Overall, I think this is great article, but I have two quibbles:
1. Start a business if you want to get rich: you can also start a business if you want to lose a lot of money. I lost nearly $100k that would have otherwise gone into my retirement trying to start a business. Most businesses fail. So think starting a business should be seen as a high-risk investment.
2. You can't get rich on a salary: My wife and I have never made six-figure salaries. We are in our mid-40s and we will be breaking $1 million in retirement savings this year if the economy stays stable. We did this by maxing out our 401k contributions since our 20s.
Becoming a millionaire is a lot of hard work, but if the recommendations in this article are too extreme I've always appreciated Elizabeth Warren's advice of 50/30/20: 50% of spending on necessities, 30% on fun, and 20% on savings. Using this a guide, I've been able to tell when I need to downsize my spending and I've been able to spend on fun without feeling guilty.
Yes that part of the article was classic survivorship bias. Ask 100 millionaires how they got rich, and 62 of them started a business! They should ask 100 people who started a business how many became millionaires.
No, that's the median full-time wage. It'll be just near $50,000 for 2018.
Two full-time incomes for a household, you can easily get to $85,000 to $120,000.
What you're referring to, includes every person that generates any bit of consequential income. Part-time workers, or people earning $8k-$10k over the Summer, are included in the total median figure (which is closer to $30k).
More than you might think. 1 in 20 people make over 200k / year. 400k is not enough to get someone into the top 1%.
So, several million Americans are making 1/4 million + per year before taxes. Which is why millionaire does not really qualify someone as rich anymore. Consider 1 million in 1915 is the equivalent of ~25 million in 2017 which is closer to what most people think of as rich.
Slightly different measurement, on their graph 20% of people made less than 10k/year and they list and use: $27,000 was the rounded median individual income in 2014. But, they are not measuring people on a salary.
Well, you weren't either so it seems fair. "1 in 20 people make over 200k / year" -> As you probably meant full income earners it would be interesting to see what it would be if measured actually for "people".
People in the highest income brackets tend be working full time significantly more in large part because people near retirement get both dividends and a full time salary, but people in retirement are generally drawing down their wealth.
So, they may not be making 420k exclusively from their job, but 200+k / year is surprisingly common.
> . You can't get rich on a salary: My wife and I have never made six-figure salaries. We are in our mid-40s and we will be breaking $1 million in retirement savings this year if the economy stays stable. We did this by maxing out our 401k contributions since our 20s.
Definitely not true. Or are the $1MM+/year jobs a myth to you?
One size fits all rules don't apply here. If you're pulling six figures in the bay area you could easily be spending 50% of your take home on rent. Another 20% on other necessities.
Toss in an individual with college debt, or medical issues, or financial family obligations, and you might not even have the option of accruing any wealth at all.
>If you're pulling six figures in the bay area you could easily be spending 50% of your take home on rent.
You also put up with a longer commute, less house, or a less nice neighborhood and keep your rent under 30% of take home pay.
Edit: Per [0] if you make $100k you end up with $5752 a month in take home pay. At 30% that would give us $1725.60 a month for rent. Checking craigslist [1] there are 55 places available for less than that if you are willing to rent just a room.
That's easy, if you're single. But "renting just a room" isn't really an option for couples, or families.
That said, if you're moving to the Bay Area for a job, you need to take into account that six figures here is not the same as six figures anywhere else.
When my wife and I first moved out here, we rented a master bath/master bed starting in January, we hard our son in July, and moved out in January. So it is an option, just not one a lot of people want to take. Then again, my wife and I want to be retired in <15 years so we are making decisions others would not.
It's one thing to do it for 6 months with a newborn that can't leave their crib (although even that's challenging). It's another to do it with one or two kids that have learned to walk.
Eh.. sort of. I lot of people argue you shouldn't spend more than a 3rd of your income on home. You argue that it's %50 in the Bay Area.. but I don't think that invalidates the 3rd rule - that's simply a bad area/job.
If I make $300k in a place where it costs $280k to live, I'm basically poor. It doesn't invalidate the 3rd rule, or this 50/30/20 thing - if anything, I'd argue it validates it.
1. Buy a house in a place where it's normal for people for rent rooms or have roommates.
2. Rent out all of the rooms other than the one you live in.
3. Renovate the house, depreciating all expenses.
4. Make all necessary repairs, deducting all expenses.
5. Buy things like solar panels, which also can be depreciated (5 years) and improve the cost basis of your home.
6. When the house is paid off from rental income + what you had to pay in mortgage anyway (this will take between 5 to 10 years. This means if you're mortgage is $3000 and your rental income is $3500, don't pocket the cash. Put most of the rental income towards the principal and save some for repairs/improvements.) Buy another house and do a 1031 exchange.
7. Repeat step (1) with a nicer house, ideally with a duplex/triplex/four-plex. Stop repeating when you're seeing diminishing returns on the cash flow of your home (this will likely be at the multi-family level).
Eventually all of your housing related expenses will be 0. Take the money you would've had to spend and put it into an index fund.
Unlike most advice, the above steps are guaranteed to work as long as you buy a house you're capable and willing to pay the mortgage of without renting it out. Finally, because you're an owner occupant you have the ultimate leverage and it's effectively zero risk, since costs are spread across your tenants and benefits go to the property you own.
What's the catch you're thinking? Why doesn't everyone do this if it's guaranteed?
Turns out people don't like being a landlord or living with others. Swallow that pill and financial success is inevitable as long as you don't try to become an investor (that's an entirely different set of problems). You also have to be willing to do this even if you have a family -- however if you started this early enough (up to late 30s) you should be able to transition over to a multi-family in most markets and still have some privacy for you and your family.
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Unlike a lot of other advice, you don't even have to make a lot of money to do the above.
> When the house is paid off from rental income + what you had to pay in mortgage anyway (this will take between 5 to 10 years) buy another house and do a 1031 exchange. This means if you're mortgage is $3000 and your rental income is $3500, don't pocket the cash.
Just to be clear, that is not what a 1031 exchange is. A 1031 exchange allows you to sell a property and buy another one, all while deferring the capital gains tax, so you have more principal to put into the down payment [1].
I think the more accurate advice here is when your property has appreciated enough from your renovations, repairs, and market appreciation, you can use that appreciation when selling + your principal (equity) to put a down payment on a bigger unit (such as a multiplex) and repeat the process.
> When the house is paid off from rental income + what you had to pay in mortgage anyway (this means if you're mortgage is $3000 and your rental income is $3500, don't pocket the cash)
The other catch is that housing doesn't always go up. It's awesome until you see a 30% drop in housing prices and your paying off a $300k mortgage on a house worth $200k.
This is irrelevant since you're an owner occupant. You're generally right, though. The goal with the strategy outlined is to hedge against that by living there yourself. That and tenants will protect you from appraisal gotchas.
Not true. There are plenty of cities in the US where you can buy a very nice house with several bedrooms in the 150k-250k range. You can get by with even less if you're willing to start with a fixer-upper. Totally doable for non-millionaires, especially if you're starting off with a mortgage as the OP described.
And plenty of people still seek roommates in these areas; lower housing costs also tend to correlate with lower wages and general cost of living, so it doesn't mean everyone is going to automatically live alone just because you're not in SF or NYC.
Ok so that means moving to a shakier employment environment (you are relying on employment while you bootstrap), so this becomes riskier than “guaranteed“.
This is only true in coastal bubble cities. It's perfectly viable in the 90% of the country that isn't those places. My setup is similar and I didn't start off rich at all.
Nope. I have a friend (Minneapolis, MN) who was doing exactly this, and she was far from rich. Last time I talked to her she owned a triplex and was renting out the upper two floors on a per-room basis, while she lived on the ground floor.
OP is right though: most people don't want to be landlords. I was for a few years, then decided I didn't really want to be in that business. Pity too: my tenants were great and I was bringing in +$300/month over mortgage/insurance/etc. costs.
This advice can work out really well, or really poorly.
I live in one of the largest cities in North America, and despite nearly three decades of house prices rising every year, a quarter of the houses in the city are still worth less than they were in 1989. What I pay in rent for my place would only cover about 60% of the mortgage. The only way for your plan to work out would be for housing prices to continue to skyrocket for many years. And they might.
Instead, I took the downpayment for a house, plus the 40% I save every month from not having a mortgage and put it in index funds. Things will have to go really well in the housing market and really poorly in the equity and debt markets for me not to come out ahead.
How viable is this if you're not a handyman? I've always thought something similar to what you're referring, but avoid it because I don't deal with anything construction related.
Not at all. I've done this with my family, friends have done this, and it is definitely not for everyone - especially if you dont like doing all the repairs and renovations yourself all the time.
I hated it, and sure after 10-20 years you are sure to succeed, and those who do this do well, but for me it is not worth it. I'd rather spend my free time doing just about anything except having to deal with all the headaches you have as a landlord and handyman.
It's viable. Just make sure you get an inspection prior to buying the house (usually $1000 and under for this) to avoid getting a money-pit. Save a chunk, say 25%, of rental income and just hire people to resolve minor problems.
Again, if you decide to do this get an inspection. You will be screwed if you buy something with structural, plumbing, electrical or foundation problems (which are technically structural, but I put in its own category since it's that bad).
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That being said, you're definitely going to want to learn how to do some basic stuff like drywall, change outlets, tighten pipes, etc.
If the house is in reasonable shape when you buy it you don't have to be very handy at all. If you take preventative care, like checking the roof, cleaning out gutters, basic inspections monthly, you really shouldn't have any large expenses.
Also there is a literal legion of professionals who can fix any issue you will encounter.
The above advice doesn't apply if you are buying a distressed property that will require significant upgrades and repairs.
Beware you may have a harder time getting a mortgage if you plan to use the home with tenants, even owner-occupied.
When refinancing our place (which we don't rent out) there was a lot of back and forth over this subject when I merely asked if it was possible - the bank got spooked. (We have excellent credit and can easily pay 3-4x the monthly costs fwiw.)
Eventually we convinced them we had no intention to proceed with renters (because we didn't it was just a question), but I imagine it would have changed the financials pretty drastically if we had actually intended on pursuing it. I don't know if a refinance versus original purchase made it different.
More accurate advice I would say is, just don't tell the bank whether you plan to have tenants. At least in Canada, the bank wants you to lie, closing the deal and banking the commission is all that matters. Risk is offloaded to the Canadian Mortgage and Housing Corporation, or if a bubble pops, directly to the Bank of Canada who will take any risky mortgages off bank balance sheets, as demonstrated in 2008.
I would re-phrase it as the classic lawyer advice - only talk when answering a question, and only answer exactly the question that was asked.
For my case (parent post) this would have manifested as me just not asking about tenants, and if they brought it up as "are you planning to have tenants" I would say "No" (not "maybe" - no plan existed at that point!)
I'm starting with steps 1 and 2. I'm hoping to get a 3 bed mortgaged with repayments around $860, plus bills and taxes around $330. Rent out each spare room for around $555.
As far as I know in the UK there are no income tax benefits unless you are a proper landlord letting out properties.
It's not quite as lucrative as perhaps your suggestion, but if I take the profit from the lodgers and overpay the mortgage, it would be paid off in around 9 years (and I certainly won't be a millionaire at the end hah!)
And it's quite theoretical, as I'm not going to live with 2 people for 9 years, but that's the math.
I'm not familiar with UK tax law, but you don't have to live with 2 people for 9 years. I'd do it until you have enough to put a down payment on a multi-family and transition to that. Then you don't have to live with the other people, but you still have the advantages.
This is true. One thing I want to add though, is that at least in your unit, standard housing laws do not apply -- meaning you can discriminate on any basis in regards to the people you allow to live with you.
They're very numerous, including but not limited to:
1. A higher downpayment is required to purchase property. This means significant liquidity is taken from you immediately.
2. Investment property is often more distressed and/or requires more upkeep. Add the fact that you're not physically on the property and you'll see how you only will be reported for expensive issues and not preventative maintenance, which you can't really do as an investor (there are laws around just going in your property).
3. The biggest issue as buying as an investor is that you have to have a lot of money to cover vacancies. Under the plan outlined earlier vacancies don't matter since you'd only do it with a house you can afford with or within tenants.
Have an income that can get you a mortgage for a starter property. The median existing US house is about $220k to $250k depending. Assume you shoot lower, $175k. Texas, and three dozen other states, are overflowing with houses in the $175k to $225k ballpark.
Your primary challenge will be the downpayment. You'll either need to involve another investor, family/friends, do something risky on debt, or save for a number of years first.
The big caveat here is that you have to actually live in one of the units. This is commonly referred to as 'House Hacking' and you can buy up to a 4plex, I believe.
Otherwise, barring some creative financing, you'll be putting down 20-25% of the purchase price.
Absolutely right here. If you're not an owner occupant it doesn't make sense. One other reason you want to be an owner occupant, in addition to financing, is that you're closer to the action, meaning your property will be far less likely to be ruined as you respond to things way faster.
> a lot of millionaires live on something like 10% of their income. Everything they own, their house, their cars, even boat, doesn’t surpass 10%. You can apply this thinking too!
Something tells me the people able to live on 10% of their income have at least one "multi-" prepended to their "millionaire" label.
In SF, doing this while living in a 1BR apartment would require a yearly income over $430,000. San Jose, over $300,000. In NYC, DC, Boston, Miami or LA, you'll need at least $240,000 a year. National median rent ($1234/mo) still needs above $150K/year. And that's just rent, no frivolities like "eating food" or "wearing clothes".
Presumably once you're a millionaire, you're past the point of needing to rent a 1-bed apartment in high CoL like the other working stiffs. You can retire to a lower CoL area and live off your investments, or switch careers.
I always translate monthly expenses as 2055 dollars, because that is my target retirement date.
If something in 2018 costs $100/month that means it costs $1,200/yr. You can expect to see about 8% returns in the stock market over the long term. By saving $100/month for a year instead of spending it I will have ~$20,000 in 2055 money. If I continue to save the $100/month instead of spend it I will have ~$275,000 in 2055 money.
Edit: Translating to your target retirement date dollars also works for one time purchases.
Have you accounted for inflation and the fact that your assumption about stock market returns may very well be completely false since past results do not imply future returns?
The best way to get rich is to generate a large amount of value for a lot of people as fast as possible in a way that you will directly benefit on the upside (imho.) Not pinch pennies and put your fate in the hands of returns on a specific asset class.
1) I am aware of inflation, but my calculations shown don't consider them. A dollar today has slightly more then half the value it will have in 2055 if you assume yearly 2% inflation. I suspect we will have a few years with much more than 2% inflation between now and 2055 and we might be finished with years with very low inflation for awhile.
2) 8% returns at 2055 is a bit optimistic, but not unrealistic. I won't mind if I have to adjust the date +- 10 years to time the market. I feel comfortable putting the majority of my assets in the US stock market, but I do have some assets independent of it. The last the stock market crashed substance farming was popular.
You have to account for the expected value of those two approaches.
The payout on your strategy (generate a lot of value for a lot of people) is high, but the probability of success is very low. (And the payout is usually tied to the stock market, if you're talking about generating corporate equity value, private or public.)
Conversely, a dollar saved is just a dollar plus it's return over time, but the probability of saving that dollar is essentially 100%.
The probability may be low but the number of attempts allowed is unlimited (barring time / energy / other obligations). So one can keep trying until something sticks. The important part is to keep trying.
Even over a lifetime of trying, the probability remains pretty low. This is why articles like this emphasize that the more realistic was is via savings; lots of folks fail to save because they believe they're going to "hit it big" on the next deal / job / inheritance / lottery ticket, but it's usually just going to result in failing to save enough because you've over-estimated your future income.
It's also a convenient way to justify not saving enough.
I've watched fairly successful business owners make this mistake many times - they were making 400K or 500K (in some cases, millions) a year off a business, but not saving anything because they still expected it to grow a lot larger. If it fails to grow, then end up either broke or in debt.
It's inherent to entrepreneurs that they believe in the big future payoff more than average, but that's also a big blind spot for financial planning.
Probability of making onto the Forbes 400, very low for sure. Probability of building an income or capital base whose returns can match a typical salary, over a lifetime of attempts is very high.
Your examples showcase the pitfalls of bad planning and not the probability of business success. Success doesn't absolve one of the responsibility to plan, but being someone who did succeed can open up additional doors and options for the said plan.
I'd love to see your stats you're using to set that outcome's likelihood at "very high", relative to the probability of being able to save enough for retirement based on simply being a saver.
The entire problem is that most folks grossly overestimate their probability of future success, even over a lifetime.
(Not to mention likely done a lot of damage to your health and relationships, if you spend a career trying to finally achieve a big outcome... there are non-financial costs to taking bigger risks that we often fail to assess.)
Bigger risk wrt what exactly? Time? Working 60-80 hour weeks on entrepreneurial pursuits may boost your chances, but isn't required, except on a rare, brief inflection point occasions, IMO.
As for probabilities, spending 10 hours per week, thinking, and iterating on side projects, over the course of 10-15 years can bring a sustainable $10-15k monthly pre-tax income if done well. (I define well to be build stuff people want, focus on your customer, etc) If one's time horizon is smaller or income needs are larger, then there are other leverage points that can be used.
But the example in the post is just utterly stupid. What's the benefit of finding a cheap cellphone contract when it results in a crappy connections/coverage/dopped calls. Don't save money on things that make you unprofessional. Invest in quality for things that are important.
> What's the benefit of finding a cheap cellphone contract when it results in a crappy connections/coverage/dopped calls. Don't save money on things that make you unprofessional. Invest in quality for things that are important.
Adding to this point: Don't make your life suck today so 2050 you can live. What happens if you die tomorrow?
Strike a balance between making it rain and being a miser.
Thinking about costs as they apply to my finical situation in 2055 doesn't mean that I don't spend money in 2018 for enjoyment. I just look at the cost from a different point of view.
The real answer: save $20,000 a year at 3% growth for 30 years. If you want to do it in 20 years you need 8% growth, which is probably not sustainable; or you can save $35,000 per year at 3%.
8% annual average return is not unrealistic for the US stock market.
I did it using this method. I worked hard and lived within my means for 5 years. You'll quickly realize that after taxes a million isn't close to retirement money in the Bay area.
Cumulative return for the S&P 500 over the past 9 years (conveniently leaving out the 2008 crash), with dividend reinvestment, is equivalent to a YoY gain of 16.25%, which gets you to a million on $46,000 per year for those 9 years. However I think it would be foolish to presume that the stock market will continue to post those kind of gains forever.
> Cumulative return for the S&P 500 over the past 9 years (conveniently leaving out the 2008 crash), with dividend reinvestment, is equivalent to a YoY gain of 16.25%
That's a bit disingenuous to use the generational market lows of 2009 as your starting point. It would be like using the all-time highs of 2000 and the 2009 lows as your range. Then the cumulative returns would be negative ( including dividends ).
> However I think it would be foolish to presume that the stock market will continue to post those kind of gains forever.
It's impossible for any economy/market/whatever to maintain a 16% return every year.
> That's a bit disingenuous to use the generational market lows of 2009 as your starting point. It would be like using the all-time highs of 2000 and the 2009 lows as your range. Then the cumulative returns would be negative ( including dividends ).
Right, I did that on purpose, just as a way of showing that luck (in terms of accidental market timing) has a huge impact on returns. As I said in top comment, even 8% is not sustainable, let alone 16.
One of the pieces of advice I did not heed from my Dad was to try and save/invest 30% of your salary. This one is hard to understand until you are in your 40s and realise you are probably going to continue to work well into your 50s.
I love my job, but I'm now involved a lot more in the political arena, knowing I can make a difference there, but being held back. 'Having' to hold down a job is getting in the way.
I'm at peace with the choices I made but I also recognise I could not be working now if I'd been a bit more prudent.
>One of the pieces of advice I did not heed from my Dad was to try and save/invest 30% of your salary. This one is hard to understand until you are in your 40s and realise you are probably going to continue to work well into your 50s.
A single, healthy, 20 something SWE can easily save 60-70% and retire before age 40 if you really try. I’m right around 50% now. The key is getting over that mental hurdle to where you start enjoying saving more than spending. I feel infinitely more fulfilled seeing $1,000 in my bank account than anything an iPhone X could ever do for me.
Exactly. If you don't need the new car, new house, etc. you can save a ton of money. You really only need a room and healthy food and enough clothes for the week. Everything else is "cashing in early"
Oh come on, this is just survivorship bias, self-help crap. Millionaires are just normal people with lots of money, there's nothing particularly unique about them.
The millionaires down-voting you would beg to differ. But the main conceit isn't that they're normal people, it's that success is most often a combination of luck and the resources (financial, social, etc.) to take advantage of advantageous situations. That's not to say that wealthy don't work hard, but we as people often discount the influence that our uncontrollable circumstances have on where we end up, and almost no-one wants to admit they are where they are because of dumb luck.
It’s entirely predicated on luck, but rephrase luck as “opportunity” and see you then need to also have the skills and perseverence to capitalise on that opportunity. Of course, the problem is there is having the luck to be born into a situation where you could develop those skills and attitude, either through genetics or an encouraging family environment.
Yes, a good way I've seen of phrasing it is that your opportunity depends on 'luck' and in those lucky situations it also (sometimes) requires the skill to capitalize on it. But your skill to capitalize is highly dependent on your 'lot' which is what you were born into (really just another form of luck.)
Claiming that this is survivorship bias is off the mark. That is not a criticism that you can level at any long-term study just because you heard it on the internet. If the intent of the study is to evaluate what terms lead to survivorship, then of course your study is going to be full of survivors - as this one is.
While the assessment undoubtedly suffers from some bias, that is also the intent, to some degree. It does not seek to say that these are the only reasons people became millionaires, but instead that these were common, correlated behaviors, and that the logical conclusion you might draw from them is that they are also causative.
If you only study millionaires and not the rest of society you have no control. You can't say humility makes people millionaires without looking at all the people with humility who aren't millionaires. This guy hung out with millionaires and is pretending their virtuous traits are somehow unique or somehow the reason they're millionaires. That's the definition of survivorship bias.
1. most people aren't even exposed to the opportunity to gain any appreciable wealth. step one is getting out of salaryman slavery existence and getting into companymaking, rent extraction, financial swindling/legal tax evasion, etc. the author mentions the last point, but it's too far down the line. step one is to start playing the game to win, and start trying to make real money rather than subsistence...
2. luck is probably more influential than what people suspect. see: zuck, bitcoin millionaires
3. compound interest is real, but most people in the US are living hand to mouth so reaping the benefits takes far longer than they are willing to wait-- this isn't a failure of patience but a pragmatic choice to survive until tomorrow. you ask them to stash thousands of bucks today for twenty years down the line, and they'll tell you they're already running on empty. you ask them to stash $20 today for 50 years down the line, and they'll say they'd rather have it in their pocket to pay for medicine. and they are not wrong; they can't risk even temporarily losing some of their wealth because they have so very little to gamble on investments.
4. being frugal is real, but the opportunities don't exist in places where being frugal is very effective. the more expensive the place, the more opportunities flow through it. cities have more expensive food, very expensive rent, and 100% of the opportunities that someone will need to get rich.
5. oh yeah, and it's impossible to be frugal when you have student loans bleeding you right out of the gate. 6.5% interest loans does a great job of snuffing out potential millionaires everywhere through no fault of their own.
6. learning and writing stuff down is great. but becoming rich isn't a matter of knowing the path. it's necessary to know stuff, but you need to actually walk the path to wealth without stumbling-- different skills entirely.
I went to a state school and worked to pay my expenses so there’s always that. I just checked and in-state tuition is still low enough to be paid from part time employment, so no the world hasn’t suddenly become unfair to young people.
Many of the wealthy folks I've met didn't get there by saving and scrimping. They either founded a business and won (usually after a few losses), landed the right job or inherited it.
Spending your prime years focussing on nothing but retirement seems foolish to me.
It takes capital and the capacity to take on risk to start your own business. Many younger people nowadays start their careers with tens or hundreds of thousands of dollars of debt. It's suspected that this is what is causing the declining startup rates[1].
Sounds like humility is a common personal trait, from the article. And among the people I know, patience with others seems to be a common personal trait.
I feel like the cocky entrepreneur stereotype only has the slightest success because of their persistence.
I don't get something : how 520 weeks (10 years, on a false base of 52 weeks per years) result in multiplying by 752 a weekly expense for the equivalent f 10 years.
1. Start a business if you want to get rich: you can also start a business if you want to lose a lot of money. I lost nearly $100k that would have otherwise gone into my retirement trying to start a business. Most businesses fail. So think starting a business should be seen as a high-risk investment.
2. You can't get rich on a salary: My wife and I have never made six-figure salaries. We are in our mid-40s and we will be breaking $1 million in retirement savings this year if the economy stays stable. We did this by maxing out our 401k contributions since our 20s.
Becoming a millionaire is a lot of hard work, but if the recommendations in this article are too extreme I've always appreciated Elizabeth Warren's advice of 50/30/20: 50% of spending on necessities, 30% on fun, and 20% on savings. Using this a guide, I've been able to tell when I need to downsize my spending and I've been able to spend on fun without feeling guilty.