How to Reach Your Financial Tipping Point
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- เผยแพร่เมื่อ 2 ต.ค. 2024
- I am coining a new phrase 'Financial Tipping Point' where I describe the point at which your investment gains meets or exceeds your expenses. The smaller your expenses and the faster you save, the quicker you can achieve this magical point in your life.
This point is the point at which you are free from working. Although I would not recommend to retire then and there, since true retirement of doing nothing but relaxing is no fun at all. The financial flexibility of reaching the tipping point allows you a lot of flexibility and possibility to take on more risk. All this while you do not have to worry about eating or finding a place to sleep. The peace of mind gives you a clear head to think and make decisions that are best for your endeavors rather than for the next dollar to eat.
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You marry, start a family, kids grow up, you have to worry about their college.... expenses just keep growing up
Yea I think most people here are past that point or opted out
Don't get married or have kids. It's a luxury for millionaires now
@@user-pc7ef5sb6x more like a liability to me
so you'll now be wiping with two toilet paper squares instead of one
I would think it means upgrade to ONE Charmin square versus ONE Scott 1000 1-ply square......
Yes, but still single layer paper
The ideal scenario is you spend all of your money by the time you die. The last check you write is for your funeral, and that check bounces after you’re buried.
Not sure if you've already read this, but many of the things you've shared in this video are principles written in the book "Die With Zero" by Bill Perkins..although there are a few small nuances, for example, Perkins argues that the life experiences in your early 20s are valuable and worth converting your money into even if it hurts the compounding. It offers a really great perspective on balancing frugality with life experiences. I highly recommend :)
Bill is also a giga millionnair
Great book. I should reread that. Love the idea of converting money into experiences.
this was what i was thinking when i was watching the video. Great book with the same core takeaways, altho i do acknowledge that Bill and his friends arent the best use cases in the book as they were all giga millionnaires
Love listening to financial info like this!
I respect your way of life and your frugalness. I'm working hard at getting to MY "tipping point"😄
I used to want to build as large of a net worth as possible and create generational wealth to pass on. However, I now know that generational wealth doesn't last and eventually will be squandered away by some of my descendants and their spouses.
I am still relatively young and have a frugal lifestyle and a high savings rate. However, in the future, once I reach the financial tipping point, I'll be relaxing this and enjoying my money more.
Smart. There are a lot of amazing ways you could use the money you save.
I don't know how you can assume a consistent 8% real return. The stock market is risky, we're already retired, this should be the time where we are at the "consistent returns" phase yet the only thing I see is I can lose money to inflation on savings/bonds/money market or I can gamble in the stock market for a chance to make more than inflation but also a very large chance of being wiped out quickly. It's surely better to have a cushion than not having one, but I see everybody painting a much more rosey scenario than what I can grasp. It's like everybody wants to be delusional and believe we can safely have the "money working for us" (note I said safely, if you're risking, you can, or you can not, that's the problem and that's not passive, that's a mix of active investing and gambling). Nothing is guaranteed in life, everything decays. Everywhere I look, and I am obsessed with it, I only see scams like annuities that pay close to nothing, savings accounts with terrible yields way below real inflation (you know essentials go up by much more than all those official numbers specially if you want to stay living in the same house, using the same amount of energy, eating the same food and with the same level of healthcare and other services) or gambling in the stock market. Real estate may work, but it may also be hell. You may get terrible tenants, you may be harrassed by governments, you may have a bunch of squatters moving across the street...
I am yet to find a safe and consistent way to protect my savings without losing liquidity, so I can not necessarily make the "money work for me" but at least stop it's decomposition. Sorry for my rant. I am just frustrated, I guess, because I was sold this idea that you still believe in while still young but the more I save the more I see we can't win this without risk and without working until the end, even though all I ever wanted was to save a large amount and live from it while doing "nothing" as young as possible. 😬
i use 3% over inflation for my calculations and i expect the real long term inflation to be about 3.5% per year
@@La_sagne I don't believe 3% is realistic. Those numbers are fake, I am trying to remember of a time or currency with less than 5% real inflation (essential items, keeping the same things without replacing beef with chicken, for example or cotton clothes for polyester etc).
This statistic (8% rate of return) is the average of a index fund over the life of the stock market or the last 100 years, can't remember which.
@@sandiellett1786 I know that. I won't live and work saving for decades. I need to be able to put all my money somewhere safe and cash out just enough to pay rent and bills until I reach state pension age. I also need for the amount to not go down and to have a consistent return that at or above inflation. Sadly, there's no such a thing.
Past performance isn't a guarantee of future performance. We can have a 10 or 20 year period with negative returns. And that's just talking about nominal amounts, not considering real life cost increase. Housing costs are out of normality and they're coming for our food. They'll just use their "green agenda" as an excuse to force people on a very low quality diet, so we'll also have to adjust for it.
I know we can always take the red pill out (euthanasia) but I'd rather avoid it. It's my plan B, though, surely beats homelessness or whatever else happens if you run out of money. I am unable to spin their wheel anymore. CFS/ME and other health issues. It's ok though, I am trying to get rid of this fear, so I keep repeating to myself I'll just make my application if the situation ever gets that bad. Thankfully I don't see it happening anytime soon. 🙏🏻
But that shows the risk, right? Tomorrow it could crash and go down and then what do you do? Why is no one talking about that? (things crashing and losing your gains)
One of my Financial point indicators in life was when I realized my investments went up more in one year vs my wife and I combined annual earned income from our jobs....that really showed me the power of investing.....doing nothing made more than working.....
What investment was that?
That is amazing. That was my experience during the market run up during pandemic.
Great stuff! You got me really motivated to reach the tipping point!
Hah, coincidentally I came to TH-cam and saw this video right after updating my spreadsheet where I'm tracking my progress towards my tipping point. I really like the term "tipping point" and will use it in the future!
Thank you
This is exactly what I alway wanted to make. Thank you for making it easy to see what it means to reach to the financial tipping point.
Great vid. Love the idea of reach the tipping point in order to go after your passions other people might find crazy.
I envy you and prepper princess so much, if I had the capital I'd start as business so I can make enough to semi-retire. In my industry the only way up is to management (more responsibilities) or become a trainer (boring and tedious), getting into higher positions at the head office is near impossible if you don't have a likable and charismatic personality. Had I known about these things many years ago then I probably would've got into IT, then grinded for a couple years, saved and invested then got out to start the business. 😂
As a person who retired from IT, I had a similar experience as you did. Retired at 49 because it sucked (the people, not the coding, that part was great.). We don't need as much money in retirement as we thought we would need because we paid off our home as early as we could and moved to a more affordable state to retire (Did not like the state I was living in for most of my life.). Best of luck.
@@sandiellett1786 So there's still hope for me. Thanks. If I was smarter like you I would've figured this way out earlier. The end goal remains and IT is probably the field that will be the last to be automated away, and because not too many people like to do technical work, you can command a higher salary even as a newbie in that industry.
Don't give up. There is still time to start a business and grow it. Just start small and build little by little.
Thanks a lot @beatthebush! I have been following your videos and am a big fan of your content.
I am working on my own journey towards financial independence, I am not the most frugal person, but I have been able to save up 50-60% of my income in the past 5-6 years and have only actively started thinking about financial independence for the past 2-3 years.
I had a FI number in mind a couple of years ago. It just feels like I should add at least a 100k buffer to it with the increase in inflation and with 2022 investments almost flatlining. I know this was bound to happen and there will be good years and bad years. So I was curious of your own journey and how you cope with these?
- Did you have a FI number and stick with it? Or did you have to recalibrate it as you got closer?
- How much of a "safety buffer" did you establish over your FI number, if any?
- Did you end up being over-cautious the first couple of years of retirement (I know, I would!) and spend like 10k or so less than the burn rate just to be able to give yourself a bigger buffer?
- Did you have a backup plan for getting back into some kind of work or know specifically what you'd want to do just in case you needed to and in case a recession hit that wiped out 30-40% of your assets immediately after you retired?
- Do you reduce discretionary spending (I know you are super frugal, but say put off an international trip and do a local one instead or something like that) in years or periods when the markets aren't doing that well?
- Have you considered renting your place out and moving to a cheaper city for a few years? I know you probably don't need to now, but wondering if that was one of the backup options you had.
I know these are very specific questions, but would really appreciate your response on these as they are some of the things I am actively thinking about as I get closer to the FI number.
Beat the bush was on the path to fire before it was even a thing
I'm pretty much doing that chart. I could only start saving last year when i turned 26 and graduacted from my career field at college. All my money went to the mortgage, cuz i feel uncomfortable with the debt on it. I did the math, it will be a year starting next week since i started putting all my extra cash after gas, a few luxuries and eating out a few times. And apparently I'm putting in 30K a year into the principal on the house payment with the help of my fiance. It was 120K after the down payment now i owe 89.5K. Once that is done and i feel more comfortable in the economy i will go back to investing in stocks... unless i decide on rental property.
Just hope you do not get married and divorce. That could really derail what you have going on.
Wouldn't it be a financial inflection point?
You choose too buy 10 dollars worth of rice from the revenue from this video and waiting on more money from interest
When your older, you will spend all the money on heath care needs 😢
LONG TERM CARE!
I'd call it 'escape velocity', the portfolio has momentum and just keeps growing.
That is a perfect term, may I steal?
@sandiellett1786
Sure, but meant to add keeps growing exponentially to the above.
Auto-blind heard you say retire and it wanted to retire too. 😂😂😂
Hope to be on this path! But the returns aren't quite there....
This guy needs to workout 🏋️♀️
lol the blinds. more finance vids plz :D
you should redo ur meat slicer video and have it cut to a clip of money comming out the other side lol
I can't help but wonder how much further along he would be if he continued working as an engineer while being super frugal.
It would be no question that he would be able to retire by 50, assuming he was able to get a six figure job at the time of his graduation. Most engineers have coops after college and so if they land a good job and they carry that for a decade, they are going to be set.
Can you please make a video to discuss what a person should to do if they haven't saved anything for retirement at 50? Making 60K , house and car paid off in a couple of years. No 401k match given at work. No will to change jobs. A close relative is asking!
Guess ima work 70 hours a week and invest 500 a week only worry is that theyll take it some how so im paying 10% for withdraw from ira just for that added security lucky tennessee taxes are super low so i probably make out better then regular brokerage account in california (nvm roth is 6k cap most of my money will be at risk of future things like divorce and child support or medical cost or whatever happens)
Good info
Herman Miller Aeron? I see you! :D
Nice video, well done. MOOOOOOO
I guess you don't plan on having a family. If you do, multiple that spending x2 or x3.
Good explanation.
I hope u are working somewhere get life back on track with both income and passive income u can live real good with ur gf and family after marriage.
For anyone reading this comment, reconsider the "~8% annual return" hypothesis. Even if you consider a timeframe of 20 years and say "+8% average annual return over 20 years", you might be fooled.
Consider this example with the S&P500: on November 1968, the index was priced at 104.2. On August 1982, the index was priced at 103.7. This means that over a period of 14 years, your investment had a TOTAL yield of 0. If you were to include the broker fees over this time, you would be left with a mid-5 figure loss.
Assuming this is not going to happen in the future, is a sucker problem. Especially when all the companies in the S&P500 are valued based on air, debt (on a currency that soon will lose its global dominance), and multicolor background ppt presented by empty suits. Decide accordingly.
Poor example.
You’re ignoring all the dividends, you’re also ignoring the dollar cost averaging throughout the 12 years.
I live in California and 5 millions net worth is still really hard to live on. What tipping pt？。most are still living in fear even with 10.
Get out of California. It’s a means to no end…