Financial Independence Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice. - November 30, 2020 |
- Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice. - November 30, 2020
- Daily FI discussion thread - November 30, 2020
- Coast bucket strategy with a family of four
- Time value of money, how much is your day worth? A new perspective
- Jacob Lund Fisker Podcast on FIRE
- Weekly FI Monday Milestone thread - November 30, 2020
| Posted: 29 Nov 2020 10:08 PM PST 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? [link] [comments]  |
| Daily FI discussion thread - November 30, 2020 Posted: 30 Nov 2020 12:10 AM PST 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]  |
| Coast bucket strategy with a family of four Posted: 30 Nov 2020 11:59 AM PST My wife (32f) and I (36m) currently have around 450k in retirement accounts. I'm considering the idea of ceasing contributions to those accounts (403bs for each and Roth IRAs) and putting all our extra money into other investments. The 450k is reallocated each year following the bogleheads 3 fund strategy, but a bit heavier on VTSAX. We also own a 4plex (180k at purchase) which about breaks even and a townhouse (250k) at purchase. Rents are 3,000 and 1850 per month, respectively. If we don't contribute anymore to the retirement accounts I figure that when I'm 62, we'll have just over 2MM in retirement fund assuming 6% annual growth. And I think that's enough. I want to pay off my primary mortgage, rentals, and invest in other things I have yet to discover. And some in probably a taxable account too. Is anyone else doing this? Am I foolish to stop contributing with only 450k? (Combined income for wife and I = ~225k/year And I do consulting on the side, this year looking at 25k after tax. I don't count this in projections, it mostly used to offset childcare.) [link] [comments]  |
| Time value of money, how much is your day worth? A new perspective Posted: 30 Nov 2020 02:53 PM PST Rule of 3600"$1 today is worth $15 in 40 years" doesn't really capture well what investing a dollar today actually means in terms of your goals. Most of us here aren't trying to buy more stuff, we're trying to buy time and freedom. So, what does time cost? The formula is quite simple: cost_of_one_day = net_worth_dollars / 3600 This means if your net worth is $3,600, investing $1 buys you 1 day of retirement in the future, no matter your target number or age. This way of seeing things captures why it's so important to invest when your net worth is low (usually applies to young people). When your net worth is $1,000,000, it takes $278 to buy 1 day of retirement in the future. This gives some perspective of what it costs in terms of time to continue working; if someone works 250 days a year and dumps their whole income into investments, they would need to earn $69,500 net to break even, otherwise they're valuing security or money over their time (that's okay, just be conscious of it), or because they enjoy their job more than retiring. Formula #2 days_each_dollar_buys = 3600 / net_worth_dollars How?Each year of investing has an expected return of 7% of your net worth. This translates to 0.028% per working day (250 in a year), which is roughly 1/3571 or ~1/3600. So for each $3,600 invested, you're expected to make ~$1 per day on the stock market. By investing additional money, you're buying guaranteed returns; at $3,600 invested, you're buying 1 day of guaranteed returns with each dollar. Applied to investment psychologyStock market crashes and corrections When the stock market crashes or corrects, your net worth drops, and each additional dollar invested buys more time than before the crash/correction. Remember this, and you'll be psychologically inclined to buy low. CoastFIRE At a certain dollar amount, a person might decide that they value spending those dollars than have an extra day of freedom in their life. I think most people would say that they'd rather have an extra day of freedom than spend $1. Probably the same for $10. Maybe at $100 per day, some people might say no they'd rather have fun with friends, family, or buy/experience something they always wanted than have an extra day. If $100 is that threshold, then your CoastFIRE number is $360,000. If you have absolutely nothing to do with free time, such as just wasting your day browsing Reddit, ask yourself "would I pay $100 at $360,000 net worth to browse Reddit for a whole day?" This should hit hard on some people, because retirement is pretty boring if you don't develop hobbies to do once you pull the trigger. The more fulfilling your life currently is, the higher your CoastFIRE number should be (e.g. I would pay $500 for an extra day of cycling the Alpes vs. $5 for an extra day of browsing Reddit/sitting around/mindless activity), and vice-versa. Psychologically, this helps people with boring lives spend more/develop hobbies, and people with more exciting lives value investing more. It naturally settles onto a sweet spot. Asset allocation The higher the expected returns of an investment, the high the risk, and the more costly it is to buy a day of time. This helps adjust risk too as you approach FIRE. If you're investing in a high flying tech stock that returns 30% a year, then the rule of 3600 becomes the rule of 833. This means that at $200,000 invested, it already costs $240 to buy a day of time with that tech stock; perhaps it's more worth it to buy VTI/VTSAX for $55 a day at that point, or even earlier? Then let's say you have $400,000 invested in 50% tech and 50% VTI, your average daily cost of time is $295. If you're earning less than $295 per day, you're taking too much risk with that portfolio. Let's say you earn $240 a day net, so you want to rebalance to get your average daily cost of time to $240; sell $61,325 of tech, and buy VTI with it, now you have $139,675 of tech and $261,325 of VTI. The goal of financial independence is to reach average daily cost of time equal to your daily net income with a portfolio of 100% VTI, and whenever your portfolio has an average daily cost higher than your daily net income, it gives you a sign that you should de-risk. After FIRE, this could mean setting up bond tents, having 1-2 years expenses in cash, investing in hedge funds for the very rich. PS: this method works for almost any investment. For example, BTC. It returns on average 130-140% a year. That's a rule of 260. If you're earning $100 a day net, your max investment in BTC should not exceed $26,000. If you're "investing" in call options which have an expected 3x return in a month, that's a rule of 0.0006868118945. If you're earning $100 a day net, then your max allocation to that call option should be around 7 cents, otherwise you're taking too much risk (i.e. gambling). In other words, unless you're earning $145,600 a day after taxes, you should never buy even a single call option contract of that kind (~$100). [link] [comments]  |
| Jacob Lund Fisker Podcast on FIRE Posted: 30 Nov 2020 04:20 PM PST A recent podcast that Jacob did that I thought was really interesting. Jacob was my first introduction to FIRE and while I find parts of his philosophy a bit extreme (no pun intended) there is just so much great information in his blog as well as book. It's a nice blend of science, finance, and the importance of good decision making. Hope you enjoy as much as I did! You can find the video here: https://www.youtube.com/watch?v=yNw-D57ZIzg and the podcast here: Here's a an overview of some of the topics discussed: •His journey into science and why he chose physics. •How a website on anti-consumerism that he stumbled across in graduate school is what first interested him in economics and personal finance. •How the current economic paradigm of infinite growth conflicts with the laws of physics and is unsustainable. •His philosophy of critical thinking . •What a tragedy it is that many people don't continue to develop intellectually after college. •The power of first principles thinking. •Possible reasons for why critical thinking is not more widely taught. •And other topics. [link] [comments]  |
| Weekly FI Monday Milestone thread - November 30, 2020 Posted: 30 Nov 2020 12:10 AM PST 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. [link] [comments]  |
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