Author Topic: First year of FIRE: how to approach?  (Read 721 times)

diffusate

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First year of FIRE: how to approach?
« on: August 01, 2018, 06:43:51 AM »
Posted this as a follow up to a case study, but realizing it's more of an independent question. Case study thread for reference: https://forum.mrmoneymustache.com/case-studies/case-study-selling-house-windfall/

Partner is hitting the wall with burnout. At this point she is planning on making to her next stock vest in November and quitting ASAP after. My work is also starting to phase out, it's looking like I'll be bringing in around 20k next year if I don't hustle up some more work.

We also have a bit more spending data, and are honing in on what our post-FIRE budget may look like. If we keep the condo and don't work too hard to control spending, it will be something like 55k/year, including condo ITI. With a neutral market, we should have about $1,075,000 invested and owe $255k on a condo worth about $550k.

At 4%, we would have about a $12k gap between what we could withdraw and our current spending. My 20k income will make up for this, but I may not have the same income in 2020.

There's two ways we are thinking about next year:

1. "Woooooo! We are rich!" A solid year off to enjoy to the fullest. Our budget does include $7k in travel, but we may even blow past this by a few k. We wouldn't worry too much about money. Partner has never taken more than a few weeks off since starting to work as teenager, and I've been going pretty hard for a decade. At the end of the year we would reassess - either shift to a lower cost FIRE lifestyle, or get some small gigs to fill the gap.

2. "We're close but fell a little short" Shift to a lean FIRE mindset. Lower spending to the sustainable $43k, either by renting/selling the condo or by limiting travel (in duration or ambition). Use my income to pad the stache rather than spend.

Option 2 definitely feels more prudent. Sequence of returns makes the first few years spending extra important. On the other hand, she is 28 years old and has software engineering skills, and I have a strong professional reputation. It seems like it shouldn't be too hard to earn a little down the line. There's also part of me that just feels kind of surprised to be young, in love, and have north of $1.3m net worth, and that maybe we should live it up a little.

Really curious to see what you all think! Opinions, questions to consider, or any other thoughts are most welcome.

mozar

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Re: First year of FIRE: how to approach?
« Reply #1 on: August 01, 2018, 12:43:51 PM »
I can understand that it's hard to go from doing the grind for 10 years and then suddenly having options. It takes a shift in mindset. I would live it up for awhile and you'll probably find new and interesting ways to make money down the line. I would also do lean FIRE but for me lean FIRE is way less than 43k.

damyst

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Re: First year of FIRE: how to approach?
« Reply #2 on: August 03, 2018, 04:55:37 PM »
This is entirely subjective, but I'd say living it up is the order of the day.
The way you described it, the likelihood of you two never earning income again is close to nil. You'd have to work hard at not working :-)
The 4% SWR is a statistical observation, no more. There's nothing magical about it. Some of my favorite MMM posts are the ones that explain how SWR derives from flexibility, not the other way around.

StetsTerhune

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Re: First year of FIRE: how to approach?
« Reply #3 on: August 05, 2018, 08:19:33 AM »
I'm a huge proponent of option 1. I have been (mostly) FIREd for a little over 2 years now and that's pretty close to what my attitude has been.

It doesn't sound like (or maybe I'm just projecting) like you don't have enough of an idea of what your next ~60 years will look like for it to worthwhile to try spending a "sustainable" $43k. Do what you want next year, it will give you a better idea of what you want your life to look like moving forward.

After a year of that, or less, or more, reevaluate. You have enough money and skills that you don't have anything to worry about in the short or medium term.