Financial Independence Daily FI discussion thread - September 01, 2020 |
- Daily FI discussion thread - September 01, 2020
- FIRE is BORING
- FIRE, Your Community, Privilege, and You
- Mortgage Payoff as an Unfortunate but Necessary Part of FIRE Planning?
- Leveraging Debt to Invest for FIRE
- For those who self-direct your IRA/401k, which custodian do you use? At what $ account balance did you decide to self-direct? And what asset classes do you invest in?
- How did housing affect your plans for FIRE?
- How do you celebrate your milestones?
- If you were to receive $30k in a lump sum...
- Wanting different things out of FIRE as a couple
- When do you stop?
| Daily FI discussion thread - September 01, 2020 Posted: 01 Sep 2020 01:09 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: 01 Sep 2020 08:13 AM PDT This is a bit of an "off my chest" post. But I feel like there's a large percentage of newcomers around here (not to mention a decent percentage of veterans trying to recapture that feeling of being a newcomer) who need to hear it. FIRE IS BORING Now, if you're new to all this, it might be news to you. After all, it doesn't feel boring in that first phase. Your mind has recently been blown with possibilities for your life you never before considered possible; Everywhere around you, you see opportunities to optimize your spending, your portfolio, your spreadsheets; There are so many books/blogs/podcasts you need to consume to become even more informed on it and optimize your plan even more... You want that initial rush of excitement over all the possibilities to last and sustain you and motivate you throughout this entire journey. But the truth is, this phase doesn't last. Within a year or two you'll have consumed just about every shred of relevant information you can. Your plan has been written and rewritten a dozen times. You've had several dozen fights with your partner about whether or not it's actually worth cutting another 2% out of your grocery budget and why the hell you have to keep the thermostat on 65 when it's only saving $15/mo on your electric bill. Your spreadsheets have been stress tested and refined to levels of confidence several significant digits more than you're actually capable of achieving… you get the picture. And now? You just keep going. You track your budget. You check in on your NW every few months. You rebalance your portfolio maybe once a year. It takes a grand total of maybe 10 hrs of effort in any given year. People call it the boring middle, but it's really more like the boring remaining 99%. 99% of this is just sticking to the plan for decade, after decade, after decade. Not for a year, or two, or ten. But literally however many years you have left in your life. Because the work doesn't stop when you reach FI or retire. After that, unless you've just massively overestimated how much you need, you've still got to keep living on the budget you've set for yourself. And it's the same boring slog to just stay on track after retirement as it was before. People don't fail at this because they're missing some super secret knowledge that only the elite have access to. They don't retire early because it's just long, boring fucking work to commit to not spending money they otherwise could be for decades on end. So when you look at the front page of this sub and think "ugh, there's just never any new content around here". It's because there isn't any new content for people to post. 99.9% of what you need to know for this has been reiterated to death already on MMM, and ERE, and ERN, and Mad Fientist, and YMOYL, and r/FinancialIndependence, and god only knows how many other places before. And the actually new, interesting, relevant stuff takes a lot of time to put together and doesn't come around on a daily basis to satisfy your habitual Reddit browsing. And that's how it should be. You're not pursuing FI for its entertainment value. You're doing it because (presumably) you want to actually do something else with the security, freedom, and time it affords you. And if you are doing it for the entertainment, you're actually making it less likely you'll succeed here. Because the second the novelty starts to wear off, you're going to start looking somewhere else for it, and then it's all "ooh look, Tesla announced a new model". You want exciting? Go look at loss porn on WSB. You want to actually build a predictable and reliable plan for retirement that you can execute on over the course of decades? It's going to be boring. [link] [comments]  |
| FIRE, Your Community, Privilege, and You Posted: 31 Aug 2020 07:53 PM PDT I'm 27 living in an MCOL city in Ohio, currently projected to hit leanfire around 50. I grew up elsewhere in the Rust Belt, in an economically stagnant area -- and by that, I mean the median family income in this city last year was $24,000, and the median home value sits around $40,000. My family clocked in at about 2x both of those figures, which represents the approximate average for a family of four in the US. However, by my town's standards, we led a comfortable middle-class life. My upbringing makes me think of one of most common criticisms of the FIRE concept: that FIRErs are mainly high-income earners that happen to live in LCOL areas, and that this isn't as obtainable for those without high incomes or those whose jobs can only be done in or around H/MCOL markets. I'm not rich, but I pulled in about $63k last year. Not stellar, and slightly above average for the US as a whole, but not bad for a 27-year old with a mediocre accounting degree from a Tier 4 state school, and a pretty far cry from my hometown's median of $24k. My job can be done remotely from anywhere, which allows me to live in a $900/month apartment about 45 minutes from the city with no roommates and no family to provide for, and save roughly 30-50% of my take-home pay depending on the month. I've been dealt a pretty favorable hand as far as income goes, and that level of privilege is what makes me think about how the FIRE concept relates to the US as a whole, even pre-COVID. It seems to be that a lot of the FIRE literature is aimed at people who are already middle to upper-middle class, but who have a spendy lifestyle that keeps them from accumulating wealth. Oh, if only they could get out of their BMW lease or their Starbucks habit, and FI would be theirs...or such is the theme of all of these books. It makes me chuckle a little when I hear things like "cook all your meals at home! Take public transit! Exercise in the park instead of paying for a gym! Use your library instead of buying books/DVDs!" because in my neck of the woods, everybody was already doing that. Not as a lifestyle choice -- it was their only lifestyle choice. It's this reality that makes me think twice when I hear Millionaire-Next-Door-esque comments like "anyone can FIRE if you work hard enough." While that is theoretically true, there's no escaping the reality not everyone is running this race out of the same gate. My quick and dirty calculations would have more more-or-less leanfire at 50, or FIRE at 55 or so, without taking into account Social Security or FERS pension. This is so far removed from the reality in my hometown that it isn't even funny, where most young workers live hand-to-mouth and retirees live entirely on SS. I'm not doing anything they are not doing; practically the only difference is that I was able to increase my income to a slightly-above average level that is honestly not that impressive on the national scale. I'm not sure if comments or thoughts like this are typical of FIRErs, especially those from bottom-quartile income backgrounds, and I'm wondering what, if anything, we as a FIRE community should be doing to improve access to financial education for the country at large. Discuss. [link] [comments]  |
| Mortgage Payoff as an Unfortunate but Necessary Part of FIRE Planning? Posted: 01 Sep 2020 10:15 AM PDT Interest rates are crazy low, so my instinct is to keep my mortgage as long as possible, and continue diverting all extra cash to retirement savings. Thinking purely mathematically, that is logical. And I'm all about logic, I have no desire to pay off my mortgage "because it would feel good" or some such nonsense. HOWEVER In retirement I'll live off distributions from my various tax-deferred accounts (401k, etc.), which will be taxed at my new marginal rate (hopefully lower). If I'm still paying a huge mortgage when I retire, I'll need to take larger distributions, effectively raising my tax rate. With this in mind, I wonder if having a paid-off mortgage by the time I retire should be a higher priority. That is, despite the fact that it's a relatively poor short-term investment, it may be a necessary step to minimizing my tax burden when I'm living off my retirement savings? I've never seen this idea before, so I wanted to ask if I'm on the right track with this thinking. [link] [comments]  |
| Leveraging Debt to Invest for FIRE Posted: 01 Sep 2020 04:38 PM PDT Hey all, I haven't seen this discussed much before so apologies if this has previously been hashed out. Earlier this year, I opened up an "interest-free introductory period" credit card - I was putting all of my expenses on this card to hasten the savings for a down payment on my house (didn't previously have/need a high emergency fund, and almost all of my investments were in 401ks/IRAs). For the first 12 - 20 months of these cards, depending on which you get, any credit card debt does not accrue interest provided you make the minimum monthly payments on time each month. After that, all debt is charged monthly interest at normal high credit card rates. In my case I have a $20k limit with 18 months interest-free, and I have it automatically set to make the minimum monthly payment when the statement closes. Now, this might not seem like it would make a huge difference, but most of these cards allow you to transfer debt from a previous card for a 1 time ~3% charge, where it will then be interest-free until the given period is over. I'm already planning on maxing out my current card until the 0% interest payment is over before paying in 1 lump sum. BUT, I'm considering "floating" the debt by transferring it to a new, 18 month interest free card and taking the 3% hit (annually, 3% on 18 months of interest-free debt is just ~2%). Hypothetically, the market should beat this out by far and you're floating debt to invest for basically the rate of inflation. There's always the risk that the market falls and you lose leveraged money, but at just a 2% annual debt rate it's pretty negligible. As long as you have the cash/investments available somewhere to pay the amount off if needed, perpetually leveraging debt seems like a pretty low risk way to get additional cash to invest with minimal work. Maybe open up two cards and once and evantually float $40k to leverage the debt/additional earnings even further? My question: has anyone here done something similar with credit cards or other debt in general? I know this community is generally debt-averse but it seems like an easy win to me, especially earlier on in someone's FIRE goals while their net worth is low (might not be worth the bother once you reach a certain net worth). Having a low rate mortgage for personal or rental properties uses similar principles, leveraging debt for assets to use. Are there any other factors that should be considered, or other strategies to do something similar? Yes I realize how crazy it sounds to sit with $20k - $40k in credit card debt at any given time. Any way to up my investments while I'm young and take advantage of compounding returns interests me. [link] [comments]  |
| Posted: 01 Sep 2020 08:01 AM PDT Title says it all. And before anyone says it, Vanguard (or any of the other big brokers) do not allow you to self-direct your IRA/401k. This is something different. If anyone has numbers or a spreadsheet to show their rate of return in self-directed accounts I would love to see that. TIA [link] [comments]  |
| How did housing affect your plans for FIRE? Posted: 01 Sep 2020 03:32 PM PDT I'm not one to follow trends, but this is one I'm curious about. For those of you who have FIREd already or who are on track to. Did you take your time buying a house? Did you buy as soon as you could pay a 20% downpayment? Did you live in a cheap rent place for as long as you could? Did you buy at 0% downpayment? Etc. I'm just curious with the correlation of housing and FIRE. I understand there's MANY different factors here that I'm not considering, which is why I'm curious about your specific experience. Thanks [link] [comments]  |
| How do you celebrate your milestones? Posted: 01 Sep 2020 05:02 PM PDT I recently reached a very good milestone for my financial indipendace but I don't fell it would be a good idea to share it with people I know (apart from my SO), so not quite sure how to celebrate it. How do you celebrate your milestones? Do you do something, do you tell some close people? [link] [comments]  |
| If you were to receive $30k in a lump sum... Posted: 01 Sep 2020 03:38 PM PDT and were willing to invest in something a little risky what would you do? [link] [comments]  |
| Wanting different things out of FIRE as a couple Posted: 31 Aug 2020 05:46 PM PDT I'm currently exploring FIRE, and how I can arrange my life so that i don't need to work or can work very little, or for like 3-6 months of the year. The thing is, while my partner is on board us FIREing in theory, we are not yet on the same page in terms of what that looks like for us (it's still early in the discussions). There's a few differences in what we want such as standard of living (house size) and location (I'm happy to go rural/LCOL, he currently prefers HCOL cities), which impacts how much money we'd need to FIRE. Additionally, I am very strongly anti-work at the moment, whereas he would prefer to continue working at least for next few years, and probably part time for several more years. However, I don't want to be in a position where he goes to work at a job he doesn't particularly like and I feel like I'm sponging off him, even if I contribute in other ways. So my question to other FIRE couples is, how do you reconcile differences in what you each wanted out of FIRE? Was one of you happy to work and support the other while they didn't work? How do you resolve wanting to live in HCOL vs LCOL areas and what that means for your finances e.g does the HCOL desiring partner earn a bit more to compensate? Did you make compromises and if so, did they work? Basically just looking for ideas on how other couples have FIREd while ensuring each other's differing needs/wants are met in an equitable way. [link] [comments]  |
| Posted: 01 Sep 2020 12:02 PM PDT I'm 23 and currently have a net worth of ~$90,000 including my vehicle (I rent a house). I worked VERY long hours throughout high school and college to stay debt free. I still work 3 very small side hustles (odd jobs paying $50-$150) to keep busy, but they don't make or break me. I work in finance, but not the superstar kind of finance like investment banking. I take home $3,000/month after taxes and contributions (Canadian RSP/RPP). My TFSA is maxed out, although I lost half gambling on terrible stocks when I was 20. I receive around 25% of my salary as a bonus in December so I live off 75% of my salary for most of the year. I am obviously young, but I continue to outwork my co-workers and landed in a very lucky position on a special team. I lucked out with my role and don't take it for granted. I often feel anxious about saving as much as I do. I save 18% of my income between RSP/Pension, I save $400/month in a non-registered account, I max my TFSA contribution every Jan 1st as well. For someone that doesn't make any crazy coin, I sometimes wonder if I'm saving too much. I have enough left over to pay my bills and feel okay, but I'm certainly not following the Dave Ramsay 6 months safety fund rule-of-thumb. I know that my habits are benefiting me greatly in the long run, but I'm really not seeing my bank account grow as a result. I would like to buy a home with 20% down in the next few years but find that thought to be anxiety-inducing. Should I be saving so much that it gives me anxiety? Or am I doing the right thing by saving so much that's it's comfortably uncomfortable? I have no set target for retirement but I don't want to work past 60. Let me know your thoughts below. Am I crazy or are others experiencing similar issues? Thanks! [link] [comments]  |
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