Author Topic: Struggling with the "When to exit?" Question  (Read 3408 times)

BeFree

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Struggling with the "When to exit?" Question
« on: February 23, 2016, 12:17:33 PM »
Hello, I'm new to this forum, but have been reading MMM for a while now, slowly going through all this blogs from the beginning. I've read a bit on the forum, and everyone seems really friendly and non-judgmental, so hoping for some constructive thoughts =)

I have been burned out at my job for a number of years now. Occasionally, I get a project I hate or my manager changing his mind so I have to start something completely over or something corporate that's stupid comes up that makes me just want to leave and quit right there and then. I feel lazy and spoiled sometimes, as I know I should just be thankful for what I have, but I guess I've just been slowly dying at this job for a long time at this point.

I had plans to quit this April, after this year's bonuses had been handed out, in addition to my house work being completed so I could have a clearer picture as to where my savings were at, but I still feel like I should just keep "surviving" to keep getting my paycheck and increase my savings, so I can be completely free.

The reason I have been stuck here originally was them giving me the four-day work week. I didn't want to go back to five days. They did something stupid (ie - could be viewed as illegal) last fall that I pointed out to them, so was able to arrange an even more awesome schedule, which basically allows me to keep my full-time salary while only being in the office for part-time hours (though I'd rather officially be part-time, they won't let me).

I feel like I have a really good thing going here (good salary, low hours, "flexible" schedule), and if I kept surviving, I could continue bettering my situation to being able to actually "retire". At a minimum, if I could wait another two years until after I've gotten rid of my PMI (I haven't always been an aspiring and knowledgeable MM ;-) ), that will reduce my living expenses a couple $100.

But at the same time, I lost a good friend at a young age a few years ago, which really got me focusing on realizing that life is short and each day is no guarantee. If I keep "surviving", I worry about not ever getting the chance to live life anywhere close to what I aspire to. My job makes my days feel pointless and useless. I want to feel like I'm making a difference, but no job I would enjoy would pay enough right now (immediately anyway; if I didn't have my job, I would have more time to focus on building up something else up). I'm so burned out and admittedly have high "down-time" requirements for my personality, so building something up while still continuing my job is not very attractive. In addition, right now any spare energy I find myself with, I'm focusing on decluttering as I feel that's really the first step in gaining time and energy for other uses.

There is a lot I am trying to do with my life right now, so it's really hard to prioritize, come up with a plan, and figure out where to go next. Thanks for reading =)

nereo

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Re: Struggling with the "When to exit?" Question
« Reply #1 on: February 23, 2016, 12:34:21 PM »
A lot more information is needed before we can be of much help. 
1) how close are you to hitting your "FI" number?
2) what can you save if you stick it out another 1-2 years?
3) what kind of alternative job (and salary) are you looking at if you switch your careers now?

you keep mentioning words like "survive" and "slowly dying" to describe your current job, so I think you definitely should consider alternative options. 

BeFree

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Re: Struggling with the "When to exit?" Question
« Reply #2 on: February 23, 2016, 12:59:18 PM »
Thanks for the questions. I wasn't sure all of what to include.

1. I'm probably pretty far from hitting my FI number (financially independent?). Does anyone have a calculator that includes current assets and current spending to account for? I've kept the link to the MMM blog about how long it would take you given your current % expenses to become FI, but that doesn't factor in your current status...

2. I am continually looking at my expenses, as sometimes I'm surprised at how much is going rather than coming. Now that I've decided to stay at my house, rather than sell, I'm trying to get caught up on some maintenance and upgrades so I'll be "set" for a number of years after I were to quit, so that has been some of what has been "going" =P But I could see myself saving another $25k per year at my current expenses... My mortgage and pet expenses are my highest right now.

3. Unfortunately, this is a lot of unknowns until I get myself to a point where I could start dabbling in something before I were to quit. A lot of my ideas are just random things like guru and the like to utilize my computer skills in small contracting jobs. I also have a few classes in my docket to build my programming skills for websites and phone apps, plus one class to help find my inner passion and build passive income around that. But as far as inner meaning jobs, they're all low paying jobs like senior home care, which I'd love to do for a small number of hours a week as a side job. I'm someone who doesn't want to do ONE thing 40 hours a week, but rather see myself doing a little technical work for higher pay and a little of feel good work for low pay. That's probably what I would do even if I were FI (am I using that correctly? new to all these acronyms ;-) ), as I do enjoy puzzles and figuring out how to make processes automatic, user friendly, error free, etc.

Does that help at all? Maybe the answer is still that I need to continue figuring out answers, as I think part of my problem is that I don't have all the answers/plans yet ;-)

Cassie

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Re: Struggling with the "When to exit?" Question
« Reply #3 on: February 23, 2016, 01:06:48 PM »
Yes some people die young but most don't. Look up the stats for your age group. If you get diagnosed with a fatal illness quit then.  It seems like you have a good deal getting paid f.t. but not being in the office that amount of time. Maybe what you need is a career change.

nereo

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Re: Struggling with the "When to exit?" Question
« Reply #4 on: February 23, 2016, 02:20:58 PM »
Some of the answers are easier than others

1) your FI number is basically ~25x your future annual spending.  If you plan on spending $40k/year then you need $1MM.  If you will have some income (from SS, pension, part-time job, etc.) deduct that from your spending.  If you want to be really conservative go slightly higher (e.g. 28x future spending), if you are more flexible with your plans you could go a little lower (20x future spending).  With a paid off house, no debt and no dependents it's relatively easy to get expenses down in the $20ks (and a FI number closer to $500k-600k), but that comes at the expense of having more savings.
play around with cFireCALC and firesim to get some ideas of how various portfolios have held up over the last 100 years.

2) $25k extra/year is very good... but i guess I didn't word the question carefully.  What I meant was a bit more complete of a picture - how much total would you save if you worked another 2 years (including extra pension benefits, a lower mortgage, etc).  Ultimately what we're getting at here is how much have you saved, and how much do you need (see #1)

3) There's never a bad time to look around and see what else you might want to do.  Polish your resume and scout around for  jobs you might like better (even if you never interview).  If you want to have a side-gig that pays you money, start doing that on a part-time basis and see if it's something you a) enjoy and b) can make money doing. 

A few terms to help you out:
FI = Financially Independent.  There are varying definitions, but basically around here we say you have hit "FI" when you never have to work again... which is basically when you have 25x your annual spending in investments.  You can be FI and continue to work.

"RE" - Retired early.  Again it's a squishy definition around here, because we tend to think that you can be  RE and still get paid to do work when it becomes available. 

FIRE - Financially Independent, Retired Early.  Exactly what it sounds like.  You never have to work again, and you only work (for pay) when you want to.  Many people who do this still volunteer or have side-gigs (Landlording is particularly popular).

WR - withdraw rate, or the % of your money that you can take out every year from your investments and (hopefully) have them last for the rst of your life.  For most people this is about 4% annually, although some people prefer to be more conservative (~3%) and some more risky (5-6%).  The more flexibility you have in terms of reducing expenses or earning extra money when necessary the more risky you can set your WR.  fireCALC is a very good tool for estimating historical success rates of portfolios with various allocations and WR.

BeFree

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Re: Struggling with the "When to exit?" Question
« Reply #5 on: February 23, 2016, 02:50:41 PM »
Thanks so much for the reply and the reference calculators =)

I think a good goal for me would be $500k, but that feels so unachievable ;-) Of course, if I could come up with another income source that would allow me to continue saving (ie - make more than I am spending), but get out of my current situation, I would be willing to prolong the time it would take to reach that level... So I would likely focus on coming up with a solution to that. But it's good to have a number to work towards =) *I assume that number includes 401k?

I don't currently have any debt aside from my mortgage, which is at 3.375%, so after I get rid of the PMI, it sounds like most people on here agree it's ok to keep paying that off normally and keep investments in other places with higher interest rates.

Actually, if we're including retirement accounts in savings, then I feel I could save at least $35k each year I continue working. My expenses won't change that much outside of inflation and losing the PMI (which is almost $200/month!). I don't have any pension plans at my work or anything else that you mentioned... On a morbid thought, my expenses will be lower by losing pets through old age =P But I don't like to think about that ;-)

It sounds like I should keep plugging away in the meantime. Keep saving and get my home life together such that I have the mental energy and time to really start focusing on and trying to expand my income sources. If I stay, I wanted to take a prolonged stay-cation of maybe two weeks to try to recharge, get some stuff accomplished at home that I feel behind on, etc. I am hopeful it will help. Even the "long" blizzard weekend I was stuck in the house helped launch some productivity =)

aFrugalFather

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Re: Struggling with the "When to exit?" Question
« Reply #6 on: February 23, 2016, 02:57:48 PM »
Thanks so much for the reply and the reference calculators =)

I think a good goal for me would be $500k, but that feels so unachievable ;-) Of course, if I could come up with another income source that would allow me to continue saving (ie - make more than I am spending), but get out of my current situation, I would be willing to prolong the time it would take to reach that level... So I would likely focus on coming up with a solution to that. But it's good to have a number to work towards =) *I assume that number includes 401k?

I don't currently have any debt aside from my mortgage, which is at 3.375%, so after I get rid of the PMI, it sounds like most people on here agree it's ok to keep paying that off normally and keep investments in other places with higher interest rates.

Actually, if we're including retirement accounts in savings, then I feel I could save at least $35k each year I continue working. My expenses won't change that much outside of inflation and losing the PMI (which is almost $200/month!). I don't have any pension plans at my work or anything else that you mentioned... On a morbid thought, my expenses will be lower by losing pets through old age =P But I don't like to think about that ;-)

It sounds like I should keep plugging away in the meantime. Keep saving and get my home life together such that I have the mental energy and time to really start focusing on and trying to expand my income sources. If I stay, I wanted to take a prolonged stay-cation of maybe two weeks to try to recharge, get some stuff accomplished at home that I feel behind on, etc. I am hopeful it will help. Even the "long" blizzard weekend I was stuck in the house helped launch some productivity =)

Yes, 401k and any other assets are included in the total amount you have, AKA net worth.  Home equity could be in there as well, but with PMI I'm guessing little there, and also you have to live somewhere unless you go out on the road, so the home is sometimes not included in the calculation for early retirement. 

Best of luck, at least you have the write tools now to be able to get to where you want to be and are living a more aware/voluntary life because of it!


nereo

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Re: Struggling with the "When to exit?" Question
« Reply #7 on: February 23, 2016, 03:04:34 PM »
Hello BeFree

I just saw that you have another thread under the investment sub-forum, but in the interest of simplicity I'm sticking with this one.

a few points:
Yes, $500,000 can sound like an insane amount of money when you are only able to sock away a few hundred each week, but the power of compounding (over time) makes this a very achievable goal.  Let's suppose that you could save $25,000/year and you earned the average 7%/year after inflation.  Your 'stach would hit that $500k mark in just under 13 years.  Even if you had a much worse return of 5% you coudl still hit your goal in 14 years. 
Try playing around with this calculator to see how different annual contributions and returns will get you to $500,000.

Second point:  Are you taking advantage of your tax-advantaged accounts?  These are things like IRAs, 401(k)/403(b) and HSA accounts.  You should definitely be contributing to these as much as you can, as the tax savings will turbo-charge your retirement savings

In your other thread you mentioned not knowing where to put your money.  MDM has a great boilerplate flowchart showing in what order you should invest (and hopefully he will post it here), but even more broadly you want to first fund an ER fund to your satisfaction (usually at least a few month's worth of expenses), then invest in all tax-advantaged accounts before finally investing in tax deferred accounts and/or real-estate.

As to WHERE to invest your money, low-cost index funds (e.g. the SP500 or total market index) are very hard to beat.  Don't worry about prices going up and down - what's important is that you just keep investing anytime you have money to do so.  That's called Dollar Cost Averaging (DCA) and it ensures that you don't try to time the market.  Over time the returns that you get from dividends will be extremely signficant.

Finally - for general knowledge please, please, please read the following from JL Collins.  It breaks down personal investing in a series of easy to read and understand posts.
http://jlcollinsnh.com/stock-series/

Post back with further questions
~N~

BeFree

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Re: Struggling with the "When to exit?" Question
« Reply #8 on: February 23, 2016, 03:17:02 PM »
Thanks. I guess I was trying to distribute my specific questions to the most appropriate forum, but it's fine to bleed more into this one ;-)

Getting to that 7% average is something I hope to get close to. This spring I really need get a solid plan into action and move my savings to their appropriate homes ;-)

Honestly, I am only putting 4% into my retirements, because my company is ridiculous and that's all I need to put in for them to put in another 9%, so my net is 13% going into my 401k (mixed between roth and traditional, with some of it automatically going into company stock). What I could do is put more into my HSA (my company puts $1,000 in each year) :-/ Right now I just replenish my expenses at the end of the year, but I should max those investments out...

What is the difference between a tax advantaged account versus tax deferred?

I'll add your links to my references =)

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Re: Struggling with the "When to exit?" Question
« Reply #9 on: February 23, 2016, 03:31:13 PM »
A tax-advantaged account is any account that gets preferential tax treatment.  These include the 401(k), IRA and HSA.
A tax-deferred account is one type of tax-advantaged account.  Any contributions to a tax-deferred account lower your tax bill the year you contribute them.  These include the traditional IRA and 401(k) and HSA accounts.

ROTHs (both a ROTH IRA and a ROTH 401(k) ) are the "other" type of tax-advantaged account.  For these, you fund them with after-tax dollars, which basically means you still have to pay taxes on that money the year you contribute, BUT the investment grows tax-free and you never have to pay taxes on it again.

For most people, they are better off choosing the tax-deferred option over the ROTH options when they are working.  To get into the nitty-gritty details might be more than you are looking for in this post (but it is discussed in more detail in the JL Collins series I linked).

As for shooting for 7% returns... time is your friend there.  Looking at just 1 year you might gain 35% or loose 35%.  Over a decade+ history shows us that you will most likely earn somewhere between 5-7% per year including dividends and adjusted for inflation (or as we say "real-adjusted").  You can see how the SP500 return did over virtually any time period by using this calculator.

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Re: Struggling with the "When to exit?" Question
« Reply #10 on: February 23, 2016, 09:38:32 PM »
Getting to that 7% average is something I hope to get close to. This spring I really need get a solid plan into action and move my savings to their appropriate homes ;-)

This will help:
http://jlcollinsnh.com/stock-series

Quote
Honestly, I am only putting 4% into my retirements, because my company is ridiculous and that's all I need to put in for them to put in another 9%, so my net is 13% going into my 401k (mixed between roth and traditional, with some of it automatically going into company stock). What I could do is put more into my HSA (my company puts $1,000 in each year) :-/ Right now I just replenish my expenses at the end of the year, but I should max those investments out...

The extra you put in above the 4% initial won't get any crazy matches, but it will still save you taxes and get you FIRE'd faster.  Start maxing out those tax advantaged accounts!
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MDM

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Re: Struggling with the "When to exit?" Question
« Reply #11 on: February 24, 2016, 01:37:35 PM »
In your other thread you mentioned not knowing where to put your money.  MDM has a great boilerplate flowchart showing in what order you should invest (and hopefully he will post it here), but even more broadly you want to first fund an ER fund to your satisfaction (usually at least a few month's worth of expenses), then invest in all tax-advantaged accounts before finally investing in tax deferred accounts and/or real-estate.

See below for the boilerplate.  See this Bogleheads wiki for a similar chart.  The one here is based on comments from many, including nereo.  There isn't a formal wiki process here, as there is at Bogleheads, but any other comments are appreciated.  Current version is kept in the 'Investment Order' tab of the case study spreadsheet.

In the lists below, thinking "first your 457 (if you have one), then your 401k and/or 403b" wherever "401k" appears is likely correct -   
   unless your 457 fund options are significantly worse than those in the 401k/403b.
Differences of a few tenths of a percent are not important when applicable for only a few years (in other words, these are guidelines not rules).   
   
WHAT   
0. Establish an emergency fund to your satisfaction   
1. Contribute to 401k up to any company match   
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.   
3. Max HSA    
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level   
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5)   
6. Fund mega backdoor Roth if applicable   
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.   
8. Invest in a taxable account with any extra.   
   
WHY   
0. Give yourself at least enough buffer to avoid worries about bouncing checks   
1. Company match rates are likely the highest percent return you can get on your money   
2. When the guaranteed return is this high, take it.   
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs.   
4. Rule of thumb: traditional if current marginal rate is 25% or higher; Roth if 10% or lower; flip a coin in between (or see   
   http://forum.mrmoneymustache.com/investor-alley/deciding-between-roth-and-traditional-ira-based-on-marginal-tax-rate/
   if you want even more details on that topic).  See also
   https://www.bogleheads.org/forum/viewtopic.php?f=2&t=182081,
   http://forum.mrmoneymustache.com/ask-a-mustachian/case-study-overwhelming-student-loan-debt-how-would-you-get-started/msg868845/#msg868845
   and other posts in that thread about exceptions to the rule.
5. See #4 for choice of traditional or Roth for 401k   
6. Applicability depends on the rules for the specific 401k   
7. Again, take the risk-free return if high enough   
8. Because earnings, even if taxed, are beneficial   
   
The emergency fund is your "no risk" money.  You might consider one of these online banks: http://www.magnifymoney.com/blog/earning-interest/best-online-savings-accounts275921001   
      
If your 401k options are poor (i.e., high fund fees) you can check   
   http://forum.mrmoneymustache.com/investor-alley/to-401k-or-not-to-401k-that-is-the-question-43459/
for some thoughts on "how high is too high?"   
   
Priorities above apply when income is primarily through W-2 earnings.  For those running their own businesses (e.g., rental property owner, small business owner, etc.),   
   putting money into that business might come somewhere before, in parallel with, or after step 5.
   
See http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html for some data on historical returns.