Budget Be Damned

[KTP]

Originally Posted by CaptTom

I think this is the biggest misunderstanding in most folks' financial planning.

When I was a kid, a cantaloupe melon cost $0.25. Now they're well over $2.50. Same for a gallon of gas. My house is also worth 10 times what I paid for it 40 years ago.

I don't know what the official inflation rate is, but if things I buy went up 1,000 percent in the past 40-50 years, then I can't help but wonder what the next few decades will bring.

30 years ago I could buy a gallon of gas for about $0.70. Today a gallon of gas is around $2.15 (not on the West coast).

That represents an increase of about 300%

Over a 30 year period, a 4% inflation rate per year will get you right around 300%

[a64pilot]

You have to factor in inflation of course when you run your numbers.
Now I’m no expert by any means but that may be one reason why drawing 4% or less is considered a safe number.
If your getting 8% return, but inflation is 4%, then your actual return is 4%, not 8%.

Maybe it’s not that simple, nothing seems to be,but it’s my understanding.

[KTP]

Right, exactly that. The average market return is somewhat higher than 8% but after you subtract inflation, the real return is down around 5% + or - 1%

Just because this year has been a 25% return with only 2% inflation doesn't mean that one should take out 23% of their portfolio and buy a Lagoon cat though :-)

[sailorboy1]

I plan based on inflation will equal interest/growth and cancel out. Only willing to make the spreadsheet so calculated with make believe numbers.

[a64pilot]

Originally Posted by sailorboy1

I plan based on inflation will equal interest/growth and cancel out. Only willing to make the spreadsheet so calculated with make believe numbers.

I believe that pretty realistic, the 4% rule which a great many say is too simplistic is based I believe on a 30 yr Retirement planning, meaning at 30 yrs, your broke.
As I Retired early and we are the average couple and she is 4 years younger than I am, and Women have longer life expectancies anyway, I figure I need to plan for 40 years, which takes more money than you may think or another way of course is smaller withdrawals.
Ideal for me would be for this Bull market to continue until I could withdraw my SS as then I wouldn’t have to touch investment money and could wait out the Bear market.
I’m sitting on a few years cash to hopefully ease that pain.
However that is exceedingly unlikely as this Bull market is 10 years old, and that’s never happened before, average is I believe 4.5 years.
So, I don’t believe anyone really knows what’s going to happen.

But I believe this Market has made the average person over confident, and maybe they are right?

Bear Markets are of course usually much shorter duration, but remember I believe the average drop is 33%, and that’s quite a lot, 33% can eat up a few years growth very quickly, and remember that’s average, if your aggressive having your funds cut in half very quickly isn’t unheard of.
I believe the drop in 08 of the S&P was in the 50% range wasn’t it?

[daletournier]

Originally Posted by a64pilot

I believe that pretty realistic, the 4% rule which a great many say is too simplistic is based I believe on a 30 yr Retirement planning, meaning at 30 yrs, your broke.
As I Retired early and we are the average couple and she is 4 years younger than I am, and Women have longer life expectancies anyway, I figure I need to plan for 40 years, which takes more money than you may think or another way of course is smaller withdrawals.
Ideal for me would be for this Bull market to continue until I could withdraw my SS as then I wouldn’t have to touch investment money and could wait out the Bear market.
I’m sitting on a few years cash to hopefully ease that pain.
However that is exceedingly unlikely as this Bear market is 10 years old, and that’s never happened before, average is I believe 4.5 years.
So, I don’t believe anyone really knows what’s going to happen.

But I believe this Market has made the average person over confident, and maybe they are right?

Of course we must plan, it goes without saying BUT the problem as I see it is , it's very difficult to plan in the current environment.

We use assumptions based on the past ,yet more and more unconventional policy is being used to keep the economic world floating. Even fed chair Powell himself is on record saying "unconventional policy is becoming conventional policy".

Also as I mentioned earlier few look at the underlying factors that have driven and are driving the markets since 2008, not only is it the longest bull market in history it's also been created via more stimulus than anytime in the past.

Dh said in a previous thread QE was needed and worked, I agree ,compared to the alternative it was the only action that could be taken BUT "unintentional consequences " happen.

Yep, I'm the naysayer but theres alot of facts ,numbers and very educated people that suggest my naysaying may have some substance to it.

In the meantime those that own some assets (like me) keep getting wealthier and the ones that dont get poorer. I've had my most expensive cruising year ever yet my net worth (on paper) has gone up, does this happen for ever?

[sailorboy1]

Originally Posted by a64pilot

I believe that pretty realistic, the 4% rule which a great many say is too simplistic is based I believe on a 30 yr Retirement planning, meaning at 30 yrs, your broke.

What it really is based on is maximizing the fees of the fund and financial planners. Which a lot of is based on fear to get you to work longer and pay into their funds and maintain a high balance that they are charging a fee on.

[daletournier]

A64, generally bear markets are of shorter duration BUT not always so. It took a long time for the markets to recover after the great depression. Not saying that's definitely going to happen but the problem with optimism, which runs rampant when people are making money, is it blinds them to possibilities and likely hoods.

The amount of debt and unfunded liabilities has left a very large hole in the future, that needs to be filled prior to us getting there, we need lots of growth and businesses that gain value due to real revenue increases rather than stock value increases based on speculation or buy backs.

Something I found interesting

https://www.sovereignman.com/investi...of-1929-26123/

[sailorboy1]

People need to stop trying to apply "rules" of the 60s, 70s, 80s etc. and even the 00s to the markets. Back in those days everything we knew about what was going on was based on history, we only really knew about it till pretty much after it occurred (maybe 1-2 quarters ago).

Today it is a global economy with massive communications and information floating around in real time. Anything you read about or hear is so far in the past in the markets compared to what the people with the info know that it is almost ridiculous to discuss. Today the only thing that would help an individual would be to know about some semi crazy stuff like tariffs that come out of nowhere or some sudden regional conflict.

[daletournier]

Originally Posted by sailorboy1

People need to stop trying to apply "rules" of the 60s, 70s, 80s etc. and even the 00s to the markets. Back in those days everything we knew about what was going on was based on history, we only really knew about it till pretty much after it occurred (maybe 1-2 quarters ago).

Today it is a global economy with massive communications and information floating around in real time. Anything you read about or hear is so far in the past in the markets compared to what the people with the info know that it is almost ridiculous to discuss. Today the only thing that would help an individual would be to know about some semi crazy stuff like tariffs that come out of nowhere or some sudden regional conflict.

How do you plan? If you cant look at cause and effect from a historical basis what's the strategy? Imo faith, hope and prayer isnt a strategy. One must look at the past and the current and plot the best course he can , which I believe is difficult currently.

As I said earlier it's hard to be objective when we are all getting richer without doing anything, we are influenced to heavily by what's happening to our bank accounts.

[a64pilot]

Originally Posted by sailorboy1

People need to stop trying to apply "rules" of the 60s, 70s, 80s etc. and even the 00s to the markets. Back in those days everything we knew about what was going on was based on history, we only really knew about it till pretty much after it occurred (maybe 1-2 quarters ago).

Today it is a global economy with massive communications and information floating around in real time. Anything you read about or hear is so far in the past in the markets compared to what the people with the info know that it is almost ridiculous to discuss. Today the only thing that would help an individual would be to know about some semi crazy stuff like tariffs that come out of nowhere or some sudden regional conflict.

You know in all honesty something similar to that is said about every single big drop I’ve ever witnessed, from the .com fiasco to the housing market, every single time those with an interest in selling and the true believers always say it’s different this time, to find out that history does indeed repeat itself.

But really it comes down to beliefs, neither of us are experts, you believe in a rosy future, I don’t.
But, really I’d like to be wrong, I hope your right and I’m wrong.

Being conservative I believe means two things, first I may survive a serious Bear market, and secondly if I’m wrong then my money just grows at a higher rate.

Now I’m not stupid either, as I age I won’t live in an old mobile home to die as a multi millionaire, if things stay rosy and as I age, I’ll eventually increase my spending, and by being conservative now, that just means I’ll have more to spend later.
It’s nothing more than a continuation of the way I’ve lived, by living that way, I was able to retire early and be debt free, where the average person my age is carrying the greatest debt they have ever had.

[Dockhead]

Originally Posted by a64pilot

I guess the cycles are a thing of the past?
Last time people were telling me you can’t lose money in something, it was houses pre 08.

I just hope the rising continues too as I’m worth more now that when I Retired as well, but I’m withdrawing just under 4% too.
. . .

What goes up, must come down. And going up hard and fast usually precedes coming down hard and fast, so it's getting to be time to pay attention.

[daletournier]

Originally Posted by Dockhead

What goes up, must come down. And going up hard and fast usually precedes coming down hard and fast, so it's getting to be time to pay attention.

I'll also add to fast and hard, TIME, the longer it goes up the harder it will fall. This economic expansion is officially the longest on record.

Time to pay attention is sage advice.

[sailorboy1]

Well you are free to use old history hindsight lessons that proved to not be useful except for writing a textbook and I’ll use modern communication and try to only be behind a few weeks.

The real purpose of the thread was to tell people to stop worrying about the financial noise out there and to go cruising earlier instead of making money for the planners.

I’ve been very apparent about my costs and money matters as they relate to going cruising. Im not interested much in people who aren’t doing the same telling me I’m all wrong.

[zeehag]

sailorboy i so wish i had 3000 usd monthly for cruising. my refit would have been completed in 1.5 yrs instead of still pending, and i woulda been in caribbean already. i still survive with repairs and cats and me on 1500 usd monthly.
it can be done. and no i do not skimp on food. i donot go out to fancy restaurants but i never enjoyed that. tacos on street are wonderful and so are authentic mexican meals cooked by a lovely abuela in a home or in a restaurant of low pricing. if no locals are in the restaurant i do not participate.
i donot fall for the ye gotta buy in usa and have shipped the parts i need--i buy them locally with duty already added and at a set pricing, unlike shipping into country with aduana choosing daily the duty that needs to be paid. ( like 82 usd for an 82 usd item)..yup. is cheaper to buy locally and hire locals to work.
this lifestyle is exactly what you put into it.. i ENJOY living and donot spare my comforts on 1500 usd monthly, which doesnot flex whatsoever. it cannot flex as that is a static amount based on my severely limited income.
this is do able on minidollars as opposed to maxidollars... i see both as i voyage--and everyone seems to be having a great time, if you can judge by smiling happy faces..