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How the Grizzly Sleuth Saves – Update

How the Grizzly Sleuth Saves – Update

Oct 17, 2016 | Posted by Grizzly Dad | Investing |

We started a survey last week to get a sense of the finances of our readers. It’s been a great success so far! We have about 150 responses already, and for a blog that’s been in existence all of 3 weeks I’m deeming that a pretty good showing. Thank you to everyone who’s responded already! I’m going to keep the survey open for another week, but I wanted to give folks a preview of some of the findings.

Saving Is More Powerful than Income

Awesome, verifiable proof that what we’re preaching here works. You don’t need to make loads of money to retire early. You need to stop spending on so much crap and invest the difference. The below is some dry statistics stuff, but I’ll explain.

savings-vs-income

This is a test using the responses of the survey to see what better predicts how many years everyone has till retirement. The thing to look at is the coefficient value for Income vs. the one for savings. Increasing your savings rate was 4x more powerful than increasing your income for shortening your time till retirement. That’s HUGE! For every step you moved up on the income scale you only moved up by .09 steps towards retirement. For every step you moved up on the savings scale you moved up .36 steps. This means that for our respondents changing their savings rate from 5% to 20% is moving them from retiring in 20-40 years to retiring in 10-20 years. But you could move all the way from $25k in income to >$300k and if you didn’t adjust your savings rate you would still be looking at never being able to retire. I fully expected to find this, but it’s awesome to get such great confirmation.

We Skew Young

Most of us are either starting our careers or starting to hit the midpoint. We’re a younger crowd here in the bear cave, with 80% of us under 40 years old. That means there’s still tons of time for most of us to get this turned around and on the right path.

Age% of Responses
20-3029.14%
30-4049.67%
40-5013.25%
50-657.95%

We’re Savers, but there are potential converts as well

Compared to the US average savings rate of 5.7% we’re doing pretty good as a group. However, it looks like there are still some potential converts in the audience. What we’re shooting for here is the 40%+ range or even higher if you’re willing to go all in. I think we can get there!

Savings Rate% of Responses
<5%5%
5-10%7%
10-20%14%
20-40%25%
40-60%34%
60-80%11%
80-100%3%
Retired!1%

Broad Range of Incomes and Net Worth

We come from a broad swath of income and net worth. Our readers definitely skew to the high end of both considering US median net income is $56k and net worth is hovering around $40k, but we do have a diverse mix from across the spectrum.

Net Worth% of ResponsesIncome% of Responses
Negative3%<$25k1%
$0-50k11%$25-50k9%
$50-200k17%$50-75k14%
$200-300k14%$75-100k18%
$300-500k17%$100-150k23%
$500k – $1M17%$150-200k17%
$1-2M17%$200-300k13%
>$2M5%>$300k5%

How the Grizzly Sleuth Saves – Survey

If you haven’t taken the survey yet go ahead! And thank you to everyone else for completing. It’s been awesome for us to get a sense of who we’re talking to!

Tags: Early RetirementFinancial PlanningGoalsInvestingRetirement
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8 Comments

Leave your reply.
  • Robyn
    · Reply

    October 17, 2016 at 9:34 AM

    I may be your only retired reader or there may be one more. I retired years ago but my husband continued to work. At about 50 years old he started having health problems and became disabled at 58. I drove him to work and back for 7 years because he wanted to work. Without that help, he would not have made it that long.

    My suggestion to other readers is to keep that in mind when you are planning your timeline. Getting to a secure position at an early age is good for lots of reasons.

    • Grizzly Dad
      · Reply

      Author
      October 17, 2016 at 1:34 PM

      There are a few of you sage folks hanging around. And it is huge to emphasize starting early. There’s no way my wife and I would be as close as we are if we hadn’t started saving even while we were in college.

  • Richard
    · Reply

    October 18, 2016 at 9:24 AM

    I’m retired too (as of this past April at age 53). I’m a big spreadsheet fan so I can report that, over the past 10 years, I saved an average of 44.5% of my income each year. I always assumed I would work until ‘normal retirement age’ until I started reading more about personal finance and early retirement…. about 15 years ago.

  • Brian
    · Reply

    October 21, 2016 at 9:16 AM

    Just started reading your blog yesterday and am thoroughly enjoying it. I found it through the MMM forum. Question on how you and others are calculating savings rate? Are you only defining it as take home pay minus expenses? What about 401k/403b contributions or other employer retirement programs? I work for a public university and am required by the retirement plan I’m in to contribute ~12% of my monthly pay (6% from me, 6% from employer) into a retirement account. I’m including this and my 403b contributions when I calculate my savings rate. Is this approach consistent with what you’re doing? Many thanks.

    • Grizzly Dad
      · Reply

      Author
      October 21, 2016 at 9:50 AM

      https://www.reddit.com/r/financialindependence/wiki/faq

      Basics are at the link above.

      savings rate = [(gross – tax) – (spending)]/(gross – tax), or (saving)/(gross – tax)

      The only slight nuance to this that we use is that we don’t include principal payments on our mortgage as part of spending. It’s pretty simple actually!

    • Grizzly Dad
      · Reply

      Author
      October 21, 2016 at 4:24 PM

      And to answer your direct question – yes, savings rate would include contributions to those plans. In most of my calculations I just take my after -tax income that actually gets deposited in our bank account and add back in contributions to our 401k plan. Much easier to get those amounts as it’s tracked directly in personal capital. Finding gross and tax requires digging through pay stubs and tax forms.

  • Brian
    · Reply

    October 21, 2016 at 5:51 PM

    Thanks. I noticed you only listed mortgage interest in your spending and not principal. What’s the rationale there?

    • Grizzly Dad
      · Reply

      Author
      October 21, 2016 at 5:57 PM

      Principal payments do not subtract from your net worth. I.e. I could liquidate 100% of our investments and plow them into our mortgage tomorrow. This would not decrease our net worth. We could sell our house the next day and still have the same amount to invest (this is obviously ignoring transaction costs, but it’s a thought experiment for illustration). If we don’t consider a principal payment of that lump sum amount an expense we shouldn’t consider the monthly principal payments either.

      Now if you know with 100% certainty that you will remain in the same house, never downsize, and always have a mortgage payment then yes, you should include principal payments as an expense. But that’s not our situation.

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