Financial Independence Daily FI discussion thread - September 29, 2019 |
- Daily FI discussion thread - September 29, 2019
- Early retirement medical coverage?
- My gf (both early 20s) just broke up with me because of FIRE
- List your monthly spending budget. Name one thing you should cut, but refuse to. And why.
- Are there some studies about avoiding the bottom 10% market performance?
- How possible is FIRE on a low income?
- Net Worth: Total, Financial, and Effective
- Raise your hand if you are fighting complacency
| Daily FI discussion thread - September 29, 2019 Posted: 29 Sep 2019 01:06 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]  |
| Early retirement medical coverage? Posted: 29 Sep 2019 09:52 AM PDT My dad is 54 and has enough to retire, and wants to. Problem is, if he works 5 more years he will get medical for him and my mom for life. She has some very serious health problems and his mindset is that he won't get good enough healthcare if it isn't through his work. I figured this was the best place to ask what you all do for health insurance if you retire without medical benefits. [link] [comments]  |
| My gf (both early 20s) just broke up with me because of FIRE Posted: 29 Sep 2019 01:36 PM PDT I'm a guy who graduated this year and have been working for a few months now. I'm in civil engineering working for the state, so I make ok money but not as much as compared to the other engineering majors like comp sci and whatnot, but I enjoy the work life balance and my job doesn't make me miserable. My ex is still in school and will graduate in a few years with her masters in business. I come from a poor immigrant family and was interested in FIRE about a year ago after seeing my parents always struggle with paying their bills and how they can't afford to retire. I am extremely interested in FI and a bit less interested in RE because I want kids and more financial stability. Plus, I wanted to spend some of that money to help take care of my parents, so retiring too early isn't really feasible in my case. I've shared this plan with my now ex gf in the past before and she always had her doubts when I said I wanted to retire at 50 if possible (when I can start collecting my pension). Her parents and her family friends all come from better backgrounds and are upper middle class, so she was raised with a certain mentality of "work as hard as you can to make as much money as you can". Her parents looked down on me and my family for not being as well off as them even though they've never even met me and I think this played a huge hole in what she wanted in a partner. That and the fact that she will out earn me in the future made her resent the idea of me being retired (and not caring to impress people) while she works for more money to maintain a certain lifestyle. She also doesn't understand why I want to retire early when I'm still young and physically capable of working until I'm in my 60's to earn even more money. I've always hated the idea of working my ass off as much as I can to make as much money as possible while missing out on life. Of course, I will still do my best at work but when it's 5 o clock, I'm out of there. I'm still saving about half my income and living at home to pay off student loans and working on FI. Anyways, I'm sad and this is mainly just a rant and I was wondering if anyone has been through the same thing, how did it work out for you? How did you find someone who is/is willing to FI and maybe RE? [link] [comments]  |
| List your monthly spending budget. Name one thing you should cut, but refuse to. And why. Posted: 29 Sep 2019 03:02 PM PDT |
| Are there some studies about avoiding the bottom 10% market performance? Posted: 28 Sep 2019 05:54 PM PDT The biggest risk in term of FI is to run out of money too early. I used to think in terms of improving my rate of return, which can augment your future lifestyle as your nest egg gets bigger, which is nice. However, it comes with additional risks too. This post is relevant as I was writing this one. As I spent time looking at the various simulations (for example, on personal capital), my concerns boiled down to avoiding this 10 percentile (bottom 10%). I understand that this 10% is rather arbitrary, one can decide to target the bottom 1%, or 25%, etc... If I don't run out of money, then whatever is above the baseline is gravy, and I will be an happy camper it we hit the top 90 percentile, median, or even 25 percentile of market performance. Taking this in account, and understanding that we need to be invested in stock market to not run out of money too early, what are the best investments to avoid the sequence of return risks? Are there some studies that diverge from the standard Trinity (and alike) with 100% bonds, 100% stocks, 60/40, etc... I am thinking for example at the "All Weather Portfolio" or even "Golden Butterfly"... What if my focus was to avoid the worst outcome, instead of getting as much money as possible? Interestingly enough, I have been a pretty aggressive investor, and this may mean I am becoming more conservative. I guess I am growing. :) [link] [comments]  |
| How possible is FIRE on a low income? Posted: 29 Sep 2019 03:14 PM PDT I'm 24 and a teacher. In other words, I'm gonna make 35k a year for a while, and my income potential, even over decades, caps at around 45k. I live in Missouri, a fairly low COL area. Assuming I do everything right in terms of achieving financial Independence, what will my situation look like? What's my best case scenario? [link] [comments]  |
| Net Worth: Total, Financial, and Effective Posted: 29 Sep 2019 02:49 PM PDT The topic of calculating net worth comes up here from time to time, so I'm going to address it in terms of how I do it just in hopes of helping others out and generating an interesting (I hope!) topic of conversation. For me, net worth in its purest since is no more valuable than your Reddit karma. Then again, we're naturally drawn to up our score in whatever game we're playing: Reddit or finances. That said, net worth *can* be a useful metric for financial independence beyond just bragging rights, so it's worth discussing. It helps us figure out our Magic Number in terms of investments that we need to be FI... and to RE. I break net worth into three forms: net, financial, and effective. Net worth is the traditional definition: assets - liabilities. This includes the market value of everything you own minus any debts you have. Note that "market value" is what you can sell those assets for and NOT what you paid for them or what they are worth to you. I actually find this number, while the most traditional, to be the least interesting or useful. Financial net worth is defined (by me in my spreadsheet) as investments minus any debts. That's not an industry-standard term: it's MY term for our financial "stuff". All our investments minus any debts we currently have. These are investments that give us real returns: i.e.: money we can spend in FIRE. Effective net worth is a number that includes the value of stuff from which I gain income but doesn't have a "market value". This is stuff I can't (readily) sell. It includes any income stream that isn't normally bought and sold such as pensions or disability income settlements. If you don't have any *reliable* pension or other non-marketable income streams, then financial net worth is your FI number. That is, if you want $50K of FIRE income with a 4% SWR, you need $1.25MM in financial net worth. However, if you have $50K of reliable pension income and want $50K of income to FIRE, you need a net worth of $0 to FIRE. You're broke and rich at the same time if you don't assign some sort of value to your pension. Now, some pensions have a "present value" for which you could convert that pension to cash. Many don't, however (at least not in normal circumstances). I *do* have some reliable non-investment income, so I want to include that in my "effective net worth". By "reliable" I mean the alternative is a need for gold, guns, and a secured compound (and I'm no survivalist-type). I paid a LOT of money in over the years, but it's not something I can sell, so how do I value it? I look at it by asking "What value of investments would I need to create this same income stream at a 4% SWR?". Well, if I have $50K per year in pension income that would be $1.25MM. I therefore take that $1.25MM and add it to my financial net worth to get my "effective net worth". Now... this is exactly the same thing as the question people ask (fairly often) here: How do I figure out My Number for FIRE. It's just turned around to generate that "net worth" number that is mostly/usually financial Reddit karma. You can say "I want $50K/yr in income to FIRE". If so, you need $1.25MM to do so. However, if you have $10K/yr in pension income you only need $40K/0.04 = $1MM to FIRE. The final number we need when talking FIRE is the passive income we need not to work. Generally 0.04 * investments + other income. This is about the relationship between that passive income and what you need if you had to replace your "other income" with more investments. Again, it's like Reddit karma, but we all seem to be drawn towards keeping score. Yeah, there are some differences (you can sell a pension to buy a Lambo), so it's not traditional net worth. Still, I think this breakdown addresses some of the questions about net worth that crop up here pretty frequently. In the end, it's all about income streams, but net worth, like Reddit karma, is still fun to track. Hopefully, then, I'll get a bit of Reddit karma off this post! :-) N.B.: I won't be AT ALL surprised if you find a few errors and typos in this post. I'll blame them all on my now-empty wine glass. [link] [comments]  |
| Raise your hand if you are fighting complacency Posted: 29 Sep 2019 04:48 AM PDT I most certainly am becoming complacent. And while it hasn't impacted things greatly, I am concerned it could spiral into a much worse pattern. Before I disclose details I would like to say, this is not a "look at me" post. This forum has provided me a lot of motivation over the years, and there are many here who are much more disciplined than myself and with far more NW, far higher savings rate, etc. So here is where I am: 42 years old, NW around $1.55M, one child with 529 around $50K (not quite four years old). I fully understand that "on paper" based on these numbers we are in a good place. But lately my focus has shifted perhaps too much/too fast to enjoying the lifestyle and not worrying about saving aggressively. -About six months ago I voluntarily took a pay cut of about 20%. I do shift work but in a professional field, requiring advanced degrees. -Essentially we were offered shorter shifts, which I loved and continue to enjoy. I was asked if I wanted to pick up extra shifts to make up for lost hours, and I declined. No regrets thus far. -Since then our budget has been tighter. My savings rate has been as low as 5% at times as a result of the voluntary pay cut, vs. 20% minimum before and more often I was in the 30% range (pre tax savings rate) -In fact with a few big expenses, we have (gasp) carried over a CC balance, not enough to pay interest on it, but dangerously close. And requiring a "next paycheck" to pay off expenses accrued previously. I poke fun at this to an extent with the "gasp" thing above, but this is new territory for us. And largely due to my voluntary pay cut. -Voluntary pay cut has also limited our travel budget to an extent, caused our savings rate to plummet. -All of the above were mostly by choice and I haven't much cared to be perfectly honest. But as I see the years end approaching, I have realized that our savings this year compared to previous years is really not even in the ballpark. And while I have tolerated/planned for lower income year over year for a while, this year it is going to be a big drop off. -All of this being said, I am told by my employer due to some recent facility closures I am being asked to "relocate". I use the term loosely because we wouldn't be moving but I would be working in a new locale much further from home. Commute going from 40 minutes round trip to 2-2.5 hours round trip. -I have decided this is unacceptable to me. I will only take this as a part time position with a worse commute rather than subject myself to it daily. So my monthly/annual income may drop yet again. This would put my family into a situation where I may no longer be saving AT ALL for retirement, additionally we may struggle to get by without dipping into savings month to month (to the tune of $1K-$2K) without any "fun money" on the side which we are accustomed to (vacations would be much restricted and budgeted). [link] [comments]  |
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