Financial Independence Daily FI discussion thread - Tuesday, August 31, 2021 |
- Daily FI discussion thread - Tuesday, August 31, 2021
- Milestone $1 million invested, net worth ~$1.8, family of 4, without $100k/year jobs. Done in 2.5 years!
- Did you make a big career jump/move that led to reaching your milestone faster? Or did you just stay in your role and get promoted internally?
- Aug 2021 monthly overview. 2 years into my job, 23yo, intensive spreadsheeting, high SR, <100k income
- Interesting article about asset allocation and returns in the portfolios of the wealthy
- “There will always be a reason to spend money.”
- Dealing with burnout without compromising FIRE goals
- Article on depleting social security funding
| Daily FI discussion thread - Tuesday, August 31, 2021 Posted: 31 Aug 2021 02:02 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]  |
| Posted: 31 Aug 2021 01:42 PM PDT THE MILESTONEMy partner and I made it to the $1 million milestone invested. See pretty graph here - I've gone back to 2009, I don't really have numbers or remember before this. Net worth is just under $1.8 million if I add in home equity and kids' college accounts. It feels good for sure, but I'm not jumping up and down. I don't know if it's the pandemic or what, but I figured it was worth a post here with a breakdown of how we arrived to make me feel more accomplished and maybe help someone get inspired! THE FAMILYMy partner and I have been married since 2007, two kids (3rd grade and pre-school). We have never made more than ~$165k combined, and some years were quite a bit less. I graduated college in 2003 and started saving then. We both work in a business we started together. THE PLANWe are going to retire at the end of 2023. I just set a date when my older kid was young and decided to make it happen. No more one more year type of thing here. One more year at my current age is much too valuable to give to working! We are going for a coast type of retirement, where we will do odds and ends for cash when we feel like it. My partner will have a really hard time not creating something. I don't have exact plans for how much we need to make, but the first year will be nothing just to decompress! I will not consider it a failure if we need to work again before 65. Now after that, I will want to be fully supported. There are so many variables to consider, that I'm just going to take the leap and then adjust after. I feel that I can easily make more money in many different ways as long as I am still relatively young. I think a lot of people get paralyzed by the unknown and modeling every way this could go, but life is crazy and I feel far from guaranteed a long healthy life. I'd like to say we can cut a lot of costs when we retire, but probably not that much. We can drop down to one modern car (not counting our classics, a 15-window VW, an oval rear window Bug, and a 34 ford). Maybe less on groceries/eating out? We also have about $600k of equity in our home, bought in Sept 2010, so moving outside the city is an option. If things got tough, we could certainly trim A LOT of fat from the budget, but I'm trying to be realistic about spending. We are planning on putting our business up for sale at the beginning of 2023, and hopefully, have it sold/ transitioned by the end of 2023. If I use 3-5x profits, we might get around $400-650k for it. We are also building a second leg of the business which has the potential to make it a lot more valuable. But we only have 2 years to do it! Looking at our spending puts us at ~$2.2 mil for the famous 4% rule. We will likely have ~$1.9, which means about $76k covered and $14k needing to come from somewhere. SPENDING/ BUDGET APPROACHWe took a middle-of-the-road approach: we cut down on spending overall, yet still spent for all sorts of things. We took some big trips (Egypt, Morocco, Hawaii, England/Wales, eastern Europe, Caribbean), lots of small trips to see friends (Nashville, Florida, Austin, Montana, SoCal, Chicago). We get down to Mexico every year to just relax. We had a big wedding - mainly because we are from different countries so it was a gathering of people from all over. It was totally worth it, having all these people in our lives getting to spend one crazy weekend together. Before kids we did a lot of concerts, we still go, just the ones that are really worth it. Our actual spending numbers for 2020 and for 2019. At this point, I don't enter numbers every month or really check our spending too much. It's more or less on autopilot. Things we did cut deeply on:
HOBBIESHobbies are hiking, camping, the gym and group sports, learning languages, and the aforementioned car collection (not a cheap hobby!). Hobbies for after retirement are relearning guitar, cycling, and golf. Those just need too much time for us to dedicate right now. Also reading more books! We also want to spend more time with the kids, coach their activities, volunteer at school, and do things like that that I don't have time or mental capacity to handle. INVESTMENTSMostly a set it and forget it type of thing. You can see my returns here - again I didn't have much data before 2009, so the returns from investments may be off a bit, but can't be too bad. I am in 27% bonds right now, been upping that now that we are approaching the date. My plan is to get up to 35-40% bonds at retirement and use an ERN-style glide path in retirement. I say mostly hands-off, but I got sucked into Robinhood last July (I actually ditched Robinhood and moved to Tastytrade this year) and have been trading options for the past year. I put in $20k as play money and have done pretty well. Obviously, I could afford to lose it, but I'm not doing WSB YOLO stuff. TLDR: Hit a milestone, so I made graphs cause I know you all love those. All my graphs/ numbers are here https://imgur.com/a/mu8edQ0 Input, thoughts, questions are welcome. [link] [comments]  |
| Posted: 31 Aug 2021 06:38 AM PDT 30yo guy here working in UX, I feel like it has been hard to generally get promoted due to the competition and companies hiring higher level up from the outside. I technically have never been promoted within an organization, I've switched jobs every ~2 years and each has led to increases in base (87k-> 110k->120k), all of them had varying titles around senior/staff level. Although I do want to shoot for a higher salary (open to management) given I live in a HCOL area I'm not a super outspoken guy or into competition at work so I feel like it will be challenging for me to get that bump up at work. I do a great job and work faster than most of my colleagues but I'm just not actively and visibly trying to outshine them. I'd rather make friends than competitors. I've lately been thinking about whether I should keep trying to make bumps up externally by switching jobs where I don't have to deal with office competition and politics and just deal with interviewing (but it may look bad onnresume jumping every few years), or if I should just keep on that ~120k path at my job and savings rate and just coast along at my job with or without promotion until I hit my number (in about 15 years) [link] [comments]  |
| Posted: 31 Aug 2021 02:26 PM PDT Some of you may know me as the girl that made an extensive FIRE spreadsheet for you all last year, and some of you may not know me at all. Those that do remember me know that I keep a very complex spreadsheet and go into very fine detail with all of my finances. Since I do a monthly overview of my spreadsheet for myself, I thought it might be fun to share that information to offer up new things you can implement into your own spreadsheets, as well as share my personal budgeting, investing, tracking, etc. I probably have a relatively average story as far as people in this server go, but with an increasingly younger crowd finding r/financialindependence and looking for people in their shoes, perhaps a post like this would be useful for those towards the beginning of their journey to see how it looks for someone a few years in. If this kind of post is valuable, I'd be happy to make them more often. This one will be pretty long since it includes background info as well as a look-back on 2020. I'd imagine any future post wouldn't require as much context. Spreadsheet: My spreadsheet is (to me) the most interesting part of this post, so I'll put it at the top. It's my own creation, but takes influence and inspiration both in color scheme and content from various posters on this subreddit as well as the creator of financialindependencesheet.com. I'll get into the different specific components of my spreadsheet throughout this post, but at a glance, my spreadsheet looks like this on the dashboard page. My projection tab looks like this, my withdrawal tab looks like this (and if you'd like to make your own, I made a public one here; replace the light blue cells and the rest auto-populates. Click file > make a copy). My budget looks like this. I track my income in this tab (I put tax returns and stimulus checks in 'gifts,' for lack of better place to put them). This is how I track bank account and credit card churning. Background: I'm a 23-year old consultant in a MCOL metropolitan city in the US. Through the generosity of my parents and through merit-based scholarships, I graduated college debt-free in 2019 and joined a small consulting firm in August 2019 making $74,500. I run a small side business that trains folk to use different aspects of Microsoft Office. My tutoring business makes <$5000/yr. In 2020, I spent a total of $31,962 and saved 61.47% of my income, net of taxes. In 2021, I aim to spend $2300/mo. Since January 2020 (when I became eligible to enroll), I've been maxing out my 401k and HSA. I've contributed to my IRA since March of 2018. I churn credit cards to get more travel benefits. As you'll see in a moment, I love spreadsheets, data, and analytics. I meticulously track everything because I find it fun and interesting. Starting out with finances: My family consists of first-generation immigrants. My dad started his own business which heavily invested in real estate. It survived the 2008 recession and luckily my parents are doing very well today. My parents lost a lot of money in the stock market, however, and never really spoke to me much about finances, besides recommending I stay away from stock and invest in 'real' assets like metals and land. I've always been relatively frugal and a saver, and I learned about personal finance and FIRE mostly through reddit, bogleheads forums, MMM, ERN, and madFIentist. 2020 Income/Expenses: Here is a sankey diagram of my income and spending in 2020 (made using sankeymatic). https://i.imgur.com/wH3PklR.png My gross W2 income was made up of my $74,500 salary, a $1500 bonus, and my emplyer contribution to my 401k (100% up to 4%). The 1099 income was my tutoring business. Gifts include birthday and holiday presents. The reimbursements are from my work reimbursing my cell phone and internet bills. Credit card points were from churning. I lived alone in a 1 bedroom apartment for $1600/mo for the better part of 2020. In August 2020, I leveraged the pandemic to lower my rent to $1500/mo, and my boyfriend (full-time student) moved in, who paid $500/mo of the rent. I covered all of our other expenses, leading my electric, gas, and food costs to go up somewhat. Gym was $11/mo and I cancelled it due to the pandemic. I adopted my cat in August of 2020, she's about a 1.5yr old. Here are her lifetime expenses so far: https://i.imgur.com/k2sVxrT.png. I paid a one-time fee to my apartment for having a cat ($250). 2020 Investing: Here's how my investing journey was looking in 2020: https://i.imgur.com/gA6i1dm.png. February 2018 was when I first discovered I could put my money somewhere besides a checking account, and I promptly invested nearly my full checking account balance into my 2017 and 2018 Roth IRA. In October 2019, I discovered HYSAs paid more interest than the 0% of my checking account. In August 2019, I was hired full-time into the job I still work today. Investing picture now: In my 401k, I invest 95% in FXAIX (S&P 500), and 5% into VBTIX (total bond market index fund). My IRA is 100% VTSAX (total stock market fund). My taxable account is 50% VTSAX and 50% VTIAX (international stock fund). My contributions towards my investments have been significant due to a great income and relatively low expenses. Here is my financial picture today: https://i.imgur.com/ez8PSsg.png, and another view by % of my total NW. I've been hitting milestones quickly and am likely to cross $150k NW next month. FIRE, projections, metrics: My FIRE goal is $2,000,000 in investments, a paid-off home, and enough to cover college for future children. The latter two are not relevant to my life right now, so my spreadsheets mainly focus on that $2M number. I decided on 2 million based on a desired withdrawal rate of 3.5% and expected expenses of $70k/yr, though this is obviously subject to change. My assumptions for future expenses (and how much my investments can already cover) are here: https://i.imgur.com/O7i2rph.png. I am almost 7.5% of the way to this goal. My ideal goal would be to hit this $2mm number by the age of 35, though on my current income (and without income from a partner), this would not be possible. I made a projection calculator (which I call my "lab rat") for myself to show how my income and contributions would have to increase to make this goal possible by 35 using these assumptions. The blue line is what is expected to happen if I do not increase contributions beyond maxing 401k/HSA/IRA. So far, I'm beating my lab rat, but since my lab rat gets raises and bonuses (shown by the magenta trend shift change points), I'll need to get raises and bonuses too, in order to compete in the near future. At my current contribution rate, if the market goes up 7%/yr, I'd be able to withdraw about $39.5k/yr at 3.5% at 35. I have already hit CoastFIRE at 65, which is an example of the power of starting early. I track many metrics, but one of my favorites is how much I've saved over how much I've earned/spent (saved/spent in cyan, saved/earned in magenta). Budgeting: I track my expenses every month, but on my dashboard I keep a 6-month average. as a quick view. I follow a YNAB-style of budgeting, in which my income (or in my case, my $2300 budget) is allocated towards all of my categories (every dollar has a "job). Anything I earn that month in excess of my $2300 is invested. I do not budget meticulously because I believe it is necessary for me or anyone else to do so. I like to budget, I like knowing exactly where my money goes. I like using it as a means to keep track of minimum spend for credit card churning sign up bonuses. I like knowing which parts of my spending are necessary (cyan), and which parts can be cut if I lost my job (blue). I like knowing exactly how many months my emergency fund could cover, I like keeping track of fees that pop up only once a year, and I like optimizing. For all these reasons, I budget and track. You don't have to, but as a baseline I think it's useful to almost everyone to at least have an idea of how much they spend a year, so they know how much income (withdrawals) they'll need in retirement to maintain the same standard of living. comfortably. Budget Overview August 2021: Here it is! https://i.imgur.com/7Texxf1.jpg. You'll see that the budgeted column tends to perfectly match activity. This is because at the start of the month I allocate a certain amount towards each line item, and as the month goes on I adjust my budgeted amounts as needed to cover and over- or under-spend. By the end of the month, extra is allocated towards travel, or wishes. Spending Breakdown August 2021:
Conclusion: I'm pretty happy with my life. I have a loving family, boyfriend, and cat. I have a nice apartment, I like my job, and I taught myself to save and invest early on. I'm certainly incredibly privileged, and I'm proud of myself for putting the effort I did into not wasting that privilege. I studied hard in school and graduated with high distinction into a great job, where I work hard to stand out, be a valuable contributor, and learn everything I can. I teach others in my job about personal finance and investing, and I like making spreadsheets to post here and provide others with the resources to more accurately and efficiently plan for their futures. I'm aggressive with my savings because I just don't want for much, and despite enjoying my job I recognize that I can't/won't work forever, so while I'm young and compounding interest is on my side, I should do what I can to set myself up in the future. I want a family eventually, and might pursue an MBA. The future is wide open because I use the opportunities I have now to make the best choice for myself, which allows me the most choice and freedom in the future. Happy to discuss anything I've shared, and/or to take criticism about how I don't know when to stop typing. I hope if nothing else, you found some new graphs/metrics for your spreadsheets! Happy Tuesday. [link] [comments]  |
| Interesting article about asset allocation and returns in the portfolios of the wealthy Posted: 31 Aug 2021 01:17 PM PDT I heard this discussion on NPR Marketplace this morning which caught my ear: https://www.marketplace.org/2021/08/31/investing-like-super-rich-doesnt-mean-top-returns/ Which discussed this publication Asset Allocation and Returns in the Portfolios of the Wealthy which some here may find interesting in guiding their own asset allocation strategy: https://conference.nber.org/conf_papers/f155141.pdf The paper looks at data on ~ 60,000 households using Addepar (wealth management firm software platform) from 373 firms with portfolios ranging from mid-six figures to multi-billion dollar portfolios, (mean wealth of 16.8 million, median of 1.3 million) from 2016-2020 comprising about 1 trillion in total assets. Highlights are as follows:
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| “There will always be a reason to spend money.” Posted: 30 Aug 2021 04:03 PM PDT Thought I'd share a little advice I got when I was young. When I was in college in NYC, I found myself surrounded by costly stuff to do, and people who were wealthy and spending a lot of money to do that stuff. My parents were giving me spending money of $100/month (this was in 2009, and my food and dorm and tuition were separately paid for, and at first I wasn't working other than studies) and it just didn't compare with what other kids were spending. After a couple months, I asked my parents for more money and explained the situation. As you can imagine, they were unsympathetic. I tried to explain that I needed this, that $100 is like one restaurant and a bar and then I'm done. And that's when my dad gave me some of the best advice I've ever been given: he said "there will always be a reason to spend money." It hit home, and every time subsequently that I thought about buying something, I asked myself "do I truly need this?" Most of the time the answer is "no". I try to remember this simple statement to this day (my frugality mantra?), though in some periods I've forgotten it and lifestyle creep has made unfortunate progress. Reminding myself again with this post. [link] [comments]  |
| Dealing with burnout without compromising FIRE goals Posted: 31 Aug 2021 02:22 PM PDT TLDR: I've tried some things and want to hear how other folks have dealt with burnout in a way that didn't compromise their FIRE goals. I could have posted this in other subs, but I want to pick the brains of other like-minded FIRE folks. I've been suffering from burnout for sometime and can't shake it (probably closer to 3 years spanning 2 internal roles in my company). I want to know if anyone else has had a similar experience and how they may have fixed it in a way that did not compromise their FIRE goals. Background info: Single 29M with 6 figs expecting to reach FIRE goals in 3-5 years. Obviously would change if I get married and have kids, but meh no luck on that front. Biggest problem is my burnout and anxiety is taking a toll on my health and I dont know if I can keep it up till FIRE. What have I done about it? What are other ideas I'm considering but hesitant to do? Has anyone had any luck with any of the above, or have new ideas entirely? It goes with out saying, every decision has an opportunity cost with FIRE goals, so I'm curious how you folks may have dealt with that! [link] [comments]  |
| Article on depleting social security funding Posted: 31 Aug 2021 03:52 PM PDT CNN article today saying that Social Security will not be able to pay out full benefits by 2034, shortening the projected timeline by one year. https://www.cnn.com/2021/08/31/politics/social-security-medicare-report/index.html Does this information change anyone's plans or assumptions on their path to FI? [link] [comments]  |
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