Financial Independence Daily FI discussion thread - December 02, 2020 |
- Daily FI discussion thread - December 02, 2020
- 30M, NW $400,000, My FIRE experience so far
- 31M - NW $333,333 - Third of the way to FI working as an artist (in tech)
- FIRE in other Countries/ Currencys
- Weekly Self-Promotion Thread - December 02, 2020
- Roth 401k for Roth Conversion Ladders?
- Software for maximizing Roth conversion efficiency
| Daily FI discussion thread - December 02, 2020 Posted: 02 Dec 2020 12:08 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]  |
| 30M, NW $400,000, My FIRE experience so far Posted: 02 Dec 2020 07:41 AM PST Hey Everyone, I thought I would share my story since I enjoy hearing how other people are doing on their path to FIRE. I have laid it out effectively in terms of school years since I still think in those terms. I only discovered FIRE in the last three years so I also don't know my net worth for most years but have included estimates that are likely close. College and background I grew up in a low income household and felt very poor. Ended up at a highly selective liberal arts school. Their financial aid was pretty great at first but fell off a bit. I remember paying only $4,000 for my first year. This jumped to about $10,000 per year for the next three years. Not bad for the experience though. I had only saved a few thousand for college and I wasn't excited about the prospect of debt, so I worked during school. 25-30 hours a week generally. On top of a very difficult course load (40-60 hours a week on coursework) I ended up feeling very tired and stressed. Looking back I regret working so much. I didn't even make that much money really. I studied Physics. A friend of mine tried to get me to take Economics, but it never fit my schedule. I tried to take a Computer Science course, but I couldn't take it due to demand. I regret both of these things. Year 1 (June 2012): Salary $52,000 Cash $12,000 Debt $17,000 NW $-5,000 While I had always wanted to get a Doctorate, I became disillusioned with the post graduate school job market and decided to enter industry instead. I started working at a small manufacturing company as a Physicist/Manufacturing Engineer. It turns out there are not a lot of options to pursue as a physicist. I didn't know what I was doing but at least there wasn't too much pressure on me. Moved to a MCOL area. Paid off my debts in several months thanks to dirt cheap living expenses (<$1000/month). This was thanks to $400/month rent due to sharing a house with four other people in a not great part of town. I didn't really track my net worth. I just deposited money in my checking account and tried not to spend too much. I think I put around 8% in my 401k. Looking back, I should have maxed it. Year 2: Salary $57,000 NW $20,000? Not much to report here. Just worked. Started graduate school part time in Mechanical Engineering. I felt a lack of options with only a Physics degree and felt I would have more options with an MSME. Probably a great choice especially since my work paid for it. I also initially enjoyed classes. Year 3: Salary $63,000 NW $50,000? I bought the house that I was renting. I probably overpaid for it, but I rented out rooms so it more than paid the mortgage. I guess I was house hacking. It really was about doing something with the money that was just accumulating in my savings account. Investing was scary to me. I borrowed $25,000 from my mother to help me cover the deposit and avoid PMI. I agreed to pay her back over the next 2.5 years. I also got engaged this year. More on this later. I continued taking classes. Year 4: Salary $70,000 NW $100,000? I got married! My wife was an artist so didn't bring in very much money but also was debt free. We kept two renters, but they no longer covered the mortgage. Between a decrease in rent, paying for healthcare for my wife (an extra $400/month), and paying back my mother, things felt very tight. I kept contributing to my 401k though. This brought a fair amount of stress to the relationship. I highly recommend talking about earning expectations before marriage. We talked about everything else, but somehow this didn't come up. I think in part because I was doing fine on my own and didn't connect the loss of rental income plus increased expenses with marriage. What we did that helped was to budget. This was absolutely critical. Year 5: Salary $77,000 NW $140,000? This was a big year in many ways. Finished graduate school. Woo! Unfortunately part way through graduate school I realized I didn't want to be an engineer. I enjoyed the business side of work and should have gotten an MBA. My wife applied to graduate school as we decided she needed to have a more steady career. We paid off the loan to my mother. The payment was the size of a mortgage, so it felt like we finally had some breathing room. Perhaps most importantly, this was the year that I discovered FIRE. This was good because I really started disliking my job at some point this year. Started maxing my 401k. Year 6: Salary $87,000 NW $175,000? I got promoted at work and started managing a team of engineers. I again liked my job though it was more stressful. I also applied to MBA programs. Missed out on top tiers schools (screwing up my Wharton interview is a very sad memory) but got an offer for full tuition at a mid-tier. Thanks to the promotion I decided to do part time grad school again since the company would pay for it. This was painful but probably a good choice. Started ROTH IRAs for myself and my wife. My wife started graduate school. She worked part time as well. Between part-time work and scholarships, most if not all of the cost was covered. Year 7: Salary: $95,000 NW $250,000 Started grad school. Sold my house and moved to a small 1 BR apartment in a nice part of the city we live in. It was nice to get money out of the house and be able to invest it. I didn't make a ton from the house sale but it lowered stress. Home ownership, especially for an older home, requires a lot of work. Started tracking balances every 2 weeks. Felt like this was a good balance of knowing what is happening without getting obsessed. Year 8: Salary: $123,000 NW $325,000 I finished grad school part 2. Wife finished graduate school. I negotiated for a much higher salary at work. Started disliking work again though. Unfortunately covid happened so my wife was furloughed and went to doing gig work. She definitely made some money but it isn't included in salary here. Started to finally not feel poor as well. That may be silly that it took so long but growing poor leaves marks that take a long time to fade. Something about hitting a significant income level and living in a nicer spot made a big difference. Year 8.5 (Present) Salary: $130,000 NW $400,000 I accepted a job offer in a HCOL/VHCOL city. I will be making less when accounting for cost of living differences, but I think I will enjoy it more and have more growth options (edit: its a technical marketing role). My wife also just started work (another ~$60,000/year). The last time I checked finances we just crossed $400,000, which felt like a big milestone. Hitting six figures in a taxable account just happened as well and this was very exciting. My recommendations:
Thanks for reading and for all of the encouragement that this community provides! Edit: I got a question about NW allocation: - Savings: $50K (about to buy a car and move so have been hoarding cash for the last few months) - 401K: $185K - Roth IRA: $60K - Brokerage: $105K Further edit: target number is $1.25 million. Probably another 12-15 years of work. Last edit: A fair number of comments about whether or not I was poor growing up. I grew up in a single-parent family as the youngest of four children. We were below the poverty line until I was at least 12 when a second sibling moved out. I was on free school lunches until it was just me and then I was on reduced school lunches. My mother was a saver who had a full-time job and always took part time gig work as well. So once she was able to save due to her kids moving out, she did. That is why she was able to loan me money at that point (20+ years from when my dad left her). I am sure that plenty of people have worse situations than mine, but I assure you, we were indeed poor when I was young. [link] [comments]  |
| 31M - NW $333,333 - Third of the way to FI working as an artist (in tech) Posted: 02 Dec 2020 12:31 PM PST Hey all! Long time lurker, I think a lot of ppl right now are making milestones with how things are going lol, so I figured to throw my hat in and make my first post. Raised by my single parent immigrant dad, we were somewhat middle class. Growing up he was really hard on me to do well academically, and I did OK, but honestly didn't do much homework and instead spent most of my time drawing n' posting (honestly pretty cringey) anime/furry art on deviantART starting from age 13. But I loved it and took art seriously enough in HS to end up going to art school. It was really expensive and we did not have any sort of college savings, BUT he did take on a lot of parent PLUS loans (which i'm eternally grateful for) while I took out the max in loans I could as a student. Spent the 4 years in college a lot more seriously than HS, knowing how much it cost, and did well. I got a bachelors in animation in '11 and got a job offer a year later to work in mobile games in a VHCOL area in '12. May 2012 - Salary $48,000 - Started as a jr animator at a small mobile games start up. It was moderately successful and had just been acquired by a larger company. I got RSUs in the company as it was still privately held. Fun Fact: since this was my first big boy job I was reading a lot about how to budget a salary around then, and had read Elizabeth Warren's All Your Worth and got started saving in my 401k and Roth IRA because of it. Nov 2014 - Salary $60,000 - It turns out those RSUs would be worth something! (around 20k) and all of them would vest immediately when our company got acquired by a public company. Our game was starting to really ramp up at this point, and there was a lot of bonuses and generous raises. I threw most of my windfalls/bonuses at my debt til I paid off all my loans, but my general savings rate was pretty low due to having to balance it with rent in the bay area. Jul 2016 - Salary $90,000 - My salary jumped as I accepted a role in this same startup company as an art manager. We were growing really fast, and there was a need for a lot more artists at this point. This was also around the same time I had found this reddit board and realized "hey, my salary has gone up a lot while my expenses have stayed pretty stable. This might be possible, although I still enjoy my job" So I started pouring a lot more into my savings. Maxing out my 401k, my Roth IRA, and saving another 1k~2k each month into VTSAX. I also get married soon after this point! Jan 2018 - Salary $100,000 - NW $120,000 - Uh oh, corporate sells the division I work at to a different corporate overlord. Lots of coworkers end up leaving, the culture at the company really starts changing. A game we were excited about gets canned. I'm not sure I even want to work in mobile games anymore as all of them have kind of moved towards very predatory ways of monetizing. But my job was honestly still pretty comfortable and I started really getting into FI/RE. Being frugal and still trying to do my best at work to grow my salary. At this point I set my mission to save up 900k and then quit my job to work on indie games. Today - Salary $120,000 - NW $333,333 - A lot of the same feelings from 2.5 years ago, but I've still stuck around at the same company. Just hunkering down and saving. I remember reading on the reddit here that the first 100k is the hardest to make, and then after that it gets much easier. Whoever said that was SO right. It's crazy watching all my investments grow lately. So what's next? I've been setting aside money from each month from my very first paycheck to give to my dad to help repay those Parent PLUS loans. My rent (crazy enough) has not gone up since 2016, so my monthly spend is around 2500~3000 per month (rent, bills, groceries, fun money) and the rest is saved up. My husband (also an animator) has had bouts on unemployment, but finally landed a stable job last year. He doesn't plan on retiring early at all, but is very supportive of me wanting to (very grateful for him too) . At the rate I'm going I think I'll be able to retire when i'm 36? In the mean time, i've been teaching myself to code and use various game developer tools. I'm still quite a novice in areas that aren't art related, but I'm having a lot of fun with it. tl;dr-
Happy to answer any questions, but otherwise am just gonna keep on keeping on til I can pull the cord. Hope to make that post soon :) [link] [comments]  |
| FIRE in other Countries/ Currencys Posted: 02 Dec 2020 03:18 PM PST Hi, im writing from México and im also interested in FIRE. I suppose the majority of posts around here come from the USA because I read a lot about 401k, Roth, IRA, etc. which im not really into it because from another countries, retirement plans are different. _______________________ Correct me if im wrong I have read a lot about FIRE'ing at 1M (USD) with a "4% interest rule". As I understand that translates into 40k interest anually (or $3333.33) which should be enough for living. (I know it depends on which city and a budget) A major difference about México and USA from my perspective is the salary. Ive read normal salaries ranges from $40k-$120k USD anually (before taxes?) From perspective, lets suppose a person earns $80k salary, after taxes it is like $60k (I dont really know how much less) and from those 60k that persons spends 65% and saves 35% each month. That translates to $19.2k net savings. After some many years, saving, investment, etc one can reach the 1M or desired FIRE goal. I dont know if this is right but im speculating. What am i missing? ______________________ Ok, from México, a normal salary would be around $12.5k to 37.5k USD(Anually). I know theres a lot of difference vs USA but living costs (Food, rent, restaurants, medical expenses, etc) are much lower. 15k-18k should be enough for living in an average city in México. The only things that are "kind of expensive" to us mexicans with a salary 2-3 times lower because the cost the same here or there are not indispensable things like an Iphones, computers, cars, etc or some other non basic somewhat imported stuff. Lets take an example of a person that earns $25k, after taxes it is about $20k. And with an speding of 65% and saving rate of 35% it ends with $7k anually. That same person needs almost as 3 times more to reach the same 1M. According to the 4% (which is about the interest rate in México) to get 18k anually you would need 450k USD _______________________________ 450k USD is is 2.22 times less that 1M but you would need: lets say 64 years at 7k per year saving rate) vs 52 years for 1M at 19.2k savings rate. So conclusion, you need more time for the desired FIRE number. Those numbers are some aproach (I guess). Feel free to make any comparisons and discuss. [link] [comments]  |
| Weekly Self-Promotion Thread - December 02, 2020 Posted: 02 Dec 2020 12:08 AM PST Self-promotion (ie posting about projects/businesses that you operate and can profit from) is typically a practice that is discouraged in /r/financialindependence, and these posts are removed through moderation. This is a thread where those rules do not apply. However, please do not post referral links in this thread. Use this thread to talk about your blog, talk about your business, ask for feedback, etc. If the self-promotion starts to leak outside of this thread, we will once again return to a time where 100% of self-promotion posts are banned. Please use this space wisely. Link-only posts will be removed. Put some effort into it. [link] [comments]  |
| Roth 401k for Roth Conversion Ladders? Posted: 01 Dec 2020 04:21 PM PST Hello all! I think I understand the general principal of a Roth Conversion Ladder. But I have a few questions.
Any other considerations as it relates to the above or otherwise are welcomed! [link] [comments]  |
| Software for maximizing Roth conversion efficiency Posted: 02 Dec 2020 09:35 AM PST I recently took early retirement (59) and am looking for software that can help me maximize the financial efficiency of Roth conversions over the next few years. I just collected a lump sump pension, so I'm pretty much done working (own my own home worth about $500k) and have about $5m invested. My wife and I will both receive small pensions (total <$500/mo) and social security. My dilemma is that I have about $3.5m in pre-tax (IRA) money (I know - a good problem to have). I also have about $500k in Roth and the remainder is in an after-tax account. I know the best financial plan is to start converting IRA to Roth, but the big question is how much should I be converting per year. I know my decisions now will affect tax rates and Medicare surcharges years down the line as well as affect the eventual (I hope) inheritance to my heirs. Is there any good software out there that can automatically (or even manually) run simulations and give me an idea what the best strategy would be to do Roth conversions now? Ideally, it would know about the tax law changes coming in 2025 and Social Security / Medicare rules. I've signed up for MaxiFi - it's OK, but isn't really what I want. I had a CPA demo eMoney software for me that seemed really good, but it wasn't "hand's on" - I'd have to hire him for many thousands a year to gain access to the output. I'm looking for something I can own / run myself - ideally online, and ideally one that can pull in data from various sources (Fidelity Investments, my bank, social security) so it can update as my financial situation updates (Note: I use a Mac). [link] [comments]  |
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