Savings Rates Are Worthless and What Real Net Worth Is

All of our previous posts have focused entirely on earning. This is because there is no ceiling to the amount you can earn and there is a floor to the amount you can save. No matter what you do you’re going to have to pay for food, shelter, utilities, taxes and other necessities. That said… We’re going to outline our views on saving money in general since the topic has come up many many times. To reiterate. We don’t care much for saving because all of your energy should be spent creating recurring income. If you’re working 60-80 hours a week you wont have time to waste your money in the first place and by the time you make your money… well you won’t need to worry about saving. Funny how that works.

Five Point Summary

1) Saving 10% is a Scam: The general rule of thumb is to save 10% of what you earn. What they don’t tell you is this sets you up for a very long and dire path to mediocrity. The math doesn’t help you because you’re constantly increasing your annual spending in the 10% scenario. Lets look at the simple math.

Joe makes $90K per year. To make the math simple lets say he sees a take home pay of $60K. This means he would save $6K a year. He is going to see a wage increase of 10% per year and he will continue to save 10% of his income. This sounds logical until you put the numbers into a spreadsheet.

In Year 1, he will save $6K… fast forward to year 10 and that $6K is just 4.3% of his annual spending habits.

Our readers are smart so everyone can see the problem with a fixed percentage savings method. The fixed saving percentage makes every *prior* year less meaningful because it accounts for a smaller and smaller percentage of your new standard of living.

If joe was making $60K and gets a 10% raise each year he is now making, ~$155K. If he is spending 90% of that income, his annual spending is now $140K… the original $6K is just 4.3% of his annual spending habits.

2) Focus on Annual Spending Multiples: This is the fastest way to see an acceleration in your real net worth. Your real net worth is how many years you can live if you don’t do anything. It does not matter if you’re making $50K or $500K because your real net worth depends on your annual spend. To put some brackets around it, 20x annual spending is rich, 10x annual spending is comfortable and 1x annual spending is an abysmal disaster.

There are many families that have high incomes and practically no net worth. If you’re in a major city with a $400K income. But. Are forced to send your kids to private school and have a $10K/month mortgage… You’re going to be saving a dismal amount of money.

3) How Much Should I Save? We get this question a lot. Our answer puts point 1 and point 2 together to come up with a general rule of thumb. You should find a way to increase your standard of living and you should never see a decrease in your savings (in terms of annual spending). A good and aggressive rule of thumb is this: every year you work should result in a year you do not need to work.

This usually means you don’t get to spend a lot of money when you’re young. Specifically, if you’re out of college with a good income (lets call it $100K gross), then you’re not allowed to spend more than 1/2 of your take home pay from day one. In about two years you should see income acceleration from the 60-80 hours a week you’ve been working and you’ll be expanding your real net worth rapidly.

Assuming you start earning a living at age 21, you’ll be rich at age 41. You’l have 20 years of living expenses. If you start a business and create multiple streams of income you’ll reach this mark significantly earlier (it won’t even be close to 41).

4) 10x Annual Income as the Inflection Point: If you’re following along and don’t quite make it to becoming rich by age 31… it’s all but guaranteed (just don’t mess it up!). Sure there are no guarantees in life but it becomes quite difficult to fail. If you have 10x your annual spending in investment vehicles this means you’re going to put another 0.5 years away if you do practically nothing. A 5% return, which is extremely reasonable in a basket of bonds and equities, will lead to 0.5x years of annual income for you. If you simply save your allotted 1 year of income you’re at 11.5x already! Compounding becomes a rigged game… In your favor.

5) Pay the Price Upfront: While everyone else enjoys blowing their paychecks at the bars and the clubs you’ll be busy visiting the bank and your local brokerage for a couple of years. The funny thing about the math is you won’t miss out on much because 22-24 year old kids partying in the club are not interesting to 1) the owners of the club and 2) the most attractive women at the event. So you’re not missing out on much at all.

In addition, the amount you can spend will accelerate after you simply pay the toll up front. If you can put away 2 years of living expenses in your first two years out the gate, your discretionary spending can ratchet up without much impact to your future.

If you save $40K and spend $40K.. in 3 years you’ll have roughly $150K and your income should rise 25% or more, meaning you’re now spending ~$50K that year. In just 2-3 more years you’ll be able to spend in the $80K range and the game is over.

While the above paragraph is rough math, it clearly shows the power of annual living expenses. You’re going to be spending more and more each year. But. If you started with a high foundation or base amount put away, the compounding and wage increases (your career and your side business) will propel you into the 1% in short order.


We’ve really outlined a basic plan to get relatively rich. You simply work each year to never have to work another year again. That said there are a lot of underlying assumptions about how to make decisions with your personal life based on this philosophy or world view.

1) High Cost of Living City: Everyone wants to live in the cool city. New York, Miami, etc. Does it make sense for everyone? Probably not.

If your main skills are not going to accelerate your earnings in a major city, it is best to avoid living in them. There is no right or wrong skillset. You’ve invested in XYZ skillset and cannot change the past. What you can do… is run the math.

If your line of work is going to cap out at $100K a year… We’d suggest living in a low tax state and decreasing the total cost of living. There is no point in living in a vibrant city if all of your income is going to taxes and rent.

Make some basic guidelines:

– Spending 33% or more of your income on rent is a catastrophe. You want to shoot for 10-15%.

– Commuting is also a fixed cost, add this number to your rent number

– Time spent commuting is also a fixed cost, you cannot do meaningful work on public transit or while you’re driving so multiply each hour by your hourly income (approximate it)

– Take your rent and double it. That will estimate your actual monthly spending to account for necessities, leisure and one time negative events (life is a roller coaster and many things may go wrong)

2) Does a Broad Skillset Make Sense? We’re told to always keep a broad skill set. This means being good at multiple items so you will always have income. The problem with this logic is very simple. If it is easy enough for anyone to learn why will there be openings? If anyone can learn it you could very well find yourself competing with many people for the exact same position (hint hint, if it’s a rule based position that will be automated sooner than later).

Lets put the pieces together, if we know savings rates are a myth and you’ll be choosing your geography *carefully* you’d be a fool to have a broad skill set. Why? You’re not creating a long-term edge over your competition and mathematically we only need to see ~20 years of income in a worst case scenario.

Make Basic Industry assumptions:

– Will my skill set be valuable in this geographic location for the next 20 years?

– Will this geography be the primary hub for the next 20 years?

– Can this skill set be automated in the next 20 years?

If you answer yes, yes, no to the above you’re going to be safe. You’re setting yourself up for a *high probability* win. The future cannot be predicted perfectly but life is probabilities and you’re making the right decision based on your skills.

3) Mental Investment: If you have done the two items above and ascribe to the general world view we outlined in terms of “savings” you’re making it painfully difficult to reverse course after Year 1. If you decide to veer off course, every single cent you spend dilutes your real net worth (annual living expenses saved).

It is really that impactful.

If you put away $200K and decide to start  spending $200K instead of $50K… you just wasted three full years of your life. Your net worth is simple a 1 instead of a four or a 75% reduction.

The mental pain will make it a lot easier for you to avoid making useless material purchases until you can officially afford it.

4) Consistency: The only real skill if we read between the lines is consistency. If you’ve ascribed to becoming rich, you only need a modest amount of will power. “is this going to impact my ability to put away 1x of living expenses this year?” If the answer is yes, it goes into the garbage.

As your income rises, you’re also consistently rewarding yourself because it gives you much more wiggle room. Your investments will allow the next egg to grow and this will make it easier to put away another year of expenses every single time.

5) Math Doesn’t Lie: We really didnt have a fifth point because we’ve become extremely efficient in describing complex topics into a few points. If forced to add a final comment it is simply to run the math. Compound interest is only a tool if it is *relative* to your annual spending. Otherwise it becomes meaningless in a hurry (broke NBA/NFL players as an example).

In summary, getting rich only has to do with multiples of living expenses and consistency. Choosing skills that cannot be automated and a geography that will maximize your skill set is really all that is needed. The rest is filler given that the multiples continue to expand rapidly over a short 5-10 year time frame.

Importantly, for those that are serious about developing multiple streams of income and a high net worth, we can recommend Personal Capital. The Company offers *free* software tools with the following four key features: 1) ability to avoid losing money by tracking all fees associated with an investment product allowing you to choose the best possible fund for your future, 2) portfolio analysis where your risk profile is stacked up against your current age and retirement goals, 3) in addition to these free tools, you can also track your net worth and path to becoming a millionaire and 4) when you hit $100K in networth you’ll receive a free one time consultation with an investment professional at Personal Capital. After linking up all of your accounts you’ll be able to sit back and watch as your net worth goes up and your fees remain minimal over the next several years. We strongly believe that Personal Capital is the premier personal finance software tool when compared to its competitors such as Mint. If you’re looking to avoid personal financial collapse, it makes sense to track everything in one place for *free*.


    • AJ says

      As an 8 year veteran of London living I hear you. However, you *can* achieve this figure if you do as suggested by creating multiple revenue streams.

      You’re absolutely correct that even 33% is barely doable given typical salary:rent ratios in London. I risk being ostracised by saying that when I first graduated and moved to London, rent sapped 75% of my income. Seventy. Five. Percent. I’ll put that down to naivety, poor judgement and decision making. I’m now at 15% with (currently) only 3 consistent, active revenue streams (Main salary, teaching corporates my craft, rental income from tenants). I live in a top floor mansion apartment overlooking Battersea Park.

      It took a while to create additional revenue streams but I found a few things were key: experience and credibility so I could sell courses and teach, enough initially saved to buy a property and charge tenants more than the mortgage repayment, and most importantly, an appetite for risk.

      If you can, create some revenue streams that are based on passive income. Anyone can get a second job with Uber. Maybe rent from tenants in a property you own. Or letting out your place on Airbnb when you’re out of town.

      Or, move to Elephant and Castle. Shudder!

  1. Expat says

    10-15% on rent? Come on, this doesn’t really apply to your audience, most of whom are/want to be high performance individuals and thus live in big cities (LDN, NY, SF) where things are actually happening, otherwise you’re just watching from the sidelines all the other more determined people make money while you’re stuck.

    Even if you earn 150k in SF (around 7k per month after taxes and some 401k contributions), there is no decent place below 2,5k per month where you can live alone and have a proper adult life (unless you want to live with roommates after 30!).

    Same thing in London. If you make 60k GBP (starting salaries in good tech/consulting companies are around 35k, so this is after some years on the job where you’ve displayed good skills and high performance) it’s around 3,5k per month after taxes. Again, the minimum you need pay for a decent place in a good area is at least 1k per month.

    So we’re talking around 30% of your net salary if you’re lucky and highly paid, more likely 40-50% of your salary if you’re starting out.

    A more realistic advice would be to find something decent and then stay there while your income is going up, not following the masses that move to better apartments and areas to show they make money to their neighbors while their net worth is staying flat, but actually keeping and investing (financial instruments, on yourself) the extra money you earn. Living in a big city comes with a price, but you must willing to pay it because you’ll get opportunities to make more and more.

    • Wall Street Playboys says

      In first situation described above, the guy/girl should live with a roommate. Total income of $150K gross with high quality skill set is against everything this blog stands for especially at 30.

      Should live with a roommate, stop partying, get a side business up and running which should have been started at least 5 years prior.

      No one gets rich from a salary.

      We agree, yes at age 22 you’re probably going to have to pay more than 15% and that shouldn’t be the case at 30… nearly a decade has gone by. Primary source of income should no longer be working someone else. Realistically you’ll quit working for someone else in your 20s if you play your cards right.

  2. says

    Highly based on your previous post “Calculating Individual Total Worth”, but finally some clarifications on the numbers that you can calculate with it.

    If I may sum it up: focus on cash flow, not net worth; stop wasting money by spending too much or taking too much debt; use that extra money to build more cash flow; profit when it all starts compounding.

  3. says

    I’ll have to come back to this post at a later time for all the advice to truly sink in.

    Basically, the goal is to become financially independent. The math in this post is based on the 5% p.a. returns from investment portfolio. Therefore, it makes sense to define rich as 20x annual spending.

    I think you guys define “rich” similar to what others would call true freedom. In your equation being rich isn’t directly dependent on the amount you spend.

    A person spending 60k per year with 1.5Mil saved up would be rich. Even though that wouldn’t necessarily lead to a fun lifestyle in an expensive city.

    This seems like a good framework for guys who know they want to remain single. That is of course the majority of this audience.

    A good addition for other might be the following…
    If you’re planning to have a family, I’d suggest basing your 20x annual spending calculation on the amount you’ll be spending when you have a wife and kids.

    *Just the thoughts of a young kid. Take it for what it’s worth and make up your own mind.

    The savings strategy I’ve been using recently comes from one of your posts (I believe).

    When your income goes up. don’t increase your spending for at least a year. (paraphrasing)

    That’s how I’ve been able to save a decent amount of money for a young guy. Having said that, the key was to increase my income first. Without that, I’d never have been able to save any money.

    Looking forward to the book!


    • Pinchharmonic says

      How much money have you saved as a young guy? I’m 24 and have 30k cash… 70k salary. My plan is to stay liquid and have it ready for a real estate down payment (hold and collect rent, not count on appreciation) or to have it for a business idea (still thinking, building connections, investing in myself).

      As you digest this material the path becomes more and more clear. WSP is good because of their straightforward writing containing no feelgood, no fluff.

      Basically strive for expanding revenue streams while working. Find a job that is easy hours, yet pays well and let’s you learn good skill(s). In other hours, learn and attempt to create something of value. Basically have low risk while still cashing in for the 1x living expense gain in net worth every year.

      My goals moving forward are to up my job salary or lateral to another higher paying job (maybe 100k), while actually implementing my entrepreneurial ideas. Even if they fall flat, there is a lot learned.

      Just wanted to see what other guys in my age bracket (still new to the real world, but miles ahead of the average schlub) are doing and where they are at.

      • glain says

        21, rough 50-60k per year income. ~13k invested in market. No way would I look at property as an investment, I’ll stay liquid and get better returns from the market average.

        Working a job that gives a decent skill. Building recurring income on the side (sell a product with an upfront payment and recurring with auto increases) and getting uni/regulatory education requirements sorted.

        All in all, hard to save up much at this stage but according to my maths it will get exponentially easier.

  4. says

    Great mindset to have: Earn more instead of being frugal on every little thing. That said, rent should definitely not go higher than 10-15%. If you can’t afford it, don’t rent big apartment, simple as that. It also amazes me, how large percentage of people don’t value their time and don’t calculate opportunity costs. Example: commuting to large distances instead of living closer, saving some time and earn side income in that time. Same goes for watching TV, being sports fan and other time wasters, where you should be actually focusing on making more money. Live well below your means and focus on earning more instead of being frugal on every little thing. As stated in the article, busy people don’t have time to spend much anyway. Excellent article.

    • pinchharmonic says

      One thing that is never stated is if this is 10-15% of your before-tax or after-tax income?

      From my college graduating class, and I think most peoples’, the absolute “dream” is to move right into the city. I got a job near the city, and instead of living in the city and reverse commuting, I just live in the nearby town, work there, and then go into the city on the weekends if I choose to. My rent is essentially 2.5x less than it would be in the city, and I don’t have those weekday distractions that would pop up in the city.

      I’ll have the opportunity to move there in a few years if it makes sense, and at that point may have considerable liquid assets (aiming for 100k). Meanwhile, the guys that moved there after school, paying $1500 for a crappy small apartment shouldn’t be in the same stratosphere of savings (and therefore capital).

      Key is to balance things to some degree. I’m not into football, fantasy football, etc. but I’ll be down once in awhile to have a beer and watch the game with people. Doing it every single game and weekend is a complete waste of time.

      • Mechanical Engineering Student says

        Alway amuses me how deeply football has pervaded our everyday lives. The NFL makes billions by letting losers live vicariously through “their” team, and if you don’t give a shit, you’re “gay”!

  5. Lee says

    What about if the answer is Yes-Yes-Yes?

    Skillset is valuable. In the best geographic hub for this skillset. But skillset will likely be automated in 20 years.

    I’m a plaintiff trial lawyer. I make 33% off million dollar car accident settlements. But I figure this field will be done in 20 years once self-driving cars become the norm.

    • says

      Curious about this.

      Just my two cents, but I’m thinking about somewhere along the lines of a startup company which specializes in insurance for self-driving car companies. Is such thing even possible? haha.

      • Kevin says

        Its possible, but probably not as a start-up. Insurance is a really lucrative field. That’s how Warren Buffett got his first pile of cash, research it. But like starting a bank, you need a lot of money and a trusted reputation, or else why would people trust that you’ll be solvent when they need you? The problem for you is that once self-driving cars become a thing, any accidents will be caused by 1) The car manufacturers, or 2) The municipal/state in charge of upkeeping the road. If you’re going to insure a manufacturer, you better have deep pockets. If there’s something wrong with your car, there’s probably something wrong with 10,000 other cars, so the potential exposure is massive. If the manufacturer thinks you’re ever going to go bankrupt if a black swan event hits, they’ll never buy insurance from you. Municipalities are a bit better, but its a similar deal. As sophisticated consumers how are you going to get them to treat you seriously when you’re not an established player? The nice thing about retail clients is that they’re not too fussy about your reserves. If you look professional despite being a startup, they’ll assume you’re good for it. They just want the cheapest price. So if you can find a niche market, like Geico when it was starting out, you can grow as a start-up. Right now the majority of auto insurance consumers are retail customers insuring against human error. That’ll change once self-driving cars become a thing.

  6. Ambitious says

    lifestyle inflation will get ya lol…. I am worth around $2m post-tax, and last month I looked at my spending, and I realized I spent $30k in a month somehow…. that’s how much I spent in a year just 2 years ago lmao.

    Nonetheless, cutting my ridiculous spending without cutting my lifestyle makes a lot of sense. Even tho im worth $2m I feel like im a treadmill to making a lot in business or im going broke. I don’t feel like I have “fuck you” money, because im spending so much (ironically).

    THEN, I realized I have about $60k of business overhead a month and I think I should focus MORE on getting more out of that then cutting spending – especially since my income potential is still $5M-10M if I hustle properly this year.

  7. says

    On the living cost, really makes sense to move if it brings back more time, $ and greater access to resources for biz. Any amount of time(or $) you get back from commuting anyways is already an A+ since the more of those you put back into work just mathematically accelerates everything.

    Love it.

    Personally (guy in early 20’s here) anyone at my age will already appreciate being able to move out from mom’s basement to any flat of his own. Extra points if you have side gigs that allows you to afford one without the need of a roommate (which to me is kind of valuable). I think the #1 point in the post speaks cautiously on over-exaggerating things. Well I do love a big condominium too, hahaha, but fuck it maybe not too soon.

    Anyways, thing without having roommates is it gives you space to invite girls in (or even friends, as you like).

    Guaranteed you’ll have nights where you’re done with daytime work & biz and you can go to the nearest bar to hang out with peers, like a classic weekend lay-up to end a great week.

    Yet lately I’ve been also getting nights where I do shit at day, then I eat dinner by six, then by 8pm a friend or a girl arrives to chill out until 12mn, then as they leave I’m immediately back in the mood to do some more for the side projects until I pass out.

    I still get to socialize, chill and rest.
    Zero time and energy wasted on commutes to wherever.
    More. Shit. Done.

    I cycle between nights like those above to thrive. Quite sure some readers also do side projects at night though so this might make sense and seem relate-able. I mean, girls by the weekend might be too late to ease you out, but a girl by tues/wed sometimes does the trick, so yeah, swag!

  8. says

    Consistency is key. Like compound interest, compound your work time. Spending 60-80 hours of work a week consistently will pay off astronomically. Most of the “average” people complain about being broke but they don’t spend there time working. This isn’t complicated, yet most people make excuses for not understanding why they’re poor.

    Even if you take one year, just one, and work a 60-80 you could easily hit 100k a year salary. For the average person that could make them happy.

  9. D Train says

    Great article! Good to see another post so soon. I know you guys are anti-frugality and this definitely clears it up. As a 28 year old making around 100K I am in full panic mode, but have made a lot of strides the past few months. I’ve realized my intelligence type is mostly intent with a little bit of synthesis. Therefore, online sales seems like a natural fit to me. I’ve found a good community and I’m shelling out a few grand for an intense course that I’m hoping will get me started on the right foot (it starts in a couple of weeks I’m sure you guys know what I’m talking about).

    I’m reading up on online sales (and zig zaglar/ Ca$hvertsing), but want to find a balance between working hard in my current job and starting my side hustle and making sure I give that 100%. I pay low rent in NYC (got very lucky), but still can’t save close to what I’d like to.

    I think I have my priorities correct for the most part, but want to make sure I spend enough now and don’t limit myself in my online sales gig.

  10. LKY West says

    Makes me laugh @ my dad who takes his calculator out to figure out how:
    “This evil supermarket is ****stealing**** from him 0.25 cents for a cookies (read: LQ food) pack!!!!”

    Can’t wait to turn 18 & gtfo.

      • LKY West says

        Yup, I agree wildly – Although I don’t have the final call (parents) & that can hinder progress madly(osmosis of bad habits – prohibition of good ones), you gotta play dumb son’, or stagnate.

        I never had good social skills, so the play dumb & “never outshine the master” things are huge lessons.

  11. says

    I really like your mostly uncommon approaches to saving and to thinking about saving–very useful!

    While I endorse100% your observation that there’s no ceiling to earning potential but savings can go only so far, I’d make this small point: Uncle Sam hasn’t yet figured a way to tax savings. So $1 saved means $1 more in my pocket while $1 earned means maybe $0.75 in my pocket. Unless I’m Donald Trump, in which case $1 earned means $1.10 in my pocket. 🙂

    • Wall Street Playboys says

      Not sure what the trump comment was about because tax loss carry forward is used by literally every technology company!

      Other than that yes, a dollar saved is more than a dollar earned due to taxes!!!

  12. Playing Catch Up says

    “The funny thing about the math is you won’t miss out on much because 22-24 year old kids partying in the club are not interesting to 1) the owners of the club and 2) the most attractive women at the event. So you’re not missing out on much at all.”

    Not sure how to actually interpret this but the whole partying, chasing women, and having those experiences is a tricky situation to be in. Not sure if you’re saying that guys should avoid spending a big chunk of their income on social experiences or if they should avoid those kinds of adrenaline fueled social experiences altogether.

    It is going to be enjoyable and fairly easy to party, have a social life, make “friends” (read: acquaintances to socialize with), and enjoy those experiences in your 20s. In your 30s, you’re pretty much going to be a loner for the most part and your body won’t crave all of those experiences anymore. Even if you somehow manage to get the opportunity to do it, you’re probably going to do it all by yourself and end up being that weird old guy at a club full of 20 somethings as others your age “grow up”.

    I read the post where you guys say it is normal to be unhappy in your early 20s but I would think that at some point, the guys who missed out on the fun in their college years would want to make an effort to address that before it destroys them on the inside and they can’t focus on their goals as much.

    • Wall Street Playboys says

      That begins at 26, also college is a blast. You shouldn’t miss out then if you know how the play the system.

      We have a detailed post on college. Regurgitate professor’s opinion to get top grades. Spend rest of time either working or messing around.

      Nothing is learned in college

      • Playing Catch Up says


        I love it when WSP starts going at age in just about everything whether it is finances or dating! Just lets the readers know where they should be in life at certain ages, at least gives them a general guideline. Would love it if the posts did this more and more, those are the posts that always stay with me.

        Going to have to disagree with you about college, especially if you majored in STEM as opposed to the liberal arts and business/finance. You will miss out, especially if you go to the best universities simply because the girls aren’t nearly as hot, parties by comparison are fairly lame compared to your prototypical party school (though some odd exceptions exist here and there, Penn seems to be one), and if you can’t afford to be in a fraternity it gets only more difficult at a lot of schools.

        I read your detailed post on college btw, good stuff in terms of admissions and picking a major. I also read your post about the 20s and 30s but would love for you guys to talk about how to balance the game, partying, and fun aspect of your 20s while also putting the time into making money.

        You went into it into some of your very early posts where you discussed how men really only need health, money, and social life/sex in order to be happy but it seems like you might have changed your stance on that.

        Just being selfish here, typical 20 something having a rough time getting any sort of a social life going after college.

      • Recent graduate says

        I think the trick is to enjoy your work (aka building businesses) so much that you don’t even think about missing out on partying.

        Likewise, the reason you may feel like missing out on “the fun” is because you see how happy social party animals people are. Their “work” consists of making and spending time with friends and they enjoy their “work” so much that they don’t even think about making money in their 20s.

        WSPs has mentioned many times about taking a night off a week for fun. Now you don’t have to have fun the way everyone you see seems to have fun. You just have to be honest with yourself and find your niche social group. It can be traveling, partying, language exchange, etc. I personally spend two weeks a year traveling to exotic countries and get along very well with my fellow travelers despite working all the time and “missing out” on the typical 8 month long backpacking adventure. I don’t party and I don’t think about missing out on partying anymore now that I find building businesses, which occupies 90% of my time, extremely rewarding (pun) and challenging.

        You definately sacrifice a lot of social time in your 20s if you work hard but there’s no need to worry about your social skills deteriorating by the time you reach 30. Social skills can be learned easily (like game) and you can practice with anyone even while at work. And yes, if you’re rich and in your 30s, you will look like the loner at the club aka the only one there with his life together, razor sharp game and a custom suit…

  13. says

    Hm. This post is provocative, but it’s also all over the board and includes advice that directly counters the title!

    In reality, saving rate is the most important number in personal finance. It’s the only thing that matters. Without a high saving rate, you don’t reach a high net worth. I agree that a 10% saving rate isn’t enough. I want people to save half. And, apparently, so do you.

    You write: “Every year you work should result in a year you do not need to work.” In other words, you’re arguing that you should save half your income. You’re urging a 50% saving rate. And that’s great! Because with that level of saving, your readers can escape the 9-to-5 in just under twenty years.

    But it’s disingenuous to say that saving rates are worthless in an article where you’re urging a high saving rate. 🙂

  14. David Nystrom says

    RE point 5–*math doesn’t lie*. Wall Street Playboys very nearly hit the nail on the head with income 20x expenses.

    In 1998 three finance professors at Trinity University conducted the *Trinity Study*.

    The Trinity Study examined securities markets between 1925-1995 to examine maximum portfolio rates of withdrawal that would allow keeping up with inflation while preserving capital over a 15-30 year period.

    The study found that withdrawal rates of up to 4% were generally safe.

    The “early retirement” crowd has done one better and created a tool called FIRECalc.

    FIRECalc uses historical market data all the way back to 1871 to present you with a hypothetical scenario of what you retiring *today* would look like for any given year going back to 1871. The site also has another calculator for those still building their portfolios (hopefully everyone reading this comment…).

    This allows you to see how you’d hold up if you’d lost your job/business in a worst case scenario like 1929 as well as how great you’d do in a best case scenario like 1982.

    Note that taxation is not included so adjust accordingly (Americans use 15 or 20% to reflect long term capital gains and qualified dividend rates).

    As to all the guys complaining about cost of living…even in high cost of living cities you’d be surprised how much you can save. There’s a post on Mr. Money Mustache (think of him as a less ambitious Financial Samurai) about a couple in MANHATTAN obliterating $100k of student debt in one year, and neither in lucrative professions.

    If you start your own business that doesn’t require you to be in an expensive metropolitan area more than two days a week then housing in the USA is dirt cheap. You can buy perfectly serviceable houses in small town America for $50,000.

    Note: this isn’t a post in support of extreme frugality or (worse) early retirement, just pointing out that a lot of expenses are simply not needed no matter what your situation or goals (unless your goal is being broke).

  15. RihannaDeservedIt says

    OT new study shows that making 250K effectively puts ugly rich men on the same playing field as the best looking average men in terms of dating. I don’t know about you guys but that is incredible news to me.

    Also wanted to say thanks for this blog, the ambition on here is contagious and the networking tips have helped me break into finance.

  16. says

    “There is no point in living in a vibrant city if all of your income is going to taxes and rent.”

    Truth! I’ll never understand why people move to San Francisco to work at a fast food chain.

  17. idea1 says

    Sound advice, especially for pure wage earners.

    I’d like to add another dimension, one I find relevant but may have been outside the scope of the article: being a [successful] business owner changes the savings calculus tremendously.

    Business owners have significantly more control over their pre-tax income than wage earners. “Reinvesting” can save you ~40% more simply by using pre-tax money.

    This has so many benefits it gets ridiculous.

    And before anyone starts whining about diversification: if you’re smart, you can legally use pre-tax profits to fund the development of new income streams. Diversify those.

    Easy-math example: your wage-earner buddy makes $100k, takes home $60k (~40% taxes), saves half ($30k), spends $30k. You make $100k and want to invest the equivalent of after-tax $30k? That’s a $50k pre-tax reinvestment. Hell, bump it up to $70k, take $30k as income, and you’ll save a ton on income tax too.

    This compounds quickly.

    If I were doing this all over again, I’d save every damn cent I could possibly spare in my early 20’s until I had capital to start a business and then do the above. Living cheap really, really sucks in your 30’s.

    • David Nystrom says

      Entered my 30s recently.

      Living cheap is just fine with two caveats:

      *You don’t have roommates
      *You don’t live in bad neighborhood

      My monthly spend is around $1,000 and life is great. I live much cheaper now than I did in my 20s or even my (late) teens.

      Of course I live in a rural area…this would not be possible or even desirable in a large metro area.

  18. REIT Game Strong says

    Content is straight fire and much appreciated by us young gunners on the make.
    Just one question regarding a side business: How can you get around FINRA’s outside business activities rule when starting out in Aff Marketing? Currently a first year analyst at a MM.

    Much Appreciated

  19. Gavin says

    I’m 24 recently graduated college this past August (late due to changing majors) and just started out one of the bigger investment firms to make it as a FA in Houston, TX. I decided this career path because it is a career, not a job and has no cap on earning like many sales jobs (territories, etc.) I know it won’t be easy especially with my age but I’m going for it. Houston is NOT cheap to live in. Rents are inflated as hell and parking downtown where my job is ridiculous. Right now I’m only making 48k before taxes while studying and have some accounts waiting for me. I would not be able to live off 24K no way so this plan is a good goal for me to get to as I move on in my career. I like this post a lot and Wall street Playboys a lot, glad I found yall. I think there are many people in my career field that read you alls stuff and think it would be cool to write a wealth management career based article. Keep up the good stuff!

    • Tyler says

      You’re single, and don’t think you can live on $24k in Houston, the cheapest of all the big cities? You’ve got a long way to go my friend.

      • Gavin says

        Yes I could in retrospect, but I would live in a terrible part of town and eat Ramen every day. Parking for my job alone is 200 a month. And I make 48k before taxes, so to save half of my net income in Houston and try to be alive every day is not doable in my opinion…. You clearly do not know Houston.

  20. Jonas Bro says

    Hey guys,

    I’m a 22 y/o senior working at a famous tech company in NYC after graduation. I want to take an optimal approach to my savings. With good performance (75% percentile, I am aiming higher), my comp growth would look like:

    $160k (my new grad offer), $200k-$225k, $250k-$280k, $280k-$320k,

    Since my current base salary is $110k, I’m thinking of investing my cash and stock bonus every year and living off of $110k for the duration of my time there. This means I’ll be living in the same apartment at $250k that I did at $160k. Given that I could put money in a 401k or sometime else that’s tax-free, I feel like I should be saving enough.

    This isn’t as aggressive as the savings rates given above which I read thoroughly) but NYC is a ridiculous place to live and I need to be here to get put on high visibility projects. What do you guys think?

    • Jay says

      How did you get to the point that you’re at now?? I’m also in the tech industry but I’m a freshman. I just want to make sure I’m not making a mistake by choosing tech instead of finance or sales like everyone is advocating.

      • Jonas Bro says

        If you like tech, just do it. The upside is way higher than in finance/sales because there are plenty of things you can do – HFT programming, ML research, Web UI to name a few – and the exit is obvious (start your own company). If you’re looking for how the comp stacks up to finance/sales, go to for new grad and senior engineer numbers at the big names (Facebook, Microsoft, Amazon). My comp numbers are for a big name in NYC.

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