Even on down days now, the WylieMoney portfolio is holding up. The 1.27% increase for the week was way better than the S&P 500 ETF, SPY which only gained 0.4%. Year to date, the WylieMoney portfolios have pulled even farther ahead of the mostly index fund portfolios that had, at one time, been in the lead.
S&P 500
ETF 20
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A great quote from the article is:
"I would walk into (a work social event) in my $60 thrift-store gown and my $10 Payless shoes and I would feel like an actual millionaire, because I was..."
So are these strategies extreme?
Cook cheap meals at home. I've already written about tips for saving big time on food costs.
Drive an economy car. I drive a Civic Hybrid. We did buy it new, which was not frugal, but used hybrids were going for close to new prices if you could actually find one. We wanted one so we bit the bullet. We would have spent more money taking the commuter rail than we paid for the car and gas for the 80,000 miles we have put on it and maintenance since 2003, so not only do I enjoy it, it has been a very good deal for us.
Find affordable housing, even in expensive cities. When I got married, my wife and I moved from an expensive apartment near Cambridge to a home outside the city. The mortgage/insurance/real estate tax total was more than our rent, but not by much. After the tax write-off for our mortgage, which was more than the rent write-off that Massachusetts actually does allow, our housing costs were about the same. Rather than buy a more expensive home which our combined incomes would have allowed, we kept our housing costs low and doubled up on payments. After a couple of years we were able to refinance for a 30 year fixed loan at no points at 5.375%. Even with the subsequent spike in real estate taxes that naturally followed the reduction in federal taxes and thus a reduction in state and local tax revenue, our housing costs remain in line with what our rent would have been and we have built equity.
Don't run the AC all the time. We don't own an air conditioning unit. There are a few nights a year that this is not comfortable, but we survive.
Don't spend more as your income rises. Of course nobody wants to just scrape by and if your first salary is not great, you are going to increase your spending as you earn more. But it is up to you and your circumstance how much you increase your spending and if you are frugally minded, you will find that over time you can do more with less. So you can actually do more without increasing your overall expenses. If you lived just fine on your salary 10 years ago and work smart and get promotions, your income should be higher than what you needed to live on back then. Only you can assess if you can you get by on 25-50% of what you earn, but be honest!
I'm going with not extreme on these strategies. Sure I would not make some of the other choices discussed in the article, but I do other things not mentioned. Not buying cable saves me hundreds of dollars a year. Some call that extreme! I'll reevaluate it in my 40s...
When picking each fund I looked at a variety of factors. I wanted a portfolio that could work for a non-retirement account so tax efficiency was important. Rarely was there one fund in each category that was the best in every aspect so the selection was sometimes more art than science. Here are the factors I considered:
Then on May 1st of 2007, I 'hypothetically' invested $50,000 in the 20 funds I selected. I set up a portfolio at Morningstar with $2500 'invested' in each fund. Then I set up $50,000 in a portfolio of Vanguard funds to see which would perform better.
The funds I picked are mostly managed funds meaning managers pick and choose which companies they think will do well and invest in them. Most of the Vanguard funds are index funds, meaning the 'supervisor' of the fund invests in every company in the index the fund seeks to track.
I also invested in 20 ETFs which can be loosely described as index funds that trade like stocks. Later, I set up another portfolio of three index funds and invested 55% in US stocks, 15% in bonds and 30% in International stocks. This was close to the percentage breakdown of the 20 fund portfolios and I wanted to see if just picking three broad index funds was just as effective as attempting to keep track of 20 different funds. I 'invested' $50,000 in SPY an index fund that tracks the S&P 500 index. And finally, I set up a portfolio that will add one new fund each month until it has 20.
Below are the details about each fund. I am listing the category the fund covered when I picked it, the ticker symbol with a link to Morningstar's details about each fund, the name of the fund, my post explaining why I picked it, an indication of whether it is a managed fund 'M' or an Index fund 'I' and the order in which I picked the fund.
WylieMoney Slowly
Really Lazy Three Fund Index
S&P 500
The Details (Click the image for a larger view):
