The Savings Chart that Made Us Millionaires

Frugal_Millionairess

Dramatic title, I know. Put it down to flipping through so many gossip magazines in the checkout line seeking ever more information on the child count and relationship status of Brad and Angelina.

But the chart has had an almost magical effect on my husband and me as we've continued this journey to financial independence, which started with a negative net worth as the wedding bells rang that September day in Chicago.

The concept was first presented in Your Money or Your Life, by Joe Dominguez and Vicki Robin. I was fascinated the first time I read about it and went to an office supply store for a pad of graph paper.

We kept those charts right there at eye level on the wall, staring at us day in and day out. Each month, we would chart our month's after-tax income, our month's expenses, and the gap (usually positive).

Knowing my pen would be recording those dots each month was a powerful motivator to put off or rethink various purchases. The months with a big positive gap were celebrated. A small or negative gap became fodder for late night pen and paper strategies for reducing everything from electric to food costs.

A second graph charted our net worth each month. And we were beyond thrilled when if first hit $100,000 (60547 GBP). Eventually our net worth grew to other milestones.

We still have not achieved financial independence, the number at which your income from investments pays enough to fund all your expenses should you live to be one hundred. And this is not an easy task to accomplish, especially as our expenses have grown quite a lot in the past five years with kids and looser purse strings.

To put this in context, for every $100 (60 GBP) a month in expenses, dinners out, electric bill, or annualized heating costs, we need to have $24,000 (14531 GBP) in the bank spinning off interest at a rate of five percent. And many think five percent may be optimistic. At three percent, we need $40,000(24219 GBP) in the bank.

We haven't done the chart in almost two years, not surprisingly coinciding with the birth of our beloved, energetic, rambunctious, started up Grandpa's combine when no one was looking, two year old son Kai.

But as I write this, I'm excited to dig out some more graph paper and restart the process.

One mistake I made early on was to think, "when we finally reach XYZ, THEN we're going to be SO happy." Looking back, the first milestone brought us every bit as much satisfaction, if not more than the many that came after.

And I've come to realize my daily happy moments don't tend to involve our net worth. Watching my Pug greet her canine buddies at the park, my petite, slightly sadistic step-aerobic commandant announcing cool down time, my kids occasional camp out nights on our bedroom floor, my husband's eyes lighting up on date night because I took the time to read the Economist and the conversation turns from potty training to "The Vote That Changed Japan".... It really IS the journey.

Whether you're starting at a negative number, zero, or three million, good wishes to you as you plot and graph your way to wealth, taking time to realize you're probably already pretty rich;-).

Jonbvn

A million dollars at your relatively early age (i.e. you recently had kids) probably means that you have an income in the top 0.01% of the UK population (probably not to dissimilar for the US).

I agree that the basic tenet of maintaining an income larger than your outgoings should underline all financial planning. However, unless you have a fantastic income/job it is not going to make you a millionaire!

mr_fishbulb

Mean People Suck

cheerfulcat

http://thefrugalmillionairess.blogspot.com/

Spam?

Lokolo

cheerfulcat wrote: »

http://thefrugalmillionairess.blogspot.com/

Spam?

I can't see her being spam, just a bit crazy with all the online blogging stuff...

Shes quite attractive too! Even if a little old for moi.

mr_fishbulb

I was introduced to The Millionaire Next Door book because of one of her posts on her. Good book so far. Little too many stats though.

If they have accumulated that much at their age, and with children, well done too them I say.

Lokolo

mr_fishbulb wrote: »

I was introduced to The Millionaire Next Door book because of one of her posts on her. Good book so far. Little too many stats though.

If they have accumulated that much at their age, and with children, well done too them I say.

Yeh I enjoyed the book, but agree the stats are a pain, and it is a shame the book is American! :rotfl:

Paul_Herring

To put this in context, for every $100 (60 GBP) a month in expenses, dinners out, electric bill, or annualized heating costs, we need to have $24,000 (14531 GBP) in the bank spinning off interest at a rate of five percent. And many think five percent may be optimistic. At three percent, we need $40,000(24219 GBP) in the bank.

You don't appear to be taking inflation into account. If you're withdrawing all the interest, then the value (in real terms) of the capital is actually going down (as will the interest you receive.)

tradetime

Lokolo wrote: »

I can't see her being spam, just a bit crazy with all the online blogging stuff...

Shes quite attractive too! Even if a little old for moi.

Yes indeed, yum yum

KingL

Lokolo wrote: »

and it is a shame the book is American! :rotfl:

The Average American tosses $859 worth of food a year - How do you stack up?

:rolleyes:

mr_fishbulb

tradetime wrote: »

Yes indeed, yum yum

The Millionaire Next Door taught me that PAWs tend to stay married to the same partner.

Stupid book!