Good morning, EREfolk!
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petertacos
- Posts: 3
- Joined: Sat Nov 23, 2024 1:35 pm
Good morning, EREfolk!
Good morning, EREfolk! I've been following the forum for 4 years now. Decided to join in the hopes that I can get some advice and also have a public forum hold me accountable for my spending. I get easily overwhelmed with details so I tend to oversimplify things, but my current situation is as follows: I've accumulated a net worth of X after ~10 years of working. I spend about X/10 every year which isn't sustainable esp since I've recently developed concerns about my ability to continue earning due to mental health issues. I want to learn how to re-frame/think about things differently.
Re: Good morning, EREfolk!
Hello Peter, welcome.
If you already have X, you need X to grow to roughly 2.5 times to cover your expenses "forever". (You would then have 25 times your annual spending). If you don't add new money to the pile (but also don't take money out), and you have invested X in low-fee diversified index funds, it will take about 14 years or so for X to grow to 2.5 X.
Alternatively, if you manage to shrink your expenses, then X no longer is 10 times your annual expenses, but would be for example 12 or 15 times your annual expenses. Then your pile doesn't need to grow as much for it to represent 25 times annual expenses.
So a few questions: if you can't work your current job anymore, will there probably be a way to bring in some other income? Either by working another job (lower stress, easier, and/or part time) or earn money as an independent contractor, or because you will receive some sort of disability payments from the government?
Do you see options to (also) reduce your spending? Maybe that will be easier if you also can work less hours or have less stress? (No more stress chocolate eating, for example).
With reduced expenses and still some income coming in covering all or most of your reduced expenses, you might be able over the next 10-15 years to grow X to the amount that you need to cover your expenses forever.
And one more thing: have you built up some rights for monthly payments in old age? Maybe just because you're a citizen of a country (and they give Y money to everyone over age A) or because you worked 40 quarters (for social security payments in the US) or because your work offers a pension. Those payments (use a safe estimate) can also be a part of your overall financial plan and can sometimes mean that you don't need 25 times your annual expenses, but could do with less because at some time the retirement benefits will kick in and share the load. So: if you are entitled to "retirement income": how much (as % of annual expenses) and from roughly what year?
If you already have X, you need X to grow to roughly 2.5 times to cover your expenses "forever". (You would then have 25 times your annual spending). If you don't add new money to the pile (but also don't take money out), and you have invested X in low-fee diversified index funds, it will take about 14 years or so for X to grow to 2.5 X.
Alternatively, if you manage to shrink your expenses, then X no longer is 10 times your annual expenses, but would be for example 12 or 15 times your annual expenses. Then your pile doesn't need to grow as much for it to represent 25 times annual expenses.
So a few questions: if you can't work your current job anymore, will there probably be a way to bring in some other income? Either by working another job (lower stress, easier, and/or part time) or earn money as an independent contractor, or because you will receive some sort of disability payments from the government?
Do you see options to (also) reduce your spending? Maybe that will be easier if you also can work less hours or have less stress? (No more stress chocolate eating, for example).
With reduced expenses and still some income coming in covering all or most of your reduced expenses, you might be able over the next 10-15 years to grow X to the amount that you need to cover your expenses forever.
And one more thing: have you built up some rights for monthly payments in old age? Maybe just because you're a citizen of a country (and they give Y money to everyone over age A) or because you worked 40 quarters (for social security payments in the US) or because your work offers a pension. Those payments (use a safe estimate) can also be a part of your overall financial plan and can sometimes mean that you don't need 25 times your annual expenses, but could do with less because at some time the retirement benefits will kick in and share the load. So: if you are entitled to "retirement income": how much (as % of annual expenses) and from roughly what year?
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petertacos
- Posts: 3
- Joined: Sat Nov 23, 2024 1:35 pm
Re: Good morning, EREfolk!
Hi everyone,
Thank you delay and DutchGirl for the warm welcome and detailed advice! I really appreciate you taking the time to help.
- I just got the ERE book and will start reading that.
- You're right about the stress eating! I can see several areas where I could cut back, especially once I'm not working such crazy hours.
- That's a good call-out about social security benefits. I hadn't considered those! I'm in the US and I just looked up my Social Security Statement -- it seems I have 32 out of 40 credits, which means I only need to work another 2 years to get retirement benefits?
Thank you delay and DutchGirl for the warm welcome and detailed advice! I really appreciate you taking the time to help.
- I just got the ERE book and will start reading that.
- You're right about the stress eating! I can see several areas where I could cut back, especially once I'm not working such crazy hours.
- That's a good call-out about social security benefits. I hadn't considered those! I'm in the US and I just looked up my Social Security Statement -- it seems I have 32 out of 40 credits, which means I only need to work another 2 years to get retirement benefits?
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petertacos
- Posts: 3
- Joined: Sat Nov 23, 2024 1:35 pm
Re: Good morning, EREfolk!
To answer DutchGirl's questions:
> if you can't work your current job anymore, will there probably be a way to bring in some other income?
Hmm I haven't thought about this very much. I don't have many skills beyond my current set, but I think I could teach or tutor in this field. I can look into this...
> Do you see options to (also) reduce your spending?
Traveling is probably my biggest expense right now, though I have some control over this. I don't track my day-to-day expenses very closely and mostly track at the annual expense level. Are there any tools or apps you might recommend for tracking spending for the lazy man? I'm very bad at receipt tracking.
> If you already have X, you need X to grow to roughly 2.5 times to cover your expenses "forever".
Is there any recommendation on how much of X I should invest in low-fee diversified index funds today?
> if you can't work your current job anymore, will there probably be a way to bring in some other income?
Hmm I haven't thought about this very much. I don't have many skills beyond my current set, but I think I could teach or tutor in this field. I can look into this...
> Do you see options to (also) reduce your spending?
Traveling is probably my biggest expense right now, though I have some control over this. I don't track my day-to-day expenses very closely and mostly track at the annual expense level. Are there any tools or apps you might recommend for tracking spending for the lazy man? I'm very bad at receipt tracking.
> If you already have X, you need X to grow to roughly 2.5 times to cover your expenses "forever".
Is there any recommendation on how much of X I should invest in low-fee diversified index funds today?