Author Topic: Halfway to FI - how to leavethe rat race now?  (Read 4110 times)

pka222

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Halfway to FI - how to leavethe rat race now?
« on: March 24, 2013, 12:30:53 AM »
Hey MMM forum - So, after taking some good advice from MMM and Jacob and ignoring a bit as well (doh!) I'm at a cross roads.  Thankfully I  can save the self face punches by seeking good advice early. My job of 5 years will be up/done in less than a year.  In that time I've gone from negative net worth to 200K+; with everything tracking as is we should be at about 250K in Jan of 2014 when the job ends. Excellent!  I could probably/possibly stay on for another contract and be FI in 4-5 yr(expat living overseas great tax rate).   Its been a good run but I'm over tired of selling my time and with the new baby I'd just like to have more say over what I spend the day doing, hence the interest in MMM and ERE of late.  I want to be done with falling asleep to thoughts of the next days meetings, business travel and reporting requirements as soon as I can- one more year is doable - 5 years - too much.  I've been following the ERE i.e. Jacob's methodology- focused on reducing expenses and saving - at the expense of investing for the time being.  So  I'm rootless, soon to be jobless, my partner can work anywhere - globally- but will bring in less than 10K annually, and we have a small child.

 Which brings me to my question.  We're not FI yet but are ready to quit.  With  somewhere around 200K in liquid assets, I'll need a bit higher than a 4% SWR to make ends meet. I'd like to keep growing the nest egg- at least double it - but without returning to the salaried work world. 

So senior mustacians tell me: If you had a small nest egg, need at least 15K income to cover basic costs (+partner's income) - and had a goal of doubling your net worth in 5 years, what would you do? And where would you go?

Bonus points if you can address the constraints:
   you have a family you'd like to be near most of the time and want to have time for ,
   You can live anywhere but are focused on areas with lots of natural beauty, low cost of living, moderate temps -
   Spending more than half the day on the computer is undesirable
   Working more than 100 hours a month would not be ideal.
   Current skill set- civil servant - int. development - not the most mustancian of skill sets- I know.



One idea that sound sort of doable
1) To find a location that works for me and the family in the USA, with a recovering housing market and see what we can do in terms of real estate- something like what Lacking Ambition (Mikebos) tells as his story of buying a few homes, rehabbing them and being a landlord.  Perhaps that would be the route for me for the next few years?  The draw back is rusty to nonexistent home rehab skills, no idea what market I could afford to buy into that we'd also like living in.  Plus-I like getting my hands dirty and I like crunching numbers.  Colorado sounds great but housing costs might rule it out.  The big island also looks nice but same issue with costs. 

Be mean, be creative, save me future face punching.

gooki

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Re: Halfway to FI - how to leavethe rat race now?
« Reply #1 on: March 24, 2013, 02:15:06 AM »
Simply putting you money in the stock market and assuming 7% return will give you a 40% net worth increase over 5 years.

So they way I see it your options are.

Paid or self employment that covers you expenses and the remaining 10% per annum increase to your current capital.

Unlevereged rental investment (enough to cover your expenses) with the capital growth coming from an increase in property value.

pka222

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Re: Halfway to FI - how to leavethe rat race now?
« Reply #2 on: March 24, 2013, 05:29:29 AM »
Hey Gooki,
Thanks for the suggestion- sure enough your numbers work out.  What I'm trying to get at is how to structure the next few years and the next geographic move to maximize our savings and enjoyment.  The small amount of capital we have will surly be more productive in Dallas than San Francisco - at least that's what I'd like to hear more about-. I'm not super keen on Dallas but I'd listen to an Sierra/Rocky mountain argument, or even Christchurch for that matter.

Speaking of location - I was just down your way yesterday, in Auckland for a couple days - had a great run out to the beaches in the morning and a nice BBQ in the afternoon.  Now Auckland is a nice city, lots of great attributes- but one that in my particular situation might not be as profitable as somewhere a little less "hot" in terms of real estate at least.  What do you think, if you were trying to work less and grow your savings, where would you head to?

Cheers

arebelspy

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Re: Halfway to FI - how to leavethe rat race now?
« Reply #3 on: March 24, 2013, 07:56:09 AM »
Unlevereged rental investment (enough to cover your expenses) with the capital growth coming from an increase in property value.

As previously mentioned, that is not capital growth of any real amount.  That is your stache keeping up with inflation.

The property value will tend to increase with inflation.  I.e. 0% real return.

OP: How about moving overseas and living super cheap while building the stache for the next few years?  Often one can make 60k+, have all of it tax free (foreign income exclusion act), and live on about 10k (that would be equivalent to 30k here).

Although in my mind you're approaching this wrong.  Don't look for a place to live so you can "get through" the next 5 years, but think about what you want to do with the rest of your life and get closer to that now.  Give us more details about what life would be like if you had 500k stache right now.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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MooreBonds

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Re: Halfway to FI - how to leavethe rat race now?
« Reply #4 on: March 24, 2013, 09:10:32 AM »
One idea that sound sort of doable
1) To find a location that works for me and the family in the USA, with a recovering housing market and see what we can do in terms of real estate- something like what Lacking Ambition (Mikebos) tells as his story of buying a few homes, rehabbing them and being a landlord.  Perhaps that would be the route for me for the next few years?  The draw back is rusty to nonexistent home rehab skills, no idea what market I could afford to buy into that we'd also like living in.  Plus-I like getting my hands dirty and I like crunching numbers.  Colorado sounds great but housing costs might rule it out.  The big island also looks nice but same issue with costs. 

There are many ways to achieve one's dreams. Most on this board are very young, have very low (current) budgets, and have the invincible optimism of youth - which can be a very strong asset to have.

However, I tend to fall in the more conservative camp when it comes to pulling the plug and FIREing away. That, and many on the ER forum who are in their 40s/50s/60s will add a dose of real life experiences to the mix and help people realize that you can't always assume living on just $10k/year in expenses indefinitely. Sure, some can get by and do it - but it's not always possible.

The advantages of buying a home now is the incredibly low mortgage rate. However, you yourself say that you have no construction experience. If you are unwilling/unable to learn, then I wouldn't suggest buying a rehab and renting it out - especially as a long-distance landlord.

Also, I would strongly suggest you stay with a gig that is enabling you to sock away roughly $50k/year. So, either suck it up and work another 5 years to double your stash (because the markets don't always go up), or look for another job state-side that would give you a decent income. You can try to do a part-time gig somewhere for just enough earnings to make ends meet....but if you have the opportunity to keep growing your stash at that rate, I would suggest you make hay while the sun's still shining. Life brings unexpected expenses, especially as a homeowner. A $200k (or even $400k) stash doesn't offer much growth, income, or safety if you have a few major unexpected financial hits over the span of a few years, with your home, health, or anything.

There could be opportunities later on to get a full-time job if you 'need it' - but nothing in life is guaranteed, especially if you try to re-enter your profession after 5-10 years of part-time work, and are competing with people who have a full resume history and appear more driven (even though most people change employers, no employer wants to hire someone knowing that they worked part-time for 10 years because they wanted to retire early, and are forced back to full-time employment...because they would wonder if they'll just quit in a few years like they did last time).


Jamesqf

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Re: Halfway to FI - how to leavethe rat race now?
« Reply #5 on: March 24, 2013, 11:18:49 AM »
First question: What do you enjoy doing?  Which of those things do you think you will enjoy doing for maybe the next 50 years or so?

Now out of those things you enjoy doing, what could you make some money at?

You're in a position where you could afford to invest some time & money in retraining.  If you really think you'd enjoy rehabbing houses, you could take basic skills courses at a community college, then find a contractor and work out some sort of apprenticeship. 

Nor should you discount your current skill set.  They might well apply to smaller towns, working part time, even if it means you're stuck with the dreaded "overqualified" label.  As for instance a friend who spent a couple of decades managing payroll &c for a fairly large company, then moved to a rural area and works part-time doing the accounts for the rural hospital.  Yeah, she's over-qualified, but she has a 5 minute commute and gets to ride her horses 4 days a week.

gooki

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Re: Halfway to FI - how to leavethe rat race now?
« Reply #6 on: March 25, 2013, 02:09:47 AM »
Speaking of location - I was just down your way yesterday, in Auckland for a couple days - had a great run out to the beaches in the morning and a nice BBQ in the afternoon.  Now Auckland is a nice city, lots of great attributes- but one that in my particular situation might not be as profitable as somewhere a little less "hot" in terms of real estate at least.  What do you think, if you were trying to work less and grow your savings, where would you head to?

Nice to see youve made it to New Zealand, I had written a long reply, but lost it, so here's the shorter version.

If you can leverage your current income to get into the rental market in the US a couple of rental and a place for yourself should be doable for $500k. So if you can borrow $300k at 3% and are happy carrying that much debt then that'd be one way to reach you goal.

To directly answer your question

If you had a small nest egg, need at least 15K income to cover basic costs (+partner's income) - and had a goal of doubling your net worth in 5 years, what would you do? And where would you go?

1. I would move to Coopers Beach, New Zealand

2. I would buy one of these houses:
http://www.trademe.co.nz/property/residential-property-for-sale/auction-571855879.htm
http://www.trademe.co.nz/property/residential-property-for-sale/auction-566619434.htm
http://www.trademe.co.nz/property/residential-property-for-sale/auction-545762992.htm

3. I would rent it out as a holiday home over summer while we are in Christchurch staying with family. At $1,000 a week, that would bring in close to $5,000 to $8,000 per year.

4. I would build speakers a d sell them online. This should cover the remaining $10,000 a year to cover living expenses.

5. I would keep chasing down high paying contract work in the fields of web, graphic and UI design, this income would be invested.

6. And most importantly I'd be exploring the great outdoors with my family. Down at the beach with my kids, walking though our native forests, plant a garden, cook great food, go windsurfing, get a kayak and go fishing, go mountain biking, put my feet up with a good book and some home brew, help out at the local school.
« Last Edit: March 25, 2013, 02:32:58 AM by gooki »