Author Topic: Any changes you would make to this plan?  (Read 853 times)

Nycginger

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Any changes you would make to this plan?
« on: April 08, 2018, 01:46:40 AM »
Iím a 31 year old entrepreneur and will probably continue to start businesses, so I live minimally with the expectation the next one could make 0 or a billion dollars. Itís very important to me to remain free and not need a normal job (Iím always open to part time non serious ones). Open to any changes I need to make. My expenses are higher than Iíd like, but about $1,000 of the $2,200 is NYC rent, which is pretty low.

Here's where I'm at financially:

My income has ranged from 20k to 300k, w/ an average of 70k. Iíve basically always lived on 20k regardless of how much I make. My net worth is a little under 550k w/ the following breakdown.

175k cash (mostly sitting in a high yield savings account around 1.5%)

175k investments between a taxable account and retirement accounts

134k business equity

30k of my cash sitting in the business which I draw $1,800 a month from

Note: I left business in 2016. I still own 70% and my business partner has the option to buy 40% from me at a 190k evaluation. It was break even for 2016-17 and has just started to become profitable again. Who knows if that will continue?

8k in crypto currencies

20k in tax credits that I can redeem in the future

10k (other random property, paid off car, etc.)

When I plug in just the cash and investments (assuming I have it all invested fully in the next few years) at 4.5% (I know I'm supposed to use 4% but I'm also leaving out my other assets and the likelihood I'll make money doing something), and factor in spending $2,200 a month, in 33 years the Future Value is $639,000.

I also donít expect to have to put MUCH of my own cash into the next business. I tend to bootstrap and then either get investors or keep putting profits back into the business.

One change Iím thinking of is investing some of the cash into higher return than the Ally savings but still relatively safe (Iím average dollar investing it into broad ETFs at $1,000 a month currently). Not sure if itís too premature to be thinking about increasing rates? Anyways, Iím open to suggestions on those products as well or any general advice. Thanks!

civil4life

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Re: Any changes you would make to this plan?
« Reply #1 on: April 09, 2018, 07:28:27 AM »
I am not an investment guru so basically sharing on personal experience.

Before going to the investing what are your FIRE plans?  Based on your spending and current NW you are already in the FIRE range?

Overall I do not see anything that jumps out at me.  You seem well diversified.  The only one I question is the large amount of cash in the high yield savings.  I would honestly only keep 6 months of spending in the high yield savings unless you have something that you know you will need a large sum of liquid cash in the near future like buying a house.  Since you live on such a small budget 6 months would only be $10k.  I have pretty much all of my investments in ETFs.  Even if you chose a more conservative one, you would be much better than keeping it in the high yield savings accounts.  Plus now is a perfect time to dump some cash in with the market in a bit of a down swing.

Laura33

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Re: Any changes you would make to this plan?
« Reply #2 on: April 09, 2018, 08:29:38 AM »
I think you are misapplying the 4% rule -- that figure reflects how much you can withdraw from your portfolio, not its growth rate.  For the growth rate, you can use the rule of 72:  basically, take the rate at which you expect the market to grow, and divide that into 72, and the result is how many years it will take for your current 'stache to double.  So if you take the $350K that you have in cash and investments, and you expect the market to earn an average of 7% over the next decade, you will have about $700K in 10 years.  And once you have $700K, the 4% rule says that you can take out $28K/yr, plus inflation increases, likely forever.  So even if you never save another cent and your business investment crashes, you will be FI in less than ten years. 

I agree with civil4life: you need to identify your goals.  You seem to have a very solid foundation and low expenses for your part of the country, which should set you up very very well for the future, in whatever form that takes.  The primary change I would make is getting your extensive cash into investments sooner rather than later - if half your 'stache is in cash, your average return over the next decade is likely to be more like 3-4% than 7%, which means it will take more like 20 years to reach FI.  Also, if it were me, I'd sell the crypto, but it is such a small portion of your portfolio that it won't really hurt you if/when it goes to $0, so if you enjoy playing with it, go ahead.

Nycginger

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Re: Any changes you would make to this plan?
« Reply #3 on: April 12, 2018, 01:26:53 PM »
Thanks, Laua 33!

Your first paragraph also assumes that I am able to come up with living expenses over the next 10 years, right? I donít currently have an income other than the last business. In between businesses at the moment.

Thanks!