Financial Independence Daily FI discussion thread - July 28, 2019 |
- Daily FI discussion thread - July 28, 2019
- "Owning your home doesn’t make you rich. Owning somebody else’s does"
- Military Couple: 5 years from FIRE goal (Update)
- Putting life into perspective
- Fire during high equity valuation periods or low periods?
- My house hacking experience
- New to New Orleans
| Daily FI discussion thread - July 28, 2019 Posted: 28 Jul 2019 01:09 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. [link] [comments]  |
| "Owning your home doesn’t make you rich. Owning somebody else’s does" Posted: 28 Jul 2019 07:54 AM PDT Came across this interesting article about building wealth. Here are my key takeaways. I would like to hear your thoughts on it. https://www.latimes.com/business/la-fi-landlords-business-owners-20181105-story.html
Not sure if this claim is true because there are certainly lots of people who built their wealth through traditional passive investments like 401k, Roth IRA, index funds. This sub is proof of that.
Seeing this kind of stuff makes me wonder if I should get into real estate investing. I hear it involves lots of debt which is something I'm not good at dealing with. Are you folks sticking with passive investing or investing in real estate as well? [link] [comments]  |
| Military Couple: 5 years from FIRE goal (Update) Posted: 27 Jul 2019 09:41 PM PDT Update to my [last post](https://www.reddit.com/r/financialindependence/comments/8yu2vu/military_couple_6_years_from_fire_goal_update/). It's been a year so I figured I should make another update post as the FIRE goal gets closer. My goal remains to have $2m in net worth plus our military pensions and retire at age 43. Current Ages:
Income:
Rental Property: $1850/mo rent, $185 management fee, $1367.68 mortgage, $90 HOA. This ends up being an extra $200 in cashflow with $850 of the mortgage payment going to principle or a net $1050/mo. We owe $41.5k (3.25%) on the 15 yr mortgage and the house is worth about $290k. (Purchase price: $215k + $20k repairs/improvements). Continuing to pay the mortgage as scheduled results in paying off the mortgage when we retire. I just dropped the rent $50 to lock the tenant into a 2 year contract. Savings: Both wife and I max out our tax deferred savings options. We also put $27.6k/yr into the taxable brokerage account, Traditional TSP ($19k/yr each), college funds ($4k/yr), cash savings (12k/yr), and Roth IRA ($6k/yr each). Total annual savings is $93,600 when I add everything up. The vast majority of these investments are in extremely low cost index funds. The only change to this over last year was a move of my emergency fund cash to a high yield savings account offering 2.1% interest. Current balances:
Life insurance: No change in policies, $145/mo combined for both our policies. We each have $1m which will drop in half to $500k/each when we retire and the work insurance goes away. The $500k policies are 30 year term that take us to around age 63. I figure with $1M insurance and $2M assets, the kids will be taken care of just fine. We currently plan to opt out of the survivor benefit plan. The simplified math of SBP would cost 6.5% of our pensions and would pay the spouse 55% of their pension if they died. It's not a bad deal and it's inflation adjusted. The premiums stop after 30 years, but the coverage continues. I'd prefer to just not have either of us die and keep the $600/mo. I still need to do some thinking on this. Expenses: No major changes to expenses other than the addition of a car payment (580/mo). I might add a bi-weekly cleaning service, but don't see any big costs anytime in the near future.
Extra money left in checking account each month is about $3-4k. That funded a new roof, cutting down some trees, trips, and extra debt payments/savings contributions. I could be more disciplined with that, but honestly we're pretty frugal and generally don't spend much on random things. In our fixed expenses we allocate money for eating out and entertainment. Historical Actual Net Worth (updated): https://i.imgur.com/RduzDlc.jpg
Historical Actual Debt (updated): https://i.imgur.com/JUfrPNV.jpg
Retirement plan: Military pensions are equal to 2.5% * yrs of service * high 3 base pay avg. So, 20 years = 50% of your base pay. Based on our expected rank at retirement, this would be $54k each. That is in today's money and since this is tied to inflation it'd be slightly higher (5 years from now) and would continue to grow each year in retirement since it's chained to the CPI. Age 43:
Age 62:
Major risks:
Please let me know if you have any questions and I'll do my best to answer! tl;dr Net worth is now $1.6m ($439k debt, $2m assets), an increase of $212k from my last post. Plan is to retire in 5 years at the age of 43 with $2m in assets and military pensions worth a $108k/yr. [link] [comments]  |
| Posted: 28 Jul 2019 09:15 AM PDT https://waitbutwhy.com/2015/12/the-tail-end.html This article really resonated with me on the FIRE journey I liked the summary best: 1) Living in the same place as the people you love matters. I probably have 10X the time left with the people who live in my city as I do with the people who live somewhere else. 2) Priorities matter. Your remaining face time with any person depends largely on where that person falls on your list of life priorities. Make sure this list is set by you—not by unconscious inertia. 3) Quality time matters. If you're in your last 10% of time with someone you love, keep that fact in the front of your mind when you're with them and treat that time as what it actually is: precious [link] [comments]  |
| Fire during high equity valuation periods or low periods? Posted: 27 Jul 2019 06:05 PM PDT Thoughts? Research? I don't want to oversimplify the process, but understanding what everyone's logic here would be valuable. [link] [comments]  |
| Posted: 28 Jul 2019 03:00 PM PDT I just want to share my house hacking experience. House hacking is where you buy a multi unit property and live in it and rent part of it as well to help you cover some or all of the mortgage. I believe this can be the best investment normal people can make. Here is an example. I bought a 4-plex with an FHA loan so I only had to put 3% down on it. The rent from 3 units more than covers the mortgage. My only costs are maintenance and increasing my emergency fund. If we say inflation in housing is like 3% a year, then I am earning about 100% on my initial investment which was my down payment in equity. I also earn money because I'm paying down some of the principal by just making the payments. Also, there are many tax benefits to home ownership and business ownership. Property values have averaged something like 5% appreciation in my area over the past 25 years or so. I bought for half a million dollars with roughly $20k down. At 5%, this thing could theoretically double in value twice in 30 years. So I might end up with a 2 million dollar asset in 30 years that I only paid like $20k for. Do I think it will really double twice? Maybe maybe not but most likely it will at least once. Now think about this, as you are able to increase the rent over time, you can get a home equity loan. My plan is to increase the rent, then get a home equity loan where the payment is about the same as my rent increase. Soooo my budget doesn't change really but I can have like $50k or $100k to then go get another property. You do need to be careful with that because you don't want to overextend yourself. Anyway, I am just an average dude making an average income but I will end up with a very above average amount of wealth. In my mind it really isn't that difficult either and I think many people could do what I am doing. I'm a few years into the plan so far and things have been working out pretty much as I expected. I'm about to get my second 4-plex. I'm turning 30 this year. I think I will be able to retire early. Is this hard? The hardest two things are making sure to maintain an excellent credit score and finding good tenants. My credit score is about 800 mostly because I just always pay my bills and I have a large mortgage now. Finding tenants amounts to keep your rent slightly lower than you could and background and credit checking people to make sure they will likely pay their rent on time. Anyway people way over complicate things. I have found a way to earn a legit 100% on my investment every year. People always say that is impossible but I have found multiple ways to do it not just through real estate. Work smarter my friends, not harder. Maintain your health and relationships and always be learning new things even if not in school. Peace. [link] [comments]  |
| Posted: 28 Jul 2019 07:12 AM PDT My wife and I just moved to New Orleans (this week!) and are interested in making some FIRE friends. We are not yet FIRE but are on the path and it would be great to talk to some people who know the area more. This is especially true because we are thinking about buying a house/starting businesses etc. A little about us:
Let us know if you would want to grab a coffee/beer. [link] [comments]  |
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