Author Topic: At what multiple of your net income vs. networth you became discouraged?  (Read 2001 times)

max9505672

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Guys, for those of you that it happened to, at what multiple of your net income vs. networth did you become discouraged in daily work in order of pursuing FIRE?

For example, in my case, now, my net income represents around 28% of my networth. Obviously, as the years go, this number is going down and I feel like, at some point, the impact of earned income will have so minimal effect on my networth vs. the impact of market that Iíll get discouraged from work. Every day of work might feel like a drop in the ocean and the motivation to keep hustling will disapear.

In my case, I canít really decrease my expenses in any way I would be comfortable with (or that would make big impact), so pretty much the only thing I can do now is find ways to increase my income. But I am not sure I want to do this, since it usually comes with more responsabilities, more work, less free time, etc.

How did you guys deal with?

FrugalToque

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #1 on: February 08, 2019, 01:36:29 PM »
I never thought that this might depress me, so thanks ... :-)

Really, I just see my net worth continually going up - faster and faster because of compounding - and that constantly makes me feel better.

So I don't imagine the effect you're citing will ever bother me.

Toque.

charis

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #2 on: February 08, 2019, 01:55:38 PM »
If the alternative is pulling money from the 'stache for living expenses, one's perspective on earned income stays pretty rosy.  This "problem" just sounds like another version of impatiently grinding toward your FIRE date.

ixtap

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #3 on: February 08, 2019, 01:58:47 PM »
It would have to be a number smaller than my expenses + expected return to be discouraging.

Ann

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #4 on: February 18, 2019, 01:45:54 AM »
I think I understand where you're coming from.  I track my net worth every month.  When I began my journey, I could see the number go up a lot (to me) on months I worked extra shifts / spent very frugally and the numbers barely budge on months I did not.  Now, though I have a long way to go, I am at the point where my monthly net worth is far more affected by market shifts than my personal discipline over the past few weeks.  I sympathize that is can be less motivating to "hustle.". January 2019 would have been a "good" month even if I had been lazy.

I remind myself that as long as I dollar-cost-average, I am buying index funds "on sale" during the downward months.  I also compare how much I spent verses how much I earned.  I compare spending to budget (I like to track everything).  This gives me a "gold star" feeling on months I met my goals even when the net worth drops.

Malkynn

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #5 on: February 18, 2019, 05:27:15 AM »
If that were me, then that would be the point that I would start seriously considering CoastFI, quitting the job I am sick of, pursuing work that I enjoy, and leaving the 'stache to grow on its own.

If your expenses are really low, you can probably generate your entire yearly spend by working just one or two days a week, or doing a few months of contract work and then having the rest of the year free.

I'm all for delayed gratification, but not if the cost is being unnecessarily unhappy in the present. There are just too many options out there for a smart person with a solid savings to choose staying in a job they aren't enjoying.

This sounds like a great problem to have, and not actually a problem at all unless you choose the one option where it's unpleasant.

2Birds1Stone

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #6 on: February 18, 2019, 07:00:26 AM »
I've thought about this very early on in my FI pursuit.

Decided that if my income no longer allows me to contribute >10% of my existing NW annually, it's time to reevaluate if work is worth it.

I'm not there yet, but pulling the plug soon anyway =)

FatFI2025

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #7 on: February 19, 2019, 06:56:54 AM »
Am I reading this right? Let's say you make 100k net, 100k/.28 = 357k NW. If this is the case, then let's say you're saving $50k/yr (50%) and your investments are growing at 7% per year. This means that your investments are earning $25k/yr, half of what you're saving. This 7x multiple (357/50) is far off from the 25x standard, or even a 15x barista FIRE.

2Birds1Stone

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #8 on: February 19, 2019, 07:14:34 AM »
Am I reading this right? Let's say you make 100k net, 100k/.28 = 357k NW. If this is the case, then let's say you're saving $50k/yr (50%) and your investments are growing at 7% per year. This means that your investments are earning $25k/yr, half of what you're saving. This 7x multiple (357/50) is far off from the 25x standard, or even a 15x barista FIRE.

You clearly missed the part where OP is speculating into the future. These ratios will shift significantly over the period of a few short years, especially with a high enough savings rate.

less4success

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #9 on: February 19, 2019, 08:40:32 AM »
I ran across this exact concept in a blog post that I enjoyed:
https://thefinancebuff.com/delayed-gratification-enough.html

Itís an interesting concept because it points out that there is one point at which itís not worth working at that income, but there is presumably also a (much higher) number that could pull you back into the workforce.

Edit to add that this is just the natural progression. So donít worry about it too much.once youíre in a position that your income has a negligible impact on your net worth, you may be ready for FIRE.
« Last Edit: February 19, 2019, 08:43:54 AM by less4success »

LPG

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #10 on: February 19, 2019, 09:36:07 AM »
I wouldn't say I've had quite that experience, where working to invest comes to feel pointless. Right now my annual investments are close to 10% of my stash, so I seem to be right around the same point you're at without hitting that particular variety of depression. I tend to avoid that feeling due to the two thoughts of 1) Hey! Increasing my stash by 10% each year is pretty good!, and 2) I don't have enough to FIRE yet so every dollar added to the stash counts. A single dollar may not feel like much now, but I keep reminding myself that A Millionaire is Made Ten Bucks at a Time (http://www.mrmoneymustache.com/2011/08/01/a-millionaire-is-made-ten-bucks-at-a-time/). It's just as true when you have $999,990 in the stash as when you have $0.

I have found myself hitting a related snag though, and am still working through my solution to that one. I have ~8x my living expenses invested right now. Not the glorious 25x FIRE point, but certainly enough that I don't want to put up with a lot of misery in exchange for a paycheck anymore. I've been bored out of my mind at work for a few years now and, without the financial desperation to justify putting up with that, I'm searching to figure out what's next. Part of that is searching for a new job, and I'm pretty sure I have one lined up to start in May, but, honestly, I don't really want another job. I find the thought of taking another salaried position, where I'll probably feel bored and stifled the vast majority of the time, extremely depressing. So a lot of it is also trying to figure out what comes after that job. What do I want my FIRE life to look like? How much can I start building that now, rather than waiting until I get to 25x? Are parts of that FIRE life things I can start now AND monetize to help me get there sooner? Some experiments I'm undertaking include:
  • I've started a blog teaching people how to automate scientific data analysis. I historically focused on content, now I'm trying to build the readership, soon I'll try (harder) to monetize.
  • I'm talking to a friend about collaborating on a home automation side business. I'll likely start this over the summer, depending on how my timeline for everything else pans out.
  • I expect to buy a condo in the SF Bay Area soon (EEP! So expensive!) and put the 2nd bedroom on AirBnB. This could give me an opportunity to be the best AirBnB host I can be for the satisfaction of it, and increase my income for investments.
  • I've started making electronic music as a hobby. I doubt I'll ever make much money off of this, but I find it satisfying. And if I can make songs that I really like to share with friends, that'll be even better.

Can you think less about your FIRE numbers and progress? Can you start transitioning to building your FIRE life now?

catccc

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #11 on: February 19, 2019, 10:15:13 AM »
My net income is currently about 10% of my NW, yet I'm not discouraged from working (not by this, at least).  Because even if it just a drop in the bucket, RE means taking scoops out of the bucket.  Adding drops v. subtracting scoops?  When you aren't FI yet?  To me, that means motivation to keep dribbling in what I can.

I've run into some office drama (I can't even say politics, it's not that sophisticated) recently at my job, and that is discouraging.  But that's another post for another day...

Car Jack

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #12 on: February 19, 2019, 12:53:06 PM »
Net income to net worth.  Mkay.  Never did that math and can't see where it's of any use....but then again, I think net worth is sort of a dumb thing to be looking at.  Let's do the math.  Ok, Income over net worth is 6.7%.  Ok, now what?  I'm not discouraged or depressed.  Do I need to be?

DadJokes

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #13 on: February 19, 2019, 02:47:08 PM »
This sounds like a FI version of senioritis.

The closer you get to the end, the harder it is to remain focused and finish the job. I think that is a problem to a great many things in life. If you don't love what you do, it can be especially difficult here. I have no idea what the solution is- I am counting the days, and I still have 15+ years before I can FIRE.

MDM

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #14 on: February 19, 2019, 03:57:29 PM »
...at some point, the impact of earned income will have so minimal effect on my networth vs. the impact of market that Iíll get discouraged from work. Every day of work might feel like a drop in the ocean and the motivation to keep hustling will disapear.

Alternatively, "...I'll get encouraged to quit the day job...and the motivation to hustle at doing whatever I want, instead of what I feel I have to, will increase."

max9505672

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #15 on: February 19, 2019, 05:58:47 PM »
I remind myself that as long as I dollar-cost-average, I am buying index funds "on sale" during the downward months.  I also compare how much I spent verses how much I earned.  I compare spending to budget (I like to track everything).  This gives me a "gold star" feeling on months I met my goals even when the net worth drops.
Good motivation idea!

obstinate

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #16 on: February 21, 2019, 10:47:02 AM »
My net income is getting to be about 12% of my net worth. Assuming you mean after taxes but before expenses. If you mean my saving then itís now around 6% of net worth annually.

I wouldnít say Iím discouraged but I have noticed that Iíve started to let some purchases slide because on some level it doesnít matter how much I save any more. On the other hand we are moving to a cheaper neighborhood this year because itís gonna save us 1% of our net worth per year.

ditheca

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #17 on: February 21, 2019, 11:10:45 AM »
We have a similar situation; trying to figure out if it is worthwhile for my wife to start working part-time.  Her earning might let us contribute an extra $20k/year towards retirement.  Turns out that makes very little impact on our FIRE date.

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #18 on: February 21, 2019, 11:48:56 AM »
I'm not discouraged, but it was a lot more exciting to watch my net worth grow when it was only 1x-2x my annual salary. Above 2x, market fluctuations overwhelmed anything I did on a month-to-month basis. Also, I lost interest in tracking my net worth after I bought a house and had to pull out $30,000 for a down payment and closing costs. Right now I'm just in coast mode, even though I'm a long way from retirement. All my investments are automated, and my lifestyle is dialed in where I want it to be. No point in worrying with things I can't control.

soccerluvof4

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #19 on: February 21, 2019, 02:27:01 PM »
I know this might be off base a bit in the equation but you have to figure the difference of your health care cost into this equation in some form.

brian313313

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #20 on: February 21, 2019, 07:59:32 PM »
My net income was about 12% of net worth last year. My goal now is to make less, just enough to cover my expenses. I'll let compounding take me the rest of the way there. I was going to work 6 months this year but I'm already thinking about quitting. I can cover my expenses with 4 months but I wanted some "splurge" money for vacation equipment after I'm done for the year. Enjoy, you're almost there.

Edit: I originally used salary instead of income. I didn't work all of last year as I took a couple 2-3 month breaks.
« Last Edit: February 22, 2019, 05:41:28 AM by brian313313 »

Tester

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #21 on: February 22, 2019, 09:58:10 AM »
Opposite for me: gross income equal to my net worth.
I am discouraged as I know I have a long way to go.
I am just trying to reduce spending as the saving part is not big enough yet.
I am not complaining though, I think I am a very lucky person to be where I am.
No debt, good job, enough time to get in a good place, even starting late at 37 from some debt.
3 years in now and net worth above 200,000.
I just need to double down until I get to 500,000 to then see the compounding to be encouradged.

FIRE 20/20

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Re: At what multiple of your net income vs. networth you became discouraged?
« Reply #22 on: February 22, 2019, 03:08:23 PM »
No discouragement here.  I just estimated the ratio as 8.5%.  I can't say I'm frustrated by that; I get to FIRE in a few months!  However, I also wasn't frustrated before reaching the home stretch.  The only thing I can say that might have a relation to your question is that it has definitely been a challenge to work up any motivation to earn more money.  This has actually been a great thing for me.  As @Malkynn said, when I hit a certain number where it felt like the money I was adding was drowned in the noise of market moves I started to coast.  I have only worked 3 full pay periods since last June.  That's roughly 15 two-week periods where I worked under 80 hours and only 3 where I just barely hit 80.  Before that I moved into a low stress job with people I liked.

One other thing that helped me is that about 2-3 years ago I was able to see the finish line approaching but I was concerned about market valuations.  I assumed we would see zero growth or might see a significant market correction or crash.  As a result when calculating my FIRE date I used a 0% growth assumption so I could see (at least in my projections) that my contributions - even though in reality they were dwarfed by market volatility - were the driving force to get me to FIRE.  But I was also able to see that stressing about work and exerting effort to move up up weren't going to get me there much more quickly either.