Financial Independence Daily FI discussion thread - October 22, 2019 |
- Daily FI discussion thread - October 22, 2019
- My first year of tracking my NW. Two years into FIRE. Modest income. Lucky human.
- 85% of the way to FI with an existential fear of a recession right before I hit FI, considering a major portfolio shift to hedge against it
| Daily FI discussion thread - October 22, 2019 Posted: 22 Oct 2019 01:07 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]  |
| My first year of tracking my NW. Two years into FIRE. Modest income. Lucky human. Posted: 22 Oct 2019 09:10 AM PDT Let me start by saying I am sorry if this breaks any rules in the sub. I've been here long enough to know it will be removed by the *new-ish* mod team if it does. Apologies in advance if that occurs. This IS your typical "I'm on my way to FIRE. Here's where I'm at" post. I've gone ahead and tried to add more detail but if you have no interest in another mid twenties person rehashing the last couple years of professional experience and a FIRE-minded approach to life then I would simply stop here. I started college in Fall semester of 2013. I was 18 and went to a state university in the NE region. I was granted merit based scholarships as well some subsidies for tuition due to a program known as the New England Regional Tuition. Some of my college was subsidized by my achievements and due to my choice in the discipline. The other part of my college was completely paid for by my parents. I cannot stress this enough. While I was in Uni, I was lucky enough to have all of my necessities covered by my parents or other means. I did work as a sophomore up until I graduated (undergraduate lab where I was published as a #2 author, gas station), but literally pissed all that money away on alcohol and drugs. I really am very lucky and privileged. I got to enjoy all my college years and graduate with no debt. I could not have done this had my parents not helped me and given me so much. There just would've been no way for me to balance the workload (I went to school for ChemE..it was hard because I'm a pretty average guy) Well fast forward to graduation of college. I'm out of school with no debt. Again, most of this success to this point has been a combination of (alittle) of my skills & drive, and (a lot) of my surrounding support system). By this time, it is May 2017. I've just received my diploma and drive back home to have knee surgery (woohoo ACL tears!). By August 2017, I had my first job after living at home for 3 months (recovering + job hunting). My pay would be almost $50k a year. Once I got a job offer my parents gave me $10,000 to put towards whatever I wanted. OK. That's the story before I really started my FIRE journey. A lot of privilege. A lot of luck in the genetic lottery. Absolutely amazing self-less parents who I would do anything for. A VERY strong support system. Cue the start of my own (I mean really, my OWN) journey. In November of 2017 my parents would sell the house I grew up in and move out of state. I lived in their old house until I was forced to move out. In Nov 2017 I moved into my friends duplex. He had graduated a year prior and co-signed with his parents. Myself and another friend were renting out rooms on the first floor while he lived in the master. He also had tenants above him (kinda sounds like the start of his own FIRE journey :p). This is around the time I started realizing I'm starting to stack up some sizeable amounts of money. This is also around the time I first dove into investing, retirement planning, personal finance and the likes. Until 2018, I just kept absorbing information without taking much action. I wanted to be sure of myself. I think I put like $3k into my 401k in 2017 but I'm not sure I'd have to look. So once 2018 began I took things more seriously. I applied more effort to handling my money. From about 2018 until now, I've followed a budget close to the one you will see below: Monthly Summary 2017-2018 (note: in 2019 the income rose to ~$4833/month, expense constant) Income - $4000 (gross) 401k - $1550 Taxes + Other deductions – $894 (S/0) Expenses - $1015 Taxable Brokerage - $166 Roth IRA - $500 Savings = $2216 ($26.5k/yr) Spending + Deductions = $1784 ($21.4k/yr) You'll notice this is slightly off – approx. $225 / month in the red.. That is due to the following:
So all things considered lets be conservative and say maybe ~50% savings rate? I know numbers are a little funky but it's hard to go into alllllll the details here. I also don't stress about the fine details much because lets face it – there will be things well out of my control that happen and have a far greater impact than actually only putting $18,450 in my 401k in 2018. I do what makes sense for me. Hopefully there isn't too much blowback from the accountants on this board. Now comes my favorite part…The chart and current investment thoughts. As I mentioned, I really started thinking about FIRE in Nov 2017, or that was my first formal exposure to the idea, anyway. That is reflected in the following chart, which begins in Oct 2018 and ends Oct 2019. https://imgur.com/gallery/Wt0YEkP Really the only thing to note is that in 2019 I got a big raise (I said gimme or I'm gone..thanks to having a huge E-fund and safety net (the one I built, not the one I was born into). I made the jump from $48k to $58k and a got a nice bonus with backpay. Investment Thoughts: 21% cash (declining every pay period) 79% invested (Bogle 3fund) Of my investments: 68% 401k (US Total Market Fund) 21% Roth IRA (95% US Total Market funds + 5% lotto tickets) 11% Taxable Brokerage (~85% US Index funds + 15% EX-US Index Funds) I am working towards an 80/20 (equity/bond) ratio with ~20-40% international equity weight. I just decided on the asset allocation a short time ago, so my current investments don't reflect my desired allocations. I will be working to amend that by simply increasing my international funds. I don't think I'll re balance into that AA at this time. Bonds won't really be added until next year, at 25. I don't plan to be 20% bonds until maybe 35-40. In Oct 2020, I plan to make a similar post. If you read this whole thing, I hope you enjoyed it. I look forward to any comments and discussion. Edit: I've really enjoyed all of these discussions. I think there are some interesting opinions about privilege and how it applies to FIRE. [link] [comments]  |
| Posted: 22 Oct 2019 05:40 PM PDT Title says it all basically. I'm really tired of the corporate grind. I live in a HCOL city and I'm 2 years away from FI if I immediately move to lower COL city once I hit the magic number, or probably a decade away from it (unless one of my side businesses/projects takes off) if I want to stay here. Both these estimates assume ~7% market growth and no recession... big if. I'm so, so tired of working a 9-5. And my biggest fear is that, right at the cusp of FI, a recession hits and suddenly I'm several years away from it and I've got to sacrifice more of my finite years on Earth to the office. All this is to say, I fear loss much more than I desire gain, and that sequence of returns risk is what keeps me up at night. If my portfolio were to just keep up with inflation I'd still hit the lower cost of living FI in ~4 years (though that assumes no layoff type event). My portfolio is currently 80/20 stocks/bonds, and I'm seriously considering moving to a portfolio to hedge my downside, even if it limits my gains--one like Ray Dalio's All Seasons, for instance, or maybe doing something like 40-60 stocks/bonds. The tldr of the ERN's safe withdrawal rate series is: after hitting FI, use a 3.5% withdrawal rate and immediately bond tent to 60-40 stocks/bonds, switching over to 100% stock over a ~11 year period to avoid sequence of returns risk (e.g., a market crash the day after you retire). So I was thinking, move over to a conservative portfolio now until I hit FI to hedge the risk of a recession within the next 2-4 years, and then once I hit FI go to 60/40 stock/bond and follow that plan of switching to 100% stock over a decade. I realize I'm contemplating this in a state of fear which can result in emotional decisions and poor choices, hence me posting here. Is my thinking wrong? Would I be making a mistake to drastically reduce my upside at this point? [link] [comments]  |
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