Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

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Actin
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by Actin »

Only if your idea of wealth is being a millionaire at 70 in a nursing home

Your annual income is exponentially more important than your savings rate to building long term wealth.
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HomerJ
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by HomerJ »

tvubpwcisla wrote: Sat Jun 19, 2021 9:42 am It seems like building long term wealth is pretty simple. Live below your means and invest in a low cost total stock market index fund. Am I missing anything other than stay the course? Is it really that easy?
Yes, that's basically all it takes...

You've got 90% of it right there.

Spend less than you make, save the money in a low cost total stock market index fund (need an emergency fund too), and stay the course through stock market crashes.

Sure, there are some other details (as you get close to retirement, you'll need some in safer money to avoid the danger of a crash right when you retire), but you definitely have the big picture right.
Last edited by HomerJ on Sat Jun 19, 2021 1:13 pm, edited 1 time in total.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by coffeeblack »

Silence Dogood wrote: Sat Jun 19, 2021 12:54 pm
coffeeblack wrote: Sat Jun 19, 2021 11:50 am What if they just bought one fund. Lets say lifestyle strategy fund at 20 years old. Invested in it for 30 years or more. they can even put it on auto pilot. That would have a very high probability of success. That seems pretty simple. Perhaps not easy because it requires someone who has the will to avoid some excessive spending and channel it into saving.
I've done something similar to this.

My Roth IRA has been exclusively invested in the Vanguard Target Retirement 2055 fund since I first opened it, age 20.

(I also have a 401(k), which does not offer this fund, but I use other available index funds.)
I bet it has done well for you.
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wander
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by wander »

You cannot live below your means, invest in a low cost total stock market index fund, earn minimum wage and magically become wealth. You have to make good income first.
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HomerJ
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by HomerJ »

dbr wrote: Sat Jun 19, 2021 11:17 am Wealth is $1B by the time you are 50 starting at age 20.

Assuming your return is 6% you would have to LBM by $12,648,911.49 each year.

Math matters.

If you have a less ambitious goal of say $1M then the LBM is only $12,648.91 per year, and that is very reasonable.

If the investment is in stocks and you reach $1M at age 50, then it is a possibility that at age 51 you will only have $500,000.
I get that you want to point out that the devil is in the details, but throwing out a $1 billion strawman argument isn't that helpful.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by Elric »

tvubpwcisla wrote: Sat Jun 19, 2021 9:42 am It seems like building long term wealth is pretty simple. Live below your means and invest in a low cost total stock market index fund. Am I missing anything other than stay the course? Is it really that easy?
Yes, provided you earn enough that you can live below your means and have enough left over to invest wisely. Not everyone is in that position, for many different reasons.
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HomerJ
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by HomerJ »

Let's not get hung up on the word "wealthy". Let's assume it means you have enough money to live your same lifestyle without having to work, and you don't have to worry about running out of money.

Financially independent is probably the phrase most of you would prefer, since "wealthy" is very subjective.

Some other caveats -

You can't save 1% (which is still technically living below your means) and expect to become wealthy.

I suggest starting at 10% savings when young, and saving half your raises. If you get a new job or a promotion and you get a 10% raise, save 5% and spend 5%. That way your lifestyle is still increasing, but so is your saving rate.

That's a fairly painless way to increase savings over time.
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Padlin
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by Padlin »

HomerJ wrote: Sat Jun 19, 2021 1:29 pm
I suggest starting at 10% savings when young, and saving half your raises. If you get a new job or a promotion and you get a 10% raise, save 5% and spend 5%. That way your lifestyle is still increasing, but so is your saving rate.

That's a fairly painless way to increase savings over time.
Worked well for me too, did this almost exactly except I started at 14%, started @ 24, retired at 57.

I've never had being wealthy as a goal, happy and financially secure is good enough for me.

One does not have to have a high paying job to succeed.
Regards | Bob
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by kleiner »

Since we had maxed out our respective 401ks, my wife and I started automated monthly investing in an S&P 500 index fund in 1998. Initially it was $500 per month but in recent years it has increased to $2500 per month. We are still at it without a break 23 years later. We now have over $600k in this fund alone. It was easy to get this started but we were somehow able to resist stopping these automated investments between 2008 and 2010!
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by dharrythomas »

It is incredibly simple. BUT there is a good deal of randomness in life, avoiding injury, marrying right the first time (there is luck involved there), being physically and mentally healthy, choosing the right career or business in a world where the only constant is ever accelerating change, managing risk (you should be graded on the quality of your decision making process, but a 95% chance of success means that 1 in 20 times the correct decision doesn’t provide successful results).

I love “The Millionaire Next Door”, it’s the only path open to most of us, but they selected for success. Many small businesses only provide enough income to support the person and the only thing left over is the real estate, if any.

On a global and historic basis, I won the lottery. I was very lucky to be born when and where I was at a time when the markets rewarded savings and investment. I picked a profession where the rewards were reasonable, found a spouse willing to endure my craziness, was out of work only once, the family has been reasonably healthy, I didn’t end up in the wrong place where people ended up bankrupt or in jail, I sidestepped the two big crashes more because I couldn’t understand what was going on so we didn’t profit from it but didn’t get hurt too bad, and I found this forum which has tempered my financial irrationality. I’m not in the top 10% in this country for my age group, but we’ve got enough and more important the kids and grandkids are OK. I feel blessed.

Work, discipline, and a good plan are necessary but not sufficient. There is a large element of luck in success.
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Matahari
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by Matahari »

It also helps to have a "wealth" target that is (1) reasonable and (2) stable -- in that it does not become an illusive moving target.

And, by definition, long-term results take decades, often over the long course of one's working life. It's one thing to be thrilled about the past 3 years' worth of stock market returns. When people have had some incredible years, it's all to easy to start spending more freely, especially when one is young or raising a family.

It takes a significant degree of discipline to be able to look back and see what the fruits of 25+ years of dedicated, consistent saving and investing returns. One needs that length of time to allow the effects of this simple math:
2 x 2 x 2
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by Elric »

dharrythomas wrote: Sat Jun 19, 2021 2:32 pm It is incredibly simple. BUT there is a good deal of randomness in life, avoiding injury, marrying right the first time (there is luck involved there), being physically and mentally healthy, choosing the right career or business in a world where the only constant is ever accelerating change, managing risk (you should be graded on the quality of your decision making process, but a 95% chance of success means that 1 in 20 times the correct decision doesn’t provide successful results).

I love “The Millionaire Next Door”, it’s the only path open to most of us, but they selected for success. Many small businesses only provide enough income to support the person and the only thing left over is the real estate, if any.

On a global and historic basis, I won the lottery. I was very lucky to be born when and where I was at a time when the markets rewarded savings and investment. I picked a profession where the rewards were reasonable, found a spouse willing to endure my craziness, was out of work only once, the family has been reasonably healthy, I didn’t end up in the wrong place where people ended up bankrupt or in jail, I sidestepped the two big crashes more because I couldn’t understand what was going on so we didn’t profit from it but didn’t get hurt too bad, and I found this forum which has tempered my financial irrationality. I’m not in the top 10% in this country for my age group, but we’ve got enough and more important the kids and grandkids are OK. I feel blessed.

Work, discipline, and a good plan are necessary but not sufficient. There is a large element of luck in success.
Excellent boost. Very well said! :sharebeer
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by thenextguy »

tvubpwcisla wrote: Sat Jun 19, 2021 9:42 am It seems like building long term wealth is pretty simple. Live below your means and invest in a low cost total stock market index fund. Am I missing anything other than stay the course? Is it really that easy?
You’re missing that you have to start somewhat early. The later you start the harder it is bevause you give your money less time to work.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by StevieG72 »

It is that simple! In my opinion DYI is the best way to go, avoids conflict of interest.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by Wanderingwheelz »

Actin wrote: Sat Jun 19, 2021 1:08 pm Only if your idea of wealth is being a millionaire at 70 in a nursing home

Your annual income is exponentially more important than your savings rate to building long term wealth.
Hold up. Are nursing homes really full of 70 year olds?

And also if ones goal is to be a “millionaire” long before age 70 in the $1MM to $5MM range I’d be hyper focused on my savings rate, especially when I was younger in order to get as much compounding early as possible. The first million takes an average of 32 years and I think the second only 5.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by MathWizard »

1) Increase your human capital first.

You are not going to get rich in a minimum wage job, because you won't have anything left over for
investing.

2) Don't be unemployed or long periods at a time.

You typically need to be earning for 30-45 years to make this work.

3) There are other ways to build wealth, starting a successful business being the most likely.

4) You can also just inherit wealth. This is the easiest, but not so satisfying.

5) You can win the lottery. This seems to not always be a good thing.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by Abe »

Actin wrote: Sat Jun 19, 2021 1:08 pm Your annual income is exponentially more important than your savings rate to building long term wealth.
I'm not going to say that your income is not important, but I believe your savings rate is more important than how much you make. The key to long term wealth is to get something working for you other than yourself. You can have a million dollar a year income and still live pay check to pay check. By the same token, you can have a modest income and still become financially independent. You can only work so many hours a day, but if you have investments, they will work for you 24/7.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by sailaway »

Abe wrote: Sat Jun 19, 2021 4:46 pm
Actin wrote: Sat Jun 19, 2021 1:08 pm Your annual income is exponentially more important than your savings rate to building long term wealth.
I'm not going to say that your income is not important, but I believe your savings rate is more important than how much you make. The key to long term wealth is to get something working for you other than yourself. You can have a million dollar a year income and still live pay check to pay check. By the same token, you can have a modest income and still become financially independent. You can only work so many hours a day, but if you have investments, they will work for you 24/7.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by bling »

overly simplified, for every year you can save half your income is one year you can live in retirement at the same standard of living.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by chazas »

THY4373 wrote: Sat Jun 19, 2021 10:46 am
leeks wrote: Sat Jun 19, 2021 10:17 am Having (and keeping) a spouse on the same page is relevant too.
I am going to disagree on this. Having a spouse can help especially at lower incomes by (potentially) adding to the family income while maintaining some "economies of scale" on living costs and diversifying incomes sources. However spouses introduce additional risks/costs:

About the best divorce rate I have seen is about 35% which is for first marriages, well educated couples who got married later in life. While not all divorces end in financial disaster (mine certainly did not) many do. I find it a bit amusing that Bogleheads will argue endlessly over safe withdrawal rates but often completely ignore this elephant in the room.

You need to find a spouse that is not only compatible with you on the economic side of things but also the myriad of other things you are looking for and this can be a real challenge (and of course folks change over time so the person who was perfect for you at 30 might not be at 50).

Spouses often lead to children which while (often) truly rewarding in many ways, aren't great for accumulating more wealth.

Solo folks have a lot more control and flexibility in what they do and how they do it. My highest savings rate ever is now that I am solo again post divorce.
Yeah, more control, but I miss that big chunk of money that disappeared. And single vs MFJ rates when I was the primary earner. Painful.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by jaqenhghar »

bling wrote: Sat Jun 19, 2021 5:30 pm overly simplified, for every year you can save half your income is one year you can live in retirement at the same standard of living.
Would you mind explaining this a bit more? Still learning, and I don't quite follow.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by namajones »

Padlin wrote: Sat Jun 19, 2021 9:45 am It's that simple, but not necessarily easy.
Well said. To flesh out the "not necessarily easy" part a bit, it almost requires taking, as Robert Frost said, "the road less traveled," and that can be a lot tougher to do than to say when your life intersects with others (spouse, for example) who want the usual things (house, kids, cars, etc.) that so often define success or happiness but frankly keep even above-average earners from getting ahead today. Having a life today that looks like the lives that many of our parents or grandparents lived in the late 40s, 50s, 60s, even 70s (single earner, house full of kids, cars, college, etc.) is darn near impossible without getting in hopelessly over your head financially, even in a household of two middle to upper middle class earners.

You can say "no" to most of it and get ahead, but the cost is more than most are willing to bear.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by CloseEnough »

Not much mention of luck, good fortune, whatever you want to call it, in these comments. I’ve seen plenty of very financially successful people who don’t acknowledge the role luck played in their success.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by namajones »

dharrythomas wrote: Sat Jun 19, 2021 2:32 pm
Work, discipline, and a good plan are necessary but not sufficient. There is a large element of luck in success.
Wise words. I would even add that more than one good plan is necessary (Plan B, C, D, etc.). And then hope for the best.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by minimalistmarc »

CloseEnough wrote: Sat Jun 19, 2021 6:14 pm Not much mention of luck, good fortune, whatever you want to call it, in these comments. I’ve seen plenty of very financially successful people who don’t acknowledge the role luck played in their success.
Very true. Even avoidance of bad luck is lucky.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by Lee_WSP »

You will have more wealth relative to your income, but your income and savings rate will determine how wealthy you are relative to everyone else.

So, yes you'll be wealthy relative to where you started.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by cbeck »

Yes, but it helps a lot to avoid debt as much as possible, don't own a car, and don't have children. Doable if you live in a city with public transportation.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by arcticpineapplecorp. »

living below your means doesn't in and of itself make you wealthy, unless your definition of wealth equals any positve net worth. Therein, if you have $400 in savings as almost half of the US population supposedly didn't at one point, then you're doing better than half the US population (whether that means you're wealthy is another question).

Siimilary by the amount of income compared to most of the world, people in developed nations tend to be much better off (many are living on $1 a day). You're probably doing better than that. You're rich by the world income of many countries.

the fact is you do need to live below your means to get wealthy (unless you're going to inherit, win the lottery, sell a business, etc).

otherwise if you're spending 100% of your income, then where would the money even come from to build wealth?

some may say, well I borrowed to buy my house and now I have equity! I built wealth without having to save. Sort of. Paying down the mortgage is a forced savings, really no different than paying a monthly amount into an index fund.

I once asked the question, "If you earn $1,000,000.00 a year, but spend $1,000,001.00 a year are you rich or poor?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events.
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HomerJ
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by HomerJ »

arcticpineapplecorp. wrote: Sat Jun 19, 2021 6:39 pm I once asked the question, "If you earn $1,000,000.00 a year, but spend $1,000,001.00 a year are you rich or poor?
“Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness.
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery”


-Charles Dickens.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by bling »

jaqenhghar wrote: Sat Jun 19, 2021 5:53 pm
bling wrote: Sat Jun 19, 2021 5:30 pm overly simplified, for every year you can save half your income is one year you can live in retirement at the same standard of living.
Would you mind explaining this a bit more? Still learning, and I don't quite follow.
you have an income of $100k. you spend $50k and save $50k. whatever your standard of living you achieved with that $50k, you can do the same with the other $50k once you reach retirement.

it's oversimplified because of compound interest and # of years until retirement, so in reality you can save less than half and still maintain the same standard of living.

early in your career, when portfolio is still small, your savings rate trumps everything else you do. you could make some very bad investment decisions and you'll probably still come out OK with a high savings rate. it's not until later in your career after you've been saving diligently for many years that it flips, where your portfolio is large and its swings trumps your income.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by rich126 »

Personally if you want to be wealthy I think real estate was the way to go in my lifetime. I didn't go that way since I am a bit risk adverse but looking back that was a huge mistake.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by JoMoney »

HomerJ wrote: Sat Jun 19, 2021 6:54 pm
arcticpineapplecorp. wrote: Sat Jun 19, 2021 6:39 pm I once asked the question, "If you earn $1,000,000.00 a year, but spend $1,000,001.00 a year are you rich or poor?
“Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness.
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery”


-Charles Dickens.
If that $1,000,000 a year was "earned" from income you regularly received on $50,000,000 of invested assets, you could probably get away with spending $1,000,001.00 every year for the rest of your life and most would consider you as "rich" even when you passed.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by Schlabba »



Some people take a reasonable argument, stretch it all the way to the extreme and then say that is the reason the argument is wrong. One example is defining wealth as 1B, the other example of living on minimum wage your entire life. What percent of the people live at minimum wage their entire lives? I don't know the number but I do know that for most people they tend to improve their situation over time. Both wage and wealth are correlated to age.

I'd say that living below your means and investing the difference is a path to wealth available to the vast majority of us in the developed countries.

The biggest hurdle is probably knowledge. I never knew about building wealth before I actively started looking for information. I met many (intelligent & professional) people who have no idea about index funds and the 4% rule. I'd like to see personal finance and investing covered in high school. It might inspire people that it is achievable to reach some level of wealth during their lifetime and it can provide them a goal to work towards.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by NiceUnparticularMan »

CloseEnough wrote: Sat Jun 19, 2021 6:14 pm Not much mention of luck, good fortune, whatever you want to call it, in these comments. I’ve seen plenty of very financially successful people who don’t acknowledge the role luck played in their success.
Absolutely!

And this is by no means meant to undermine that point, but I would also mention that making use of your good luck (understanding good opportunities and not getting in your own way and such), and dealing well with your bad luck (staying flexible, staying constructive, and so on) is important.

But the fact is if you end up having a lot of bad luck, a long-term, simple plan to become "wealthy" might not work out. And I don't want to sugarcoat that fact.
Last edited by NiceUnparticularMan on Sun Jun 20, 2021 9:25 am, edited 1 time in total.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by corn18 »

CloseEnough wrote: Sat Jun 19, 2021 6:14 pm Not much mention of luck, good fortune, whatever you want to call it, in these comments. I’ve seen plenty of very financially successful people who don’t acknowledge the role luck played in their success.
Luck is the intersection of opportunity and preparation.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by arcticpineapplecorp. »

JoMoney wrote: Sat Jun 19, 2021 7:17 pm
HomerJ wrote: Sat Jun 19, 2021 6:54 pm
arcticpineapplecorp. wrote: Sat Jun 19, 2021 6:39 pm I once asked the question, "If you earn $1,000,000.00 a year, but spend $1,000,001.00 a year are you rich or poor?
“Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness.
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery”


-Charles Dickens.
If that $1,000,000 a year was "earned" from income you regularly received on $50,000,000 of invested assets, you could probably get away with spending $1,000,001.00 every year for the rest of your life and most would consider you as "rich" even when you passed.
sorry i wasn't more specific. i'm talking about someone who makes a buttload of money at their job but spends more than they make. they've got nada, zilch, zero after they've spent all their income (and then some).
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events.
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by Grt2bOutdoors »

Taylor Larimore wrote: Sat Jun 19, 2021 12:05 pm
tvubpwcisla wrote: Sat Jun 19, 2021 9:42 am It seems like building long term wealth is pretty simple. Live below your means and invest in a low cost total stock market index fund. Am I missing anything other than stay the course? Is it really that easy?
tvubpwcisla:

The answer is "YES" (although it is not "easy"). I am an example:

I started investing in 1950 at the age of 26. ​On December 1950 the S&P 500 stocks were valued at $21. Today the S&P 500 Index is valued at more than $4,000 (not including dividends).

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Put money in a stock market index fund and you balance it out with some bonds, depending on age and so on, and don’t look at it for 50 years. But when you retire, open the envelope. Be sure a doctor is nearby to revive you. You’ll go into a dead faint, you won’t believe there’s that much money in the world.”
Curious, what was your first investment? There weren't many mutual funds around back then, I suppose they had huge loads attached to them.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Grt2bOutdoors
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by Grt2bOutdoors »

Yes but toss is a good measure of patience. You should always strive to earn more which enables you to save and invest more. Investing in your career or profession or business is a good way to obtain more compensation. Don't forget to play defense along the way. You want to ensure you carry sufficient levels of insurance to protect your health, unemployment (liquidity to tide you over) and against liability claims. Choose wisely with whom you surround yourself with and that includes your choice of a life partner. Insufficient defenses will erode your wealth.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
yules
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by yules »

tvubpwcisla wrote: Sat Jun 19, 2021 9:42 am It seems like building long term wealth is pretty simple. Live below your means and invest in a low cost total stock market index fund. Am I missing anything other than stay the course? Is it really that easy?
Having proper and sufficient insurance (all types) is important also.

Yules
texasdiver
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by texasdiver »

The other very important element is starting early.

It's one thing to start living beneath your means and investing into a low cost index fund when you are 25. Then your path is easy.

It's an entirely different prospect to start out doing the same thing at age 55.

It is never to late to start saving. And doing so is always better than not doing so. But you make your life a lot easier if you start when you are young.
Dottie57
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by Dottie57 »

Padlin wrote: Sat Jun 19, 2021 9:45 am It's that simple, but not necessarily easy.
+1
lazybones18
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by lazybones18 »

what does living below your means really mean ?

is there a % of income i need to save or spend ?
cbeck
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by cbeck »

corn18 wrote: Sat Jun 19, 2021 8:34 pm
CloseEnough wrote: Sat Jun 19, 2021 6:14 pm Not much mention of luck, good fortune, whatever you want to call it, in these comments. I’ve seen plenty of very financially successful people who don’t acknowledge the role luck played in their success.
Luck is the intersection of opportunity and preparation.
And luck.
cbeck
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by cbeck »

yules wrote: Sat Jun 19, 2021 9:44 pm
tvubpwcisla wrote: Sat Jun 19, 2021 9:42 am It seems like building long term wealth is pretty simple. Live below your means and invest in a low cost total stock market index fund. Am I missing anything other than stay the course? Is it really that easy?
Having proper and sufficient insurance (all types) is important also.

Yules
Prudent, but not strictly necessary. How many people do you know who would have been ruined, but for their umbrella or homeowner's policies? I have known one person in my long life whose house burned down. I have known zero persons who were rendered penniless by a court judgment against them. By comparison I have known lots of people who lived below their means, invested from an early age, and retired comfortably.
minimalistmarc
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by minimalistmarc »

rich126 wrote: Sat Jun 19, 2021 7:15 pm Personally if you want to be wealthy I think real estate was the way to go in my lifetime. I didn't go that way since I am a bit risk adverse but looking back that was a huge mistake.
I made lots of mistakes.
Not buying bitcoin when it was $1
Not buying Amazon when it was $10
Not massively leveraging on property after the great crash

But I’m doing fine with index trackers.

Hindsight is a wonderful thing!
sean.mcgrath
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by sean.mcgrath »

wander wrote: Sat Jun 19, 2021 1:16 pm You cannot live below your means, invest in a low cost total stock market index fund, earn minimum wage and magically become wealth. You have to make good income first.
Absolutely untrue in reference to the original question. Building wealth is not the same as becoming wealthy. I won't become Bill Gates, but the principles of building wealth apply to everyone.

tvubpwcisla wrote: Sat Jun 19, 2021 9:42 am It seems like building long term wealth is pretty simple. Live below your means and invest in a low cost total stock market index fund. Am I missing anything other than stay the course? Is it really that easy?
Yes, and it's true for almost every income level. What I've taught our kids:
  • Unless you are truly in poverty, everyone can save 20 - 30% of their net income. Low-earning single parents face a brutal financial challenge, but almost all low-earning single or low-earning two income couples with children can do this.
  • Saving 10% is the bare minimum. Saving 20 - 30% will give you tremendous freedom throughout your life, and there will come a point when you will really appreciate it.
  • Debt is only for investments (e.g., a house or education) and never for expenses. A car is most certainly not an investment.

Understood that some people are more impulsive than others. But this is something that can be taught, and it is that easy.
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RickBoglehead
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by RickBoglehead »

No, it is not that simple.

Living below your means, once it is possible to do so, is of course key. From 1994 to 2021, we have never spent above our 1994 needs, and that included savings and investing. In other words, at some point you need to live well below your means.

And index funds is too broad. Total Stock Market or S&P 500 index fund.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
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dodecahedron
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by dodecahedron »

texasdiver wrote: Sat Jun 19, 2021 10:32 pm The other very important element is starting early.
And persevere and live long enough to see the results of compounding.
acegolfer
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by acegolfer »

Yes, it's that simple. But many ppl can't. This explains why.

https://www.etf.com/docs/IfYouCan.pdf
Silverado
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Re: Is the secret to long term wealth as simple as living below your means and investing in a low cost index fund

Post by Silverado »

lazybones18 wrote: Sat Jun 19, 2021 11:39 pm what does living below your means really mean ?

is there a % of income i need to save or spend ?
It starts simply as a penny, but a first target of saving 10% when maybe sub 30 years old is a better starting point. You’ll need more percent or bigger income, but start reasonable.
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