Everyone's Chasing Financial Goals That Are Meaningless
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- Опубліковано 29 чер 2024
- Thanks to @ramitsethi &@TonyRobbinsLive for inspiring this video topic! Be sure to check out their wonderful UA-cam Channels!
00:00 Free To Do What I Want
01:10 SMART Goals
02:28 Get Specific
04:38 Figure Out Your Number
05:30 Financial Freedom Number
08:33 Absolute Financial Freedom
10:53 Financial Independence Plus
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Disclaimer: Please note that this video is made for entertainment purposes only and not to be taken as financial advice. Always make sure to do your own research.
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Thanks for watching, I appreciate you!
#financialfreedom #financialindependence
The number I care about is “zero” - no debt! That’s a whole another level of freedom.
💯
The key number is net cash flow. No debt is great, but you still need cash flow to exist
Hello everyone. Anyway the blood of Jesus Christ against all fallen angels spirits with in any humans or by any humans who is reading this. The blood of Jesus Christ against you fallen angels heading for the lake of fire and the bottomless pit. In Jesus Christ name return to hell and return to the earth or 2nd heaven again.
Yeah, I am realist like Qpitmaster, my goal is no debt. 1st goal is no debt including house and vehicle, 2nd goal build up saving to 100K for future investment like buying property etc... after than maintain and enjoy my cup of coffee and play some video games. Way into the future might consider modest travel.
Stop spending, learn austerity and you won't need much money to be happy.
It all starts with a budget and a plan. At 48 years old, I was able to walk away from my job and start an early retirement. When you are truly debt free, you might be surprised how small your monthly living expenses really are. More power to those who want expensive homes, fancy cars, and private jets. I don't need or want any of that to live my best life.
What do you do about healthcare or health insurance?
@@thomasorchard ACA has made this easy and very affordable with the subsidies provided. They scale based on income. This year if I can keep my capital gains in check, almost all of the premium will be covered. Even worst case, heath insurance costs around $1500/month for a decent plan.
Same. It’s insane how much people have in debt.
@@thomasorchard I shopped for a plan on the open marketplace at healthcare dot gov. I was able to find plans from the same providers I had when I was employed full time.
@@darrenmatthews1667can’t say $18,000 is affordable
What a fun video. I can afford a lot more than the 100K budget I set but after working so hard for my money, tossing it away on lavish Hotels, cars, and privet jets is just nuts. I know I have said this already but 18 months into retirement I find planning and eating at home, having a daily gym workout (when it's not buzzy), and just having quality time with my wife is really all I wanted.
That sounds amazing.
Same here; go for it.
my retirement in 2030
Now 47 years old
I had plan for regular payouts..decimate and lifetime
My budget is half that and I am extremely comfortable; I chose Mexico as my homebase and travel multiple times a year to Europe and Asia. I cook most of my meals even when I travel, I drive a basic Toyota Corolla, I fly first class once in a while but mostly opted for coach. I grew up poor and worked hard for my money, the idea of automatic 20% gratuity in the US is nauseating, $20 minimum wage is unsustainable, equality/equity in the soup alphabet never achieved.
One thing that's become clear as I've gotten older, you can never get back time. It's funny when you're young, you trade your time for money, but it usually switches as you get older & realize there is more to life than just having increased money. Life is about balance.
Yeah, life is about balance, but you have to have a life first.
Owning a roof over your head is probably the first step and with the current real estate market, it requires most people to work full time with a few side hustles.
Earning money is not just about fun, it's also about giving meaning to your life.
@@QoraxAudio My first house had a 9.5% interest rate 30 year loan and I was the sole wage earner. I can be done and have balance. Everything is relative it just takes a little time to realize it.
Glad I realized this at 24. Life has been better for the few months where I'm more worried about my life, not my bank account.
@@ld5714You are extrapolating your situation on to us, as if times arent different now
You only have the now
Die With Zero is a great book... We always are chasing some financial goal of retiring old with a sh-tton of money that we can't enjoy because we're old.
But much of the middle class do not receive inheritance bc too many people live like this. My mother in law has virtually nothing saved in retirement so she’s going to live off of SS and her children’s good graces. That’s no way to live! You don’t know when precisely you’re going to die so you should have a nest egg to compensate for that. And it feels good knowing you’ll leave even a small legacy behind of money for your kids and/or community giving to charity. Wealthy people leave something behind for the next generation.
@@schuylergeery-zink1923 I'm guessing you've never read the book.
Hopefully with new medical developments I can live to 150 plus years or download my conscious to a digital platform .
So it's its important I don't spend all my money
I've run these numbers, I have always called it Survival Level, Comfortable Level, and Lux Level. I am retiring this year at 55 and should be very comfortable. I have worked to get my survival expenses very low (solar, EV's, 50 year roof etc...) and if markets do worse than historical I should still have more than double my survival income. If markets do well I could be living my Lux Life.
as you get closer to retirement, its important to boost your emergency fund so it will last a few years so you can weather any stock market downturns.
I’m on VA disability with no extra income. I have thankfully been retired for 2 years now. Thanks to people like Dave Ramsey I have created a monthly budget and I stick to it. I got my cell phone bill down as low as it can go, I no longer have a car payment, I reduced my rent by $300, I’m not concerned with what people think of my lack of spending, etc. I eat out once a week, and I eat good shopping at Trader Joe’s for food. I have about $1250 left over each month after bills, which allows me to go on vacation every couple months. Although I’m not flying first class and staying in lavish hotels, I still get to see the world, and most importantly, I get to wake up when I want, do what I want, and not have to worry about my mental health from a taxing job. I grew up extremely poor with almost nothing, so I don’t need luxury items to make me happy. $15,000 a year for fun money is more than enough for me. I have achieved F.I.R.E. by the age of 35. It might be lean FIRE, but I don’t care. I am more than comfortable knowing my bills are more than covered.
Of you dont mind me asking. What state do you live in? Im a 32 year old army veteran. Got a % as well. Im freaking struggling. Of course the main reason is because im in California.so thats my first step. getting away from this money draining place.
Your NOT FIRE if your getting VA disability payments.. your literally dependent on the government. Signed a veteran receiving va benefits and still working!
Congrats on your exemplary discipline & focusing on what matters 💜
@@ericnewman6523came to say this
Much respect to you.
I want peace of mind, being rich wont get me there but not having a bunch of debt and living pay check to pay check will certainly get me closer to the peace I so desire.
Financial literacy is the language of the wealthy. I thought about this financial freedom thing when I was 23. Today, at 57, I am comfortable. The key here is Clarity and having a Plan!
The rich aren't any better with money. They have the cushion to make more mistakes. The language of the wealthy is delegation, not financial literacy. They pay people to do shit because they can.
57? what took you so long.
Owning a large home is way more expensive than the sticker price. Utilities and taxes are a ton as well
Yup, small houses are great. Utility bill is low, taxes and insurance are low, and repair costs aren't as bad. I don't need the bigger HVAC units. The roof and gutter replacement wasn't bad because less material is needed and they're not dangerously high off the ground. And I don't have tons of extra space waiting to be filled with more stuff.
The lower purchase price is just the beginning.
If I could do things over, I wouldn't even have a regular house. I'd get a barndominium with minimum living essentials and room for vehicles. Preferably in the back yard of a rental house.
Define "large" and in what State?
@@ReddingRed the bigger you go, the more it costs across the board, in context to the state. Give a pig a pancake.
Made that mistake 2 times. No more. Downsizing for life now. Minimalism, frugality, investing hardcore and doing 1-2 bucketlist experiences a year helps
Excellent job with the budget demonstration. Amazing how many people don't do this. I "retired" two years ago in my late 40s. I'm not super rich but so far I think I can go the rest of my life without working for someone else ever again and it feels good. Been traveling non-stop for the last couple years and have seen far more than ever before. I have my father to thank for having me max out my 401k on day one, even if it meant eating soup and salad for the first few years. He showed me the power of simple compound interest, and with inflation, how much I should shoot for. Changed my entire perspective.
By the way I tweaked the SMART goal thing to something simpler: RATS (which is more cute because you can say "awww, rats" when you know you need a new goal)
R - Relevant (the most important part of a goal)
A - Achievable (second most important thing)
T - Time bound (this is all encompassing with tracking/monitoring, etc ... the "action plan")
S - Satisfying (i.e. what would it feel like to achieve this goal? ... put it on a sticky note and look at it every day!)
"Fun to say, not necessarily helpful." I'm stealing that. Today.
This is a great video! A little bit brainy and introspective, but then gets rooted in real numbers and a specific call to action at the end.
This one went perfectly with a cup of coffee. *chefs kiss*
Thanks, as always, Erin! I'm going to try this exercise today.
☕️
This is really great content. I am an aggressive saver who considers myself very financially literate, but put a lot of stress on myself because I didn’t have my magic number and created arbitrary time bounds. Wish I had seen this video earlier!
I've given this subject some thought over the years. It's funny but increased spending comes with significant drawbacks. A mansion for instance comes with a stunning loss of privacy as you'll need a staff for everything from cleaning, cooking for entertaining, gardening etc. Those expensive vehicles are maintenance nightmares with expensive parts/labor and they really aren't that well built. A nicely equipped Toyota is a far better choice and far less trouble. Jewellery and expensive clothes don't really mean much and the relaxed comfort of plain old clothes trumps all. I've got a $35 stainless steel Timex that I bought 20 years ago that I don't even wear any longer as my flip phone has the time and even multiple alarms. Sure, there's travel but it's hard to imagine spending that much and by doing so you'll never get to experience what your destination is truly like. Then there's vacation properties but again, they come with maintenance problems and you'll need to hire out everything from a caretaker to repairs, painting, winterizing, etc. Not much fun spending your vacation time managing all of this and most vacation homes sit unused for most of the year save for a few weeks. When it comes down to it, it's hard to beat an average sized house, or even a little smaller and more manageable one especially as you get older, a well built mass manufactured vehicle that will give you at least a decade of trouble free transportation and a wonderfully frugal lifestyle that's easy and fun. At least that's my two cents on the matter.
Cheers!
This is good content and spot in IMO. Unlike most of your followers who are still on their journey to retirement, I am 12 years into my journey. I was one of those people who never gave it much thought other than a million dollars sounded like a good number. Fortunately, I was always a good saver and began investing in my mid 20's and have always been very conservative and was also the sole wage earner. You are absolutly right when you say it's fun to say but isn't necessarily helpful. When the day comes you actually hit your number and beyond, it becomes ineffectual if you never really developed specific plans or visions of what it meant or what you would do. You must know what it looks like before you can actually see it. After I figured that out, the fog lifted and a new journey began. You are doing great work with your channel and I hope your listeners are learning and benefiting from the content you offer. They will be better off for it. Larry, Ca.
People way over-think this. I don't have a goal, I have good habits. I'm putting away 15 percent towards retirement, paying double on my mortgage, and have no other debt. I'll just keep doing that and we'll see where it goes.
It's worth thinking about when your habits are no longer as helpful or necessary. Eventually the house will be paid off and the retirement account balance is going to be a large number. Then what?
At 15% it might take a while so you can just enjoy the grind while you get there, but I'm at the point where the "max out 401k" habit could instead be "convert $x to Roth" because I don't need more pre-tax money. Should I keep grinding to get bigger numbers, or should I ease up and go on more trips?
Eventually you should be deciding how much you want to spend and determine how much more you want to work from there. Most people just don't think about it much and end up spending it all as they go so they have to keep working until they can't.
My financial goals are similar to playing arcade games.. I'm just seeing how high a score I can get. I've found that in a lot of things in life, the journey is more fun than getting to the finish line
I think you bring up a good point. How much of a consumer are you really? I whole heartily agree with the bottoms up approach of determining what you want, and back in to the number that will get you there. But I also strongly believe that "experiences": are so much valuable than "things:". And I don't think we all need to consume as much as possible to "win the game". Lets take the examples in your video and you will see what I mean. First the "house wives" what do you think would be more important to them. The people that they were with, or the size and shape of the room? I suspect its the people. Yeah a nice room is better than a crowded one. But who would be happier, people fighting in a nice room. Or friends in a small room, talking and enjoying each others company? And who will remember the time more? Now lets go to the ":private plane" guy. Will he enjoy the place he is going with more if he took a plane that wasted energy, or hurt the environment. Would he enjoyif the place he was going to was "destroyed by pollution, or would he enjoy the place, more if it was in good condition, because we all took care of the environment that we all share.
I will be honest, I have a net worth much higher than the average. But I am like you. I bought the Toyota, not the Lexus. Could I pay for the Lexus in cash. Yeah I could. Would the Toyota get me to the same place in basically the same comfort? Yeah it does. So to me, the most important thing for people to do, is determine who they are, how they want to be remembered. And who they want to enjoy their short time on earth with. That cliché is right. Money is just a tool. Without the tool, things are hard. But with the tool, you can not do much with out a good plan.
I met my goals: successful-loving marriage, retired military, tricare, retired state service, SS, yoga practice almost every day, healthy, I owe no one anything, and I am alive when I should have died so many time.
The start of 2023 I had $22,500 in credit card debt with a 22% interest rate. By the beginning of 2024 I had paid down $6,000 of it and the interest rate shot up to 28.99%
My financial goal is to pay the remaining balance down by the end of 2024 through lifestyle changes to free up the available finances.
Surely, you could consolidate to a lower interest in the meantime. Good luck, and keep crushing that debt at any interest rate though.
invest in any of the top 10 cryptos. You'll have it paid off by early 2025. The bull run is about to start. Bitcoin halving is in april and it only happens every 4 years
You can get a balance transfer card with a 0% interest rate.
I just want to be able to retire comfortably with my husband so our kiddo won't worry about us, pay for my kid's college coz I don't want him to enter adulthood with student debt, and have enough money to go see my family overseas every 2 yrs. I don't think I will retire early as life is too hard, but going down to part time after 65 would be great. 😊
This was a great video. I am nearly 52 and have close to a $1.8M Net Worth. Thanks to videos like Erin’s and books such as “Your Money or Your Life” I finally have the courage to say Enough - I am done trading my valuable and irreplaceable, finite life for precious money so I can buy stuff. Stuff I don’t need! It takes courage to retire several years before the norm but I finally have it.
That's how I determined I was able to retire at 52. Good info for others to understand.
I arrived at my financial freedom number by taking my peak salary, then subtracted the sum of what I was saving in my 401(k), taxable brokerage account and SS/Medicare taxes. Then I subtracted my small pension and my SS benefit. That's close enough. My goal is to live in retirement as I did while I was working, just with a lot more free time. I don't think I could bring myself to spend the money on a private jet even if I had the money.
Thank you, Erin! Another thoughtful and helpful video. Your thoughts on "relevancy" and "specificity" with goals is so helpful (Pre-AFI, I helped companies and executives define and achieve their short- and long-term goals). By making each goal so vivid and personal, it serves as a giant magnet in your brain pulling you towards it. I like Tony's take on creating a BHAG (big, hairy, audacious goal). It is almost like the Overton window where you stretch what you currently think is acceptable/possible - particularly if you make it vivid. We redraft our goals annually (3-5 goals only) and discuss quarterly. Last thought, when my wife and I jointly created a detailed monthly and annual budget and committed to reviewing it 2X month our progress towards absolute financial freedom dramatically increased (Setting the goals is generally the "what," "when," "where," and the "why", and the budget (needs, wants, savings) in many ways is the "how").
Erin, you've got to check out Ramit's stuff! It's really fun. He pronounces his name rah-MEET SAY-tee
I just watched one of your older videos from July 2022 and it made me realize I miss when u included the outtakes at the end. I always end up laughing from all the mistakes that u have during the making of these videos. It's also a feel good moment to see the imperfections that people can have and that's reality. I think u should start including those again but I enjoy all your videos and your opinions and knowledge on finance. Keep up the excellent content. Thank u!
I think the Money Guys do a whole course/bit on “Know your number”… anybody familiar?
Bob Brinker used to call it the “Land of Critical Mass”! This was the amount where you could live comfortably without being tied to a job. I used to live in my car when I went to college and I was dirt poor, so the fear of crushing poverty was my incentive to save. For many years after graduation, I gave myself a small allowance to live on each week and saved the rest. But the key was to reduce my housing cost by renting the cheapest apartment I could find and by driving a reliable used car. By the end of the second year I had saved a years gross salary.
Good video! The Petoskey/ Harbor Springs area is the most beautiful area in lower Peninsula Michigan IMO! I'm in Grand Rapids and am up there often. Lately it seems like our "Midwestern Affordability" has gone to the moon in terms of housing prices.
I could not agree more! I love my hometown…and GR is pretty amazing too, I have family there, so I still go there quite a bit. Hoping to move there when my husband finishes up in the service. 😊
It's all about doing what you want to do! Work is great when it has purpose! Being financially independent make all this much more possible.
Erin, I can tell you don’t look at luxury cars much. $45k is barely the nicest Honda Crv, lol. I just laugh because it’s not high on my priority list but I was looking because a friend was. Let’s just say that $60 to 80k is much closer for the lower end of the real luxury cars. Holy cow.
haha....well that's probably very true. Not my area...I don't really do car shopping
@@ErinTalksMoney Same here a nice vehicle is way down the list, but everyone I work with is infatuated with nice vehicles.
Its scary how much some people put down to drive a 'luxury' car 😮Keeping up with the jones's is a big thing this side of the pond.
I retired 2 years ago at 49 after doing a simple spreadsheet. Simple maths and NO debt 😀
one of the best videos from your playlist. well done.
Wow, thanks!
My wife’s grandmother is currently sitting in a nursing home 3 people to a room, one dresser, 3 ft on each side of the bed, and only 1 person in the room can see the 2x2 window, as she lays there waiting to die.
I want better for myself and my wife.
I’ve reached a point where I live comfortably, and save/invest a significant amount of money. While my goal is to have enough for a “comfortable” retirement supplemented by passive investment income, I haven’t defined it much beyond that. I enjoy my job immensely and retiring early is not a goal. In fact, I think without my job I’ll lose purpose, and motivation. Maybe I need some new hobbies. 🤷♂️
Have a wonderful job with significant life style benefits that money cannot buy (yep, that's a thing). So working as long as its fun. Retirement is a target and option, but even in retirement you need to busy yourself to maintain a social life, stay fit, keep up with tech, engage with your neighborhood, have a hobby, have meaningful relations and keep your brain fit etc. etc. No wonder so many people in retirement never feel they have time - just like me. 😂
I recently heard someone replace "Retire Early" with "Recreational Employment." That really resonated with me.
Rethink Everything works for me 😁
Most of my huge accomplishments in life were created not by having long term goals but by lettint my passion develop those goals along the way. I ran 200 miles in under 60 hours but that was never my goal when i started mile 1. Goal making isnt the only path to success. Enjoying the journey is.
There are a few things I have read over the years that talks about how some people are goal driven and others are process driven. Either mindset can result in great achievements, but you need to know how you are wired and act accordingly
But would you walk 500 miles?
@@bellmattwebb true story, I walked 500 more.
Forget the pressure of what the pro's say.Just put away as much as you can per month.Start small and as bonus money or raises come along,put them away also.NEVER touch retirement money,if at all possible.You may never hit the dream goals of what people tell you.BUT,at least you done your best and also have something tucked away in retirement.Start now.
Set a savings goal and spend the rest on whatever you enjoy
As a boglehead I've come up with a form of an "Investment Policy Statement" that I've customized to my individual thinking that doesn't just talk about what I invest in, why I choose those assets, and how I project (guess) it will grow into the future. I do this so I can compare my investment actions and progress against a "retirement" target number I've arrived at an estimation for, including notes on extra savings I need for health or large charitable gifts I'd like to be able to make.
My wildest dream goal? Buying a private island and protecting the nature on it!
Another great video. You go beyond just money to the meaning of our goals
Traveling to see the world is my why!
I have a very simple why right now but even if I had started perfect planning 15 years ago I am 35 I would probably be in a similar situation I am in right now. Like I had a number of things against me which just quite frankly prevented me from doing much. And even now what I have right now is only through luck
Watching this video brought back memories of maintaining decades of Quicken financial data on every dollar of income and expenses. As an engineer, I was able to calculate the financial freedom number for my family decades ago as I recognized that I needed a target number for my retirement. My wife and I have reached the Absolute Financial Freedom number "for us" as a result of good saving and investing. One aspect of dramatically increasing one's financial status is that you won't necessarily be accepted or comfortable in a significantly increased luxury lifestyle. Yes, I know we are blessed with our situation, but living an extravagant lifestyle while growing up middle class is not likely what you have dreamed about. Money does not solve your problems; it "might" just give you more options. Most of us have heard the phrase "Don't meet your heroes", well I have to tell you that if your hero is Absolute Financial Freedom, you will likely be disappointed if you get there.
I find that spending time with folks that have always been upper class is quite tough for me. I grew up very middle class, and appreciate an occasional nice dinner, but pretending to be someone I’m not by dressing up, drinking a fancy cocktail and forcing small talk about anything I’m not interested in makes me hate myself. I’m top 10% income in my area, but you’d never know it, modest home, vehicles, and like wearing shorts and flip flops and a t-shirt. I’d rather have a cold beer around a fire pit, then sip on 100yr old bourbon in a mansion.
@BDUBB24 same situation for me here. I typically can't really stand non working class folks anyway.
I think Erin's channel is mostly going to attract middle class folks with something to invest, but not enough to find her channel irrelevant. So even for those of us that now have more than we'll ever need, it's not us to blow through it like it wasn't hard to make...lol
@@BDUBB24 Pretending to be someone their not is why so many have financial problems.
I’m retiring on Skid Row. That’s true freedom. No property taxes, utilities, maintenance costs or other unnecessary expenses other than maybe a new tarp.
I used to say "$1 million." But that was a long time ago and inflation has boosted that up a LOT.
This is a really good way to think about it, and Ramit is right - if it's not specific it's not a goal!
I would add to this, how Tim Ferris talks about thinking about your dream lifestyle - which is how to get at it without necessarily spending a lot of money. An example he gave was someone who wants a luxury sports car, like a Ferrari - he suggested you rent one instead of buying, because not only is it heaps cheaper, but you get the thrill you wanted and maybe that is enough. Same with travel, that if it's the place you want to go, there are ways to get there that don't cost the earth (figuratively and, in the case of private jets, literally) if you put in a bit of work looking for deals and such.
So you can get even more from your Financial Freedom Plus if you think a bit laterally about what you really want to try - and not necessarily have to "have" things in order to use them, which i think is a neat way to consider it.
Two macro points, however, that would make this number a “moving target” are:
- capital gains taxes that should be paid whatever investment plan is used
- annual inflation rate till the time one can actually use the invested savings to cover up life expenses.
In my opinion, those are two crucial variables are greatly overlooked with dire consequences to the planner. With aging societies (like the western ones) the expectations for both of them is only to go higher so the “state” can fulfill its social security obligations or inflate its debts away.
I started to do some basic calculations along these lines a while ago, without going into complete details. By three different "rule of thumb" metrics, it came out to needing about a million pounds for financial independence. If and when I get closer to that amount, I'll work out my number more accurately (maybe it's a little more, maybe it's a little less). For now, a rough figure that happens also to be a "named number" is convenient to think about.
A Great Clip. Thank You. You give a wisdom to me.
Great Content. I built a basic excel spreadsheet for a fun exercise to visualise this topic and had a great chat with my partner about it.
Thought provoking …. A must to avoid regrets and to make the decision as to when, most solid. TY ….
I have saved and invested for a couple of decades. It paid off tremendously. I have big numbers in the accounts, but that isn’t what I mean. The real value is in the ability to easily fix a problem or to do something unexpected but valuable. Here is an example. Recently the AC in my vehicle broke. It needed a new condenser, which was a fairly expensive repair. I was able to just go ahead and get it fixed. No need to work some extra hours or to worry about how the extra expense would affect future plans. A couple days and problem solved. Back to comfortable driving and my plan to give this car to my daughter when she gets a license remains on track.
Great topic from a wonderfully smart young lady! The dream of being a millionaire is or was one not always based in the desire for money but based on the "idea" that millionaires can buy what they want, have time to do what they want, and that somehow that distinction will "Make you Happy". The truth is that if you are not able to manage what little or much you have and set achievable realistic financial goals and live congruently then you will not be happy and you may struggle financially. “It’s not what we do once in a while that shapes our lives, but what we do consistently over time” - Tony Robbins
Honestly I agree with you I personally have set realalitic fincal goals based on my financial situation. That being said I am told I chose my financial situation but it's more like I chose to accept it.
In my 20s, my mentor played a trick on my mind and said by 30 I would fail to become a millionaire, he was right I only made it half way. The power of failure. Great video!
Hey Erin, big thank you for this video. I used the calculations to figure out my pension freedom number, and worked out how much I need to contribute a month to achieve this. It's a real relief to get a handle on the situation. Thanks again. I'm now subscribed 😊
Glad it was helpful! Welcome to the channel!
Talking finances with my parents is frustrating because they don't understand that what you are talking about with investments for use to pay for lifestyle and financial freedom isn't the same as a person's net worth.
My parents did their calculations, got their number, reached their number, and retired... And now had to go back to work. In trying to talk it out with them so that they can someday retire it seems they they don't understand that their house isn't part of this calculation. Yes, their net worth hit goal... But unless they are selling their house, or car, or stuff, then they can't count those things towards that end goal. But they still do, and they are probably going to fail at retirement a 2nd time in another year. It isn't that they are dumb, it is just after a lifetime of "your house is your greatest investment" there is a disconnect there and they continue to count the home they live in as part of all of their investment calculations. It's a little frustrating. They are going to be fine, and I'm glad they are successful enough that they won't be any kind of real financial burden on my siblings and me as they age... But man it's difficult to talk in circles lol
I'm that parent you are talking about. In 2009 I took out a Reverse Mortgage with a starting principal of $250,000. It is now worth $500,000. Which means I can tap that amount and continue to live in the house. The primary reason was to provide a way for my DW to never worry about money.
Really enjoyed the video. It gave an open ended perspective and mental model to building wealth. People love the oversimplified answer but to dive deep holds a lot of value. Really gets to the “why” of it all. Subbed
Love midwest extravagant!
Thank you very much. ❤❤❤
I went to a retirement workshop part sponsored 23 years back. We crunched some numbers based on salary and historical market returns and I kept the file for a long time - but more importantly, I vividly remember the exact dollar amount that I calculated as my personal goal. Of late, I started down another path. I wrote down what I spent every month for last 7 years (and I am continuing on that path) and plotted the graph. I can calculate my goal with a 4.2% withdrawal rate and this is smaller than what I arrived at in the financial workshop. Either of those numbers should work - but the second approach is more practical - because it is based on my spending pattern instead of using projections.
This video really got me thinking. 🤔Thanks Erin! 👍
I'm so glad! 😀
Absolutely right Erin.... Maybe you just missed to say "the basic qualification for anyone to be able to say being a Millionaire is not relevant to me" to own a million bucks !!
As someone who has a very low financial freedom number because I have a very simple lifestyle, I think the thing I need to factor in most in my calculations is the future inflation figure which is hard to do. I mean, I have two rental property that currently provide enough rental income to cover my monthly expenses, and I'm working on increasing my saving for things like roof repairs, replacing gas boilers etc in my properties so that my tenants continue to get a good service. But even though I have a modest lifestyle and don't desire more than what I currently have, I still have to factor in that inflation will rip through my budget each year and I can't always just increase the rental income on my properties as there is usually a limit by how much you can increase the rent before you price yourself out of the market.
Self awareness plays a part in financial literacy also. If it is a big house, high end car or expensive personal items you desire you need to ask yourself why do I want these items? Is it to ‘look’ wealthy? to impress your peers? did you grow up poor and these things will make you feel you have ‘made’ it. did you grow up around wealth and think this is the way your expected to live. If you say yes to these questions it is something you want to explore and investigate. Once you understand your motivations often you will realise the purchases are for superficial reasons only. Finding the answers can save you a lot of money.
Engagement for Erin. Keep up the great work!
Always!
For me, its always been freedom. I don't mind working, actually its good for your brain. But I don't want to be tied to debt nor tied to a location and not able to spend time with family when needed. I really realized this when, my FIL was sick. We could not even spend enough time with him because he lived in a different country. The last time we saw him, he told us he thinks he won't see us again. We had to come back home to work again, in the office because HR didn't allow us to work abroad. 1 week later, he died. The night the doctor told us he had 2-3 days to live, we immediately booked a ticket. That same night, we passed. We ended up going against HR and spending the next 1 month to spend time with the family and support everyone. What my husband and I would do, to go back in time and say F*** this company and spend that last week with him. That was devastating for us.
As for the video, it was good but still very unclear about the rate of withdrawl part.
For certain people having a steady income is important. My rentals, since I live in Florida will provide me with enough to retire. If you just live with in your means then you can achieve your dreams.
I would consider my wife and I to be at Financial Independence Plus (no debt). At age 66, I'm going to be retiring from my 2nd career in May, and may current 1st career pension + wife's SS + my SS + monthly payment from my variable annuity (yeah, not my best financial decision, but it's done) will cover our budget. Our IRA/403b balances don't need to be touched for living expenses, but we've used some of it for luxury purchases. We may use some for our next luxury event: taking our 2 kids and my son's fiance on a week long trip to Hawaii for our 45th anniversary in 2025.
Good morning appreciate the content, sad reality a lot of Americans focus little to zero when it comes to their retirement. We live in a society that wants instant gratification, one of the main reasons we live in debt society.
Agreed. It's sad, but maybe we can help those people close to us to be more financially intentional and hopefully turn the trend around within our spheres of influence.
Which part of our society ever even focuses on that? No government nor quasigovernment groups seem to do this, nor do the BIG businesses seem to do this anymore! EVERYONE in our society has these humongous dreams, with little serious planning to achieve them. No wonder the 'little people' who have been conditioned for generations have become products of this.
I'm hopeful things will change over time.
Most people I know have the same desires, want to be financially independent, not be tied to work. When I was growing up, there wasn't the free financial school of UA-cam. Plus there's more media focus on retirement saving today, since the Boomers are fast approaching it, and the world has been geared to their wants, needs, and tastes since they started entering the workforce. It can only get better with more information/education available, and lots of savings/investment options too (index ETF's). The big pivot point, imo, will be when someone figures out how to change the focus of the majority from consumption/debt, to saving and investing for their future. The masses need to find that Eureka moment, their epiphany.
Hey Erin, is that a video topic? Researchers have been looking for what triggers motivation for decades now. Closest thing they've found that works that I'm aware of is nudge theory.
@@dstevens518 I'd watch that video in a heartbeat
Financial goals makes sense because it helps cover any version of you that you become. Defining specific goals of how one intends to spend money over the next 30 years in retirement is kinda pointless because what we value today is unlikely to be what we will value in 10 years, or possibly even 5. Our interests change and having financial freedom and unlimited time itself will become a catalyst for change with whom we will become, how we spend our time, and what we value most.
The problem is if you get enough bad luck for a concentrated period, then it doesn’t matter what plan you have in place, you’ll still be screwed.
It's not even bad luck, it's how the system works. I started putting money in a savings account years ago, and as time passed, the interest kept getting reduced, so the more I put, the less I gained. I am pretty much at the same point, if not worse, since inflation is rampant in my country.
I spent 45 years in the cold North, and I wanted to go to Florida for the winters. Sent from my I phone in Miami. That was my financial goal.
I had a calculated FI number in mind when I was younger, but by the time I hit it, lifestyle creep and inflation made it not enough. So now I don't really have a goal number in mind. When my investments are 25x my spending, I'll know I've roughly hit it.
I'm in the UK, but the same applies. Too many people are stuck on the mantra that home ownership is "an investment", but - to me - it increasingly looks like a debt-trap. Higher payments, taking a lot longer to pay off, under decreased job security, should surely be viewed as a liability. It is not an asset until you own it outright. Until then, you are renting from the bank, praying the equity doesn't fall.
Did we account for inflation in the calculation? How about healthcare and long term care costs? I feel like the number needed is higher than these quick estimates.
No amount of money will make you healthy or extend your life at the end. If you try anyway, it's probably the worst utility per dollar you could get... but people insist on trying anyway because they don't have any other options besides accepting that the ride is coming to an end, and most people really don't like that.
If you have a reasonable budget for insurance and OOP costs per year, that's enough worrying about it. Better to spend that time learning nutrition 101 or moving around.
I think there should be a distinction drawn between vision setting and discrete goals to realize the vision. SMART-style goals are themselves meaningless unless they are tied to a clear, overall life objective that will often be less about numbers and more about philosophy.
Google used to have this really crisp mission statement - to index and make accessible all of the information in the world. It's not really measurable or achievable or time-bound, but it provided an easy lodestar to create SMART goals around so you would know those goals were moving you in the right direction.
So, in this case, the vision of financial freedom answers *why* the person wants to become a millionaire and provides a gauge for whether a million is the right number and when that million needs to be in place.
It all started with us in 1993. I was shocked by how much debt we had. The net worth statement kept us on track. This is really your adult report card, forget income, develop wealth slowly, by reducing debt increasing long term savings/ investments. I love travel land now we can.
Great video as is typical from the presenter. My extravagant plan would be taking road trips around the country, staying a descent (not extravagant) hotels and spending freely enough to enjoy local attractions, descent restaurants etc. while at the target destinations. I could easily expect $500/day all in or the equivalent of a $1MM at a 3% withdraw rate to be on the road 60 days a year. Good news is that I would likely not do this forever as I get older, so I could likely assume a higher withdraw rate (and lower accumulated amount) dedicated to this purpose.
What a great channel, Erin!
Thank you so much! 😊
Inflation be like: "Lol, you thought you were going to be financially free?!"
"Live life on our own terms."
Not my financial goals.
"44,400" is the goal/objective - at retirement, myself and my spouse 'each' with a 4k ssn draw (which seems about what it's shaping-up to be), a 4k monthly income from retirement savings (for 30-40 years), and a nice paid off 2000-2400sqf single story home with a current value at about 400k (obviously not in CA or comparable cost of living areas) - lower tax structure state - debt free - looking very achievable at this point
Erin - I guess I will take a shot at the "absolute financial freedom" model, but TBH I don't have much interest in living that kind of lifestyle. Maybe I would try it once.😊
First off, great content! However, one important thing left out is to take inflation into account when making these calculations. A 3% inflation rate for 40 years will make the purchasing power of today’s dollars about ~31%. (Said differently, to have the purchasing power of $1,000,000 in 40 years you’d actually need $3,260,000 with these assumptions.)
THE MONEY GUY has a know your number course that could be helpful to people.
I thought they did a course on “know your number” 👍
I want to move back to the city I grew up in. I want to walk in the city’s conservatory every day, take swim aerobics classes, sing karaoke, and live in a nice assisted living home when I need one. 15.4 more years to go and I’m on track ❤
I follow a budget that includes money for travel and money for home improvements in addition to all my basic living expenses. Because I live well within my means, my budget also has a surplus for savings and investments. From that, assuming no major lifestyle changes, I've worked back to income needed in retirement. It's actually a bit less than what I would get using the 70% rule, though I actually do base my retirement income on the 70% rule. Then I subtract things like social security and pension from that number, which gives me an amount that has to come from savings and investments. I then do a time value of money calculation to figure out how big my nest egg has to be--assuming a conservative rate of return of 4% and me living to 95. I'm well on my way to reaching my target.
Like everything, I think money has huge diminishing returns, so, I always try to keep track of an amount where returns on my own lifestyles would be less than the joy of using my assets to help people / causes I care about. I think, like a lot of people, I can get caught up in my own perspective and forget that the joy of helping others is right there.
I live on about 50k a year (not exactly nothing) and I don't think money spent on myself would have a significant return on my own contentment - I'm already happy. I think I'm at a point where I'd get a lot more sustenance out of the hard work of self-reflection and, honestly, I think there is a level where money becomes a distraction (for some) in order to avoid the work that would actually increase their happiness.
That said. . .I'm still looking forward to not depending on a job!
I’m 54 and I decided to plan how much I will need based on age. Come up with a lifestyle plus number for ages 55-75. After that, I will likely be dead (father and grandfather died around 70) or be too old/have health issues to reallly care much more than the basics - For this I plan to 90
SMART goals have definite tangible experiences, expectations, and a dash of luck.
The most basic number is relatively easy to run. I have a spreadsheet that tracks my income, and my spending for the past 15 years, it constantly updates my numbers. I can say with confidence that using the 4% rule a number of 1 million dollars is approximately correct to live my existing lifestyle. That said, I know that in retirement my expenses will go up. Unless you plan on sitting on the couch watching TV all day, in which case you retirement will be very short, your expenses likely will go up significantly in retirement. My best guess running calculations that allow me a little more ability to leave the house put me at about 1.2 million. So that's my current target. (Average annual spend for the last 3 years was $34k, When grossed up to account for taxation I end up at 39k, that's within rounding distance of the 40k you would get using the 4% rule from 1 million dollars)
Even though this is more for the high reaching entrepreneurs, MJ DeMarco has a calculation in his book called the Escape Number and it 100% can be used to figure out your ideal lifestyle you want to live without having to work another day in your life.
It's kind of scary how insightful and clear minded you are for your age...lol. Superb video, great idea for a topic. I am like many of the older viewers that follow your channel, already comfortable financially, but still figuring out exactly what I want to do with my time and money afterwards. Thanks for prodding me to get on it 😊
I'm basically a grandma 😂 but I was born that way...I've been told that my whole life. I actually have a neighbor who says that she wants to grow up to be just like me one day...she's 50 years old 😂
@@ErinTalksMoneyThat's hilarious! But lucky you! Wisdom beyond your years, already doing stuff that matters for your quality of life, less time wasting. Lucky us too, better videos with salient points. Hope u r enjoying motherhood.
@@ErinTalksMoneyha ha. That’s too funny! Hilarious. 😂😂
$625k NZD invested for an income of $25k a year to cover our core expenses. We're 4 to 5 years away from that. When we qualify and get NZ Superannuation (Social Security equivalent at age 65) then that will be our cherry on the top for travel and other lifestyle improvements.
I haven't really worked for years. I need to get back on the horse. I've been able to use these low income years for substantial Roth IRA conversions. I'm looking forward to having millions tax free in retirement. I've decided I can desk jockey while I'm old rather than retiring early. I've been developing a variety of non-professional skillsets and tending to my health during this hiatus from professional life.
I met some arbitrary goals and have zero debt with no desire to live a shallow life of conspicuous consumption. Could stop working if I wanted to with no change in lifestyle. Each milestone meant nothing honestly. Setting fulfilling aspirational goals is 99.9% of the meaning of life; still trying to figure that out. (PS, good car goals with a Toyota - I've had a bunch lol). If you've been sensible and pragmatic your whole life, you don't just suddenly waste money regardless if you have plenty or not - and the reverse is true too.
This is a very very good video!
Thank you very much!
Put the investments first before buying anything else
I want to have 25 million. Since I will never be able to check that box, my goal is all set.
Hey, Erin- great video (as always)! I have ran my numbers and the method was similar to yours except for one thing -- did you account for inflation on the $48K in the financial freedom number in your example, or are you keeping the number flat across the years? Just asking. Inflation was the tweak a friend had me make to my number back when we went over mine and it alters things dramatically over time. I just plugged in a 2.5% increase each year on the number I needed to hit.
Great video
I priced out a midsize jet from LAX to JFK and the quotes came out at $30,000 one way from multiple charter companies. That puts the hourly rate at about $6000 per hour. Flying first or business class is just fine for me!