Riding a bike can save you a million!

Jawgap

Interesting, but not sure how accurate it is

http://bicycleuniverse.info/

Beasty

Completely unrealistic!

It assumes a 6.72% return on the cash saved - show me where you can guarantee that sort or return over 35 years and I'll make myself a multi-millionaire

The 6.72% is basically the balancing figure to give the author the answer he is looking for ...

Cookie_Monster

also one bike in 35 years :pac:

AstraMonti

Cookie_Monster wrote: »

also one bike in 35 years :pac:

That's the only doable thing in the quotation !

Ryaner

Most US tracker funds got 7-8% long term returns. They do have the benefits of very low fees however, 0.25% low compared to the 4-5% we have in Ireland.

The costs side of cycling is very low however. As cookie_monster pointed out, 1 bike over 35 years is unrealistic by any account, as is the wear and tear figures for anyone replacing a car with a bike.

mgmt

Ryaner wrote: »

The costs side of cycling is very low however. As cookie_monster pointed out, 1 bike over 35 years is unrealistic by any account, as is the wear and tear figures for anyone replacing a car with a bike.

You could add a depreciation charge in the maintenance tab to account for a new bike every 5 years or so.

Beasty

Ryaner wrote: »

Most US tracker funds got 7-8% long term returns. They do have the benefits of very low fees however, 0.25% low compared to the 4-5% we have in Ireland.
.

I note the past tense there Ryaner - I would hope the world is a bit more realistic nowadays, with the likes of Madoff and Stanford not setting the "standards" for everyone else to try and match

Then there's tax on your investment returns....

It is impossible to outrun overall growth rates indefinitely (if it was the investors benefiting would own more that there is to own). I appreciate we are talking 35 years here, and I may well not be here to be proven wrong, but I think (and definitely hope) that the days of those sorts of returns are behind us, as it inevitably means someone else is paying for it (such as the Irish taxpayer should the country ever be able to return to the Bond Markets).

ROK ON

Beasty wrote: »

Completely unrealistic!

It assumes a 6.72% return on the cash saved - show me where you can guarantee that sort or return over 35 years and I'll make myself a multi-millionaire

The 6.72% is basically the balancing figure to give the author the answer he is looking for ...

BIG +1

Ryaner wrote: »

Most US tracker funds got 7-8% long term returns. They do have the benefits of very low fees however, 0.25% low compared to the 4-5% we have in Ireland.

Untrue yet trotted out regularly. 7% is the mean return from investments over the very very very long term - but it is the return that you are least likely to ever observe in any one year. Returns are either double digit or very low single digit to negative. Furthermore the returns are completely dependant on one variable and one variable only - the starting valuation.

Finally this return is nominal. It does not take into account inflation. Even of you could save $1m, over a life span, that would be nominally, with no account for the purchasing power of that cash.

Ryaner

Beasty wrote: »

I note the past tense there Ryaner - I would hope the world is a bit more realistic nowadays, with the likes of Madoff and Stanford not setting the "standards" for everyone else to try and match

Then there's tax on your investment returns....

It is impossible to outrun overall growth rates indefinitely (if it was the investors benefiting would own more that there is to own). I appreciate we are talking 35 years here, and I may well not be here to be proven wrong, but I think (and definitely hope) that the days of those sorts of returns are behind us, as it inevitably means someone else is paying for it (such as the Irish taxpayer should the country ever be able to return to the Bond Markets).

Over 35 years, those are the returns "people" expect from an averages stock based investment. And since this example is purely for fun and to benefit the cycling image, you take certain liberties such as dollar cost averaging, hitting the high days, missing the low days, and ignoring tax because you leave the "investment" in-place to increase the figures.

That all said, I don't actually believe it is possible starting now. Anyone who is going to cycle for 35 years will probably dabble in recreational cycling - and that is the first step to financial ruin as the new bikes/wheels/clothers never stop.

ROK ON wrote: »

BIG +1



Untrue yet trotted out regularly. 7% is the mean return from investments over the very very very long term - but it is the return that you are least likely to ever observe in any one year. Returns are either double digit or very low single digit to negative. Furthermore the returns are completely dependant on one variable and one variable only - the starting valuation.

Finally this return is nominal. It does not take into account inflation. Even of you could save $1m, over a life span, that would be nominally, with no account for the purchasing power of that cash.

35 years is long enough to get the averages. Over last 100 years (up to 2007), the worst 35 year period had a return of 6.1% using monthly DCA. After index based fees that drops to 5.85% which still out paces inflation over the period. Lowest period started in 1906 in case you are wondering. World wars tended to impact somewhat.
Still your point about inflation is valid and something that should be explained to people more, especially with regards pensions.

Lumen

Compound Interest Time Travel Gambit

In a Red Dwarf episode, it is revealed that Dave left £17.50 in his bank account on Earth. Three million years have passed, and he now owns 98% of the world's wealth. He also left a sausage out on his table which went mouldy; now the mould covers seven-eights of the surface of the Earth. Furthermore, he left the lightbulb in his bathroom, racking up a gigantic debt to the local utility company, which has now become the ruling faction on Earth and whose battle fleet is rapidly approaching in an Attempt To Collect.

Jawgap

Red Dwarf? Now, there's a series I never really "got" but wanted to.

Diarmuid

This is the average and inflation adjusted returns for the S&P500 for 35 year blocks going back for the past 15 years. Taken from here

		Annualised Ret	Ave Return
2011	1976		
2010	1975	7.48	8.89
2009	1974	5.85	7.57
2008	1973	4.51	6.31
2007	1972	6.29	7.76
2006	1971	6.56	8.03
2005	1970	6.15	7.62
2004	1969	5.66	7.2
2003	1968	5.63	7.16
2002	1967	5.5	7
2001	1966	5.88	7.3
2000	1965	6.6	7.96
1999	1964	7.41	8.72
1998	1963	7.48	8.81
1997	1962	6.46	7.78
1996	1961	6.37	7.68
1995	1960	5.76	7.09
			
	Ave	6.224375	7.68
	Std Dev	0.796207416	0.70181669

People have been saying for years that this won't continue.... Maybe it won't but history isn't on their side

seamus

If you're honest with yourself about how much you actually spend on "maintenance" for your bike, you'll find that it's doesn't work out much cheaper. If at all.

Note to self: Do not show this calculator to your wife.

Lumen

Diarmuid wrote: »

This is the average and inflation adjusted returns for the S&P500 for 35 year blocks going back for the past 15 years. Taken from here

I think that calculator uses the CPI. CPI is mostly a measure of the price of goods. Stock market valuations are a measure of the price of people, since companies are made of people. Your "growth" just measures the fact that US goods are getting cheaper relative to the price of US people, mostly because the goods consumed in the US are produced by cheaper (Chinese) people elsewhere, whose price is kept low by debt increases, QE etc.

Any fule know that real wealth is measured in armies, and the richest individuals currently in the world cannot even afford a standing private army large enough to take on a couple of small African states. Put that into some historical context, and you'll see that the world doesn't really have any rich people any more.

Therefore, modern "wealth" (as measured by the amount of iPads) is a complete illusion. It's like a 5 year old imagining a million euro in terms of how many sweets they can buy.

ROK ON

Diarmuid wrote: »

This is the average and inflation adjusted returns for the S&P500 for 35 year blocks going back for the past 15 years. Taken from here

        Annualised Ret    Ave Return
2011    1976        
2010    1975    7.48    8.89
2009    1974    5.85    7.57
2008    1973    4.51    6.31
2007    1972    6.29    7.76
2006    1971    6.56    8.03
2005    1970    6.15    7.62
2004    1969    5.66    7.2
2003    1968    5.63    7.16
2002    1967    5.5    7
2001    1966    5.88    7.3
2000    1965    6.6    7.96
1999    1964    7.41    8.72
1998    1963    7.48    8.81
1997    1962    6.46    7.78
1996    1961    6.37    7.68
1995    1960    5.76    7.09
 
    Ave    6.224375    7.68
    Std Dev    0.796207416    0.70181669

People have been saying for years that this won't continue.... Maybe it won't but history isn't on their side

My point is not that it isnt the average, its that you rarely observe it. &% is rarely the single annual observation, which is more likely to be a strong teen return or a paltry low single digit/negative return. IN ANY ONE YEAR. Unfortunately very few people have the behavioural makeup to sit tight for 35 year to achieve the average, so they chop and change according to gains and losses that have been realised. This is fatal.
Also the returns can be skewed massively in ones favour (or against one) by waiting for the correct point in time with which to begin substantial investing. Markets operate in long run secular cycles driven largely by valuation. We are in the midst of a secular bear market presently, one that began in 2000. During this time markets continually derate until the ending valuation is sufficiently low for a new secular bull market to begin (1921-28, 1942-65, 1982-99). That is largely the point that I make.
Sorry as I have derailed this thread.
I will stop now. If folks are interested in learning more about market cycles etc then I suggest that you visit
http://www.crestmontresearch.com/stock-market/
There aare lots of other places and I can suggest a few if people are sufficiently interested (PM me). But Crestmont is a great starting place.

tomasrojo

Ryaner wrote: »

That all said, I don't actually believe it is possible starting now. Anyone who is going to cycle for 35 years will probably dabble in recreational cycling - and that is the first step to financial ruin as the new bikes/wheels/clothes never stop.

"Probably", but not necessarily. I can't be the only person who only buys what he strictly needs for the purposes of transport.

If you avoid buying a car, you can probably save three or four thousand euro a year, net. Let's say three thousand. Put that every year into a one-month notice An Post Deposit Plus account (3% interest per annum) and over thirty-five years you will end up with about 180 grand. That's a long way short of a million, but it's a handy sum of money.

And it's guaranteed. Unless there's a disorderly sovereign default. Oh wait ...

Lumen

tomasrojo wrote: »

I can't be the only person who only buys what he strictly needs for the purposes of transport.

Consumer economy killer! Burn him!

tomasrojo

Lumen wrote: »

Therefore, modern "wealth" (as measured by the amount of iPads) is a complete illusion. It's like a 5 year old imagining a million euro in terms of how many sweets they can buy.

Very true.

The Guardian did a comparison between 1971 and now. They reckoned people were still better off now, but the downside was an amazingly higher rate of personal debt.

http://www.guardian.co.uk/worklifeuk/cost-of-living-1971-today

Jawgap

I think the original calculator is guilty of a bit of exaggeration for the purposes of illustration. I reckon it was contrived to generate a headline grabbing figure (1 million) over a conceivable timeframe (35 Years).

In principle, cycling more and driving less saves expenditure - now the principle has been established, the argument moves on to the quantum!

Whatever the figures, I do know that at this time of year the amount of cash sloshing about in my pocket goes up because the bike gets hammered while the car stays at home and secondly, because the kids spend a lot of time with their grandparents so I'm spared having to feed them.

The only downsides are having to clean the bike more often and having to calm one sugar-loaded teenager and one sugar-loaded pre-teen down to get them to bed in the evening!

Khannie

Currently saving me nothing because I have an annual train ticket. Next year though I'm going to let it lapse for the summer and aim to commute 4-5 days a week for 3-4 months. That should save me....very close to zero when maintenance cost and time (which has a value too) comes into the picture.

el tel

Applying the logic used in the link below can you imagine how much money you'd 'save' by not having a bike at all? :rolleyes:

Those tribes in Africa must be fúcking minted - they don't have cars, bikes or even shoes for that matter.

Michael Bluejay

Beasty wrote: »

Completely unrealistic!

It assumes a 6.72% return on the cash saved - show me where you can guarantee that sort or return over 35 years and I'll make myself a multi-millionaire

The 6.72% is basically the balancing figure to give the author the answer he is looking for ...

Before slandering me, I wish you had bothered to read the notes posted right below the calculator where I conspicuously explain the source for that figure. Contrary to your accusation, I didn't pull the 6.72% figure out my ass, but rather I got it by searching for the very best default I could think of: the long-term annualized inflation-adjusted return for the U.S. stock market. I also prominently link to the source to show my work. Also, the figure isn't an ASSUMPTION as you claimed, it's a DEFAULT. The page in question is a *calculator*, not an *article*, and you can certainly change the figure to whatever you want (which is the whole point of a calculator).

Jawgap wrote:

I think the original calculator is guilty of a bit of exaggeration for the purposes of illustration. I reckon it was contrived to generate a headline grabbing figure (1 million) over a conceivable timeframe (35 Years).

No. I created the calculator first, and wrote the headline second once I saw the results. In fact, earlier the bottom line in the calculator was only around $889,000 because of a math error, and so my headline referred to "nearly a million dollars". After a Canadian reader pointed out the error I fixed it and then changed the headline to say "millionaire". And again, if you don't like the defaults, you can put in your own figures. That's the whole point of a calculator.

Beasty

Welcome to the forum Michael

So are you saying 6.72% is the 35 year post tax return?

I stand by my comments - it's a totally unrealistic return for the next 35 years. Essentially as the markets have become more sophisticated they have "built in" an element of expected future growth. That means the historic returns have been increased at the expense of future returns

Also those historic figures are highly distorted, as the markets in question automatically end up incorporating the highest growth stocks, but do not correctly adjust for stocks that end up being worthless or low growth (it's a fundamental fault with all stock market indices). Indeed, the influence of the likes of Microsoft, Apple, Amazon, Google etc has been to significantly push up US stock market returns over the past decade or so - is there something else round the corner that could deliver such returns? I cannot say there is not, but I consider it unlikely

Hence even if there is evidence to support historic returns, they cannot be considered indicative of future returns (and this is my main point here - I acknowledge I am in no position to know your intentions when mentioning the 6.72% figure - only you can know that)

Michael Bluejay

Beasty wrote:

So are you saying 6.72% is the 35 year post tax return?

Here again, if you will bother to read the notes conspicuously posted under the calculator, then you'll have your answer.

Beasty wrote:

I acknowledge I am in no position to know your intentions when mentioning the 6.72% figure

Good, I'm glad you admit you were wrong when you originally said, "The 6.72% is basically the balancing figure to give the author the answer he is looking for."

Keep_Her_Lit

Crikey, I’d better be careful what I say here!

The figure of a million seems more plausible if you factor in another very important variable that’s absent here – health. Granted, it’s going to be difficult to quantify that.

But if you compare the health benefits of 35 years of regular cycling against the effects of a predominantly sedentary lifestyle over the same period, there’s certainly potential for some fairly major savings.

Also, if you can attach a realistic monetary value to longevity and "quality of life", you’re really onto a winner.

[mods: if anyone finds my remarks slanderous, feel free to remove them]

Beasty

Michael Bluejay wrote: »

Here again, if you will bother to read the notes conspicuously posted under the calculator, then you'll have your answer.

Yes, you've ignored tax - that means for an Irish resident taxpayer, at current top rates of tax and levies, you're talking about something nearer becoming a "$400-500 thousandaire"

Michael Bluejay wrote: »

Good, I'm glad you admit you were wrong when you originally said, "The 6.72% is basically the balancing figure to give the author the answer he is looking for."

So 35 years is your balancing figure - still don't see any credibility in your "headline" given the above.

Bear in mind you're talking to "converts" here, but sensational headlines don't tend to do the "cause" any good;)

ROK ON

My tuppence worth to fan the flames.

Beasty wrote: »

Welcome to the forum Michael

So are you saying 6.72% is the 35 year post tax return?

I stand by my comments - it's a totally unrealistic return for the next 35 years.

Its an opinion - you have no proof of your assertion. In fact it cant be proven. If we make it to 2046 we will find out.

Essentially as the markets have become more sophisticated they have "built in" an element of expected future growth. That means the historic returns have been increased at the expense of future returns

Seriously Beasty, that is utter BS. The same things drive short term market fluctuations as always have, namely fear & greed.
Over the longer term, the level of valuation will as always drive returns. Growth has not and never has had anything to do with returns strangely enough. Over the course of say 35 years you have to assume that the average company at best grows in line with the underlying economic averages - some a bit more others a bit less.

Also those historic figures are highly distorted, as the markets in question automatically end up incorporating the highest growth stocks, but do not correctly adjust for stocks that end up being worthless or low growth (it's a fundamental fault with all stock market indices). Indeed, the influence of the likes of Microsoft, Apple, Amazon, Google etc has been to significantly push up US stock market returns over the past decade or so - is there something else round the corner that could deliver such returns? I cannot say there is not, but I consider it unlikely

Yep, survivorship bias in indices is a factor. But every long run market cycle has had Microsofts.
In the first few decades they were radio and railroad stocks, it was electronics and consumer companies in the 50's and has been commodity stocks in the past decade.

tomasrojo

I don't think Beasty's scepticism is tantamount to slander, but good of Michael to drop in and explain his work.

(Are comments on an online forum equivalent to public speech or equivalent to published remarks? I mean, if Beasty were guilty of bringing down Michael's reputation, would he be guilty of slander or libel?)

Beasty

Jeez. Suggestions of slander, libel and BS in the one thread. I think I'd better quit this topic while I'm ahead...;)

Jawgap

tomasrojo wrote: »

I don't think Beasty's scepticism is tantamount to slander, but good of Michael to drop in and explain his work.

(Are comments on an online forum equivalent to public speech or equivalent to published remarks? I mean, if Beasty were guilty of bringing down Michael's reputation, would he be guilty of slander or libel?)

It's libel, rather than slander as its written words / published remarks.

However, for a statement to be defamatory, it must be shown, among other things, that the communication was about the plaintiff and that another party receiving the communication could identify the plaintiff as the subject of the defamatory message. I think Michael's work, rather then Michael was being discussed.

.......and just to kick the pot of p1$$ over again, Berkshire Hathaway had average annual rate of return of 24.73% over each of those forty years - although they might be regarded as an outlier:)

tomasrojo

Jawgap wrote: »

It's libel, rather than slander as its written words / published remarks.

However, for a statement to be defamatory, it must be shown, among other things, that the communication was about the plaintiff and that another party receiving the communication could identify the plaintiff as the subject of the defamatory message. I think Michael's work, rather then Michael was being discussed.

.......and just to kick the pot of p1$$ over again, Berkshire Hathaway had average annual rate of return of 24.73% over each of those forty years - although they might be regarded as an outlier:)

So can Beasty sue Michael for a libellous statement that Beasty was slanderous?

Tonyandthewhale

Riding a bike can save you a million, but only if you're successful in suing everyone who counters that statement for libel/slander. Groovy.

Jawgap

tomasrojo wrote: »

So can Beasty sue Michael for a libellous statement that Beasty was slanderous?

No - truth is an absolute defence in defamation proceedings!!!!:D:D:D

Cookie_Monster

I think I'd rather spend money on the car tbh, at least you can get some enjoyment out of it.

tomasrojo

http://www.guardian.co.uk/environment/bike-blog/2011/jul/07/money-save-cycling

How much money (and time) does cycling to work actually save you?

The potential savings made by not using public transport can often end up going towards bike maintenance and gear

In my fairly typical case – cycling to work in London – I aimed to save around £50 a month on public transport – £600 a year – but reckoned on spending £150 a year on maintenance and accessories; a net saving of £450 a year – or about £1.25 a day.

Cookie_Monster

^^ seems a slight bit more realistic than the claim in the OP's link

tomasrojo

The Irish Times had a piece about how much money you could save cycling a while back, but they implicitly assumed maintenance costs of zero over five years.

It is possible to buy very few accessories, however.

Beasty

I did work out that commuting by bike, rather than car, saves me around €15 per day, recognising depreciation as well as car running costs - that could be around €3k in a year if I managed to commute every working day (which I don't)

However as I can expect to live perhaps 7 years longer due to the health benefits, it could actually cost me a lot more in the long term (even ignoring the "excessive" bike spending I'm prone to do;))

Still worth it though ....

Jawgap

I think something that is overlooked sometimes is that (seriously) money spent on cycling is an investment.

If I spend €850 on an annual train ticket all I'm left with at the end of the year are some happy memories of being sneezed on and overhearing teenage mobile phone conversations.

At least money spent on bike kit adds to your wealth by leaving you with something tangible (maintenance expenditure excepted).

.......and I tell myself that every month when the credit card bill arrives:)

Cookie_Monster

Beasty wrote: »

I did work out that commuting by bike, rather than car, saves me around €15 per day, recognising depreciation as well as car running costs - that could be around €3k in a year if I managed to commute every working day (which I don't)

However as I can expect to live perhaps 7 years longer due to the health benefits, it could actually cost me a lot more in the long term (even ignoring the "excessive" bike spending I'm prone to do;))

Still worth it though ....

ah but you can also expect to spend less on healthcare in general because you're more healthy

Depreciation, while needing to be added in, is a constantly decreasing figure and will be zero after 10 years of owning a car anyway so it quickly become irrelevant (over the 35 years of initial calc). The finance and dep cost assumed in that are a bit silly IMO and help make it so favourable to cycle. you could easily spend 2k on a car and keep it for 10 years, no finance, and 200 in dep...

Undercover Elephant

Beasty wrote: »

However as I can expect to live perhaps 7 years longer due to the health benefits, it could actually cost me a lot more in the long term

I've thought about the economics of this (yes, I'm that sad). For lesser mortals who don't put in Beasty-mileage, I understand that the addition to life expectancy is more like 2 years. But ... it gets you a physiology of someone 9 years younger on average.

Roughly 90% of expenditure on healthcare is for the last 10% of people's lives. But this is an average figure. Cycling effectively adds 2 years at the lower rate, but will lop off most of the time at the higher rate - it won't be all of it, of course, but it will be a good proportion. Which means that over their lifetime, health care for cyclists is significantly lower than non-cyclists. And most healthcare is taxpayer funded.

From a taxpayer perspective, then, it would make good sense to subsidise cycling. Or to look at it another way, we are subsidising non-cyclists by buying bike stuff. This must end.

I will accept my share in Wiggle vouchers, thanks.

Beasty

It's not just the mileage - I'm nearly 6 stone lighter than I was 4 years ago, putting less strain on my heart and other vital organs and significantly reducing my risk of diabetes

Add to that my heart is much more efficient, my lungs are stronger, I have not suffered major back problems for a number of years ....

There was a study done of French ex TdF riders who (despite any crap some of them may have been pumping into their bodies) were still living much longer than their contemporaries - that's where the 7 years comes from. Now I'm not claiming to be that standard or anywhere near, but the 7 years is considered to be an underestimate because so many of them are still alive and most would have had a shorter overall life expectancy given the era they were born in.

Jawgap

A friend of mine is a professor of health economics and in his darker moments he likes to explain how it would be much better for the health system (in this case the NHS in the UK) if we all smoked!!

Smokers die younger and quicker - it's the chronic diseases of old age that cost the state a fortune :D:D

As a cyclist you might be saving yourself a few quid, but you're going to be a terrible burden on the health system by engaging in an activity that extends your life expectancy.

Undercover Elephant

Jawgap wrote: »

As a cyclist you might be saving yourself a few quid, but you're going to be a terrible burden on the health system by engaging in an activity that extends your life expectancy.

Only if you're unhealthy for a longer period. The figures tentatively suggest the opposite.

Jawgap

Undercover Elephant wrote: »

Only if you're unhealthy for a longer period. The figures tentatively suggest the opposite.

I think it's to do with the fact that the longer you live, the more likely you are to need care for issues such as senility, chronic musculo-skeletal conditions and other diseases old age which are not of themselves curable or treatable in the same way lifestyle driven conditions such as heart disease.

Keep_Her_Lit

Beasty wrote: »

It's not just the mileage - I'm nearly 6 stone lighter than I was 4 years ago, putting less strain on my heart and other vital organs and significantly reducing my risk of diabetes

Add to that my heart is much more efficient, my lungs are stronger, I have not suffered major back problems for a number of years ....

That nicely summarises just how transformative cycling can be. I bet you feel a damn sight better too, quite apart from the more favourable health statistics. Fair play to you, that's a hell of an achievement.

tomasrojo

Jawgap wrote: »

I think it's to do with the fact that the longer you live, the more likely you are to need care for issues such as senility, chronic musculo-skeletal conditions and other diseases old age which are not of themselves curable or treatable in the same way lifestyle driven conditions such as heart disease.

I know a doctor who reckoned much the same.