Financial Stability

am a young graduate and I feel very welcomed in this forum. I thought maybe I can take this opportunity to ask all alums out here how y'all plan your finances. How do you calculate that if you make $XXX,XXX by the time you turn 50 you can retire a little early?

I know there are a lot of websites out there but I wanted to ask people who have already done it or are on their path with real-world experiences. Would love to listen to everyone's experiences, young or old.

I myself have recently started investing in stocks and ETF. Don't understand a lot of financial jargon but doing the basics.

Newmark, best thing is to keep reading and talk to a financial advisor or someone else to keep learning. Some advisors will give you a free session in hopes of you being a client later on. Although it has its flaws, you can use the 4% rule or the 3% rule as a very rough proxy for how much you will need (sticking my thumb in the air). As far as how much you need to make, it's tied to how much of your gross income do you save and would you need in retirement. 20% would be an aggressive saver from what I have been told. It's more important to save and invest it in the general market and real estate then get too worried about exactly what you are invested in or trying to beat the market. If times are good and you are invested you will do fine. Focus on saving at a young age if you can and let your investments compound over time.

Play around with the the fidelity retirement score at the bottom of this link. I've found it to be one of the best rough calculators.

My main advice would be, find an online calculator and see what is ideal to save/invest and set goals.

You don't need a financial advisor if you are disciplined, if you are not find one.

Invest as much as you can at a young age and DO NOT touch it. Find solid stocks and do not try to play the market, just buy and HODL. I'm taking Apple, Amazon, Google, Nvidia, Netflix, (maybe Tesla/Rivian) etc. and some Bitcoin. Do not freak if the market drops, just buy and hold - even if there is a big market correction, you are young and it will recover. Just zoom out 10-20 years and see the bigger picture.

Had I done that at a young age I'd be retired by now, I tried to get smart and took profits, spread my money too thin and had too many holdings so when a couple went up, a couple went down and I was buying and selling too much.

Anyway, this is not financial advice, just things I've learned by making a lot of mistakes along the way.

There is one rule to follow if you want to retire early. (I retired at 54). Live well below your means.

Take pleasure in saving instead of spending. Take a rather large percentage of your take home pay and bank it. NEVER touch it again until you are actually retired. As it says in other posts, invest in things you know and don't worry at all about yearly fluctuations. You have plenty of time for a recovery.

One exception. If you bought something based on certain assumptions and facts, and they change dramatically, ask yourself: Can I deploy the money from selling this investment in something more attractive with better future prospects? If so, do it. Never worry at all about how much "up or down" you are in an investment---only question the future prospects of that investment. Good luck and good investing.

p.s. read the book "The Millionaire Next Door." It will give you a framework to live your life.

The defining feature of economies going forward is described in a 2014 book called Clean Disruption, by Tony Seba. It describes the tectonic shift taking place as a result of converging cost curves.

ETF's based on Wright's law that I know of are run by Ark Invest (Cathy Wood, check youtube), and they're volatile. ARK shares their research and publish their trades daily, which is better transparency than you'll get anywhere else.

Spend less than you earn. The fact you're willing to ask the questions you did, bodes well. Good luck.

The fact that you graduated from a great university and are asking these questions means you’re already on the right track. Great job!

I work for as an investor for a asset manager. I’m not a financial planner/advisor, so please don’t take this as formal advice. But I’ll share some general guidelines that I’ve learned over the years and hopefully will help you. This is in what I would consider in order of importance.

- it’s been said already, but is very true - live below your means. I’ll add to that - invest the difference (discussed more below). It’s important to not think about “what can I afford” and think more like “what do I need and what do I truly value.” Usually that results in most professionals living below their means. If it doesn’t for you, then you’d need to reevaluate what you truly value. What the exact $ value is for what your means are is specific to your situation. U can use online calculators to get an approximation and make sure you’re below that.

- focus on maximizing your value generating opportunity. For most of us, that means our jobs. Spend less time on worrying about when you’re going to retire and more on maximizing you’re earnings power (ie - kick a** in your career). The more you maximize that, the earlier you’ll be able to retire

- don’t leave free $ on the table.This is mostly true for retirement savings programs and taxes. Specifically, maximize your contributions to retirement accounts to the extent you can. Take the $ you have left over from living below your means and invest in products such as 401k’s/IRA’s. A lot of employers have 401k mataches - make sure you contribute at least enough to max out the March. Free $!! But I’d say you should contribute more than just the match amount. On the tax side, make sure you minimize that. This includes leveraging aforementioned retirement accounts. If you’re on a high deductible health plan, make sure you have an HSA and max out the contribution (HSAs are really some of the most tax advantaged investment vehicles). There’s other examples that u can google but these are a couple of examples of maximize value of your hard earned money.

- in terms of how to invest, for 90% of people, it’s buy SPY (or some similar broad market ETF) and forget it. This includes the retirement accounts and normal ones. If you really want to try your hand at individual stocks, take a piece of your portfolio and do so. But, as sounds like in your case, you don’t have much knowledge around it OR don’t have time to spend on it, make sure it’s a minority of your portfolio. I typically keep a small portion in Cash for rainy day and the rest is invested at all times. Don’t try to time the market. If your horizon is more than 10 years, you’ll very likely be just fine and the value of trying to time is most likely very negative.

Just some high level advice. Hopefully it’s helpful. Let me know if you have any questions.

There is a subreddit specifically for this. You can read multiple anecdotes and look at the resources they provide. You can post and ask questions of people who have done/are doing it.

I live in the Austin area. Real estate market has gone crazy since Covid. A lot of Californians who make good money on selling their houses have moved here and bought houses in cash with their profits. They will no longer have a house payment for the rest of their lives. They are now free to save thousands of dollars a month they would otherwise be spending. My friend sold his home here, made 300k+ on it. Moved to Virginia for his girlfriends job and paid cash for a house. Makes 6 figures from google. Gets 50% of his 401k matched and will never have a house payment again.

Takeaway: if you can plan or get lucky enough to get out of a house payment young, you put yourself in A great position to save.

Surprised to see a personal finance thread here! Good advice above. One addition to highlight: limit lifestyle inflation as your income increases. If you can save/invest 15-20% to start and as your income increases start to nudge that up (e.g. save 50% of all pay increases) you will continually shorten your required working years. I am 37 and did this from the start and am on track to be done at 40-41ish depending on the markets. Don’t let your friends’ spending habits determine how you do you.

Forum-wise take a look at the Bogleheads.org in addition to the subreddit mentioned. Tilts older but there is a lot of great info to digest. You don’t need to get fancy right now, just avoid making big mistakes, save and invest aggressively and keep your skills valuable to drive income over time. Compound interest is a world wonder.