One thing that is nice in personal finance and early retirement, is that you don’t need to reinvent the wheel. Most of the time you just have to absorb valuable financial lessons, and follow or emulate the good examples.
In terms of Financial Independence and Retire Early, quality lessons rarely change over time. Therefore easier for anyone to master.
Real Estate is Hard
“Stock market is riskier than investing in physical assets such as houses”, they said.
Hold my beer.
“50 Cent Sells Massive Connecticut Compound for 84% Less“, according to WSJ, rapper 50 Cent finally sold its house for 2.9 million or 84% less than he had previously invested 12 years ago. That’s harsh. And brings new information to the discussion that real estate is more “safe” than stocks/stock market.
Remember 2007-2009 financial crisis? In the worst possible moment, the SPY (SPDR S&P 500) was trading at a 55% discount from the previous peak. Thus still better than some real estate examples.
That’s paying big to live in Connecticut
Imagine he had invested all those savings on an S&P500 ETF like SPY. Even taking into consideration the financial crisis of 2008, he would have a gross profit of 154.70% (including dividends).
Dates considered: 03-04-2007 -> 03-04-2019.
That’s a 12.89%/year.
What Does This Have to do With Super Savers?
Glad you asked. According to MarketWatch (and TD Ameritrade), there’s a big difference between people that save a lot, and people who don’t.
Apparently, people who save 20% or more of their incomes, the “super savers” do that by saving more in housing. The super savers spent only 14% while non-super savers go all the way up to 23%.
When you think about it, the mortgage is a decision that you can plan accordingly, and manage to keep it under a threshold that gives you peace of mind. If you know how much you earn, you can set a limit, a look for a home (and for a mortgage associated) within that value.
Of course this may imply a trade-of. I may have to trade a less-dreamy house (and location) for more financial freedom (and possibly early retirement).
Super Savers VS Non-Super Savers
As you can see on the table below, the big difference is housing. Another thing that one can read is that Non-Super savers spent more in practically all the sectors with the exception of “Travel”, “Medical expenses” and obviously “Savings and Investment”.
So if you want to change teams, you know what to do: start saving more in housing, and “spend” more in savings and investment. Therefore becoming a Super Saver!
Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.
James W. Frick