Category Archives: FIRE

From Now to Rich in 3 Years.

What does “rich” mean? There was a huge debate on if having $1M makes you rich in one of my Facebook groups the other week. My argument was — no, $1M does not make you rich. It certainly doesn’t make you poor either, but it’s not what I’d consider wealthy.

Wealth, to me, is having enough in savings that with reasonable diversification and YoY growth, you never have to save another dime to support your future lifestyle. Your income, which can be passive or active if you feel confident you can maintain active employment and want to maintain active employment, should cover all of your bills and expenses until you age into one of your retirement buckets. You may only have one retirement bucket (i.e. age 67) or you may have multiple buckets (I have an early retirement bucket set for age 45, and another bucket at normal retirement age.

Wealth, to me, is being able to buy things like… a minivan… new… and a trip to Hawaii with a stay at a non-budget hotel… without worrying about it impacting my retirement goals. It’s flying my sister and mom to Hawaii and getting them their own room at the hotel for a week. It’s being able to pay to get my mother an in-home aide (or at least contribute to it) when she needs it, maybe even moving her across the country when she’s older, to be closer to us so she isn’t alone (if that’s what she wants.) It’s being able to spend like my father did–always offering to pay for meals for friends and family and tipping generously–but with the actual life savings that can withstand such spending, a life savings that accounts for potential fluctuations of the market and future healthcare and long-term care costs.

While I could do a better job honing these estimates, I feel good about my FAT Fire number. It seems to align with what I’ve seen others say — around $10M — to really reach the kind of wealth where your money continuously works for you. I figure if I ever get to $5M that’s when I can start dabbling in more complex investments like real estate. For now, it’s heads down with (mostly) index funds and a few individual stocks. This year is really the make-or-break year for my plan (though there may be future make-or-break years, but it will be difficult to encounter one in the near future where I have the chance to earn close to $1M in income for the year.)

Below, is a table on my current estimates per savings bucket. I am estimating a 6% YoY growth over time, which may be too high or too low, but as I get closer to retirement I can adjust down for more safety once I see how the years go. The current value column is approximately how much was saved in each bucket at the end of 2020. With 6% YoY until each bucket is accessed, I note the GAP in total amount needed for my final goal (ie retirement goal is $5M, if I didn’t touch my money at all and got 6% YoY now, I’d be $1.6M short. The cool thing is I’d have $3.3M, which doesn’t account for my taxable funds, and also is at age 65-ish, which doesn’t account for additional growth after age 65 since I won’t pull all the money out up front and will hopefully live much longer.

My “pre retirement” FIRE bucket is more or less my “Coast FIRE” bucket, which gets me to career freedom by 45. if I have $3M by 45 I can move into a lower-paid career (and/or take a few years off) and maintain the lifestyle I would like to have. If growth is stronger than 6% year over year we can also invest in building on to our current home, or move to a city that I prefer that we couldn’t currently afford.

2020 Goal Yrs Current Value Growth Rate “Real Value” GAP
Retirement $5,000,000 28 $651,000 1.06 $3,327,708 $1,672,292
Pre-Retirement $3,000,000 13 $833,074 1.06 $1,776,887 $1,223,113
College $600,000 17 $133,607 1.06 $359,773 $240,227
Home $2,000,000 28 $195,483 1.03 $447,251 $1,552,749
$1,813,164 total: $5,911,619 $4,688,381

2021, which is now THIS YEAR, represents a huge opportunity to get much closer to my goals. Even if I have failed to tap into the actual earnings potential I should have had at this company (my raises and refreshes have not kept up with my market value or initial grant offer), I’m still in a very, very good place if I can just hold out and remain employed until the end of this year. While anything can happen, and my mental health post baby may get the best of me, I’m really focused on surviving this year. (*note, the above doesn’t count total home value, which would be higher in 28 years since the mortgage would mostly be paid off then.)

This is why:

2021 Goal Yrs 2021 Value Growth Rate “Real Value” GAP
Retirement $5,000,000 27 $786,060 1.06 $3,790,653 $1,209,347
Pre-Retirement $3,000,000 12 $1,140,598 1.06 $2,295,108 $704,892
College $600,000 16 $261,623 1.06 $664,615 -$64,615
Home $2,000,000 27 $231,212 1.03 $513,589 $1,486,411
$2,419,494 total: $7,263,966 $3,336,034

 

By the end of 2021, if I can keep my job, and the stock markets don’t tank (ie we don’t have a civil war this year), I get much closer to my goals. Not 100%, but close enough that I really am already approaching Fat FIRE territory if I didn’t have such aggressive savings plans.

2022 I plan to switch jobs, so my income will go down quite a bit. At the moment I’m thinking I will try my best to stay until I get get the full $58k into my retirement for the year as well as max out the first ESPP period for the year, which ends in March. I’ll have to leave some money on the table at some point (unless I leave in March/April which is probably the ideal time to move to a new role), but I’m now looking at a transition around June. This assumes I make $200k total in 2022, including expected bonus that comes in February before I leave my current job. I’m kind of considering this part of 2021 plan, but since the actual receipt of income falls in 2022 it hits my 2022 goal plan:

2022 Goal Yrs 2022 Value Growth Rate Value GAP
Retirement $5,000,000 26 $929,224 1.06 $4,227,394 $772,606
Pre-Retirement $3,000,000 11 $1,314,116 1.06 $2,494,584 $505,416
College $600,000 15 $277,321 1.06 $664,615 -$64,615
Home $2,000,000 26 $269,085 1.03 $580,306 $1,419,694
$2,789,745 $7,966,899 $2,633,101

As you can see from the numbers above, with 6% YoY return expected, by the end of 2022 I’m SO CLOSE to my FIRE goals. I’m close enough that if I needed to I could stop working and probably be fine.

If I adjust to 10% YoY returns (unlikely but an easy switch in my spreadsheet), things start looking pretty crazy good. Fun to dream, right? If 10% YoY is in the cards, by 2022 I’m set.

2022 Goal Yrs 2022 Value Growth Rate Value GAP
Retirement $5,000,000 26 $989,310 1.10 $11,790,771 -$6,790,771
Pre-Retirement $3,000,000 11 $1,396,395 1.10 $3,984,077 -$984,077
College $600,000 15 $293,664 1.10 $1,226,709 -$626,709
Home $2,000,000 26 $286,934 1.03 $618,800 $1,381,200
$2,966,304 $17,620,358 -$7,020,358

 

Actually, things look really good already… with 10% YoY the total value of my current assets is $13.3M at time of use. Not bad.

2020 Goal Yrs Current Value Growth Rate Value GAP
Retirement $5,000,000 28 $651,000 1.10 $9,388,067 -$4,388,067
Pre-Retirement $3,000,000 13 $833,074 1.10 $2,875,997 $124,003
College $600,000 17 $133,607 1.10 $675,313 -$75,313
Home $2,000,000 28 $195,483 1.03 $447,251 $1,552,749
$1,813,164 $13,386,628 -$2,786,628

 

Of course I’m not going to bank on seeing 10% YoY. I probably should stick to 4-5% to be conservative and leave room for unexpected growth, versus the other way around. Either way, I’m really getting excited about these next 14 months. The next 14 months to a whole different level of living. I’m not going to change my spending immediately, and I don’t plan to ever actually stop working, but I can stop forcing myself into roles that aren’t a fit and that make me miserable. I can maybe start my own company or work for a non-profit or just do work that matters.

Even with 4% YoY growth the numbers don’t look horrible in 2022 if I hold fort. Sure, I don’t have $5M in retirement or $3M in pre-retirement at 45, but I’m at $1.9M in pre-retirement and $2.5M in retirement and nearly $500k in college for my kids. So this is all great news, if I can just survive a year with two kids, including a newborn and given lack of sleep, and a company that seems to want to set me up to fail and to get rid of me. 

2022 Goal Yrs 2022 Value Growth Rate Value GAP
Retirement $5,000,000 26 $899,962 1.04 $2,495,116 $2,504,884
Pre-Retirement $3,000,000 11 $1,273,976 1.04 $1,961,227 $1,038,773
College $600,000 15 $269,309 1.04 $485,011 $114,989
Home $2,000,000 26 $260,394 1.03 $561,564 $1,438,436
$2,703,641 $5,502,919 $5,097,081

This year is everything.

Slow FI / FIRE / FIOR / FATfire / YOLO: What’s your strategy?

Coming off of many years in startups, where you must drink the company kool-aid and believe you are simultaneously changing the world and building something that will one day make you rich (spoiler alert: it won’t), I have to say I’ve enjoyed the move into a public company where people still work hard, but also have lives. Well, at least some of them do.

I’ve been reading a lot on the FIRE concept (financial independence retire early) movement, which has unofficially been my own movement since I earned my first paycheck. Well, I more took the route that catastrophe can hit at any second, so you better have a lot of money saved up just in case. With that mindset, I just started spending less than I earned, and as I earned more, I kept my spending proportionately low, for the most part.

There are some people out there who are happy making $200k+ a year and living in RVs in their work parking lots, but that’s not my style. I’m not on the full-on FIRE bandwagon. I also don’t want to live a life in “retirement” where I can only take 4% of our my savings per year. And, heck, I like contributing to society and earning a living–I’d like just a bit more flexibility.

Hiring a CFP this year was definitely a wake up call. I thought having $1M+ saved now we’d be in a good place–but with our current spending and plans to purchase a house in a HCOL area (and my husband who will only commit to making $60k-$90k a year), there is no “early retirement” in my life. Either we leave this area–which isn’t happening, I win the stock market lotto, or I have to work for the next 30 years making $150,000 a year.

Can you blame me for still hoping to win the stock market lotto?

I don’t think it’s worth it to go back to a private company, unless I found my own–and who has the time/confidence/social skills for that? So, public companies it is. I’m thinking I can increase my happiness at work by switching from my current department to one that works together more as a team and where success is based on how happy you make someone else (ie customer service) — though I’m sure there’s plenty bad in other fields and plenty good in my current career I’m not seeing because I’m just burnt out.

I hired a career counselor I’m seeing next month to help me sort it out. I’m paying her $300 and then $400 a month subsequently to try to understand if there’s a place I can make money and not be miserable all the time, or if being miserable is so ingrained in my DNA that I might as well just stick with this career that enables me to save and maybe retire “early”–like at 64.