Financial Independence Daily FI discussion thread - October 23, 2019 |
- Daily FI discussion thread - October 23, 2019
- Seeking advice - leaning in or out from FIRE?
- At what salary were you able to contribute the max to your 401k/IRA?
- Pay down mortgage or invest in market?
- Diversify out of total stock market fund
- Just bought my first rental apartment!
- Planning to CoastFIRE to early retirement as expat
- Weekly Self-Promotion Thread - October 23, 2019
- cFIREsim question about pensions
- College money and FI
- The beginning of my FIRE journey, NW history, loose spending habits, and general overview (25M/MCOL/$65k salary)
| Daily FI discussion thread - October 23, 2019 Posted: 23 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]  |
| Seeking advice - leaning in or out from FIRE? Posted: 23 Oct 2019 11:57 AM PDT I'm facing a career choice and really unsure about the best option. I have a partner and 3 young kids, live in HCOL area but have good low rent housing that is stable. We have saved a little over $1M between us, no debt and we are in our mid-30s. I've been in consulting for 10 years (short stint at a big 3, then a smaller boutique place), so I'm making good money but I'm burnt out on travel. I'm feeling like I need a change, but I'm afraid to give up the money since I know that will cost me more years until FIRE in the long run. Here are the options I've managed to land. Any of these salaries would still allow us to save substantially since we keep expenses low, but obviously there's a big difference between the highest salary and the lowest. 1) Current job, $200k plus bonus but travel 2-3x/month and lots of work stress 2) Public sector, $120k without much growth potential, no travel. Interesting work, lighter workload 3) Private sector role, $130k with good potential, no travel. Medium intensity of workload 4) Non-profit role, $105k, interesting work, very good work/life balance. I'm intentionally not giving a lot of detail, because I'm not really asking you to make this decision for me. I'm wondering how other folks would think through this decision if faced with a similar choice in their own life. [link] [comments]  |
| At what salary were you able to contribute the max to your 401k/IRA? Posted: 23 Oct 2019 03:23 PM PDT 22M HCOL $65k salary. Average monthly expenses $2.3k/mo w/ no debt. Once I build up my emergency fund to $10k I plan on working towards maxing out my 401k Basic/Roth that my company offers. This is a key strategy for my plan on building long term wealth and I know it's possible, but it seems daunting. This got me thinking, at what salary/age did you begin maxing out your retirement accounts? [link] [comments]  |
| Pay down mortgage or invest in market? Posted: 23 Oct 2019 09:15 PM PDT I have 600k 30yr mortgage at 4% rate, and I save about 6k per month after paying all monthly expenses and maxing out 401k. Does it make sense to use some of this 6k towards paying the principal portion of mortgage? Or should I continue investing all of this 6k in market? The way I see it, not paying mortgage early helps reduce my taxes. And market should give higher returns than 4%, so make up for money "lost" to interest. [link] [comments]  |
| Diversify out of total stock market fund Posted: 23 Oct 2019 08:03 PM PDT Thoughts on approach in the article linked? Summary: Ditch TMI and instead diversify equally among large-cap growth, large-cap value, small-cap growth, and small-cap value. From the article:
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| Just bought my first rental apartment! Posted: 23 Oct 2019 09:07 PM PDT Not trying to brag, but motivate! I am not exaggerating when I say that I have been looking to buy a rental apartment for more than 3 years. I live in a country that has high tax levels, so the numbers needed to be perfect in order to make any money at all and I never found that until some weeks ago. I was looking for an apartment that I would fall in love with and wanted to live in myself. As many of you probably will guess; that did not turn out to be the best option. Instead, what I bought was a 3-bedroom apartment in a lower-class neighbourhood (it will be gentrified, though, and luckily I have a long term-perspective) near a big university. I went from looking at the beauty of the apartment, to only looking at 2 things; the numbers and the condition of the building the apartment was in. I bought an apartment that is in a newly renovated building and is on a floor in the middle of the building. I will rent out to students, who in my country are a very, very safe bet because they have money from scholarships or parents (or loans). It took me a week of biddings and negotiating, but finally I got it yesterday and by today I have already rented out one of the rooms, meaning I will already have covered all the running costs per month. What I want to communicate through this post is just how amazing it feels. I bought the apartment for a cheaper price than the city centre, which means I was able to pay cash. I now know that I have 1000$ dollars net in income every month from that apartment, and even though I will need to keep some of it stored to make a buffer and for maintenance, there is something unexplainably relieving in having that income. I rent myself, as I have to relocate often because of my job(and I bought a place in my home town as that is the area I thoroughly know) but I know that I every month will have my rent paid + my student loan payment just by maintaining renters in the apartment. I am so shocked as to how relieved I feel. I have wanted this for so long and I have saved for so long, I even kept my student loans instead of aggressively paying them off so that I could save for this instead. Probably not the best choice only by looking at the numbers, but on a personal level this was really the right thing for me. No matter what happens I will have a monthly income to cover my needs (rent+loan). Everyone working towards buying rental property, han in there! The wait and saving can be so long and feel so worthless, but my oh my is it good when you make money without doing more than seeing to renters! [link] [comments]  |
| Planning to CoastFIRE to early retirement as expat Posted: 23 Oct 2019 02:10 PM PDT So, I'm a FIRE stereotype: I am a 40 year old single man who is ready to quit his career, travel the world, and retire early as an expat in a foreign country. My Coast Number is $400k. Who's with me? Let's get to some numbers. What does firecalc say about my situation?
Now let's talk about some details. First, let's talk late-retirement phase: I'm estimating $2k/mo social security /because/ I actually forecast $2.5k/mo via https://socialsecurity.tools/app.html and I assume there may be a 20% reduction in benefits before I retire. I am also assuming I do not reduce expenses in retirement. In reality, I do expect my cost of living will decrease at older age. Next, let's talk about retirement cost of living. I think $4k/mo is a little low for me retire in the US (re: healthcare). This is especially true for an "active" early retirement. But plenty of people retire on less. On the other hand, $4k/mo is well-off in many of the expat destinations. I'm seeing that a moderate comfortable cost of living for retiring in Costa Rica or Thailand is around $2k/mo, or maybe $2.5k/mo. This means that Social Security should take care of me in these countries, at worst case. But, I suspect those numbers don't include things like return visits to the US and similar experiences. I'm targeting $4k, so nearly 2x these what it "should" cost. And the $4k/mo target lets me fall back to the US if I end up missing home. Over the next 15+ years I'll refine my cost of living projects for retirement and better understand what I want. Now we can talk about Coasting at 40. I could continue to work a job I dislike until I'm 50. Another decade. Another middle aged man withering away in an office. Or I can use the Freedom I have to make some calculated risks and see where they go. My goal over the next 5 years is to phase out my career, and begin to find forms of income that are more satisfying. By "satisfying" I'm referring to a bunch of things that I will be looking for other than maximizing cash income: for the work itself to be more enjoyable, to work less hours, to generate passive income, to do work that is meaningful, etc. To me FIRE is the freedom to find ikigai. I'm going to take a career break for about 1.5 year, costing me about $50k. I'm going to travel cheaply, experiment with ways to turn my hobbies into some profit, and keep my resume up to date by learning new technologies and look for freelancing opportunities. If things don't go perfect, I expect to the workforce with a fresh set of skills and a rejuvenated spirit. My only requirement: that I break even over the five year period from 40-45. Since I'm risking $50k, in this case, I'll need to find a job that let's me save $1,250/mo. I currently profit much more than that, so even if I have to take a pay cut, I feel confident I can find a way to return to my career with a year+ break. My best case situation is that I find a way to begin making money working on projects I love. If I make enough by the end of a year or so, I'll begin considering a permanent departure from my career. However, I know it often takes ~3 years to settle in to a career change, and the longer I delay returning to my career, the worse it will be. What about Stock Market Return? The reality is that I have a massively greater chance of being rich or dead by 90 than running out of money. I'm using FIRECalc, and it gives a 98% success rate. Only 2 cycles failed, both over age 90. The average outcome is $3 million. The worst case results from FIRECalc can be avoided. If the market is severely underperforming for the next decade, I'll re-evaluate my work life to make a profit. I also have a safety net of social security that should cover my minimum comfortable living in a place like Thailand / Costa Rica. My goal by 45 or so would be to build out income streams that cover my cost of living (or more), with a mix of income from passive income, hobbies/projects that I love, opportunities that are meaningful, and maybe the occasional high paying contract gig. My goal is to retire by 55 rather than 60, if I'm lucky with the market and find success in my endeavors. [link] [comments]  |
| Weekly Self-Promotion Thread - October 23, 2019 Posted: 23 Oct 2019 01:07 AM PDT Self-promotion (ie posting about projects/businesses that you operate and can profit from) is typically a practice that is discouraged in /r/financialindependence, and these posts are removed through moderation. This is a thread where those rules do not apply. However, please do not post referral links in this thread. Use this thread to talk about your blog, talk about your business, ask for feedback, etc. If the self-promotion starts to leak outside of this thread, we will once again return to a time where 100% of self-promotion posts are banned. Please use this space wisely. Link-only posts will be removed. Put some effort into it. [link] [comments]  |
| cFIREsim question about pensions Posted: 23 Oct 2019 06:23 PM PDT I am 37 and planning to FIRE within the next year or so. I have a small pension coming my way at age 53. I want to plug it into the calculator to take it into account, but I'm a little uncertain of how inflation adjustments work. I know what the pension pays out, relative to the dollar value in my account. I know the dollar value of the account today and approximately how much it earns each year in interest. I can extrapolate that out to age 53 and see that I should get $24k a year. Easy enough. But, $24k in 16 years is worth quite a bit less and I'm confused as to how cFIREsim takes those numbers and how they should be entered. I could ask the same question about social security. Not that I want to count on it, but if I want to factor it into the calculator do I put in the expected payout in todays dollars? SSA can project your expected payout, so I have some numbers there, but I believe its in todays dollars. [link] [comments]  |
| Posted: 23 Oct 2019 10:35 AM PDT Part of my investment plan has always been to save money for my kids (17, 15, 10) to go to college. Now my 17 year old is thinking of not going. She may change her mind and go, but if she doesn't, what should I do with the money? I know I could roll it down to the siblings. I would pay a penalty to use the money for a non-college purpose, but I thought about doing something else with it for her like setting aside money to buy her a condo. Of course, I could reach FI years earlier if this money was moved over to my retirement account. Thoughts? [link] [comments]  |
| Posted: 23 Oct 2019 06:42 AM PDT TLDR: Age 25, graduated w/ $50k in debt, increased NW from -$50k to $25k over the course of 2.5 years with a $65k salary in MCOL. I'm also a home owner and landlord. I don't have any new wisdom or secrets but I figured some readers might have similar characteristics or have questions on pieces of my story. Age:Current age is 25. I discovered this sub around 2 years ago. Net worth by age (estimate) 21: -$51k 22: -$45k 23: -$31k 24: -$8k 25: $26k Graph of NW (note: I only started tracking this in the summer of 2018) https://i.imgur.com/8xikl38.jpg edit: I can't get the graph to work, probably because I'm using an ancient internet browser. Childhood: I come from a middle class family, where my dad works in maintenance and my mom is a teacher. They are average savers. They're 55 and only have around $350k saved. My dad will have a pension of about $2k/month because he's work for the fed gov't for about 25 years. One thing I'd like to add is that my parents were very good at pushing me to get decent grades, participate in activities, and generally enjoy myself. However, we only went on 2-3 vacations throughout my childhood which is a major driver for why I want to travel as much as possible while I'm young. I recently hiked in Rocky Mountain National Park and I'm going on an international trip in January courtesy of my ignup bonues from Chase credit cards! College: I received a half-ride scholarship at a local liberal arts school. I got a degree in economics and finance. I also graduated with $50K in student loans. My parents weren't able to help with the cost, but they did let me live at home for 2 years during school. This helped, although rent in my area was around $350 a month so it wasn't a huge boost. I've been smart my whole life, but I do have a tiny amount of regret of choosing the expensive liberal arts, private school rather than a public university. I essentially traded $50k in total school loans for the opportunity to play basketball (D3 and no scholarships for athletics). I could have went to an in-state school 15 miles away for free due to my ACT score. To make matters worse, one of my coworkers I started with graduated from that school I could have gone to for free (and probably gotten paid after some other small scholarships). Oh well, it all works out in the end and I'm content with my decision. Throughout college, I worked at a local retail store earning around $15 an hour. It was hard to find something better that had flexibility around basketball season. Post-grad: I graduated with a GPA around 3.85 which allowed some flexibility while job-hunting. I actually signed some documents (over email and adobe) accepting a job offer at a mid-tier consulting firm for a salary of $53,000. However, I soon realized that 50-70 hour work weeks would be my reality, and the recruiter saying "But they cater in dinner for free!" wasn't a good reason to stay. I went on a summer recruiting retreat with this company and employees would tell us about how they worked from 8 am to 9 pm during crunch time. I decided to take a completely new route. First (and only) job: I decided to apply for a job with the federal gov't out of Wisconsin. I now work for the US Treasury as a federal regulator in the financial industry. My starting salary was $56k and I've never had to work more than 40 hours a week. After 2.5 years, my salary is now $68k. I should note that I also get per diem and mileage reimbursement when I travel. This probably averages out to about $5k in additional "income" each year. Benefits are outstanding and include a 10% retirement match, free healthcare, free vision, and free dental. I've essentially traded the possibility of making >$100k doing consulting or public accounting for the security net and benefits that comes with federal work. No one who made it through the 1 year probation period as been fired from my district office for more than 20 years (seriously, it's insane). Be careful applying for a gov't job in places like Denver, NY, or San Francisco. The geo-pay isn't nearly enough to make-up for the crazy cost of living in those areas. I feel like a gov't job is especially great in LCOL or MCOL areas like mine. I bought a house: Last fall, I purchased a 3 bedroom/ 2 bathroom house. It's a fairly nice house but certainly in a dodgier part of town. I wasn't planning on buying at that time although I had plans to buy a place and rent 1-2 rooms out to help cover my mortgage expense. I wanted to wait until this spring when I had more money saved and was better ready. I looked at 10+ houses to get a better feel for the market. I came across this house and I loved it. The problem was, I only had about $5k in liquid funds. The house was listed at $240k and I offered $240k with the stipulation that the seller paid closing costs (I simply didn't have the cash). She somehow accepted, and I began trying to come up with ~$8k in closing costs required for my 3% down payment. I ended up borrowing $2k from my Uncle, who really helped me out. My parents probably could have swung the $2k loan but it wouldn't have been easy. I paid my uncle back, with interest, over 6 months. So now I owned a house! It was an awesome feeling. My mortgage was around $1,600 including taxes, insurance, and PMI. I started looking for a couple renters for my 2 extra bedroom. In my area, rent is wild so I knew I could have success finding renters to cover most of my mortgage. I ended up finding 2 renters who paid a total of $1,500 each month. I used TransUnion's Smart move website to do background and credit checks on potential tenants, which I highly recommend. So bam, now my rent/mortgage expense is closer to $200/month. We also split utilities 3 ways. I've spent approximately $1.2k in maintenance and repairs over the last year. I have about $11k in equity now. Not really even worth mentioning at this point. Oh, and I already had to refinance, which sucks. My original rate was 5.00% in November of last year (highest peak) and I refied down to 4.00% a few months ago. Cost me about $1,800 out of pocket and increased my loan amount by about $1,000. Monthly budget: It's not the norm for this sub, but I don't really budget. Owning my home and having renters is absolutely the ONLY reason I get away with this. Basically everything here is a guess. I use CC's almost exclusively (primarily for sign-up bonuses and free travel) so I can get a rough estimate of expenses. Yeah, I know I could be doing much more in the saving department. But in my eyes, I'm living a darn good life while also setting myself up for the future. Estimated monthly expenses: Mortgage and utilities: ~$200 (1 bedroom apt rent is about $1100 here. I used to pay $850 when I split a 2 bedroom with a friend) Student loans: $400 Retirement contributions: $600 (work matches around $500) Dining out: $400 -Yep. I travel around 2 weeks/month for work and I also eat out a TON). I could bring food when I travel but damn it's nice to eat at the top rated cafes and restaurants in new cities I frequent. Groceries: $100 (I typically only eat at home on weekends or on some nights when I'm not traveling) Car payment: $350 (2017 sedan, paying off in 4 years @ 3.5%. I enjoy having an above-avg car especially since I have to travel for work) Car Insurance: $150 Gas: $60 Phone: $60 Gambling: $100 (whoops. Sometimes I win though!) Breweries, happy hours, dates w/ GF, etc: $100 Travel: almost fully covered by credit card points and rewards now Total: Around $2,500/month High-overview of Assets: Cash: $5k Retirement: $35k Car: $14k Home: $240k Liabilities: Student loans: $26k Auto loan: $13k Mortgage: $225k I probably forgot a bunch of stuff so feel free to ask questions. And feel free to disagree or feel disgusted by my spending. [link] [comments]  |
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