Antony Holmes


I write most of the posts because this is my site.

That's me posing by the Hudson River for no particular reason.


CEO, CTO, employee #1, all of the above

Small changes can lead to big outcomes with a little bit of disipline.



You might have heard a rubbish, but frequently repeated, expression along the lines of **Save $5 on a coffee a day, retire a multi-millionaire** popularized by financial gurus like Suzie Orman and Dave Ramsey.

Sometimes called the **latte factor**, because everything requires a name and and a brand nowadays, no matter how mediocre, it's the idea that cutting out the small purchases (like lattes), and investing that money over time, will give you a big retirement nest egg.

Whilst the idea is not althogether unreasonable, it's a little disingenuous, and misleading. If you save $5/day for 250 days a year, every year and compound that over 35 years at an average 6% return, you get **$140,000**, which is A LOT of money, but it isn’t a million.

## Can we take away anything useful from this though?

We sure can. The kernel of truth is that one small change might not make that much difference, but one change can lead to others and many small changes can add up over time to something big, really big. Something much bigger than a small potato: a really big potato or even a cauliflower.

Ultimately, financial freedom and building a retirement nest egg requires disipline for which no amount of buzzwords and phrases can help you. It requires a particular outlook and way of thinking. Skipping the coffee is symbolic. You have to want to meet your financial goals strongly enough that you're willing to make sacrifices and optimize parts of your lifestyle to trade short term gratification for long term success. So the next time you’re standing in line at Dunkin', think about it. Are you willing to do whatever it takes to become financially independent?

## Want to live like me?

I doesn't drink tea, coffee or alcohol so the latte factor is built into my lifestyle and as well as saving I have fresh breath and a limited need for teeth whitener, but I fully appreciates that this isn't for everyone.

Small Potatoes

There's an old adage in financial circles that **you get what you don't pay for**.



Just like with vanilla ice cream, sometimes the simpliest, plainest option
turns out to be the most financially delicious.



Don't be fooled by people telling you that investing is inherently complex and you have to pay someone to manage your finances.

You can easily create a simple, low cost investment strategy and manage it yourself which will out perform 90% of the strategies financial managers will try to sell you on.

Just follow these simple steps and you can largely forget about your money and what the markets are doing and go do something more interesting:

- Save at least **20%** of your gross income every year towards retirement.
- If you have access to a **401(k)** or **403(b)**, try to max that out, especially if you get a company match.
- Try to fill your **Roth IRA** or **Roth 401(k)** .
- If you have money left over, invest through a taxable brokerage account.
- Invest a sizable percentage of your money in risky investments such as stocks, and put the rest in bonds.
- Use a low-cost total stock market index mutual fund and a low-cost total bond market index mutual fund for your investments. You don't need anything else regardless of what you may read.
- Don't change this % no matter what the markets do. Plan to decrease your investments in stocks over time and re-evaluate your plan every 5-10 years.

Not sure what % of stocks your portfolio should be? Use the [Benjamin Graham](https://en.wikipedia.org/wiki/Benjamin_Graham) rule of thumb and pick the highest value between 20-80% you think you can tolerate. 60% is a reasonable, though quite conservative, starting point.

Make sure your investments are with a reputable, low cost brokerage such as Vanguard, Fidelity or Schwab. All of these are great companies so pick the one you like best.

<div class="conclusion">
<h2>Here's the scoop</h2>
<ol>
<li>Save a lot.</li>
<li>Fill up as many tax advantaged accounts as you have access to.</li>
<li>Buy total market funds.</li>
<li>Use Lactaid if you can't handle ice cream.</li>
</ol>
</div>

Small Potatoes

The Vanilla Investor