No. of Recommendations: 6
<< If you have a wife and kids, that just pushes the time out a bit. The premise about fees and taking advantage of ESPP (etc, etc) remains the same. >>
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Yep. The factors that fueled my early retirement would have worked whether you're single or married, kids or not.
1) Engineering degree. I happened to attend a college (WPI) that had an innovative, competency-based program that allowed you to graduate in less than 4 years at the time if you played your cards right. Only a few students were able to do so, because, everyone knows college takes 4 years, maybe longer. I graduated in 3 years. A math major 2 years ahead of me got his degree in 18 months, along with passing the first 4 exams for becoming an Actuary. Some years later he appeared in the alumni magazine in a feature story with a picture of him in the courtyard of his Virginia mountaintop mansion with about a dozen expensive European motorcycles fanned out in a semicircle. All the result of being a pioneer in selling annuities on the Internet. Obviously a man who understood the angles.
My starting salary as an engineer with a Fortune 500 company was about equal to 3 years of room and board, so being able to get that big engineering salary a year early, almost made the education "cost free".
2) Job-Hopping. I learned pretty early in my career that working uncompensated overtime in the hopes of big raises and promotions is only a sound financial strategy in the rarest of situations. You can usually get much higher compensation if you move around. I got my BS degree in 1977, cycled through five Fortune 500 companies in the 1980's, then quit working in 1994 at age 38 after a 5-year stint with a chemical company in Baton Rouge. Once I'd accumulated enough capital to live off the "4% rule", there really wasn't a good reason to remain under the supervision of an employer. {{ LOL }}
3) 401k investing. I paid off my student loans by age 25, about the same time I left Corning in New York for Exxon in Houston. This being 1981, Exxon had only recently started their 401k plan -- and it was a good one. It had a 6% match and employees were allowed to contribute up to 14% of their salary (at least until they reached the "highly compensated level" where that "up to 14%" number get reduced.) I contributed the max since I now had some free cash flow after paying off the student loans.
One thing that was notable about the Exxon 401k plan was its low fees. Company paid all the admin costs, and the mutual funds matched the super low expense ratios you see in the Federal Gov't Employees Thrift Savings Plan. As I moved around to other employers during my blissfully short engineering career, I noticed the fees were generally rising. The last company I worked for in Baton Rouge had an expense ratio of nearly 1.00% on their S&P 500 index fund during the time Vanguard was charging about 0.20%. You're going to lose a lot of your wealth over time paying those kinds of fees.
And that brings me to the big advantage I've enjoyed in my financial life. That 3-day financial planning course I took as an 18-year-old Freshman in college where I learned that financial advisors, mutual fund salesman, stock brokers and insurance agents really weren't going to do much to help you, and to "Never pay a load" (In the 1970's it was common for a mutual fund purchase to come with up to an 8% sales commission (i.e. sales load). You're not going to ever retire paying fees like that.
Once I had money to invest, I was smart enough to avoid Merrill Lynch or anything to do with an insurance company. Most people lose a decade or two of compounding before they figure out where they're getting screwed. I was able to avoid all that on the strength of the 3-day financial planning course and hit the ground running. It was by far the most valuable piece of information I gleaned from by engineering education.
Housing Costs. The other thing I did was apply a rent vs. buy analysis to my housing decisions over the past 40 years which goes against what just about every American is taught from birth. Let's face it "renters are losers".
Bottom line is that over the past 100 years the average home in the US has appreciated at 4% per year (and about half of them, less than that), while you can get 10% plus in an S&P 500 index fund no matter where you live in the country. My preference is to have more of my money in the stock market, and less of my money tied up in a poorly appreciating single-family home. I’m only willing to own a home if it has some prospect of delivering the unleveraged 10% return of the stock market
The rent vs. buy calculation didn’t turn positive for buying until I was living in a suburb of Portland OR at the tail end of the 2008 home mortgage market meltdown when I paid cash for a home in 2012 for 70%-off it’s 2008 value. It’s since quadrupled in price. And how did I pay cash for a home? The difference between 4% and 10% compounded over 2 or 3 decades is a fortune.
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