Financial Independence Daily FI discussion thread - Friday, January 07, 2022 |
- Daily FI discussion thread - Friday, January 07, 2022
- “You’re saving too much, you can definitely afford to not be cheap and splurge a little bit,” have you received “pushback” on FIRE from others, too?
- 11 Years post FIRE yearly update
- An Efficient Leveraged Portfolio vs An Inefficient Unlevered Portfolio
- Weekly FI Frugal Friday thread - January 07, 2022
- A case for making irrationally-rational financial decisions.
- is "lying flat" just the latest iteration of a generation discovering FIRE?
- Where do you meet other early retirees?
- My personal financial details (from they guy who makes the updates on the year-2000 retirees)
- I made a (new and improved) advanced budget/income/net worth/FIRE spreadsheet. Easy to use, lots of analysis, dashboard, dark mode. Critiques welcome!
- Daily FI discussion thread - Thursday, January 06, 2022
- (Charts!) Year-2000 Retirees: The ultimate survivors!
- FIRE EU, 2021 update
| Daily FI discussion thread - Friday, January 07, 2022 Posted: 07 Jan 2022 02:02 AM PST Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments] |
| Posted: 07 Jan 2022 04:19 AM PST I (25/M) was having a nice phone call with my parents yesterday. We were chatting about life updates and stuff, when I brought up the fact that I'll be moving out of my current place in two months (apartment out in the suburbs, I've been kind of isolated), as my rent (1BR/1B) is being raised by ~15% ($1.1k per month to $1.3k per month), which I thought was pretty substantial. I was telling them about how I was considering getting a roommate again, or either moving into a studio or smaller 1BR/1B that would be cheaper overall, and they simply didn't understand why I'd be doing that. My lease is up in March, but I won't know whether I get a raise/promotion/bonus based on my performance from last year, until this April (the company I work for is weird like that, IDK why). Anyway, they had told me: Parents: "u/HeyWhatsUpBonjour, you save way too much, you can definitely afford a nicer place in a nicer area, and your savings rate won't be affected. What's your savings rate right now? $X.Xk a month?" Me: "Ummm, double that, actually, but I understand what you're saying. I just want to do whatever I can to continually maximizing my savings rate. I'm trying to set myself up for the rest of my life, right now." P: "Holy shit. Yeah, you need to splurge a little more, you can afford to. Also, by all means, you can get a roommate, but you've been living on your own for the last 2 years. I'm telling you, unless you're moving in with a SO, that's going to be a big challenge for you. It's your life, by all means, but remember, living costs money." ————————————- I thought all of this was really interesting. Before you say anything — no, my parents aren't horrible with money; quite the opposite, actually. They had started their own company, lived pretty frugally and worked crazy hours in the first few years the company was brought up and running (this all took place when I was a little kid; I didn't understand the frugality aspect until I was much older, but I do vividly remember that they weren't around much when I was very little); but, as the company grew and became more successful, we became more of an upper-class household. Down the road, they were bought out by a much bigger corporation. So, my question is, have y'all received any "pushback" (I don't know if pushback is the right word, hence the quotes) from your parents, regarding trying to go the FIRE route? Looking forward to hearing your thoughts, and I'm happy to answer any questions you might have. Thank you. [link] [comments] |
| 11 Years post FIRE yearly update Posted: 07 Jan 2022 07:34 AM PST This was cross posted in r/leanfire a couple of days ago and r/Fire today, so if you have already seen it there, nothing is different. I always begin these yearly updates with the same disclaimer that I don't have a specific FIRE date since I was self employed before retirement and slowly dissolved my business over time and started investing in real estate. I use the 2010 time frame for reference because it is around the time I hired a property manager (thus leaving me zero active work to do unless I choose), but it certainly isn't exact. This isn't meant as a comparison to anyone else. This is strictly provided to the FIRE community because I know I would have liked to have seen real world example of how people handle their finances when I was trying to figure all this out many years ago. Another reason I post these is to show there is more than one way to do FIRE. I was able to accomplish this without ever making a high income during my working years. I simply lived very frugally and put the money I saved into individual stocks (hey, it was 80s - 90s...I didn't know better and stock investing was a completely different animal back then) and then converted that to buying rental properties in a low cost of living area in the 2000s. Quick stats: I'm 56, single, no kid's, about 11 years post FIRE. INCOME Total net income for the year. $124,040 (this does not count reinvested dividends) If you think they should be counted, my total in dividends is $10,089 GROWTH AND NET WORTH My growth in my investments so far High Dividend Stock account began the year at $98,892. I invest $100 per day into it. It currently is at $169,774.19 Broad Market Index fund account began the year at $193,640. I invest $200 per day into it. It currently is at $394,610.11 My Fundrise account started the year at $44,479. I invested a total of $16,000 so far this year. It is currently at $78,778 My real estate (rentals) is very difficult to estimate since I have partners on some of the houses and some I own outright. Not to mention it isn't a liquid asset. I usually just judge it by the income it produces...that being said it does have a value that adds to my net worth. I'll be conservative and say my real estate portfolio is worth $1.5M - $2M, although the amount I've personally invested into it is well under $500k. My personal property (the house and 10 acres of land I live on) is worth about $450k - $500k...again as a conservative estimate. A house similar to mine, but in my opinion not quite as appealing, recently sold for over $750,000. I have misc. accounts totaling around $25K...this is a small Acorn account, and my liquid accounts that I use for personal and business expenses. I keep more in a "cash" bank account than most because I need to cover business expenses. I try to keep around $20K in there, but it will fluctuate greatly throughout the month to as low as $7 or 8K, to sometimes as high as $30k. I currently have another $4k in a money market fund. I have this for quick liquidity when needed. This also varies greatly and will be as high as $50K at times. Not going to bother with my cars and other misc. on this update. This brings my total net worth as of this update to around $2,618,162 (using the conservative estimates above)- $3,000,000 EXPENSES I spent a total of $8,531 on all non business related expenses. This came in slightly under my goal of $800 per month, or $10K per year even though I did have an "expensive" car repair in the first half of the year. Phone/Internet $25 (Visible wireless with unlimited hotspot for internet) Insurance on my cars $45 (3 cars liability only) Food/groceries $100 (I've done some detailed food budget breakdowns if you're curious how I keep this so low) Electric $125 - $150 (average throughout the year/ all electric house) I have my own well and septic tank, so no bills for water, sewerage, and trash. Gas for cars $50 - $100. I spent a little more time driving in the last few months of the year, so my gas budget went up quite a bit. This is mainly due to semi local trips for hiking/and or entertainment. (everything within 100 miles, but it does add up) Entertainment $100. I hate to give this it's own line in the budget, but I do sometimes spend on entertainment, so although this is no way a true reflection of what I spent last year, I am including it because everyone asks, lol. Most of my entertainment ends up being "free" or nearly free other than the gas it takes to go places. Health Insurance is a free (for now) catastrophic plan. Thanks to all my real estate deductions I get to write off most of my income, leaving me just able to qualify for the absolute worst plan available in my state for free. Of course, if one little thing goes wrong at tax time and I step over the threshold at the end of the year, that could change and I'll be left paying for a plan I've never used. That brings me to $470 - $555, that give me plenty for any one time expenses that come up. Some months are under, so months are over, but my average even after the car repair this year was $711. I like my yearly spending to stay under $10K, but if I go over I'm not freaking out. I've been able to stay on budget with my personal spending for many, many years now, though! I know it is controversial, but since my house is appreciating faster than my actual investment into it, my house falls under the investment and not expense category in my accounting just in case you noticed no house payment was listed as an expense. I think that covers where things are now. WHY DON'T I SPEND MORE? I get asked this a lot. Why am I still trying to accumulate wealth 10 + years after I retired? Well, I'm still relatively young, and I have some big future goals that includes a large animal sanctuary with its own vet clinic and vegan restaurant. Even though I already have about 40 acres lined up for it, it is going to take a long time to get all the infrastructure in place. It might be 5 -10 years before it actually opens. I'm hoping to build as much as I can in the meantime. I'm also just frugal by nature. Most of the stuff I enjoy is free or nearly free. Hiking trails, video games, TV, movies, diving down rabbit holes of whatever interest me at the time, etc. Some of my hobbies even make me money. I've managed to buy cars that appreciate. I happen to be a decent poker player. My watches have done really well...same with my art collection. I don't live like a pauper. I live alone in a 4000 sq ft Mid Century house built into a cliff overlooking a river and beautiful valley with an indoor pool...so don't think my frugality always comes at the cost of the finer things. It is true until I recently bought my dream house I lived in a very modest house most people wouldn't associate with a millionaire (that house now rents for $750 a month), but I was patient and wanted to find the perfect house before I bothered to move. As I briefly mentioned before I have nice things like collector cars, art, watches, etc....I just try to spend as little as possible on depreciating assets or things like food. I appreciate good food, but being vegan makes it hard to eat out in my area. That is probably an understatement. There are maybe a handful of places I can eat at all (at least with more than salad as an option), and most of those only have one or two items on the menu I can eat. So I'd rather prepare great meals at home from cheap ingredients. I've gone into details in other posts about how I shop and prepare food, so won't make this post any longer doing it again. As always, I'll try to answer any questions you might have. Thanks for reading such a long post!! [link] [comments] |
| An Efficient Leveraged Portfolio vs An Inefficient Unlevered Portfolio Posted: 06 Jan 2022 11:20 AM PST IntroOne of the bullet points on this subreddit's sidebar says:
I want to provide one of the alternatives to this method that I don't see talked about on here nearly as much as it should be, leveraged efficient portfolios. If you are one of the people who refuses to touch leverage in any form with a ten foot pole I would love to hear your thoughts on this especially. I am going to give a brief explanation of portfolio efficiency, share some backtests under different circumstances, and attempt to make the case that no one who is trying to grow their wealth both safely and quickly should be invested in 100% stocks. What is risk?Everyone here has a general concept of risk and reward. It's something that every investment has, but not all investments are equal. If you invest in a one year treasury bill today you will have next to no risk but the reward is only 0.4% per year. If you invest in a 20 year treasury bond you will have slightly more risk and therefore you get a slightly higher reward of about 2% per year. If you invest in the S&P 500 you are taking on much more risk, but how is that measured? It is incredibly difficult to define what risk is. Some people consider it to be the odds of losing everything if you're dealing with derivatives for example, while more commonly it's defined as the amount of volatility you may experience along the way. The S&P 500 dropped by a bit over 50% in the 2008 Financial Crisis. The more volatile your investment is, the bigger the chance it has of going down significantly in value and because there's never a guarantee of it going back up in value this is perceived as risk. The stock market (the S&P 500 for the purposes of this) returns anywhere from 6-12% per year on average depending on if you include inflation, dividend reinvestment, and depending on the time frame you're looking back at. The backtests I will show go back to 1994 and including dividends, but not including an inflation adjustment, show the S&P 500 returning about 10.5% per year. This is a great average return and while there are significant crashes from time to time, it has shown to be incredibly resilient at recovering. This has led a lot of people who are looking to grow their wealth to allocate 100% of their investment portfolios into stocks. Don't get me wrong, this is still a great way to grow your wealth and if you do it for 20+ years you can expect to retire quite nicely. The point of this paper is to explain a way that you can either keep the risk the same and increase your returns, or keep your returns the same and decrease your risk. This is done through having an efficient portfolio. What is an efficient portfolio?Most people here are familiar with the movement of stocks. They generally follow the broader economy and when that struggles they also struggle. This can lead to lower future expectations which causes some to sell their stocks and move their money to something less risky. Well what is that less risky thing? In most cases it's bonds. What happens is during times of uncertainty people make this switch from stocks to bonds. This is often known as a "flight to safety". It causes stock prices to drop and bond prices to rise. What also can happen in times of uncertainty is the Federal Reserve cutting interest rates. I won't go into too much detail here but lower interest rates cause bond prices to increase. Now you have stocks that perform well in good times and bonds that perform well in bad times. This is called an inverse correlation. Stocks and bonds do not always have an inverse correlation, especially during good times, but they do have some degree of it during bad times. There are other things that move somewhat or completely inverse to the stock market, such as put options which involve betting on something going down, but the key difference between those other options and bonds is that bonds have a positive expected return. If the market is expected to return 10% per year and bonds are expected to return 2% per year and you hold them 50%/50% you would have an expected return of 6%. This seems worse than holding just stocks... but return is only half of the picture. A stock/bond portfolio is going to have less than half of the risk of the 100% stock portfolio. This is because of the somewhat inverse relationship I mentioned earlier. You can plot the risk and return of every combination of stocks and bonds. For example on one end you have 100% stocks + 0% bonds, on the other end you have 100% bonds and 0% stocks. This does not form a straight line. The resulting risk/reward ratio is a curve and the portfolios on the curve are known as tangency portfolios and looks like this. Every portfolio on the curve is as historically efficient as possible. Now you might notice that even 100% stocks, which would be a broad index fund, is on the curve. That does not mean that it is the most efficient. What that means is that without using any leverage it is the most efficient way to achieve those higher returns. Looking at the curve you'll see that there is a huge amount of diminishing returns with 100% stocks. You are taking on more risk for fewer returns when compared to some of the more efficient combinations which are generally 55-60% stocks and 40-45% bonds. The effects of adding leverageIf you are willing to take on the risk, defined as the volatility, of 100% stocks, then it follows that you should be able to take on the risk of the portfolio that I am about to describe. There exist leveraged ETFs (r/LETFS) that multiply the daily gains of whatever they track. If you want 2x leveraged S&P 500 you would probably use the ticker SSO. If you want 2x leveraged 20 year bonds you can use the ticker UBT (Side note: if you have issue with the low AUM of UBT you can use 50% TLT and 50% TMF to get the same result). Combining the two of these in a 55%/45% ratio (or 60%/40% if you prefer) you can effectively double the most efficient portfolio. This is the same as holding 110% stock and 90% bonds. You can use any degree of leverage you like but I am a fan of 2x because it matches the risk of 100% stocks very closely. Let's look at some backtests from 1994 to present day. Here is the backtest of the main portfolio I am describing compared to an unhedged S&P 500 portfolio. This test covers 28 years, 20 of which the leveraged portfolio outperformed. Please note, the years that it outperformed were not all during bull market years. It outperformed every year of the Dot Com crash, 2008, and 2020. It had a CAGR about 50% higher (15% vs 10%) over this time period, a better worst year, and a marginally better maximum draw down. Here is the portfolio from 2006 to 2010 which fully encompasses the 2008 Financial Crisis. In this time the S&P 500 basically broke even and this portfolio did marginally better. This is to illustrate that even if we have another 2008 this portfolio is going to be just as resilient, if not more so, than the S&P 500. Here is the portfolio during 2015 to 2019. You might wonder why this period is significant and that's because rates were rising from near zero to almost three percent during this window. Rising rates are bad for bonds but generally are a sign the economy is strong. This year is the start of a series of rate increases which are most likely already mostly priced in at this point. The Fed wants to get interest rates up a couple percent so that they have room to drop them in the next crash. During this time the portfolio was more or less on par with the market yet again and came out with both a slightly higher CAGR and lower maximum draw down. Here is a visualization of each of the parts of the portfolio compared to both the market and the combined portfolio itself. I wanted to show this one so you can get an idea of how each piece moves. You can see that it really is a team effort between the two assets, especially during crashes. ConclusionI know after seeing this there are still going to be people who won't touch leverage ever in their life and that's okay. I just want to put this out there for the ambitious ones who want to shave a few years off of the time it takes to reach their goal.
If you read all of this, thank you! I would really like to have some good discussions in the comments. If you're going to try to make a case against it, which I welcome, please bring your sources! For more posts like this you can check out r/financialanalysis [link] [comments] |
| Weekly FI Frugal Friday thread - January 07, 2022 Posted: 07 Jan 2022 02:00 AM PST 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] |
| A case for making irrationally-rational financial decisions. Posted: 06 Jan 2022 06:38 AM PST Most people in this sub are prob like me. You love running calculations and retirement projections and can understand compounding interest more than most. That being said I understand the "pay off the mortgage vs invest those funds" discussion. It basically boils down to… Avg Market Returns > Mortgage Interest Twice I've now made irrational decisions as it pertains to mortgages. I had two of them 3 years ago. The first I paid off was a 2 unit rental property I sold a couple years ago. It was cash flowing $1k a month due to a boom in rental market. I sold it because I wanted to be self-employed and leave my job. I was super stressed being a new first time Dad, working 9-5 and side hustling as an Internet marketer while also worrying and managing the rental. I'm a natural worrier and I bet many in this sub are too bc I put away partly for FIRE but partly to make sure I'll be okay in the future and ease my anxiety. I mention this bc I don't have that mentality of jump into the deep end with being an entrepreneur. I needed a large cash cushion to feel okay making that leap and I had roughly 2.5 years of runway or living expenses in my EF after selling the rental. At that time I wanted to pay off my home Mortgage too but decided to keep the large EF. That gamble paid off well. Last year was my first full year being self-employeed and I earned about 6.5x more income than I would have at my day job and I actually enjoy what I do now. I'm pretty sure if I didn't make the irrational financial decision to sell the rental that I wouldn't have taken the leap. Even my realtor (a friend of mine) tried to dissuade me from selling. But financially it's worked out great. A week ago today I used some of those business profits to pay off my home mortgage. Again a dumb financial decision but I've slept like crap most of my life and wouldn't you know all the sudden I'm sleeping great. Too early to tell if they're connected but I feel great. I do a lot of therapy and sleep hygiene work too but I noticed an immediate improvement after paying off the mortgage. If I sleep even 10% better I will out perform that delta between the markets/mortgage just with producing new income streams in my business. I also paid off the mortgage bec Id like to help my wife transition into a new career which is scary. If we eliminate all debt that leap is much easier for her. TL:DR There are more to financial decisions than what a spreadsheet can calculate. Take inventory of your situation and mental makeup and the opportunity costs on both sides. Here's to sleeping better in 2022! [link] [comments] |
| is "lying flat" just the latest iteration of a generation discovering FIRE? Posted: 07 Jan 2022 05:01 AM PST "Lying Flat" (Tang ping) is a lifestyle choice and social protest movement in China by some young people who reject societal pressures on hard work or even overwork, and instead choose to "lie down flat and get over the beatings" via a low-desire, more indifferent attitude towards life. (Wikipedia) Maybe not the indifference but getting over the beatings and rejecting overwork.... sounds familiar. [link] [comments] |
| Where do you meet other early retirees? Posted: 07 Jan 2022 10:15 AM PST I'm in my mid 40's and I'm not rich, but I'm comfortable enough. I don't foresee myself ever returning to full time work - unless perhaps I open a business again and decide I'd want to spend that much time running it. Problem is, I never meet anyone my age who isn't working full time or a full time caregiver - where do I meet others like myself? Around where I am it's kind of hard to fee comfortable without having a job to talk about. [link] [comments] |
| My personal financial details (from they guy who makes the updates on the year-2000 retirees) Posted: 06 Jan 2022 12:27 PM PST In response to my last post, a few people asked about my personal finances and what SWR I'd recommend. I've posted them before (years ago), but I'm posting them again here rather than messaging everyone back individually. Income and spending for the 10 years leading up to my retirement In 2009 I started tracking my spending. Even in college in the early 2000s I told friends I wanted to live frugally and retire young so I could focus on my hobbies. FIRE'd as a single guy in my mid-30's due to health reasons; otherwise I probably would have worked about 5 more years. (Keep in mind that my income taxes are for the income earned in the previous year. It's federal + state + FICA) Rough thinking when setting my initial SWR at ~3.25% The 4% rule-of-thumb is a great starting point for setting a SWR for someone retiring at a traditional retirement age. But as many people in the community have stated, it makes less sense if you're planning for an extended retirement. Here's how I set my SWR when preparing to retire:
Reasoning:
[link] [comments] |
| Posted: 05 Jan 2022 08:06 AM PST Built for anyone, from spreadsheet newbies to experts! Two years ago, I shared with the community a free FIRE spreadsheet, and since then, I've received a lot of requests to share a public version of my dark-mode personal spreadsheet. In response, I re-vamped the public spreadsheet to include a better dashboard, simpler inputs, more analysis and features, and packaged it in a better color scheme. I like it better than my personal spreadsheet now, so I might switch over, too :) See how it looks filled out with fake data: https://docs.google.com/spreadsheets/d/1kWHnihgmOHy6ZQ9K2oGWZ1lsiqCoP-UWo0Kj_YG4g1M/edit?usp=sharing Pick up your own copy here: https://docs.google.com/spreadsheets/d/1SB7cCd_Rk9HHEtjDYb_mGKYBR-68Y-Dqe1IuPMHQg_E/copy This spreadsheet can be used by those just starting and those far along. It will enable you to do things such as budget, track your income, determine your savings rate, project your safe withdrawal rate, view how much of your debt payments go towards principal, quantify your CoastFI numbers, calculate unrealized gains, determine proximity to goals and how you might need to adjust, quickly view metrics such as NW breakdown, asset allocation, and FI %, easily compare net income to expenses, show progress to each NW milestone, etc. Grey background means editable, black background means not editable. I recommend using the Fake Data Sheet as a reference alongside the instructions. This subreddit doesn't allow images within posts, so I'll link to images within the instructions as best as I can to make it easier to follow along. Initial SetupFirst, if you'd like to start the spreadsheet on a date other than 1/1/2022, then adjust the cell at the top-left of the Net Worth tab (cell A5). The Fake Data Spreadsheet starts on 1/1/2021, for example. In the Dashboard tab, your FIRE number is calculated as your yearly expenses divided by your withdrawal rate. If you have a FIRE number in mind that differs from that, input your FIRE number into Dashboard cell B8. Next, in the Net Worth tab, if you had any balance in an account prior to the starting month of the spreadsheet, unhide row 4 and in cells {B4 through K4} (B4:K4), enter the previous month's account balances. Please refer to the Fake Data spreadsheet (comments located in Net Worth tab cells C4 and J4) for a visual. Hide row 4 once complete. This concludes the initial setup. Now let's get into how to regularly use each tab. Net Worth Tab InstructionsColumns B:K are where you input each account's end-of-month balance. Columns L:T are where you input contributions (Ctb), withdrawals, and debt payments (interest and principal) which occurred in that month. In column AE, input savings rate goals for each month. All other columns in this sheet will auto-calculate various metrics for you. If any columns are irrelevant to you, hide them or rename them. Notes: Row 2 will show a sparkline (chart) of each column, and row 3 will return the current month's value. The Asset Value and Asset Debt columns are relevant to secured loans such as mortgages, while Other Debt is applicable to unsecured loans such as student loans or credit card debt. Month 1 of Monthly Delta will show a value of 0, and months 1 and 2 of Delta % will show a value of 0%. Deltas reflect the difference between the current and previous month. SW Monthly and SW Yearly will show how much you can safely withdraw based on your SWR given your portfolio value today. The Gains columns (AL:AR) are cumulative and do not subtract interest from monthly loan payments, nor do they include asset value gains. In TabAt the end of the month, fill out grey columns using your paystubs, and feel free to use the 'Other Income' column to include anything outside of your regular job's income such as gifts, reimbursements, tax refunds, stimulus checks, etc. Row 3 will auto-calculate the current year's summary of each column. If any columns are irrelevant to you, hide them or rename them. Out TabInput your monthly budget into column B for each month. The budgeted value will turn red if exceeded by spending. In columns D:E, input monthly expenses as they occur or at the end of each month. Row 2 returns a running 6-month average, row 3 returns a sparkline (chart), and row 4 returns the current month's spending. If any columns are irrelevant to you, hide them or rename them. SWR TabInput your date of birth in F2 (so the spreadsheet can calculate your age, or just put your age in C2), input your preferred withdrawal rate in H2, input your desired retirement age in J2, input your stock and bond allocation in K2:L2, input your expectations for future average stock and bond growth in M2:N2. LeanFIRE is calculated as 80% of FIRE goal, and FatFIRE as 2x FIRE goal. If your Lean/Fat numbers differ from this valuation, alter cells O2 and Q2. With row 2's grey cells filled out, you can read the tables. (Sorry to anyone who is red-green colorblind. All tables can be adjusted via conditional formatting!) The table on the left, using your annual contributions, current NW, withdrawal rate, current age, portfolio growth (B4:J4; 6% through 10%), and retirement age (A5:A50; age 24 through 69), will return your projected annual withdrawal. There are three tables on the right. The first, titled Proximity to Coast to Desired NW at Desired Age, will display how close you are to being able to coast to your LeanFIRE, FIRE, or FatFIRE goals if you were to stop contributing today and coast until the age on the left. If the % is over 100%, you've already achieved the desired NW at the age on the left if you stop contributing today. The second table, titled Monthly Contributions to Reach Goal, will show how much you need to contribute towards your NW monthly to reach each NW goal at the age on the left. If the number is negative, you could withdraw that amount each month starting today and still reach that goal. If it is green, you are already contributing that amount monthly. If it is mauve, it is higher than your monthly contributions. The third table on the far right, Portfolio Value Needed to Coast Today, will show what your portfolio value would have to be today in order to coast to each NW goal at each age. All tables on the SWR sheet update themselves automatically. Feel free to manually input a number into cell G2 (annual contributions) if you don't have 2021 filled out in the Net Worth tab. Dashboard TabWhen the Net Worth, In, Out, and SWR tabs are filled out, the dashboard comes to life. In the top left, you'll find the current date and a link back to this post. Below are a few handy metrics such as projected portfolio returns and your CoastFI number. You can change the "65" in cell A9 to any age. Cells A14:A15 calculate annual savings based on 2021, but you can adjust the year if you have prior data in the Net Worth tab, or adjust the year to 2022 if you don't. The two tables below will show proximity to various NW goals based on total NW and based on just investments. The charts in the middle of the dashboard show, from left to right and top to bottom, a stacked bar graph of assets and debts by dollar amount, a stacked area chart to display the % each asset takes up of your total NW, your FI % over the months, a comparison of your net income and expenses, and a comparison of your savings rate and savings rate goal with a trendline. The table on the right calculates, based on your SWR and current NW, which expenses you can cover, and which you can't yet, and how much in additional investments you'd need to cover the latter. These expense names were copied from the Out tab, so if you altered the Out tab, copy and transpose the renamed column headers into the dashboard cells L3:L25. The M column uses an annualized 6-month average, so if any of the expenses are irregular (e.g., annual expenses), you may want to manually adjust the M column to reflect their yearly costs. ExtrasI've also thrown in an amortization schedule (designed for a 30-year mortgage but adjustable to fit your needs, be it a car loan or student loan, etc.). At the top, you can input your loan's terms. On the right half of the spreadsheet, you can see what happens to the loan's interest and length if you pay extra in a given month. At the very end of the spreadsheet is a free math section for taking notes or doing random calculations. Comments, critiques, and requests for help are welcome! Edit: I answer some FAQs in this comment. [link] [comments] |
| Daily FI discussion thread - Thursday, January 06, 2022 Posted: 06 Jan 2022 02:02 AM PST Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments] |
| (Charts!) Year-2000 Retirees: The ultimate survivors! Posted: 05 Jan 2022 09:46 AM PST When I first started working toward FIRE around 2010, it was thought that 2000 would end up being one of the worst years ever to retire, and one of the few years that breaks the 4% rule. So every year I like to track their performance. Here is the update through 2021! (For the first time ever, I'm not only looking at people who are 100% stocks. I've also included people with a 60/40 stock/bond asset allocation) Charts
Note: These charts assume dividends/distributions are reinvested, and monthly returns net out monthly inflation (using CPI). I get asked this every year. Yes, it accounts for inflation and dividends! Results If you retired in 2000 with 100% S&P500 and stuck to a fixed 4% SWR, you were scared out of your mind only 9 years later with 23% of your portfolio remaining. But if you were super irrational and stayed the course, the next decade+ of returns were so good that you still have exactly 23% of your portfolio remaining as of 3 days ago! I thought these guys would have run out of money long ago, but they keep proving me wrong! Bonds during this time had a very good performance. So, if you instead had a 60/40 stock/bond split, then you were sweating a little less in 2009 than people who were 100% stocks. While they had 23% of their portfolio left, you had 47% of your portfolio remaining. And if you stayed the course, then you'd still have 75% of your portfolio remaining. Great shape for surviving the standard 30-year retirement window! If you were looking for a longer retirement window than 30 years, or if you wanted to preserve a significant portion of your portfolio value, it looks like the year-2000 retiree (who is 100% stocks) would have needed a much lower WR of 2.5-3%.. But there are 2 pieces of good new. First, incorporating just a bit of bonds into your portfolio would have greatly offset the poor performance of stocks, leaving you pretty comfortable with a 3.5-4% SWR. Secondly, retiring just a few years before or after the worst retirement year in generations would mean you've actually seen your portfolio grow! Though, people do disproportionately retire at the worst possible times :( Anyone nearing their FIRE goals should read ERN's SWR series. I learned a lot from it. And while I don't necessarily agree with all of his conclusions or assumptions, it's the best SWR analysis out there and better than anything I'd be able to put together. Source ERN's data that I used: https://earlyretirementnow.com/2018/08/29/google-sheet-updates-swr-series-part-28/ . You can use this to look at different asset allocations and to adjust other assumptions. If you don't want to work with the raw data directly, he has some tools in the spreadsheet that will do the analysis for you when you adjust assumptions. Here is the extra sheet I added to ERN's workbook, in case you want to play around with it: https://docs.google.com/spreadsheets/d/1JcSRDrGv9YxQmR8E8dAmLELRgtqiCFtw8lcdSRUyAVc/edit?usp=sharing [link] [comments] |
| Posted: 05 Jan 2022 04:56 AM PST Original, Year 1 Post here: FIRE Financial progress – Year 1 Review : financialindependence (reddit.com) This is the 2021, year 2 update on our Portfolio progress as well my current thoughts on our development TL;DR: Our EU FIRE journey is going exceptionally well. Personal part: I switched to part time, 28h working week last year. I have every Friday off as well as any other workday an additional 4 hours less. It's a blast and I wholeheartedly recommend it to anyone who can afford this. This year I am expecting a hefty wage increase due to new responsibilities at my job. Overall, my situation improved drastically in the second half of last year where I became a team leader for my department and if I manage to seal the pay raise now, I will be satisfied for the time being. My SO got an unlimited job contract on her current Job. But she is not satisfied due to no challenges at the Job and no perspective in this regard. Now she has the classic dilemma: keep a safe, boring Job or look for a new exciting job with higher uncertainty. We will see how this develops this year. Financial part:
Portfolio breakdown Portfolio size: 211k€ [+198% YoY]
2021 PF thoughts:
ETF/Stocks, the Basic PF part:
Crypto, the Gamble PF part:
Cash/EF/Travel money
Metals:
Lending
General thoughts:
Next major FIRE Goal: PF of 250k€ Thanks for reading [link] [comments] |
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