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    Financial Independence This will be my last week of full-time work, hopefully forever

    July 08, 2018

    Financial Independence This will be my last week of full-time work, hopefully forever

    This will be my last week of full-time work, hopefully forever

    Posted: 08 Jul 2018 01:28 PM PDT

    Quick info:

    • 33 years old, married with kids, living in the San Francisco Bay Area
    • Job: Overpaid engineer at a Silicon Valley tech company
    • Annual household income: $250k-300k, which is $150k salary plus $100-150k stock and bonus
    • Annual expenses: About $65k, with half of that going towards rent for a run-down 2-bedroom duplex that's 18 miles from work (sigh, Bay Area housing...)
    • Assets: $1.4M invested in 50% VTSAX, 30% VTIAX, and 20% VBTLX, plus $70k cash. Investments are held in roughly 50% taxable and 50% tax-advantaged (401k, IRAs, HSA) accounts.

    Tomorrow is a special Monday for me, because it's the beginning of what will hopefully be the last full-time work week in my life. Ever since my first kid was born a few years ago I've really struggled with managing my time and have found it nearly impossible to balance work, parenting, spending time with my spouse, my own personal interests/hobbies, and various other responsibilities. I'm incredibly fortunate to have a massive income and a fairly average lifestyle, which has led to me saving a lot of money in relatively little time.

    At work I'll be dropping to 80% time and will no longer work on Fridays, so every weekend will be a three day weekend. This comes with a pay cut, but I have enough money saved up at this point that I feel like it's a pretty good deal. Additionally the money I'm giving up would have been taxed at the highest rate, so while my gross pay will decrease by 20% my net pay will decrease by less than that.

    While 80% time sounds nice I know that I want more, and I'll be attempting to drop to 60% time soon. One thing I've realized is that my savings gives me a lot of negotiating power - if management is not willing to go to 60% time then I have the freedom to quit and find another job that will allow me to work at 60%. Additionally my department recently lost a bunch of people for various reasons (transfers to other parts of the company, people quitting, medical issues, etc.) so we're now very understaffed, which I think will give me even more negotiating power.

    While I would like to completely stop working for at least a year or two (possibly forever!), I'm hesitant to do that right now for a few reasons. First, I'm not quite FI yet - I would be if I moved to a LCOL area, but I'd prefer to live in a MCOL area. Another year or two of saving money should be all I need, and while I could get there a bit faster by continuing to work full-time I've just reached a point where I feel like I need to scale back on work for my own sanity.

    Second, the health insurance situation in the US continues to be wildly unstable and unpredictable. I can currently afford to buy insurance out of pocket with ACA subsidies, but I don't want to put my family in a position where we'd be in trouble if those subsidies were no longer available to us. We're very lucky to have Canadian citizenship in case healthcare becomes a massive problem, but moving to Canada is something we'd really like to avoid if possible.

    Finally, I know that the current bull market must come to an end eventually, and if possible I'd prefer to work through the next market crash. I'm not completely set on this and may stop working before the crash if it takes more than a few years to happen, but if possible that's what I'd prefer to do.

    My view of FI has changed a lot over the years. When I first learned about the concept all I could think about was early retirement - I wanted to quit working as soon as possible and never work again. I still feel that way to some extent, but I'm realizing that there's more than that to FI and that having the freedom to try something different (work part-time, take a less stressful job, etc.) is also an incredible benefit. It's really about having the financial freedom to do what you want and try different things instead of being locked into a career for several decades. And who knows, maybe once my kids are in school I'll feel less busy and decide that I want to spend my time working again :)

    submitted by /u/FIREThrowaway9
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    Do you have a fun way to measure/report on your goals? Please share.

    Posted: 07 Jul 2018 10:07 PM PDT

    As the title says, I'd like to hear some ideas on how you measure your goals and report on it. I've been using a spreadsheet for the past 2.5 years but I'd like to hear of any ways those in this community have turned it into something fun.

    I'm taking about a big thermometer posted on the wall with red filling it up as you reach your net worth goal (like a fundraiser), or a graphic you've attached to your spreadsheet dashboard, etc.

    Also not necessarily just net worth, maybe it's savings rate, or other milestones.

    Let's hear it! Inspire me.

    submitted by /u/Buildadoor
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    Daily FI discussion thread - July 08, 2018

    Posted: 08 Jul 2018 04:08 AM PDT

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply!

    Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked.

    Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts.

    submitted by /u/AutoModerator
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    Part time side job ideas?

    Posted: 07 Jul 2018 11:24 PM PDT

    Trying to achieve FI - just got bit. Had a 2.5 yr client, thought project was going to last another year at least, enrolled in Masters program.

    Found a hack to basically end the project. Very nice, except now I'm out of work and would need to start eating into my precious emergency fund /etfs. Would rather not.

    Good news is my schedule is 100% flex. I have experience in organizational development, project management, strategy, and some associated skills. Various industries over the years.

    Any ideas how I can not knock myself off the FI trolley while I finish this program?

    I'm guessing part time work, but feeling like I can't imagine anyone hiring anyone for anything close to the sort of stuff I do (or anything decently paying) for part time.

    I only need about $1000/month. But ideally would not be working a lot to get to that number.

    submitted by /u/Asterios390528
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    The Rise of the Millennial Prenup

    Posted: 08 Jul 2018 03:54 PM PDT

    Interesting nytimes article on the rise of the prenup with the millennial generation:

    Prenuptial agreements, commonly known as prenups, are legal documents that outline how engaged couples will divide their assets if they divorce. And, in recent years, more millennials have been requesting them, according to a survey of matrimonial lawyers.

    One likely reason: Millennials are marrying later than previous generations, with years to build up assets and debt on their own. "I got married at 23, so we put nothing and nothing together," said Louis Cannataro, partner and founder of Cannataro Park Avenue Financial, where he has advised dozens of millennial clients on their prenups. "But when someone's getting married in their 30s, there's a different approach."

    That approach accounts for the changing role of women in the work force, too. In 1980, just 13 percent of women who lived with a male partner earned at least half the couple's income — today, that number has nearly tripled.

    So while prenups traditionally protected the party with money — which often was the man, and which often led to resentment — millennials usually tackle the agreements as a team.

    Would love to hear about any success — or failure — stories of folks in here in regards to a prenup, millennial or not. Figured it relates a lot to this community after seeing the recommendation in the article that those with "robust retirement accounts" may want to consider one.

    submitted by /u/Phiery
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    Study suggests that higher testosterone levels are driving men to luxury goods

    Posted: 08 Jul 2018 03:38 PM PDT

    Just read an article that I found really interesting. This might explain why so many people, men in particular, are not financially independent and are buying expensive things all the time.

    It's also good to remind me why I sometimes have the urge to buy something new and shiny.

    submitted by /u/CynexHD
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    Favorite Personal Finance YouTube Bloggers?

    Posted: 08 Jul 2018 02:50 PM PDT

    The Financial Diet on youtube is one of my new personal personal finance favorites.

    submitted by /u/ArcTanSusan
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    4% Rule assumes your savings are drawn down to 0?

    Posted: 08 Jul 2018 01:12 PM PDT

    Do all of these various studies / formulas that are used here end up drawing down the principal investment?

    I understand that the 4% or whatever similar withdrawal rate used is using a probability function looking at various scenarios, and it is the minimum amount one should withdrawal to ensure that, even if things go badly in the future market, you're still able to continue making inflation adjusted withdrawals that are the future equivalent of what 4% buys you now?

    Is that right?

    It seems like if we just use the same (naive) 8% that pensions and annuities use, a 4% withdrawal rate might actually allow the funds to continue growing, such that when you finally did die, your initial FIRE base amount would now be larger.

    Guess I need to research this more. Any good links so I can start playing around in Excel or Marhematica?

    submitted by /u/jim234234red
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    What do you use for simulated S&P500 (or equivalent) returns?

    Posted: 08 Jul 2018 11:47 AM PDT

    Today is my "spreadsheet day" so I was thinking a bit about my future projections. Of course it's kind of irrelevant as reality will have it's ultimate say in this, but it's fun to think about still.

    I've seen a lot of people around here who invest in simple index funds (S&P500 or some variant), and have some spreadsheet simulations showing where they hope to be in X years. Those of course rely on historical data to predict a "typically average" rate of return. Most numbers I see fall in the 5-7% range.

    Looking at historical data (using this site: http://moneychimp.com/features/market_cagr.htm) most timeframes indicate a 9-11% with dividends re-invested (depending on what year you start the calculation from). Are people correcting these for inflation to get the lower 5-7% range? Since a big chunk of my expenses (mortgage) does not increase with inflation this doesn't seem consistent.

    What do most people use to estimate future investment annual returns? Do you scale up your required income in retirement as your current expenses + inflation?

    submitted by /u/no_comment0
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    [Countdown to Retirement: A Five-Year Plan](https://www.nytimes.com/2018/07/06/business/retirement-five-year-plan.html) NY Times 07-JUL-2018

    Posted: 08 Jul 2018 10:16 AM PDT

    Countdown to Retirement: A Five-Year Plan NY Times 07-JUL-2018

    I thought this short article aimed at conventional retirement, while basic, highlights some of the financial costs of aging that the FIRE crowd doesn't tend to address too specifically. How do you think an article like this does at preparing people to start thinking about retirement, ignoring the fact that waiting until five years before seems like a terrible idea?

    Some good points that apply to us as well:

    Take stock of your entire portfolio now. Use an online tool to estimate your retirement income and expenses. I don't love the shilling for a subscription-based product and it makes me wonder if this is a paid endorsement.

    Start living on your projected retirement income now. This seems like the single most useful piece of advice the FIRE crowd can spread to others.

    Don't underestimate the costs associated with aging and long-term care. Many of us will become dependent on assisted care at some point and our financial plans should include those future costs.

    submitted by /u/jrdhytr
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    FIRE with an art career

    Posted: 07 Jul 2018 09:56 PM PDT

    Hi all, long time lurker here. I guess I'm looking for some general advice and thoughts regarding early retirement when you're someone who has a less stable income - any other artists, writers, musicians, etc out there?

    A little bit of background for my current situation:

    Single, 29 yo next month, graduated art school in 2013 with 0 debt due to a combination of financial aid, scholarships, and working 3 part time jobs. I've always been prudent and conservative with my finances (credit to my mom who always stressed the rule of no more than a 1/3 of your income for living expenses). However, I've only started taking FIRE seriously this year, although I'm aware that I'm still way ahead of most people my age, and definitely among my artist friends, most of who think I'm speaking a foreign language whenever I bring up anything finance related.
    The year following graduation I worked various odd jobs after moving cross country (negligible income, just trying to survive), then worked at a large company in the entertainment industry for about 3 years (starting salary of 66k), after that I traveled the world for half a year, now I'm at another large company with a 77k salary.
    Long story short, I love traveling and creating more for my self than others, which is something that I've come to realize recently, and is my primary drive for FIRE before the life gets sucked out of me by the next place I end up working for (my job is considered very creative, but at the end of the day it's still a high-stress oppressive office environment. Current office also has some weird politics that I'm not fond of). My current finances are as follows:

    Max out my Roth IRA (new job does not offer me a 401k currently) and HSA, about 14k total
    12k in a money market emergency fund (expenses for 6 months, I live in a VHCOL area)
    35k split between moderate risk Wealtfront and Betterment accounts
    5k cash
    Ride a paid for motorcycle, no car (I save a ton in insurance costs and gas, yes, I know it's dangerous)

    Net worth ~66k

    My average annual expenses are around 24k.

    Now the main issue is that I don't see myself staying at my current job for long, and even if I did it's the kind of place where you don't really get much of a raise or opportunity for advancement. I could try to stay in the area and job hop while the market is good, but at best I might be able to work my way up to a 6 figure salary in 3-4 years of a lot of grinding. I don't really want to do that. I'm mostly looking to hear from other people in the arts who are either self employed, or have managed to stay in one place career wise and make FIRE work for them. Honestly, if I'm aiming for x30 my annual expenses in less than 10 years, it doesn't seem very encouraging. Any and all thoughts/advice appreciated!

    submitted by /u/IndividualVisual
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    What are people’s thoughts on Fundrise?

    Posted: 08 Jul 2018 08:56 AM PDT

    Mint keeps emailing me about Fundrise, a real estate investing platform that is meant to give smaller investors access to the investment real estate market by pooling resources.

    They claim that 8%-11% annual returns are expected (of course I know they're not guaranteed).

    I like the idea of diversifying investments through real estate without having to be a landlord. But hesitant to dive in, and curious if folks have used Fundrise or researched this kind of platform.

    submitted by /u/mdwass
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    Just had an AMAZING realization about Safe Withdrawal Rates and why a market correction is actually awesome! Can someone smarter than me verify or dispute this?

    Posted: 07 Jul 2018 05:43 PM PDT

    Okay, I'm going to try to keep this short and organized. For simplicity sake, I'm going to model a safe withdrawal number based off of a portfolio of $1,000,000 invested in 100% equities (VTSAX or other broad market tracker) over a 60 year period using cFireSim. It gives me 3.4%, but I'm going to round up to 3.5% for easier math.

    2 Key Facts/Assumptions:

    • Past performance does not guarantee future results, but this is the most conservative SWR (based on 100% success over any 60 year historical period) and it's really all we can go by.
    • This SWR worked even if you retired at the peaks.

    My hypothesis:

    If there's a downturn in the market and we go down 30%, we could calculate what our shares would have been worth at the All Time High of the market and base our 3.5% withdrawal rate off that number instead of the current market value.

    Example:

    I have a million dollars in the market on this fictitious day. Let's say that's 30% less than the peak. Does this not mean that my safe withdrawal rate of 3.5% should be based off of $1,428,570 (the hypothetical market value of my shares before the 30% drop.) Which is a SIGNIFICANT difference in withdrawals:

    • $1,000,000 at 3.5% = $35,000/ year
    • $1,428,570 at 3.5% = $50,000/ year

    My Findings:

    So, essentially, that would be a 5\% safe withdrawal rate! ($50,000/yr from an actual balance of $1,000,000). If that's all the case, aren't market corrections great for us instead of scary? To me, this means that if the market drops, it creates a MULTIPLIER for my new money going in, since it increases my SWR even more than the dollars I'm putting in. Ie. Every $100 dollars I put in is not worth $3.50 (3.5%) in safe withdrawals, it's actually $5.00 (5%).

    Am I missing something? Has this already been discussed?

    submitted by /u/sheppy52
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