Financial Independence Daily FI discussion thread - October 04, 2020 |
- Daily FI discussion thread - October 04, 2020
- Quit my career at my CoastFire Number. Poke holes in my plan!
- How an extravagant car set me on the path to financial independence
- We hear a lot about FIRE success stories (and good on them too, GFY!). How about a thread for those who've gone nowhere with FIRE, or have lost hope? Any way we can help?
- Further education and FI
- Building generational wealth through financial "time capsules"
| Daily FI discussion thread - October 04, 2020 Posted: 04 Oct 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. [link] [comments]  |
| Quit my career at my CoastFire Number. Poke holes in my plan! Posted: 04 Oct 2020 01:58 PM PDT I(30m) spent the last 10 years working a corporate job in tech. Almost immediately upon getting signed full time I realized I wasn't going to be able to exist in this environment for long. I found this subreddit during my first year and started following all the advice, but with a slight deviation from optimal(fast-tracked my mortgage). I held on as long as I could but last month I hit my emotional breaking point and put in my two weeks. I have some financial dilemmas I would like this community opinion on. Please see the data points below: -Total Investments(401k/IRA/HSA): 121k -Total investment at 65 with 6.9% returns: $1,344,630 -Withdraw Rate 4% 65yo: $53,800 -Yearly cost of living 2.5% inflation-adjusted at 65yo: $45,000 _____________________________________________________________________ -Savings: 35k -Debt(Mortgage balance 4% APR): 30k -Home Equity: 150k -Monthly cost of living with mortgage: 1,900 -Monthly cost of living without mortgage: 1,200 -Passive income: $800/month These are my final numbers. I'm planning on taking at least 6 months off to clear my head and decompress. I have a few questions on my situation:
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| How an extravagant car set me on the path to financial independence Posted: 03 Oct 2020 05:24 PM PDT I should start by saying that I am not financially independent. I'm happily on my way, but not there yet. I thought this post might be an interesting insight into how something generally considered to be amongst the worst uses of money... a new (gasp!) luxury (cringe!) vehicle (faint!) actually wound up being a good thing for me. So how on earth did something so universally vilified within FIRE circles actually work out in my favor? First, a little background. I grew up in a "wealthy" middle class family but had relatively little financial education. My parents made sure to educate us on the perils of things like credit card debt ("if you pay it off in full each month, it's a free loan. If you don't, it's tremendously expensive"), but beyond that, there wasn't much (no investing/budgeting/tracking spending). If we're being totally honest, I would classify my family as "big income, big spenders" as typified in The Millionaire Next Door. (I am by no means trying to disparage my parents or my otherwise exceptionally privileged upbringing, just making an observation about how money was treated growing up.) I attended the US Air Force Academy for college, which was an excellent financial decision as luck would have it. I got a world-class education for no money (though you do pay in other ways). I had a stable, guaranteed income for the next 10 years of my life (after pilot training). No debt. Various tax-free allowances. Free socialized healthcare. And a less-known perk of the military called a "career starter loan"--a 5 year loan of ~$30k at a low interest rate (usually ~1%). I invested some of mine (haphazardly at the advice of some USAA financial advisors), used some for a down payment on a new car (no, not the car referenced in the title...just wait), and loaned some to my siblings to help them through college. This is all relevant because... Once I graduated, had my incredibly stable income via the military, and monthly payments to make on both my car and paying off the loan, I realized that I hated having monthly payments. I paid both off ahead of schedule. Even though the loan *on paper* is something I should not have paid off ahead of time (it's pretty easy to beat 1% interest in the stock market)...but I just hated knowing that bill was due. Fast forward another year and I find myself developing a mild interest in "affordable" sports cars (mustangs and the like). I'm a pilot, so I like to think I have an appreciation for high-performance things, even if I'm not particularly a "gear head." So 25 year old me is researching these cars, and there's one catch. Fuel. Efficiency. I'm very much an environmentalist and the prospect of getting a coupe or sedan with less than 30 miles/gallon fuel economy was just unacceptable, regardless of how nice the car is. Enter this comic by The Oatmeal. That was it. Game over. Checkmate. You're telling me I can have the acceleration of a sports car, the practicality of a 4 door family sedan, the safety of a tank, all with a pittance of the pollution produced by a gas guzzler? Count me in. There was just one little catch...those things are expensive. Real expensive. And remember the part about me hating to have monthly payments for things? I was not about to have a monthly car payment equivalent to a mortgage. So there was only one thing to do: start saving. My Tesla goal, in conjunction with a hatred of debt, got me to start saving quite early in my career. I started with $500/month...enough to buy a Model S in cash after just 10 years. But 10 years is a long time, and I found that I really didn't notice my extra savings impacting my lifestyle. So $500/month became $500/paycheck, which became $750/paycheck and continued to grow from there. I intended to pay cash for that thing when I finally had enough. So, the first thing that car did was get me to start saving early in my career and at a much higher rate than I would have otherwise, because I had a goal. Not the most financially savvy goal, but I was saving quite a bit anyway. Next, somewhat fortunately, I had a general intuition that my .01% interest savings account wasn't a great place to keep my money, and I had gleaned some basic knowledge of the stock market through coworkers. I knew that with a long enough time horizon market risk was lower, and that there was at least an opportunity to make some extra cash. I also figured that even if I did poorly, it would just mean a little be more time driving my perfectly serviceable Hyundai Elantra (great car, btw). So I started throwing my monthly savings into an individual brokerage account. I didn't have the knowledge about index funds I do now, but fortunately my stock picks weren't bad either. In the end, I essentially matched the S&P 500. The takeaway here, however, is that my ridiculous car goal also got me started investing my money. because I was already saving and my time horizon was long enough to stomach market variance. A byproduct of my investing was that I also had regular conversations with coworkers about investing/personal finance. I wasn't confident enough to dispense advice, but I enjoyed banter about what stocks people liked, how company X was doing on a given day, etc. Enter a man named John, who mentioned that I should check out a blog called Mr. Money Mustache. I must admit I dismissed it at first, strictly based on the name...but his stance on bicycles (ironic, given overarching subject of this post) was what sucked me in. Then I read The Shockingly Simple Math Behind Early Retirement and my whole world paradigm changed. I suddenly gained direction in my life. Instead of some nebulous concept of working until 65 and then figuring out some form of retirement, I had concrete dollar amount to strive for. I cut my spending way back, generally grew happier, and greatly accelerated my savings (no longer with the solitary goal of affording that Tesla model S). And thus I landed on the path to FI, all from the humble beginnings of trying to buy a car. Some of you, especially those familiar with MMM, may now be wondering if I wound up following through with buying that new, expensive, luxury depreciation-mobile. The remainder of that story goes like this: my goal swapped from a model S to a model 3, as it met my expectations at a more moderate price point than the S. I put down a day 1 reservation around the time I started reading MMM. When I was finally notified that I could order one (about 2 years later), I had read quite a number of blog posts from reputable sources vilifying such purchases. Was I really willing to throw 1/5 of my net worth into something that frivolous? Could I delay my retirement timeline by about 1 year of savings? Conversely, was I willing to let go of a goal I'd worked toward for over half a decade? And a chance to support a company doing incredible good for the environment and climate change?Ultimately... I did it. Some things are worth more than cutting a little bit of time off of my retirement timeline. Like occasionally supporting good companies, decreasing my carbon footprint, and the most utterly absurd and wonderful car I could ever imagine. I don't regret it (though I'll definitely look to the used electric car market in the future, once enough time has passed for that to be a thing.) TL;DR: Young adult starts saving for a Tesla early in his career and happens to stumble into FI circles. Edit: Thanks to everyone for taking the time to read and comment (especially with how long this was)! [link] [comments]  |
| Posted: 03 Oct 2020 10:41 PM PDT My background- Far from a success story, but haven't given up hope (32M, not in the USA, Target FI age 48). Aiming to reach FI within the next 20 years. [link] [comments]  |
| Posted: 04 Oct 2020 01:17 PM PDT I was pondering what to do after lean FI. A long hanging idea struck me: I want to pursue advanced degree (math or physics) at least as enrichment. But the cost can put dent on my FI path. I am very excited about the idea but can't give up on FI dream. Ideally, I want to retire early and devote full time to pursue advanced degree. To be qualified for a phd program, I need to earn several credits in undergraduate courses. It's hard to get the funding for these credits because I already have a undergraduate degree and I'm not a full time student. The noble hobby has an expensive cost (sigh) [link] [comments]  |
| Building generational wealth through financial "time capsules" Posted: 04 Oct 2020 03:44 PM PDT Ok so this is about very long-term financial independence, so bear with me a second. Apart from the different strategies to save as much as possible to become financially independent and retire early, which require a lot of discipline and, all things considered, don't have a lot of followers (as a percentage of the middle class, at least), I thought about a strategy that may be very naive but I can't find a real flaw with it, so maybe you guys will find some! So essentially, this is about securing your grandkids' future by building generational wealth (without having to be rich) by setting up a financial "time capsule" — say a one time $10,000 S&P500 index investment + small monthly contributions, something a large number of middle class homes could afford — that will remain untouched for decades (60 to 80 years for instance, or even a century). After a few decades, say, when the people who bought this financial time capsule retire, it still wouldn't be very big, but after 60 or 80 or a 100 years it would have appreciated greatly. Even if past performance isn't indicative of future performances etc, if we bet on the global economy growing in the next century this is a pretty "safe" bet ($10,000 of today's money invested in 1950 in the S&P would be worth close to $2M today, adjusted for inflation, for instance). The main flaw I see with this system is human nature, aka: what's to stop people from taking their gains or cutting their losses early, before the 60 to 80 years? A possibility could be a fee structure for such a financial time capsule that strongly disincentivizes early withdrawals (something extreme like a 90% fee if you withdraw in the first 10 years, then 89% for 11 years, 88% for 12 etc... until the financial time capsule reaches maturity and you can withdraw without paying early withdrawal fees). Another issue would also be the appeal of such a financial product: this is so far into the future that most people probably wouldn't care. However, there are a lot of people opening savings accounts for their kids/grandkids when they're born and putting a few thousand dollars in them, so it could be branded as part of this sort of "package" for planning your family's future. All in all it's a very simple thing, and I genuinely wonder why banks/financial advisers don't sell it (to my knowledge). What do you guys think? (And thanks for bearing with me!) [link] [comments]  |
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