Author Topic: What to do if going FIRE tomorrow?  (Read 2012 times)

moustachedane

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What to do if going FIRE tomorrow?
« on: September 13, 2020, 12:35:24 AM »
Hi,

I'm new to this forum but have been lurking a while. I could use some advice on FIRE (Financial independence, retire early) in these turbulent times. I want to go FIRE but I'm very hesitant on how to approach the situation at the moment with all the things going on in the World. Maybe I have been watching too many Youtube videos about 2020 stock market crashes, gold investments, Robert Kiyosaki radio shows, the FED and ECB (European central bank) printing money like crazy buying up government bonds (with the risk that the bond market will crash), risk that the Euro currency might crash and all EU countries go back to their original currencies, negative interest rates on savings accounts, too many evictions going on in the US, housing crash, Corona slowdown, travel restrictions, TSLA rising to astronomical heights within a month etc.

On the other hand, other people invest and live their lives like there's no tomorrow.

The more I read, the more I get confused with the information overflow.

I know there is no definite answer, but imagine the following scenario:

1. You accumulated 500k USD (or 500k EUR) in your savings account as cash.
2. You have no debt whatsoever, no real estate and you are 100% independent and free to move everywhere.

How would you proceed tomorrow?

moustachedane

EscapeVelocity2020

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Re: What to do if going FIRE tomorrow?
« Reply #1 on: September 13, 2020, 12:53:44 AM »
There is a thread dedicated to just this - https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/

Have a look and post up your details there, we're here to help

Dicey

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Re: What to do if going FIRE tomorrow?
« Reply #2 on: September 13, 2020, 01:30:22 AM »
Welcome! Just so ya know, you do not have to define FIRE to this crowd ;-)

terran

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Re: What to do if going FIRE tomorrow?
« Reply #3 on: September 13, 2020, 06:28:12 AM »
First I would stop watching goldbug and Kiyosaki youtube videos. Next I would familiarize myself with https://earlyretirementnow.com/safe-withdrawal-rate-series/

Retire-Canada

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Re: What to do if going FIRE tomorrow?
« Reply #4 on: September 13, 2020, 07:46:04 AM »
I want to go FIRE but I'm very hesitant on how to approach the situation at the moment with all the things going on in the World.

There is always something going to be afraid of and to make you think "This time is different!" even though it's not different. A low information diet helps a lot. Ignore the FUD. Seek out useful sources of information.

To respond to your scenario if I had $500K invested in globally diverse index funds and my cost of living including taxes was $20K/yr or less I would FIRE and stop working. If my cost of living was above $20K/yr I would either work FT and crush out a high savings rate to increase my investments quickly so they were about 25 times my annual spend then FIRE. Alternatively I would work longer PT with low to no savings and let my investments grow under their own steam until I hit about 25 times my annual spend then I would retire.

There are other ways to get the income you need to retire....such as owning rental housing, but that's not how I did it. I like the simplicity and hands off nature of index investing.

We could get into a more complex discussion around variable withdrawal rates that could allow you to retire with less than 25 times your annual spend, but for most people it's better to shoot for a simple FIRE plan like the typical 4%WR Rule based plan. Then when you have saved a lot of money and are getting somewhat close to that target you can decide if retiring early on a higher %WR makes sense for you.

If your cost of living is currently well above $20K/yr and you have $500K invested and really really want to FIRE now you can. There are many examples of people living on low annual spends on the internet. There's van life, house hacking, geographical arbitrage, etc... The only thing to remember is the more highly optimized your lifestyle is to live on a lower annual spend the less fat you have to trim if something unexpected comes up.

Ultimately your FIRE plan needs to accurately reflect your personality and priorities if you want it to be successful.
« Last Edit: September 13, 2020, 07:47:51 AM by Retire-Canada »

Simpli-Fi

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Re: What to do if going FIRE tomorrow?
« Reply #5 on: September 13, 2020, 08:39:25 AM »
Ouch, having $500k cash On the sidelines in this market is a little scary.  Put it in a week ago and lose ~$20k in value by the close on this past Friday.  Entire year of "spending" evaporate the first week...hows your appetite for risk?

Significant drawdowns early in retirement can be devastating.


Retire-Canada

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Re: What to do if going FIRE tomorrow?
« Reply #6 on: September 13, 2020, 08:47:50 AM »
Ouch, having $500k cash On the sidelines in this market is a little scary.  Put it in a week ago and lose ~$20k in value by the close on this past Friday.  Entire year of "spending" evaporate the first week...hows your appetite for risk?

Far better to endure some volatility than to watch your cash pile's buying power dwindle as inflation eats away at it...even more so if you are spending from it. While you can lose $20K in a week you can also make $20K in a week. That's the bargain you strike with the market. Personally I only look at my account balance every 3 months so I avoid most of the drama and with rare exceptions my account is usually notably higher than last time I looked.

If you gave me $500K in cash today I would invest every dollar Monday morning when the markets opened.

Financial.Velociraptor

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Re: What to do if going FIRE tomorrow?
« Reply #7 on: September 13, 2020, 09:35:06 AM »
If volatility bothers you, you need (more) bonds.  The equity markets can fall 50% or more in a short period of time.  The broad bond market very rarely falls more than 6%.  Meanwhile, your coupons keep rolling in.

reeshau

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Re: What to do if going FIRE tomorrow?
« Reply #8 on: September 13, 2020, 10:11:05 AM »
The first thing I would do, since you are FIRE'd, is sleep in.  The bonus to that is that you miss all the talking heads trying to rev up the market in the morning.

With a good night's sleep, you can conduct your day and plan your future around what you want to do, and worry less about what others are doing.  That's the whole point of this exercise.

I'm only being half facetious about this.  Yes, you should do a case study, and you can get more specific advice / confirmation.  And you should research more into asset allocation and understand your own risk tolerance better.  If you can't sleep at well at night due to your money at risk in the market (see first point, above) then you should have more assets in safe places.  The downside to that is they will not grow as quickly or at all, and you will need to save more.  But since you are sleeping well, you will be able to accomplish that.

"Rules" in investing come from averages over many, many people and long history.  Advice comes with the skewed view of others: their experience and their preferences.  In the end, any external reference is just you trying to prepare yourself for your choices, and their consequences.  With that responsibility comes the enlightenment that yes, it is possible, and the realization that there is a lot of scaremongering bullshit being peddled as advice by people that want you to pay them.

Paul der Krake

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Re: What to do if going FIRE tomorrow?
« Reply #9 on: September 13, 2020, 01:52:36 PM »
You’re not “free to move everywhere”. Countries still have borders, and generally speaking with only 500k you are going to have to restrict your options to low cost of living countries.

I suggest getting a better idea of what you want before doing any big moves.

AdrianC

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Re: What to do if going FIRE tomorrow?
« Reply #10 on: September 13, 2020, 05:14:10 PM »

I know there is no definite answer, but imagine the following scenario:

1. You accumulated 500k USD (or 500k EUR) in your savings account as cash.
2. You have no debt whatsoever, no real estate and you are 100% independent and free to move everywhere.

How would you proceed tomorrow?
1. Set up a periodic investment plan to put the 500k into stocks over a year or so.
2. Continue accumulating money. Look for opportunities to accumulate faster.

$500k isn’t nearly enough for me.

MustacheAndaHalf

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Re: What to do if going FIRE tomorrow?
« Reply #11 on: September 14, 2020, 08:40:20 AM »
At 0% equities, you're very afraid of what happens next.  I don't think it makes sense to retire in that emotional state, nor with a 100% cash allocation that historically has lost against inflation.

Another point: historically going all cash meant you had to accumulate a much larger nest egg to retire on (or accept much lower spending).  I think it would be a really bad idea to convince yourself 0% equities is okay, and find out deep in retirement that it wasn't.

Take a look in retirement simulators (Vanguard's is simple and informative).  In simulations I've run, as stocks drop below 1/3rd portfolio survival chances drop significantly.  0% equities isn't positioned for accumulating money nor for retirement, from what I've seen.  I'd recommend delaying retirement until you feel comfortable with a much higher allocation to equities.

ChpBstrd

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Re: What to do if going FIRE tomorrow?
« Reply #12 on: September 14, 2020, 11:07:46 AM »
I agree the first thing to do is cut off your sources of misinformation from youtube and financial media. Their "job" is to toy with your emotions so you view more ads. Replace them with:

https://jlcollinsnh.com/stock-series/

https://earlyretirementnow.com

https://www.mrmoneymustache.com

https://www.alibris.com/search/books/isbn/9781453601211utm_source=Google&utm_medium=cpc?utm_campaign=NMPi_Smart_Shopping&utm_term=NMPi_Smart_Shopping&ds_rl=1264488&ds_rl=1264488&gclid=EAIaIQobChMIsZnA1ofp6wIVjYbACh2HEgiNEAQYBCABEgKTFPD_BwE&gclsrc=aw.ds

https://www.abebooks.com/Random-Walk-Down-Wall-Street-Completely/30735725408/bd?cm_mmc=ggl-_-US_Shopp_Trade-_-used-_-naa&gclid=EAIaIQobChMIt8_-8Yfp6wIV0sDACh3iTQZyEAQYBiABEgJEZvD_BwE

http://www.cboe.com/education/education-main

Any available used economics or business strategy college textbooks.



My second step in your hypothetical shoes might be to invest in value stocks (i.e. through VTV). Contrary to the financial news, not all stocks are at scary bubble valuations like Tesla and Amazon. There are REITs delivering key infrastructure and yielding between 4% and 8% like OHI, LTC, SBRA, IRET, EQR, and UMH. There are profitable companies with solid organic growth and PE's under 20 (here are a few hundred: https://www.screener.reuters.wallst.com/stock/us/index?quickscreen=gaarp ). Preferred share funds like PFF, PGF, and PFXF still yield over 5%. This is all boring stuff that doesn't make the clickbait click, so you'll have to do your own research and read some 10k's. But as mentioned, unplugging from the toxic internetosphere is step 1.

John Galt incarnate!

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Re: What to do if going FIRE tomorrow?
« Reply #13 on: September 19, 2020, 05:17:50 PM »
Hi,

I'm new to this forum but have been lurking a while. I could use some advice on FIRE (Financial independence, retire early) in these turbulent times. I want to go FIRE but I'm very hesitant on how to approach the situation at the moment with all the things going on in the World. Maybe I have been watching too many Youtube videos about 2020 stock market crashes, gold investments, Robert Kiyosaki radio shows, the FED and ECB (European central bank) printing money like crazy buying up government bonds (with the risk that the bond market will crash), risk that the Euro currency might crash and all EU countries go back to their original currencies, negative interest rates on savings accounts, too many evictions going on in the US, housing crash, Corona slowdown, travel restrictions, TSLA rising to astronomical heights within a month etc.

On the other hand, other people invest and live their lives like there's no tomorrow.

The more I read, the more I get confused with the information overflow.

I know there is no definite answer, but imagine the following scenario:

1. You accumulated 500k USD (or 500k EUR) in your savings account as cash.
2. You have no debt whatsoever, no real estate and you are 100% independent and free to move everywhere.

How would you proceed tomorrow?

moustachedane

FIREtirement is an uncommon and welcome accomplishment.

A FIREee's first day of FIREtirement ought to be an easy, relaxed  day of reflection  so the new FIREee can savor and celebrate their accomplishment of FIRE.

TheHardenedInvestor

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Re: What to do if going FIRE tomorrow?
« Reply #14 on: September 20, 2020, 10:12:48 AM »
If I had 500k in cash I would be more worried about that actual nightmare than anything that could happen (but probably not) in the market. I get nervous when my cash starts creeping over 10k.

I would start investing in a stock market index fund immediately and keeping saving and investing. You’re not there yet.

talltexan

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Re: What to do if going FIRE tomorrow?
« Reply #15 on: October 15, 2020, 08:03:00 AM »
FIRE requires creating an income source to replace your labor. Kiyosaki has a lot of baggage, but he (correctly) argues that your top priority is acquiring assets that will replace your income.

Even a very cautious investor should probably be 20%-40% equities.

If you have that nut in cash, I'd (overnight) figure out how to put $150,000 into $VTSAX immediately. That mix should give you piece of mind if stocks go down (they often do), and you can take some time to study investing and decide if that's the correct allocation for you.