Author Topic: 25x expenses... now what?  (Read 10158 times)

phxguy23

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25x expenses... now what?
« on: November 15, 2014, 11:54:10 PM »
Hi all,

The recent stock runup has been good to me, as I'm sure it has for many of you. Tallying everything up, I recently discovered that I've officially exceeded 25x my annual expenses (about $35K per year), just in time for my 35th birthday next week.

Here's the issue... I don't think I'm ready to hang up my professional hat just yet. For better or worse, I still find that work gives me purpose -- along with many other interests I enjoy. I even have been contemplating pursuing another degree to further my career (partially work-paid).

I know that not everyone here agrees on the whole 4% rule, but even if I wait it out for a while longer, I anticipate that I'll hit the equivalent of 3% within the next couple of years. This assumption is based on my current savings rate, some equity finally (potentially) getting cashed out from a previous employer, and so on.

I don't have kids and all indications are that I won't. With that in mind, I don't expect too many life changes that will drastically impact my spending over the next several years. So... what do I do in this case? Up my spending? While I won't claim to live a completely mustachian lifestyle, I think that I do relatively well keeping myself in check, yet I rarely want for much. It seems illogical to increase my spending when I don't crave more stuff, but it's equally silly to accumulate more and more wealth for no purpose... right?

What would/are you all doing as you approach this very-nice-to-have problem?

lhamo

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Re: 25x expenses... now what?
« Reply #1 on: November 16, 2014, 12:05:32 AM »
I'm a total victim of baglady syndrome (probably will never really feel I have enough, even at a 3% or less SWR) and have kids whose futures I hope to contribute to (college funds, help with initial housing purchases, perhaps help to start up a business if they want to go that route), but if I were in your position I think I would probably plan to set up an annual "splurge fund" that I would use for travel, personal enrichment, and the occasional purchase that would improve my quality of life or otherwise make me happy in some relatively long-lasting way.  Enough to buy really high quality shoes and clothes (basic wardrobe stuff that I would wear every day and love -- like good quality cashmere sweaters, silk long underwear, excellent hiking and running shoes, etc.).  If I had a particular hobby or interest I would probably pay more for great gear in that area -- again, the great hiking shoes come to mind.  Also create a bucket list and use the money to pay for items on that -- for me things like trips to amazing places to have amazing experiences (trekking, skydiving, kayaking, scuba diving). 

I'd also use some of my windfall to try to help make the world a better place -- either through monetary contributions or volunteering my time, or probably a combination of both in most cases.

You are definitely in the sweet spot so don't be afraid to enjoy it!

homehandymum

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Re: 25x expenses... now what?
« Reply #2 on: November 16, 2014, 12:28:38 AM »
Charitable works.

Not kidding.  This is what the independently wealthy were expected to do in the old days.  Sort of noblesse oblige.  A moral obligation of the haves to care for the have-nots.  Partly because of morality, partly because there's nothing like an underclass who've got a shitload of resentment and a pitchfork to focus your mind on the benefits of sharing a little of the wealth around :)

Once you've got enough stashed away for yourself, and you're really just working for the fun and the challenge, have a look-see at what you can do to make the world a better place.  The benefit of it being your money is that the definition of 'better place' is entirely up to you. 

Dicey

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Re: 25x expenses... now what?
« Reply #3 on: November 16, 2014, 12:32:03 AM »
Why wait until you are dead to pass the fruits of your labors unto others? If your nest egg is secure and you still enjoy working, why not pass your income (or portions of it) on to causes that you believe in? How cool would it be to be able to call yourself a philanthropist at your age? Once you identify the ways you want to contribute to the greater good, you will have no trouble avoiding lifestyle inflation. There are also a number of giving strategies to reduce your taxable income if that is important to you. Yes, you can do good deeds and reduce your taxes.

Oops, I see homehandymum and I are thinking along the same lines...

Malaysia41

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Re: 25x expenses... now what?
« Reply #4 on: November 16, 2014, 04:55:20 AM »

I don't have kids and all indications are that I won't. With that in mind, I don't expect too many life changes that will drastically impact my spending over the next several years. So... what do I do in this case? Up my spending? While I won't claim to live a completely mustachian lifestyle, I think that I do relatively well keeping myself in check, yet I rarely want for much. It seems illogical to increase my spending when I don't crave more stuff, but it's equally silly to accumulate more and more wealth for no purpose... right?

What would/are you all doing as you approach this very-nice-to-have problem?

What?  Hell no it's not silly to accumulate more wealth! Keep growing that stache esp since you enjoy your work.  Get to 2% SWR.  It's called INSURANCE.  And it also puts you in a position to fund a start up or help a friend or family member in need, or do some other good stuff that requires money. 

Just because you passed the first finish line doesn't mean you need to stop running.  You are 35 for goodness sakes.  Sheesh. Of course, I'm 41 and just FIRED.  But from my perspective, I'd be a whole lot more comfortable if our stache was 3x its current value. 

FWIW.

Ricky

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Re: 25x expenses... now what?
« Reply #5 on: November 16, 2014, 06:00:44 AM »
Are you married? Things would quickly get boring alone.

Treat this site no different than any other American culture, including consumerism. Don't feel like you have to do something just because everyone else is.

The purpose of this site isn't to encourage everyone to save enough to live on forever then quit their jobs, it's to encourage the former and give the option for the latter. For you, quitting isn't the answer yet. But, you have the option to do so. Be happy with that.

Raay

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Re: 25x expenses... now what?
« Reply #6 on: November 16, 2014, 06:06:44 AM »
Have you considered participating in the next stock market crash or a sudden medical emergency? ;) They might reduce your book worth by 50%, thus eliminating your immediate "problem"...

plantingourpennies

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Re: 25x expenses... now what?
« Reply #7 on: November 16, 2014, 06:07:17 AM »
Learn to define the purpose of your life; not by what others say you have to do, but by what you enjoy doing (or not doing).

You're free-go play.


Malaysia41

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Re: 25x expenses... now what?
« Reply #8 on: November 16, 2014, 06:25:20 AM »
Learn to define the purpose of your life; not by what others say you have to do, but by what you enjoy doing (or not doing).

You're free-go play.

Exactly. You have reached FI.  RE whenever it pleases you.  Personally, given what you stated, I would build the stache more in your shoes, but, hey, whatever you want to do is fine.  I'd say don't RE just because building the stache further seems silly.  That's not a great reason to RE IMO.

Zette

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Re: 25x expenses... now what?
« Reply #9 on: November 16, 2014, 07:20:33 AM »
Set a new 'stache goal for yourself -- enough that you'll still be at 25x expenses if the market suffers a 15-20% correction.

arebelspy

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Re: 25x expenses... now what?
« Reply #10 on: November 16, 2014, 07:24:53 AM »
I agree with the others.  Building more gives you a safety buffer, and past that: charity.  There are lots of ways you can make a difference.

Staying at your current job, which you enjoy (or at least want to continue doing) will let your wealth compound and reach ridiculous numbers and can have a big impact.

Do that which brings meaning to your life.  If that's your job, great.  If spending a little more adds meaning, cool.  If it's charity, okay.  Building a legacy, fine.  Whatever that is, do it with gusto.

Congratulations on your success!  Being FI at 35 is awesome.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

chasesfish

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Re: 25x expenses... now what?
« Reply #11 on: November 16, 2014, 08:06:07 AM »
Go play!  That's what being FI is about, doing what you want, when you want to do it.  I'm in a similar situation and "work" has started to become more of a mentally stimulating game instead of something I have to go do.

I look at being FI and continuing to work as the "bonus round".   You are going to naturally save more money, plus your portfolio you have already created then generates its own money.  If your FIRE number was $900,000 but you work another year, you'll naturally add something to your stash AND see that $900,000 grow by 3-10%.

Personally, I spend money on traveling, sporting events, and on housing.  I'm about to move for the job and both my current and new house are/will be small houses in older areas/very expensive lots where I enjoy the area (and most houses around me are either remodeled or raised/rebuilt).  I dislike driving and continuing to work/being FI helps me enjoy housing in areas I don't have to drive much.  I'm fine carrying a mortgage because if I ever FI, I'll just swap the equity into a low COL area.

If it wasn't explicitly prohibited in my job, I would use some of the excess money for angel investing.  I think one of the best "charities" you can support is newer businesses that'll grow the economy and jobs.  Sometime's you'll win, other times you made an investment and it turns into charity.  Until I can do that, I like supporting the local Community Foundation.  They're a good consolidator of funds and help send funds out to the charities that make the most impact.  They operate on a 4-5% SWR rule and my contributions will help in perpetuity. 

phxguy23

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Re: 25x expenses... now what?
« Reply #12 on: November 16, 2014, 09:38:03 AM »
Wow... the consistency in responses is impressive in its own right! Clearly you're all absolutely right -- I should take the opportunity to volunteer more, donate to the right causes, or find other ways to make the world better. While I do some of this now, there's definitely room to do more.

Of course this is in addition to growing the stash more... which I think will happen naturally anyway.

phxguy23

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Re: 25x expenses... now what?
« Reply #13 on: November 16, 2014, 09:43:13 AM »
If it wasn't explicitly prohibited in my job, I would use some of the excess money for angel investing.  I think one of the best "charities" you can support is newer businesses that'll grow the economy and jobs.  Sometime's you'll win, other times you made an investment and it turns into charity.  Until I can do that, I like supporting the local Community Foundation.  They're a good consolidator of funds and help send funds out to the charities that make the most impact.  They operate on a 4-5% SWR rule and my contributions will help in perpetuity.

This is a really interesting idea. How do you get yourself exposed to businesses looking for angel investing? I would love to do this for multiple reasons, including what you stated along with the ability to use the knowledge from my dayjob to help newer businesses.

mjs111

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Re: 25x expenses... now what?
« Reply #14 on: November 16, 2014, 09:56:43 AM »
I agree with what's already been posted, just wanted to add one additional thought:

You may have done this already but in case you haven't, start casually researching stuff you'll need to do a bit differently when retired so the mechanics of actually living off your stash are well known to you ahead of time:

1.  Of the money in easily accessible taxable accounts, how would you turn that into cash to live off of? Does it throw off enough in dividends? Would you need to sell and incur some capital gains tax?

2. If you only need to live off of $35,000, your taxes will likely be much lower than they are now.  Investigate what your overall tax liability would be. Many people are surprised how little it actually is when transitioning from a decent paying regular income job to living of of a small amount of cap gains/dividends.

3.  Where to get health insurance, what kind of coverage, and how much it would cost on your own under ACA.

This is all easy stuff compared to actually building the stash. You've done the hard part! Being well-versed in the financial mechanics of being a FIRE person though will make the transition less stressful.

Mike

chasesfish

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Re: 25x expenses... now what?
« Reply #15 on: November 16, 2014, 10:22:03 AM »
I haven't run too much research into angel investing, although I have a few suggestions of places that would be a good start:

Go seek out the director of the local Small Business Development Center and ask them about Angel Investors or clubs in the area.  They provide advice to startups and are funded through fees in SBA loans. 

https://www.sba.gov/tools/local-assistance/sbdc

How much they'll know depends on their director/consultants, the good ones in my experience are doing this as a hobby second career.

I would also lookup your local community foundation and get involved.  Depending on how big of an area you're in, a lot of the supporters are people like you that are FI but will have lots of side investments. 

Don't rush into anything, most people in this hobby turn down 90%+ of the opportunities until they find something that's right and fits their skill set.


chasesfish

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Re: 25x expenses... now what?
« Reply #16 on: November 16, 2014, 10:23:35 AM »
I'd also see if Nords chimes in on this thread, I think he actively does this as part of his "charitable" adventures

RichMoose

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Re: 25x expenses... now what?
« Reply #17 on: November 16, 2014, 10:25:14 AM »
Congratulations! My view on this is if you're happy with what you have going on in your life at this point, just keep going. There's no need to quit your job and begin volunteering (or retiring and doing nothing) just because you're FI. I also wouldn't keep working just to build buffers in your stash. Technically the 4% rule accounts for things like stock market corrections and such. My suggestion would be to build up a year's expenses in a HISA or something of that nature. This way you would not have to dip into your stash in down markets. After that, consider giving away your "extra" earnings to charitable causes. This should reduce your taxes and put your stash to work while you still enjoy your career.

bacchi

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Re: 25x expenses... now what?
« Reply #18 on: November 16, 2014, 11:07:14 AM »
angel.co has hi-tech startups that want funding. You'll need to be an accredited investor, which is a fancy term meaning that you're a liquid millionaire.

etselec

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Re: 25x expenses... now what?
« Reply #19 on: November 16, 2014, 01:19:43 PM »
Agreed with others, charity is a great way to deal with the "problem" of having excess money and still wanting to work. Check out givewell.org - it's a website/organization that looks for and recommends the most cost-efficient charities. It definitely appeals to my Mustachian sense of frugality and efficiency - why donate to a random charity when your money could provide dozens of times the positive impact at a more effective charity.

goodlife

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Re: 25x expenses... now what?
« Reply #20 on: November 16, 2014, 06:44:52 PM »
If it wasn't explicitly prohibited in my job, I would use some of the excess money for angel investing.  I think one of the best "charities" you can support is newer businesses that'll grow the economy and jobs.  Sometime's you'll win, other times you made an investment and it turns into charity.  Until I can do that, I like supporting the local Community Foundation.  They're a good consolidator of funds and help send funds out to the charities that make the most impact.  They operate on a 4-5% SWR rule and my contributions will help in perpetuity.

This is a really interesting idea. How do you get yourself exposed to businesses looking for angel investing? I would love to do this for multiple reasons, including what you stated along with the ability to use the knowledge from my dayjob to help newer businesses.

microventures.com

I am registered there and they often have quite a few interesting opportunities. I haven't really done any due diligence on it though since I am prohibited by my current job to make such investments.

Villanelle

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Re: 25x expenses... now what?
« Reply #21 on: November 16, 2014, 06:53:22 PM »
Another option for potential Angel investing is contacting the nearest universities' business schools and see if they have business plan competitions or any other way of connecting entrepreneurs and angel investors. 

I may be more conservative than many, but I wouldn't start donating or doing much angel investing just yet. You have the opportunity to make your 'stache even more hirsute.  I would wait until I was at maybe 28-30x  before I started giving significant amounts away or putting them in risky places.

Nords

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Re: 25x expenses... now what?
« Reply #22 on: November 21, 2014, 10:26:16 PM »
Hi all,

The recent stock runup has been good to me, as I'm sure it has for many of you. Tallying everything up, I recently discovered that I've officially exceeded 25x my annual expenses (about $35K per year), just in time for my 35th birthday next week.

Here's the issue... I don't think I'm ready to hang up my professional hat just yet. For better or worse, I still find that work gives me purpose -- along with many other interests I enjoy. I even have been contemplating pursuing another degree to further my career (partially work-paid).

I know that not everyone here agrees on the whole 4% rule, but even if I wait it out for a while longer, I anticipate that I'll hit the equivalent of 3% within the next couple of years. This assumption is based on my current savings rate, some equity finally (potentially) getting cashed out from a previous employer, and so on.

I don't have kids and all indications are that I won't. With that in mind, I don't expect too many life changes that will drastically impact my spending over the next several years. So... what do I do in this case? Up my spending? While I won't claim to live a completely mustachian lifestyle, I think that I do relatively well keeping myself in check, yet I rarely want for much. It seems illogical to increase my spending when I don't crave more stuff, but it's equally silly to accumulate more and more wealth for no purpose... right?

What would/are you all doing as you approach this very-nice-to-have problem?
My spouse and I are getting real good at asking the questions in this area, but we don't have the answers.

Here's some ideas, in no particular priority order:
1.  Take a weekend (or a couple of weeks) to complete Ernie Zelinski's Get-A-Life Tree thought-provoking chart.  If you're feeling fulfilled by work, and you enjoy the complexity with some autonomy, then that's what you should keep doing as long as it's fun.  However the other side of financial independence is a greatly reduced tolerance for the workplace's BS.  No matter how fulfilled you may feel by work, it might not be enough to deal with what's overfulfilling your BS bucket.  In case that happens to you too, then have an exit strategy and a list of interests to move into... not just running away from a bad office environment.

2.  Consider a long-term care insurance policy.  They may not be worth the price or the coverage, but you could also look at hybrid LTC-life policies or couple's LTC policies.  This is more a sleep-at-night comfort factor than an actual financial need.

3.  Think about funding 529s for neices, nephews, and other relatives.  Work out the details with their parents so that there aren't any unpleasant surprises.

4.  You can gift anyone $14K/year, and you can gift as many anyones per year as you want.  Then your spouse can do the same with $14K/anyone as well.

5.  Establish a college scholarship fund at a college.  As little as $25K will fund a $1000/year award.  You name the scholarship but let the college financial aid office figure out the eligibility and application requirements.

6.  Endow a bigger version of #5 by pledging $25K/year for 10 years.  The college will really be happy with you!

7.  Serious home improvements:  a 50-year metal roof, a whole-house water conditioner, photovoltaic panels, an electric vehicle charged from your PV panels, energy-efficient A/C & furnace, energy-efficient windows, extra insulation, maybe a pool/hot tub (if that's your lifestyle), landscaping, fruit trees, a veggie garden with power tools to boost the size/yield, a new septic system, a gray-water recycling/irrigation system... capital investments to permanently reduce your home's operating expenses.  Of course you'd want to live there for at least another decade to reap the payback.

8.  Put some amount in a charitable gift fund every year.  The idea is to make the contributions every year for tax purposes, and then you can make the grants to the charities whenever it's appropriate-- fundraising challenges with matching donations, an exceptionally large donation (that you built up with several years of contributions), or pledges stretching out over several years of milestones.  The biggest advantage of a CGF, besides uncoupling the timing of the tax deductions from the grants, is that you can make the grants completely anonymously.  No more unsolicited fundraising mails or phone calls.

9.  Now that you're FI, consider annuitizing a portion of your portfolio-- 25% or so in an inflation-adjusted SPIA, or 30%-40% in a fixed SPIA.  This longevity insurance will assure you a minimum level of income (above Social Security) and allow you to feel more comfortable taking risks with the rest of your portfolio.

I'd also see if Nords chimes in on this thread, I think he actively does this as part of his "charitable" adventures
10.  Angel philanthropy investing.  Read a few library books first:  Rob Robinson's "Angel Investing" (Rob's a good friend, and a very smart business prof), plus Scott Shane's "Illusions of Entrepreneurship" and "Fool's Gold".  If you're getting into it then start reading the Venture Hacks blog, the personal blog of Paul Graham (of Y Combinator) and the AngelList website.  If that still doesn't scare you off then look up an angel group in your area via the Angel Capital Association, 500 Startups, or Tech Stars.  This paragraph should ideally take you 6-12 months.  One month is too fast.

"Accredited investor" means $1M of investable assets (home equity doesn't count), or $200K/year annual salary, or $300K/year income between you and your spouse.  Nobody audits that, but you will have to sign affidavits for the lawyers of each startup in which you invest.  Again nobody cares unless you get into litigation with the startup, but that's the SEC rule.  Do not invest by yourself-- join an angel group and work alongside them.  If you do this on your own you will be quickly fleeced.

I've been doing angel investing for seven years.  I took it slowly and invested my money over a five-year period.  40% of my investments are already worthless, which is encouraging in a "fail fast" sort of way.  Another 10%-20% are on the edge of the cliff.  Another 30% are too close to call either way.  10%-20% are probably going to be acquired within the next five years.  (Note that means a total of 12 years to the exit.)  I might even make a profit.  This is typical of the statistics-- one veteran angel has invested in over 100 companies during the last decade, and all of his returns to date have come from four of them. 

I believe that the main reason one should do angel investing is because it's a philanthropic version of job creation.  It might even turn out to be sustainable.

Another reason to do angel investing is to immunize yourself against the temptation when you're in your 60s (and older).  You don't want to have an investment whose exit strategy is "probate".

Bonus #11:  A couple years on your country's roads in an RV, or a couple years traveling Asia/Europe in whatever style suits your fancy.

Default #12:  Let it all pile up.  Use your will to establish a charitable foundation (after you're both gone) to give it all away over the span of 20 years.  Put a trusted relative or a professional trustee in charge of the foundation. 
« Last Edit: November 21, 2014, 10:28:09 PM by Nords »

EscapeVelocity2020

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Re: 25x expenses... now what?
« Reply #23 on: November 22, 2014, 08:04:01 PM »
Of all of the 'monetary' things I've done in my life, going on an African safari in Tanzania was the most life-changing.  I can give you details on the company my family used.  Visit a Masai village, then you'll really have something to think about.  Listen to a herd of elephants cross the savanna crunching trees, see lions (my avatar) and cheetah up-close, and even rhino and (even more dangerous than the big five) hippos in the distance outside the vehicle window.  Have your lunch stolen by vervet (monkeys) and sleep with unearthly animal sounds outside your hut, or sip a beer while watching the sun set over the ngorongoro crater...  Really puts things in a new perspective.

I'm sure others would chime in about surfing, sailing, scuba, and countless other travel destinations...  Once you hit FI, you need to loosen the purse strings a little to explore and re-establish balance; don't let time waste away while clutching money too dearly.  Good luck!

Malaysia41

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Re: 25x expenses... now what?
« Reply #24 on: November 22, 2014, 09:50:53 PM »
Of all of the 'monetary' things I've done in my life, going on an African safari in Tanzania was the most life-changing.  I can give you details on the company my family used.  Visit a Masai village, then you'll really have something to think about.  Listen to a herd of elephants cross the savanna crunching trees, see lions (my avatar) and cheetah up-close, and even rhino and (even more dangerous than the big five) hippos in the distance outside the vehicle window.  Have your lunch stolen by vervet (monkeys) and sleep with unearthly animal sounds outside your hut, or sip a beer while watching the sun set over the ngorongoro crater...  Really puts things in a new perspective.

I'm sure others would chime in about surfing, sailing, scuba, and countless other travel destinations...  Once you hit FI, you need to loosen the purse strings a little to explore and re-establish balance; don't let time waste away while clutching money too dearly.  Good luck!

V2020 - have you read West With the Night by Beryll Markham? If not, given that you've hung out with the Masai and gone on African safari, I highly recommend it. It's written beautifully.

homehandymum

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Re: 25x expenses... now what?
« Reply #25 on: November 23, 2014, 01:12:45 AM »
Nords - that is a super fantastic list.

Nords

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Re: 25x expenses... now what?
« Reply #26 on: November 23, 2014, 10:26:43 AM »
Nords - that is a super fantastic list.
Thanks-- I'm probably going to get a blog post out of it, so let's keep adding to it!

MMMdude

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Re: 25x expenses... now what?
« Reply #27 on: November 23, 2014, 03:07:42 PM »
I am almost at 25X expenses so this post hit close to home as when I get there, then what?  Well for me I do not believe in 4% SWR and an aiming at 3% at most and likely in the 2.75% range before I feel  really comfortable.  Especially given the stock market highs we are at right now and yes I know the 4% rule factors that all in.

So once I get to that point in 3 to 5 years I will be in my early 40's.  I will likely go on some adventure travel type vacations while I am still young enough to do it.  The Angel investing others brought up sounds very interesting and something I would look into. 

Nords

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Re: 25x expenses... now what?
« Reply #28 on: November 23, 2014, 05:31:55 PM »
I am almost at 25X expenses so this post hit close to home as when I get there, then what?  Well for me I do not believe in 4% SWR and an aiming at 3% at most and likely in the 2.75% range before I feel  really comfortable.  Especially given the stock market highs we are at right now and yes I know the 4% rule factors that all in.
So once I get to that point in 3 to 5 years I will be in my early 40's.  I will likely go on some adventure travel type vacations while I am still young enough to do it.  The Angel investing others brought up sounds very interesting and something I would look into.
You're essentially saying that instead of possibly consuming some of the principal of your investment portfolio, you'd rather live off just the dividends.

I think you're going to find that perspective difficult to reconcile with the practices of angel investing, but at least you'll have enough excess capital to do either one.  Possibly both.

Gin1984

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Re: 25x expenses... now what?
« Reply #29 on: November 23, 2014, 05:49:58 PM »
Hi all,

The recent stock runup has been good to me, as I'm sure it has for many of you. Tallying everything up, I recently discovered that I've officially exceeded 25x my annual expenses (about $35K per year), just in time for my 35th birthday next week.

Here's the issue... I don't think I'm ready to hang up my professional hat just yet. For better or worse, I still find that work gives me purpose -- along with many other interests I enjoy. I even have been contemplating pursuing another degree to further my career (partially work-paid).

I know that not everyone here agrees on the whole 4% rule, but even if I wait it out for a while longer, I anticipate that I'll hit the equivalent of 3% within the next couple of years. This assumption is based on my current savings rate, some equity finally (potentially) getting cashed out from a previous employer, and so on.

I don't have kids and all indications are that I won't. With that in mind, I don't expect too many life changes that will drastically impact my spending over the next several years. So... what do I do in this case? Up my spending? While I won't claim to live a completely mustachian lifestyle, I think that I do relatively well keeping myself in check, yet I rarely want for much. It seems illogical to increase my spending when I don't crave more stuff, but it's equally silly to accumulate more and more wealth for no purpose... right?

What would/are you all doing as you approach this very-nice-to-have problem?
My spouse and I are getting real good at asking the questions in this area, but we don't have the answers.

Here's some ideas, in no particular priority order:
1.  Take a weekend (or a couple of weeks) to complete Ernie Zelinski's Get-A-Life Tree thought-provoking chart.  If you're feeling fulfilled by work, and you enjoy the complexity with some autonomy, then that's what you should keep doing as long as it's fun.  However the other side of financial independence is a greatly reduced tolerance for the workplace's BS.  No matter how fulfilled you may feel by work, it might not be enough to deal with what's overfulfilling your BS bucket.  In case that happens to you too, then have an exit strategy and a list of interests to move into... not just running away from a bad office environment.

2.  Consider a long-term care insurance policy.  They may not be worth the price or the coverage, but you could also look at hybrid LTC-life policies or couple's LTC policies.  This is more a sleep-at-night comfort factor than an actual financial need.

3.  Think about funding 529s for neices, nephews, and other relatives.  Work out the details with their parents so that there aren't any unpleasant surprises.

4.  You can gift anyone $14K/year, and you can gift as many anyones per year as you want.  Then your spouse can do the same with $14K/anyone as well.

5.  Establish a college scholarship fund at a college.  As little as $25K will fund a $1000/year award.  You name the scholarship but let the college financial aid office figure out the eligibility and application requirements.


6.  Endow a bigger version of #5 by pledging $25K/year for 10 years.  The college will really be happy with you!

7.  Serious home improvements:  a 50-year metal roof, a whole-house water conditioner, photovoltaic panels, an electric vehicle charged from your PV panels, energy-efficient A/C & furnace, energy-efficient windows, extra insulation, maybe a pool/hot tub (if that's your lifestyle), landscaping, fruit trees, a veggie garden with power tools to boost the size/yield, a new septic system, a gray-water recycling/irrigation system... capital investments to permanently reduce your home's operating expenses.  Of course you'd want to live there for at least another decade to reap the payback.

8.  Put some amount in a charitable gift fund every year.  The idea is to make the contributions every year for tax purposes, and then you can make the grants to the charities whenever it's appropriate-- fundraising challenges with matching donations, an exceptionally large donation (that you built up with several years of contributions), or pledges stretching out over several years of milestones.  The biggest advantage of a CGF, besides uncoupling the timing of the tax deductions from the grants, is that you can make the grants completely anonymously.  No more unsolicited fundraising mails or phone calls.

9.  Now that you're FI, consider annuitizing a portion of your portfolio-- 25% or so in an inflation-adjusted SPIA, or 30%-40% in a fixed SPIA.  This longevity insurance will assure you a minimum level of income (above Social Security) and allow you to feel more comfortable taking risks with the rest of your portfolio.

I'd also see if Nords chimes in on this thread, I think he actively does this as part of his "charitable" adventures
10.  Angel philanthropy investing.  Read a few library books first:  Rob Robinson's "Angel Investing" (Rob's a good friend, and a very smart business prof), plus Scott Shane's "Illusions of Entrepreneurship" and "Fool's Gold".  If you're getting into it then start reading the Venture Hacks blog, the personal blog of Paul Graham (of Y Combinator) and the AngelList website.  If that still doesn't scare you off then look up an angel group in your area via the Angel Capital Association, 500 Startups, or Tech Stars.  This paragraph should ideally take you 6-12 months.  One month is too fast.

"Accredited investor" means $1M of investable assets (home equity doesn't count), or $200K/year annual salary, or $300K/year income between you and your spouse.  Nobody audits that, but you will have to sign affidavits for the lawyers of each startup in which you invest.  Again nobody cares unless you get into litigation with the startup, but that's the SEC rule.  Do not invest by yourself-- join an angel group and work alongside them.  If you do this on your own you will be quickly fleeced.

I've been doing angel investing for seven years.  I took it slowly and invested my money over a five-year period.  40% of my investments are already worthless, which is encouraging in a "fail fast" sort of way.  Another 10%-20% are on the edge of the cliff.  Another 30% are too close to call either way.  10%-20% are probably going to be acquired within the next five years.  (Note that means a total of 12 years to the exit.)  I might even make a profit.  This is typical of the statistics-- one veteran angel has invested in over 100 companies during the last decade, and all of his returns to date have come from four of them. 

I believe that the main reason one should do angel investing is because it's a philanthropic version of job creation.  It might even turn out to be sustainable.

Another reason to do angel investing is to immunize yourself against the temptation when you're in your 60s (and older).  You don't want to have an investment whose exit strategy is "probate".

Bonus #11:  A couple years on your country's roads in an RV, or a couple years traveling Asia/Europe in whatever style suits your fancy.

Default #12:  Let it all pile up.  Use your will to establish a charitable foundation (after you're both gone) to give it all away over the span of 20 years.  Put a trusted relative or a professional trustee in charge of the foundation.


You can also give it to your department and let them decide.  Often the professors know the students who need it a bit more than the financial aid offices.  Though I admit my bias, none of the three financial aid departments I have had access to (community college, undergrad and grad) have been good.

clifp

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Re: 25x expenses... now what?
« Reply #30 on: November 23, 2014, 07:09:13 PM »
The one thing that most people experience that work once they have reached FI is that their tolerance for workplace politics decrease dramatically.   As it has been explained by others.
The workplace is like being in room with a large bucket, every day a chute opens up and shit comes down from upon high.  The amount of shit varies greatly some days none others days gallons.
Periodically people come and remove shit from the bucket. This can be the feeling of satisfaction from completing a project, enjoyable co workers,  praise from the boss, and raises and promotion. However for most people the single largest source of shit removal is the paycheck, couple of times a month a bunch of crap is removed from the bucket. Once you have achieved FI, the amount of crap removed from bucket each paycheck shrinks.  You don't really need to the paycheck to pay for the nice dinner, vacation, new computer or whatever, income from investments can do the same thing.  Eventually for most people you find the BS bucket overflowing, and you feel like you are working in environment, ankle, knee, or waist deep in crap.   When that situation becomes intolerable than its time to leave.  Personally it took me about 2 years to go from FI to I'm gone.