Posted: 03 Sep 2020 01:07 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.

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Easing into a simpler life after Covid...

Posted: 03 Sep 2020 08:57 AM PDT

Can anyone relate to this?

I'm in my late 30's, married, and a business owner. Just north of $1m in index funds saved and have a couple of years living expenses in cash. Was making about $300k yearly in a LCOL area.

Pre-Covid, I put up a dramatic post about how I have been having mental breakdowns, my marriage is crumbling, all I do is work 24/7, and my life is miserable. I want more than anything to FIRE but should probably start COASTing so I don't completely break down.

Since then, my business had been mandated closed for over six months and is, just now, on the precipice of reopening.

After six months of no-salary, reflecting, panicking, stressing, relaxing, and going through every emotion you can imagine, I have a new mindset.

I could technically COAST right now and just earn living expenses for the next 15-20 years. We don't spend frivolously, as evidenced by six months of a shutdown. I'm reopening my business now and it looks like I will be starting around $75-80k yearly, working a dramatically reduced scheduled.

Before, I would have panicked at this, but I actually feel an ease at the idea that as long as I cover living expenses, my family and I will be ok. I will work on maximizing profit, inside my limited schedule only, and anything extra can always go into savings. Maybe I'll be able to FIRE earlier than 15-20 years, who knows?! The whole situation plucked me from the rat race for a period of time and I just feel more relaxed and less pressure to SAVE SAVE SAVE EARN EARN EARN SAVE SAVE EARN EARN WORK NONSTOP WORRY WORRY SAVE EARN SAVE EARN

Simply, I was grinding myself to death, in an attempt to FIRE, and now I feel like I'd rather enjoy life a little bit. It's a mental adjustment, but I'm starting to feel ok with it now. I was so wrapped up in money, that I forgot how nice it felt to sit down and eat dinner with my wife, go for a long walk, read a book, etc.

Anyone else experience anything similar?

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Capital in the 21st Century

Posted: 03 Sep 2020 03:52 PM PDT

Hello fellow FIRE enthusiasts.

I recently read Thomas Piketty's work Capital in the 21st Century. Piketty argues that much of economic history can be understood by analyzing the ratio of wealth to income. He uses tax records and datasets from European countries and the United States going back several hundred years. While the book is long and dense, I found it fascinating. Key points include:

In pre-industrial societies, economic growth is basically non-existent, or only very slowly outpaces population growth.

Since the industrial revolution, invested wealth has typically grown faster than the incomes of the majority of working people. This mathematically and inevitably leads to inequality.

Approximately half of the population own nothing or very little. This pattern repeats across countries and at every level. For example, if you again break down the the top half of the population (those with assets), the top half of that half (overall the top quarter) own most of the wealth. This repeats until you reach Bill Gates or Jeff Bezos.

In the era before the world wars, inflation was very low or non-existent. Returns (typically on government bonds, the favored investment) were around 4%. An interesting note comes from Victorian era novels when incomes and portfolio sizes are referred to interchangeably. An income of 20,000 pounds translates to a 500,000 pound portfolio and vise-versa. After the world wars, novelists stopped making these comparisons, and generally stopped mentioning actual monetary values in print, since they would become quickly outdated.

The world wars and depression destroyed much of the world order, including the concentrated fortunes of the wealthy. Governments during and after the wars paid for the tremendous debts incurred in a variety of ways, including very high tax rates and by simply printing more money and devaluing their debts (along with the fortunes of the wealthy).

The post war economic climate is a historical anomaly – many fortunes were destroyed, and much of the world was actually destroyed. This leveling had several effects – there were very few fortunes that were passed down by inheritance and the generation that grew up in that period saw their labor as a higher proportion of national income compared to invested wealth. Coupled with the rise of mass higher education and highly paid professional careers gave boomers a new way to the top – income instead of inheritance.

Since the late 1970's, the historical pattern of wealth accumulation and inequality has reasserted itself.

In the postwar era, the long term rate of return on invested capital is still approximately 4%. The calculation is complicated by inflation but generally holds.

To combat the inevitability of the very few eventually owning everything (more so than they already do), Piketty advocates for a globally coordinated progressive tax on wealth. Otherwise, "the past will eat the future", or those few that are lucky enough to be born into historical family wealth will dominate the rest.

As someone striving for FI, this work was very illuminating. Basically I am trying to jump on this historic inevitability of invested wealth growing faster than labor, and living off the proceeds. I find it interesting that the 4% rule has held for many centuries, and that the "OK Boomer" meme has something to it – their life experiences were shaped by a very different and historically anomalous economic climate.

This has also been made into a documentary, but I have not seen it. Any reviews?

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The first million is the hardest

Posted: 02 Sep 2020 06:47 AM PDT

I hope my journey can be an inspiration for those of you who have nothing, are just starting out, and are in it for the long haul.

I just finished a reconstruction of the growth of my net worth since 1991, when I moved out on my own, making $5.25/hour. That's also when I started college. Because I managed to work while in school, I managed to keep a positive NW (of a whopping $5000) throughout undergrad and Masters. Four years later, upon completing my doctorate, I'm at my worst financial position (-$110,000).

Though it's a steady climb, I won't see a positive net worth for another 7 years. I hit $+40k in 2007, then go back into negative territory in '08 and '09 because of my stock positions during the Great Recession.

But throughout this time, I have been building my businesses. Contributing to retirement accounts. Building my stature as a consultant. Building my investment portfolio. Trying new things like buying foreclosure properties. So, even though my net worth is no better than it was when I started, I have all the right things in place. I just have nothing to show for it yet.

In 2010, things start to take off. By 2014, after 23 years of working hard, I hit a NW of $1M. It was around then that I establish my "minimum" FIRE number of $3M (but I really want to get to $10M).

23 years to get to $1M

Just 4 years later, I cross the $2M line.

Just 2 years after that (thanks to this insane Covid market), I hit $3M. I hit my minimum FIRE number 5 years early.

If my projections hold true, might actually be able to hit the $10M mark and still retire 10 years early.

At this stage, I'm still working (for myself), but knowing that I could FIRE at any moment gives me great peace of mind. I don't really put in 40 hour work weeks anymore (or 60, or 80, like I used to). More like 20-30 hours. I feel like the major financial struggles are behind me and that all I have to do is not screw it up and stay the course.

For those of you who don't have your house paid for, or you are just crossing over into a positive NW, or you are staring at a mountain of debt and hoping one day to get there, all I can say is to stay dedicated to your goals. It will take time. But, eventually, you start to feel like you are wining the game.

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What to do after FIRE?

Posted: 02 Sep 2020 01:17 PM PDT

I'm 35, married and will reach my FIRE goal this year.

We started early, paid off the house, and have managed enough savings and passive income to start now and maintain a pretty cushy lifestyle for us and a possible addition to the family.

BUT I've been so focused on getting here that it's hit me I've no clue what to during the RE, anyone else in this position?

Sure I'd imagined travel, exotic places, relaxing etc but then what... it all seemed great while I was planning "the dream" during the stressful times, but now that it's actually here, I'm just not sure what to do with the time I'd have?? What happens after a few months of travel and relaxing, even if income isn't a concern, would it get boring after a while?

Is this just cold feet? If anyone's been there, please some advise.

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