| Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice. - August 24, 2020 Posted: 23 Aug 2020 11:09 PM PDT Need help applying broader FIRE principles to your own situation? We're here for you! Post your detailed personal "case study" and ask as many questions as you like, or help others who've done the same. Not sure if your questions pertain? Post them anyway…you might be surprised. It'll be helpful to use our suggested format. Simply copy/paste/fill in/etc. But since everybody's situation is different, feel free to tailor your layout to your needs. -Introduce yourself -Age / Industry / Location -General goals -Target FIRE Age / Amount / Withdrawal Rate / Location -Educational background and plans -Career situation and plans -Current and future income breakdown, including one-time events -Budget breakdown -Asset breakdown, including home, cars, etc. -Debt breakdown -Health concerns -Family: current situation / future plans / special needs / elderly parents -Other info -Questions? submitted by /u/AutoModerator [link] [comments] |
| Daily FI discussion thread - August 24, 2020 Posted: 24 Aug 2020 01:10 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. submitted by /u/AutoModerator [link] [comments] |
| 37M/37F Reached 1M. Journey here. Posted: 24 Aug 2020 12:19 PM PDT I tried to post on a throwaway but kept getting ghosted so f it. Here it goes. Might nuke this post after a while. The 1M is in my own accounts https://imgur.com/a/c3SsO8K. Wanted to share because there's no one I can talk to about it other than my wife (who doesn't really care) and also because it's very possible I could go back under with just a few days of a down market. It's my personal milestone. When I include my wife's assets and our home, total NW is closer to 2.1M. - 1,000,000 retirement accounts
- 450,000 taxable accounts
- 140,000 crypto
- 850,000 condo
- (280,000) mortgage
Combined income is about 220,000. We had our first child two years ago, which gave us lots of time to develop professionally and save more money before kids. How we got here:
Got into the idea of buying assets and limiting liabilities from reading Rich Dad Poor Dad in my early 20s. First "real" job in mid 20s. Wife started "real" job a few years earlier than me. We started maxing our Roth IRAs in early/mid 20s. Lived at home until our late 20s. Slowly raised our 401k contribution and maxed out a few years ago. Also shoved extra money into a taxable account over time. We basically invested in VTI and other ETFs until ~2014ish, when we began introducing individual stocks into our investments. Now our investments are now as aggressive as ever at ~50/50 ETFs/stocks. Very heavy in tech. I didn't know about the term "FIRE" until very recently, although I've lived by the principles ever since Rich Dad Poor Dad. Mistakes made along the way:
* Not maxing our 401ks earlier
* Going 100% Roth 401k for 1 or 2 years with a job and completely missing out on 3% employer contributions
* Not maxing our HSA's earlier
* Wishing we were less conservative with our first investments (basically nothing but VTI)
* Attempting to day trade crypto, and losing half my crypto position overall
* Poor investment decisions with my wife's 401k early on. Should have paid more attention to it. Blessings:
* Got lucky with timing. We were not too invested in the 2009 recession, and got to ride the market as it recovered
* Both of us are fortunate to have steady, decent paying jobs in tech/finance.
* Got lucky with our stock picks. Heavy tech. A handful in range of 600-1000% in gains to date. I basically buy and hold forever. Almost never sell anything, but I have ended up shedding positions that don't work out after long periods of time including PEY, DVY, EEM, CMF, VSS, VO. What we're thinking about now:
* Do we sell our riskier stocks and lock in our gains? Or do we stay the course since we don't need the money any time soon? Maybe a mixture? Buying, holding, and never selling is how we can get a 1000% return. Philosophically, I don't really believe in selling to lock in short gains, as it prevents exponential growth. Just buy and hold and don't sell until I need the money.
* Will we be severely impacted in the event of a huge downturn in tech? Most likely. But we also don't need the money any time soon and can ride it back up hopefully.
* It's crazy watching my portfolio swing 5-30k in a day in either direction. Future contributions now feel like just an insignificant blip over the course of a year.
* Is it possible, and is it a good idea, to shovel the money from my taxable account into a Roth IRA via megabackdoor? We're looking for a tax accountant to help tidy up our assets, plug any holes and hopefully advise on this as well. I figure, $1500 to retain an accountant to optimize our retirement path would pay for itself many times over in the long run. Anyways just wanted to share. I feel very fortunate, but also feeling very vulnerable. A tech downturn could crush us. Stories about the dot-com bubble and about the Nikkei really scare me. But if all goes well, I hope an early retirement someday soonish would be possible. submitted by /u/askdogey [link] [comments] |
| Real Estate path to FI FAQ.... and rambling stories Posted: 24 Aug 2020 11:27 AM PDT META: FIRE is quite often index fund and forget it. But there are a number of paths to FI. Owning a business is a common one and the most common path to FATFIRE. Probably once a day someone posts on here that they discovered real estate or ask why nobody mentions real estate. Real Estate is mentioned in every longish thread. It is brought up all the time. I am a Real Estate investor who reached FI within 3 years by applying leverage to Real Estate as a way to build passive income beyond my annual spend. So here are my FIRE FAQs that I see asked and answered. - How do I FIRE with real estate? 1. Buy a property that can reduce your cost of living such as a duplex that covers a chunk of your mortgage via rent. Live in it 1-2 years. Put the savings aside. 2. Buy another and keep the first. 3. Buy a few more properties whose cash flow is above their expenses after all expenses are covered. In general a house that costs $100,000 needs to rent for $1000 a month to be positive. 3. Use this cash flow to qualify to buy more properties. Keep buying until your true cash flow is greater than your living expenses. You are now leveraged like crazy. 4.
Hope for the best and pay down mortgages for a while before making the leap to retirement to be a little safer. This should take about 10 years. 5. Pray to sweet baby Jesus that the political and economic climate remains stable and your local laws don't become too tenant friendly. You are now retired. You are welcome.
- Since Real Estate has a much better returns than indexes why isn't everyone doing it? Because returns are variable. But more importantly investing in real estate is a skill and not everyone has that skill. Not everyone is interested in developing that skill nor does it always make sense to spend time building that skill when you could be developing your primary career. Any dummy can set an auto buy for VTSAX and not check it for a decade. It is the best choice for most people.
- Real estate is pretty awesome according to XXX book and XXXX website and XXXXX guru on facebook, right? There is a ton of money to be made in real estate. But it is a ton of work. Real estate falls less into the "buy passive income and forget it" and more in the "build a profitable business" category. Much of the money in real estate goes to the people in the know. Brokers, agents, authors, gurus, coaches etc. A beginner can get eaten alive. I cannot tell you how many people I've dealt with who have paid a coach to sell a 'system' who have no business being in business. I went to a seminar where the presenter had no idea what he was doing. His answers were laughably and demonstrably wrong and he had many people ready to write him a check. There are way more people out there who "used to own rentals" than who "love owning rentals". Real estate is hard. It is also rewarding.
- A nice building in San Fran would be 10X the value over the last decade. Why not just buy in high appreciating areas? For the same reason you don't just buy AAPL 20 years ago. It isn't clear where the winners are in your crystal ball. Plus taxes. After a huge appreciation run up you have a lot of equity and hopefully some cash flow but the taxes can absolutely erode your modest cash flow while you are crossing your fingers for appreciation. My property taxes went up 10K+ last year. That is not something I control and is tough to plan for. I can't sell 3% of an apartment to cover the taxes. For mortals cash flow is king and appreciation is a potential side benefit.
- A nice single family home in Omaha is only 60K and kicks off 500 a month from $900 in rent. I buy 10 at 5% down and I'm done, right? Sure. Assuming you have an awesome agent, inspector, manager, lender and handyman. Assuming you know Omaha well enough to not get screwed and assuming you pay more than anyone else looking on the MLS. And assuming you know why this house is magically worth 20K less than the one a block over. Investing out of area is a legit way to invest, but it isn't easy to get started. I find it terrifying. Real estate investing is a skill. Long distance investing is a skill and an art and part mystical incantations.
- Leverage is magical!! why doesn't everyone apply leverage? Good property returns usually rely on leverage which multiplies returns on cash invested, but when things go bad it multiplies mistakes. In real estate an asset can go down and you lose your entire investment plus another 100K. Straight index fund investing limits losses to what you put in, and probably only a fraction of that. You can apply leverage in the stock market too. But those people are generally not on the FIRE forums until you reach FAT levels where leverage starts to make sense again because you can handle staggering losses. Market margin buys aren't the FIRE way because they are active and potentially risky. The only reason real estate leverage works is because it is often fixed, at low rates, for a long time and therefor fits in a spreadsheet nicely. But that tends to mask the potential downside.
- I can do it without leverage, right? Yes. But then returns are the same or worse than index funds plus you have all the work. Leverage is not mandatory but it is the only way it makes it worth the work vs passive investing.
- I can make it passive. Turn it over to a property manager and forget about it right? Sure. If you are extremely lucky or want to get robbed. Even with a manager you will spend some time managing the manager. There are always decisions to be made. There are tough ethical questions to answer. It can be minimal time once you are up and running, but it is still time and effort. It takes quite a while to dial in your system. Expect to go through multiple managers before finding a decent one. Then expect to find another in a few years when that one goes south. It is still a business and nobody cares about your business more than you.
- I'll just buy 1 fix it, use the profits to scale up to 2 the repeat to own enough units to retire on, right? Sure, but do the math right. Transaction costs eat you alive. When you go to sell figure 10% for realtors, closing, allowances etc. Then capital gains taxes. Then depreciation recapture. If you don't hold for a while you pay short term gains at your marginal rate. It is rough. There are massive benefits to buy and hold and exchanging but you need to be careful to stay on the right side of the tax system. Take what you think you will spend and boost it 50%. Then reduce profit by 20% and you are closer to reality. And all this activity is extremely active. For each deal I flip and make good money on I chase 10 that I make negative money on.
- What about REITS? To me REITS don't have a long enough track record to lean on like index funds. They are tax inefficient and I don't fully understand the regulations around them. So I don't touch them. They seem extremely correlated to the stock market, so just buy VTI.
So how and why did I go the real estate route? - Income. I make under 50K a year and have kids. After child support, regular bills a mandatory pension contribution and maintaining a decent quality of life I was a couple decades from FIRE without significant changes in lifestyle. Really I was better off just working until pension age. But I am always worries my employment situation could change dramatically and I hated to have all the eggs in the government issued basket. But I just couldn't save enough to do it fast and I'm a bit of a gambler so I'm good with leverage.
- Experience. My first home was a duplex. My second home I converted to a duplex in a massive remodel. I have always done home improvement projects myself and my family is also well versed and supportive in the construction side. My dad is right now fixing a sink for me in a basement apartment for a few extra bucks. I was 15 years into dabbling with real estate before I decided to get serious. I am a strong candidate to boost cash flow via DIY and BRRRRR (google it).
- Comfort with the market. I know my town well. I luckily live in a good place to invest for cash flow. I understand the political and cultural climate, the economics and I know virtually every street in town. I am extremely well connected in my town as I have only briefly lived elsewhere. There is a good chance I already know the neighbor. I'm not going to accidentally buy a clunker 2 blocks the wrong side of the tracks or a know meth den. I'm also irrationally comfortable with being concentrated in 1 market.
- Partner. My partner wanted to go this route. I was already semi-supplementing my income with rentals. When we combined households our buying power improved and it became more viable. My partner also took on the clerical side of things and allowed me to focus on the physical side of things. It met our core competencies well and that keeps it on track. If I was alone I'd have nice functioning apartments that nobody bothered to pay rent in because I don't keep track. If she went it alone she would collect rent and pay it all to plumbers that charge $500 to install a toilet even though it just needs plunged.
- Luck and The boom. I got extremely lucky and timed the market well. I bought huge at a local housing low. A bunch of landlords finally got positive after the 2008 crash and sold when they could 'feel' another bubble. I bought those and then the market has actually gone up in term of value and rents. Plus interest rates fell. This took me from mediocre deals to solid deals. A big round of refinancing pushed mortgages out a couple years but brought payments down to FI cash flow levels.
- Luck. I found cheap long term fixed financing with lowish money down at a local bank by pure chance. Between them and earning a commission I was maybe $5000 out of pocket to buy a house. This helped pick up a lot of property quickly.
- Luck. Multiple deals have come our way off market and we have found the cash to capitalize.
- Speed. Since 2017 I've been flipping, rehabbing and hunting houses doggedly. Sometimes that is painting at midnight, knocking doors before work, driving by at lunch and unclogging sinks at 2am. I've dealt with sewer backups, domestic disputes, horrible tenants, great tenants, many mistakes and not seeing my kids much. I like the work though. It sped up my journey by 15 years.
- I have a plan B/C. I have a pension job. I'm almost 20 years in. At age 57 I have a full retirement plan waiting so I can afford the risk. The risk has so far worked out and I can coast semi retired until actual retirement kicks in. I can probably fix and flip my way to 57 working 5 months a year even if rentals somehow stop cash flowing for 2 decades.
- We have maintained an emergency fund. We have enough cash to get through some pretty rough times ahead. and we have lines of credit to cover for a very long time. Winter is coming and I think I built a big enough castle. But I'll admit that during peak buying I didn't have 2 nickles left and any bump would have derailed my train and left me starting over with nothing.
submitted by /u/fiya79 [link] [comments] |
| Anybody here overcome tremendous student loan debt? Posted: 23 Aug 2020 06:52 PM PDT I'm 27 with 6 figures of student loan debt. Currently making $65k in a MCOL. Able to put $2k a month on my loans and 6% into a Roth, debt should be cleared up in 7 years without any promotions or raises assumed. I would love to be financially independent one day. I'm curious if anyone here has overcome a challenge like this, and what advice you may have. submitted by /u/chugged1 [link] [comments] |
| More money, more problems: More "guard labor" required as you get older and closer to FI/RE. Posted: 24 Aug 2020 01:53 PM PDT When I first started my career, I was focused on having a good paycheck, keeping my expenses low, investing, and growing my career. Now as I am getting older, I am suddenly paying more for insurances (business E&O, accident, life, etc), and lawyers. I had to go to court once for a family money issue. You can't do everything yourself, you can't know every law, and you need to be protected from catastrophe. You'll end up ponying up more for this "guard labor" for your wealth the older you get. It's not something you think about during FI/RE, but it sneaks up on you, and keeps you awake at night. submitted by /u/jubjub7 [link] [comments] |
| Weekly FI Monday Milestone thread - August 24, 2020 Posted: 24 Aug 2020 01:10 AM PDT Please use this thread to post your milestones, humblebrags and status updates 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! Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments] |
| HELP - To reach FI in 15 years: Put cash towards RE or 401K?? Posted: 24 Aug 2020 03:16 PM PDT Hi, please help! I could use some guidance here from people who don't think I'm crazy for trying to retire in 15 years... 32, F, single, no kids, based in San Diego btw...here we go: I now have access to my company's 401K plan. I'm trying to determine how much I should contribute to this given my ambitious plan to replace my salary income with RE cash flow within 15 years. I plan to buy my first house by the end of this year, and acquire at least 5 more as quickly as possible thereafter. I'll throw all rental income at the mortgage to have these paid off asap. The goal would be to own at least 6 houses outright by the age of 45 giving me the freedom to continue working or retire early. I'll look to continue to grow my portfolio beyond this mark as well. I make $85k/year. I have an auto withdrawal that puts $900 of each paycheck into a "high yield" savings account that I am building up for my real estate empire (approx 21,600/year). By the end of this year I'll have almost 30K to put towards my first house (out of state btw). I also deposit $100/month into my Vanguard SEP IRA account each month. I currently have over $4300 in that account. Each month I also contribute to my savings account emergency fund to keep that healthy. After these savings, this leaves me with about 3K to cover my living costs and that is very tight for me! Sometimes I'm naughty and over spend... :\ Given my plan to aggressively use real estate to FIRE, how much would you suggest I contribute to my new 401K plan? I want to have as much cash available to me to solve my future problems now. I can still quality for the max employee contribution (3% of gross salary- $2550) even if I only contribute a dollar, so I'll definitely still get the free money. There is a profit share of approx 2% after 6 years at the (privately owned) company as well. What tax benefits am I not considering/taking advantage of by not contributing a solid amount to the 401K? Should I get rid of the SEP and only rely on the company 401K? Please let me know if I'm missing any info. I really appreciate all of your kind souls - thank you for sharing your wealth of knowledge! submitted by /u/ManiacHounddog [link] [comments] |
| Are there friends in your FI goal? Posted: 24 Aug 2020 02:15 PM PDT I'm fairly young, 27. Grew up poor. I'm new to FI, I have a plan, a realistic plan, adjusted to a real return at 5%. Anymore would be great. We're planning on aggressively saving/investing in our retirement accounts. According to my calculations, I can leanfire with the wife at age 50, or coastfire at age 45ish. Enough of the numbers, my real question is how do you cope with realizing you're the only one in your friends group; actually, family AND friends group that will achieve FIRE? I'm currently in a MCOL-HCOL area and planning to move to a LCOL area during our FIRE journey depending on our situation. I have a wife and two daughters, if we move away, it's just us. Growing up I've ALWAY had friends. From the time I was born (literally have pictures). I still have a tight group of friends with 15+ years of history. It's sad knowing they will no longer be in the picture (or at least not much if any at all). Same with my siblings. We don't really make new long term friends, it's always been the same people since middle school. It's hard to explain my dilemma, I'm not sure how to, but my question is; are their any close friends or close siblings in your FI journey? Or are we riding a new chapter into the clouds whilst ending the "rat race"? submitted by /u/LifeInGeneraI [link] [comments] |
No comments:
Post a Comment