Financial Independence Daily FI discussion thread - October 15, 2019 |
- Daily FI discussion thread - October 15, 2019
- Has anyone else stopped tracking their expenses down to the dollar? I realized my variable costs are so low at this point it's not worth it.
- Is it a myth that multinational US corporations provide enough international exposure? The case for investing in international equities
- Consulting with a professional before pulling the trigger
- Would you take a 20-30% pay cut to work 2-3 less hours and have a more flexible schedule?
| Daily FI discussion thread - October 15, 2019 Posted: 15 Oct 2019 01:08 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. [link] [comments]  |
| Posted: 15 Oct 2019 09:30 AM PDT For the past decade I tracked pretty much every penny I spent/earned. But then earlier this year, I had a revelation: something like 85% of my spending is fixed. Student loans, rent, utilities, food, and saving for retirement take up a bulk of my expenses. Even things like going out for dinner; if I have $200/month budgeted for that, and go over by 15%...that's still only 30 bucks. Or if I have $1000/year for clothing budgeted, and under-spend by 15%, that's still only 150 I've saved for the entire year. At the end of the day the overages only set me back in that decade of tracking by ~$4000. When I combined the fact that I'm trying to get into the 7 figures to retire, that's a drop in the bucket. Plus I actually make that in less than a week. I was talking with another coworker who's doing FIRE and he actually hasn't tracked anything in 15 years; he funds his retirement accounts, pays his mortgage (when he still had one), pays his utilities, etc. Once those are out of the way, if there is any left over that's his pool for spending. I still track all of my savings accounts, retirement accounts, debt accounts, etc. but the actual expense tracking turned out to just be a chore with relatively little value. In the 8 months since I started doing this I've been plugging along just fine hitting my savings goals, and it's one less time-sink to dump effort into. For the people that DO track every expense, have you looked at the actual cost/benefit of doing so, and if your fixed/variable expenses warrant the stress? [link] [comments]  |
| Posted: 15 Oct 2019 11:29 AM PDT I frequently see posts here saying that because many large US firms generate a significant portion of their revenue from foreign operations, the diversification benefits of international investing are already reflected in US stock ownership (AKA "all in VTSAX"). I think this thought could be wrong for many reasons reasons: (1). Historically, companies' performance is more highly correlated in their domestic markets than international. Looking at one study, although the median company of the 50 largest US companies conducted nearly 60% of their business internationally, the correlation to the US market was 0.52, and international was 0.45 (Rowland and Tesar, 2000; McEnally and Cristophe, 2000 Multinationals and the Gains from International Diversification) (2). Sector diversification. A portfolio of exclusively US stock is heavily concentrated in biotechnology, software, IT technology, and computer equipment, and underweighted in "old world" sectors such as automobiles, durable household goods, electrical equipment. Investing internationally allows your portfolio to be more evenly distributed across industries. Beyond diversification, there are other advantages to owning international stock: (1). Historical minimum-variance analysis. A fully globally market-proportional portfolio across history shows significantly lower annual volatility relative to a 100% U.S. equity portfolio. This of course depends on the time period analyzed and is backwards looking. Achieving the "maximum diversification benefit" can range from 20% to 70% international. Research by the Vanguard Group has shown that a 20% allocation to non-US stock has provided 70% of the maximum diversification benefit, while 30% to non-US stock provides 90% (Considerations for investing in non-U.S. equities, 2012). (2). Diversification of returns. Investing internationally allows you to capture whichever regional market is outperforming. Although US stocks lead now, inevitably another country or market will lead at other times. In conclusion, an international asset allocation of 20 - 40% adds significant diversification benefits, and balances the benefits of diversification with the risks of currency volatility and higher U.S. to non-U.S. stock correlations. Currently, Vanguard recommends 40% in international equities. Here's an article to learn more: https://investor.vanguard.com/investing/investment/international-investing [link] [comments]  |
| Consulting with a professional before pulling the trigger Posted: 15 Oct 2019 06:59 PM PDT I think I'm ready to make the jump. Or just about. But I don't totally trust my math and the truth is I'm still a little unclear on the finer points. What gets taxed how much, how to structure my withdrawals from various investments and retirement accounts, etc. Has anyone here tried chatting with a financial advisor before pulling the trigger and found it helpful? On that note, if anyone wants to recommend someone in the Bay Area, or online, who would be good to go over my numbers and instill some confidence, that would be great. [link] [comments]  |
| Would you take a 20-30% pay cut to work 2-3 less hours and have a more flexible schedule? Posted: 14 Oct 2019 06:08 PM PDT Edit: 2-3 less hours per day. Or whatever time signifies a 20% shorter work day. I was just wondering how many people would consider doing this. Sure you might FIRE a couple years later, but you'll get to spend more time with your kids/family. You also would probably be working a lower stress job which would affect mental health. Just thought it was an interesting subject to discuss. [link] [comments]  |
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