My Retirement Plan At 35

[CityFarmer]

Wealth = Income - Expenses

You have significantly more control over your expenses than income. While you should focus on both elements of the equation, it is often far easier to cut back on Expenses, than to increase Income.

Check out the article below on how even a cup of $5 Starbucks coffee a week can add up to a four figure expense on an annual basis.

"Saving Money on Small Things that Add Up to Big Dollars"

We don’t always think about saving money while indulging in our small luxuries. They are convenient, make us feel good, and give us a sense of confidence. We feel self-empowered for treating ourselves to them because we can afford them — or at least we like to think we can. Sure we all love to feel glamorous, but that requires some spending, and it can add up faster than we realize. Without even knowing it, we can be spending an extra $500 or more a month on little things!

We don’t have to give up the all little things that make us happy or start experimenting with the WallMart L’oreal do-it-yourself hair highlighting kit. But how about saving money by cutting back on some small things that add up fast?

You may have already heard of the “latte effect.” It suggests that we spend large sums of money on small, unnecessary items each day. This isn’t breaking news to us coffee drinkers. We love our coffee runs in the morning, before work, and after the desk doldrums when we get into that afternoon slump.

Naturally, we don’t want a plain, cheap ‘ole cup of coffee — especially not the one the receptionist brewed at 7:00 a.m. We want a frothy frappuccino, a milky macchiato, or a skim-pumpkin-cream-cinnamon-spiced-vanilla-brulee-latte from the fancy coffee shop downstairs! There’s just one problem (okay, maybe a couple) – not only are these expensive ($4.75), they go great with the the fresh chocolate chip banana nut muffins on display ($3.50).

Budget Schedule:

1 latte a Day – $4.75 each, and 825 calories if you buy a muffin!
5 days a Week – $23.75
4 weeks a Month – $95
12 months a Year – $1,140

IMO, if you plan to be prudent in spending, you have to make it generic and become a life style, instead of just apply to only a selective and narrow part of your life.

[money]

Yes, this is one of my key concerns. I did think about allocating some in government bonds, but the 2% yield for a 10 year bond is too low, and is an erosion of real wealth after factoring in a 4% inflation. Corporate bonds in the investment grade space provide around 3-5%, but unlike the stock market which is liquid, the bond market is not accessible to the retail investor. Bonds, I feel, are actually more complicated than stocks because you need to consider the yield curve and interest rate movements, in addition to fundamental company analysis i.e. better not to buy what I do not understand. I will not buy into a bond fund or any mutual trust as it doesn't make sense to pay fund managers a 1-2% management fee when most of them under perform the index.

I considered preference shares as well, until I read an excellent article in this forum on its risks and how the investor is actually shortchanged - it basically revolves around the option for the issuers to redeem the preference shares when interest rate decline.

I don't know what else to invest in

invest in berkshire hathaway then

[CY09]

If you have enough capital you could consider LTA or other stat boards bonds. They pay quite a decent coupon (LTA 4.17%).

[tanjm]

There is no plan for you that has zero risk. Even cash has risk. Just the requirement alone to maintain an inflation adjusted standard of living means you have risk even if holding cash.

But I understand your current dilemma in the current market. Unless you are a "True Believer" ™, which many if not most of the forumers are, I can understand the current weird markets (both equity and fixed income) are unattractive.

Which is why, given your requirements, I suggested the equivalent of sitting on the fence (for the next few to several years) by buying medium duration, high quality corporate bonds. If markets crash, you can pledge your bonds as collateral (getting around your liquidity issue) to buy some equity (e.g. income earning stocks). If interest rates rise, your moderate duration means smaller capital loss or none at all if you hold till maturity.

The govt has recently been reported as considering inflation indexed bonds. That might be an option eventually though I suspect not totally attractive since a low yield market will ensure these bonds are priced highly.

I suspect interest rates will stay relatively low (i.e. no more than 100-150 bp higher than today) for an abnormal length of time btw. Longer than most people think.

[Temperament]

{I suspect interest rates will stay relatively low (i.e. no more than 100-150 bp higher than today) for an abnormal length of time btw. Longer than most people think.}
Unquote:-
Yes , i think so too. Japan is a good example. i think for more than decade already. Pity all simple folks who think equity is too dangerous to invest and just put their money in the banks.

[tanjm]

{I suspect interest rates will stay relatively low (i.e. no more than 100-150 bp higher than today) for an abnormal length of time btw. Longer than most people think.}
Unquote:-
Yes , i think so too. Japan is a good example. i think for more than decade already. Pity all simple folks who think equity is too dangerous to invest and just put their money in the banks.

Yep, like I said "True Believers" 8-). (not that I'm not one myself).

[Muck]

Congrats on the 1mil. My 2 cents...
Take a break of 3-6 mths. Think about wat you enjoy doing and go do it. After half a year you'll get an idea of whether or not you like the new lifestyle. There are some who can't take it and go back to the workforce. But some relish in doing wat they like. Most impt is to KNOW wat you enjoy... Wat keeps the fire burning within... And rem to keep ur mind active and engaged. If you don't use it, you'll lose it!

[corydorus]

35 is too early to permanently give up on marriage/family.
You may change your mind later and then realize you do not have enough.

1 Mil is barely enough IMO.

[sgd]

Also adding to what cory mention.

The occupation you were doing earned you a million dollars in a few short years, that is something that is really not everybody can have a chance to do, most people have to work a lifetime to even smell that amount and you wanna throw it all away 35.

if you give up now at 35 later you change your mind and want to go back will you still have this chance again? No one can be great forever or can win all the time, even how terror and fierce a lion will grow old and go downhill.

You have this kind of opportunity don't waste not everybody have such lobang can earn 1 mil in a few short years.

If it was me I will chain myself to the tree chinese saying pah si mai chao (whack me also dun wan to leave)

[yeokiwi]

There was once a businessman who was sitting by the beach in a small Brazilian village.
As he sat, he saw a Brazilian fisherman rowing a small boat towards the shore having caught quite few big fish.
The businessman was impressed and asked the fisherman, “How long does it take you to catch so many fish?”
The fisherman replied, “Oh, just a short while.”
“Then why don’t you stay longer at sea and catch even more?” The businessman was astonished.
“This is enough to feed my whole family,” the fisherman said.
The businessman then asked, “So, what do you do for the rest of the day?”
The fisherman replied, “Well, I usually wake up early in the morning, go out to sea and catch a few fish, then go back and play with my kids. In the afternoon, I take a nap with my wife, and evening comes, I join my buddies in the village for a drink — we play guitar, sing and dance throughout the night.”

The businessman offered a suggestion to the fisherman.
“I am a PhD in business management. I could help you to become a more successful person. From now on, you should spend more time at sea and try to catch as many fish as possible. When you have saved enough money, you could buy a bigger boat and catch even more fish. Soon you will be able to afford to buy more boats, set up your own company, your own production plant for canned food and distribution network. By then, you will have moved out of this village and to Sao Paulo, where you can set up HQ to manage your other branches.”

The fisherman continues, “And after that?”
The businessman laughs heartily, “After that, you can live like a king in your own house, and when the time is right, you can go public and float your shares in the Stock Exchange, and you will be rich.”
The fisherman asks, “And after that?”
The businessman says, “After that, you can finally retire, you can move to a house by the fishing village, wake up early in the morning, catch a few fish, then return home to play with kids, have a nice afternoon nap with your wife, and when evening comes, you can join your buddies for a drink, play the guitar, sing and dance throughout the night!”
The fisherman was puzzled, “Isn’t that what I am doing now?”