Have $800k - What do I do?

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zeek123
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Joined: Wed Mar 14, 2018 1:37 pm

Have $800k - What do I do?

Post by zeek123 » Wed Mar 14, 2018 2:04 pm

I just joined this board but have been reading a lot of the posts for some time and it's been super helpful. I have a couple of questions that revolve around the following...

1. I'm looking for a good financial advisor in the Columbus, Ohio area or someone that offer services remotely. I don't necessarily need to meet in person, but want someone that is not only proficient in investing, but real estate, owning a business, etc. I'd like to find someone that can make some recommendations in this area.
2. Trying to plan a good financial strategy for exiting the corporate 9-5 environment.

My background
-35 years old, engineer
-Live in Columbus, Ohio
-Current salary: 110k per year
-Financial status:
-$650k of stock in a private company. This is a very well known company in my industry with lots of people waiting for an IPO. Every year my stock increases between 15-20% in value, so I've been holding onto it for several years. Without giving away the details of the company, it is not software related and very well positioned to continue to increase in value in the coming years. My stock is likely to be worth ~$800k this year with the new company valuation. Since this is not stock I can sell on the public stock exchange, I would sell them through equidate or back to the company.
-$110k in a 401k
-$20k in mutual funds, IRA, cash, miscellaneous funds

My goal
-I really am tired of the 9-5 and I am not passionate about what I do.
-I understand that there isn't such a thing as truly passive income, but I want my money to work for me and generate interest or return.
-Want to figure out how to gradually set myself up so that I don't have to rely on a 9-5. I'd rather own a few franchised businesses, or focus on real estate, etc.

My question is this.... Based on the money I do have, what is the best approach to generating income that will allow me to quit my 9-5? At this point, I'm more focused on that, and less focused on trying to figure out how to amass a ton of money to retire on. My main goal is to use the money I do have to somehow generate a return similar to what I currently make per year (110k) but allow me to have more mobility in my life. I'm tired of being confined to a desk all day. I'd rather own a couple of franchised businesses that I pay someone to manage, which would allow me time and flexibility to spend more time with my family.

Any thoughts or comments would be super helpful.

Thanks!

Dottie57
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Joined: Thu May 19, 2016 5:43 pm

Re: Have $800k - What do I do?

Post by Dottie57 » Wed Mar 14, 2018 3:08 pm

Don't count your private stock sales money until it sells.

If I read your post correctly you have <200k, most of which is in an IRA. I don't see any way to generate 110k a year from that. Even with sale pf private stock, you would generate about 40k.

bloom2708
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Location: Fargo, ND

Re: Have $800k - What do I do?

Post by bloom2708 » Wed Mar 14, 2018 3:18 pm

Read up on the 3 fund portfolio.

A follow up question: You have been reading here and understand the Boglehead philosophy and have watched the videos and gone through the getting started and still want/need to hire an advisor?

I ask it as more of a rhetorical question. Not to be difficult. :wink:

With as few as 2 or 3 funds you can buy the entire market at your desired mix of stocks and bonds.

3.5% of $800k is $28k. Will that cover your expenses and health insurance and some taxes? Your spending is very important. Are you willing to work part time to supplement your income?

I think more reading/learning/researching is needed. Ask any question here you would ask your future advisor. Save the fees and perhaps an assets under management fee.

Others will certainly add their thoughts.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

bampf
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Re: Have $800k - What do I do?

Post by bampf » Wed Mar 14, 2018 3:21 pm

I know very little about you and or your situation, but, I have been there before in terms of stock and salary. It looks like almost all of your assets are tied up in one company (both compensation as well as equity). This is a pretty uncomfortable place to be. If something bad happens, like oh, the dot bomb bust of 2000-2001 you could be out both your stock and your job. Whatever your industry, the bust cycle can be devastating. Anyone looking seriously at GE?

My point is, at some point you pull some of the money off the table. If it were me, I would float a 25% sale (200K worth) of my 800K in private equity. If that goes as planned, you can plot out your next strategy. Don't forget about taxes. Those will be a big deal. Next, $200K or $800K isn't enough to just punch out, in my opinion. You could go real estate and rentals. That can work. It can also cost you a lot of money, time and stress. You can dump it in to the 3 fund portfolio and count on a ok return. So, a lot of words to say I can't really tell you what to do except to say that it aint real money til it is, and the only way to know that it is is to sell some. If it really is growing at 15% to 20% a year and you feel strongly about it, you might keep some there. That being said, if everyone decides to get rid of it at once you could be in trouble. Up to you. Good luck!
Last edited by bampf on Wed Mar 14, 2018 3:34 pm, edited 1 time in total.

mega317
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Re: Have $800k - What do I do?

Post by mega317 » Wed Mar 14, 2018 3:32 pm

Sorry dude. Lots of people would like to retire at 35, but most can't. What are your expenses?

I don't know how owning private stock works but I would consider it worthless until you have the money in your pocket. If you can sell it back to the company I would do that tomorrow. Do you really know what's going on at the highest levels? It's not like you would get wind ahead of time of some major problems or malfeasance or something that you could act on before your stake became worthless.

One thing I would consider, especially if you can get cash out of the company stock, is go back to school for additional training in your field, or move to a completely new field, to find something you're passionate about that you can do for 30 years.

Luke Duke
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Location: Texas

Re: Have $800k - What do I do?

Post by Luke Duke » Wed Mar 14, 2018 5:07 pm

How have you managed to only save $130K as a 35 year old engineer?

zeek123
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Joined: Wed Mar 14, 2018 1:37 pm

Re: Have $800k - What do I do?

Post by zeek123 » Thu Mar 15, 2018 10:01 am

Luke Duke wrote:
Wed Mar 14, 2018 5:07 pm
How have you managed to only save $130K as a 35 year old engineer?
Yes. A lot of my money after college went towards paying medical bills for my father who passed away 3 years ago, since I had to take care of him. Also, 2 of the companies I worked for out of school did not have a 401k.

I did not start investing until several years after college. Only then did I start realize that I needed to be doing something.

jehovasfitness
Posts: 397
Joined: Mon Jan 22, 2018 2:26 pm

Re: Have $800k - What do I do?

Post by jehovasfitness » Thu Mar 15, 2018 10:06 am

Luke Duke wrote:
Wed Mar 14, 2018 5:07 pm
How have you managed to only save $130K as a 35 year old engineer?
Very easily for the average person to be even below that.

Jack FFR1846
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Joined: Tue Dec 31, 2013 7:05 am

Re: Have $800k - What do I do?

Post by Jack FFR1846 » Thu Mar 15, 2018 10:10 am

I think your view of franchises and real estate are not well based. Income from either is anything but passive.

For a franchise, expect to work 18 hours a day and break even (make zero profit) for 3 years.
In real estate, consider business real estate. Residential is very easy to get into (buy a house, rent it out) but you either pay a manager or take the 3am call to come fix the toilet. With business, you won't get those calls so often and mostly worry about vacancies and a fly by night company vacating before you notice the missing rent payment.

Figure you need at least 25X expenses to live from passive income, so assuming stock and bond mutual funds, you'll need $2.5M to fund $100k a year lifestyle. I'm a EE and have worked for plenty of companies. I value my stock at Zero until it sells.
Bogle: Smart Beta is stupid

magicrat
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Re: Have $800k - What do I do?

Post by magicrat » Thu Mar 15, 2018 10:23 am

OP - You cannot generate $110k per year through stock and bond investments. If you want to be a franchisee, then you'll need to sell your stock and buy into a franchise. However, it will likely take a long time to scale up a franchise business to where it is viable to hire someone else to manage it AND provide you with income. Until then, you'll be working much more that 9-5, though may not be chained to a desk.

Luke Duke
Posts: 721
Joined: Tue Jun 18, 2013 11:44 am
Location: Texas

Re: Have $800k - What do I do?

Post by Luke Duke » Mon Mar 19, 2018 10:05 am

zeek123 wrote:
Thu Mar 15, 2018 10:01 am
Luke Duke wrote:
Wed Mar 14, 2018 5:07 pm
How have you managed to only save $130K as a 35 year old engineer?
Yes. A lot of my money after college went towards paying medical bills for my father who passed away 3 years ago, since I had to take care of him. Also, 2 of the companies I worked for out of school did not have a 401k.

I did not start investing until several years after college. Only then did I start realize that I needed to be doing something.
That makes sense. I'm sorry about your father.

Luke Duke
Posts: 721
Joined: Tue Jun 18, 2013 11:44 am
Location: Texas

Re: Have $800k - What do I do?

Post by Luke Duke » Mon Mar 19, 2018 10:18 am

jehovasfitness wrote:
Thu Mar 15, 2018 10:06 am
Luke Duke wrote:
Wed Mar 14, 2018 5:07 pm
How have you managed to only save $130K as a 35 year old engineer?
Very easily for the average person to be even below that.
An engineer is not the average person in regards to income and the ability to save. There were obviously extenuating circumstances involved.

3funder
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Joined: Sun Oct 15, 2017 9:35 pm

Re: Have $800k - What do I do?

Post by 3funder » Mon Mar 19, 2018 10:29 am

What do you do? Give half to me, of course!

Glockenspiel
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Joined: Thu Feb 08, 2018 1:20 pm

Re: Have $800k - What do I do?

Post by Glockenspiel » Mon Mar 19, 2018 10:39 am

Luke Duke wrote:
Mon Mar 19, 2018 10:18 am
jehovasfitness wrote:
Thu Mar 15, 2018 10:06 am
Luke Duke wrote:
Wed Mar 14, 2018 5:07 pm
How have you managed to only save $130K as a 35 year old engineer?
Very easily for the average person to be even below that.
An engineer is not the average person in regards to income and the ability to save. There were obviously extenuating circumstances involved.
I'm a 33 year old engineer and have saved 25-30% of my income for several years and have only saved $240k. It seems very reasonable for an average engineer to have only saved $130k at age 35. I'm sure a lot of my co-workers are behind that rate.

jehovasfitness
Posts: 397
Joined: Mon Jan 22, 2018 2:26 pm

Re: Have $800k - What do I do?

Post by jehovasfitness » Mon Mar 19, 2018 10:54 am

Glockenspiel wrote:
Mon Mar 19, 2018 10:39 am
Luke Duke wrote:
Mon Mar 19, 2018 10:18 am
jehovasfitness wrote:
Thu Mar 15, 2018 10:06 am
Luke Duke wrote:
Wed Mar 14, 2018 5:07 pm
How have you managed to only save $130K as a 35 year old engineer?
Very easily for the average person to be even below that.
An engineer is not the average person in regards to income and the ability to save. There were obviously extenuating circumstances involved.
I'm a 33 year old engineer and have saved 25-30% of my income for several years and have only saved $240k. It seems very reasonable for an average engineer to have only saved $130k at age 35. I'm sure a lot of my co-workers are behind that rate.
Yup, take an avg engineer, 10 yrs to pay off $100k in student loans and then get a 30k car after college, then a house and family. Pretty typical imo not to have a lot left over

N10sive
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Joined: Thu May 05, 2016 6:22 pm

Re: Have $800k - What do I do?

Post by N10sive » Mon Mar 19, 2018 11:13 am

jehovasfitness wrote:
Thu Mar 15, 2018 10:06 am
Luke Duke wrote:
Wed Mar 14, 2018 5:07 pm
How have you managed to only save $130K as a 35 year old engineer?
Very easily for the average person to be even below that.
Yes that is a very blanket statement. I expect to only have around 250k when I turn 35 and besides a large payment to help my parents, I don't believe I have spent too lavishly. I just know I paid all my college myself and everything since I turned 16. Many engineering degrees don't pay great out of college compared to others, I've also never had a 401k match. Salary varies greatly by locale too. Everyones situation is different.

crazygrow
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Joined: Sun Apr 24, 2016 8:56 am

Re: Have $800k - What do I do?

Post by crazygrow » Mon Mar 19, 2018 1:56 pm

Luke Duke wrote:
Wed Mar 14, 2018 5:07 pm
How have you managed to only save $130K as a 35 year old engineer?
I hate questions like this on the board - especially when it isn't relevant to the question being asked by the OP.

There are extenuating circumstances in many peoples' lives. I had triplets and had a substantial (multiple six-figures) medical debt situation. Not everyone - even if they want to - can focus all their "extra" money into savings from a young age.

guilard1
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Joined: Fri Mar 02, 2018 11:25 am

Re: Have $800k - What do I do?

Post by guilard1 » Mon Mar 19, 2018 2:41 pm

crazygrow wrote:
Mon Mar 19, 2018 1:56 pm
Luke Duke wrote:
Wed Mar 14, 2018 5:07 pm
How have you managed to only save $130K as a 35 year old engineer?
I hate questions like this on the board - especially when it isn't relevant to the question being asked by the OP.

There are extenuating circumstances in many peoples' lives. I had triplets and had a substantial (multiple six-figures) medical debt situation. Not everyone - even if they want to - can focus all their "extra" money into savings from a young age.
Or an ex wife who spent most of what you had.
:-)
I am not bitter.

bloom2708
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Location: Fargo, ND

Re: Have $800k - What do I do?

Post by bloom2708 » Mon Mar 19, 2018 2:47 pm

crazygrow wrote:
Mon Mar 19, 2018 1:56 pm
Luke Duke wrote:
Wed Mar 14, 2018 5:07 pm
How have you managed to only save $130K as a 35 year old engineer?
I hate questions like this on the board - especially when it isn't relevant to the question being asked by the OP.

There are extenuating circumstances in many peoples' lives. I had triplets and had a substantial (multiple six-figures) medical debt situation. Not everyone - even if they want to - can focus all their "extra" money into savings from a young age.
It is relevant when the OP wants to figure out how to retire early and is 35 years old. The "FI trap" can get you at any age. I call it a trap because it an excellent goal but people are usually unwilling to do the things to get on track for early FI.

If you are going to help someone think outside the box, some tough questions might have to be asked. I thought the same thing and wanted to ask, but someone already had.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

guilard1
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Joined: Fri Mar 02, 2018 11:25 am

Re: Have $800k - What do I do?

Post by guilard1 » Mon Mar 19, 2018 2:49 pm

I would suggest trying to get as much cash out of the $650k as possible by selling it back to the company, or whatever you need to do. All of it being invested in one single stock is too risky. Bear Stearns didn't loose money for a single year, until the year it went bankrupt. Likewise Enron had a very healthy balance sheet until it went bankrupt. I would be content with a well diversified low cost index fund that makes 8-12%. You can read much more about that on this site.
Also if it was only making 20% gains in the last few years, then that isn't that impressive. We have had a bull market.

I like the idea that you want to give up your 9-5 job and do something else. You should read MMM. That is exactly what he did. Now he does all sorts of cool projects or whatever he wants to do and blogs about it. He latest article reminds me of your situation.
https://www.mrmoneymustache.com/2018/03 ... hangeable/

The one warning I would give you, is that maybe you should try it out with an extended vacation, or go part time, or something like that before you quit.

Jon H
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Re: Have $800k - What do I do?

Post by Jon H » Tue Mar 20, 2018 1:04 pm

I agree with the others who advocate for getting the money in your hands. You don't have to sell all of it, but sell enough so you feel like you got real money out of it. Its okay to keep some of it as investment, maybe 10-20% of what you have now.

What you decide to do with the cash is up to you. This might be a good time to work on an investing policy statement and follow through with that plan.
Consider gain and loss, but never be greedy and everything will be alright (fortune cookie)

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Sandtrap
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Re: Have $800k - What do I do?

Post by Sandtrap » Tue Mar 20, 2018 1:41 pm

If you want accurate suggestions based on a comprehensive look at your entire financial picture, do this:
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212

You can edit your original post in this format and then the $800 question will have accurate context.

j

zeek123
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Re: Have $800k - What do I do?

Post by zeek123 » Wed Mar 21, 2018 11:12 am

Thanks for the comments so far.

I should've been more clear in my original post. I'm not necessarily looking for one investment that's going to bring in the cash flow I need. What I was interested in was where is a good place to start? ... I understand it might take some time to build up a portfolio of investments and/or businesses that will allow me to quit the traditional sitting in front of a computer 9-5. I like the idea of having multiple smaller investments - to spread out the risk. IE - a laundromat, a car wash, possibly a small franchise. I understand that none of these are going to be totally hands off, and none of these alone are going to make a lot of money. But i'm looking for some ideas or a direction where I could still keep my day job for the time being while I gradually acquire some smaller investments that could eventually, together, bring in a decent amount of cash flow.

In regards to the stock, I also understand that it's not cash in hand yet, but at this point i'm speaking more hypothetically. If I were to sell today and had the cash in hand, I'm curious to see what my strategy would be.

The main reason I am looking into this is that I currently don't enjoy my job, but it makes a decent buck and I have a low cost of living. I can justify working a job that isn't super enjoyable but pays well if there's a reasonable plan to use the money to eventually get me out of it. However, if that's not really in the cards or not a realistic expectation, then I'd likely rather just move to an area where there are actually jobs I enjoy, even though they may pay a little less.

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