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Topic Title: TMMO Recommended Savings Percentage 5-10%
Topic Summary: Am I Missing the Obvious for BS4 and BS5?
Created On: 07/10/2011 09:25 AM
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 07/10/2011 09:25 AM
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MyTMMO User
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When we resume our BS4 and begin BS5, the combined percentage will be well over 15%.

I haven't re-referenced the TMMO book yet; I haven't searched other threads.

I'm guessing DH and I shouldn't concern ourselves?
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 07/10/2011 09:28 AM
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I am Dave

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BS4 is 15% of your income
BS5 is what your goal is for saving for your kids college(some contribute nothing, some only do ESA, some use a college savings calculator, etc)
BS6 is whatever extra you have left after BS4 and BS5.
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 07/10/2011 09:32 AM
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Check the step tools available at the top of the page, but I'm thinking you are low-balling a LOT.

15% to retirement savings alone (I'm in my 40s and plan we will save 20%)
Then saving for education depending on the age of the kids, number of kids, college goal (AD in something vs a budding surgeon, etc)

But basically, living on a disciplined budget doesn't end after BS3. You have plenty of time to worry about it when you get there.
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 07/10/2011 10:01 AM
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I am Dave

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Once DW and myself reach BS4/7 in March 2012, we will be maxing out both our 401K's and our Roths. This will be far exceed the 15%. We will be closer to 30% maxing out. We are 58 and 55 respectively, with only 150K saved in retirement plans, we need to make up for lost time. Additional savings will be done to get the house remodeled - we need a new kitchen, and two bathrooms. Anything left will be invested. Still trying to figure out percentages here.
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 07/10/2011 12:32 PM
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Gotcha on the 15% retirement and extra for college and mortgage.

Why is the recommended savings in the budget sheet 5-10%? Is this one of those 'relative to income' things; i.e. a new car for a billionaire is like buying a happy meal?
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 07/10/2011 02:17 PM
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One of the reasons he caps it at 15% is because the rest of the money can be used for tuition for the kids, paying the house off, and non retirement investing.

Personally I am only doing 7%. I took a look at it, and at 7% I'm going to retire with a paltry 5 million. I'm not a greedy person and the difference between the 7% and 15% very well is 10 million dollars, but like I said I can get by on a cool 5 million. I want to use the 6% I'm not retirement investing for investing for the next 10 years (CAR purchase), upgrade of my house and other things of that nature.

I know he says 15, but I am not a $$ driven person. 5 million is more than enough and I have no desire for the extra 10. I'd rather live my life with that other 6% then only have 10-15 years to enjoy it after retirement.

"If you want to know what it is to be rich, buy a house smaller than your means would otherwise allow you to have, drive a cheaper car than you can otherwise buy and in general decide not to buy an item just because you have the money to"
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 07/10/2011 03:17 PM
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We are saving 15% pretax pre-take home then another 15-20% after take home. So we are way over budget per TMMO. We have our college savings (tuition due in 31 days) in the savings category versus personal too. We have our sinking funds under savings as well. It's funny to see our percentage turn RED under savings...
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 07/10/2011 09:04 PM
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Yes, it is kind of weird to see your savings turn red but I understand why. It is good to save a whole lot for a little while, but if you save like that for a long period you become a slave to your saving habit and a miser, putting money ahead of people which is no fun for anyone.
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 07/11/2011 07:56 AM
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Yes, it is kind of weird to see your savings turn red but I understand why. It is good to save a whole lot for a little while, but if you save like that for a long period you become a slave to your saving habit and a miser, putting money ahead of people which is no fun for anyone.


It's red because we are cashflowing college to the tune of $1500.00/month. So none of it is actually "savings". Nor are the sinking funds come to think of it. I just prefer to keep items that I transfer to ING in the savings catagory. Perhaps I should put it in another catagory?
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 07/11/2011 08:03 AM
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Yes, it is kind of weird to see your savings turn red but I understand why. It is good to save a whole lot for a little while, but if you save like that for a long period you become a slave to your saving habit and a miser, putting money ahead of people which is no fun for anyone.




It's red because we are cashflowing college to the tune of $1500.00/month. So none of it is actually "savings". Nor are the sinking funds come to think of it. I just prefer to keep items that I transfer to ING in the savings catagory. Perhaps I should put it in another catagory?


I do. I put all of my sinking funds in their own catagory that I created and just leave my FFEF under savings. Sinking funds are more or less planned expenses.

And PLEASE reconsider the ING account. Poor ING, they were bought by Bank of America. I guess you can forget about the customer service you've been receiving...
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 07/11/2011 08:15 AM
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I thought ING was bought by Capital One....?

And I believe the 15% is on gross pay instead of net (BEFORE taxes and insurance are taken out). Right,y'all?
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 07/11/2011 08:20 AM
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Yes, they were bought by CO. I've noticed no changes at all with ING.
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 07/11/2011 08:28 AM
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Yes, they were bought by CO. I've noticed no changes at all with ING.


My mistake. I get the two confused A LOT. I've been seriously screwed over by both of them so I lump them both into the "don't go there" catagory.
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 07/11/2011 08:50 AM
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DR has a "one size fits all" approach to many things, like savings. In reality, there is no way that everyone should be saving the exact same percentage of their income, but he has to keep it simple or his plan wouldn't work for the masses. Just like with college, retirement savings is something that you can plan for.

If you look at the early retirement experts, they tend to target a 4.5% safe draw rate on retirement savings, and recommend that you plan your retirement spending budget based on what you project you will be spending in retirement (not just based on a percentage of your pre-retirement spending). The reason everyone is not the same is that some people are 50 and just starting their retirements savings, while some are 30 and already have $250K in investments. Some people plan to do a lot of traveling in retirement, and some plan to spend time on hobbies that are virtually free. Some people have a bunch of kids and plan to pay for college for them... some people don't have any kids. All of this factors into your savings. Some plan to retire at 55 and some plan to retire at 75. All of this stuff impacts how much you should be saving.

DR's "15% of income" rule gets you on a regular planned saving plan, and I'm guessing that he knows that at some point you'll get more savings savings savvy and start looking at the details of your plan to adjust it to your situation.
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 07/11/2011 09:21 AM
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I think the OP was talking about the TMMO budget category "savings" as a percentage of take home pay of '5-10%'. Of course 15% pretax to retirement when you reach BS4.
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