Financial Independence Daily FI discussion thread - August 25, 2020 |
- Daily FI discussion thread - August 25, 2020
- FIRE update 1 year in - Lean(ish) FIRE accidentally turned into Coast FIRE? A case study to consider for those who are on the fence about pulling the trigger.
- Different professions and FIRE, is there a correlation?
- Lean FI (Milestone 2 of 4)
- The struggle of splurging on a toy
- What does retiring look like?
- What tools do you use to plan your cash flow?
| Daily FI discussion thread - August 25, 2020 Posted: 25 Aug 2020 01:08 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]  |
| Posted: 25 Aug 2020 03:39 AM PDT My wife and I FIREd last year with about $1M invested, and 1-1.5 years of cash on hand. The original plan was to completely stop working, and follow the standard 4% rule to live off approximately $40k/year. We thought we could do this because we had spent the past 8 years diligently saving, being frugal, and finding ways to maximize investment value. What actually happened was the following:
The result of these two things was that we recently had a moment of clarity. For our situation, we can work maybe 25% as hard as we used to, and generate more than enough income to cover our annual expenses. We can also do this while pursuing our pre-FIRE goals, which mostly involved slow travel (yeah, maybe next year...) and raising our daughter without having to send her to daycare. Of course, this is really just Coast FIRE that we stumbled into. The difference being that we are now "coasting" with the amount invested that we planned on living off indefinitely. If we can keep this up for the next 15-20 years, we will be comfortably sitting on a portfolio of $2.5M to $4M, which should be more than enough to "actually retire" in our late 40s/early 50s. The other nice side effect of this strategy is that if we make significantly more than we need to live on in a given year (which is happening this year), we can choose to loosen our belts a bit and splurge on large expenses or add to our investments. Anyway, I know this is a specific situation that does not apply to everyone, but I urge anyone who is close to pulling the trigger on FIRE to consider if this could work for you. For us, it really is the best of all worlds, in terms of happiness, security, and freedom. [link] [comments]  |
| Different professions and FIRE, is there a correlation? Posted: 25 Aug 2020 09:18 AM PDT Do you think there is a propensity for some types of professionals to seek FIRE more than others? I can't start a poll, but it seems to me that there's a "stereotype" of people in this subreddit and others similar, usually working in IT, software development or some sort of online related business, is it due to some kind of bias like "people who use reddit are already filtered out from the general population based on some criteria" or do other professionals in for example healthcare, law, international relations, agriculture are less likely to seek financial independence? Or am I completely wrong in my observation? Edit: I'm amazed at so many different professions you guys actually have, I was wrong in thinking there were only tech guys pursuing FIRE, thank you for all the personal stories shared. Also to summarize some of the theories you posted as for why tech seems to prevail in these groups: relatively short education + high starting salaries + low job/raise perspectives after 45yo + some reddit bias) [link] [comments]  |
| Posted: 25 Aug 2020 12:51 AM PDT TL;DR: From Spendypants to Lean FI in 3.5 years, on track for fat FIRE in another 2.5. The Background (Detailed in a previous post.)As of today's market rally, I've hit my second milestone of "LeanFI". (Celebratory Fireworks). I doubt I'll stay above the milestone for long, but I figured I'd post the first time I cross the milestone. I've committed to writing down reflections along my FI journey, and I figured 4-6 posts over the course of multiple years probably doesn't necessitate adding yet another FIRE blog to the internet. The Numbers and Progress (Continue reading here)Diagrams, Summaries and Flowcharts I took some of the feedback from my last post and modified my FI numbers slightly. I got a better estimate of supplementary health insurance. The most expensive package was CAD $160/month for basically full service everything, so I raised my healthcare number from CAD $100 to $160. I took a little bit out of the other categories, and raised my LeanFI number slightly to accomodate. My mortgage is getting paid down, the mortgage interest number is dropping, but that's being partially offset by increases in condo fees. Insurance and taxes are growing roughly inline with inflation, so it's all a bit of a wash. One of my investment properties was just delivered end of last year, and my relatives moved out of my original place, so I had a few months of losses as it was hard to find tenants right before year end. Thankfully, both units are rented out now (and before COVID struck). I've also added some new aspiration goals. I realized that even when I hit "FatFIRE", I'm not ready to leave the workforce. I've added in "SumoFIRE" and "5million". I've delibrately made SumoFIRE a stupidly high number. I'm projected to reach that by age 38, so that seems like a logical stopping point, both from a financial and stage of life point of view. I didn't know whether to name that "fatfuckingfire" or "SumoFIRE", but I just went a bit ridiculous.
I assume some of this spending will probably get soaked up by significant other / children. People seemed to get the impression that I spent absolutely nothing in my last post. While I see where they were coming from, at that time, I was spending approximately USD $90k/yr. I've found that using the 80-20 principle, the majority of life's expenses are split between three categories: home, car and food. If I can manage those aggressively, nothing else really moves the dial. Once those three categories were dialed in, everything else was just steady state. Operating ExpensesIn Hong Kong, most people don't have a car, and get around on public transit. It's good, efficient and there's no human urine or defecation. I don't even know how much this costs me, but it rounds to 0. Food, well, I eat out almost every meal, and end of the day, it costs me about $700/month. I consciously choose this, and I value the convenience. Housing is the killer in Hong Kong. I've turned this money dial up and down, and I think I've found a compromise. I've moved far out of the city - into a 2 bedroom in a small village. It ends up costing about $4k a month, but it's new, clean and comfortable. I've setup one bedroom as a home office, and my commute these days consists of leaving my bedroom and entering my office. Luxury ExpensesOne new thing I've done this year, now that I have documented two years of luxury spending, is to go back and see which are the things that still bring me joy years later. I've marked those things off and here is the trend I've noticed. In general, travel and experiences have almost always been worth it, no matter what I spend. Material things that I tend to use often - really nice bedding, a nice coffee grinder, my favourite pair of sneakers tend to bring me joy even years later, while things that are not often used (fashion accessories, suits, status items, etc.) are largely forgotten and I regret spending the money on them later. The monetary amount is often not related to the amount of satisfaction, but it's more a function of the frequency of usage and the enjoyment per usage. For example, I only snowboard once or twice a year, and even so, every time I pull out my crazy expensive snowboard, it brings a smile to my face. On the other hand, my bedding was relatively cheap by comparison, and it makes me smile every night when I lie down on the softest bedding known to mankind. As a proportion of my luxury spending, the items that I feel are worth it later are going up year to year, so I believe the quality of my spending is increasing. Looking Forward (Unconnected Stream of Thoughts)I've also put some thought into what it would take for me to pull the trigger on RE. Given that the work situation is manageable and I have quite a bit of freedom, and there some some very valuable benefits, I see no reason to RE right away. That being said, I've made a checklist of "frivolous luxuries" that I would want to achieve before voluntarily leaving the workforce and moving home. This forms the "SumoFIRE" number that I've created. I've given a bit of thought into the last five years. From one perspective, it feels like I've wasted my twenties. Everyone else was having fun, partying, partnering up, while I spent a lot of time in misery and grinding my career. On the other hand, many people would kill to have the career success that I have had. I've had the rare opportunity to advance my career out of Ottawa to Toronto to New York City to Hong Kong and likely moving on to new horizons soon. I feel like a common theme that I've been thinking a lot about is compromise. My late twenties were characterized by extremes. I put complete single-minded focus into a very small number of things and refused to compromise of any of them. I think that is a strength as well as a weakness. I'm not smarter, faster, or stronger than most other people, but when I put my mind to something, it is without compromise, without holding back. However, I've definately burnt friendships and relationships over my ambition. Looking back, although I'm not sure that I can say I regret it as things worked out relatively well for me, I feel like I could have handled things with more moderation. With the whole WFH thing, I feel a lot less stressed, and working, in general, feels a lot more sustainable. If I have the freedom to choose my hours, and choose my location, I can see myself working a lot longer, just to have something to do. I had plans to write a lot about how I handled investing through COVID. Basically, I FOMOed into the first 5% drop and used up most of my dry powder. I started increasing leverage, then when I started getting a bit uncomfortable with the leverage ratio, ended up taking a large loan from the bank (converting some of the margin loan to noncallable debt) and luckily enough, I invested it near the bottom. I never got close to a margin call, but I setting the equivalent of a BMW on fire every day was uncomfortable. There were plenty of sleepness nights, and I've spent most of time since then deleveraging. Financially, I came out pretty well through all of that, but more importantly, I know that my previous approach left too much discretion and I needed more structure in how I deployed capital. I've automated my ruleset into my spreadsheet - how and when I lever up, how I delever and how I want my portfolio to evolve through time (from basically 0-100 portfolio to 60-40 portfolio in the next 8 years). I had plans to write about portfolio construction and how I've automated shifts from 0-100 portfolio to equity glidepath to 60-40, thoughts on home country bias and tax avoidance, but I think that's more of me showing off exercise, as opposed to anyone being interested. I'll include some images graphing my current portfolio, and what it's projected to shift to by 2030. Happy to answer any questions if people are interested. I think that I'm slowing down a bit into my thirties. I'm less ambitious than I used to be, and instead of trying to maximize my total compensation, I'm trying to maximize dollars saving per unit stress. I think as I actually hit my goals, I've started to care less and less. I cared a lot when I hit SurvivalFI (and it was a big deal for me), and as I hit LeanFI, I care a lot less (cool. shrugs). I expect to hit FIRE by May, and each of FatFIRE, SumoFIRE and 5million are spaced out at almost exactly 2 years milestones after I hit FIRE. Given the chunky nature of my income, there's not really a lot I can do to significantly move up, or move down those dates, so the frank answer is that there isn't too much I can do to accelerate or decelerate the process anymore. Get a few of the big items right, and everything else takes care of itself. Consequently, I'm spending less time thinking about FIRE, and focusing on other things. I've increased spending slightly, for my sanity and comfort levels, and I'm more focused on my health, my relationships and trying to figure out what else I want to accomplish (where do I want to live, what do I want my lifestyle to be like, who do I want to be around, what are the causes I care about?) [link] [comments]  |
| The struggle of splurging on a toy Posted: 25 Aug 2020 04:24 PM PDT I turned 35 this year. Been watching all my friends upgrade to bigger houses, buying boats, and RVs, and horses, and UTVs. I'm still living in my same ole 1200sq ft house I bought 15 years ago. Ford recently unveiled the new Bronco, and I immediately plunked down my hundred bucks for a reserve slot. Even opened a separate savings account and seeded with $5k and an additional $1200 a month auto transfer. Package pricing isn't out yet, but by the time it is, I'm figuring I'll be buying a $60k toy. And it is a toy. My GF and I both drive paid off late model vehicles, and neither one of them were a damn sight near $60k. I was looking at that account today, then extrapolated it out to where it would likely be by the time I could take delivery on my car, sometime mid-late 2021. That's a shitload of money that I could be funneling into the market instead. Our RE date is 20 years from now, 55. But maybe an extra $60k invested now would shave a year or two off, ya know? We're not married (might as well be though), no kids, and we make about a buck sixty a year between the two of us. We live on $4k a month in a MCOL area with no debt aside from a bit left on my mortgage. We invest a lot of our excess income each year. I think I could easily afford to finally have something new and cool before everyone else has it, but man is it a tough decision to make. Thanks for listening to my rant about the Joneses. [link] [comments]  |
| Posted: 25 Aug 2020 02:27 PM PDT I'm 19, so this question is just for my own curious interests. What does the act of retiring look like? Do you have to tell the government? Is there any paperwork to fill out? Do you literally just quit working, get your social security benefits, and start pulling on your massive savings? (Assuming you've done it right and saved a massive amount) [link] [comments]  |
| What tools do you use to plan your cash flow? Posted: 25 Aug 2020 01:27 PM PDT Are you using any apps to evaluate different scenarios? E.g How much will I be able to withdraw if I invest this amount per month for the next X years? I'm looking for something with multiple combination of different decisions to analyse complex situation like understanding the impact of buying a new car before a home. I've been doing it in spreadsheets so far but it's not ideal. [link] [comments]  |
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