The 5% Rule | Beating the 95% Statistic

I think one thing that non-savers don't understand is this. It becomes extremely addictive once you've built even a modest nest egg. Almost to a fault where you don't even want to use any of it for any circumstance. Well, maybe that last part is just me.

You are so beautiful

My greatest asset was a quote from Thoreau. That man is the richest, who's pleasures are the cheapest. I could retire now and my net worth is only a bit North of 600k. Didn't start investing but only about 15 years ago at the age of 36

My parents were frugal, shopped sales and didn't teach us much about money other than by their example. As a teen, I think I had a short period of time when I would dream of growing up rich. I had friends that got a brand new Mustang for Christmas and I got a basketball and a clock radio with a wake up alarm. I learned at a yound age that if I wanted something, I was needing to find a means to earn for it. 50 years later, I reflect what I did to be in the 5% Erin talked about. I kept a tight reign on my debt, paid rent for just 2-3 years and paid mortgages asap, realized I had much more energy at 20-30 years old than later in life so I worked overtime when it came available or had side gig jobs that primarily went to pay down any debt or was saved in a retirement account 1% increases at a time, dreamed, planned, pursued and sought out opportunities. I didn't plan on SS or any inheritances, and when they occurred, it was wisely utilized. I did have a friend or 2 that were not healthy financial role models that I steered away from to a certain extent. I sought out good friends that had a similar responsible financial attitude and still do. I was blessed with a patient spouse who was not motivated to pursue a healthy financial understanding, but always kept her spending in check. I am now 70+ and I still pursue a sense of financial knowledge almost daily. Peace of mind is an amazing reward!

Most fortunes are so thoroughly distributed in 2 or 3 generations as to be considered spent by the heirs. The only real middle class asset is a commitment to higher education over multiple generations. I come from 3 rich families. The money was gone before I was born.

80% of households get only one third of AGI. Forget savings.

Of the people who make it to 50, a quarter of that cohort die in each decade. 36% is a reasonable approximation. Of those who retire, 80% have no other liquid assets or financial income. 51%. Most of the rest spend down income and/or lose it to speculative investments like mortgage backed securities, tech stocks or Bitcoin.

If the life expectancy is 80, that means 50% of people die before 80, and 50% after.

36% by age 65 actually doesn't sound that far off.

most people simply never give their money any serious thought. it's weird to say but it's true. if people put as much time and effort into managing their money as they do watching the NFL, more like 50% of people would be financially free.

Even if I do everything extremely right and well, I might end up dead.

A lot more people are dead since 2020 then when this quote came into existence.

Lol, of COURSE chat GPT’s response was “sounds like it isn’t the but it’s probably commentary about income inequality”

I now know how people afford their life styles. I was wondering how the hell can they afford that? They were borrowing and spending their retirement today.

That quote is from Earl Nightingale’s The Strangest Secret

I took my first accounting class in high school and that is where I learned about money. I got my associates degree in accounting at twenty one and then graduated with my Bachelor’s of Accounting in 2010. I definitely did not spend like my peers. It’s paid off in the long run.

Erin, I appreciate the message and I have pursued it all my working life. But, I do take issue with “it just that simple, you cannot fail”. Unfortunately, there are many many people who just can’t make enough to save a meaningful amount of money. It’s a sad fact of our financial system.

well said.......

There are so many money rules, it might be a fun video to highlight some of the worse ones and explain why you don't like them.

I just ran across the 50/30/20 rule, 50% of your after tax income for needs, 30% for wants, and 20% for savings and investing. As someone who thinks everyone should be striving for FI for their own good, that 30% for wants seems like you're just making your own journey to FI harder. I'd drop that to 10% and up the savings to 40%. When you reach FI, or at least get much closer, then you can ease up and enjoy. 30% from the beginning only makes sure you get into bad habits of confusing wants with needs, and risk your own financial security in the long run.

My mom was the financial wizard in the family. She obtained her GED when in her 40's too. she taught us hoe to manage money and what was important. "You want that bicycle?". "You can go shovel snow and make $5 per driveway. I'll hold $4 of that and put it towards the bike." Life's lessons learned well. I retired at 52 because of those lessons. Thank you mom!

25% of those over 50 have more than US 1 million in assets. Top 10% have more than US 3 million. Basically data from your video. Even the median net worth of those above 50 exceed US250,000. With your social security, I would say Americans on the whole are doing well in retirement.The top 25% are basically millionaires with social security. Phenomenal.

Yeah, if you live to working age (20), there's no way 36% of people die before FRA. If this was true it would be tragic, but the Social Security trust fund would not be at risk of running out of money. 😕

2nd generation Dave Ramsey. Parents taught me his principles in high school in the late 90s. One of the best things they ever taught me.

Just subscribed.
Great videos.

My exposure to finance was two items: an allowance from my mother and a savings account from my grandparents. I enjoyed watching my money and savings grow.

If you correlate that with IQ, it would be very interesting to see how big a role IQ is related to financial security or wealth.

I have seen this somewhere before Erin. If I find it again I will send the link.

My family never talked about money but I picked up on the stress from my parents as they lived paycheck to paycheck. It scared me enough to become an extreme saver. It was my wife who started investing in mutual funds. She always had an interest in investing. The drive to save and investing those savings let us retire early - very comfortably.

My mom was great at saving. She taught her kids to pay cash for things. Sadly, I'm the only one who listened.

My siblings have great incomes but finance liabilities/cars etc. I buy assets. Stocks, rental real estate, etc. Now I hear how everything was handed to me. I'm way better off than my parents. So, i just ask my siblings how my mom gave me what she didn't have.

Financial literacy should be taught in schools. Start early and continue to invest throughout your life is the only way too live.

Raised by common sense survivors of the 30s great depression. They used a savings account at the local bank. I of course revolted and lived a YOLO lifestyle for about 15 years. Woke up late in the game. Thankfully I did not adopt a fear of the stock market. Had to save 55% to retire in the double comma club. If we can do it so can too. Intentionality is a powerful thing.

Excellent video.

Money for your retirement is kind of the invisible elefant in the room. When younger you do not think much about, and getting closer to retirement it may become an issue, but then its too late for the good solution.

My message to youngsters (and others)
- Start saving now, so you get compounded returns over 30-40 years.
- Keep focus on high returns from S&P500 and STOXX600 ETF’s or many stocks. (Above 7%)
- Keep the yearly costs ultralow (very important, below 0,1%)

I and my wife was not born with a silver spoon in our mouth, but born in Denmark with the possibility of free univercity and by our own drives and luck, we have saved and invested as above and is today financial independent by the age 62.

This wisdom we try to transfer to our two kids, so they also can get a financial freedom later in life.

Money is not all, but a good servant.

If you use SSA's actuarial tables: men 23:100 and women 13:100 never reach 65yo from 18yo, so that averages to 18:100 never reach 65yo. Which makes sense given that 18% of the population is 65+. The first part of the ChatGPT output is actually incorrect. SSA does comment on financial outcomes of people's working life. You just need to go to SSA's "Understanding the Benefits" pamphlet to see that it does. ChatGPT should caveat it's caveat, too, which it doesn't do--that is, ChatGPT assessment should be interpreted with caution. Let's bash AI🤣

Picking a like minded life partner is super critical for success in building wealth.

My dad was quite similar to yours.. can’t remember how many times he started the next visionary business .. and failed. Luckily, my mom had her own mom who survived the Depression and had to be financially independent. They both taught me to take charge of my own financial fate.

ChatGPT fact check for the win 💪

If there's any truth to the statement, the biggest takeaway is that 95% of people live outside their means. This means you you should virtually never compare the current lifestyle you live with those of your peers.

While it is a topic for debate, I think that I can say that I've taught myself a reasonable amount of personal finance theory and have put a good portion of that into practice. Yes, there are holes in my understanding, but I think I have the basics. This really was born out of necessity because we really neglected that aspect of our lives and the clock stops for no man. All this to say I think we will be in a quite decent position when we are both retired but it could have gone sideways with ease based on the direction we were headed. As for investing and saving, let's say that we are not spending about 50% of our income. That is what we are retaining. It is actually surprising how much money we are currently setting aside for our future, at the same time upsetting to think that prior to our great financial wakeup call that money was a mist on the horizon. I think though that some lessons have to be learned the hard way.

There are actual IRS tables that give "life expectancy starting at a given age" - primarily in order to calculate RMD of various funds. And it makes sense; you'd never look at a man in his 80s and say "that's impossible - you should have died six years ago!"

Your parents views/habits around money completely mirror my parents!

Isn’t from Eral Nightingale

Living below your means is the key to financial success. It's really that simple. But unfortunately 90 percent of people aren't doing this.

I think that quote is from earl nightingale

Live beneath your means and invest the difference. That about sums it up. It's not complicated, which isn't to say that it's easy. But, if you can maintain that discipline, you'll do fine.

I had a physically and verbally abusive father. Became my early life goal to never be financially dependent on him. Left him in the rearview and never looked back.

It came from a longevity study conducted at Harvard University. They followed the lives of 1974 MBA graduates all Caucasian males for their entire working like. . The study came out in I think 2015 or so.

At 100 K in income in our retirement using only 80% interest from our annuities and a Net Worth of 1.8 Million our Financial Adviser said we are at 90% tile in wealth (works for us )

Calling BS. At age 20 to say you have a 35% chance of making it to 65 is utter nonsense. And not even close

I wish I had better financial literacy as a youngster (should be taught in school), but still figured it out in time to find those rules on my own... except I invest 30%.