% of Net Worth from Saving and % of Net Worth from Investing

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stand@desk
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% of Net Worth from Saving and % of Net Worth from Investing

Post by stand@desk »

I'd be interested to hear what % of an ERErs Net Worth is from Saving Money and what % is from Investing.

The natural progression would be from 100% savings down to a lower % number as more money is placed into investments that increase in value and dollars generated from traditional work income decline.

I'm 83% Savings and 17% Investments currently with those numbers fluctuating slightly from time to time. The more senior ERErs would likely have a much greater % from investments but to what level I have wondered.

I'd like to get to 80/20 for an intermediate goal. If one is still working and saving a good lot of money, then to see the ratio move more to the investment side would mean one is doing very well savings and investing their finances.

On a side note:

Are there any movies anyone can suggest about the theme of the passage of time in one's life? Example: Mr. Holland's Opus where the main character's life is shown from age 30 to 60. I really enjoy movies like this that show personal growth, maturity and how life changes as we age. Another example is the Notebook. These movies are the sappier more heartfelt movies that leave an emotional feeling in your heart.

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Sclass
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by Sclass »

12% savings, 88% investments plus or minus a few percent. I've been at it a couple of decades.

Edit -that being said I can rewind back to a darker time when I was younger when I was 50/50 or even less. Hmmm...like 90/10 when I set off on this quest.

JohnnyH
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by JohnnyH »

Wow, 88%! Well done, sclass... I would really like to know this but I'm afraid it would be very difficult for me to find out.

Spartan_Warrior
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by Spartan_Warrior »

Net worth = 175k
Amount Saved NOT Including Earnings = 100k
Home Equity NOT Including Appreciation = 30k
Total Saved Minus Earnings = 130k

74% from savings, 26% from earnings

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Sclass
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by Sclass »

JohnnyH wrote:Wow, 88%! Well done, sclass... I would really like to know this but I'm afraid it would be very difficult for me to find out.
Not hard Johnny.

So this is why I think so little of my lackluster career. I needed to work to generate seed but it is painful to think how much of myself I gave to receive so little in compensation.

Understanding the mechanism is simple. Time value of money. Contribution, present value, return and time. The hard part for me was the return.

I started writing a twenty year timeline of the journey plotted with the ratios. Starting from living in a basement/garage of a rich guy during my years working at HP. Running a secret business from my cubicle. Selling surplus gear HP was putting in the dumpster (they locked it after the recycling company complained that somebody was cherry picking the scrap! :lol: ). Buying various investments like it was going out of style all along the way. Failing at a venture funded startup and falling back on the nest egg at age 43. (it's all on the forum in bits and pieces). The timeline looked like fiction so I thought I'd better not post it.

That being said the path is actually pretty clear cut. Time value of money. Exponential(investment) will easily trump linear (salary savings) given time, return and sufficient principle. The math doesn't lie...you just need to figure out how to get the variables pumped up as much as possible. No principle, no future value. No return, no future value. You need to pump up each one as much as you can. ERE lifestyle gives you principle and contribution. Health gives you time. Clever investment gives you return. I used an HP12c to convince myself...you can use paper, excel, tables.

I gotta give credit to Jacob on this. He presents the mathematical arguments clearly in the blog.

Luck. Risk. Creativity. Vision.

As I always say, it really doesn't matter how you get your double digit return so long as you get it and it is repeatable. My best friend used collectible stamps and that is my favorite extreme example because it is just ludicrous as far as investing goes. But it worked because the math worked.

IlliniDave
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by IlliniDave »

I don't have enough data to back this up precisely, but I'm pretty sure that > 25 years into it that I'm well over 50% by now. I still remember a graph presented with the introductory material of my employer's 401k plan 28 years ago that showed the simple text-book illustration of compounding applied to an account with ongoing contributions. After 30 years the contributions were about 33% of the account value.

Tyler9000
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by Tyler9000 »

In less than 10 years of investing, I'm at about 90/10 savings/investments. Although I should point out that for the first half of that time, it was probably 110/-10. Learning to invest beyond buying the hot fund high and selling low when it inevitably corrects (a style most people never mature from) took a little time. But now that I'm no longer my worst enemy, things are much better.

Seneca
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by Seneca »

~50/50 within investments, all low cost index. A bit better if you include matching.

I am glad you asked the question, I hadn't actually checked mine. Very unsatisfied with this.

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C40
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by C40 »

Movies:

Benjamin Buttons (might be called the curious life (or case) of Benjamin buttons)
Forest Gump

I'm sure there are plenty of others. I'm trying to remember movies that required numerous actors to play one character, but I'm horrible at remembering movies and actors.

saving-10-years
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by saving-10-years »

Movies: Godfather series? Harry met Sally. Or if you don't mind subtitles Hanamizuki spans group of friends from 1996-2006 http://en.wikipedia.org/wiki/Hanamizuki

Sorry but can't get anywhere with the % calculations. Property and pension pot (now paying pension and in case of one property rent) account for 90% of net worth. Are these savings or investment. I guess I am near a zero for investment in the stocks/shares/bonds sense (must try harder).

JohnnyH
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by JohnnyH »

The accounting isn't that simple... Assuming all spending is taken out of savings (even spending on investments), you'd still have to figure out taxes. In what bracket would investment come in; before or after wage earnings?

Jacob mentioned in another thread he still has every penny (and then some) he ever earned... That might be an easier way to calculate this.
Sclass wrote:As I always say, it really doesn't matter how you get your double digit return so long as you get it and it is repeatable. My best friend used collectible stamps and that is my favorite extreme example because it is just ludicrous as far as investing goes.
Where was your double digit return?... I would definitely 'go postal' for a return over 10%! :?

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C40
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by C40 »

Starting from the beginning of 2012 with a net worth around $140k (my data before that is screwed up):
Savings: $140k
Growth/income: $22k

So that's about 15% from Investing.

stand@desk
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by stand@desk »

For the Movies, Yes I watched Benjamin Button today and loved it, what a great film!

Big Fish is another which I really enjoyed a couple years ago. I may have to check out the Godfather Series.

@JohnnyH - The Investing % what I'm referring to is Total +/- from taxable and deferred accounts, plus dividends and re-invested distributions pre-tax.

The Saving % comes from all other income sources after tax. Work income is included in this amount. This is how I have calculated my %s. But you are right, when you factor in taxes it becomes much more complicated especially because different investments, stocks and bonds for example are taxed differently.

I'd leave pensions out of both calculations totally and would become income once they start being paid out.

@sclass The 12% savings, 88% investments ratio seems very remarkable to me, meaning that a millionaire would have $120,000 from savings and $880,000 from investments. Perhaps I have not made myself clear that when I refer to the investing side of things, I am speaking only about dollars invested in the stock market in stocks and bonds etc.

For real estate (not including REITs which I would consider a stock for the purposes of this thread because they are traded on the stock exchange), I would include those dollars made under the Savings column. I'm looking to see how big a % someone can reasonably get from stock market investing.

@tyler9000 I was well into the red 4 years into investing in the markets (2008 market decline was the catalyst) But the markets have greatly recovered.

Now, my issue has been being too defensive over the last few years, which has lead to much smaller gains than the general market. I'm looking to correct this but it's hard to find entry points for major index etfs imo. I'm hoping for opportunities this summer.

George the original one
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by George the original one »

Jan 2009 to Jan 2014 in my taxable accounts: 55% was saved and 45% is from investments.

theprincereturns
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by theprincereturns »

Roughly my numbers are 69% savings 31% earnings at the moment. Ramping up the investments here quickly though.

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Sclass
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by Sclass »

stand@desk wrote: @sclass The 12% savings, 88% investments ratio seems very remarkable to me, meaning that a millionaire would have $120,000 from savings and $880,000 from investments. Perhaps I have not made myself clear that when I refer to the investing side of things, I am speaking only about dollars invested in the stock market in stocks and bonds etc.
.
Ok, I've lost all credibility here long ago.

I'm going to make the mistake I make with my family. I've written this six times in different ways and deleted it. I hope this helps on your journey. I can say nothing but, that wouldn't help you. At the risk of looking like an idiot (which I kind of am) or worse a liar, here goes.

I graduated from Stanford Engineering 20 yrs ago. I got a good Silicon Valley salary but chose to remain in the basement rental I had as a grad student. I saved $20K a year on average. I can achieve high returns. This was the hard part and it should not be taken lightly because you can go broke. My average rate of return over that period was 15%. Stocks. Individual stock picking in issues that both went bankrupt or yielded hundreds of pct. The average worked out to 15. Can you do it? Maybe. I had to work hard at it and I have a trader's mind. I started with about $XXK at graduation - I asked for money instead of a car from my folks. Now get out your HP12C (Jacob has one in the classifieds don't all jump at once :D ) and punch it out.

I still have to pinch myself. This is why I hang out here. This is the way. But from what I've been reading here most people need to improve their returns. How to do this? Well that depends on you. The first step is knowing something is possible.

Edit - the alternative is lower your expenses. Nothing wrong with that either. I'm just explaining my "remarkable" result.

Seneca
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by Seneca »

Sclass, is this all investment return, or are you including home equity?

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jennypenny
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by jennypenny »

stand@desk--What sclass describes isn't that far from what we've experienced. I've been trying to tease out the number the last couple of days, and I think it's probably around 20% savings and 80% returns if you remove any inheritances, home equity, etc.

I think there are two things that might be *non-standard* with us and sclass for the ERE crowd.

1) We're 47 and he's 45, so we invested during the same market conditions. Even with '00 and '08, it's been a pretty good ride if you had an aptitude for investing and avoided real estate blunders. Lucky timing.

2) We've spent 20 years contributing to the kitty, so it hit the 'hockey stick' return point much faster and at a higher level. IIRC, sclass worked 20 years also. That does make a difference. Someone who retires in 5-10 years and only draws 1-2% afterwards will hit it too, but much later on.

Tyler9000
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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by Tyler9000 »

FWIW, one of the reasons my return percentages look low on the surface is that our salaries skyrocketed for a few years (we moved to Silicon Valley and job hopped in engineering for a while). So our income compounded faster than our investments.

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Re: % of Net Worth from Saving and % of Net Worth from Inves

Post by jacob »

Yeah, I was just about to point out that your ratio will likely be heavily influenced by where your salary history is relative to 2009 (or 2003).

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