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    Home Unlabelled Financial Independence Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice - August 02, 2021

    Financial Independence Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice - August 02, 2021

    August 02, 2021

    Financial Independence Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice - August 02, 2021

    Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice - August 02, 2021

    Posted: 02 Aug 2021 02:01 AM PDT

    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?

    submitted by /u/AutoModerator
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    Daily FI discussion thread - Monday, August 02, 2021

    Posted: 02 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.

    submitted by /u/AutoModerator
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    If you make a decent income, it becomes all about lifestyle creep.

    Posted: 02 Aug 2021 07:35 AM PDT

    I spent my career at FAANG (I'm FIRE now) in the Seattle area. I viewed my position as a winning lottery ticket. Anyone at a higher leadership level at a FAANG makes such an insane salary (by a comparison to any normal income) that FI is clearly possible. Since every one of my peers should have made $300k annually or often much more, you would expect that they're all working because they love the work, not because they still need the money.

    Even with these high salaries, the majority of my co-workers spent a significant percentage of their income. They would talk about anxiously waiting for a stock vesting to pay off some bills. They'd talk about how their car payment (on their Tesla, or fancy BMW) was almost done, which was a relief because it was hard to make ends meet.

    I remember talking to someone who was certainly making 7 figures a year, and had been for years. They said they needed probably another 10+ years to be able to retire, if they could cut down on their expenses. With complete seriousness they said that their third vacation home was probably too expensive, and they needed to really figure out a family budget.

    In the end, if you make a "decent" income, it is 100% about lifestyle creep. It's not necessarily about living like a college student (e.g. leanfire). Lifestyle creep's impact surprises people. It's not always about a third vacation home. Sometimes it's about the slightly more expensive car, and the slightly more expensive vacation, and the slightly nicer clothes. Next thing you know, you've received lovely 5% a year raises, with 6% a year expense increases. That's digging a hole, not improving your situation.

    Anyway, my main point is that income is necessary up to a certain point to be able to achieve FIRE, but the majority of people above that line shoot themselves in the foot all on their own :)

    submitted by /u/ScarletInked
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    The impact of market performance on the year of retirement.

    Posted: 02 Aug 2021 10:32 AM PDT

    I was playing with some numbers and was frankly blown away by the impact the year you retire has on your long term savings. I largely figured it'd wash out over time but it does not.

    I made a simple spreadsheet to show how much money you'd have today based on year of retirement using historical returns.

    For each year I entered $1 million * the SP500 return for that year and minus a flat $40,000. (4% of 1 million) then carried that number forward to what the balance would be today continuing the same calculation for each year (flat $40,000 expense, not 4% of the total portfolio)

    The results kind of blew my mind.

    For example:

    • If you retired in 1973 you'd now have $9 million
    • If you retired in 1975 you'd now have $40 million
    • If you retired in 1977 you'd now have $20 million

    A more recent example:

    • If you retired in 1998 you'd now have $1.7 million
    • If you retired in 2000 you'd now have $441 thousand
    • If you retired in 2002 you'd now have $1.6 million

    As you can see from this screen shot these kinds wild variances are all over the place.

    https://imgur.com/a/KAqCtyG

    So what can we do about it? Well, the best plan is to not retire right before 3 years of negative returns. But since that's basically impossible to predict, let's instead look at that same recent time span but now assume we'd socked away an additional two years expenses ($80k) in cash/bonds so we're not subtracting $40k for the first two years.

    • If you retired in 1998 you'd now have $2.0 million
    • If you retired in 2000 you'd now have $729 thousand
    • If you retired in 2002 you'd now have $1.9 million

    That almost doubles your current position if you retired in 2000 and while it still leaves you under your initial investment it's a vastly more comfortable position. Also, to be fair if you just had that extra $80k in the market from the beginning instead of in cash you'd be at $682k currently which is still far better than $441k

    Also, if you retire in 2000 and were able to cut your expenses to $30k (3%) then you'd be at $1.08 million currently.

    TLDR:

    As long as you don't have a once in a generation market crash immediately after you retire you should do great.

    EDIT

    I expanded my research to include margin loans and even retiring at literally the worst time ever since the Great Depression you still come out way ahead by just borrowing against your assets instead of withdrawing money. You end up with $3.0m in investments and $1.2m in debt for a total net worth of $1.8m

    Here are my numbers

    Rates were taken by eyeballing THIS CHART and adding 1% to each rate.

    These rates are available HERE.

    submitted by /u/Yangoose
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    The impact of FI

    Posted: 02 Aug 2021 11:13 AM PDT

    I wanted to take a moment and share some of my story. If you are like me someone who started lurking on the this channel for years just trying to take everything in, and figure out how to get started you might relate :)

    I finished college in 2012 and moved to an awesome high cost city to get started. Got a job at a startup making very little (30k). Didn't really know any better. I am also an immigrant, so I didn't really have parents that quite understood my reality. I didn't really know startups, stock options, IPOs, or RSUs. I learned about all of this several years down the line. Heck I am still learning more now after one of the startups I worked at sold and I got a little bit of money.

    From 2021 until now, I worked at different companies, became skilled, and slowly but surely worked my way up. My salary increased exponentially over the last several years. I remember being so excited when I started making 100k. I went from making 30k to more than 200k in ~9 years. Unfortunately, the constant salary growth didn't quite translate to a net worth growth.

    I had been lurking reddit trying to learn a little bit more about personal finance. When I stumbled upon FIRE. I loved the goal and of course started wrestling with the idea. Did I really want to retire early? of course not...I love working. BUT financial independence was very attractive. I get to work on the things I like, and with the people I like.

    So, my partner and I got serious, focused on budgeting, on understanding how we want to spend our money and prioritizing, reducing expenses where needed, and on income maximization.

    Budgeting
    We used existing data to get a real understanding of our ACTUAL budgets. God, it was painful to see how much we ate out. We then created a realistic budget. The goal was to 'win'. To stick by it. That's where prioritizing came into play

    Prioritizing
    As we started looking at how we spent money and building a budget we realized that we didn't want to give in on some things. Of course, we didn't need to. We have a good salary, and enjoy eating awesome food. Prioritize that but don't do it every day because it loosing is sense of specialty but make a 'eating out day' where the family gets to enjoy a (new) restaurant a week. We made it a ceremony. It helped us reduce how much we ate out, and when we did it felt special.

    We prioritized several other things including our kids education. Going through the FIRE journey for us does not mean that we live on ramen noodles BUT that we shed wasteful expenses and focus on what matters.

    Reducing expenses
    We started asking ourselves the deep questions. Did we actually need the new german car? The majestic house? Who are we really, and what matters to us beyond what society tells you you should do?

    As we prioritized the things that are important to us we focused on reducing expenses on the things that weren't. We switched where we do groceries and became far more efficient and meal planning. We always HATED throwing food out. Meal planning was like killing to birds with one stone and then making lunch with them :)

    Income maximization

    We see this as two different fronts. Front 1. Make as much money as possible on a monthly basis w/o compromising our mental health. This means picking up some consulting hours, taking that new job. Front 2. Investing. This was, as most of you already know, the game changer. The stockmarket, vanguard, etc are life changing. There is no excuse, no matter your salary level for you not to at least try invest something into the stock market every month. We used the "pay ourselves first" method and grab a high percentage of our expected income a month and put it into the market.

    The end...

    We started doing a version of all of this in January of 2020. The results have amazed me. I looked at the graph this morning (which is what prompted this post) and:

    - From 2016 to 2019 we had little net growth change even though our salaries did increase.

    - From Jan 2020 to Aug 2021 NW went from 35k to 270k! An almost 8x growth by doing the things we did above.

    I have nothing but gratitude for the knowledge shared here and in other places. It truly has changed my life! If you are finding the incentive to get started I hope this post helps get you there. If you are looking for advice or a push, I am happy to help.

    submitted by /u/NotNollie
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    Does this count?

    Posted: 02 Aug 2021 11:31 AM PDT

    Have had to work 3 of the past 4 Saturday's. I don't like making my managers do it and my boss lives 90 miles away. Our logistics team goofed, promised sales no Saturday deliveries this week and then had to walk it back to 20% Saturday deliveries at 9 PM Thursday night...so, I'm working last Saturday as well.

    Kids have a Dr appt, tennis lessons and a soccer game and I've committed to my wife to be available to help. Run in at 6AM, get trucks on the road, update our tracking system and zip out to pick up a kid for tennis. Emails and texts start coming in while I'm trying to watch her tennis lesson, the first one I could make in a couple of months. Dash off replies as I get home and then bundle kids up for soccer. My middle one is challenging. He's smart, would rather watch tv than go to soccer and emits ear-piercing screeches when any part of life is "not fair."

    As I'm walking him through soccer practice (which he did very well through), the texts and emails start coming in from my director and COO, looking for information that is readily available through the tracking system that I updated at 6:30 AM. Get back to the house, quite stressed out now, I majorly overreact to something the middle kid did. Wife and I quickly review how long I could be out of work, review how I acted towards my son, look at how fast the kids are growing up and how much I'm missing.

    Hop back in the car to go back to work to deal with guys coming back, call my boss and tell him once I'm back I'm resigning. Sent it out 30 minutes after returning. I can swing 18 months pretty easy, but figure I'll be itching to do something after 6 or so.

    FI Stats:

    42YO SI3K
    1.1M NW
    200K-Equity
    100K-Roth
    500K-Pre Tax
    300K-Brokerage

    Plan is to finish my MBA over the next 12 months as a cover for the job gap and then get back at it. Our yearly spend is 55K and I can trim that to 44 (or 4%) for the next year. Definitely not ready to retire yet, but having that FU money sure was nice. Super stoked to spend the extra time with the kids. 5,3 and 2 so young and they still think dad is pretty cool.

    submitted by /u/silver_sAUsAGes
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    Taking stock of the pandemic while we are still in it - lessons from 18 months of COVID

    Posted: 02 Aug 2021 01:01 PM PDT

    Hi all – I had posted a few years ago about being in the middle of the FI journey, and have basically lurked occasionally in this subreddit since. I am still moving along the path to FIRE.. Obviously, the last year and a half has been a different world. We are still in the middle of the COVID pandemic, but I wanted to take some stock of lessons learned and thoughts I've had (mostly financial ones), and see if people here have their own thoughts. Feel free to disagree!

    1. It feels like the stock market has its own gravity/political reality, and the forces keeping it up might be permanent. Like most people with investments, we are way better off right now than we were at the beginning of 2020. American stocks are at all time highs, despite the enormous economic disruptions of the last year. There are probably a lot of reasons for this, but I wanted to suggest that at least some of this might be a permanent political shift in how the market is viewed and the political importance attached to the Dow Jones and S&P indicators. With the removal of pensions as a common corporate perk, a good chunk of the country has 401k's and IRAs and has a direct stake in the market, if only for retirement. (This is especially true of the top 20%, which seems to have the most political power, anyway). Trump certainly viewed the market as a direct proxy for the health of the economy, and the Democrats don't shift much from that. The result has been massive support for keeping the markets afloat, from the Congress as well as the Treasury. Are we sure that this might not be the new reality moving forward? It seems like the lesson of 2008 was that we can deficit spend, and that its worth doing so in a massive way if there is a crisis. I am not sure of this argument, but if true it would suggest that the gains that we have seen in the past will continue, and that a return to 60s and 70s style stagnation is not possible, if only because the political incentives would prevent the market from languishing that long without substantial intervention.
    2. We are living in a world of occasional severe crises, and being able to weather those storms might be the most important aspect of financial success we have moving forward. I want to call this the 'big boat' theory of Financial Independence. From my perspective, one of the best parts of having a decent amount in both cash and investments already saved was not having to worry too much about weathering the financial storm of the covid crash of last year. In a sense, having sizable savings, in addition to a financial plan, is almost like navigating a large storm with a big boat rather than a small raft – it just means that the waves are less likely to toss you overboard. At the same time, living through this experience has to have given us a sense that normal is not guaranteed, and that crazy things can and will happen to the world. The effects of global warming are one obvious example – increasing natural disasters, climate conflicts, droughts, etc. It just feels like more is possible than before, and that normal is not guaranteed. This point maybe conflicts a little with my rosy assessment of the market above, but I guess I would say that I have confidence in the long term trajectory of the market, and very little in the short term. It just feels like being confident in your ability to deal with big downturns is hugely important.
    3. It's time to start thinking and talking about positive lessons/gains that we have made from the pandemic. It has to have been a rough 18 months for everyone, and it has certainly been rougher for some than others. There is certainly a great deal of inequality in results coming out of the pandemic, especially as those who kept their jobs and could work from home or already had investments are doing fine financially, and a lot of other people are not. I think there has also been an enormous amount of psychic trauma from this last year, even among those who have done well, just in terms of fear and isolation, and we will probably be reckoning with it for a long time. That being said, we are where we are, and it is up to all of us to try to make the best of this situation. In what ways do you think you are better than you were two years ago? Do you have a greater appreciation for certain things? Are you better at working from home? For me, I think I have learned to be in better shape than I was, and I am trying to take more time to be with my kids rather than work. But it is something I wrestle with – I would like us to all leave this terrible two years with something gained from the suffering. Anyway, those are my thoughts for now. Back to work..
    submitted by /u/videobojackson
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    Weekly FI Monday Milestone thread - August 02, 2021

    Posted: 02 Aug 2021 02:00 AM PDT

    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.

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    Pre-FIRE Almost Complete Spending/Saving Breakdown - [US High Income/VHCOL 35/32/2]

    Posted: 02 Aug 2021 11:53 AM PDT

    We've seen tons of how accumulation occurs, but less of spending breakdowns of those trying for some sort of FIRE (only FI for us, we don't plan on retiring from our jobs, but you never know). There are snippets from the annual survey here, but it is hard to really see what is going on. This big missing piece seems to be pre-tax/non-salary benefits.

    Some details (throwaway account).

    • Combined $275K/year in salary in a VHCOL coastal-US city. FYI - 85-90th percentile of income depending on metric.
    • 2 adults and one little kid
    • 23K/month in salary;
    • 5.5K/month in benefits with clear $ value
    • 1K/month in passive income in investments that can't be re-invested automatically
    • 14K/month savings post-kid. (was much higher pre-kid...)
    • 6.5K/month in taxes
    • 9K/month in spending

    I've made 3 sankey graphs illustrating the breakdowns. First for income/total compensation. Second for just spending. Third, for both together. All numbers are monthly, since that is how I keep track of numbers. Spending numbers are for an average month. Things like vacation and college funds are usually very lumpy and front-loaded. For full disclosure, we actually do backdoor ROTH IRAs; but I've lumped that with brokerage.

    no pretending that we're not high earners, we're about the 90th percentile for our metro area. (So well-off, but not super rich)

    • We've both got multiple graduate degrees from good schools
    • undergrad was paid by family and graduate school 100% paid for through scholarships/fellowships
    • DO NOT WORK in tech. Education and non-profits/public sector for us.
    • We're extremely fortunate to be well enough to easily raise a kid in a big city. One parent takes lower salary to better raise a kid. We plan on another kid.

    Income notes:

    • Salary is not the same as compensation. Your employer outlays quite a bit in taxes, health, and retirement on your behalf.
    • A better measure of total compensation puts us at 350K/year; a massive 75K/year increase. But this also matters in things such as taxes and such.
    • Excluding sales tax (which I don't personally track), we and our employer pay 75K/year in taxes (that I know of).
    • Our employers give massive 401K/defined contribution matches/top-ups. (one of the plans is technically not a 401K, but functionally identical). This adds almost 30K/year to our total compensation.
    • Our average tax rate (not including sales tax) is 20%.
    • But this rate is deceptive, as much of our savings are pre-tax - which means that they will be taxed eventually. I'm assuming that medicare/social security will not be around in the current form in 30 years. It goes in the 'tax' bin. If you feel otherwise, you can put them in spending bin (pre-paid medicare) and savings bin (social security).
    • We have solar panels; we sell credits on the open market. Going rate has been around 400$/megawatt. We generate 5-6 MW per year from our paid-off roof system.

    Spending/Saving notes

    • Some of the numbers may seem high, but that is since we're not skimping at all.
    • We spend 15K/year on travel and eat very well. Mostly Whole Foods/Trader Joes, with the occasional Patel Bros/H-Mart/Costco trip thrown in.
    • I've neglected to include the fact that we get non-cash benefits from employment - most air travel is free due to points, as are many of our technology related costs (cell phones, etc). I don't know how to correctly value this. At 1cent/point - maybe 4K/year in hotel+airline+car rental.
    • We spend 15K/year on daycare and own a 1M home next to shops/jobs/daycare/schools.
    • Housing is our 'high cost' - we pay for location. We know this and we are OK with it. Our jobs are not remote and again, we don't really pay for transport.
    • We have near 0 non-travel transportation costs, since we live in an area where we can walk/bike to nearly everything. The paid-off car is a beater for costco. A typical family in our income band spends 10-20x what we do (according to the US government).
    • I have a high deductible plans - my spouse and kid are on one too. (it was cheaper this way) Our max deductibles are about $2000/year. But most 'preventive' stuff is 100% covered.
    • We're treating our health savings plan (HSA) as a retirement plan.

    FI Number notes:

    • House principal payments are counted at savings. Curious what others do. Also our house value is 80% land and only 20% structure (teardowns to developers in my neighborhood sell for 80-90% our home's value). Our mortgage rate is about 2.3% on a 30-year. Rates like this are common with relationship banking at big banks if you refinanced last year.
    • If we retired, we'd almost certainly not live in this city; but a slightly cheaper college town nearby.
    • A back of the envelope calculation, we'd need 75K/year to retire - excluding a paid off house and daycare costs. Health care is the wild-card. We'd need to need to figure that out. I'm assuming ACA subsidies for a family.
    • We have 1.5M in assets, home value is 300K of that (after expected transaction costs of 8%). 1.2M is evenly split between pre and post-tax, with a small 529 for the kid. Small 50K emergency fund in I-bonds.
    • Our employers currently do lots of heavy lifting - even here in the US. We make our companies do this, versus having the government directly do this in Europe. I'm not taking a stance here, but it is curious how different systems are.
    submitted by /u/thrownjunk
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