Financial Independence Daily FI discussion thread - December 03, 2019 |
- Daily FI discussion thread - December 03, 2019
- "Coast" into RE sooner with freelance+gig economy work?
- International property ownership
- (Canada) I am on the path to FIRE because I have no other choice
- How to transfer wealth to children to get their FIRE journey started early
- A reminder of why we have emergency funds
- PhD student's quest for FI: detailed progress post
| Daily FI discussion thread - December 03, 2019 Posted: 03 Dec 2019 12:08 AM PST 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]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| "Coast" into RE sooner with freelance+gig economy work? Posted: 03 Dec 2019 09:37 AM PST Let's say you're sick of full time work, but you're a few years away from FI. Work itself doesn't make you unhappy, but the obligation to be somewhere and be available at a certain time every day/week does. You're $300k short of your 4% FI number ($12k/year). What if you could make up for that shortfall and still (somewhat) maintain your time independence? My hypothesis is that a combination of freelance and gig economy work can close this gap and allow burnt-out RE-types with flexibility to leave full time work even sooner. Call it "semi-FI" or whatever. I want to understand if others have done something similar to this, or if anyone is planning to, and if there are any shortcomings I'm overlooking. Freelance/contract work is lucrative, but irregular, and often includes tight deadlines or lengthy obligations (e.g., 40hr/wk 3 month contracts). Gig economy work is low paying, but flexible, allowing someone to turn on and off the money spigot more or less at will. So let's say you have an FI shortfall of the aforementioned $300k ($12k/year @4%). You RE in January 2020. Fast-forward to June, you've made $10k on freelance gigs, but have travel scheduled off and on for the remainder of the year, preventing future contracts. Instead of trying to find a freelance gig, you pick up part time dog walking through Rover/Wag to plug that shortfall (Rover reports that part time dog walkers make ~$1k/mo, full time is closer to ~$3k/mo). Outside of plugging shortfalls, the other benefits I can see with freelance+gig work in "retirement" is that you stay somewhat relevant in the job market, and potentially have a stream of revenue you could ramp up if needed. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| International property ownership Posted: 02 Dec 2019 06:12 PM PST My wife and I are extremely fortunate to be internationally-connected to friends and family on different continents. We were recently informed that upon my in-laws' passing, we'll be inheriting a series of properties in Egypt and Brazil (in addition to a few properties in the US). The question is this: would it be worth trying to hang on those properties if we have no one to directly check in on the properties when we're not around (which is likely the case given that we won't have the ability or desire to fly frequently across the world? The idea of a "vacation" house in another country is thrilling but the reality of it all seems daunting [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Canada) I am on the path to FIRE because I have no other choice Posted: 02 Dec 2019 09:13 PM PST I am disabled. My entire family, myself included, expected over the years that my disabilities are so severe that I would never be capable of getting, much less holding down, a job. My luck turned in September 2017 with some help from a nonprofit. 3 months after I started searching, I landed a job as an interpreter. I am still at that same role, same company almost 2 years on and will probably stay until I am (1) laid off/fired, (2) die or (3) get too old/sick to work, whichever comes first. It looks like (1) is the most likely. The problem is, if I get laid off or fired, I will most likely be unemployable. I got lucky and got this job, and if I am old when laid off, I will certainly not be so lucky. A 40 year old disabled person with no university degree or other credible post secondary education will not be hired for anything beyond minimum wage. I can't drive due to visual impairment (legally blind in the left eye, 75% of my vision is gone in my right eye), and can't do any form of manual labour. I therefore cannot work in a warehouse or grocery store if I were to run out of money and have to work to pay the bills. So, how exactly do I deal with this? A 70% savings rate (as a percentage of post-tax income--and I only use a TFSA as a tax shelter and not an RRSP), and a planned 2% safe withdrawal rate--I absolutely cannot afford to fail. My expected income is somewhere between $42 000 and $57 000 per year while working--and my expenses are about $10 000 per year, both when working and retired (all of the above figures are in Canadian dollars). If I failed, and ran out of money after years of unemployment due to age and disability, plus a lack of higher education, I could go on ODSP ("Disability") only if I can prove that I am unable to work, which would be impossible if I had been working full time for a long period of time, unless I suffer from another, new disability that further diminishes my ability to work. Also, I must have less than $40 000 in liquid assets, a figure I now have surpassed, but will be impossible to build back up to once it goes below that due to prolonged unemployment. The expected scenario--which is in the middle, between the best and worst cases, will see me having (in 2017 terms) $500 000 in assets by 2035 and be able to retire on a 2% withdrawal rate for who-knows-how-long? Could be that I drop dead of a heart attack before I get to retire at 40, or could be a 40 year retirement and be dead by 80. But nonetheless, my estate should be mostly untouched (or even be larger than the assets I retired with) the longer I live, unless I end up needing long term care not covered by government health insurance--in which case my retirement money is gone in 5 years. Does anyone on this sub find that this is your reality? I am just putting it out there that this is the harsh reality some must face. I am luckier than most in that my mother essentially gave me a house to live in and I only need to pay for the food, property taxes, condo fees and utilities (I live with her). I am also luckier than most in my situation in that the unemployment rate of people like us are in the 80%+ range. I cannot even begin to imagine what itis like if you are unable to work and your parents are not wealthy enough to give you a place to live. No wonder why so many disabled people are so broke. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| How to transfer wealth to children to get their FIRE journey started early Posted: 02 Dec 2019 07:39 PM PST I want to start saving money for my children so it can grow over a long period (eg 60 years) and be used by them in retirement. For example, if I set aside $5k/year for the first 7 years of their life, it would grow to $1.8M by the time they turn 60, assuming a 7% avg rate of return. I plan to use this to kickstart their FIRE journey and teach them the value of investing. What is the best vehicle for transferring wealth to them in this manner while minimizing taxes - a trust? Custodial account? JWROS? Something else? Has anyone else done this? A few more details: 1. I want this money to be available to them regardless of whether or not I'm alive. I do not want this to be an inheritance, because there is a chance that I will still be alive when they turn 60.
Edit: a lot of people are suggesting Roth IRAs, which I definitely plan to do when they are older and eligible to earn income. However the purpose of this effort is to maximum the number of years of growth by contributing to this fund starting from when they are born. Edit 2: a lot of people are also suggesting 529s. I should have mentioned earlier that I'm already doing that to fully cover the cost of education for them so they come out debt free. The main motivation here is to make small contributions over time that won't really make a material impact on my FIRE timeline but will compound to meaningful sums of money for them so that they might never have to save for retirement. They can make different life and career choices between college and age ~60 knowing that starting at 60 they'll have guaranteed $63k annual income for life (@ a 3.5% SWR). They can also choose to accelerate their retirement timeline by saving aggressively early on themselves. Edit 3: many people are questioning this approach and whether it teaches children the "right" lessons about working hard, saving, and investing. I personally don't think there is one "right" approach and there's no way to know what will be effective for your children when they reach adulthood. The aim of this is to give my children more freedom in life so they aren't driven to choose careers that maximize compensation. This is a gift I would like to give my children regardless of whether it fails or backfires. I'm open to hearing other ideas that would provide more freedom, but that's probably worthy of a different post. I'm not going to be convinced NOT to do this, I'm just trying to figure out HOW to. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| A reminder of why we have emergency funds Posted: 03 Dec 2019 03:17 PM PST I've been on the FI train for a while and diligently save 60% of my income. Both my housing and car are far below what most in my income bracket pay. I live a simple life and way below my means. I grocery shop at Aldi and meal prep most of my meals for $2 each. Today my beloved 13 yo dog came down with some serious health issues and I had to hand the animal hospital my credit card for a $2,000 bill. Just like that. Yikes. Steep bill for someone who diligently packs lunches for work to save $10. I figure, the money is worth my peace of mind and knowing I did my best by him. Other FI folks, can you relate? ....How do you mentally battle these bills when you work so hard to nickel and dime the day-to-day stuff? [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PhD student's quest for FI: detailed progress post Posted: 03 Dec 2019 01:11 PM PST I see people mention on a bunch of FI subs that it would be nice to see more average income people and finally thought I'd share my experience so far - inspired by hitting $50k in assets in November! As you can see, I have a long way to go but thought it might be interesting to people at a similar stage of the journey. [Note: originally posted in r/FIREyFemmes but thought I'd share here too.] TL;DR: I'm 23 and have been studying full time non-stop since kindergarten. I just hit $50k in assets with no bad debt in November 2019. I live in Sydney, Australia. My current savings rate is 35% and I plan to keep my spending relatively constant once I get my first full time job to get my savings rate above 50%. Below is a table outlining my savings progress since I left home in 2014. Savings progress
Note: I was forced to change superannuation (retirement) accounts when I started my RA job, which means I don't have any of the statements from original account anymore. I can only estimate based off the amount that was rolled over to the new super account in late 2017. Background My family is lower-middle class. I'm from Canada and my family moved to Australia when I was 12 years old. My parents separated when I was 15. My mom moved back to Canada with my younger brother while my dad stayed in Australia with me and my sister. My dad now makes an average income (for Sydney), whereas my mom in Canada is most likely below the poverty line (works 3-4 shifts a week at Walmart as she was unable to resume her job as a pastor when she returned). My biggest reason for staying in Australia was the group of friends I had at school, and the second biggest reason was education. I wanted to study psychology and Australia has very high rankings in this area, plus they have the HECS-HELP scheme, which essentially means that citizens (which I am) can study with no upfront costs with the help of an interest-free loan to be paid off at a specified taxable income threshold (this was recently lowered to about $50k/year). Choosing this degree at UNSW meant that I was able to enroll in the general education course that has quite literally changed my life. The course was called personal finance, which I took because I knew I didn't know as much as I wanted to about it. Wow. I learned a huge amount in 3 months. One of the assignments involved tracking spending over a minimum of 30 days, though I ended up using that app for over 2 years. I gained a lot of insight into my financial situation, learned about ETFs and investing, learned about the benefits and risks of buying housing, and learned for the first time the meaning of financial independence. That was in 2014. Financial Progress 2014 When I moved out of home to start my degree, I was 17 years old (a month before my 18th birthday). I had no savings (I spent it all visiting my mom in Canada a couple months prior) and no job. Once I turned 18, I knew I would receive a back payment from centrelink (student welfare) of about $2,000 so I just had to wait until then to buy a phone, laptop, pay my sister back (who I was living with) for rent/food, etc. Then I started to get regular payments of about $960/month. My rent was $775 month living in a 3 bedroom apartment in a cheaper area with my sister and a roommate so this was not enough. After applying for a few jobs but not hearing back soon enough, I started putting up ads for high school tutoring since I had received decent grades in math, biology, and English. I soon had two families who wanted tutoring from me, one who wanted 3 hours a week, and the other after 5 hours a week. Since I was new to tutoring I charged $20/hour (low income for Sydney, but was a lot for me). One family offered to pay higher: $100 for 3 hours. This made up most of my non-centrelink income, though I did occasionally have additional hours/students. Below is a table of my income and expenses from 2014: Income 2014
Note: The 'gift' is referring to my dad paying my super cheap phone bill for the first year after I moved out, and health insurance (helped out with dentist a lot). Expenses 2014
So I was saving, on average, about $500 a month. Through some extra hours and penny pinching I had $6,820 in savings in November 2014. Around that time I started applying for casual jobs since I knew I wouldn't get income from tutoring over the summer (meaning Dec-Feb). I lucked out and got a job sooner than expected, so I was able to start work before the end of the month. I had been expecting about 20 hours a week but actually ended up working 37.5 hours a week for most of the summer which had a huge positive impact on my savings. I was not used to having so much money (I felt incredibly rich for someone earning $16/hour). At the end of December I spent $3,400 on flights to Canada to see my mom (pretty sure I paid for my boyfriend too which is why it was so expensive) and was still left with $5,900. 2015 I made huge leaps over the summer, hitting $11,000 by the end of March 2015, meaning I saved just over $5,000 in 3 months. When classes returned in March 2015 I kept my casual job while also tutoring, though I don't have a good record of how much I earned. I started charging a bit more for my tutoring and got small raises for my casual job as in Australia, the minimum wage increases based on your age until you're 21. In June 2015 I had $15,350 in savings. My trip to Canada was shortly after that in July 2015, so my income was essentially $0 for the 3.5 weeks I was overseas (Centrelink gets cancelled when you're outside the country). While I was in Canada, the store I'd been working at closed temporarily for renovations, but they had no date for reopening. I never went back and instead found myself a retail job that had a higher hourly rate, sales bonuses, was more enjoyable, but had fewer hours than my previous job (bit of a pro, bit of a con). Oh, also I got engaged while in Canada (ripe old age of 19!) and moved in with my boyfriend upon our return, so my rent was higher and I needed to pay a bond. (Pro tip: don't get engaged at 19!) By the end of the 2015 after a month of no income, and booking some wedding services and buying a dress, I was almost on par with 6 months prior with $15,570 in the bank. 2016 Man, this was a rough year. In December 2015 my fiancé was 'made redundant' at his job (despite him seeing a job ad for his exact position a couple weeks later) which was very stressful until he found another one in February. He also signed up for an amateur play and was out at rehearsals multiple nights a week which took a toll on our relationship. My obsession with saving money definitely didn't help as we spent an incredibly small amount of money on going out together. But hey, savings, right? I volunteered in January as a research assistant at my university and was incredibly lucky to be hired in another lab based on that position a couple months later. This meant I was studying 4 subjects, working in 2-3 shifts a week, tutoring a few hours a week, and was doing research assistant work 1 day a week. With all this working I was able to save up to $20,000 at the end of June 2016. Which is right around the time shit hit the fan. My fiancé, being enlightened by his cool theatre friends, decided he no longer believed in God, was starting to think that marriage was some bizarre societal construct, and was seriously fed up with me never doing anything fun because it cost money. I rarely drank alcohol but he was getting drunk multiple nights a week, also leading to significant tensions between us. My university grades took a serious plunge during that period. When our lease ended August, we did not renew, and we called off all wedding plans (with $5,000 down the drain on non-refundable deposits + a wedding dress). Although it was rough, I managed to quickly find a flatmate close to the uni for $215/week. More than I was paying before but still affordable, especially with my safety net. Having space seriously improved my life. I started working out, lost a few kilos, my grades picked up again, and I stopped being so stingy with my spending because I no longer had a wedding to pay for. My partner and I kept seeing each other while he sorted out his shit. He was diagnosed with ADD and general anxiety which helped explain some of the problems we had. With my saving so (relatively) high, and no more large, planned expenses on the horizon, I finally took the plunge into ETFs, putting $9,000 into the market. Because I was sort of 'over it' with finances at the time (seeing how much my savings habits negatively impacted my relationship) I didn't save a whole lot in the second half of 2016, and ended the year with $11,400 in the bank and about $8,800 in shares (decrease in value). 2017 Things significantly picked up this year. As this was my final year, and the year that would determine my eligibility for a PhD scholarship, I reduced my work hours significantly. I quit my retail job so I could get more from my higher paying jobs (was now charging $60/hour for tutoring university students, and earned $40/hr as a research assistant). My grades were up and my research project was going well. In the first 6 months my savings were up to $15,500. I was still in a relationship with my boyfriend/finacé, though I seriously considered breaking up with him more than once. A few months after his diagnosis he really started doing better mentally and by that time he was starting to regret our separation. We ended up moving back in together 9 months after our separation, about halfway through 2017. Because our previous apartment had probably contributed to our horrible year together (it was very dark and depressing inside and we didn't have a lot of space) we increased our budget and got a place for $520/week with LOTS of windows. Because he was in a much better paying job by 2017, we agreed that he would pay more of it - so I paid $220 and he paid $300. I think we made the right decision as we're still going steady now (but do not plan on getting married any time soon). I did really well in my degree, landed the scholarship I wanted to enter the PhD program, had my supervisor lined up, and a really solid savings account of $18,000. However, I needed it for something. It turns out I am quite an unlucky individual who somehow ended up with a congenital breast deformity called tuberous breasts. This comes in degrees (some people get a more mild version where it is not that noticeable, or only in one breast) but I had a very severe form in both breasts. When I told my Dr (because I needed a referral) she was very skeptical of me until I took off my top. She awkwardly had to backtrack on what she said about me probably being normal, etc. She wrote my referral and I went to a highly regarded plastic surgeon. He said he'd never seen anyone with such a severe form of it, and a different surgeon I did a consult with said surgery to fix it wasn't even possible (for him). I did not take the decision lightly as I am not the kind of person to throw $18,000 down the drain, but that is what it cost, even after I waited a year for my insurance to pass the waiting period for pre-existing conditions. My surgery was booked for May 2018. 2018 I started my PhD late in January 2018 - I didn't earn any income between graduating in November 2017 and starting the PhD because my RA contract was over, I was no longer eligible for student payments, and I didn't want to get a casual job over Christmas (I had already worked enough Christmases!) The standard PhD scholarship in Australia covers all tuition in addition to $27,000 per year for living expenses, indexed to inflation. My specific institution pays an extra $5,000 per year to all students with the government scholarship. With this, my base income is $32,000 p.a. net because neither of the scholarships are taxable. I still tutor for $60 an hour in first semester which typically earns me an extra $5,000-$6,000. This extra income is taxable but Australia has a tax-free threshold of $18,200, so I do not owe any tax unless I exceed that in addition to my scholarship income. I had a lot of students in 2017 which really helped me cover the surgery costs while keeping a safety net, without having to sell any ETFs. My lowest bank balance was $3,900 after paying all surgery related expenses. I spent the second half of the year recovering from surgery both physically and financially. I started tutoring second year psychology for the university to boost my income and get my savings up again. I was up to $13,000 in September when I decided to invest another $5,000 in ETFs, and ended the year on $8,350 cash after splurging $2,000 on a quality laptop. 2019 This year, with my surgery out of the way, with no upcoming wedding plans I was able to really focus on FI again. I started being a lot more detailed with my records again mid-February 2019. I've been regularly buying shares and revising my spending to make sure I am not over-spending. I also took the chance to visit Canada for the first time since 2016 (and got paid while away this time - yay). I'm pretty happy being able to make this much progress in one year. Savings since Feb 2019:
My current budget is not all that different from what it was in 2014, though a little bit more generous. Below are some tables to summarise: Income 2019
Expenses 2019
While the above numbers fluctuate from month to month, since May 2019 (when I started tracking it) my savings rate has been 35.9%. What about debt? While I do have student debt (to the tune of $26,800) it does not accrue interest and instead is only indexed to inflation, so I usually just ignore it as I don't think my true net worth is as good an indicator of my financial position as my assets are. I will not have to pay it off until I finish my degree and start working full time, and as long as my investments are growing above inflation, the relative amount that I owe decreases over time. I do also have a credit card that I pay off in full every month and have never paid any fees or interest. I currently owe a couple thousand because I recently went to Canada and most of the expenses we had while there went on the credit card with no international fees. That is due in a week which will put my assets slightly below $50k, but hey, it's still a cool milestone to hit! Moving Forward I feel like my lifestyle has enough variety and leisure in it to be sustainable, however I plan to increase my budget to $2,500 a month once I'm working full time - which is another 2 years away, most likely. My PhD is on track and I expect to finish by around September 2021 but anything can happen. The typical starting salary for a post-doc in Australia is $96,000 p.a. but if I don't get a post-doc I plan to go into a government position (hopefully either policy or a research position) and will take anything as low as $75,000. The main downside to academia is the lack of job security as most positions are on 2-3 year contracts or based entirely on your ability to get grant funding which currently has very low success rates (about 15% success rate on average for some grants). While I have no idea what the future holds, I am hoping that having some FU money means I can withstand the poor security. Alternatively, there's always industry and government jobs to go for instead. For now my FI goal is $1MM, but I have mixed feelings about early retirement. Ideally I'd like to hit around $500k then reduce my workload to part time, maybe 3 days a week until I actually want to retire. THANKS FOR READING MY GIANT POST. Hope you find it helpful! [link] [comments]  |
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