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FIRE in my bones

Posted: Thu Oct 06, 2016 6:59 pm
by MZMpac
Hello all,

I made my introductory post here ... f=1&t=8145, aka the "silver shackles" guy.
The purpose of this journal is just a public record of my progress and to keep myself honest.

I'm going to deliberately avoid posting too many financial specifics, mainly because it's tedious but also because this will be more of a "qualitative" journal rather than a financial ledger.

Background; why I got into FI:
As noted in my intro, it has dawned on me in the past year how "unfree" I really am. I made what I thought were a series of conscientious, wise decisions about my future and career path, only to find out the things I thought would get me more freedom ultimately ended being shackles.

FREEDOM is what I value most. It has never been about "retirement" in the traditional sense of the word, it's really about being beholden to nobody; financially or occupationally. That is how I would define FI.

The good: I have a relatively high-income job with reliable salary increases twice a year. I am in a union so my job is reasonably protected. I have free health care, and all the usual benefit trappings of a white collar, upper middle class salary job. So the income infrastructure is there. I am also married and my wife works in a similar stable industry. Qualify for Public Service Loan Sorgiveness---total federal loan payoff tax free in 10 years.

The bad: To acquire such a ticket into the professional workforce I also acquired a tremendous amount of debt. Without a doubt my biggest anchor. My job always carries the potential for burnout, which is somewhat beyond my control, and has happened to me before. I have valuable skills like any other doctor or PA, but my skills require strict licensure and cannot be "moonlighted" or scaled. I lack the laterality the MD degree carries--e.g.; authorship, consulting, business opportunities.

Sex: Male
Age: 34
Personality type: no one cares (INTJ, have been for life)
Marital status: Married
Children: 0. No interest in children.
Location: Denver, CO
Employment: salaried, full time
Salary: ~100k/yr. ~140k yr with wife.
Housing: Homeowner, mortgage
Debt: ~209k in student loans. 2 modest low-interest vehicle loans. Mortgage. No consumer debt.
Savings: Depleted recently to purchase home. About 3k and rising.
401k: ~15K in the total market index
Life insurance: yes, term
Hobbies: MANY!! Hiking, backpacking, playing the drums, gardening, weightlifting and fitness (former competitive lifter), hunting, fishing...
FI strengths: I can live modestly. I have the mind for FI. Not beholden to social conventions. High-ish income job. Stable industry.
FI weaknesses: HUGE student debt. Live in a high COL area. Restricted to work in one industry to make maximal income. Non-transferable skills.

My start:
Rebuilding 10k contingency fund, should be there by March. Wife is on board with overall strategy; grew up in a frugal home; getting her on board with certain lifestyle changes is an ongoing process.

My goals:
I believe in simple, durable strategies.

Year one: Replenish 10k emergency fund. Begin investing in a taxable account. Continue to chip away at lifestyle costs and increase frugality. Achieve 25% savings rate.

Years 2-3: Pay off all vehicle debt. Achieve 35% savings rate.

Years 3-5: Sell our starter home, relocate to a lower COL area. Buy home less than 1/2 the cost of our current home. Achieve 50% savings rate.

Years 5-9: Stay the course. Maintain and improve low lifestyle costs. Maintain or improve 50% savings rate. Cultivate new skills that can be reliably converted into income. E.g. lawn and garden care, personal training, writing more books.

Year 10: Achieve PSLF!!! Loans now gone, only modest mortgage debt. Can now live on remarkably lower income. Achieve as sizable a nest egg as possible; realistically 600-800k. Formally retire from full-time medicine; work locums jobs a few months a year, or cultivate whatever side work I have gotten into by that time.

Re: FIRE in my bones

Posted: Thu Oct 06, 2016 7:39 pm
good title :)

seems MZMpac has a good plan. the only challenge really is the quite high amount of debt, so it will take some time.

is there a reason to wait for years 3-5 to lower housing cost? if the current home is overkill/too expensive, why not downsize now?

Re: FIRE in my bones

Posted: Thu Oct 06, 2016 10:39 pm
by C40
A lot of debt, yep, but also a good income.

I'm also curious about the housing plan. I know people in Denver and they've told me about how much home prices went up the last couple years (and 3/4 of the people I know in Denver have sold their house to cash out)

Did you buy your house before the prices went up? Do you expect prices to go up more? You've got a fairly drawn out plan for increasing your savings rate. The #1 way to speed it up is likely the housing change. That could be a good way to "blow the logjam" on increasing savings rate.

Re: FIRE in my bones

Posted: Fri Oct 07, 2016 9:21 am
by MZMpac
Thanks for the replies.

Re: the housing thing, we just bought our hour this summer. Poor timing from a market perspective. I've been following the regional housing market closely for a while, and things are more or less at their peak right now. Incomes cant support much more appreciation. My hunch is prices may fluctuate +/- 2% over the next couple of years, but essentially plateau over the next 5. Reason being is that 1) Denver is a desirable city to live in and will continue to be one as long as jobs support more residents, 2) more appreciation would potentially topple over an already over-valued market because incomes just cant support it, and 3) the housing inventory city-wide is competitively low for a variety of reasons.

So why did we buy a house?? Well, our backs were kind of up against a wall with our lease ending in July and rent prices soaring to ridiculous rates. We reasoned we could pay as much for a low-rate mortgage on a small home as we would in rent, and at least have something to sell in a few years. This was before I was so intent on FI, so in retrospect I may have made a different decision. Other reason being I just started a new job here (the PSLF job) in April, so leaving isnt really an option anytime soon. A PSLF job is critical to our plan, and achieving cheaper housing costs would necessitate leaving Denver and the job.

Re: FIRE in my bones

Posted: Fri Oct 07, 2016 11:01 am
maybe it's possible to rent out rooms in the house

Re: FIRE in my bones

Posted: Sun Oct 09, 2016 11:48 am
by MZMpac
Unfortunately no. I explored this and due to the small size of our home, this would equate to having roommates and dramatically reduce our QOL as a married couple. The garage could be finished and made into an apartment, but the capital and time sunk into making a livable unit would take 2-3 years of renting to recoup, when we could just aim to relocate in that time frame.

Re: FIRE in my bones

Posted: Sun Oct 09, 2016 11:55 am
by jacob
You could also rent out the garage as a garage, for cars.

Re: FIRE in my bones

Posted: Sun Oct 09, 2016 11:59 am
by MZMpac
I think the biggest downer of my plan is that it will take 10 years (9.5 now) minimum due the PSLF program. This really is the equivalent of indentured servitude. Even if we were to theoretically achieve FI before my loans are paid off, I would still need to work full-time for a non-profit to be eligible for the loan forgiveness.

I've ran the numbers and paying off my debt purely from income would 1) take almost 10 years, and 2) preclude the high savings rate necessary for FI, and set me back another 5 years in terms of achieving FI.

In retrospect, like many things, getting into student debt was probably the single dumbest financial decision of my life, considering my values.

Car loans are usually low interest and can be paid off in a few years, mortgages can be leveraged and sold, but student debt in the US of A is non-dischargable for all intents and purposes. You pay it off the old fashioned way if it makes sense, or you sign up for one of the loan forgiveness programs and exchange freedom for an earlier payoff date.

Hindsight, but when I was younger and not really smart about money at all, my thought was just a binary "yeah I'll have lots of debt but I'll also have lots of money, so it will cancel out." I think a lot of people get into student debt under this mindset.

Re: FIRE in my bones

Posted: Sun Oct 09, 2016 12:00 pm
by MZMpac
jacob wrote:You could also rent out the garage as a garage, for cars.
Not a bad thought. :idea: