Financial Independence Daily FI discussion thread - Saturday, July 03, 2021 |
- Daily FI discussion thread - Saturday, July 03, 2021
- The Financial Independence Diet
- Found /r/FinancialIndependence At Age 21: $500k at Age 30
- TIL that career changers make more over the long run than those who never switched
- Greetings from Russia :)
- A real-world example of the direct and marginal cost impacts of different MAGI levels for those using the ACA for health insurance.
- 18k to 51k at 21!! 1 year tracking NW
- When you reach FIRE and either fully retire or go part-time- are you going to collect Social Security at age 62?
- Daily FI discussion thread - Friday, July 02, 2021
- Weekly FI Frugal Friday thread - July 02, 2021
| Daily FI discussion thread - Saturday, July 03, 2021 Posted: 03 Jul 2021 02:00 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]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The Financial Independence Diet Posted: 03 Jul 2021 02:03 AM PDT When I was 17 years old my weight peaked at around 260 pounds. I was out of shape, pretty depressed, and found socialising hard, somehow (I still don't really know how) I managed to get a girlfriend. Then we left for university and I managed to shed a few pounds just by virtue of having no money, but I was still making very unhealthy life choices. At the end of my third year, my girlfriend rightly dumped me. This shattered my world into a million pieces, I had no idea what to do. I begged her to take me back, cried a lot, and wallowed in my own self pity. I'd built my world around her and hadn't put any safety nets in place, there was no Plan B. I'd had blinkers on and had no aim or purpose. Right at the height of this despair, for some reason unknown to me at the time, I decided to go for a run in the woods behind my parents house. I couldn't even run a single mile lap, it was embarrassing. From that day, I put an actionable plan in place. I ran, kickboxed and gymmed my heart out until my clothes were drenched in sweat. I actually almost collapsed a couple of times at the gym and kickboxing I was pushing myself that hard (always followed by a day off if that happened). I researched dieting, I didn't starve myself at all, but slowly picked one thing to change. First, I stopped drinking diet coke, then I got rid of crisps, then chocolate. I slowly added protein shakes, eggs, chicken and slow carbs. I never did a fad diet, just simply monitored calories in and calories out. The next year was the best year of my life at that point. I made great friends now I didn't have my girlfriend to fall back on, I tried new things. Once I'd mastered my calories, I actually slowly stopped tracking them at all, gym became a habit with no schedule. By the end of the year I'd dropped down to around 175 pounds. I hit that weight 10 years ago this week and I'm still around 180 pounds. Well great, congratulations, you might be thinking, but what the fuck has this got to do with financial independence? I think everything, not just the fact that people make the biggest changes at their lowest points. Every good habit has common threads, and those are transferable to the next. The more disciplined improvements you make to yourself the more they snowball into better and better things. There are so many parallels in FI with healthy diet and exercise. Track the numbers You need to understand how many calories you bring in (your income) and how many calories you exert (your spending). Once you master this understanding it slowly takes less and less effort to maintain a good balance. I spend less than I earn. I track my net worth and spending now, but more for fun. Same as I stopped tracking calories and weighing myself religiously. A systematic, actionable plan. It's a marathon not a sprint! Sustainable habits, no fad diets. Sure, there's always some crazy success stories from fad diets (crypto, tesla, wallstreetbets etc.). Some of those diets might even get proven to have a long term benefit. But you can't beat the amount of success people have from having strong, repeatable, simple proven systems which are easy to maintain. You want a plan that you think will still work in 30-60 years. The weight loss is just the tool to a healthier life, same as FIRE is a tool to an end goal. Keep it simple. Lift big, eat less, keep moving. Earn more, spend less, invest. The fact you are saving is the biggest driver at first, don't worry about the fund split. You don't need the fancy exercise plan or the fancy financial advisor, although if that works for you no judgement here. Keep it healthy. Undereating is bad, so is punishing yourself by being too frugal. If you over exercise at the gym you crash and burn and get injured, the same as overworking to speed up FI. That first few months of weight loss Id do crazy shit like run 5km and then go to a kickboxing class. Same as at first with FIRE id try and save 50c on something pointless. Have a healthy end goal and don't let it consume your life. Mental Health is Important Psychology and healthy sleep is becoming a bigger proven factor in weight loss, I don't know this for a fact, but for me it seems a lot harder to save when I'm depressed. I usually sort that out first and relax my rules a bit. My spending has doubled in the last few of months while I've sorted my shit out through a bad patch. Hopefully that gives at least one person out there motivation to make a change or keep doing what you are doing. Put a solid, achievable plan in place, run your own race, and the changes will happen before you even realise it. Good luck! [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Found /r/FinancialIndependence At Age 21: $500k at Age 30 Posted: 02 Jul 2021 11:13 AM PDT Discovering FIRE I found this subreddit circa 2011-early 2012, mid-way through college, and I've hung around here with sometimes-changing usernames ever since. Today I wanted to add my story to the sub in case it benefits anyone else. In my college days, I saw graduating and joining the corporate world for [insert majority of your life here] as a daunting and depressing thought. That was my original motivation. Following MMM's blog which had just blown up, I schemed that upon graduation, if I saved up about $300k over a 5 or 6-ish year period, that would provide a 4%-rule withdrawal of $12k per year, which could be enough for me to be LeanFI (vlcol Midwest). But "to be safe" I would maybe go as far as saving $500k, depending on how long I could tolerate working. That would give $20k/yr in 4%-rule withdrawals, which seemed an excessively high amount for me. I don't believe those numbers anymore; Today my opinions on that have changed. Starting Point Fortunately, in 2014, thanks to a combo of scholarships and family, I was able to get through school debt free with my masters in accounting, and an internship before my last year of school even allowed me to graduate with about +$5k cash to my name (netted to nothing due to ~5k car debt). Starting from zero was a massive benefit in starting balance compared to most of my peers who graduated with debt, and I realize how fortunate that is. Working Years I worked for 5.5 years as a CPA (Audit->M&A Advisory) and after that transitioned into an FP&A role at a PE portfolio company. Over the last 7 years, I've averaged $69k/yr in post-tax income ($80k pre-tax) and a 64%-65% savings rate on that number.
The last three years expenses have been $27k->$28k->$29k. There was a step up in 2018 which was then alleviated by raises at work. Rent-wise, I lived at home the first 4-5 months (2014), then got my own place for $425/mo in a rough part of town. Years 2-4 my rent was about $650/mo in smaller place but nicer area. The last three years I've lived with my SO and our combined rent is $2100, and I pay majority of that (in 2021 I've paid all of it). This has been the main source of expense creep for me – my expenses have been pretty flat otherwise. Where am I today With today's market close and paycheck, I've hit a personal milestone at $500k in networth, entirely in investments/cash, although I suppose my car and other 'stuff' is worth another 10k+ or so if I included it (I don't). I see myself as nearly FI assuming continuation of the same lifestyle I've been living. I feel the need to disclaim that none of this was the result of crypto or any other one-off situation/windfall, other than a $10k inheritance I received in 2016, which I included as income above. This has all been the boring route of saving + S&P 500 index investing, with a few individual stocks thrown in (BRK.B being the main one, and recently a few other minor dabbles) which have in aggregate under-performed the S&P 500. Warren B has sadly not beaten the index for me. Current assets:
Do you feel like you sacrificed/deprived yourself to do this? I've never felt that way. I did basically everything I wanted to do during this time including eating out most days, traveling very frequently (almost all on CC churning points), etc. My expenses may appear surprisingly/miserably low to a lot of people here who live on the coasts, because I live in a very low cost of living area in the midwest. For example, COL calculators say to scale up my #s by 40% to get Chicago equivalent, or by 190% to get Manhattan equivalent. I'm actually moving next month to somewhere even cheaper for lifestyle reasons. I mentioned my lower rent earlier - Couple that with a paid off used car, and hobbies that are mostly video games/biking/weightlifting/reading, and you don't have many expenses, even with eating out. This is one thing that has been relatively consistent for me since the start: I'm naturally a laid back minimalist, and my happiness doesn't correlate much with spending. A good day for me in my 20s was video games + takeout food + biking or lifting. But, some of this changing with age. Looking forward - what next? A 55 year old version of myself travels back in time to visit 30 year old me. Senior: Hiya kid how you doing? Current: Saving for FI, nevermind that, how are you doing? Senior: Rich, very rich Current: Ah it worked, the high savings rate pays off! Senior: I am worth millions – and you are still trying to pad my bank account a little more? Come on, think about it, look after your present self – don't sacrifice your youth to help out some middle-aged millionaire. Current: Wait, before you go, have you got any tips? Senior: Sure – same as if you ask any 50-something guy what he should have done in his younger years Current: And that is? Senior: Live a little. My nest egg goal the last few years has shifted to $1m, and my drive to reach it has decreased. I project $1m will take 4-5 years from here, even accounting for relaxing the gas pedal. My career has gotten progressively more enjoyable as I've moved up, so I don't have as much inner motivation to quit cold turkey anymore – at least for now. I'm wary that can change. I expect between now and $1m I will get a house (later this month), get married (1-2 years?), have kid(s). Those things may inflate my already-inflated goal. Existentially I think my focus is increasingly turning more to the non-financial. I don't fully know what that looks like from where I stand now. I may take a gap year(s) to try on FIRE in my mid-30s, to try out the other side for a stretch once I have 'enough'. Probably primarily to be a stay-at-home-dad and raise my kid(s) as well as possible during their most formative years. Or balance with some sort of in-between, more relaxed work-from-home type role. Similar to how the sub has evolved over the last several years compared to early days, like a growing proportion of you, I don't subscribe as hard to the 100% work or 100% no-work dichotomy anymore… although if I had to pick, the latter is still preferable! What would you do differently?
That's it; thank you for letting me share - and thank you to all who I've learned from over the years here. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TIL that career changers make more over the long run than those who never switched Posted: 01 Jul 2021 08:12 PM PDT I read the book Range by David Epstein (author of The Sports Gene), and it said that people who specialize early tend to earn more in their first 6 years after school, while generalists who switched jobs or made a career change out-earned the specialists after that mark.
A lot of us believe we should wait until FI to do what we really want to do. The data actually shows that you might get to FI faster (higher income) and have more fun while you're at it if you experiment a bit and find the best career that fits you. It could also mean you'll never have to RE even after hitting FI. Personally, I was a career switcher, and I started making 2-3 times more than what I would've made in my previous job, which was already a 6 figure salary, 4.5 years after the switch. All the people I know who made a career switch also ended up making more than double what they were making before, usually 3 to 5 years after the switch. Also, the career switches were very rarely towards "learn programming". Many actually switched from software engineers to another domain, and all ended up making more. This makes logical sense because rarely do people switch if they don't think that career's a much better fit. All of us who switched careers never really hesitated, except for the opportunity cost of lost income for a few years. You also don't need to go back to school to make a career switch, but that's what I did so don't be afraid to lose 4 years income if it's something you really think you should do. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 02 Jul 2021 01:02 AM PDT I'm on my way to FI/RE too. We are a family (32M, 33F) with two children (4 y.o. both, twins) from Saint Petersburg, Russia. We started living below our means a long time ago, perhaps in 2012. For a long time we did not understand that we are FI/RE or smth, using cash savings accounts and real estate to save money that we earn. In 2018 I found an information about FI/RE and now I understand that we are not alone :) Since 2018 we use stock market to save money against inflation etc. Living in Russia isn't really expensive: $16-17k / year is enough for our family for everything like food, clothing, army of bills, taxes - everything except travels and expensive stuff. We earn much more, so it's possible to save 50-70% of our earnings and let the money "work" for our future financial independence. If all goes well, we will get FI/RE under 40, now it's 45-50% complete (stock market is so high nowadays, crazy) Some "numbers": Net worth (except home, car equity): ~$197k, asset allocation: 90% stocks, 10% cash & cash equivalents. Home equity: ~$136k. SR: 60-75% in 2021, 50-60% in 2020. FI/RE number: ~$470k (if inflation would be ~2% average) About Russia & FI/RE: We have a very strong wealth stratification in Russia. But we were lucky to get a good job, good salary. We work in "near-IT" (actually, GIS and maps, consulting, urbanistic - but no one cares, it's easier to say "near-IT"), so we have a high income. Very few in Russia understand the values of FI/RE, because "Instagram life" is in trend (spend more, buy these Gucci, don't be like a donkey). But this is not for us, financial freedom is much more valuable than Gucci. We also do not want to move to Western Europe, although we could - simply because this is our home, and we are already tired of moving, having changed three cities before the age of 30 (we were born in russian asshole calling "Volga region"), and we are tired of moving. But at the same time, we have very convenient tax conditions for FI/RE in Russia. We have something like "Roth IRA", calling Individual Investment Account (IIA). You can open the IIA and get up to $720 of your taxes back every year if you invest up to $5500 and don't close your IIA at least 3 years. You can do everything you love - buy&hold index funds, buy&hold cash/bonds funds or trading SPCE intraday - nobody cares. So, it's a good thing, 13% bonus to your CAGR (but not really big amount, $5500/year limit x2 because we are family :D). Second "cheat stuff" when investing in Russia is tax-free on capital gain for those who hold their investments at least 3 years. It isn't stack with the IIA, but c'mon, we are in Russia, so we have some "rabbit hole" and we can stack it (maybe we get nerf in future). It has also limits: ~$41k capital gain/year but it's a high limit. Although we have dividend tax 13% with no any method to avoid it. Finally, we have very expensive ETF's: US ETF's like VOO, SPY etc are "banned" (we can buy it on NYSE, but we don't get any tax prefferrings), russian ETF's have 0.8-1% expense ratio. So I should pick stocks, because stocks have no expense ratio but have all tax prefferrings - it's cheapest way. I'm trying to make my stock potfolio with highest correlation with S&P500, so I just download iShares OEF holdings and go buy same stocks with same weight and.. it works :D P.S.: sorry for my bad americano, I hope you understand me, you can help and message me if I use wrong words, and I fix my text. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 02 Jul 2021 11:34 AM PDT There is a fairly constant stream of posts in the various FIRE subreddits about health insurance costs in FIRE and many of those discuss the impact of the ACA on people's planning. Considering the consistent interest, I thought it might be interesting to look at an example of the actual financial impact of the ACA for a typical middle class family as of today. Our family has used the ACA for seven years now, but I've never really looked in detail at how things might change if we dramatically increased our MAGI. Also, it gave me a reason to finally play with table formatting on Reddit. :) The following table below lists the figures for a family of four in Austin, TX (where I live).
Some notes/caveats: First and foremost, the costs and policy options via the ACA are extremely variable and hyper-local, with both state and county-level impacts being huge. So results will vary tremendously based on where someone lives. This is only one example to illustrate the potential impact the ACA can have on someone's financial planning, FIRE or otherwise. I used Healthcare.gov to get actual subsidies and the policy details for the third-cheapest Silver plan available as of today in Travis County, Texas (Austin). I tried to eliminate the temporary COVID-related impacts by reducing the child tax credit back to $2,000 and re-imposing the ACA subsidy cliff at 400% of the FPL. The subsidy amounts themselves unavoidably include the COVID tweaks to the subsidy calculations, but the general slope of the marginal tax impact shouldn't be too off from what it would have been without them. Texas is also a non-expansion state for Medicaid, but I'm going to pretend that isn't the case to make this more relevant since most people live in expansion states. Essentially, in non-expansion states there is a lower MAGI cliff in addition to the upper one. The Total Tax column is calculated as income tax plus the net cost of ACA premiums after subsidies. The Marginal Tax column is calculated as the increase in Total Tax between MAGI levels divided by $10K. This shows the marginal cost of the increase in MAGI in years with minimal health costs. The MaxOOP Marginal Tax column is calculated as the increase in Total Tax and MaxOOP between MAGI levels divided by $10K. This shows the marginal cost of the increase in MAGI in years with maximal health costs. Finally, I threw this together in less than an hour while drinking my morning coffee, so please let me know if I messed anything up and I will edit as needed. I think I caught most of my mistakes, but you never know. Some observations: At the $20K line everyone is on Medicaid. At $30K the parents lose Medicaid eligibility. Income tax and ACA premiums are minimal, but MaxOOP costs impose a sizable marginal cost in big health spending years. At $40K the total tax impact is minimal, but MaxOOP increases continue to bite. At $50K there is a sweet spot where the marginal impact is minimized as deductible and MaxOOP remain unchanged. At $60K the decrease in ACA cost sharing reductions imposes a huge impact via deductibles and MaxOOP. The kids lose Medicaid/CHIP eligibility, but increased ACA subsidies help mitigate the cost impact of adding them to the ACA plan. At $70K the loss of all ACA cost sharing reductions imposes another big increase in deductibles and MaxOOP. At $80K to $100K the incremental cost of each MAGI level is fairly steady as income tax increases and premium subsidies decline. At $110K the family falls over the 400% FPL cliff and loses all subsidies, leading to a MAGI level with a greater than 100% marginal tax impact. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 18k to 51k at 21!! 1 year tracking NW Posted: 02 Jul 2021 05:04 AM PDT Hi all! I'm 21 and today marks one year since I started tracking my net worth. I got my first corporate/salaried job early last year and through that learned a lot about personal finance. At first I had a financial advisor, but broke up with him once I realized I learned enough to not need his help. After that, I came across FI, FIRE, personal finance, and CC churning. I've improved my decent CC to really good, and increased my networth by almost 3x (a little bitter i didn't hit 54k lol). Here is a breakdown of my NW in 2020 and 2021. July 2nd, 2020: Salary: 55k+bonus
Total: 18k July 2nd, 2021: Salary: 60k+bonus
Debt: - 500$ CC debt Total: ~51k Admittedly, I do have to pay rent which is going to drop it under 50k, but I'm going to selectively ignore that for now lol. And with July being a triple paycheck month, I will be permanently above 51k by month end. Some things that helped this happen: obviously, my lack of debt which is 90% privilege, parents paid for college costs. I got financial aid, scholarships, a job in my program which 100% covered my first year if my MA, and company assistance for the 2nd year. All in all I "covered" ~$50k worth of costs thorough these things + worked multiple jobs at once before getting a salaried position to be able to have money (had less than 1k to my name stating my MA program) and begin to pay my expenses sooner (plan was after i graduated and i started paying my expenses over a year before grad). Regardless, huge privilege. I also got a paid off car. So obviously huge financial helps. My actual expenses are just rent, food, utilities, and car stuff (gas+insurance), +a few recurring Healthcare costs. Other outside help: Covid $, this includes stimulus checks and having a roommate for 5 months that gave me a small portion of rent but covered all food costs. Other changes: Have worked hard to combat money anxiety I was having. No clue why I had it but it was servere enough I stress about buying tacobell for my partner. Now, we're planning vacations, covid permitting. Going forward: going to keep doing what I'm doing, increase my 401k contribution and move some HYSA money to my brokerage. I do not have an FI number and have no clue how to make a goal at 21 with no kids, no home, and no debt, which will all likely change with time. I also will prob go back to school, although I'm thinking of changing fields atm. A bonus is my partner and I will be living together soon and I'll be saving half my rent each month, and my rent is $$$$ ~1900. That's going to go into 401k, brokerage, and fun money 😎. Feel free to comment and helpful suggestions or advice or your own stories! Thanks for letting me humble brag! (Full on brag? Lol) [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 02 Jul 2021 02:53 AM PDT It seems like every financial advisor, expert, and book on money management says we should wait until we are 70 years old to collect Social Security. They say we get an 8% return every year we wait. I plan to FIRE and retire from full-time corporate office work next year when I turn 62 years old. I have two options:
The experts say I will get an 8% return each year I wait and my first Social Security check at age 70 will be about twice as much as the monthly check I will get if I collect at 62. The advocates for collecting earlier (at age 62) say there is no 8% return for waiting because I would lose ninety-six (96) Social Security checks between age 62 to 70. And because I am raiding 6.5% out of my retirement accounts each year instead of 4.0%, I lose the opportunity cost of the money due to the higher withdrawals. (I am forced to withdraw more money each year to make up for the missing funds from the Social Security checks from age 62-70.) I did the math on Portfolio Visualizer and found out if someone had 1 million invested in the Fidelity Balanced Mutual Fund (FBALX) on July 1, 2014, when they retired at age 62 but decided to wait until they were 70 years old and withdrew the 6 1/2% a year, they would have $266,647 less in their retirement account than the person-who collected Social Security at 62 and only had to withdraw 4% a year. But the person who waited till 70 to collect SS would have a check nearly double that of the person who collected at age 62. But how long before the conservative- Social Security at 70 person- would break even? 20 years? To me, it seems logical there is no real return on waiting until you break even, likely in your late 80s. https://www.portfoliovisualizer.com/backtest-portfolio#analysisResults ADDED AFTER Reading fifty-six (56) comments from Reddit posters: Lots of people are naive about Social Security and money and investments or did not read my first post carefully. So many people kept saying the Social Security break-even date is in your mid 70s. That is only true if you don't have a retirement nest egg invested in the stock and bond market. I used the example of the Million Dollar Nestgg that I have invested in the Fidelity Balanced Fund (FBALX) because it is a very popular vehicle for retired folks with a 60% total Stock and 40% total bond portfolio. Regardless if I start collecting Social Security at age 62 or 70 my income would be the same each year. But if I collect SS at age 62 I only raid my retirement accounts at a rate of 4% of my nest egg per year. If I wait until I am 70 I have to increase my withdrawal (raids) to 6.5% of my nest egg, which will cause me to have less money at age 70. The question is how many years at the higher SS check amount I would get by waiting until I am 70 would it take for me to break even with the same inflation-adjusted withdrawals. According to my calculations with a typically conservative stock/bond market return it will be at 88-92 years old. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Daily FI discussion thread - Friday, July 02, 2021 Posted: 02 Jul 2021 02:00 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]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Weekly FI Frugal Friday thread - July 02, 2021 Posted: 02 Jul 2021 02:00 AM PDT Please use this thread to discuss how amazingly cheap you are. How do you keep your costs low? How do become frugal without taking it to the extremes of frupidity? What costs have you realized could be cut from your life without pain? Use this weekly post to discuss Frugality in general. While the Rules for posting questions on the basics of personal finance/investing topics are more relaxed 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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