| FI gen-xer about to RE in 18 months | first post Posted: 09 Aug 2020 08:36 AM PDT Greetings to my fellow FIRE enthusiasts, and welcome to my wall of text. I am a long-time (11 years) redditor and have been very lightly engaged in this subreddit for much of that time. I've created this alternate account specifically for personal Accountability, as well as a way to Interact with the reddit FIRE community. Here's what I mean by that: Accountability - One key enabler of my ability to RE is a very early start to index fund investing, and a set-it-and-forget-it approach.
- Perhaps not surprisingly, I haven't been very active in actually planning to FIRE, and I've developed certain lazy behaviors in the intervening years. I could have been more aggressive with my current career. I should have been more thoughtful about real estate decisions. I could have done a better job communicating my specific FIRE goals to my wife (she's now on board). Etc.
- So, I'm looking to drive more Accountability for myself in actually taking concrete steps to RE. And, there are some specific milestones that I'm setting for myself.
- Obviously, an anonymous account doesn't drive Accountability terribly well, being anonymous and all. But I'm giving a go nonetheless. As many in this community know, communicating FIRE goals with your friends and family as a means to Accountability is fraught AF. I don't care to blog. So I'm putting it all on you.
Interaction - I personally find the Personal Journey content in this community to be the most engaging, though the technical and financial discussions are helpful as well.
- I suspect that most of my contributions will be of the "how it's going/what it's like/what I've learned" sort, versus robust financial advice. But I'll share what advice I can. Think of the updates you see from u/FIRE_and_forget_it and u/jasonlong1212 [+3] [+3] … that is what I envision.
- This also obviously runs the risk of being solipsistic and indulgent. So I apologize in advance and graciously accept your downvote.
With that Purpose out of the way, here's some deets around yours truly: Quick Demographic info - I am a Gen-X American white male. Married with no children. All of our close relatives are self-sufficient. We are generally healthy (though with pre-existing conditions) and very in-shape for our age. We have a social network in the Goldilocks zone. Our community reflects our values.
- Right away, you can see the privilege. More on that below.
- I currently live in a large city in the Northern half of the US. I have lived in several different cities in my life, but spent the vast majority of my career in a single region of the US.
My Educational Background and Career (the over-long section … tl;dr at the end) - Public Schools. The most consequential test I ever took was in 5th grade. I grew up in a public school system with several tracks of study at the Middle and High school level, the most advanced of which was called Gifted & Talented. The test I took alongside all of my peers in 5th grade happened to put me in the G&T track starting my first year of Middle school. I didn't even know what the test was for at the time. It was easy sailing from there on out, literally through college, kicking off a virtuous cycle of achievement and positive reinforcement. This is surely an indictment of the US public school system.
- State University. I moved around a bit as a kid, which did not advantage me in terms of developing a record of extra-curricular achievement, reputation and rapport within any given school. Consequently, many of my friends I grew up with "back home" ended up going to some really prestigious schools (the Ivies and the ilk), whereas I went to a large public University system in-state with a fair amount of scholarship support. This was a huge blessing in retrospect. It was an incredible bargain, and I graduated with zero debt.
- First Job. A year after graduation, and after a … light academic adventure, let's say … I started applying for jobs. I had probably applied to 10 or so companies when I was asked to come in to interview at a local software company. The interview process was very rigorous, and I think describing it in detail may give away too much. Not FAANG though, (in fact, there was no FNG at the time, and barely a second A), and nowhere near FAANG-level compensation, at least initially. I was offered a job over the phone one Friday afternoon, and started work the following Monday AM. My starting salary was $31K. The job search lasted probably two months. I realize this sounds crazy nowadays.
- Career Path. My career trajectory from that point has been: software > MBA > consulting > corporate gig. That "gig" term is carrying a lot of weight. On paper, each of these moves looks like a step-up in salary, but in reality each represents an unintentional down-shifting of earning growth. I can elaborate on that if there's interest. I've been working full time non-stop (except for the full-time MBA) for over 20 years now. I can elaborate on the value of a full time MBA if there's interest.
- Lucking Out. As I look back on this education and career trajectory, I feel like I was getting through some really critical gates just before they got tougher to pass through. That G&T exam in 5th grade was barely a blip on anyone's radar (I think), but now I suspect parents view it as a make-or-break moment for their child (if it exists anymore). AP courses were just becoming prevalent after I left high school, so that wasn't a big stressor for me. My University was still easy-ish to get into (a two-page application without an essay, if I recall correctly). College tuition really didn't explode until after I was out. The software company I joined was very particular in who we hired, but didn't really didn't draw large numbers of applicants until after I joined. I was oblivious to any career guidance and interviewing/application support at my university. It probably existed, but I view that as a reflection on how unserious we were about competing for jobs in the 90's. Maybe it's a Gen-X thing.
- Modest Spending the past 20 years. All along the way, my appetite for material things, and consequently large expenses, has remained relatively modest. There are vices here and there (eating out at nice restaurants, international travel, organic groceries, craft beer), but on balance, I have deliberately not cared much at all about the Joneses. Maybe it's a Gen-X thing. Obviously, not having kids is probably the single-biggest variable here. So, I've been able to sock away a fair bit, and invested it primarily in broad-based mutual funds. My grandpa opened an S&P500 index fund for me with probably about $500 when I was very young and barely able to understand the concept (maybe when I was 13). At age 23, without really thinking, I just started adding to that. Again, privileged. I would estimate my lifetime savings rate at over 50%, but I haven't seriously calculated it.
I tell you all of this to emphasize that I didn't blaze my own way to FI, not really. But there are still lessons to be had (more below). TL;DR: heads-down student, unstrategic and overall lucky career trajectory, modest spending levels, DINK, all generating what you might call "passive-aggressive" saving. The Numbers - Our net worth is currently $2.4M, setting aside the value in RSUs that I would forfeit if I RE'd right now.
- The vast majority of this is in index funds, split between Taxable and Retirement accounts. I have about an equal split between Taxable and Retirement, though not due to any deliberate strategy, and is something I probably haven't given enough thought to. I have about $100K in home equity and a bit in cash that makes up the balance of the net worth.
- My relatively small proportion of net worth in home equity reflects my own belief that I would be better off investing in the broader equities market versus local real estate market (i.e., my home). I may or may not have been correct in that belief, I truly don't know.
- Very little of this originated as equity compensation until recently, even from my software days (which is a sad tale for another time).
- Our 10-year trend in non-healthcare spending is about $65K/year. A fair chunk of this year-in and year-out is Home Improvement, which is shocking and sad to me.
- Based on certain assumptions around income next year, tax rates in retirement, stock market valuations, RSU vesting, and healthcare premiums and other costs, if I were to RE at the beginning of 2022 (a year and a half from now), our WR would be 3.2%. This WR is about what we're comfortable with. For context, a WR of 3.5% would allow for $75K in non-health spending, which we've never exceeded in the past 10 years.
How I Got Here/Advice if you're interested (Thanks to u/CripzyChiken for ideas to make this post more helpful than it was about to be.) Moving beyond my own biography, here are some things that I think enabled our ability to FIRE: - Appreciate the power of compounding interest. As a former student of economics, I refuse to call it "magic." But saving early has non-intuitive benefits. Debating between saving $15/month vs spending it on HBO? You won't remember what you watched on HBO ten years from now, but you'll certainly enjoy knowing that extra $3K gets you much closer to retirement.
- Think in terms of Opportunity Cost, constantly. This is a concept I think most of us know, but which seems so overlooked when I see my friends' and family's spending behaviors. The incremental expense you take on now isn't just a trade-off at the moment of purchase, it's something that has long-term consequences of what that cash could have provided you. Similar to the HBO example, I like MMM's swimming pool example even more. This has the unfortunate consequence of being debilitating (is anything truly worth it?), but is a good baseline attitude to have.
- Understand your values with respect to material things. As a household, we spend $65K/year. That's not nothing. But we definitely under-index in spending relative to our peer group here. And we're more than OK with that. In fact, we are looking to downsize and economize with our next home. Life is to be lived, sure, but it doesn't hurt to think about what things deliver happiness to you versus what social pressure would have you spend. I currently drive a Honda Civic that I bought in 2011. My previous car was a Honda Civic that I drove for 14 years.
- The ROI on a graduate degree may be iffy. I can elaborate in future posts, but my decision to get an MBA likely had a profoundly negative ROI. A graduate degree is by no means a ticket to a better financial outcome, and the opportunity cost you pay in taking time off of work should be measured not only in terms of the year or two you take off work, but also all of the foregone goodwill you would have otherwise created in your field. Happy to elaborate if there's interest.
- Deliberate career decisions with those you trust, ideally with more experience than you. A story for another time, but my leaving the software company when I did was arguably the most consequential financial decision I ever made (and not in a good way). If I were to do it over, I would have consulted my dad and others 20+ years my elder for their view. (Correct, I did not run the idea past my dad - I have an independent streak.) I'm sure I would have been advised to wait it out a year or two. And, in my case, if I had followed that advice, I would definitely be retired by now, no question.
- Understand that you have tax and healthcare burdens when you think about a SWR. Too often I see people in this subreddit compare annual expenses to net worth, and believe that they're golden when that ratio dips below 4%. You need to account for capital gains taxes (potentially at the state level too), as well as healthcare insurance premiums that you'd incrementally incur when estimating future expenses. In my case, I will need to draw down my investments by $95K/year to fund my non-healthcare spending of $65K/year, though I do live in a high tax State.
Acknowledgements - The biggest contributor to my ability to FIRE is the profound privilege I experience as a white American male. It's probably obvious from the above, but I have encountered very few material hurdles in my life.
- One one hand, I haven't actually received an obscene amount of financial support from others after graduating high school. My parents helped to pay for some living expenses early on in college, through perhaps my Sophomore year, but tuition and later expenses were covered by my scholarships and through my part-time jobs. I stayed at their home for the two months-long job search, but moved out shortly after that. I covered the down payment on my first house (I think many Americans get support from their parents on this, though it doesn't seem to be discussed much in polite company).
- On the other hand, I am by no means self-made. In fact, I feel the opposite. The non-financial investments my parents made in me were significant. And, I've been on the receiving end of this country's firehose of white privilege since birth. Since before birth, if you think about it. In a sense I have a different kind of debt that I believe I need to pay. More on that in post-FIRE posts, I hope.
Why FIRE sooner versus later - I do not draw meaning from my work. I undoubtedly have an impact on the company, create shareholder value, etc. But my company's mission is not something that fulfills me at a personal level.
- I am a tired imposter. While I fully acknowledge how easy I've had it in the grand scheme of things, I have been working pretty damn hard for 20+ years. Early on, in software and consulting, the hours and effort and travel were insane. Insane! Nowadays, thankfully, it's just a low-level burning grind, but it's still taxing. I do somehow feel a cumulative mental wear-and-tear from work over the past 20+ years. I don't handle stress as well as I used to. I should be supremely in-control of the work and team by now, but I don't feel I am. And I feel like an imposter oftentimes: my Millennial and Gen-Z colleagues (how'd THAT happen so fast?) are twice as bright and three times as productive as I ever remember being. Maybe I'm just getting old. Maybe it's a Gen-X thing.
- I owe. Even though this is an anonymous account, I realize this will sound self-aggrandizing -- but this fucked-up year has really opened my mind to my privilege and I need to do something more. It's time for me to get off the pot and create a domino of openings for others at the company who have had to work a lot harder than me to get where they are. This is a concrete and specific thing, and my company would almost certainly take it as an opportunity to increase diverse representation (my company is serious AF about this issue now). So, I intend to quit within two years, ideally at the beginning of 2022, depending on certain constraints.
The above are the immediate drivers, and may seem to violate the "create the life you want and then save for it" credo of FIRE, but to me it does not. I have a very happy life outside of work, which I intend to maximize post-FIRE. My retirement will be overfilled with a backlog of interests groaning to expand. The above are just pushing me to an earlier vs later RE date. Next Steps for Me Why am I setting my RE date at the beginning of 2022 instead of right now? There are a few constraints I need to work through: - Constraint 1: Healthcare coverage. While we are generally healthy, we have pre-existing conditions that I worry will impact our ability to secure coverage upon RE. The ACA has been an important innovation (albeit a half-measure) for this country. But with the current ACA challenge to be argued in front of the Supreme Court in October, and a decision coming by June 2021, I really would like more confidence in the long-term availability of affordable healthcare coverage despite pre-existing conditions. Best case, ACA is affirmed once and for all by June 2021. Worst case, it is struck down, and we have a divided Congress next year that delivers nothing on this front. That's a big milestone for me.
- Constraint 2: COVID and Mortgages. We would really like to move out of our current home to a smaller home in a different location in the metro area for the first many years of FIRE. I know that asset-based mortgages are a thing. But I would much prefer getting into a traditional mortgage, and then RE after that. We are choosing to wait until after the pandemic is resolved (however that happens) before we get out into the market, and show our home for sale. So, I don't expect to put our current house on the market until late 2021 at the earliest.
- Constraint 3: RSUs. Some of my RSUs vest in early 2022, so would be worth waiting out even if RE were possible earlier than the above two constraints seem to allow. This is of course the goal of RSUs.
Immediate next steps I'm taking: - Constraint 1: Vote in November. At the risk of getting political here, I perceive one party as being more committed to healthcare access than the other. This is selfishly important to me. Mathematically more important than any negative response to election results that the markets may take.
- Constraint 2: Make a plan around moving to a new home. This still involves a build-buy decision we need to make. I have a lot of research to do.
- Also: Build a relationship with community organizations in the coming months, so I have a plan for post-FIRE engagement in my community. I have plenty of interests that will divide my time, but none of them really contribute to the community meaningfully.
- Also: Stay employed until then. No small thing -- I know how close I am to RE, and my energy and motivation to exceed expectations at work is flagging. Stated differently: the senioritis is real. Granted, I will be fine if I were laid off tomorrow, and perhaps needn't work full time again. But I'd much prefer to keep to my plan.
This post may not be particularly intriguing now, and may not generate much interaction. But consider this the first entry that I'm hoping you all can come back to as I journal my FIRE journey in the coming years. In the meantime, what would you like to see in updates going forward? I will share what I can. Finally, to the Millennial and Gen-Z redditors who aspire to FIRE: I am sorry for the fucked up world you are in. You will face many more challenges to save for retirement than I (and especially the Boomers) ever have, and you do not deserve that. I am in awe of your resilience (I see it all the time at work), and I am trying to do my part to make it better. Keep at it! TL;DR: American guy wants you to read about his FIRE journey in the coming years as a means to his achieving personal accountability. This is a "kick-off post" of little immediate interest, and likely worthy of your downvote, but may be something to read again later on in the journey to see how well he stuck to his goal. He also wants to know what you want to hear from him about. Edit: I appreciate all of the early responses, I can feel the accountability growing -- yikes! A quick note as a number of you have told me not to apologize for being white. I think I understand where you are coming from, but I didn't intend this to seem like an apology per se. I mean only to emphasize the reality in my own life that so much opportunity has come from this. I understand the point some of you make that there are examples of privileged individuals from all races. I would offer this way to think about it: Let's take the one example of the critical G&T test I took in 5th grade. I was able to take that test because my parents moved into a plum public school district, which they were able to do because they were able to get a nice(ish) home, which they were able to do through rolling over the home equity from another city, where they were unencumbered by redlining because our family was white. Now, multiply that by everyone I went to school with in that district (not every family had the same path, sure, but the systemic privilege exists). It wasn't just me in that boat at school, and I can count on one hand how many Black friends I had at that school. At any rate, I will likely not change any minds here, and while this is a deeply held belief of mine, I will probably delve little to not-at-all into this in future posts. submitted by /u/FIRE_in_the_North [link] [comments] |
No comments:
Post a Comment