I saw that some FIRE folks say they are saving 90% of their income? That is the income after tax? how does that work?
How is that done?
Without specifics I would just be guessing.
If I earned $1M/yr, I could have saved 90% of my earning, too. Even with the mortgage our expenses never topped $60K/yr.
They could also be LBYM. Tiny house, old car, no travel, no eating-out, etc.
Sorta that old adage: either earn more or desire less.
"If I earned $1M/yr, I could have saved 90% of my earning, too. "
you have to tell me how. Whatever you earn, if the taxes eats up more than 30% for these high earnings, then you could not save 90% of it. For 1M maybe all are capital gains in which case you would incur 20% capital gain tax. Still impossible to save 90% unless you can somehow pay less tax?
I guess they mean income after tax?
I am thinking of salaries (which are always lower out of school) and maybe later on capital gains for one that would be considering FIRE. And if you can earn 1M/year, I donât think you need FIRE.
tj
Oh, I see your point. I would assume the savings rate is after-tax. As you point out, most people will pay more than 10% tax.
It still comes down to âearn more or desire lessâ. Though I disagree with the LBYM philosophy of sacrifice everything now to save. You have to enjoy the journey. I agree with them that saving is important, but living now also is important. You donât know what tomorrow will bring. I think a balance between enjoyment now and LBYM is key.
yes I agree.
I would not consider myself to be a big spender. I have had pretty basic material wants and needs, and I thought of myself to be very frugal without being extreme and going out of my way ânot to spend on things I think I needâ until I encounter those FIRE stories.
tj
Tiny house, old car, no travel, no eating-out, etc.
Man, that sounds awfully familiar but look at me now. I make more money now than I ever did working.
Regards,
ImAGolfer (retired 2003)
I would not consider myself to be a big spender. I have had pretty basic material wants and needs, and I thought of myself to be very frugal without being extreme and going out of my way ânot to spend on things I think I needâ until I encounter those FIRE stories.
I often hear of people saving 50% of after-tax income. Thatâs doable for some high earners.
I did it when single/we did it when we had two incomes.
90%? Is that 1%er level of earnings?
Or, most living expenses are paid by the employer? I did this for a couple of years.
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I often hear of people saving 50% of after-tax income. Thatâs doable for some high earners.
I did it when single/we did it when we had two incomes.
Depends on the timing. I havenât looked back but we could have when we finished 10 years of college with two double years. That with a paid off house and cars would make it doable.
If itâs not a goal for you(all other posters), then why worry about what other people chose ? I donât see a savings rate as anything but a step toward another goal. If it is a goal for you, write a financial plan and start paring expenses.
50% saving of income is indeed doable. We have done that in some years.
But 90%? unless you have 10% tax and you donât spend any of your income?
That would not be the case for âhigh earnersâ or even practical.
However if you (they) are talking about after tax money then I can see that. One can certainly save most of its after tax income.