Building wealth?

[LivingAlmostLarge]

I wondering, when do you stop playing catch up and start living? I mean in the sense, where you only have mortgage debt, and are debt free otherwise? And are satisfied with saving for retirement, sinking funds, and are able to save for luxuries like vacations, home repairs, newer cars, college, etc and then still have money left over? I guess when you are saving for everything and have nothing left to "save" for, but can buy anything. And that left over money can be invested?


When do you reach that point? I sort of feel like we won't get there for another 5 years at least, so mid to late 30s at the earliest. That we really have a lot of pots of money/savings to fill before we can really get to building wealth. I'm not sure if this is typical or not.

[jIM_Ohio]

I wondering, when do you stop playing catch up and start living? I mean in the sense, where you only have mortgage debt, and are debt free otherwise? And are satisfied with saving for retirement, sinking funds, and are able to save for luxuries like vacations, home repairs, newer cars, college, etc and then still have money left over? I guess when you are saving for everything and have nothing left to "save" for, but can buy anything. And that left over money can be invested?


When do you reach that point? I sort of feel like we won't get there for another 5 years at least, so mid to late 30s at the earliest. That we really have a lot of pots of money/savings to fill before we can really get to building wealth. I'm not sure if this is typical or not.

I weigh this all the time.
My wife has differing opinions than myself on some details, but overall if only debt is a mortgage, and a person/family is setting aside 20%+ of gross pay, then that needs to be "enough".

Our achilles heal is we still finance cars, so we have about $1100/mo tied up into 2 car payments.

The overall goals we have- paying cash for vacations, getting wife a bigger car (her current accord was purchased before kids were in picture), and having sufficient cash reserves.

Those 3 forces pull at us- we take a few mini vacations each year (like our annual wine tasting trip and family weddings or camping trips).

No person will ever have enough money... so at some point you need to decide to spend to feel fulfilled, I believe. I am in my late 30's and with any luck all will be squared away before I turn 40.

[Slug]

It's a balance. There's no timeline. You can't just always live for tomorrow by saving constantly. Most everyone here skews to the heavy saver side of the scale as best I can tell. At least it's on our minds. For me this balance is very hard. It's impossible to know if you are saving enough so I always assume the worst and just save, save, save. I've been mulling seeing a personal finance counselor for the first time ever just to get an idea where I stand, but I have doubts about their ability to do so AND I'd just rather save that money :-)

[Caoineag]

For us, it will come when there is only the mortgage and we have an emergency fund. I think we have about 5 years to go before we are finally at that point since our house still have some big projects coming up.

[bjl584]

I think that in 10 years I should be in a very good position financially. I should be competely debt free at that point. I'm 31 now.

[Beppington]

I think that in 10 years I should be in a very good position financially. I should be competely debt free at that point. I'm 31 now.

It can be done. That is me. Age 41.

If you feel like you're better off with at least some stress in your life, then keep some debt

[disneysteve]

I wondering, when do you stop playing catch up and start living?

We have never put off enjoying today at the expense of saving for tomorrow. We have always vacationed regularly, always driven decent cars, always had all the basics along with some luxuries that were important to us. Even when we were first married and I had 6-figure student loan debt, that was true. Our only debt is our mortgage and has been for a couple of years, but nothing really changed when that became the case, except we started saving more. My goal is to retire as early as possible. I'm shooting for 62, but I wouldn't complain about 61 or 60.

[LivingAlmostLarge]

I think in 5 years we should start builiding true wealth. To me like saving 10% in a taxable account.

I thought we might be there but unexpected expenses made it harder to do than expected.

[maat55]

Without knowing debt load and income, I would generally say that getting out from under moderate to high interest debt in the shortest time period would be a good short-term goal.

Next would be building an 3 month EF. At this point, I would establish 10% towards retirement investing. With the extra funds I would fund vacations, additional EF and paying off low interest SL's or other, as you please.

I don't know where you are in any of these areas, but this is my opinion of an order.

[zetta]

Are you asking when is it (philosophically) permissible to spend money on enjoying life, or when is it permissible to devote money toward building wealth instead of just retiring debt?

I like the formulation found in All Your Worth -- 50% to needs, 30% to wants, 20% to savings. Minimum credit card and student loan payments are considered part of needs, while prepayment of principal is considered savings. For the savings, devote 15% to retirement, and 5% to loan prepayment, sinking funds, or investing to build wealth (in whatever proportion you choose.) Fulfill your wants (whatever makes you enjoy life) with up to 30% of your income.

As for building wealth, if your student loans have an interest rate lower than the return you can get from mutual funds, it's ok to choose to invest money in the mutual funds instead of in prepaying the student loan principal. By doing so, you are choosing a higher risk invesment (equities) over a guaranteed rate of return (loan prepayment).

You also don't have to wait for all your sinking funds (such as your next car) to be complete before choosing to invest to build wealth. You may choose to lengthen the amount of time to reach a sinking goal (new car) in order to have money available to invest each month. (Things you have to pay with a firm deadline like property taxes should be considered a need rather than a savings goal.)

[LMA]

What is your definition of living?

I have caught myself in a similar situation thinking of when do I start living which in reality turns out to be spending more. I constantly have to remind myself that what I am trying to create are experiences not possessions. Those experiences sometimes require money but many times they don't or require a lot less than I think.

[LivingAlmostLarge]

Hypothetical. and I guesss it's when yo uhave too much money to spend and so you save.

[feh]

Depends on many factors...income, lifestyle and local cost of living, to name a few.

Some folks get there early, many never get there. I don't think there is a standard timeline.

[Beppington]

I wondering, when do you stop playing catch up and start living? I mean in the sense, where you only have mortgage debt, and are debt free otherwise? And are satisfied with saving for retirement, sinking funds, and are able to save for luxuries like vacations, home repairs, newer cars, college, etc and then still have money left over? I guess when you are saving for everything and have nothing left to "save" for, but can buy anything. And that left over money can be invested?


When do you reach that point? I sort of feel like we won't get there for another 5 years at least, so mid to late 30s at the earliest. That we really have a lot of pots of money/savings to fill before we can really get to building wealth. I'm not sure if this is typical or not.

I think it's a balancing act/ judgment call everyone has to make for themselves based on their specific situation, current career, career outlook, savings, income, health, comfort level, etc. There can't be an absolutely correct answer: You could ratchet down & plan to live the most frugal life ever ... & then win the lottery tomorrow. Or, you could spend every cent you make every day & live to be 100 & poor as h3ll. Also, no two people are going to see the situation the same, either.

You can get some outside advice, of course, from maybe a paid financial planner, & that's probably smart to do, but you'll still have to make the call.

I know this isn't really helpful, but I do think some plan is better than no plan. At least a plan can be tweaked as you go along ... whereas with no plan you might realize you shoulda had a plan long after it's too late.

[daviddane]

It takes a long time to build a huge amount of wealth and maintain it. People work for lifetime but the never save a extreme amount their whole life and at the end the just curse themselves. I am sure the post will surely be liked by many people as people will get to learn a lot of thing from it.