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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sureshoe
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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 sureshoe »

There is a lot more to it than just "living below your means and investing in a low cost fund".

So if this question is a broad question of "shouldn't anyone be able to do it if they just don't do dumb things", I disagree. We use this as a reason to have contempt for those people who don't have wealth, and it has created a society of haves and have nots. Do people make lots of bad decisions that lead to their own self-destruction? Certainly. Do some people pull themselves out of the dirt despite ridiculous opposition? Certainly. This is the politics line that I'm probably crossing and won't go any further. Just google how your family born affects likelihood of future wealth. It's empirical, not opinion.

If this is a question about the OP asking, "what do I need to do to personally grow long term wealth", spending below your means is a good start. Getting an education that enables you to earn an elevated income. Find a partner who shares your vision. Delay children. Etc.
nigel_ht
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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 nigel_ht »

sureshoe wrote: Tue Jun 22, 2021 7:42 am There is a lot more to it than just "living below your means and investing in a low cost fund".

So if this question is a broad question of "shouldn't anyone be able to do it if they just don't do dumb things", I disagree. We use this as a reason to have contempt for those people who don't have wealth, and it has created a society of haves and have nots. Do people make lots of bad decisions that lead to their own self-destruction? Certainly. Do some people pull themselves out of the dirt despite ridiculous opposition? Certainly. This is the politics line that I'm probably crossing and won't go any further. Just google how your family born affects likelihood of future wealth. It's empirical, not opinion.
Birth plays a huge role on lifetime earnings and opportunities but it is also empirical is that if you LBYMs and save you end up with more money at the end. That's true at every socio-economic level although it is much easier to LBYMs at the higher tiers. I think that's the only thing really being said here.

If there is contempt here it's, IMO, primarily reserved for those with high incomes and no savings. Not for folks that start disadvantaged and never find a viable path to break the poverty cycle. For those folks you not only have to not do dumb things but also manage to do smart things while often being encouraged to do the opposite by society. That's really tough to do.
sureshoe
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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 sureshoe »

nigel_ht wrote: Tue Jun 22, 2021 8:40 am
sureshoe wrote: Tue Jun 22, 2021 7:42 am There is a lot more to it than just "living below your means and investing in a low cost fund".

So if this question is a broad question of "shouldn't anyone be able to do it if they just don't do dumb things", I disagree. We use this as a reason to have contempt for those people who don't have wealth, and it has created a society of haves and have nots. Do people make lots of bad decisions that lead to their own self-destruction? Certainly. Do some people pull themselves out of the dirt despite ridiculous opposition? Certainly. This is the politics line that I'm probably crossing and won't go any further. Just google how your family born affects likelihood of future wealth. It's empirical, not opinion.
Birth plays a huge role on lifetime earnings and opportunities but it is also empirical is that if you LBYMs and save you end up with more money at the end. That's true at every socio-economic level although it is much easier to LBYMs at the higher tiers. I think that's the only thing really being said here.

If there is contempt here it's, IMO, primarily reserved for those with high incomes and no savings. Not for folks that start disadvantaged and never find a viable path to break the poverty cycle. For those folks you not only have to not do dumb things but also manage to do smart things while often being encouraged to do the opposite by society. That's really tough to do.
Your final point is really what I was getting at. If you're disadvantaged, it's ultra-tough to climb out. It's why I don't like these type of questions, because they try to draw too simple of a solution to a far too complex of a problem. "If your fat, just stop eating." "If you're poor, just stop spending" "If you're unhappy, just stop moping around." Not looking to absolve people of bad decisions, because YES, I know some people who make 6 figures and are broke, which I just can't reconcile in my mind. Of course, all those people have a story on why they can't save.
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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 nigel_ht »

sureshoe wrote: Tue Jun 22, 2021 8:59 am
nigel_ht wrote: Tue Jun 22, 2021 8:40 am
sureshoe wrote: Tue Jun 22, 2021 7:42 am There is a lot more to it than just "living below your means and investing in a low cost fund".

So if this question is a broad question of "shouldn't anyone be able to do it if they just don't do dumb things", I disagree. We use this as a reason to have contempt for those people who don't have wealth, and it has created a society of haves and have nots. Do people make lots of bad decisions that lead to their own self-destruction? Certainly. Do some people pull themselves out of the dirt despite ridiculous opposition? Certainly. This is the politics line that I'm probably crossing and won't go any further. Just google how your family born affects likelihood of future wealth. It's empirical, not opinion.
Birth plays a huge role on lifetime earnings and opportunities but it is also empirical is that if you LBYMs and save you end up with more money at the end. That's true at every socio-economic level although it is much easier to LBYMs at the higher tiers. I think that's the only thing really being said here.

If there is contempt here it's, IMO, primarily reserved for those with high incomes and no savings. Not for folks that start disadvantaged and never find a viable path to break the poverty cycle. For those folks you not only have to not do dumb things but also manage to do smart things while often being encouraged to do the opposite by society. That's really tough to do.
Your final point is really what I was getting at. If you're disadvantaged, it's ultra-tough to climb out. It's why I don't like these type of questions, because they try to draw too simple of a solution to a far too complex of a problem. "If your fat, just stop eating." "If you're poor, just stop spending" "If you're unhappy, just stop moping around." Not looking to absolve people of bad decisions, because YES, I know some people who make 6 figures and are broke, which I just can't reconcile in my mind. Of course, all those people have a story on why they can't save.
I think it's been pointed out that it's really a 3 step process:

1) find a way to have a livable income that has some cushion
2) live beneath that income and save the cushion
3) invest saved cushion in low cost index funds

None of these steps are easy to execute when starting disadvantaged and with a low income.

But possible if you can fight through to get a high school diploma and a decent ASVAB score...that still requires desire, a lot of effort, a little luck (or lack of bad luck) and decent guidance. Ultra tough? Yes, compared to many in the US but on a global level being born in the US puts you in the "born lucky" category...
Maverick3320
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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 Maverick3320 »

I'm going to agree with Warren Buffett on this one: the secret to long term wealth is investing in yourself, and then living below your means.
sureshoe
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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 sureshoe »

nigel_ht wrote: Tue Jun 22, 2021 9:50 am But possible if you can fight through to get a high school diploma and a decent ASVAB score...that still requires desire, a lot of effort, a little luck (or lack of bad luck) and decent guidance. Ultra tough? Yes, compared to many in the US but on a global level being born in the US puts you in the "born lucky" category...
I think we can agree being born poor in the US is better than being born poor in Zimbabwe :)
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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 JoeRetire »

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?
Luck is always involved. Always.
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ModifiedDuration
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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 ModifiedDuration »

HomerJ wrote: Mon Jun 21, 2021 9:40 pm
1913-1929 Bull market (16 years)
1929-1947 Bear market (18 years)
1947-1966 Bull market (19 years)
1966-1982 Bear market (16 years)
1982-2000 Bull market (18 years)
2000-2011 Bear market (11 years)
2011-2021 Bull market (10 years so far)
This is very interesting.

I really hadn’t thought of (or realized) these cycles had occurred like this over the past 100 years.
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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 abuss368 »

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?
Hi tvubpwcisla -

If an investor can not start with that, nothing else will make a difference.

Best.
Tony
John C. Bogle: “Simplicity is the master key to financial 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 Marseille07 »

ModifiedDuration wrote: Tue Jun 22, 2021 1:00 pm
HomerJ wrote: Mon Jun 21, 2021 9:40 pm
1913-1929 Bull market (16 years)
1929-1947 Bear market (18 years)
1947-1966 Bull market (19 years)
1966-1982 Bear market (16 years)
1982-2000 Bull market (18 years)
2000-2011 Bear market (11 years)
2011-2021 Bull market (10 years so far)
This is very interesting.

I really hadn’t thought of (or realized) these cycles had occurred like this over the past 100 years.
People use various definitions for bull / bear markets. For example, lots of people think we had a bear market in 2020 but the above poster's list doesn't capture that.
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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 lostdog »

Marseille07 wrote: Tue Jun 22, 2021 7:59 pm
ModifiedDuration wrote: Tue Jun 22, 2021 1:00 pm
HomerJ wrote: Mon Jun 21, 2021 9:40 pm
1913-1929 Bull market (16 years)
1929-1947 Bear market (18 years)
1947-1966 Bull market (19 years)
1966-1982 Bear market (16 years)
1982-2000 Bull market (18 years)
2000-2011 Bear market (11 years)
2011-2021 Bull market (10 years so far)
This is very interesting.

I really hadn’t thought of (or realized) these cycles had occurred like this over the past 100 years.
People use various definitions for bull / bear markets. For example, lots of people think we had a bear market in 2020 but the above poster's list doesn't capture that.
Good point. 2020 could be considered a very short bear market. If so, we could be in a new bull market.
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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 phantom0308 »

ModifiedDuration wrote: Tue Jun 22, 2021 1:00 pm
HomerJ wrote: Mon Jun 21, 2021 9:40 pm
1913-1929 Bull market (16 years)
1929-1947 Bear market (18 years)
1947-1966 Bull market (19 years)
1966-1982 Bear market (16 years)
1982-2000 Bull market (18 years)
2000-2011 Bear market (11 years)
2011-2021 Bull market (10 years so far)
This is very interesting.

I really hadn’t thought of (or realized) these cycles had occurred like this over the past 100 years.
This must be using a really weird definition of bear and bull market. No recession or bear market lasts that long and most people here know the market bottom was Match 2009. The longest since before the depression is less than 3 years. There was also a 5 year bull market during the mid 2000s
BV3273
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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 BV3273 »

I’ll call it for what it is.

50% of people on here did it that way from day 1 on regular earnings. The other 50% came into some sort of windfall on top of regular earnings - Options, RSUs, inheritance, business buyouts, real estate sales after a big run up, bonuses, etc - took that money and bought index funds and turned it into ever more money.

So yes, but with some caveats for certain individuals.
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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 mikejuss »

BV3273 wrote: Wed Jun 23, 2021 6:00 am I’ll call it for what it is.

50% of people on here did it that way from day 1 on regular earnings. The other 50% came into some sort of windfall on top of regular earnings - Options, RSUs, inheritance, business buyouts, real estate sales after a big run up, bonuses, etc - took that money and bought index funds and turned it into ever more money.

So yes, but with some caveats for certain individuals.
+1. People's pathways to wealth vary widely, even if their investment strategies are similar.
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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 »

phantom0308 wrote: Wed Jun 23, 2021 2:22 am
ModifiedDuration wrote: Tue Jun 22, 2021 1:00 pm
HomerJ wrote: Mon Jun 21, 2021 9:40 pm
1913-1929 Bull market (16 years)
1929-1947 Bear market (18 years)
1947-1966 Bull market (19 years)
1966-1982 Bear market (16 years)
1982-2000 Bull market (18 years)
2000-2011 Bear market (11 years)
2011-2021 Bull market (10 years so far)
This is very interesting.

I really hadn’t thought of (or realized) these cycles had occurred like this over the past 100 years.
This must be using a really weird definition of bear and bull market. No recession or bear market lasts that long and most people here know the market bottom was Match 2009. The longest since before the depression is less than 3 years. There was also a 5 year bull market during the mid 2000s
Look up the terms "secular" bear and bull market
A secular bear market can last anywhere from 10 to 20 years and is characterized by below-average returns on a sustained basis. There may be rallies within secular bear markets where stocks or indexes rally for a period, but the gains are not sustained, and prices revert to lower levels.
If you look on a graph, you'll see 1913-1929, stock market rising, from 1929-1947, it bounces around a lot, but there wasn't much growth.

Then from 1947-1966, there was a ton of growth... then from 1966-1982, mostly flat again (there were large ups and downs through those 16 years, but DOW was at 1000 in 1966, and STILL around 1000 in 1982)

Then 1982-2000, large growth... then 2000-2011, flat, then 2011-present, upward climb again.
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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 Dennisl »

sureshoe wrote: Tue Jun 22, 2021 10:30 am
nigel_ht wrote: Tue Jun 22, 2021 9:50 am But possible if you can fight through to get a high school diploma and a decent ASVAB score...that still requires desire, a lot of effort, a little luck (or lack of bad luck) and decent guidance. Ultra tough? Yes, compared to many in the US but on a global level being born in the US puts you in the "born lucky" category...
I think we can agree being born poor in the US is better than being born poor in Zimbabwe :)
haha. Agreed. There are a lot of things that are outside of our control. Where you were born. Born to family with 2 parents that are supportive. Safe/supportive environment. Access to quality schools, teachers, extra-curriculars, etc. The need to work early in life to support family, etc. This assumes that you put a lot of sweat equity into life. If you are lucky enough to be healthy and have a well paying job, then yes, it's as simple as living below your means and investing well.
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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 »

JoeRetire wrote: Tue Jun 22, 2021 10:30 am
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?
Luck is always involved. Always.
IMHO, that's a copout. I don't think luck is not required to succeed.
Last edited by corn18 on Thu Jun 24, 2021 7:43 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 T4REngineer »

corn18 wrote: Thu Jun 24, 2021 7:06 am
JoeRetire wrote: Tue Jun 22, 2021 10:30 am
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?
Luck is always involved. Always.
That's a copout for the lazy. Luck is not required to succeed. Ever.
While I feel your post borderlines name calling I would like to say I whole heartedly disagree with you , luck plays a huge part in ones life and success - there is far more in this world/our lives that we do not control than what we do. You may not consider that luck but I do and I am far from lazy.
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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 nigel_ht »

corn18 wrote: Thu Jun 24, 2021 7:06 am
JoeRetire wrote: Tue Jun 22, 2021 10:30 am
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?
Luck is always involved. Always.
That's a copout for the lazy. Luck is not required to succeed. Ever.
The lack of significant bad luck is required…

Some 30 year periods are better than others both for accumulators and retirees. Looking at the range of outcomes for the Trinity study makes this pretty obvious.

So luck has a much higher impact on outcome than say…AA.

You can certainly overcome bad luck or squander good luck but it’s an external factor out of your control that can have significant impact on your life.

This also is part of the birth discussion. Some folks simply have a higher chance of success based on the circumstance of birth. Given you can’t choose parents than can be considered “luck”.

“Always” and “Never” statements are both equally wrong.
Last edited by nigel_ht on Thu Jun 24, 2021 7:32 am, edited 1 time in total.
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corn18
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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 »

T4REngineer wrote: Thu Jun 24, 2021 7:19 am
corn18 wrote: Thu Jun 24, 2021 7:06 am
JoeRetire wrote: Tue Jun 22, 2021 10:30 am
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?
Luck is always involved. Always.
That's a copout for the lazy. Luck is not required to succeed. Ever.
While I feel your post borderlines name calling I would like to say I whole heartedly disagree with you , luck plays a huge part in ones life and success - there is far more in this world/our lives that we do not control than what we do. You may not consider that luck but I do and I am far from lazy.
Have you ever made your own luck? The number of people that I have coached that have no interest in networking baffles me. Maybe it's that frustration that colors my opinion of the concept of luck. I am always networking and it is work. Last weekend, I was playing at a gig near my old work location and I was networking between sets. I'm not even looking for a job, but I had conversations with at least four people that I might find useful in the future. I got offered a job. Was that luck? I called my last boss yesterday to check in and see how he was doing. Learned what his future plans were and thought it might be interesting to work with him again. Maybe that turns into luck later on. Some might perceive it as luck. I perceive it as preparation meeting opportunity.
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corn18
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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 »

T4REngineer wrote: Thu Jun 24, 2021 7:19 am
corn18 wrote: Thu Jun 24, 2021 7:06 am
JoeRetire wrote: Tue Jun 22, 2021 10:30 am
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?
Luck is always involved. Always.
That's a copout for the lazy. Luck is not required to succeed. Ever.
While I feel your post borderlines name calling I would like to say I whole heartedly disagree with you , luck plays a huge part in ones life and success - there is far more in this world/our lives that we do not control than what we do. You may not consider that luck but I do and I am far from lazy.
My apologies. I edited my post to be less aggressive. Your quote will serve as a record of me being a baby.
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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 JackoC »

T4REngineer wrote: Thu Jun 24, 2021 7:19 am
corn18 wrote: Thu Jun 24, 2021 7:06 am
JoeRetire wrote: Tue Jun 22, 2021 10:30 am
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?
Luck is always involved. Always.
That's a copout for the lazy. Luck is not required to succeed. Ever.
While I feel your post borderlines name calling I would like to say I whole heartedly disagree with you , luck plays a huge part in ones life and success - there is far more in this world/our lives that we do not control than what we do. You may not consider that luck but I do and I am far from lazy.
Not to be 'peacemaker', but I think this debate is largely irrelevant to the question. We would not debate whether a Chicxulub size asteroid striking the earth would prevent one achieving 'long term wealth' nor put it on the same basis as things we *do* have personal control over, like LBYM or investing in index funds. It would obviously be in a different category of 'stuff happens'. I think the confusion about more mundane random differences in individual outcome is that they tend to lead to debates about 'societal unfairness' something which, with our voter or political activist hat on, we might believe we can affect. And perhaps so, but let's debate that no further. But in planning our individual financial life 'unfairness' is pretty much the same as the asteroid. So I don't think it's that relevant to the question, or the logical version of it: '[what things that you *do* have control over] can you do to achieve long term wealth besides LBYM and investing in a low cost index fund?'

I think a missing piece might be: [doing everything *under your control*] building your skills to build your career to increase your income. Some might say they further understand the question to only refer to *investing* actions, and perhaps that's reasonable under the sub forum heading 'Investing-Theory, News and General'. But I think sometimes this forum gives oddly little emphasis on income, even when it gets into pretty personal advice column type threads. The way to get rich, basically, is to make a lot of money. Getting rich without making much money relies on high investment returns. Those often do not happen.

But if it's limited to investment, not counting aspects of income under your control, nor counting all the things beyond your control, saving a lot and investing wisely (mainly along BH lines for most people IMO, though I'm not as absolutist about that for everybody as some people here are) would be mainly it I believe.
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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 nigel_ht »

JackoC wrote: Thu Jun 24, 2021 9:14 am
corn18 wrote: Thu Jun 24, 2021 7:06 am
JoeRetire wrote: Tue Jun 22, 2021 10:30 am
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?
Luck is always involved. Always.
That's a copout for the lazy. Luck is not required to succeed. Ever.
...
Getting rich without making much money relies on high investment returns. Those often do not happen.

But if it's limited to investment, not counting aspects of income under your control, nor counting all the things beyond your control, saving a lot and investing wisely (mainly along BH lines for most people IMO, though I'm not as absolutist about that for everybody as some people here are) would be mainly it I believe.
This is the luck factor for investing that is often unacknowledged by BH...it strikes me that for accumulators consideration of luck should factor into AA as much as risk tolerance.

90/10 (including EF) should, IMHO, be the default AA for accumulators to capture whatever good luck the markets bring your way. So we're at:

Step 1: Make enough income to have a cushion (preferably 20%)
Step 2: LBYM and save the cushion
Step 3: Invest the cushion in index funds at 90/10 and stop watching it for 30 years except optionally for 15 minutes once a year to rebalance to 90/10.

From age 22 to 52 ignore your personal risk tolerance in favor of optimizing for luck. After age 50 all sorts of risks emerge...career, SORR, etc where a more defensive AA should be considered but IMHO, until then, optimize for capturing good luck while you have human capital left.
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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 dbr »

When it comes to investment returns luck of history for the period involved is a huge factor.

Luck as a general concept in life is a philosophical debate.
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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 JackoC »

nigel_ht wrote: Thu Jun 24, 2021 9:50 am
JackoC wrote: Thu Jun 24, 2021 9:14 am
corn18 wrote: Thu Jun 24, 2021 7:06 am
JoeRetire wrote: Tue Jun 22, 2021 10:30 am
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?
Luck is always involved. Always.
That's a copout for the lazy. Luck is not required to succeed. Ever.
...
Getting rich without making much money relies on high investment returns. Those often do not happen.

But if it's limited to investment, not counting aspects of income under your control, nor counting all the things beyond your control, saving a lot and investing wisely (mainly along BH lines for most people IMO, though I'm not as absolutist about that for everybody as some people here are) would be mainly it I believe.
This is the luck factor for investing that is often unacknowledged by BH...it strikes me that for accumulators consideration of luck should factor into AA as much as risk tolerance.

90/10 (including EF) should, IMHO, be the default AA for accumulators to capture whatever good luck the markets bring your way. So we're at:

Step 1: Make enough income to have a cushion (preferably 20%)
Step 2: LBYM and save the cushion
Step 3: Invest the cushion in index funds at 90/10 and stop watching it for 30 years except optionally for 15 minutes once a year to rebalance to 90/10.

From age 22 to 52 ignore your personal risk tolerance in favor of optimizing for luck. After age 50 all sorts of risks emerge...career, SORR, etc where a more defensive AA should be considered but IMHO, until then, optimize for capturing good luck while you have human capital left.
People on this forum more often overestimate than underestimate expected return from now, IMO/IME. So perhaps it could be said that from my POV they are banking on luck, since higher than expected (and lower than expected) return is possible for risk assets by definition, but reasonably called lucky (if higher). I don't agree however that that leads to a conclusion in favor of any particular high stock allocation in answer to the question 'is it as simple as LBYM and investing in index funds'. I see the question as asking about things that would be generally applicable once we've established a strong preference to be wealthy (some people don't really care about that). High risk allocation needs a further assumption about risk tolerance, and if risk tolerance is really high then 90% could be too low a stock allocation*. It's assuming no leverage. Why not, if fearless?

But maybe you're right and the person asking the question would view 'take more risk' as a relevant answer.

*simplistically estimating volatility drag/'rebalancing bonus' at .5*(leverage)*(leverage-1)*vol^2 per annum, with given assumptions about risky and riskless expected return, max expected return is above leverage=.9, ie 90% stock, unless vol is nearly 50% per annum. At the historical VIX (since early 90's),~19, the max expected return comes out at ~190% stock. Although in the real world figuring in fat tails with a fixed leverage ratio, you have to prevent being stopped out at zero by the biggest crash you deem possible so it would be lower...unless you dynamically changed the leverage ratio according to the VIX or did tail hedges, then the answer would again be different. Not to go off on a tangent, just explaining why I feel 90% stock is arbitrary. If a person had a strong enough desire to become wealthy and enough risk tolerance, they couldn't reasonably argue they didn't have the time to learn about futures and options. The real obstacle is that most people aren't that fearless (I'm sure not), even if strongly preferring wealth.
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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 nigel_ht »

JackoC wrote: Thu Jun 24, 2021 11:05 am
nigel_ht wrote: Thu Jun 24, 2021 9:50 am
JackoC wrote: Thu Jun 24, 2021 9:14 am
corn18 wrote: Thu Jun 24, 2021 7:06 am
JoeRetire wrote: Tue Jun 22, 2021 10:30 am
Luck is always involved. Always.
That's a copout for the lazy. Luck is not required to succeed. Ever.
...
Getting rich without making much money relies on high investment returns. Those often do not happen.

But if it's limited to investment, not counting aspects of income under your control, nor counting all the things beyond your control, saving a lot and investing wisely (mainly along BH lines for most people IMO, though I'm not as absolutist about that for everybody as some people here are) would be mainly it I believe.
This is the luck factor for investing that is often unacknowledged by BH...it strikes me that for accumulators consideration of luck should factor into AA as much as risk tolerance.

90/10 (including EF) should, IMHO, be the default AA for accumulators to capture whatever good luck the markets bring your way. So we're at:

Step 1: Make enough income to have a cushion (preferably 20%)
Step 2: LBYM and save the cushion
Step 3: Invest the cushion in index funds at 90/10 and stop watching it for 30 years except optionally for 15 minutes once a year to rebalance to 90/10.

From age 22 to 52 ignore your personal risk tolerance in favor of optimizing for luck. After age 50 all sorts of risks emerge...career, SORR, etc where a more defensive AA should be considered but IMHO, until then, optimize for capturing good luck while you have human capital left.
People on this forum more often overestimate than underestimate expected return from now, IMO/IME. So perhaps it could be said that from my POV they are banking on luck, since higher than expected (and lower than expected) return is possible for risk assets by definition, but reasonably called lucky (if higher). I don't agree however that that leads to a conclusion in favor of any particular high stock allocation in answer to the question 'is it as simple as LBYM and investing in index funds'. I see the question as asking about things that would be generally applicable once we've established a strong preference to be wealthy (some people don't really care about that). High risk allocation needs a further assumption about risk tolerance, and if risk tolerance is really high then 90% could be too low a stock allocation*. It's assuming no leverage. Why not, if fearless?

But maybe you're right and the person asking the question would view 'take more risk' as a relevant answer.

*simplistically estimating volatility drag/'rebalancing bonus' at .5*(leverage)*(leverage-1)*vol^2 per annum, with given assumptions about risky and riskless expected return, max expected return is above leverage=.9, ie 90% stock, unless vol is nearly 50% per annum. At the historical VIX (since early 90's),~19, the max expected return comes out at ~190% stock. Although in the real world figuring in fat tails with a fixed leverage ratio, you have to prevent being stopped out at zero by the biggest crash you deem possible so it would be lower...unless you dynamically changed the leverage ratio according to the VIX or did tail hedges, then the answer would again be different. Not to go off on a tangent, just explaining why I feel 90% stock is arbitrary. If a person had a strong enough desire to become wealthy and enough risk tolerance, they couldn't reasonably argue they didn't have the time to learn about futures and options. The real obstacle is that most people aren't that fearless (I'm sure not), even if strongly preferring wealth.
Mmm...my point is that 60/40 is a higher overestimation of returns than 90/10 if you assume the stocks are the primary drivers of growth over a 30 year period. 90/10 is moderately arbitrary and can be replaced with 100/0 + EF. At least for cases where the savings rate is not so high that AA stops mattering as almost any AA would get to you financial independence before retirement age.

Options, futures, leverage etc are viable alternatives but do require some level of reasonably proficient execution above that of passive indexing which only requires, as Scott Burns once wrote, the ability to fog a mirror and divide by 10*. Also, the risk is different in terms of nature (ie zeroing out or in other cases catastrophically negative) for leverage rather than in degree as for different AA allocations using broad indexing where going to 0 is a Mad Max scenario...or at least the nationalization of privately owned companies and closing of the national exchanges.

At which point, physical gold and a viable escape plan is what you need.

--

* He actually wrote divide by 2 since the couch potato portfolio was 50/50.
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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 »

corn18 wrote: Thu Jun 24, 2021 7:31 amHave you ever made your own luck? The number of people that I have coached that have no interest in networking baffles me. Maybe it's that frustration that colors my opinion of the concept of luck. I am always networking and it is work. Last weekend, I was playing at a gig near my old work location and I was networking between sets. I'm not even looking for a job, but I had conversations with at least four people that I might find useful in the future. I got offered a job. Was that luck?
You're lucky that you were born an extrovert. You're retired, not looking for a job, and you were still networking.

It's obviously not that much work for you.

For others, it's a lot more work. Sure, maybe they should do the work anyway, if they want the payoff.

But you are indeed lucky that it's not as painful for you as it is for other people.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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corn18
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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 »

HomerJ wrote: Thu Jun 24, 2021 12:55 pm
corn18 wrote: Thu Jun 24, 2021 7:31 amHave you ever made your own luck? The number of people that I have coached that have no interest in networking baffles me. Maybe it's that frustration that colors my opinion of the concept of luck. I am always networking and it is work. Last weekend, I was playing at a gig near my old work location and I was networking between sets. I'm not even looking for a job, but I had conversations with at least four people that I might find useful in the future. I got offered a job. Was that luck?
You're lucky that you were born an extrovert. You're retired, not looking for a job, and you were still networking.

It's obviously not that much work for you.

For others, it's a lot more work. Sure, maybe they should do the work anyway, if they want the payoff.

But you are indeed lucky that it's not as painful for you as it is for other people.
I'm actually an introvert. I would much rather sit in the corner and people watch than engage other human beings.
Consistently sets low goals and fails to achieve them.
PGdBxbhBSsZkBqaJsuYH
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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 PGdBxbhBSsZkBqaJsuYH »

It very well can be; it depends on your goals (within your control) and how the economy performs (not in your control).

LBYM is a good idea, period. Whether you invest in index funds, bonds, tangible assets, crypto ... again, that depends on your goals and what you think the future holds.
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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 grettman »

Nate79 wrote: Sat Jun 19, 2021 10:14 am No, there is much more to it than that.
You are right. It also takes time and consistency. All of which requires discipline.
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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 JoeRetire »

corn18 wrote: Thu Jun 24, 2021 7:06 am
JoeRetire wrote: Tue Jun 22, 2021 10:30 am
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?
Luck is always involved. Always.
IMHO, that's a copout. I don't think luck is not required to succeed.
With the double negative there, I'm not sure, but I suspect we'll have to agree to disagree.

- I was lucky to be born
- I was lucky to be born in the place where I was
- I was lucky to be raised by parents who cared
- I was lucky to be educated in a time where education matters
- I was lucky to be interested in a work domain that was financially rewarding
- I was lucky to be born in a time where my interests, along with my hard work, allowed me to have a lucrative career
- I was lucky to meet, marry, and stay married to someone who shared my financial outlook
- I was lucky to have a healthy life
- I was lucky to have invested a lot during a time of unprecedented market success

... I could go on.

My parents worked extremely hard their entire lives. They lived below their means as best they could afford. They lived very frugally, since they had no choice. They lived in a different time and weren't as lucky. They lived a happy life and got by, but they never had long term wealth. Do not dare to call it a copout.

Living below your means, investing in low cost index funds, and staying the course are important. They are not always sufficient.
Last edited by JoeRetire on Fri Jun 25, 2021 7:44 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 sureshoe »

Dennisl wrote: Wed Jun 23, 2021 12:17 pm
sureshoe wrote: Tue Jun 22, 2021 10:30 am
nigel_ht wrote: Tue Jun 22, 2021 9:50 am But possible if you can fight through to get a high school diploma and a decent ASVAB score...that still requires desire, a lot of effort, a little luck (or lack of bad luck) and decent guidance. Ultra tough? Yes, compared to many in the US but on a global level being born in the US puts you in the "born lucky" category...
I think we can agree being born poor in the US is better than being born poor in Zimbabwe :)
haha. Agreed. There are a lot of things that are outside of our control. Where you were born. Born to family with 2 parents that are supportive. Safe/supportive environment. Access to quality schools, teachers, extra-curriculars, etc. The need to work early in life to support family, etc. This assumes that you put a lot of sweat equity into life. If you are lucky enough to be healthy and have a well paying job, then yes, it's as simple as living below your means and investing well.
I'm nitpicking, but there aren't a lot of "poor" people in this country who have access to quality schools, teachers, and extra curriculars. ~7 percent of all kids have at least 1 parent in prison, and the stats are higher for minority and lower income populations. I don't want to discuss policies for fixing that or how we got here, but that's just how it is right now. Keeping it to investing > the "secret to long term wealth" is much different for these individuals.

It is not completely hopeless for these individuals, and it is much better than Zimbabwe! However, it is a different formula from a traditional middle class person who has a complete support structure, can get an education, reasonable paying job, not support a sibling, and drive a modestly used import vehicle while buying a small bi-level.
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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 stoptothink »

sureshoe wrote: Fri Jun 25, 2021 7:41 am
Dennisl wrote: Wed Jun 23, 2021 12:17 pm
sureshoe wrote: Tue Jun 22, 2021 10:30 am
nigel_ht wrote: Tue Jun 22, 2021 9:50 am But possible if you can fight through to get a high school diploma and a decent ASVAB score...that still requires desire, a lot of effort, a little luck (or lack of bad luck) and decent guidance. Ultra tough? Yes, compared to many in the US but on a global level being born in the US puts you in the "born lucky" category...
I think we can agree being born poor in the US is better than being born poor in Zimbabwe :)
haha. Agreed. There are a lot of things that are outside of our control. Where you were born. Born to family with 2 parents that are supportive. Safe/supportive environment. Access to quality schools, teachers, extra-curriculars, etc. The need to work early in life to support family, etc. This assumes that you put a lot of sweat equity into life. If you are lucky enough to be healthy and have a well paying job, then yes, it's as simple as living below your means and investing well.
I'm nitpicking, but there aren't a lot of "poor" people in this country who have access to quality schools, teachers, and extra curriculars. ~7 percent of all kids have at least 1 parent in prison, and the stats are higher for minority and lower income populations. I don't want to discuss policies for fixing that or how we got here, but that's just how it is right now. Keeping it to investing > the "secret to long term wealth" is much different for these individuals.

It is not completely hopeless for these individuals, and it is much better than Zimbabwe! However, it is a different formula from a traditional middle class person who has a complete support structure, can get an education, reasonable paying job, not support a sibling, and drive a modestly used import vehicle while buying a small bi-level.
Correct, it is far more likely in this country, now, than anywhere (at any point in history) for these individuals to becoming successful (financially, and otherwise). I meet all of the criteria (minority, 1st generation citizen, grew up in very poor single-parent household, inner-city, neither birth parent graduated high school, 1 parent in prison...shoot, I even am technically "disabled", with an autism spectrum disorder) yet all of my 4 birth siblings and myself would probably be considered "successful" in their own way and certainly wealthy by global standards - maybe not Boglehead wealthy, but far more than the huge majority of people who live where our parents came from. Certainly some have it easier than others, but opportunity is endless here; we are all so lucky to be here. Geez, how I hate the victim mentality overtaking this country.
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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 sureshoe »

stoptothink wrote: Fri Jun 25, 2021 7:49 am
sureshoe wrote: Fri Jun 25, 2021 7:41 am
Dennisl wrote: Wed Jun 23, 2021 12:17 pm
sureshoe wrote: Tue Jun 22, 2021 10:30 am
nigel_ht wrote: Tue Jun 22, 2021 9:50 am But possible if you can fight through to get a high school diploma and a decent ASVAB score...that still requires desire, a lot of effort, a little luck (or lack of bad luck) and decent guidance. Ultra tough? Yes, compared to many in the US but on a global level being born in the US puts you in the "born lucky" category...
I think we can agree being born poor in the US is better than being born poor in Zimbabwe :)
haha. Agreed. There are a lot of things that are outside of our control. Where you were born. Born to family with 2 parents that are supportive. Safe/supportive environment. Access to quality schools, teachers, extra-curriculars, etc. The need to work early in life to support family, etc. This assumes that you put a lot of sweat equity into life. If you are lucky enough to be healthy and have a well paying job, then yes, it's as simple as living below your means and investing well.
I'm nitpicking, but there aren't a lot of "poor" people in this country who have access to quality schools, teachers, and extra curriculars. ~7 percent of all kids have at least 1 parent in prison, and the stats are higher for minority and lower income populations. I don't want to discuss policies for fixing that or how we got here, but that's just how it is right now. Keeping it to investing > the "secret to long term wealth" is much different for these individuals.

It is not completely hopeless for these individuals, and it is much better than Zimbabwe! However, it is a different formula from a traditional middle class person who has a complete support structure, can get an education, reasonable paying job, not support a sibling, and drive a modestly used import vehicle while buying a small bi-level.
Correct, it is far more likely in this country, now, than anywhere (at any point in history) for these individuals to becoming successful (financially, and otherwise). I meet all of the criteria (minority, 1st generation citizen, grew up in very poor single-parent household, inner-city, neither birth parent graduated high school, 1 parent in prison...shoot, I even am technically "disabled", with an autism spectrum disorder) yet all of my 4 birth siblings and myself would probably be considered "successful" in their own way and certainly wealthy by global standards - maybe not Boglehead wealthy, but far more than the huge majority of people who live where our parents came from. Certainly some have it easier than others, but opportunity is endless here; we are all so lucky to be here. Geez, how I hate the victim mentality overtaking this country.
I think that's great. I'm assuming you weren't 7 years old and decided, "you know, I'm going to start living below my means and investing in a low cost index fund." My hunch is that some other type of support or good fortune played into you breaking the cycle of poverty - which is awesome.

That's my fundamental problem with the statement posed in this post. It assumes all these "victims" (which is what this post implies) need to just start living below their means. Is there endless possibilities? Sure. But I'm guessing there were at least a few more factors involved for an inner-city, autistic person with 4 siblings and imprisoned parent beyond "stop going to Starbucks and don't buy a BMW."
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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 HootingSloth »

JackoC seems to have really hit the nail on the head here about how to keep this as a more productive discussion:
JackoC wrote: Thu Jun 24, 2021 9:14 am Not to be 'peacemaker', but I think this debate is largely irrelevant to the question. We would not debate whether a Chicxulub size asteroid striking the earth would prevent one achieving 'long term wealth' nor put it on the same basis as things we *do* have personal control over, like LBYM or investing in index funds. It would obviously be in a different category of 'stuff happens'. I think the confusion about more mundane random differences in individual outcome is that they tend to lead to debates about 'societal unfairness' something which, with our voter or political activist hat on, we might believe we can affect. And perhaps so, but let's debate that no further. But in planning our individual financial life 'unfairness' is pretty much the same as the asteroid. So I don't think it's that relevant to the question, or the logical version of it: '[what things that you *do* have control over] can you do to achieve long term wealth besides LBYM and investing in a low cost index fund?'
Luck is obviously involved in generating long-term wealth, including in surviving long enough to do so, among many other things. The spirit of the question appears to be identifying things that are within our individual control that are important generators of long-term wealth.

Examples I can think of include:
  • Do what you can to increase your income
  • Do what you can to increase your savings rate
  • Invest your savings in one of a large range of reasonable portfolios, most of which will be entirely or largely invested in low cost index funds
  • Avoid a massive behavioral mistake by staying the course
  • Do what you can to start investing earlier in life, and to work long enough, to give the market more time to generate returns
Other things like asset allocation choices will have some effect, but more of a second order.
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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 »

corn18 wrote: Thu Jun 24, 2021 1:23 pm
HomerJ wrote: Thu Jun 24, 2021 12:55 pm
corn18 wrote: Thu Jun 24, 2021 7:31 amHave you ever made your own luck? The number of people that I have coached that have no interest in networking baffles me. Maybe it's that frustration that colors my opinion of the concept of luck. I am always networking and it is work. Last weekend, I was playing at a gig near my old work location and I was networking between sets. I'm not even looking for a job, but I had conversations with at least four people that I might find useful in the future. I got offered a job. Was that luck?
You're lucky that you were born an extrovert. You're retired, not looking for a job, and you were still networking.

It's obviously not that much work for you.

For others, it's a lot more work. Sure, maybe they should do the work anyway, if they want the payoff.

But you are indeed lucky that it's not as painful for you as it is for other people.
I'm actually an introvert. I would much rather sit in the corner and people watch than engage other human beings.
No you're not, or you wouldn't have engaged with people to network about jobs when you're retired and never need to work again.

Or may be you are an introvert but also a masochist? :)
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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corn18
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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 »

HomerJ wrote: Fri Jun 25, 2021 8:18 pm
corn18 wrote: Thu Jun 24, 2021 1:23 pm
HomerJ wrote: Thu Jun 24, 2021 12:55 pm
corn18 wrote: Thu Jun 24, 2021 7:31 amHave you ever made your own luck? The number of people that I have coached that have no interest in networking baffles me. Maybe it's that frustration that colors my opinion of the concept of luck. I am always networking and it is work. Last weekend, I was playing at a gig near my old work location and I was networking between sets. I'm not even looking for a job, but I had conversations with at least four people that I might find useful in the future. I got offered a job. Was that luck?
You're lucky that you were born an extrovert. You're retired, not looking for a job, and you were still networking.

It's obviously not that much work for you.

For others, it's a lot more work. Sure, maybe they should do the work anyway, if they want the payoff.

But you are indeed lucky that it's not as painful for you as it is for other people.
I'm actually an introvert. I would much rather sit in the corner and people watch than engage other human beings.
No you're not, or you wouldn't have engaged with people to network about jobs when you're retired and never need to work again.

Or may be you are an introvert but also a masochist? :)
INTJ on every test out there.
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1moreyr
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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 1moreyr »

LBYM and invest regularly in low cost index funds.

It may not be a guaranteed way to get there but it's definitely your best shot.
work hard and earning well helps.

My dad never made big money, but he retired at 55 with $1million in about 2000.
He cleared 50K once in his life working 60 hours a week for a year (he was hourly). He always wanted to break the SS max but never did.

I followed his lead and made more than he did (He never went to college) and I won the game by time i was 53.

My lessons to my kids are
1. LBYM
2. Marry someone compatibly and stay married if ever possible, Divorce is financially devastating.
3. Have one less child than you think you can afford because they are more expensive than you know.

Add these to your formula and you will get there.
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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 investuntilimrich »

I see a lot of people buying expensive cars, houses, junk they don't need, and worst of all they take out loans to get it because they're past broke. They go to the store and just start throwing things in their carts. They throw out food, plastic bags, plastic containers that are fine to use again. They buy pets, pay people to clean their houses or mow their lawns, they put in pools, and then they wonder why they're broke. In comparison, I buy everything with cash, I have everything planned out where not a single scrap of food ever goes to waste, and nothing is ever thrown away until it cannot possible be used or repaired affordably. There's no reason to spend money on entertainment either. I can ride my bike to several nearby trails, so that replaces the cost of netflix and a gym pass. The gym pass might be a good deal if you need the shower, but where I am staying I already have shower access. Looking at what you've saved is actually pretty entertaining, more so than spending money going to a movie I think. Once or twice a year I spend quite a bit on vacation, that's what I blow money on but even then there's a limit. The point is from my perspective the average American live like they have millions of dollars laying around, even poor people, it's really amazing.
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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 RoadagentMN »

Honestly- the secret is don’t be poor. If it’s from professional success or inheritance you need cash money. It’s really easy to pontificate about making this or that change or strategic investments. But if you don’t have the cash your doomed. The bar of “sacrifice” is wildly different at different income levels. Some would see a two year old BMW in a OK color as a sacrifice instead of picking your own color in brand new BMW.
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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 toomanysidehustles »

[/quote]

I think it's been pointed out that it's really a 3 step process:

1) find a way to have a livable income that has some cushion
2) live beneath that income and save the cushion
3) invest saved cushion in low cost index funds

None of these steps are easy to execute when starting disadvantaged and with a low income.

[/quote]

I'd add
- take risks early in your life
- start a business (or multiple)
- invest in real estate

Most CPA's will tell you their ultra high net worth clients are business owners (that took risk) and invested heavily in real estate.
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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 Garco »

It's almost never simple. Start with defining "long-term" and "wealth." A key piece of information that I received from my father when I was in high school: "We're not wealthy. We can't promise you an inheritance. But we can make sure you have an excellent education, and a college degree." This was a pledge they made to each of their 5 children.

After finishing university (a BA and a PhD) in 1971 I had only a couple of thousand dollars in the bank but no debt. My first career job had an annual salary of $11,500 for the academic year, supplemented by $2,500 for summer teaching. I rented a house; later when I relocated we bought a house for $39,500 with a $8,000 down-payment and a 30-year mortgage.

I stayed employed -- just 2 employers (universities) after I earned my doctorate. I traveled the world, mostly at somebody else's expense. My gross salary increased almost 20-fold.

Now, retired since 2015, I am "wealthy" by some people's definition (a "multimillionaire") and the key was (1) staying employed and earning a good salary that increased manyfold over my career; (2) investing 15% of the gross of every paycheck (counting the employer's contribution) in well-balanced 403b funds -- not mainly in "low cost index funds"; (3) living within my salary and cash savings (beyond the money in the retirement fund), while also saving money for the kids' college education (they graduated with no loan debt). We were a one-income family. We had one car at a time.* But we were not living paycheck to paycheck. We have annual vacation trips. Our savings habit paid off.

* Modest cars. 8 over my lifetime. VW Beetle, VW Dasher, Chevy Malibu, Ford Taurus, Ford Taurus 2, Ford Taurus 3, Ford Fusion hybrid, Ford Fusion hybrid 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 wrongfunds »

The simplest way to become wealthy is to save one penny on 1st day. Then next day double your savings and save two pennies. On 3rd day save 4 pennies, on 5th day save 8 pennies.

The simplest and easiest way to become rich!
DavidW
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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 DavidW »

As others have shared, it is simple plan but not easy to live by. It is a daily effort and impacts many of your decisions. The Jones’s are all around you and you have to ignore them. However, you will eventually separate from the pack and the reward will be there. It will also bring a sense of peace that you don’t have to adhere to what others are doing.

This a journey thing and not a destination thing as you will find that there a very few you can share your success and information with.

If you haven’t already done so, take a look at Dr Stanley’s book on the Millionaire.

Good luck
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peskypesky
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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 peskypesky »

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?
That's what I did...and it allowed me to retire early. I lived pretty frugally, invested into my 401k, mostly the S&P500 index...and it has worked out well for me. Much better than I could have ever expected.

BUT, there is some luck involved. The stock market has gone up like crazy in the past decade....if it hadn't, I wouldn't be in this position.
Williams57
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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 Williams57 »

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?
I found that the framing of the above didn't quite work for me, not sustainable. For me, it's not living below my means. It's spending money on things that I truly like and enjoy, and not spend any on things that I don't. Shockingly or not, a lot of things that bring joy and happiness are not actually "things". I understand one can spend all their money on experiences, but observing people in the US, seems that a lot of them are victims of consumerism (aka resource & labor exploitation, environmental pollution, etc). Looking at it holistically makes it easier for me.

And making sure you're earning good money for your skills. Likely will get you to your goal sooner than later. Why do just good if you can do better.
Trader Joe
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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 Trader Joe »

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 it is.
TheDDC
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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 TheDDC »

I think that’s a big part. The other I believe is being smart with using “OPM” as needed and paying the least amount possible for the greatest reward. For instance, keeping up with finding which employers will pay four a bachelors degree and steering kids to them for instance (Target, Starbucks, etc.) is just one example but it’s another kind of leverage that also helps preserve and build wealth. Not spending money you don’t have to? Score!

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
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zincTwo
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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 zincTwo »

DavidW wrote: Sun Aug 15, 2021 7:56 pm If you haven’t already done so, take a look at Dr Stanley’s book on the Millionaire.
+1; All great comments in this thread. I too, was motivated by the "Millionaire Next door" book...though my reading it occurred after a lifetime of living within my means, and avoiding debt (credit cards paid off monthly).
GoneOnTilt
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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 GoneOnTilt »

Yes.

The index fund is probably optional.
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