Since our inbox is filling up with lots of reader cases, it’s time for another one :
Hey Kristy and Bryce!
I just finished “Quit Like a Millionaire” for the second time in as many weeks, and just wanted to shoot you a thank you. While it’s certainly not the first book I’ve read on FIRE/related topics, it’s certainly one of the most updated, concise, and helpful!
I’m at an impasse, hoping you can help. Here’s my situation:
- Married, in our late 30s
- We live in a converted van, work full time, and travel the US
- Income / Expenses:
- ~$114k combined post-tax income from two jobs
- ~$30k/year ($2.5k/mo) living expenses
- Able to save around ~73% currently – $3300/month in post-tax investments after maxing out 401k and Roths offered through employers (which we haven’t started doing)
- Note: we currently just piss through most of our money and need to be more disciplined!
- Equity: ~$302k
- $180k gross in stock from my former employer
- 2/3 of which are long holds/long-term cap gains
- Noteworthy that my stupid ass didn’t sell when it was higher, I keep thinking “but it will go up, right?!”
- $12.8k in a Rollover IRA from my former employer
- $2.6k in a Roth from my former employer
- $92.4k in a Rollover IRA from my spouse’s former employer
- $15k emergency fund in savings
- $180k gross in stock from my former employer
- $19.2k van loan @ 3.99%
- 100% not having kids.
- We’re both currently working for startups with equity.
- One seems very promising and will likely IPO within a couple years, which may result in a nice little bump in the low six-figure range (though I’m not factoring it into anything since it’s not “real money” yet)
- Want to FIRE before 50 (seems very doable based off of multiple FIRE calcs)
- Honestly, after the past two years especially, I’m burned the f*ck out with work. The sooner the better.
- Will 100% househack (since we’re not having kids, we’re looking to buy an investment property in the next 1 to 5 years – rent out most of it and live in an in-law type setting).
- Hopefully with the goal of paying 3/4 if not all of our mortgage via rent.
- Notable that I’m very handy and can do basic carpentry/woodworking, plumbing, electrical, etc.
- Long-term goal of this would be to either flip or have somewhere to retire to
- I would never buy a property again without putting enough down to eliminate PMI
In my calculations, with our current income and savings rate, we’re on track for FIRE in 9.8 years. Note in the FIRE calc link that I have retirement spending at $65k and SWR at 3.5%. I always have the habit of over-planning. I expect retirement spending, especially if a property is basically paying its own mortgage via rental income, to be more like $45k. This reduces the 9.8 year timeline to 7.1, which is an easier pill to swallow. I also did not calculate anything from my wife’s employers potential IPO, since it hasn’t happened yet and thus isn’t real.
So my questions are:
- Should I sell my long-held equity (~$100k post-tax worth) of TOST now, at a record low, and diversify?
- I’d like to take this moment to say how much of a fucking idiot I am for not selling back in April when it was $24/share. But HOW do I get over that little voice that says “but what if it goes up?!” in my head?
- Let’s say that I do sell and get $100k post-tax. Where the fuck do I put it? VTI?
I’m sure I have more questions, but those are the big two right now.
Thanks for all the help, past and future! 🙂
Okay, first of all, I’m impressed by the fact that VF is saving an insane 73% of their combined salary and still thinks “we currently just piss through most of our money and need to be more disciplined!”
Say what? Your savings rate is currently as high as our HIGHEST savings rate, and you still think you’re overspending?
If that were true, then everyone in the FIRE community is pissing away too much money. You might be spending way too little (I know, very hypocritical coming from me). From the level of detail and the calculation, it seems like you might also be an Optimizer like me. So, if that’s true maybe it’s because of the appeal of trying make everything efficient and not wasting money. Like a chess game you can’t lose!
Now, you did mention that going forward you want to buy an investment property and do some house hacking, which given the current state of the falling housing market due to interest rate hikes, might be catching a falling knife. But, given how strong your finances look, could it still work out?
As we always say on this blog, let’s MATH THAT SHIT UP!
|Net family Income:||$114,000|
|Expenses:||$2500/month or $30,000/year|
|Investible Assets:||$180k (company stock) + 12,800 (IRA) + $92,400 (IRA) + 2600 (Roth) + $15,000 (emergency funds) = $302,800|
This means your savings rate is 114K-30K/114K = 74%, your FI number is $30,000*25 = $750,000, and your total net worth is currently: $302,800 – $19,200 = $283,600.
With the $84,000 you are saving every year, you should reach FI in:
Less than 5 years!
That means, you’ll be FI by the time you’re in your 40s, beating your projected FI age of 50 by a whole decade!
In your calculations, you’re assuming a retirement spending of $65,000 even though you don’t plan on having kids (we don’t even spend that now, even in Toronto, one of the most expensive cities in Canada), and an extremely conservative withdrawal rate of 3.5%. I think this is extremely conservative and not necessary if you’re good at optimizing, but hey if it gives you peace of mind, than you can redo the calculation with 1/0.035 =29 times your $65K spending number to get an FI number of $1,885,000, which at your current savings rate, you would reach in:
Slightly over 11 years!
So, even with this extremely pessimistic conservative outlook, you’d STILL reach FI by your 50s!
So, you’re in on track either way.
Now, as for buying an investment property to do house hacking, since I don’t know where you are planning to buy it and what the rent-to-own ratio or cap rates are, I can’t tell you whether mathematically it makes sense. You’re just going to have to Math Shit Up and figure it out when you have all that information.
I do like that you said you “I’m very handy and can do basic carpentry/woodworking, plumbing, electrical, etc.” so that makes you a much better fit for this than me. Real-estate investing can beat index investing in returns but it’s not passive. But hey, if you’re like Mr. Money Mustache and love putting in sweat equity, it might be a good fit. Just make sure you’re aware of the risks if housing prices fall.
And finally, to answer your questions:
- Should I sell my long-held equity (~$100k post-tax worth) of company shares now, at a record low, and diversify?
- Let’s say that I do sell and get $100k post-tax. Where do I put it? VTI?
If you want to have the mindset of a long-term investor to reach FI, the first thing you MUST do is stop beating yourself up for not having a crystal ball. What if your company stock had gone up instead of down? Then you’d be stressed over whether you should sell now or hold out for even more gains. See, this is why I hate 1) timing the market and 2) individual stocks. You’re always worried that it could crash to zero so you’re always on edge to stampede for the door when it tanks. And when the prices go up, you have no idea when to sell. Even if you make a decent profit, you feel bad if it goes up even more.
Stop beating yourself up, sell, diversify and move on with your life. Honestly, I think at this point, you’re shortening your lifespan by stressing over this and you’ll never become a veteran investor if you keep trying to time the market. Diversify, set it, forget it, and get paid dividends and interest to own assets regardless of what the capital values are. That’s why we can sleep easily at night these days even with the market volatility causing our net worth to oscillate.
What do you put it in? Follow our free workshop here to create a balance and diversified portfolio: https://www.millennial-revolution.com/investworkshop/
So, there you have it. What do you think? Do you think VanFIRE should sell their company stocks? Buy an investment property? Let’s hear it in the comments!
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