Market Philosophy: What You Got?

Harvey wrote

I guess you can't do a weekly contribution. MC did you use annual compounding and start with $1?  What settings did you use?

I used annual compounding and $1. I converted your weekly numbers to monthly numbers by multiplying by 52 & dividing by 12.

I know no one listens to me, but it doesn't matter if it's weekly or monthly if it's compounded annually.  All that matters is the total sum over the year.

Never used a financial planner ,as an economist who married a banker  did my own plan at age 25 . We exceeded our planned financial  goals and got a life at 51 .Life is good .

warp daddy wrote

Never used a financial planner ,as an economist who married a banker  did my own plan at age 25 . We exceeded our planned financial  goals and got a life at 51 .Life is good .

Yep. Forgot to mention warp, who also had a great plan, executed flawlessly.

When you are (for the purposes of conversation) assuming an 8% market return, I'd assume that would be compounded continuously. It's kind of irrelevant because the market returns 15% one year and -5% the next.  It's really done to illustrate the importance of starting early and being consistent. You can't get married to the actual number.

I actually did an exercise like this about 20 years ago. I still have it and it is amazing how to close to reality it is.

This is the formula



The one I posted earlier is related but only works without payments.  It's just a lump left to sit with no addition.

In that formula above, the CF is the yearly cash flow (either 4800 or 5200, depending on how you wanted to calculate your monthly payment).

You don't get a huge difference from the discrete formula over long time periods.

If you start with a non-zero sum, then you simply just add that amount compounded over the time interval:



Either using the discrete formula or the continuous one shown above.


I also recall reading an article when I was in my 20s about how to have a million dollars in your 401k after 30 years.  It's a pretty easy calculation.

I was pretty on track after 10 years but I had to withdraw some and now I'm on a lapse.  My wife has a very good pension and a 403b.  The only issue I forsee is trying to figure out what I'd do in between whenever I retire and when I reach 59.5 - my wife could probably retire and get a very good pension in about 15 years, but likely she'll work longer.  I assume 16 years and I'd like to be putting money back into my 401k and the 403b for 15 of those.

Harvey wrote

*can someone tell me what you would have if you saved $50 a week for 30 years with 7.5% return every year? What about $100 a week?

at $50/wk it's $278,604
at $100/wk it's $557,209
Use the FV function in excel with a negative value for the payment and you will have your answer.

I used FV(i,30*52,-50,0) where i=1+10^(log10(1+0.075)/52) where i is the effective weekly interest rate to get a 7.5% annual rate.

Excel has all these formulas for financial planning.

So the basic calculator was certainly good enough.  Point remains, start early, be consistent, live simply.

It's the same calculation except for how Peetex determined annual interest rate.  That's why there's a discrepancy.  Actually I'm not entirely sure why he did it that way because the function can work on a yearly rate if you input the yearly payment.

I don't expect to be acknowledged for any of this... carry on.

He should have just input FV(0.075, 30, -2600)

Cunningstunts wrote

I'm not saying Peetex is this way or that, but I knew a lot of people like that in my former career.  It's a shame because they tend to stifle progress even though they may have lots of experience.

You assume I work for a company - I am a company of one but I sometimes hire college interns who help me and I teach them - I guess teaching the next generation is stifling.

As far as what I do know about Peetex, I recall him saying he couldn't imagine living off less than 6 figures a year (sorry, don't know where that quote is), so I'm not sure if he just has a ton of debt, or if he's burning $1 bills for heating fuel.

So, so, so many people live off way less than that.  And many are retirees.  I was always very unclear on that statement.

If you get to a point in your life where you have very little expenditures, you don't need a large income to live.

If I sold my real estate and lived in a trailer and eat cat food I could probably live on a lot less but that wouldn't be any fun.

Matt likes to speculate about me, he is very jealous. He's just a disgruntled millennial who thinks everything should be given to him and he shouldn't have to work. I come from a different generation who finds working very satisfying and does not regard it as something to avoid.

PeeTex wrote

Cunningstunts wrote

I'm not saying Peetex is this way or that, but I knew a lot of people like that in my former career.  It's a shame because they tend to stifle progress even though they may have lots of experience.

You assume I work for a company - I am a company of one but I sometimes hire college interns who help me and I teach them - I guess teaching the next generation is stifling.

As far as what I do know about Peetex, I recall him saying he couldn't imagine living off less than 6 figures a year (sorry, don't know where that quote is), so I'm not sure if he just has a ton of debt, or if he's burning $1 bills for heating fuel.

So, so, so many people live off way less than that.  And many are retirees.  I was always very unclear on that statement.

If you get to a point in your life where you have very little expenditures, you don't need a large income to live.

If I sold my real estate and lived in a trailer and eat cat food I could probably live on a lot less but that wouldn't be any fun.

Matt likes to speculate about me, he is very jealous. He's just a disgruntled millennial who thinks everything should be given to him and he shouldn't have to work. I come from a different generation who finds working very satisfying and does not regard it as something to avoid.

I didn't assume any of that.  Actually I assumed you do consulting work because that's what you have mentioned.  I didn't want to attack you personally with the stifling comment, but trust me there's plenty of old curmudgeons in the transportation and energy industries who are not helping us go in a positive direction.

If MC is a millennial, then so am I, because we are the same age.  I think I'm a GenXer?  Who knows.  Does it really matter?

Cunningstunts wrote

It's the same calculation except for how Peetex determined annual interest rate.  That's why there's a discrepancy.  Actually I'm not entirely sure why he did it that way because the function can work on a yearly rate if you input the yearly payment.

I don't expect to be acknowledged for any of this... carry on.

He should have just input FV(0.075, 30, -2600)

I did it that way because I assumed for this case compounding was done on a weekly bases rather than a yearly bases. Given how Harv laid out the question that's what I assumed. You could use 1 payment of 50*52 , 30 payments and an interest rate of 7.5%. Your answer will be different by about 10K based on your assumptions.

PeeTex wrote

Cunningstunts wrote

It's the same calculation except for how Peetex determined annual interest rate.  That's why there's a discrepancy.  Actually I'm not entirely sure why he did it that way because the function can work on a yearly rate if you input the yearly payment.

I don't expect to be acknowledged for any of this... carry on.

He should have just input FV(0.075, 30, -2600)

I did it that way because I assumed for this case compounding was done on a weekly bases rather than a yearly bases. Given how Harv laid out the question that's what I assumed. You could use 1 payment of 50*52 , 30 payments and an interest rate of 7.5%. Your answer will be different by about 10K based on your assumptions.

Yeah - that's why I then put up the continuous compound formula.  Harvey mentioned using that with good success because the interest rate is not constant.

Either way, they don't change the value by enough that I'd worry about for an estimate like this.  If you are worried about 10k or so over 30 years then you have other issues to resolve.

Cunningstunts wrote

If MC is a millennial, then so am I, because we are the same age.  I think I'm a GenXer?  Who knows.  Does it really matter?

The cut off is about 38 years old. I assumed Matt was not older than that. If he is than he from his statements he hasn't aged well.

I have no beef with you I know you are trying to get along with every body and if you don't poke me I won't poke you.

PeeTex wrote

The cut off is about 38 years old. I assumed Matt was not older than that. If he is than he from his statements he hasn't aged well.

I have no beef with you I know you are trying to get along with every body and if you don't poke me I won't poke you.

Yeah - we are both 38.  No matter.  You can call me a millennial if you like, it won't offend me.

FWIW I've seen good input from both of you, especially when you are not trying to bash each other's heads in.  I guess I don't think poking anyone is very productive as I know where it leads.  There's probably rational reasons for some cases and probably pride involved in others.  Try to use a self-moderating filter for yourself with those as well.  I ain't the best at that either, so no judgement either way.

My original parameters were not carefully thought out.  

I remember when our 401k started at work 30 years ago.  The guy who set it up made us answer a bunch of questions on a form to figure out how much money we would need.

For some reason that pissed me off. You had to make all these assumptions. I remember assuming social security would pay me nothing and that I would live to be 100.

Save a much as you can and still have some fun along the way. Do what you can and then see what happens.

So many have saved so little, life is going to get complicated with a lot of elderly poor.

FWIW regarding the generational thing Peetex reminds me much more of my Grandfather's generation.  He's definitely much younger, but he was very similar in that he worked almost until he couldn't.  Well technically he was retired but he still owned his CPA partnership and nursing homes, and would still work a lot of days at the "office" even though he wasn't officially working.  I think he just genuinely, really liked it.  He also spent next to nothing.  He used to play the lottery all the time but I think if he won he would have just given it all away and played the next day.  I think he just like getting the ticket and looking at the numbers.  I always assumed this was from living through the depression, but it seems like Peetex isn't quite old enough for that.

Cunningstunts wrote

Yeah - we are both 38.  No matter.  You can call me a millennial if you like, it won't offend me.

FWIW I've seen good input from both of you, especially when you are not trying to bash each other's heads in.  I guess I don't think poking anyone is very productive as I know where it leads.  There's probably rational reasons for some cases and probably pride involved in others.  Try to use a self-moderating filter for yourself with those as well.  I ain't the best at that either, so no judgement either way.

If you don't act like a millennial than you not a millennial no matter what your age.

Cunningstunts wrote

I always assumed this was from living through the depression, but it seems like Peetex isn't quite old enough for that.

Nope - didn't live through the 1930's depression but my family had it's own "depression". My father was very successful in a niche industry, I remember when I was about a 5YO at Christmas my father got us all skis & boots for christmas (leather boots, cable bindings). Life was good. About 2 years later my mother was diagnosed with cancer (terminal) and the industry my father was in collapsed and he lost his job, retirement and benefits. He was wiped out with medical bills and cost of living. He kept us all together, he worked where he could but at his age, professional jobs were hard to get (it was the time of age discrimination). As a kid I mowed lawns, delivered news papers, worked in fast food. At age 14 I bought my own clothes and except for room & board, covered all my own expenses. I was the family cook (I had a lot of siblings). I couldn't participate in sports and skiing was a distant memory. I paid for my college and worked, there was even a time I was providing support to my father.  So in my own way I went through the depression. I came out of it knowing how to pinch a penny, and I have planned my retirement with multiple contingencies. Continuing to bring in an income was not one of these but it has allowed me to have a nice life and not draw on any retirement funds and I absolutely love what I do. It keeps me young and active. I still try to learn something new every day that I work. I have been very lucky - as the old saying goes, find something you love to do and you'll never work a day in your life, so I guess you can say - I have never worked a day in my adult life.

Yeah - I get that.  I've never disliked much of anything.  Too many interests, not enough time.  Working for a big corporation is another story, but in some ways, it's really easy as long as you like to toe in line and keep your mouth shut.  Neither are my strong points.  

I can't imagine a day of not actually working on something, but I always feel like learning and earning money are two different things.  I'm the type of person that should be in or should have stayed in academia.  But I was too proud and hated the comments about about how the ivory tower knows nothing of the real world.  I wanted to accomplish something real, unfortunately that's not exactly how it works.

Even when I'm skiing or riding bikes I still learn a great deal.  I learn about the physics of the sport.  I learn about my self - how I react in situations, how I've progressed, how I overcome my fear or trepidation.  I like the maps.  I like the data.  I like exploring new areas and learning them.  I like to learn the forests - what trees, the geology, etc.  What animals?   I also like being focused in the moment of an activity and forgetting everything else.  If you have the inquiring mindset, it never leaves you.  You'll always learn something no matter how hard you might try otherwise.

Having kids is the same way.  You learn so much about how humans develop and yourself.  I've learned things I never wanted to know.  I've been put in situations that I didn't always enjoy or that made me uncomfortable, but all that makes you better equipped to deal with whatever comes your way.

To me, that is work.  Life is work.  It's the second law of thermodynamics.  If we don't work, we give way to the rise in entropy.

Money is just a way of civilizing things and making it easier to trade.  Unfortunately it's also become so intangible to most that it brings out the worst in human nature.

So I say if you enjoy life, you enjoy working every day!  And in terms of money, there's no real correlation to that and being happy, although trauma from being very poor can make you feel otherwise.  It's really having your needs met, and there's lots of ways to do that.  Some of the happiest people in the world have the least wealth.  It really depends on their outlook and work ethic to make do or thrive with what they are given.