“If you reach for a star, you might not get one. But you won’t come up with a hand full of mud either.”
Leo Burnett
I came across this quote many years ago and, looking back, it’s the way my life has unfolded. Personally, I never got that star but things have been pretty damn good and the reaching was fun. I’m still at it.
Here are some of the things I’ve learned along the way:
Spend less than you earn – invest the surplus – avoid debt
Do simply this and you’ll wind up rich. Not just in money.
If your lifestyle matches or, god forbid exceeds, your income you are no more than a gilded slave.
As individuals we only have one obligation to society: To make sure we, and our children, are not a burden to others.
The rest is your personal choice. Make your own and make the world a far more interesting place.
While giving is a fine and pleasant thing, no one has an obligation to do so. Anyone who tells you differently is trying to sell you something, most likely the idea of giving to them and/or their pet project.
Spend sparingly. Tip generously.
You own the things you own and they in turn own you.
Money can buy many things, but nothing more valuable than your freedom.
Without F-you Money you are a slave. If you have debt, you are a slave with still stouter shackles.
You weren’t born to be a slave.
Carrying debt is as appealing as being covered with leeches, and has much the same effect. The idea that many, indeed most, people seem to happily cover themselves with debt is so beyond my understanding it is hard to imagine how, let alone why, the downsides would need be explained.
Take out your sharpest knife and start scraping the little blood-suckers off.
- If life hasn’t been turning out the way you’d hoped, take a moment. Look around. Open your eyes. There might just be some luck flowing past waiting for you to grab it.
- If you are basking in the glow of your hard work, initiative and success, congratulations. Now, when you’re done patting yourself on the back, take a moment and give a little thanks.
The problem with Beanie Babies, or anything else produced as a collectible, is that when people buy them they save them. They will never be rare and rare equals value.
Fads, manias and bubbles: What they all have in common is that by the time you start reading about them everywhere, the end is near.
It’s OK for the other guy to get a deal, too.
You can’t pick winning stocks:
If you choose to try to best the averages, God Bless and God Speed. You may well be smarter and more talented than I. You are most certainly likely to be better looking. I’ll look for your name along with Warren and Peter’s in the not too distant future. I extend the same to all those folks I’ve met in Vegas who assure me they have bested the house. I listen, gaze up at the billion dollar casinos and reflect on how many smarter, more talented and better looking people there are than me.
Index funds. End of story.
Vanguard. End of story.
This whole civilization thing has been a huge mistake and we’d all be better off as hunter/gatherers. But since we do live in this complex, technical world you had best learn about money. Money is the single most important, effective tool in navigating it.
Sound investing is not complicated. Complicated investments make money only for those selling them.
Keep a mental list of people you’d like to have a cup of coffee with. Invite them.
Read.
There is nothing you can’t learn, no place you can’t go, if you read.
21 Comments
This is a great manifesto. Sadly, it has taken me much later in life to learn much of what you mention here. Now that I have it, I’m on a roll
Thank you, Mr. Stoic…
…it only took me five decades and countless mistakes to get here.
I agree with Stoic Investor. Now that I know, I share your blog with everyone who might pay attention.
Thank you, Trish….
and thanks for passing the blog along. Good for me and hopefully for those you send it to.
BTW, occasionally folks have linked my posts here:
http://www.reddit.com/r/financialindependence
That always attracts new readers. I’m just sayin’….
Hi,
I found this site off of MMM. I am 34 and I want to spend the next 20 years investing as much as possible. I only have 70k saved. 30k in a roth Ira at Scottrade in stocks and another 30k at scottrade in stocks but in a Ira. Then I have 10k in a 401k.
Just turned my life around in January after discovering MMM. I have 4k for emergency and I put 500 in a month making 3% at the bank.
Any suggestions or where should I start reading first?
I want to invest in other things but not sure where to start I want to try and retire by 54 but not sure were to put the money.
Hi Andria….
Welcome and congratulations on the new path you’ve chosen for yourself.
I’m going to arrogantly assume that when you ask “…where should I start reading first?” you are referring to on this blog.
Here you go:
http://jlcollinsnh.wordpress.com/2011/06/14/what-we-own-and-why-we-own-it/
http://jlcollinsnh.wordpress.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/
http://jlcollinsnh.wordpress.com/2012/09/17/putting-the-simple-path-to-wealth-into-action/
From there I’d read the stock series starting here:
http://jlcollinsnh.wordpress.com/2012/04/15/stocks-part-1-theres-a-major-market-crash-coming-and-dr-lo-cant-save-you/
Finally, I just finished being interviewed here:
http://www.madfientist.com/jlcollinsnh-interview/
…in case you get tired of reading.
please feel free to comment and ask questions along the way.
Hi,
Thank you for letting me know where to start reading.
I have a few questions and I could use some advice please.
I started contributing 40% of my salary which is almost $700 every two weeks to a 401k that is at Fidelity to the following funds:
Asset Class Subclass Fund Name Current %
Stock Investments LARGE CAP FID CONTRAFUND K
20%
Stock Investments MID-CAP FBR FOCUS INV
20%
Stock Investments SMALL CAP ALLNZ NFJ SMCPVAL AD
20%
Stock Investments INTERNATIONAL AF EUROPAC GRTH R4
20%
Blended Fund Investments LARGE CAP FID BALANCED K
10%
Bond Investments INCOME PIM TOTAL RT INST
10%
Total: 100%
Total current balance 10K Is this okay?
Then I have a IRA through Scottrade of stocks that total 30K.
Then we have Two Roth IRA accounts that total 30K through Scottrade of stocks and I am doing the max 10K contribution now.
I am saving $500.00 a month in a savings account that is giving me 3%. My balance is 4k
After reading your blog I am thinking I may need to change some things around. I want to start the VTSAK fund as well.
Should I go in the VTSAK for a IRA or a mutual fund? I am thinking if I do IRA I could roll over the 33K from my Scottrade IRA and get it going. Then I will contribute any extra money to the VTSAK fund each month. Then keep my Roth IRA’s through Scottrade. Any suggestions would help. Or is this too much stock and should I do some bonds?
I have never invested as much money as I do now so it is scary. : ) I like what you did for your daughter helping her to find something she does not have to constantly worry about. I need that. We are 34 so we are trying to save as much as possible for the next twenty years.
Thank you and thanks for what you do. I am so excited to have found your blog and i signed up.
Andria
Hi Andria…..
Looking at your 401k, the good news is that you have the US market covered with the small, mid and large cap funds. You’ve also got some international and some bonds.
The bad news is you are using 6 funds to do it and they are likely high cost ratio choices.
1st, you can dump the balanced fund. It is just duplicating what you have in the others. Hopefully you can dump some others as well.
Personally, I don’t see the need for International as I describe here: http://jlcollinsnh.wordpress.com/2012/09/26/stocks-part-xi-international-funds-2/
or Bonds at your age.
But if you want them, Fidelity has an interesting “fund of funds” fund that covers every thing you have in those six: FFNOX, Fidelity Four-in-One Index Fund. It has a reasonable expense ratio of .23%. If that’s an option in your 401k, it’s all you need. Assuming you want the International and bonds. If not all you need is one of these:
Your 401k almost certainly will offer one of these Total Stock Market Index Funds:
FSTVX or FSTMX. The first has the lower cost @ .07% so I’d go with that if you can.
If not, it’ll likely offer one of these Index 500 funds: FUSVX or FUSEX. Any of these four work well.
VTSAX is an excellent choice for your Roths and IRA.
As for this being scary, be sure to read Stocks — Part I and the rest of the series. That should help you decide if and when you want to smooth out the ride with the REIT and Bond funds.
In another week or so I’ll be publishing a post on Target Retirement Funds. http://jlcollinsnh.wordpress.com/2012/12/18/stocks-part-xv-target-retirement-funds-the-simplest-path-to-wealth-of-all/ These make things even simpler than the Simple Paths I’ve described. You might find them of interest, too.
Stay tuned, and thanks for subscribing!
Okay great, thanks for taking the time to respond. I appreciate it and I am going to look into changing my Fidelity account asap.
Andria
Hi,
Yes, I wanted to know where to get started on your blog.
. Thank you very much for the information so I can get started!!!!!!
Andria
I hopefully have 2 pretty quick questions.
I have e-trade account which I am currently invested in the VFINX and the VFSAX. Am I duplicating myself ?
I am 23, and also want to know is it better to have the dividends re-invest in the fund, or have them deposited into the account. I would assume to have them re-invested so you get them to compound for you. but a little advice would be great.
Thank you – and what an awesome blog!
Hi Andrew…
..and thanks!
VFINX is the S&P 500 index fund. It invests in the 500 largest US companies.
VFSAX is not an actual fund. My guess is you meant to type VTSAX, which is the Total Stack Market Index fund.
VTSAX invests in every publicly trade US company. Both are great choices, but I prefer VTSAX for its broader range.
Yes, there is considerable duplication between the two. I’s suggest you chose one and keep things simple.
And, assuming your goal is to grow your investment, yes I’d recommend you reinvest your dividends and capital gains.
Thank you!
Hi Jim –
Your writing is really inspiring to me. I’m 26 and I feel like I’m cheating at life by absorbing these ideas now!
Just wanted to say hello and to thank you for sharing your thoughts and your integrity.
I’m in MA so I’ll invite you for a cup of coffee some day.
Ha!
I love it! Cheating at life!
I’ve often wished some of the blogs like Mad Fientest and MMM were around when I was starting out. Would have saved me a lot of heartache and $$$.
Thanks for checking in. Coffee sounds like a plan! Let me know next time you make it up to NH.
Hello!
sorry to bother you but I had a few questions to ask and was hoping you could help me out a bit. I’ve also asked MMM as well and am hoping someone can help us figure everything out.
1) THANK YOU for your blog! LOVE it! Very helpful! Now because both you and MMM have recommended vanguard my husband and I are looking at rolling over everything to them from our american funds ira’s. the only thing that I’m slightly uncomofrtable with is NOT having someone local to answer your questions, make sure to follow up wtih everythings been done correctly etc. I HATE being transfered around on the phone with a company and feeling like I get different answers each time I talk to a different person. Thoughts?
2) I would like some advise… when reading these early retirement blogs we want to save/ work for early retirement but the problem is noone explains HOW to pull the money out before age 59 1/2… soooo.. where exactly should a young couple (29) be saving our money if we want to retire before age 50 so we can live off of that money?
3) my husband and I are now in a higher tax bracket… Im self employed and and have just recently incoporated into an s corp… im lookin at trying to determine If I should save into a ROTH IRA using my personal income.. or starting a SIMPLE/SEP and having the corporatin help fund our retirement.. we have only 1 full time employee other then myself and husband. He also works outside of our business. Any suggestions on what we should look at?
thoughts?
We would appreciate any advice! Thanks!
Also want to mention our tax brack is netting $100-$110k a year.. and we have 1 Rental house paid off.. and our personal home paid off.
Welcome WS!
Congratulations on the debt free personal and rental homes! Great start for age 29!
1. My pleasure!
Regarding Vanguard my experience has been that they are extremely helpful and it is easy to get a real person on the phone. My suggestion is that you call them directly and explain what you’d like to do. Then you can evaluate your experience with them for yourself.
2. What I think you are asking here is how to balance tax advantaged (IRAs, 401Ks) “buckets” with regular investment “buckets” so that you can easily pull money out without bumping into the 59.5 age limit rules.
If you are planning to retire before age 50 that implies an aggressive savings rate. With such a savings rate you should be able to fully fund your tax advantaged buckets and still fund your regular buckets. Then, before 59.5, just tap the regular buckets.
If you haven’t already, for more on this you might want to read: http://jlcollinsnh.com/2012/05/30/stocks-part-viii-the-401k-403b-ira-roth-buckets/
3. You can fund both a SEP and a Roth.
Since you are self employed, a Simple/SEP is a great option and provides great tax deferral. Go for it.
You should also fully fund Roths for both you and your husband, assuming you are under the income threshold. For 2013 that’s 178k in adjusted gross income assuming you are married and filing jointly.
Hope this helps!
Hi Jim,
Thanks for publishing this insightful blog on investing and becoming FI.
I’m 34 and have received an inherited IRA of about 100,000. Would you recommend putting it all in index funds (VTSAX) now with the market being “expensive”?
Thanks,
Ken
Welcome Ken….
I’m glad you are here. But rather than answer your question I’m going to give you an assignment.
Sit on your 100k until you read the stock series here on the blog. The answer is in there, along with a bunch more you should know before investing.
Good luck and check back!
I am totally with you on “Spend sparingly. Tip generously.” I don’t eat out often, but when I do, I make sure I tip generously. I cook and bring lunch to work 95 % of the time to “make up” for the tips that I know I’d give when I eat out. I always tell myself these tips will be for waiters/waitresses with a minimum wage who are college students or single mothers or whoever needs to support their family.
Well played, FE.
Tipping well is just part of the cost of the meal!
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