Financial Independence Daily FI discussion thread - February 01, 2020 |
- Daily FI discussion thread - February 01, 2020
- Don't forget to flex your FI leverage before you RE!
- Giving money to kids early to help them FI early
- Small windfall at the end of College, Not sure what to do with it!
- Life After Fire January Update
- Roth IRA conversion ladder vs 72(T)?
- How To: Pensions and FI
| Daily FI discussion thread - February 01, 2020 Posted: 01 Feb 2020 12:09 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]  |
| Don't forget to flex your FI leverage before you RE! Posted: 01 Feb 2020 09:24 AM PST Just wanted to share this to prevent others from making the same mistake I very nearly did. I was hesitant to pull the RE trigger, but after I hit my third FI stretch goal, it seemed like now or never. So I sent in a resignation email and figured I was done! However, instead of immediately accepting it, my company asked if there was anything that would make me stay. Given that I was FI, I shot for the moon: work part-time from home, and offload the most annoying responsibilities that I wouldn't have time for anymore. They actually said yes, and now I have a relaxed and enjoyable role that allows me to feel half-retired with time for what I want to do in life, while still earning well and building up towards a comfier FIRE. So when you hit FI, don't forget you have a lot of leverage with no risk, and you might as well try to take advantage of it before you RE! My experiences at jobs has always been surprise at how often someone will say "yes", so consider (nicely) explaining the role/commitment isn't for you, and asking if you can carve out a special role to stay on, if this is interesting to you. If you've any similar or related experiences, please share :) [link] [comments]  |
| Giving money to kids early to help them FI early Posted: 01 Feb 2020 12:53 PM PST What are the thoughts of community on giving money to kids once they start working to accelerate their FI. This can involve contributing to their investment portfolio or even giving them directly with the caveat that they save and invest it. Some can have an opinion that money or inheritance shouldn't be given and it can spoil them. I don't quite agree with that opinion. Now kids and in general people can be of two types; those with frugal and FIRE mindset and those YOLO types. Money given to the former will be kept to good use and fund their financial independence. The latter might find this money as an excuse to spend more. If we find this is the case, we can delay giving the YOLO type kids money till they are in their 40s. What are your thoughts on this? How much and what is the best way to give this [link] [comments]  |
| Small windfall at the end of College, Not sure what to do with it! Posted: 01 Feb 2020 01:35 PM PST Hi everyone, I am in a situation that I am not too sure what to do, I guess I'm looking for general life advice as well as financial advice. So I am currently a senior finance major at a very popular and accredited business school. (22/M) Luckily, my education has been paid for in full, so I will be debt free upon graduation this May. I have worked small summer jobs over the years to have money for various expenses over each school year and in high school, but I never had more than two or three thousand dollars at a time, so I don't have any experience dealing with any "real" amount of money that could make a difference. Well that just changed, I will be coming into around 21k before graduation. I have had friends receive windfalls from family member of that tune, who have moved to Hawaii and lived lavishly, but were broke within 18 months. Now that's not something that I would ever do, but I do need some advice on what to do with this, or what would be the smartest way to go about it. I have maintained deans list, over a 3.5 the majority of my undergrad, and the average salary upon graduation at my school is 59k a year, USD. I have faith that I will be able to land a well paying job sometime soon, but I know this amount of money could very well help put me on my feet instead of just scraping by at the beginning. I will most likely have to purchase a car (I don't own one right now) and possibly pay three months worth of rent if I choose to get my own apartment wherever I will be working. I have read the sidebar, and know that it is possible for me to invest it all in a vanguard account, mutual funds, ETF's, or anything better than keeping the money in a checkings accounts that will loose value, instead of making 7% a year. I've thought about using 4-7k to buy a reliable car outright, and setting some other money aside to help with rent, or any other expenses I would incur in a move upon getting a job. I think it's important for you all to know too that I am extremely open with my future. Most of my friends who have graduated in accounting, finance, etc are working extremely long hours and are generally hating their lives the majority of the time. (Mainly my investment banking friends) I did not choose my school and my major necessarily, I have a family history here, and chose business, and finance because I thought they would be the easiest, and knew I had to complete my undergrad to make my grandparents happy. Basically I'm not eagerly awaiting graduation hoping to find the highest paying job, I'm more so just ecstatic that I will finally be free to do as I please with my life, knowing I have a great degree at an amazing school that I can always put to use. I am also very private about my finances, so I haven't asked too many people for advice about what to do, but I know this community is probably the best place to come to with something like this. So yes, any recommendations, or life advice? I'm happy to answer any further questions as well. EDIT: I didn't want to post this in personal finance because I am very interested in achieving FI, and I know this could be a good start to my journey, I am just unsure about the tradeoff between spending some of it now, knowing that i have the potential to make decent money very soon, or investing all of it now. [link] [comments]  |
| Life After Fire January Update Posted: 01 Feb 2020 03:47 PM PST I've made an attempt to streamline these updates to keep things more relevant to where they are being posted. To see the previous month https://www.reddit.com/r/leanfire/comments/eik3l5/life_after_fire_december_update/ to see this month's real estate specific post https://www.reddit.com/r/RentalInvesting/comments/exefp1/january_rental_business_numbers/ I officially retired somewhere between 2011 and 2013. The time is not specific because I fazed out my previous business and was still handling my real estate management myself...so if you count from the time I hired a full time property manager and was completely finished will all previous businesses it would be later date. If your definition is more lenient, then it would be the earlier date. Okay, now for the numbers. My net real estate income from existing rentals for the month was $9,243 . (The low number this month is because I had to repair 4 AC units that were damaged in a lightening strike... in addition to the usual minor repairs and property management expenses) If you are interested in the full details of the business numbers, please see the real estate specific update from the link above.. Estimated real estate portfolio value $1.35M This is an increase of $30K over last month. Total Acquisition Costs of real estate (including initial renovations) $418,000 My total investments/cash outside of real estate totaled $266,096 This is a combination of stock, Fundrise, money market, and cash. This is an increase of $1,549 over last month. My personal spending was $800 (everything not business related)...details can be seen at my post on r/Frugal https://www.reddit.com/r/Frugal/comments/eiji4c/december_spending_breakdown_how_i_live_on_800_per/ As always, feel free to ask any questions! For those interested in my yearly numbers of income and spending, I made about $125K net in 2019 from the rentals (haven't finished taxes, so this is an estimate), my investments outside of the rental business made about $50K (all of that was reinvested) and my personal spending was about $10K. [link] [comments]  |
| Roth IRA conversion ladder vs 72(T)? Posted: 31 Jan 2020 08:51 PM PST What are the benefits of using the Roth conversion ladder vs using 72(T) to take money out before age 59 1/2. It seems both methods allow for taking out money without penalty. Please help me understand the difference, and which one works better for FIRE. [link] [comments]  |
| Posted: 31 Jan 2020 04:19 PM PST I keep seeing the question of "How do I handle pensions?" in relation to financial independence, so I thought I might write up a more general answer to this question. Look for LOTS of good info in the comments since I'm just trying to start a (hopefully) intelligent conversation about this. Q1) How do I account for a pension in determining my FIRE number? A1) FIRE is about achieving the INCOME you need to live the lifestyle you want without continuing to work. For non-pension folks, this means saving up enough to draw 4% of your investments annually (the 4% Safe Withdrawal Rate) to give you the income you need. If you have a pension you simply reduce the amount of income you need from your investments by the amount of your pension IF THE PENSION IS SAFE. Example: You want to retire with $75,000/yr in income. You have a SAFE pension that will provide $50,000/yr in income. In that case, you need your investments to provide another $25,000 in income per year. At a 4% SWR you need another $625,000 in investments to give you that additional $25K ($25K divided by 0.04). If your pension is less reliable, you'll need to hedge your bets. Honestly, I can't give you a magic formula for that: it's a guess you have to make about how reliable your pension is. If you are with the US government, I'd go 100%. State? Some states may renege on providing the fully promised pension (Illinois), but I don't expect any state to default completely. It's a tough call, but you should get most of what is promised to you. Corporate? Well... I can't even begin to advise you, so let's leave that to the comments. Q2) How do I account for my expected pension in determining my net worth? A2) OK... this is a bit complicated. If you actually stay in your job long enough to get your full pension benefits, then you can create a "virtual net worth" by saying your pension is the equivalent of what you would get from investments that gave you the same amount of income via 4% safe withdrawal rate. If your pension is really safe, though (e.g.: U.S. federal goverment), that actually understates the value of your pension since your risk of failure is really small. Then again, if your pension is a corporate pension where the company might go bust, this might be optimistic. Again, look to the comments for good information outside my most general suggestions. Example: You have a pension that provides $25K/yr in income. That's the 4% SWR investment of $625,000. You can add that to your "virtual net worth". Now, this is COMPLETELY dependent on whether of not you really do stay in your current job long enough to earn that full pension. NO ONE can tell you if you will or not. That's up to you. Likewise, "virtual net worth" is significant, but different from "real" net worth. If your spouse is kidnapped, real net worth is more important than "virtual" net worth. No kidnapper is going to accept a payment plan! That said, I hope this starts a good discussion of how we can look at pensions as regards to their impact on our FIRE ambitions. Happy Friday, everyone!!! [link] [comments]  |
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