Financial Independence Daily FI discussion thread - December 04, 2019 |
- Daily FI discussion thread - December 04, 2019
- Giving the gift of FIRE
- Cutting back on a well paying career
- Wanting to FI, most NW in house equity
- Weekly Self-Promotion Thread - December 04, 2019
- What do you base your projected returns on?
- What are your thoughts about this wealth building and wealth retaining strategy?
| Daily FI discussion thread - December 04, 2019 Posted: 04 Dec 2019 12:07 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]  |
| Posted: 03 Dec 2019 11:56 PM PST With Christmas season coming around, I thought I'd talk a little about giving. Particularly giving FIRE to your kids. Or at least a normal retirement. For example: Let's say you invest $25k in a separate account when your child is born. You just let it sit there and add no additional savings. Here's how it would grow over time using a rough estimate of doubling every 10 years: Age 10: 50k Age 20: 100k Age 30: 200k Age 40: 400k Age 50: 800k Age 60: 1.6 mil Now, I get that doubling every 10 years may be aggressive, but it's more to just illustrate compounding interest over a 60 year time frame. Whatever the "real" number ends up being, it'll most likely be a lot. Part of me thinks it's a great gift for a pretty low initial investment. A lot of people on this sub could give the gift of retirement with less than a year of additional savings for example. On the other hand, I would worry about the child not having to work for it. We all know the reputation trust fund babies have for example. Has anyone done this? Or thought about doing this? If so, how are you going about it? Questions like: Will you tell them, what age will it be given, etc. come to mind. EDIT: To be clear, the 1.6 million after 60 years accounts for inflation and is in today's dollars. Doubling your savings every 10 years is just an easy way to estimate the amount. Here's the actual math a friendly redditor pointed out: 25000 * (1.07 ^ 60) = $1,448,660 Looks right. To find the nominal value, assuming 2.5%/yr inflation... 25000 * ((1.07 + 0.025) ^ 60) = $5,791,447 [link] [comments]  |
| Cutting back on a well paying career Posted: 04 Dec 2019 03:42 PM PST I am a 29 year old dentist. I went through college and dental school on full and then partial scholarship so I paid a little less than $100k for my education. Between past work, a general practice residency and about a year of private practice, I have paid off my loans and saved up about $150k. I had initially saved in preparation to pay tuition for a residency in endodontics but I did not get in this year. I have found that I enjoy general dentistry. I'm good with patients and the procedures are easy and enjoyable. However, as an extreme introvert, I find serving patients to be mentally and emotionally draining to the point where I can do nothing else on the days I am working. I have also realized that I am content living frugally and value my time more than money. I am not sure if I want to double down on my investment in dentistry by making another shot at endodontics residency or purchasing a practice at this time. I am thinking about cutting back to working a job with a 3 day or a relaxed 4 day workweek for a few years. This will give me more free time and longer weekends to pursue hobbies and hang out with my friends. I feel that I have sacrificed a lot of my youth to get to this point and I want to enjoy more of what remains of it. I am single and don't plan on having kids in the near future. Would it be prudent for me to cut back to the point where my job is more of a hobby or should I push to build more capital while I'm young, healthy, and have the capacity to earn and save? [link] [comments]  |
| Wanting to FI, most NW in house equity Posted: 03 Dec 2019 09:12 PM PST Hello all, so me and my wife have been growing more and more disillusioned with the California rat race lifestyle. Our career progressions/incomes have kind of stalled for the past couple of years due to issues with depression/anxiety, lack of work life balance and disillusionment with our lifestyle. We have come to the conclusion that we value our remaining time above all and would like to spend the rest of our lives doing more of the things that makes us feel alive instead of spending this resource on commuting and working corporate jobs. I am 40 and my wife is 36, no kids. Our assets are as follows:
Our plan is to fix up the house (about 60k in expenses) and sell it in the Spring of 2021. The reason for this is that we just moved back into our house after renting it for 4 years. We need to stay in it for 2 years in order ti claim the theoretical 500k personal property tax exemption, which would save us quite a bit of money from the capital gains on the property appreciation. This is our only home, so we would not be property owners anymore. Our FI plan includes a lot of traveling and potentially staying overseas in low cost areas where we have family ties. Hopefully develop some additional income streams through freelancing. However, if the Bay Area property values were to drop significantly in 2021 or if we couldn't find a buyer for some reason our plan would become unworkable and we would have to continue working our corporate jobs until the next housing market upswing. Should we consider selling this coming year and seize the opportunity instead? Are we being greedy by waiting for 2021? I guess I am just looking for any advice/wisdom/guidance this reddit has on our situation. [link] [comments]  |
| Weekly Self-Promotion Thread - December 04, 2019 Posted: 04 Dec 2019 12:07 AM PST 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]  |
| What do you base your projected returns on? Posted: 04 Dec 2019 10:14 AM PST It depends what you are going to invest in of course, but do you use one number or a range? Do you base your projections on the long term CAGR, or do you knock a bit off of it to be more conservative with your projections? I personally have always just looked at the back testing of the index I'm using, and then plugged in a few different returns to give myself a likely range (this is using 20, 30 and 40+ year returns), with the highest being the average, and the lowest being 2-3%/yr below. I feel this is likely far from optimal however. [link] [comments]  |
| What are your thoughts about this wealth building and wealth retaining strategy? Posted: 04 Dec 2019 08:26 AM PST I've been doing a lot of reading on the subject of FI and there are many opinions out there on how to reach FI & RE. Some opinions are good and some are just plain awful. Mostly, everyone seems to have very different levels of comfort when it comes to their investment methods so I'm not here to bash on anyone's own thoughts…as there's certainly more than one way to make a fortune. I'm not offering any financial advice but I've come to the conclusion that the best and "safest" way for an ordinary person to build wealth is concentrating and leveraging your investments in the early stage to build wealth as fast as possible and in the later stage, you slowly diversifying your investments to maintain and protect your wealth. Here's a simple method that I've used: In the early stage – you want to build your wealth as "fast" as reasonably possible "in x number of years". Note: this is not a get rich quick "overnight" kind of thing… but it can happen relatively fast…
In the later stage – now that you grew your wealth to your "goal" point, you want to diversify your investments globally and slowly move away from being tied down by your rentals ( e.g. free to travel the world if you wish, no more maintenance issues). Moving investments to an ETF portfolio can also represent better "tax efficiency" as compared to rental income…and less personal liability" 4) Start selling all of your properties one by one to minimize capital gains tax and slowly transition to a 100% globally diversified ETF/stock portfolio ( e.g. VEQT) by reinvesting all the proceeds from each property? 5) Your portfolio is now large enough to survive market crashes and still live off 100% of the proceeds and distributions to perpetuity. Either method can work depending on how large your nest egg is using the "4% rule with Total Return" or "dividend distributions" and not selling any ETFs. The choice is yours… 6) You are now holding a globally diversified ETF/stock portfolio including all major world currencies so even if stocks crash, you are still protected as long as you keep holding your global portfolio through good and bad times. Stocks eventually recover and even sequence of return risk shouldn't be much of a problem to handle if you are mostly living on dividends or 3.5% to 4% total return. Basically your portfolio should keep pace with inflation and continue to grow over time... my experience with investments is a little like having guests over for supper… "in order to have enough food for all your guests, you need to have prepared a little too much". Do you think it is possible to achieve FI & RE using this method? All I can say is that it's worked for me. [link] [comments]  |
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