Author Topic: What if your stash disappeared?  (Read 6826 times)

mxt0133

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What if your stash disappeared?
« on: December 10, 2014, 04:10:09 PM »
My family and I (to be honest it's mostly me) are currently two years into our 5ish year plan MMM.  Things are coming along we are cutting expenses, increasing savings, following an investment plan of passive low cost Vanguard funds, maximizing tax advantaged savings plans, going to school for my second career that will allow me more flexibility and pursue my interests in personal finance.  We are even really enjoying ourselves more by doing/buying less and getting our time back instead of feeling like we are constantly trying to go from one place to another every weekend.

One down side to this is my constant focus on our stash and our progress.  I mean I think about it all the time.  I get can get obsessed/narrow minded/focused on one thing but it normally fades away and I move on to other things, but this is not the case with my FIRE goal.  I don't think it's healthy but I just can't stop.  So last night while I was reflecting on this, I asked myself what would I do and how would I feel if our stash went down 20% next year, then 30%, then 50%, until it was gone due to some medical circumstances or market meltdown?  Doing a little Stoic negative visualization.

To be honest I would be pretty bummed and even mad at myself for letting such a thing happen, as much as I like to try new things, my biggest fear is making mistakes.  I get worked up for nothing when something doesn't go according to plan.  I know it's not productive but I still get that way for a little while until I get a change to calm down.  Then I started to think about it more and I would let myself get past the emotion.  I think I would let myself get angry/sad/depressed for a bit but then I would really have no choice but to move on.  I would then tell myself that there was no way to know what would happen and investing has risks.  I would still be a Mustachian because I would need it more than ever and that the skills I've learned will serve me well when trying to build up my stash again.

Again this is all theoretical but an interesting exercise nonetheless. 

What about you?  What would you do and how would you handle it if your stash disappeared?

humbleMouse

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Re: What if your stash disappeared?
« Reply #1 on: December 10, 2014, 04:16:53 PM »
Personally I have saved lots of money and lost it all over 5 times... serial entrepreneur...

The thing about loosing all your money is that it gets easier to cope with each time.  Also, you realize that the real assets you have are the people that you know; your network.

Keep in mind I am a single male with no dependents.  I would not risk nearly as much if I had a family to worry about. 

sheepstache

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Re: What if your stash disappeared?
« Reply #2 on: December 10, 2014, 04:19:09 PM »
What you're talking about, the stash dwindling because of some medical or other incident, would just make me feel thankful that I had it to spend down rather than having to go into debt.

But if you're talking about some wave of a magic wand that would make it disappear overnight, if I were suddenly starting from zero, the effect would be to make me change careers to a higher-paying one that would allow me to recoup it more quickly than I built it. Right now I'm happy to continue on my path considering how far along I am and the fact that my job is easy, but I'd do it differently if I were starting over.

diesel15

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Re: What if your stash disappeared?
« Reply #3 on: December 10, 2014, 04:27:39 PM »
One down side to this is my constant focus on our stash and our progress.  I mean I think about it all the time.  I get can get obsessed/narrow minded/focused on one thing but it normally fades away and I move on to other things, but this is not the case with my FIRE goal.  I don't think it's healthy but I just can't stop. 

This is the part that I'm particularly interested in.  I have the same problem and I'm curious what others in this position would suggest.  I'm consumed with this daily even though I'm a long way away from actually getting there.

Rural

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Re: What if your stash disappeared?
« Reply #4 on: December 10, 2014, 04:28:15 PM »
I'd file a police report? :-)


Having to spend it over several years on some sort of medical or other hardship is not the same thing in my mind as "disappearing." I'd work on ways to minimize the damage during that time if I could. I'd change my lifestyle, or my plans, or both.


If it were my husband's health, well, we'd spend whatever we have to. But our max out of pocket, spent every year, will not deplete our stash, and his coverage can't be cancelled if he gets that sick, not anymore. If it were mine, I'd file for the long term disability I've been paying for, and that would cover more than the max out of pocket annually.


If the house burned down tomorrow, we'd have to move back into that damn trailer down the hill, though if it weren't a total loss, we'd more likely tarp up the intact side of the house and cut the water and power to the side under repair (build it yourself and you can put in multiple redundant cutoffs for the cost of valves and a breaker box) and call it good.


We'd work around, and I bet you would, too, in a real situation like that. I think you're letting anxiety get the better of you, and that you could do more about it than you're giving yourself credit for. For example, I bet you have homeowner's insurance - that puts you one up on us right off the bat.

mxt0133

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Re: What if your stash disappeared?
« Reply #5 on: December 10, 2014, 07:41:49 PM »
We'd work around, and I bet you would, too, in a real situation like that. I think you're letting anxiety get the better of you, and that you could do more about it than you're giving yourself credit for. For example, I bet you have homeowner's insurance - that puts you one up on us right off the bat.

Trust me i'm insured to the hilt.  I don't have a house but my renters insurance is half a million, because my complex requires it which covers my personal liability, my auto coverage is 100/300k, life insurance for myself and wife, I have long-term disability with my work.

@humbleMouse - I completely agree with you with regard to your family and network as the most important assets.  I would even add your health.  I was down with a really bad stomach bug and I was away on a company trip.  I spent the night alone in my hotel room feeling horrible, I couldn't even sleep it off.  It was such a poignant reminder of what I truly valued, I just wanted to be with my family and that we were all healthy.

@sheepstache - Interesting take on taking up a career that would help me recoup it as fast as possible.  I didn't even think of that, as at this point in my career I'm making plans to leave a lucrative career, software engineer, to something that would align more with my values and interests.  But that would definitely be a consideration in that scenario.

To be clear I don't think i'm anxious about it actually just disappearing.  I was just going through a mental exercise of what my stash really means to me and why I constantly think about it and FIRE. 

frugalecon

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Re: What if your stash disappeared?
« Reply #6 on: December 10, 2014, 07:55:17 PM »
For me, the idea of a stache and FI represents freedom, which I haven't always felt. I want to be a human being, not a human doing, doing things that don't feed me. To be back at square one would be dispiriting. Though I have the additional safety net of a government pension, as does my spouse. You might think that it would enable me to put it out of my mind, but it does not.

GardenFun

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Re: What if your stash disappeared?
« Reply #7 on: December 10, 2014, 08:04:14 PM »
Might sound strange, but most of us would probably build our stash back up faster than we did the first time.  Think about it - at present, you probably make the most money you ever have at your job.  In addition, you have read this blog and have honed your budget skills, plus economically invest the extra, quickly building the stash again.  It wouldn't turn into as large of a stash as the first time, and FIRE would be delayed, but you would survive and have a good story to tell. 

azure975

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Re: What if your stash disappeared?
« Reply #8 on: February 21, 2015, 10:40:34 AM »
This is one of my fears and will probably be one of the obstacles to me actually puling the trigger (not that I'm there yet, but should be within 5-10 years). I'm not necessarily worried about being wiped out in the market as I have good asset allocation but more worried about lawsuits, medical catastrophes, etc. At least if I'm still working I can rely on that income stream to build the stash back up....If I'm out of the workforce for too long I fear not being able to get back in. Yes, we have all the appropriate insurance, such as umbrella insurance and disability insurance, but I am a worrier by nature and prefer having sources of redundancy. I feel safest if I have a stash and a job. Unfortunately,  I don't like my job very much so it's a shame to keep working only out of fear. Any have any thoughts?

BPA

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Re: What if your stash disappeared?
« Reply #9 on: February 21, 2015, 10:58:52 AM »
I would still leave my job when I plan to but would pick up a different one even something making less than I do now.  I'm feeling way too burned out.

If I still had my house, I'd sell it and move some place cheaper.  If my house got wiped out too, I'd look into renting a room somewhere. 


Sunnymo

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Re: What if your stash disappeared?
« Reply #10 on: February 21, 2015, 04:02:48 PM »
Might sound strange, but most of us would probably build our stash back up faster than we did the first time.  Think about it - at present, you probably make the most money you ever have at your job.  In addition, you have read this blog and have honed your budget skills, plus economically invest the extra, quickly building the stash again.  It wouldn't turn into as large of a stash as the first time, and FIRE would be delayed, but you would survive and have a good story to tell.

Exactly!

This is a journey and like all journeys while the destination is important it is often the route that you take that gives you the most reward.

Left

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Re: What if your stash disappeared?
« Reply #11 on: February 22, 2015, 06:26:07 AM »
Might sound strange, but most of us would probably build our stash back up faster than we did the first time.  Think about it - at present, you probably make the most money you ever have at your job.  In addition, you have read this blog and have honed your budget skills, plus economically invest the extra, quickly building the stash again.  It wouldn't turn into as large of a stash as the first time, and FIRE would be delayed, but you would survive and have a good story to tell. 
i probably would, i'll be fi in late 30s, to start over i would need another 10 years so by early 50s the second time around.

The problem is if i lost it because the stock market went crazy, and i couldnt rely on it the second time around, i would need to learn other ways to build stash which would take me longer.

Russians seem to have this problem over tha past 100ish years where the they lost their wealth a few tines. Basing this on what happened post revolution, post world wars, post cold war.

chasesfish

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Re: What if your stash disappeared?
« Reply #12 on: February 22, 2015, 06:29:09 AM »
I would be bummed for a bit...but then realize how quickly it'll be to rebuild it than it was the first time.

I could probably rebuild what it took me 13 years to make in 6-7 now due to both having a better income and having less "stuff" that I have to buy. 

Retire-Canada

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Re: What if your stash disappeared?
« Reply #13 on: February 22, 2015, 07:28:16 AM »
I'm too old to want to build a big 'stach again and too close to gov't pension payouts. My plan is to work part-time and let my 'stach grow. If I lost my 'stach I'd just keep working part-time saving what I could until my cost of living was balanced by pension/benefits and investment income.

I'd have to get hardcore on my cost reductions. But, that's okay.

-- Vik

frugaldrummer

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Re: What if your stash disappeared?
« Reply #14 on: February 22, 2015, 01:01:52 PM »
I've thought about this from a "black swan event" market collapse type of scenario. I'm in my late 50's and just a few years from retirement. My thoughts:

This makes me want to get my house paid off. In the event of serious financial losses, I would still have my home, could rent out rooms, grow veggies in the yard.

I will have 3 streams of income in retirement: 401k, defined benefit pension, and social security. If one evaporates, I should be able to get by fine on the other two - again, more so if I no longer have a mortgage payment.

Final backup....I could always return to work in some capacity unless disabled.

Exflyboy

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Re: What if your stash disappeared?
« Reply #15 on: February 22, 2015, 02:57:08 PM »
Well anything is possible I guess, but back in the 1920's the stock market was the wild west of finance.. You had groups of rich "investors" artifically bidding up the price of stocks then colluding with each other when to sell out leaving every body else holding the bag (illegal to do that today but not back then). Whats more.. after the crash the Government did nothing to stimulate the economy, in fact it really was WW2 that finally got us out of the depression.

In 2007 the market topped and we had another bunch of fraudsters who managed to tank the economy by roughly 50%. But this time the Government rapidly pumped in vast quantities of cash, making the down turn much less than it probably would have been.. Plus it only lasted for 2 years.

So of course another crash will happen at some point but I doubt it will be another 1929 event. But it could easily be another 2007.. If it does and you don't have a big enough stash (with Bonds capable of lasting you say 4 to 5 years).. well then keep buying stocks during the crash.. evenutally rolling more of your bonds into cash on the way down.

When the stock market recovers you'll be much wealthier than you were before the crash.

If the above scenario is true.. how ill your wealth disappear?.. Assuming you have at least catastrophic health insurance (note.. any treatment make sure you get it pre-approved by your insurance company or you may find "Oh that particular treatment we don't cover!")

If you get sued they can't get your house or your 401k (I think)


So we could have a nuclear war I guess.. but other than that what could possibly go wrong?... Seriously hwo could you lose your entire stash???

AK

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Re: What if your stash disappeared?
« Reply #16 on: February 22, 2015, 06:19:50 PM »
I'm combatting obsessing over FIRE too. Aside from my family, it's what I think about most of the time. Last night, I was reading Killing Sacred Cows and the authors had some interesting perspectives, especially around 401Ks. The authors claim that it's a hoax akin to gambling because you have no control of the stock market and you simply hope it goes up over time. They mention how focusing on creating passive income / cash flow through various assets is the best way to invest. Personally, I think that if you don't know what you're doing that's true. This community is more investor savvy so I don't think it applies because we understand the risks and have an investing strategy. Another point they brought up was that savers after they reach their number keep stressing about money and still hoard their cash instead of spending it. They mention that many of their clients die with millions despite being able to live it up more and the tax man gets a large portion of the estate.

What helps me with obsessing is thinking about and doing other activities such as reading, blogging, gaming, etc. Other times, I'll experiment with other programming languages / features. Put differently, invest in yourself still and keep learning so that you can go back to work if needed after FIRE.

Overall, your strategy seems pretty sound. You're insuring against catastrophic events, saving and investing well, and planning for the worst. One thing that provides peace of mind is having a good sized emergency fund in case I lose my job and the search takes months for another job. Can you adjust your asset allocation so that your chances of losing a significant amount is reduced? What about diversifying your investments further into real estate, private equity, lending tree / prosper so that if one doesn't do well, it's less likely others will also go south.

While easier said than done, focus on things that you can control and stop worrying about things you can't. For example, sometimes I worry about asteroids hitting but then realize I can't do anything about it.

What second career are you looking to get into?

Exhale

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Re: What if your stash disappeared?
« Reply #17 on: February 22, 2015, 06:40:24 PM »
I'm too old to want to build a big 'stach again and too close to gov't pension payouts.
-- Vik
+1

If this happened I think I might try something totally different (at least until I reached 65 and cold be FI).

Ideas include:
- Peace Corps in a Spanish speaking country (close to fluency and would love to become fluent)
- Peace Corps in a French speaking country (used to be fluent, but lost in when I settled in the USA)
- Live and work at a Buddhist monastery (have done it before - not always easy, but very well worth it)
- Live and work at some health-based retreat
- Work in an orphanage

mxt0133

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Re: What if your stash disappeared?
« Reply #18 on: February 22, 2015, 11:37:22 PM »
So we could have a nuclear war I guess.. but other than that what could possibly go wrong?... Seriously hwo could you lose your entire stash???

Back then other than nuclear holocaust I was thinking of a medical condition where treatment was not covered by insurance such as experimental drugs or long-term care needs.  There are some scary stories out there.

Again it was mostly a mental exercise to see how I would react in the event it did occur with the actual cause not really being the focus of the exercise.

shadowmoss

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Re: What if your stash disappeared?
« Reply #19 on: February 23, 2015, 01:07:02 AM »
I was reading about the Terhorsts who were some of the first early retirees who published a book about it and now have a blog.  The wife was asked how they survived the big stockmarket crash and she said something to the effect of 'well, we looked at what we needed to do and decided that if it got too bad we might have to go live in Thailand for awhile.  We both rather like Thailand, so it was a non-issue'.  That is totally from memory, and is the gist of it if not the actual wording as I can't find that particular quote anymore.  What I took away is to figure out a worst case situation, and if you are good with that, don't worry about it.

https://sites.google.com/site/paulvicgroup/


Guesl982374

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Re: What if your stash disappeared?
« Reply #20 on: February 23, 2015, 06:21:50 AM »
Might sound strange, but most of us would probably build our stash back up faster than we did the first time.  Think about it - at present, you probably make the most money you ever have at your job.  In addition, you have read this blog and have honed your budget skills, plus economically invest the extra, quickly building the stash again...

This. You can take away my 'stache but my wife and I would grow it back extremely quickly giving our earning level and other skills (professionally, frugally, network, etc). It would also probably put both of us into cost cutting overdrive, get a roommate, etc. things that we wouldn't necessarily want to do today but could do if the situatino justified it.

Joan-eh?

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Re: What if your stash disappeared?
« Reply #21 on: February 23, 2015, 06:58:42 AM »
This is one of my thoughts while considered to commute my pension or not. Pension: the cheque will just come. If I commute the value, , though I might get better returns, -- I'll have to fuss over it. Not sure it's worth it