SWB's path to a not so extreme ER

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SavingWithBabies
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SWB's path to a not so extreme ER

Post by SavingWithBabies » Thu Jul 20, 2017 1:57 pm

Progress: 20.9% ($335,000/1,600,000)
Goal: $1,600,000 USD
Current: $335,000
Spending: ~ $42,000/year
Years saved: 8 (335,000/42,000)
Salary: $150,000/year
Investments per month (automatic): $6,000 ($3,000 pre-tax 401k, $3,000 post-tax)
Anticipated $1M: 2022-2023
Anticipated goal: 2025-2027
Business income: $?/year (more below)
Age: 40 (my wife is 33)
Weight: 265.6 pounds
Goal weight: 192 (73.6 pounds to go)
Last edited by SavingWithBabies on Mon Jul 24, 2017 2:13 pm, edited 5 times in total.

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SavingWithBabies
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Re: SWB's path to a not so extreme ER

Post by SavingWithBabies » Thu Jul 20, 2017 2:40 pm

I am rebooting my prior journal to focus more closely on the numbers. But let's get a bunch of non-number stuff out of the way:
  • expecting second child at beginning of August, plan is for partner to continue to stay home at least another 2-3 years
  • relocated back to the midwest working remotely for West coast-based company
  • salary down by $30k/year but much more affordable area (may have left some money on the table but finding full time remote while unemployed was somewhat difficult)
  • had some unemployment while in California between startups and put about 6 months of full time work into my (with one parter) business -- let's label this venture ABC going forward
  • first checks from first ABC customer came in and now need to incorporate business, get business checking, etc (not including ABC in net worth until it starts paying me)
  • ABC will be a C corporation so it should stand apart cleanly from my net worth
  • ERE-unfriendly: bought older 4WD SUV in California to assist with move back, winter weather driving here in the snow, towing stuff and going on long trips ($14k + expense of second vehicle)
  • ERE-questionable: bought older sailboat to continue to learn about sailing, learn fiberglass repair and get outdoors more ($3k but on trailer so no monthly fees)
I came across a claim of about $330k being "half way to a millionaire." That blew me away. It seemed wrong at first but maybe with compounding growth... I ran the numbers and if I can keep up the current investment per month, we could hit $1M in 2022-2023 (5 years at 11% growth, 6 years at 6.5% growth). That carries a number of assumptions including the somewhat uncertain one of a major correction not coming very soon. I'm getting nervous. Things seem too good to be true with the markets. I ponder cashing out $120,000 in post-tax investments (would incur ~$5k in capital gains taxes) and maybe some pre-tax investments. Currently in analysis paralysis.

IlliniDave
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Re: SWB's path to a not so extreme ER

Post by IlliniDave » Fri Jul 21, 2017 6:14 am

You are closer to ERE then I am--my goal lifestyle numbers are quite similar to yours but I am a household of 1 with little likelihood of that changing.

Compounding does seem to accelerate progress, especially towards the end. In the last 12 months my pile of investment assets has returned more than my total balance was after 12 years of accumulating.

It is sort of a tricky time for stock investors. I don't know what sort of investing strategy you employ, but I assume stocks are part of it based on your talking about a "correction" in your last paragraph. Looking at broad markets/market segments (the only perspective I have) prices have arguably gotten a little ahead of earnings. That could potentially unwind suddenly or slowly, but it's fair to suspect that returns over the next 10 years might be on the uninspiring side. I am 22 months from the end of my accumulation phase so I'm looking carefully at dialing back my stock exposure even before considering the relative valuations. But I'm talking about lowering it in increments, something like 10% now and maybe another 10% when I hand in my notice. I have a third trigger at a certain PE value that will cause me to step down an additional 10% (don't tell the folks over on bogleheads.org, they'll excoriate me for being a market timer, haha). You'll have to decide what's best for you, but I've found incremental moves to be best for me when it comes to defeating analysis paralysis. Big moves are gut-wrenching, small ones are easy. So you might consider an incremental approach. I know people that sold out in 2008/2009 that are still waiting for a "good time to get back in", but they look at stock investing as a binary thing: all-in or all-out.

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Dragline
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Re: SWB's path to a not so extreme ER

Post by Dragline » Fri Jul 21, 2017 6:31 am

SavingWithBabies wrote:
Thu Jul 20, 2017 2:40 pm

I came across a claim of about $330k being "half way to a millionaire." That blew me away. It seemed wrong at first but maybe with compounding growth... I ran the numbers and if I can keep up the current investment per month, we could hit $1M in 2022-2023 (5 years at 11% growth, 6 years at 6.5% growth). That carries a number of assumptions including the somewhat uncertain one of a major correction not coming very soon. I'm getting nervous. Things seem too good to be true with the markets. I ponder cashing out $120,000 in post-tax investments (would incur ~$5k in capital gains taxes) and maybe some pre-tax investments. Currently in analysis paralysis.
The non-linear way accumulation/compounding works -- slow first, then quick at the end (and the idea that you become the average of the five people you spend the most time with) always reminds me of this quote from "The Sun Also Rises" by Hemingway, albeit it was in the complete opposite direction in the book:

"How did you go bankrupt?" Bill asked.

"Two ways," Mike said. "Gradually and then suddenly."

"What brought it on?"

"Friends," said Mike. "I had a lot of friends. False friends. Then I had creditors, too. Probably had more creditors than anybody in England."

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SavingWithBabies
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Re: SWB's path to a not so extreme ER

Post by SavingWithBabies » Fri Jul 21, 2017 6:22 pm

IlliniDave wrote:
Fri Jul 21, 2017 6:14 am
You are closer to ERE then I am--my goal lifestyle numbers are quite similar to yours but I am a household of 1 with little likelihood of that changing.
I tried to figure out how to get this into the first post but in some ways it is not as extreme as it appears on the surface. The reason being is my spouse is going to go back to work in about 2020 and work through roughly 2035. She is a teacher and will be teaching in a K12 private school that gives free tuition to the children of faculty (although the pay is lower than public schools and no pension). This will also give us access to group health insurance and income to cover a significant amount of living expenses.

What I'm really looking for is financial independence so I can make my side business(es) and my family my full time focus. I want the flexibility of being able to take off months during the summer while my wife and kids are off.

If we hit the goal in 2025-2027, my wife will still be working for another 8-10 years. My kids will be in school. And I will still be working but hopefully self-employed or fully in control of my employment and the conditions of it.

I suspect the biggest risks are:
  • hitting ER goal might lead to lack of drive to continue making money
  • current side business w/ business partner (who is not my wife) may fail
  • my health -- I'm too fat and have poor body condition due to all the sitting at a computer
My fall back would be trying other business ideas and/or doing contract programming (and taking the summer off with either option).

So it's complicated. I don't know how we'll get from 2035 to medicare for health insurance. If I had to figure out that out now, I'd go for living most of the year in Mexico/Costa Rica/? with international (non-USA) health insurance. Or go on a long sailing adventure outside USA. For that aspect, any planning now seems to not be very useful as there are too many unknowns.

The silver lining is, if things go mostly to plan, the investments won't be drawn on for quite a while. So there should be some additional years or decades of compounding growth.

Jason
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Re: SWB's path to a not so extreme ER

Post by Jason » Sat Jul 22, 2017 3:58 pm

I do not know if 330K is half to millionaire but I hope it is. With the amount of number geeks populating this board I am sure someone can explain it if it is true. That being said, when I look at the accelerated growth in my portfolio, the first I thing I notice is the benefit of reinvested dividends i.e not more money per se, but more shares working for me.

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Re: SWB's path to a not so extreme ER

Post by jacob » Sat Jul 22, 2017 4:25 pm

If you presume constant exponential growth and glance at a piece of semi-log paper, 3.3 is about half way up.

Also ln(10)+1~3.3 so that's probably where that number comes from.

I wrote a blog post once about Hamilton's rule, but I can't seem to find it now, so ...

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Dragline
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Re: SWB's path to a not so extreme ER

Post by Dragline » Sat Jul 22, 2017 4:32 pm

Assuming a constant savings rate and average investment growth, its pretty close. Use rule of 72 (72/r, where r is rate of return) to determine how many years to double current investment and add anticipated additional savings to that.

There IS a Santa Claus, and his name is COMPOUNDING! (Or maybe John Cena -- you can't see him, his time is now) :lol:

@SWB, you'll be quite busy with the kids if your wife is working full time. Go stream/rent/borrow "Mr. Mom" for a laugh about that.

I would get on the health wagon -- that is actually your biggest risk factor.

Jason
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Re: SWB's path to a not so extreme ER

Post by Jason » Sun Jul 23, 2017 6:24 am

For purposes of transparency, I hate boats. And by boats I mean cruise lines, yachts, motor boats, catamarans, row boats, motor boats, sail boats. Even the little plastic ones you play with in the bath tub. I just hate boating and everything related to boating. I do admit to watching the Love Boat, but only because of the hot chick who became a cocaine addict. And whenever she was in rehab, I turned it off. And of course, Captain Crunch. That shit is good, despite the fact that it makes your mouth bleed. But If I had a son I would say "Son, I have one piece of advice for you, never own a boat. And whatever you do, never take a chick out on a paddle boat. Especially if you suspect she might be learning disabled."

That being said, the Millionaire Next Door is if anything, a disputation against owning a boat. I just read JLF's blog entry on sailing for free. 3K doesn't seem like a retirement killer. But a boat on a trailer seems like the ultimate financial and mental "slow" draining of resources.

On a completely tangental note, it appears that space travel is the new boating. These billionaires, having grown tired of expressing their inner Ahabs now want to be George Fucking Jetson. And that will inevitably trickle down to the everyone else. Pretty soon instead of boats on trailers, everyone will be hitching up their little space capsules, stopping at their local Liquor Rite and heading out to their neighborhood Captain Douchebag's Launching Pad franchise for a weekend full of beer and space travel fun. I swear, you're going to look up and the whole sky is going to look like a big fuckin trailer park caught up in a hurricane.

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SavingWithBabies
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Re: SWB's path to a not so extreme ER

Post by SavingWithBabies » Sun Jul 23, 2017 12:33 pm

Dragline wrote:
Sat Jul 22, 2017 4:32 pm
I would get on the health wagon -- that is actually your biggest risk factor.
I agree. I've been putting it off. I'm 6'3" and 250-255 pounds. I eat healthy for main meals but also snack. So too many calories and very little exercise. In 2012, I had a great year and managed to get down to 215 pounds with running and diet. It felt wonderful but later that year in the winter, a disk in my lower back herniated. I had surgery for it after a couple weeks of having all the muscles in the lower left side of my body spasming for two weeks (I couldn't bend my leg).

So I have to do it carefully -- probably doing more towards the diet side and doing lower impact/spine-friendly exercise.
Jason wrote:
Sun Jul 23, 2017 6:24 am
That being said, the Millionaire Next Door is if anything, a disputation against owning a boat. I just read JLF's blog entry on sailing for free. 3K doesn't seem like a retirement killer. But a boat on a trailer seems like the ultimate financial and mental "slow" draining of resources.
Well I'd put a boat not on a trailer above a boat on a trailer in terms of draining money and time. But I have no doubt that it is an ongoing expense. Some of that can be mitigated by DIY on the maintenance. I'll have to see if I get enough experience out of it (both sailing and maintenance) to make the cost worth it to me.

What I have is a mini version of a cruising sailboat -- my boat is intended for coastal waters while the bigger version of it could be used to sail around the world. So it has a cabin and can in theory sleep 4 adults (more like 2 adults and some kids). Having it on a trailer really opens up where it can be used plus you can sleep in it on dry land. Some people camp out with the RVs at Walmart when on a road trip to the sailing destination.

Noedig
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Re: SWB's path to a not so extreme ER

Post by Noedig » Sun Jul 23, 2017 7:08 pm

Jason's rant-cum-flight-o'-fancy about boats caused me to snort my ginger beer. He's a poetic ranting iconoclast, that one.

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SavingWithBabies
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Re: SWB's path to a not so extreme ER

Post by SavingWithBabies » Mon Jul 24, 2017 2:21 pm

I weighed in at +10 pounds over what I expected. Working from home is great however it means I'm no longer walking every day to work (was about 2 miles a day of walking at last job). I do walk every night after dinner but with a toddler and a very pregnant wife, the pace is very slow and non-exerting.

So I'm starting my diet today. Tonight I'm going to put back together one of my bicycles and start riding every day. I added my weight to the first post -- I'll use that format to post my numbers monthly.

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SavingWithBabies
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Re: SWB's path to a not so extreme ER

Post by SavingWithBabies » Wed Aug 02, 2017 3:17 pm

July 2017

Current: $345,144 (updated to reflect lagging 401k auto deposit)
Progress: 21.5%
Spending: ~ $42,000/year
Goal: $1,600,000 USD
Years saved: 8.2

It's been a hectic week:
  • Our second child was born yesterday! All the fingers and toes are there and both mother and baby are doing well. We just got home from about 28 hours in the hospital. Now starting two weeks of paternity leave.
  • I assembled one of my bicycles and got some riding in but not every day (so working on that this month). 20-30 minutes of riding helps my back not to hurt and seems to last about two days. So riding every day should really help. Something about the road bike position of leaning forward and having to use core muscles to hold up torso is very helpful.
  • I decided to go back to low carb. Read a bit of the subreddit /r/keto which looks good. I'm a bit confused on the starting phase so going to just start with Atkins induction and go forward with /r/keto after the first couple weeks. Made a flash decision to start one day but then decided to go forward a bit slower (ordered used book -- not at local library, need to plan meals and start shopping with changed diet needs).
Plans for August:
  • Start low carb diet.
  • Ride every day even if only 10-15 minutes.
  • Help wife as much as I can with all the housework while we all adjust to two children. At the hospital, one person suggested mommy having some personal time with first child to ease the transition from only child to big brother. So we're going to try to do that daily too.
  • Complete a bit of work on side project that needs to happen within next couple of weeks.
Long term:
  • Try to reduce our housing expenses. I wasn't very happy with our choice of rental in terms of cost and we had some surprising discoveries on utilities that pushed it up by about $100/month on top of the already somewhat high monthly rent. So the plan is to either go to a less expensive rental after our 12 months here are up or decide to buy. It's a sellers market but the rent-buy leans towards buy. I think it's a bad time to buy.

scriptbunny
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Re: SWB's path to a not so extreme ER

Post by scriptbunny » Fri Aug 04, 2017 5:56 am

Woot, congrats!

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SavingWithBabies
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Re: SWB's path to a not so extreme ER

Post by SavingWithBabies » Sun Aug 13, 2017 12:57 am

scriptbunny wrote:
Fri Aug 04, 2017 5:56 am
Woot, congrats!
Thanks! It's been a great break from work. I've completely disconnected. I know a lot of people seem to equate time off with a preview of ER/FI but to me, I always know I'm going back so it just feels like a break not a preview. But it is very nice not to be spending my day working on something that seems like a waste of time. I have pondered going back to looking for another job as the current one is a bit too super corporate in terms of how we do development. But being 100% remote and not crazy hours is hard to argue with. The grass is pretty green on this side of the fence even if the cows don't really need to be milked (but I have to go through the motions of milking them anyway).

Everyone is happy and healthy. All the relatives are gone so back to just us. So life is good.

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SavingWithBabies
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Re: SWB's path to a not so extreme ER

Post by SavingWithBabies » Mon Aug 14, 2017 4:24 pm

I changed my automatic post-tax investments from going into Vanguard mutual funds to going into a cash holding account (same amounts). I want to build up more cash holdings.

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