South African Mr Money Mustache?? early retirement guru

[ronz91]

Driving the right kind of vehicle to save money.

Exactly what I thought. Although would not be surprised if he showed up in a Citi Golf

 

[ronz91]

[video]www.youtube.com/watch?v=vvJ4bwnAHnE[/video]

Mr Money Moustache clip

 

[chrisc]

Compound interest is your friend. However, this needs time and you must start at an early age, preferably with your first paycheck

 

[ronz91]

Compound interest is your friend. However, this needs time and you must start at an early age, preferably with your first paycheck

What accounts have the best compound rates?

 

[satanboy]

... my spending is low because I don't buy erroneous crap, ....

LOL

I only buy correct crap.

 

[cerebus]

Compound interest is your friend. However, this needs time and you must start at an early age, preferably with your first paycheck

Compound interest is great but the ability to retire early is also largely dependent on your savings rate. Compounding a 5% savings rate even from early on is still going to push your working age to 60.

 

[ronz91]

Compound interest is great but the ability to retire early is also largely dependent on your savings rate. Compounding a 5% savings rate even from early on is still going to push your working age to 60.

Are accounts available that do better than 5%?

 

[cerebus]

Are accounts available that do better than 5%?

Savings accounts? There are some, but really you'd want to be pushing the savings into investment vehicles. Investec goes as high as 7.55% on savings: https://www.investec.co.za/products.../fixed-term-deposits/fixed-term-deposits.html

 

[ronz91]

Savings accounts? There are some, but really you'd want to be pushing the savings into investment vehicles. Investec goes as high as 7.55% on savings: https://www.investec.co.za/products.../fixed-term-deposits/fixed-term-deposits.html

investment vehicles like stocks?

 

[cerebus]

investment vehicles like stocks?

Well, stocks, REITS, bonds, rental real estate, commodities, forex, whatever. The direction of someone's investment holdings is very personal and depends on a lot of variables.

But the main point of MMM is that before you talk about investment, you have to get the savings rate from your income way up, like over 50%, even to 75%+. Then it becomes quite straightforward to forecast, based on an expected rate of return (which is never possible to forecast really) the amount of time it will take you to be able to live off the passive income from your investments. He uses a 4% SWR as a rule of thumb, and there's also a lot of controversy over the safety margin from 4%, but in general you should project that if it takes you for instance, as a married person with 1 child, say R300,000 to live in comfort, then you'll need at least 25x or R7.5mil in the bank to retire. If you can live on R150k you'll need half that, and so on.

 

[ronz91]

which is never possible to forecast really

coz of market flunctuation?

 

[ronz91]

4% SWR

SWR?

 

[Paul_S]

SWR?

Savings Withdrawal Rate
a.k.a Maximum Draw Down rate if I'm not mistaken.

 

[ronz91]

He uses a 4% SWR as a rule of thumb, and there's also a lot of controversy over the safety margin from 4%

So the controversy is whether 4% is too high?

 

[cerebus]

SWR?

1) because of lack of time travel abilities
2) SWR = Safe Withdrawal Rate. Learn more here. The idea is that you build up an investment portfolio with a view to withdrawing a percentage of that each year for your living expenses. The theory is meant to cover a time of I think 25 years retirement withdrawals, but the early retirement guys have extrapolated to say that it's effectively an infinite forecast.

 

[cerebus]

So the controversy is whether 4% is too high?

The controversy is over whether past returns can be predictive of future returns. And yeah, essentially it's whether 4% is too high. The counterargument is that people who are skilled at budgeting and active managers of their money can adjust their expenses and portfolio balancing if needed. In fact these people more often seem to find that their money increases more than anticipated, and their living expenses tend to be lower than anticipated.

 

[ronz91]

The controversy is over whether past returns can be predictive of future returns. And yeah, essentially it's whether 4% is too high. The counterargument is that people who are skilled at budgeting and active managers of their money can adjust their expenses and portfolio balancing if needed. In fact these people more often seem to find that their money increases more than anticipated, and their living expenses tend to be lower than anticipated.

Is this part of a branch of economics or just pseudo economics created by the early retirement guys?

 

[Paul_S]

1) because of lack of time travel abilities
2) SWR = Safe Withdrawal Rate. Learn more here. The idea is that you build up an investment portfolio with a view to withdrawing a percentage of that each year for your living expenses. The theory is meant to cover a time of I think 25 years retirement withdrawals, but the early retirement guys have extrapolated to say that it's effectively an infinite forecast.

Only infinite if future performance of your investments is an indicator of future performance. Who says we won't go through a 30 year recession which didn't occur in the past?

Example:
If you had all your retirement savings in local equity or cash in Zimbabwe and went through the hyper inflation scenario that they did I doubt your nest egg would have faired very well.

I'm becoming more and more certain that I will have to work until I die unless I figure out how to make crap loads of money before then.
There is no ways I can reach a savings rate of 50% let alone 75% with a family to look after.

 

[cerebus]

Is this part of a branch of economics or just pseudo economics created by the early retirement guys?

It's neither a branch of economics nor pseudo-economics. It's a quite valid study that was done and replicated, and further validated in the Trinity College study, which is used as the basis for a rule of thumb to plan early retirement. I really suggest you start reading up on this stuff for yourself.

 

[ronz91]

It's neither a branch of economics nor pseudo-economics. It's a quite valid study that was done and replicated, and further validated in the Trinity College study, which is used as the basis for a rule of thumb to plan early retirement. I really suggest you start reading up on this stuff for yourself.

Yeah I plan to. Thanks cerebrus. Any other resources you suggest?