Financial Independence Realized Freedom Is More Than Money |
- Realized Freedom Is More Than Money
- Early Retirement Update (EOY 2020)
- Daily FI Discussion Thread - January 1, 2021
- Estimated Taxes - Annualized Income Tax Method Planning Spreadsheet
- [2020] Year in review. Part 3 of my annual contribution to r/financialindependence
| Realized Freedom Is More Than Money Posted: 01 Jan 2021 06:21 AM PST A couple of years ago I got into FIRE and was ecstatic, as most of you were the first time you heard about it and realized "wow, this can actually be done?!". So of course, saving and investing became a big part of my life. Earlier this year however, something happened in my life and I decided to also start taking care of myself. Went on a diet, started exercising and have so far lost about 30 lbs. I can now do 5K runs and I don't even feel it. It's nothing now. My goal is to work up to doing half marathons. Anyway, I recently started reflecting on what freedom really means to me. Freedom is not merely being able to give your stupid desk job the finger, or having the ability to spend your time as you wish thanks to material wealth accumulation. Freedom is thinking about what you'd really like to achieve in life, and then going for it without fear, regret or what anyone else thinks. Freedom isn't having the option to eat cheeseburgers and doritos all the time, even though it technically is. The problem with doing so is that it separates you from the best version of yourself, and the best version of yourself is the freest form of yourself. Think about it: The best version of yourself is the one YOU want to become. Want to be strong, athletic and have a nice body? Figure out what you need to do to get there. Take advice from guys who have what you want, replicate what they're doing, and eventually refine it such that it works better for you. This can only be done through self-discipline. Self-discipline = freedom, as Jocko Willink puts it. FIRE is ultimately a mindset. Besides, as Charlie Munger once said: "life is more than being shrewd at passive wealth accumulation". Don't get me wrong, keep saving, folks. Just make sure you focus on maximizing your freedom in other areas of life as well. Imagine how freeing it is to be able to run long distances and not have to worry. You can just do it. It takes you places. You see things, scenery, people. You challenge yourself and it makes you feel good afterwards. THAT is true freedom. Just sharing my two cents after a couple of years of following this sub. [link] [comments]  |
| Early Retirement Update (EOY 2020) Posted: 31 Dec 2020 05:08 PM PST BACKGROUND Model: I wish to maintain a portfolio that began in June 2017 at $1,025,772. My net worth at that time was $1,333,772 (with home/land). Our actual withdrawal rate is much less than the original 3% of portfolio due to: occasionally earning additional passive income; receiving an unexpected $30k windfall in 2018; and purchasing my parents home at a greatly reduced price in 2019 (below). The budgeted maximum withdrawal amount for 2021 is $3,904/mo or $46,858/yr (now 2% of net worth). In 2017, it was $2564/mo ($2682/mo adjusted for inflation). We're so far out of danger by historical precedent that spending is no longer a thought. The road of questions about what I do for health care (subsidies and their ambiguous morality), why retail pharmacy is so bad (below), and whether my situation is from determination or privilege (a lot of both) has been well tread. Career: I am a former retail pharmacist who hated both his job and profession for the following reasons: unacceptable amounts of stress, lack of civility from the general public, capitalism gone amok, fundamental disagreement with the overuse of pharmacotherapy as an answer for underlying health issues, and a severe opiate crisis that few have yet to appreciate. I attended college for eight years to earn a bachelors (1997-2001) and a doctorate (2001-2005) before joining the workforce for nearly twelve years (2005-2017, entirely with CVS). $150k in education costs were covered by academic scholarships ($25k), employment during college ($20k), prior savings from high school employment ($5k), and revenue from an ebay business while in college ($10k), and student loans ($90k). My salary plus compensation went from $115k in 2005 to $150k in 2017. Our savings rate was about 70% on average. My parents initially promised to cover the student loans out of what they deemed to be principle, but we assumed them when purchasing their home/farm in 2019 ($380k + assumption of student loans + free rent for life, for an estimated $750k home/farm that is now probably closer to $900k). Finances: I retired at the age of 38 on June 6, 2017, the day before the twentieth anniversary of my high school graduation. I am married with no kids and generated over 95% of the family income while employed. We live in LCOL rural TN. Our asset allocation was initially 60% VTSAX (total US stock market) / 20% VFWAX (total INTL stock market) / 20% VWLUX (US municipal bonds). After the purchase of my parents' home/farm, our net worth is closer to 50% real estate (one house with 28 acres and another house with 66 acres) / 50% VTSAX (total US stock market). We also hold roughly $50k in belongings not included in the portfolio. My spending model places no dependence upon possible future employment, social security, other inheritances, universal health care, or universal basic income. The final balance will be left to charities and worthy causes. 2020 RECAP Spending: Living expenses for 2020 came to $39,458 (max budget $41,736). We generated $8,045 of income this year from some almost entirely passive stuff. Our investment withdrawal was $31,413 this year, thus our pro-rated, annually-adjusted withdrawal rate was 1.51% for the year (max budget 2%). Without the additional income stream, our withdrawal rate would have been 1.89% for the year. Spending guideline for 2021 will be $46,858 (2% of net worth). Our net worth has gone from $1,333,772 (start) to $2,342,926 (current). Did I panic when the market corrected 40%? No. Howling monkeys are always gonna howl. I rode it out, got all of it back, and padded the portfolio even further. The New York Times reached out to me again in March to see if I was financially ruined, but I had to disappoint them. Experiences: I ran nearly 2000 miles after my competitive running career came to a close (personal records: 5:12 mile, 17:37 5k, 36:39 10k, 1:17:38 HM, 2:43:12 marathon). That's way down from 3000 miles in 2019, but I switched over to cycling (2000 miles) primarily during the summer (marathon training carried over, so my wattage [261w / 3.6 FTP] would put me around a good Cat 4 or bad Cat 3 racer if I ever were to compete). I allowed the pandemic and others' imbecilic denial of reality surrounding the pandemic to make this a less productive year. I mostly stayed home and stuck with existing hobbies (reading, gaming, watching movies, web browsing, vintage card/nintendo collecting, hiking, bird watching, shopping for my parents, following the near demise of our republic). I even reapplied with my old employer and the state volunteer medical core to help with immunizations for the upcoming year, but I am apparently not wanted. Upcoming: In 2021, I want to get vaccinated so that I can return to society, learn to swim effectively without a snorkel, learn to play some basic piano, look into becoming a race director, continue running for my physical/mental health, find some new volunteer opportunities, decrease my time in the digital world, spend more time with existing hobbies, make up for lost traveling (California #3, Hawaii #2, Japan #3), and continue to do whatever the fuck I want. [link] [comments]  |
| Daily FI Discussion Thread - January 1, 2021 Posted: 01 Jan 2021 04:56 AM PST Automod got discontinued. We'll need to figure out how to use the new tools once we emerge from the New Years stupor. Here's a manual thread for the day. Daily FI discussion thread - January 1, 2020 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]  |
| Estimated Taxes - Annualized Income Tax Method Planning Spreadsheet Posted: 31 Dec 2020 06:07 PM PST Link: https://docs.google.com/spreadsheets/d/1WJnEcpNJ7N2n5kLwvV6JfGpxrwX_DNfFSAc-j236P98/edit?usp=sharing Please COPY the spreadsheet and don't request edit access. Original credit goes to a Bogleheads user TaronM that made the original spreadsheet. I updated his spreadsheet for the Tax Jobs Cuts Act which the original poster wasn't willing to do, which took a lot of work as the annualized income forms changed significantly. I updated his spreadsheet as I'm on SSDI income and was wracking my brain trying to estimate taxes correctly for $0 penalties. I'm invested all-in on Hedgefundie's UPRO/TMF portfolio and re-balancing that can throw off significant capital gains every quarter. In one year I'm either $0 federal taxes or paying $40,000 in federal taxes solely due to rebalancing my portfolio. SSDI is tax free with $0 income, and up to 85% taxable otherwise. I looked everywhere for an online calculator or software package to spit out numbers and the only thing I found was a "Please contact us for pricing" offering. Being too cheap to hire a CPA for this and not wanting to do these forms once a quarter, with the workload of doing a tax return, I decided to do the work once and build upon what TaronM started. InstructionsMake a copy for each new year from the template. Put in your tax brackets. I have the single tax brackets, if you're married, you'll have some work to do to put in the married tax brackets. Put your YTD date income for each "quarter", the first 3 months of income, the first 5 months of income, the first 8 months of income, then finally in December your total income. You'll do this 15 days before the estimated taxes are due at each quarter and put your ACTUAL income received. Save this spreadsheet and refer to it at tax return time. You'll have to enter the same numbers you estimated in your tax program of choice for the annualized income method. You'll probably want to save this spreadsheet for 7 years with your tax return in case you're ever audited to show that you did the worksheet. My spreadsheet puts every number into the worksheet for you. Enjoy saving money of having to hire a CPA year round to do the busy work by hand and tell you how much estimated taxes you owe. Cheers! LimitationsIt does no QBI phaseout rules, they're really complex. If you're self employed I trust you're putting in realistic numbers and knows how this QBI phaseout works. My spreadsheet will spit out whatever numbers you put in same as the Annualized Income Method forms itself. I have not tested this part extensively so YMMV on it. Remember: garbage in = garbage out. DisclaimersI'm not a CPA. I've only tested this for my expected situation of SSDI, ordinary income, dividends, qualified dividends, short term capital gains, and long term capital gains. I've tested this with 2019 tax brackets and a 2019 Tax Act Return. At most TaxAct generates a $1 or $2 penalty, which is a lot better than the $100-$200 in penalties I was facing with my previous attempts to figure out estimated taxes on my own. How this spreadsheet applies to FIREWe're more likely to retire early, and our income is based off our portfolios, and we may have uneven income in a year (say withdrawing $40k extra from stocks in June to fix a roof.) FIREing doesn't give us much withholding opportunities either - so we're either paying estimated taxes or doing 60-day rollovers of 100% withholding IRA withdrawals. Another poster yesterday was asking how to estimate such taxes and so I decided to post this today! :) [link] [comments]  |
| [2020] Year in review. Part 3 of my annual contribution to r/financialindependence Posted: 01 Jan 2021 08:25 AM PST Hello all, this year in review is something I've been contributing for a few years now. As long as it doesn't break any rules and we continue to get something out of it I would like to make it a bit of a tradition. There was some good advice given to me during last years submission and I've made an effort to clean things up a bit for this year. I love hearing your suggestions. Here is a link to last year's submission: https://old.reddit.com/r/financialindependence/comments/eio3lm/2019_year_in_review_pt_2_of_what_i_hope_to_make/ Background For the last 5 years, at the end of the year I always crunch some numbers to see how our finances look in order to get a complete picture of our path towards financial independence. I add up all of our major assets, subtract all of our debts and come up with our net worth and find the year over year changes. I then separately add up our retirement assets (essentially net worth subtracting home equity), figure out what our average monthly expenses were(we have tracked every single dollar in and out of our checking account using YNAB since February 2015 https://old.reddit.com/r/personalfinance/comments/f83u0y/for_5_years_we_have_tracked_every_single/) and perform some rudimentary calculations to project how many years from being Financially Independent we are. Note: I actually began tracking all of this in the middle of 2015. So there is a bonus 6 months at the start that can be more or less disregarded for purposes of looking at annual variations. 2020 Financial Results On the whole our path towards Financial independence had a stellar year. Our investments performed great considering the current economic climate and we were able to make all of the tax advantaged contributions that were allowed us(401K/HSA/rIRA x2). This may be the last year we have access to IRA contributions in the full amount. We really padded out our efund and are at the point where we are a bit cash heavy. Crunching our asset allocation in retirements accounts we are weighted roughly 75% domestic stock, 15% bonds, 10% international stock. Cash makes up slightly more than 10% of our net worth currently. Our biggest wins this year were continued aggressive pay down of mortgage, continued building of emergency fund, and favourable market returns. The latter being primarily out of our control and so disconnected from what's going on concerns me, but I have no control over it and count my blessings. We also received a modest income increase(wife promoted, yay!) which helped slightly. We honestly didn't have any sort of real financial set back to note this year. Everything seemed to go our way in 2020. The only critique that I have is being so cash heavy, although given what 2020 was I'm not sure I would do anything differently. I see upcoming challenges for next year being thus: * Possible loss of ability to contribute to IRAs due to pro-rata rule and income increases * Reduction in cash position either by opening a brokerage account or more mortgage pay down * Continued favourable market gains, surely the chickens will come home to roost eventually, maybe 2021 is the year? Final Savings Rate: 71% Years until FI (change from last year): 6 (-4!) Raw: https://imgur.com/a/2EbQm2n Final Thoughts We had a very lucky year overall. To not only keep both income streams(with modest increases and stimulus) during the pandemic, but also for markets to return such favourable and strong results was a financial blessing. On the non-financial side, we've both managed to be quite healthy and nobody that we know has really been all too effected by covid. That's what truly counts! From the financial standpoint it was mostly just "steady as she goes" other than a bit of rebalancing earlier in the year it's all just been on auto pilot. It's surprising to look back and see just how the year played out. I quite enjoy only doing this annually as a check in, automating most of it and trying not to pay any attention to the noise of any given quarter/month/week/day. Perhaps even annually is a bit much? I'm hoping that next year is more of the same. Continue working, continue investing, and continue aggressive mortgage paydown. I'm going to try and reduce our cash balance a bit in the coming year, I would like it to be around $20k less. Gotta put those dollars to better work, and with conditions as they are now, Ally isn't working them nearly hard enough for my liking! I'm hoping that 2021 is a bit of a transitional year for me personally. I would like to focus less on work and more on starting to picture what a post-needing an income life would look like. Over the last few years we've been fortunate enough that I think we're at a point where we can more or less coast and while we can't completely take the foot off the accelerator at least we can maybe begin to stop holding it pinned to the floor and attempting to push it through the floorboards. That's very stressful. Physical and mental health has been rough in 2020 and need to be focused on this year. Beginning to feel old stinks! If anybody has any questions or tips let me know. Good feedback is always appreciated! [link] [comments]  |
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