The Story of Goldilocks and the Three Retirement Contributions

Goldilocks and the Three Bears

By Jen Smith, The Millionaire Mommy Next Door

Once upon a time, Goldilocks went for a walk.  Pretty soon, she came upon her bank.  She asked the bank teller for her retirement account balance and when she was shown the number, she wept.

Goldilocks returned home to assess her budget and see where she could come up with some extra money to make regular IRA contributions. She thought about quitting her latte habit. $3 saved per day could grow to $177,706 in thirty years.

“This idea is too soft!” she exclaimed.

So she returned to her budget and considered cutting her housing and utility expenses in half by downsizing to a much smaller home. $1200 saved per month could compound into $2,389,653 in thirty years.

“This idea is too hard,” she said.

So she returned to her budget and took aim on her transportation costs. If she sold her car and used her city’s excellent public transportation system instead, she could save $780 per month. In thirty years, her retirement fund could blossom into $1,553,275.

“Ahhh, this idea is just right,” she said happily. Goldilocks sold her car, walked back to her bank, and made a contribution to her retirement account.

Thirty years later, Goldilocks retired, and lived happily ever after.


For illustration purposes, results were calculated at 10.00% ROI compounded annually. The actual rate of return is largely dependent on the type of investments you choose. Over the most recent 30 year span, from January 1, 1980 to December 31, 2009, the compound annual growth rate (annualized return) for the S&P 500, including reinvestment of dividends, was 11.29% (source). Total savings are calculated in actual dollars (not inflation-adjusted). A common measure of inflation in the U.S. is the Consumer Price Index (CPI), which has a long-term average of 3.1% annually (from 1925 through 2008).

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Millionaire Mommy Next Door

A self-made millionaire shares her recipe for success, happiness and financial freedom.

35 thoughts on “The Story of Goldilocks and the Three Retirement Contributions”

  1. PS.. Goldilocks shouldn’t have her retirement accounts in a bank to begin with. Perhaps, she should lock in gold. No pun intended. She also, should be doing all 3-make her own latte’s, downsize her home & expenses and make sure the new location is near a city yet a bit suburban and tranquil. She could cut her retirement horizon down to 15 years vs 30.

    I prefer that ending to this fairy tale.

  2. So many people tell me that they can’t save and invest because their budget is stretched too thin. Rather than get into investing specifics, my main intent with this story was to show that there may be some savings solutions that you’ll find too small/soft, others too large/hard, but if you keep looking, you’re bound to find one that is JUST RIGHT.

  3. Re: The cost of home ownership vs. renting, which you reference in this post – The real-world costs of home ownership are often under-appreciated by many. Everyone assumes renting is “throwing money away,” but like you, I beg to differ. Now I personally do own a home, but only because I run a business out of my home that cold not really be run out of a rental house. condo or apartment. So for me the math and logistics of running my business are clearly in favor of home ownership. But this week I will have to write a check for about $2,500 to have a 100 foot pine tree removed from my backyard that’s infected with tree-eating pine beetles. There’s all kinds of costs like that with owning a home that I don’t think many “compare renting vs owning calculators” take into consideration. Owning a home is also a lot more work than renting, and utilities tend to be quite a bit higher as well. All things to consider.

  4. Jen,

    I love all the ideas you suggested, and I have subscribed to your blog for several years, but I was wondering if you would be so kind as to perhaps focus a few blogs on the specifics of investing. With the severity of our economic situation we could all use a few more tips! Thanks so much for the wonderful blog! I hope you and yours are doing well.

  5. I like the fact that you focused on an outcome with multiple solutions. I think of a budget as a way of working out how much I can SPEND and still achieve my goals

  6. I 2nd the suggestion regarding how to invest. Would love to hear your thoughts on the Couch Potato or Coffeehouse Investor plans.

  7. This would be nice and I have been considering what should I save. However, I don’t know if I would be able to enjoy it many years from now. :-)

  8. I enjoy the moral of the story. However, it states a 10% return in below in small print. Am I the only one who finds it hard to find a fund that returns a consistant 10%? I always come across articles from MSN, CNN to commentary from Susie and Dave. All of them seem so nonchalent about placing your money in a 10% fund. Perhaps it’s just the magic number for attracting viewer interest, but it seems a little misguided as well. Just my two cents.

    1. @Dan, no, I am not aware of a fund that returns a “consistent 10%”. This is why people refer to a “LONG TERM AVERAGE ANNUAL RETURN” of 10% rather than a “consistent” one. Historically speaking, if you have time on your side, 10% ROI is reasonable. Of course as they say, “past returns are not a guarantee of future performance”… but as they also say, “history tends to repeat itself”.

  9. Millionaire Mommy,

    You are so awesome I’ve stumbled on your website late May while at work. I’m always looking at millionaires and I try to model building wealth behind all of you. Great story and great analysis. I’m currently doing the Dave Ramsey program I know alot don’t agree with what he preaches. I do 100 percent but I’m debt free I don’t own a home. I’m about to invest 100 dollars a month into a Roth IRA. In time I will do a little more. I just love reading your blogs and I truly love this peace that you have.

    It’s very true if alot of people will look at their budgets and cut alot of the fat out they too can invest 100 dollars a month over and over will make alot of us well off in years to come.

    Thank you so much for your blogs. Yes I’m a huge fan of yours.

    Rashidi my real name by the way.

      1. Exactamundo!
        I have no doubt that a double-digit return is possible. It will not, however, be possible for those who don’t think it’s possible. I guess we’re all correct! :D

  10. Small changes can mean big payoffs. I should read this story to my 3 year old :)
    Much better than the real Goldilocks who breaks into someones home!

    Thanks Jen!

  11. I understand the appeal of getting rich from passive investing. People are lazy so they are prone to Wall Street propaganda about historical returns.

    Of course those returns were made when NO ONE was investing except a few like Buffett. Once everyone piles in – as they have now with financial advisers on every corner, 24 hour financial channels, and click of the mouse stock trading/investing – the gig is up.

    BTW, there’s no money left in *baseball card* investing either – now that everyone preserves what they used to dispose of.

    Good luck to y’all and your lazy delusions!

    1. I find it sad that you call people morons and chicks (yes, I saw where you called me “some chick”…) What is the point of pushing people away?

      I DON’T invest passively — read this post:

      Should you want to engage in constructive conversation or friendly debate, I welcome you. If not, please keep your negative behavior and name calling to yourself/own blog.

      1. investing in funds = passive investing, it doesn’t well matter whether you go in and out. Do you know precisely what basket of stocks is in each fund?

        I find it *sad* that someone might read this post, swallow the kook-aid of 10% compounded annual returns, and dump money into today’s market.

        1. No, INDEX funds are passively managed, but actively-managed funds are not.

          Ideally, the active manager exploits market inefficiencies by purchasing securities (stocks etc.) that are undervalued or by short selling securities that are overvalued.

          1. Handing over money to someone else who merely markets himself as an *active manager* is still passive investing. Again, you don’t know what positions the quack is taking and when.

            When the market fell nearly 40% in ’08….

            Just about every category of fund, including *market neutral*, *quantitative*, etc., was down almost precisely (35+%) as much.

            Active-investing is doing your own research, and personally entering and exiting positions in stocks, bonds, commodities, derivatives, etc.

            1. Sounds like you have a different definition of passive vs active management than I do. Or it’s a matter of degree. It also sounds like you didn’t read the link I referenced because if you had, you’d have learned that I “actively” “exited my positions” in the equity market and “entered my positions” into cash in early ’08 when all of the market started showing downward momentum. In doing so, I didn’t ride the market down.

              Using the standard definition of “passive management”, I would have stayed the course; hold the index; a non-managed fund that tracks an index.

              Curious, why does your definition of active investing include transactions in stocks, bonds, commodities but not in mutual funds? Sectors? ETF’s?

              Oh, and final warning — no more name calling (“quack”) in my space… My space, my rules.

  12. Wow- CNut, aren’t you a barrel of sunshine? I can see you are a hard worker because you took the time and energy to find this blog and this story just to impart your wisdom. That’s fantastic. I hope you’ll become my Facebook friend.

  13. I have to second Swissmexms request, would love more detailed info. I had bookmarked so much of your incredibly helpful info from your previous blog and then ::wham:: you were sabatoged by some jerk. I know you offer your coaching business but for now, it remails unaffordable until my debt is gone.

    Btw, we’ve paid down $40k in debt in 2 years, and that was while unexpectedly juggling 2 mortgages for 8 months. I felt so downtrodden during that time, it was hard for me to see the progress.

    Your blog has been a real beacon of hope for me. It helps me remain positive and optimistic. THANK YOU for sharing your knowledge with us. I could do all the financial studying in the world and I still would not have a grasp on investing as you do, trust me, I’ve tried.

  14. Dear Jen,
    I’ve found your site when I was looking for “women, millionaire success stories” years ago.
    I easily get ‘offtracked.’ Your site helped me in a way to stay focused and motivated. I am now a vitamin seller, worker, mommy of 3 and working towards debt free (from Malaysia).


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