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October 12, 2009

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I think it is true that we get too caught up in the idea that things have to be complex. However, by getting back to the basics, we might be surprised to find that we have enough. Of course, as you point out, the problem is that few people are content with enough...

Thanks for the reminder that finances can, in fact, be very simple. What gets complicated is when you don't do anything - then your fear of starting the process and seeing how financially healthy or unhealthy you are seems overwhelming.

I like to start small and focus on one or two things I can do to spend less or save more, then when the good habit is in place I bite off another challenge. Coming back to these basics is a good reminder that I'm on track!

Unfortunately there's a certain amount of Luck involved in becoming wealthy. Primarily it is because of the time period between when you start your first job and when you retire.
Forgetting about what I did for myself in regard to education and hard work I had two major things going for me that were totally outside of my control.

1) I started work in aerospace in November 1956 and retired in September 1992 and never had a single day of unemployment. During almost that entire period the Cold War between the USA and the USSR was in full force and jobs in aerospace were plentiful and well paid with nice raises every year. Also during that period jobs came with the prospect of nice retirement pensions and participation in company healthcare plans during retirement.

2) I started managing my 401K plan and my other investments in earnest when I retired and was very lucky that the stockmarket performed wonderfully between 1992 and March 2000 when the bottom fell out as the DOT.COM bubble burst because of widespread "Irrational Exuberance" to quote Alan Greespan. By March 2000 I used my engineering and mathematical skills to learn a lot about technical analysis of the market and write my own software to know when it was time to get out and move into money market funds.

The bottom line is that I find myself now at age 75 in an excellent financial position but I have to admit that the time period was the major factor and not any great brilliance on my part. I worked hard, had promotions, and have always been very conscientious. We lived well within our means, were good savers and raised 3 children, but that alone is not nearly enough if you run into a miserable period in history for the market, like the one that started on March 2000. So far it has been a lost decade and the job market, budget deficit, and national debt situation has deteriorated tremendously since Clinton left office.

Index 1/1/1993 to 3/15/2000 -------- 3/15/2000 to 10/12/2009
Nasdaq 100 ------ +1096.3% ....................................... -59.9%
Nasdaq Comp----- +606.7% ........................................ -55.3%
S&P500 ------------- +216.5% ........................................ -22.0%
Dow Industrials----- +207.0% ......................................... -2.50%

This table shows what a huge difference it can make between being in the right place at the right time and being there during a bad time. I regard the DOT.COM bubble as a once in a lifetime opportunity and of a type that comes along rarely.

I have to learn to be happy with a poverty-level income???

Old Limey,

Thank you for acknowledging the luck in timing. You are absolutely right on this.

I too have been very luck to be able to advance my career during the dot com era, that's in part how I got to be a Director of a company at age 27.... opportunities like that are not to be taken for granted.

-Mike

Terry,

Do you really believe that's what FMF means? Of course you do not have to be content with a poverty-level income, this is America! Even in this slow economy, we still have the most routes out of poverty anywhere on the planet!

Whether your income is at poverty level, millionaire level, or somewhere in between, you have to be content-enough to not spend more than you make.

Unless you have a physical disability or young children needing chilcare, why not get 1 or 2 more poverty-level income jobs? I did that for years during/after college until I got my first teaching job--waiting & bussing tables, babysitting, working at a gas station, etc. I had very little money for extracurricular activities anyway, so instead I used that time to work more. You can really save money when you don't have the time to blow it because you're working all the time!

Save, go back to school, or get more experience and a promotion, or switch careers altogether, and save, save, save--there will be an opportunity for you somehow to earn more money!

I hate it when people tell you to get rich by being frugal and saving your money. Where did this nonsense originate?

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