originally Posted by NemesisX

The way I define affordability is extremely simple and extremely stringent, and it's almost certainly a function of my background and the kind of household I grew up in.

You are W years old. You make $X/year. You have $Y in liquid assets. Your annual expenses are $Z per year, and you want to retire at the age of Q.

If, after spending $Z/year you save and invest enough money in the stock market ($X-$Z plus any money placed into tax-deferred (401k/403b) or tax-advantaged (Roth IRA) retirement plans) such that assuming a conservative 3% real annual compounded rate of return, a 3% withdrawal from your nest egg at retirement age + your annual pension + any guaranteed, passive income will generate at least $Z/year and ideally (1.5 times $Z)/year in perpetuity without eating into the principal amount, then you can afford whatever it is you want to buy at the moment. I don't care if it's a Starbucks coffee or a Bugatti.

Why do I suggest 1.5 times $Z and not just $Z? It's admittedly arbitrary, but health care costs skyrocket for most individuals around retirement age. The average person can expect to spend $300,000-$400,000 out of pocket in health care from age 67 to 87.

So as a rule of thumb, a $1 million nest egg will safely generate $30,000/year at retirement age. If you spend $60,000/year right now, you'll need either a $3 million retirement nest egg or a less than $3 million nest egg + a guaranteed pension + guaranteed passive income (e.g. rental income) to make up the difference. Doable, but it takes discipline. Under my conditions, one cannot make $90,000/year after tax and comfortably spend $60,000/year. You'd need more like $150,000/year after tax.

How many people actually save and invest enough money annually to meet these requirements? Probably less than 0.1%.

The facts (particularly in the U.S.) are pretty sobering. Having $1 million in liquid net worth not including primary residence puts you in the top 6%, and yet the entry point to top 6% for income is more like $150,000/year. There's a clear disconnect there. If you make $150,000/year and spend $100,000/year, it's unlikely that you're saving and investing enough money to meet the criteria listed above, and the problem simply gets worse as one moves down the income ladder to the point where it's completely infeasible for those near or below the median household income to come anywhere near fulfilling the requirements I posted above.

I'm fully aware that the criterion I've provided is extremely stringent, mostly due to four factors:

(1) my requirement of being able to generate 1.5 times your current annual expenses per year when most people assume that their expenses will decrease (often significantly) at retirement age

(2) the fact that I've only allowed for a 3% compounded real annual rate of return when historically the stock market over large periods of time has returned more like 4-6%.

(3) the fact that I've ignored social security [see recent headlines on Republicans planning to significantly slash benefits]

and

(4) the fact that I've implicitly assumed that one will stay in one's primary residence throughout retirement. In reality, many people sell their primary residence and downsize significantly to generate additional investment income and slash costs (on property taxes, among other factors).

I made enough money to afford an M car in the time it took to read this post.

[01101001]

Originally Posted by NemesisX

Sounds right! You'd expect tails on both ends of the age spectrum, albeit for different reasons (young people don't have the collateral or financial capital to make large, non-primary residence R/E purchases; and older people (usually) don't have sufficient risk tolerance to keep them)

Risk tolerance? With real estate? ROFL.
Never heard of such a thing.
Stocks are where the elderly lack risk tolerance, and they should, with the lunatics in banking and wall street that have shown their complete disregard for the greater good in order to enrich themselves. 2008 meltdown anyone?

I guess I don't follow, because my wifes parents own many properties and they are decades into retirement. Friends of my wifes parents, one in particular, owns about 16 rentals. Most elderly people I know who have property, keep it, because they want the assets passed on in the family.

[Steeler]

Originally Posted by SakhirM4

I've never made 6 figures in my entire life by myself (with my wife we did) and now that I am retired, I never will. What does age have to do with making 6 figures.

But I have owned 18 BMWs, my home is paid for and I paid cash for my M4. You don't have to make 6 figures to achieve success.

^ this.
It's not what you make($) it's how you choose to spend and invest it.