KF's simple rules to achieve FI [Financial Independence]

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KlangFool
Posts: 10744
Joined: Sat Oct 11, 2008 12:35 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Sat Apr 28, 2018 7:32 pm

aerosurfer wrote:
Sat Apr 28, 2018 7:09 pm
KF

Some really interesting wealth strategies I hadn’t ever though of looking at that way.

According to rule #1 what do you lump into as savings for annual expenses? Any and All money saved; pre-tax, post tax, how about employer matching? Same goes calculating expenses, simply based on revolving budget, or would you factor in any infrequent or unplanned expenses?

I’m newer to these boards, so I only know about your history in this thread. Though it seems you have really taken a methodical way to making FI work sooner, but you also keep stressing about being out of work for extended times and having enough to live off of savings. Are you saying all those times you had Zero income coming in while you looked for another job? No matter how specialized your field it seems like not working is not an ideal choice vs. ‘some’ working. No freelance, no side jobs? All of that seems like a disservice to your family as the primary earner, as well as for planning to keep your other rules in check.

I’m an airline pilot, so my field is pretty specialized as well. If my airline went under I feel I could find another flying job soon, but if the industry tanks, I can’t imagine I would just wait out flying while I depleted my savings under any circumstances, even if I had reached my FI independence point. Which you seem to indicate you hadn’t yet reached at your various unemployment points.

Im Still trying to wrap my head around your point of view regarding specific college savings at any level. A lot has already been said for both sides of the argument, but I do like the perspective

Aerosurfer
Aerosurfer,

<<Any and All money saved; pre-tax, post tax, how about employer matching? >>

It includes employer matching.

<<Same goes calculating expenses, simply based on revolving budget, or would you factor in any infrequent or unplanned expenses?>>

There is no budget. This is based on "Pay Yourself First" saving method. All the savings are deducted out of the paycheck automatically. Then, you spend the rest.

<< in any infrequent or unplanned expenses?>>

If you have the money to deal with it, you spend it. Or else, you use your emergency fund. Then, you reduce your expense over the next few months to refill the emergency fund.

<<I’m an airline pilot, so my field is pretty specialized as well. If my airline went under I feel I could find another flying job soon, but if the industry tanks, I can’t imagine I would just wait out flying >>

What do you do if there is no flying opportunity?

A) The reality is at my age and my specialty, there is only contract work at $60 per hour or higher for me. I try to get some contract at a lower price but I had zero offers. But, I had contract work at $60 and $100 per hour.

B) It is the same with the job offer. There are not many job opportunities out there for me. And, for the job that needs me, there are not many out there that can do the job. I have 30+ years of experience in my area. For jobs with a lower requirement, they would not hire me because they believe I would leave as soon as a suitable job shows up. I am overqualified.

KlangFool

EddyB
Posts: 568
Joined: Fri May 24, 2013 3:43 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by EddyB » Sat Apr 28, 2018 7:36 pm

KlangFool wrote:
Sat Apr 28, 2018 5:32 pm
EddyB wrote:
Sat Apr 28, 2018 5:06 pm
KlangFool wrote:
Sat Apr 28, 2018 3:30 pm

You believe that it is not possible for someone to be permanently unemployed or under-employed. Hence, your financial planning is based on those set of assumptions.

I believe that it is possible for someone to be permanently unemployed or under-employed. Hence, I designed my rules to take those assumptions into consideration.

We agreed to disagree. Our base assumptions are different.
KlangFool
No, it’s certainly possible for someone to suffer seriously adverse employment outcomes (although much can be done to alleviate that), but I believe it’s possible to be overly fearful, and consequentially too conservative, and that such planning will harm far more people than it will help.
EddyB,

1) Show us a better system and provide all the reasoning and calculation behind the system.

2) My system needs 15 to 25 years of employment in order for the numbers to work out. I do not consider that to be conservative.

<although much can be done to alleviate that>>

3) I disagree. I was in Asia during Asian Currency Crisis. The only way out was to leave the country. That was only possible because I was not "House Poor".

KlangFool
I don't propose to make "rules," but as with many others, think your rules regarding (1) ratio of net worth to house purchase price and (2) avoidance of 529s don't hold up to any kind of scrutiny. In general I agree with the fundamentals, though, of not buying more house, or anything, than one "needs" until one is very well cushioned. It's been discussed at length already, and obviously there's no reason to argue it with you if these are, as you say, just your personal rules.

KlangFool
Posts: 10744
Joined: Sat Oct 11, 2008 12:35 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Sat Apr 28, 2018 7:41 pm

Will do good wrote:
Sat Apr 28, 2018 7:14 pm
KF,

I agreed with most of your rules. Some people just don't understand the immigrant mentality, sacrifice today for a better tomorrow. Because we have seen much worst situations than what most Americans had faced, we prepared for the worst but hope for the best.
Will do good,

I would not say that. In my area, there are a fair amount of "House Poor" immigrants.

KlangFool

KlangFool
Posts: 10744
Joined: Sat Oct 11, 2008 12:35 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Sat Apr 28, 2018 7:45 pm

EddyB wrote:
Sat Apr 28, 2018 7:36 pm
KlangFool wrote:
Sat Apr 28, 2018 5:32 pm
EddyB wrote:
Sat Apr 28, 2018 5:06 pm
KlangFool wrote:
Sat Apr 28, 2018 3:30 pm

You believe that it is not possible for someone to be permanently unemployed or under-employed. Hence, your financial planning is based on those set of assumptions.

I believe that it is possible for someone to be permanently unemployed or under-employed. Hence, I designed my rules to take those assumptions into consideration.

We agreed to disagree. Our base assumptions are different.
KlangFool
No, it’s certainly possible for someone to suffer seriously adverse employment outcomes (although much can be done to alleviate that), but I believe it’s possible to be overly fearful, and consequentially too conservative, and that such planning will harm far more people than it will help.
EddyB,

1) Show us a better system and provide all the reasoning and calculation behind the system.

2) My system needs 15 to 25 years of employment in order for the numbers to work out. I do not consider that to be conservative.

<although much can be done to alleviate that>>

3) I disagree. I was in Asia during Asian Currency Crisis. The only way out was to leave the country. That was only possible because I was not "House Poor".

KlangFool
I don't propose to make "rules," but as with many others, think your rules regarding (1) ratio of net worth to house purchase price and (2) avoidance of 529s don't hold up to any kind of scrutiny. In general I agree with the fundamentals, though, of not buying more house, or anything, than one "needs" until one is very well cushioned. It's been discussed at length already, and obviously there's no reason to argue it with you if these are, as you say, just your personal rules.
EddyB,

<<(1) ratio of net worth to house purchase price >>

Just to get a clear understanding of your position.

1) You believe that net worth should not be used at all to decide the house purchase price

Or,

2) Or the ratio of 2.5 is too high and it needs to be lowered. And, the number should be?

Is it (1) or (2)?

I understand your position on 529.

KlangFool

aerosurfer
Posts: 49
Joined: Fri Feb 02, 2018 6:10 am

Re: KF's simple rules to achieve FI [Financial Independence]

Post by aerosurfer » Sat Apr 28, 2018 7:53 pm

KlangFool wrote:
Sat Apr 28, 2018 7:32 pm
[
<<I’m an airline pilot, so my field is pretty specialized as well. If my airline went under I feel I could find another flying job soon, but if the industry tanks, I can’t imagine I would just wait out flying >>

What do you do if there is no flying opportunity?

A) The reality is at my age and my specialty, there is only contract work at $60 per hour or higher for me. I try to get some contract at a lower price but I had zero offers. But, I had contract work at $60 and $100 per hour.

B) It is the same with the job offer. There are not many job opportunities out there for me. And, for the job that needs me, there are not many out there that can do the job. I have 30+ years of experience in my area. For jobs with a lower requirement, they would not hire me because they believe I would leave as soon as a suitable job shows up. I am overqualified.

KlangFool
Again, perhaps I’m just new to your style of writing on here, but if I couldn’t find flying, locally or abroad, and I’m not injured I’ll work outside of aviation. Retail, driving, construction, etc.... I’d do what it takes, not necessarily to just put food on the table,but to not waste time while depleting the savings until I could find flying or another field that provides the income I hope to earn.

Your writing makes it sound like if you can’t do what your field offers, do nothing until you can. Investing in ones own future over (formally) investing in your children’s makes sense, to a point. But if you are not a FI point, being unemployed for an extended time, seems like it would be bleeding cash and not be indicative of striving towards FI.

As perspective, I say this as a healthy highly trained37 y/o married, 2 kids, sole income earner, with a net worth of about 450k in a LCOL area. If I lost flying we could eat steak every night, as well as pay the bills for a sustained time, but I wouldn’t not be working towards new financial security.

KlangFool
Posts: 10744
Joined: Sat Oct 11, 2008 12:35 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Sat Apr 28, 2018 8:03 pm

aerosurfer wrote:
Sat Apr 28, 2018 7:53 pm
Again, perhaps I’m just new to your style of writing on here, but if I couldn’t find flying, locally or abroad, and I’m not injured I’ll work outside of aviation. Retail, driving, construction, etc.... I’d do what it takes, not necessarily to just put food on the table,but to not waste time while depleting the savings until I could find flying or another field that provides the income I hope to earn.

Your writing makes it sound like if you can’t do what your field offers, do nothing until you can. Investing in ones own future over (formally) investing in your children’s makes sense, to a point. But if you are not a FI point, being unemployed for an extended time, seems like it would be bleeding cash and not be indicative of striving towards FI.

As perspective, I say this as a healthy highly trained37 y/o married, 2 kids, sole income earner, with a net worth of about 450k in a LCOL area. If I lost flying we could eat steak every night, as well as pay the bills for a sustained time, but I wouldn’t not be working towards new financial security.
aerosurfer,

<<Again, perhaps I’m just new to your style of writing on here, but if I couldn’t find flying, locally or abroad, and I’m not injured I’ll work outside of aviation. Retail, driving, construction, etc.... I’d do what it takes, >>

1) If I do not constantly keep up with the latest development and take online training classes, how could I find and keep a job?

2) Even when I was working, I have to spend about 20 hours per week of self-study just to keep up with my area. When I am unemployed and looking for work, it is a full-time job.

<<Retail, driving, construction, etc.... I’d do what it takes, >>

3) None of that pays enough to make a difference. My annual expense is 60K per year.

<<As perspective, I say this as a healthy highly trained37 y/o married, 2 kids, sole income earner, with a net worth of about 450k in a LCOL area. >>

4) I am 50+ with 20 times my annual expense. I am down to my last few years towards FI.

KlangFool

aerosurfer
Posts: 49
Joined: Fri Feb 02, 2018 6:10 am

Re: KF's simple rules to achieve FI [Financial Independence]

Post by aerosurfer » Sat Apr 28, 2018 8:07 pm

KlangFool wrote:
Sat Apr 28, 2018 7:45 pm
EddyB wrote:
Sat Apr 28, 2018 7:36 pm
KlangFool wrote:
Sat Apr 28, 2018 5:32 pm
EddyB wrote:
Sat Apr 28, 2018 5:06 pm
KlangFool wrote:
Sat Apr 28, 2018 3:30 pm

You believe that it is not possible for someone to be permanently unemployed or under-employed. Hence, your financial planning is based on those set of assumptions.

I believe that it is possible for someone to be permanently unemployed or under-employed. Hence, I designed my rules to take those assumptions into consideration.

We agreed to disagree. Our base assumptions are different.
KlangFool
No, it’s certainly possible for someone to suffer seriously adverse employment outcomes (although much can be done to alleviate that), but I believe it’s possible to be overly fearful, and consequentially too conservative, and that such planning will harm far more people than it will help.
EddyB,

1) Show us a better system and provide all the reasoning and calculation behind the system.

2) My system needs 15 to 25 years of employment in order for the numbers to work out. I do not consider that to be conservative.

<although much can be done to alleviate that>>

3) I disagree. I was in Asia during Asian Currency Crisis. The only way out was to leave the country. That was only possible because I was not "House Poor".

KlangFool
I don't propose to make "rules," but as with many others, think your rules regarding (1) ratio of net worth to house purchase price and (2) avoidance of 529s don't hold up to any kind of scrutiny. In general I agree with the fundamentals, though, of not buying more house, or anything, than one "needs" until one is very well cushioned. It's been discussed at length already, and obviously there's no reason to argue it with you if these are, as you say, just your personal rules.
EddyB,

<<(1) ratio of net worth to house purchase price >>

Just to get a clear understanding of your position.

1) You believe that net worth should not be used at all to decide the house purchase price

Or,

2) Or the ratio of 2.5 is too high and it needs to be lowered. And, the number should be?

Is it (1) or (2)?

I understand your position on 529.

KlangFool

I think a combination of the two.....

My own example was our last 2 house purchases. Our previous house was the right house, at the right price, at the right time, all of which allowed savings and fit our budget. However it was in summer 2010, so prices were still on the down slope, and rates were yet to still drop.....

I was underwater, at least on paper, for the home almost for the next 6 years. However, while still saving, both pre and post tax, I was aggressively paying down the principal, hoping to get refinanced. Had I not done that, that money likely would have done well, but been tied up in pretax accounts. Higher net worth as you say, but not really useable.

2016 we refinanced, 2017 we sold, after the market took a vertical climb and we came out ahead quite well. Our current house was bought solely with that equity. Again (after hard negotiating) right home, right mortgage. But renting the last 7 years likely would not have had the same chain of events, even if net worth was higher, nearly all would have been pretax.

It may be a good guideline, perhaps in a LCOL area, but I think it needs to be applied with total picture in mind.

I know I’m new to the party, but I’m not trying to argue here or above, simply keep the discussion going. Like others I think there is some adoration for the framework you have posted. And like you said, modify our own situation to fit.

KlangFool
Posts: 10744
Joined: Sat Oct 11, 2008 12:35 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Sat Apr 28, 2018 8:17 pm

aerosurfer wrote:
Sat Apr 28, 2018 8:07 pm
KlangFool wrote:
Sat Apr 28, 2018 7:45 pm
EddyB wrote:
Sat Apr 28, 2018 7:36 pm
KlangFool wrote:
Sat Apr 28, 2018 5:32 pm
EddyB wrote:
Sat Apr 28, 2018 5:06 pm


No, it’s certainly possible for someone to suffer seriously adverse employment outcomes (although much can be done to alleviate that), but I believe it’s possible to be overly fearful, and consequentially too conservative, and that such planning will harm far more people than it will help.
EddyB,

1) Show us a better system and provide all the reasoning and calculation behind the system.

2) My system needs 15 to 25 years of employment in order for the numbers to work out. I do not consider that to be conservative.

<although much can be done to alleviate that>>

3) I disagree. I was in Asia during Asian Currency Crisis. The only way out was to leave the country. That was only possible because I was not "House Poor".

KlangFool
I don't propose to make "rules," but as with many others, think your rules regarding (1) ratio of net worth to house purchase price and (2) avoidance of 529s don't hold up to any kind of scrutiny. In general I agree with the fundamentals, though, of not buying more house, or anything, than one "needs" until one is very well cushioned. It's been discussed at length already, and obviously there's no reason to argue it with you if these are, as you say, just your personal rules.
EddyB,

<<(1) ratio of net worth to house purchase price >>

Just to get a clear understanding of your position.

1) You believe that net worth should not be used at all to decide the house purchase price

Or,

2) Or the ratio of 2.5 is too high and it needs to be lowered. And, the number should be?

Is it (1) or (2)?

I understand your position on 529.

KlangFool

I think a combination of the two.....

My own example was our last 2 house purchases. Our previous house was the right house, at the right price, at the right time, all of which allowed savings and fit our budget. However it was in summer 2010, so prices were still on the down slope, and rates were yet to still drop.....

I was underwater, at least on paper, for the home almost for the next 6 years. However, while still saving, both pre and post tax, I was aggressively paying down the principal, hoping to get refinanced. Had I not done that, that money likely would have done well, but been tied up in pretax accounts. Higher net worth as you say, but not really useable.

2016 we refinanced, 2017 we sold, after the market took a vertical climb and we came out ahead quite well. Our current house was bought solely with that equity. Again (after hard negotiating) right home, right mortgage. But renting the last 7 years likely would not have had the same chain of events, even if net worth was higher, nearly all would have been pretax.

It may be a good guideline, perhaps in a LCOL area, but I think it needs to be applied with total picture in mind
aerosurfer,

<<It may be a good guideline, perhaps in a LCOL area, but I think it needs to be applied with total picture in mind>>

The median house price in my area is around 500K to 600K. The median annual household income in my area is 150K.

KlangFool

MrPotatoHead
Posts: 429
Joined: Sat Oct 14, 2017 10:41 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by MrPotatoHead » Sat Apr 28, 2018 8:20 pm

Will do good wrote:
Sat Apr 28, 2018 7:14 pm
KF,

I agreed with most of your rules. Some people just don't understand the immigrant mentality, sacrifice today for a better tomorrow. Because we have seen much worst situations than what most Americans had faced, we prepared for the worst but hope for the best.
+1

2pedals
Posts: 650
Joined: Wed Dec 31, 2014 12:31 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by 2pedals » Sat Apr 28, 2018 9:13 pm

KlangFool, I like your simple rules. Many folks are moving along in life and things are working out quite nicely but things can change. This post makes me think about some uncomfortable things in life such as:

1) How will I achieve FI if I and/or DW does not have a stable job?
2) How will I achieve FI if I get a divorce?
3) What happens if my home depreciates in value and your workplace transfers you to a new office out state?
4) What if there are chronic unexpected healthcare expenses in the immediate family?
5) What if your mother, father, brothers or sisters need some financial help?
6) What if you have disadvantaged children and need lifetime family support?
7) What if my company freezes my defined pension plan at 50?

These are real life problems, how you react and plan of them can make or break your FI dreams.

EddyB
Posts: 568
Joined: Fri May 24, 2013 3:43 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by EddyB » Sat Apr 28, 2018 10:31 pm

KlangFool wrote:
Sat Apr 28, 2018 7:45 pm
EddyB,

<<(1) ratio of net worth to house purchase price >>

Just to get a clear understanding of your position.

1) You believe that net worth should not be used at all to decide the house purchase price

Or,

2) Or the ratio of 2.5 is too high and it needs to be lowered. And, the number should be?

Is it (1) or (2)?

I understand your position on 529.

KlangFool
Once renting becomes more expensive than buying for one's target housing over some reasonable period of time, I think buying becomes a reasonable decision, subject to consideration of other relevant factors, including ability to handle the downpayment and job and geographic stability. The ratio of one's net worth to house purchase price alone doesn't seem significant, to me, and a specific ratio seems arbitrary. I do agree that many people would be better served by more modest housing purchases.

KlangFool
Posts: 10744
Joined: Sat Oct 11, 2008 12:35 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Sat Apr 28, 2018 10:37 pm

EddyB wrote:
Sat Apr 28, 2018 10:31 pm
KlangFool wrote:
Sat Apr 28, 2018 7:45 pm
EddyB,

<<(1) ratio of net worth to house purchase price >>

Just to get a clear understanding of your position.

1) You believe that net worth should not be used at all to decide the house purchase price

Or,

2) Or the ratio of 2.5 is too high and it needs to be lowered. And, the number should be?

Is it (1) or (2)?

I understand your position on 529.

KlangFool
Once renting becomes more expensive than buying for one's target housing over some reasonable period of time, I think buying becomes a reasonable decision, subject to consideration of other relevant factors, including ability to handle the downpayment and job and geographic stability. The ratio of one's net worth to house purchase price alone doesn't seem significant, to me, and a specific ratio seems arbitrary. I do agree that many people would be better served by more modest housing purchases.
EddyB,

Thank you for the clarification.

KlangFool

bling
Posts: 294
Joined: Sat Jan 21, 2012 12:49 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by bling » Sun Apr 29, 2018 9:24 am

2pedals wrote:
Sat Apr 28, 2018 9:13 pm
KlangFool, I like your simple rules. Many folks are moving along in life and things are working out quite nicely but things can change. This post makes me think about some uncomfortable things in life such as:

1) How will I achieve FI if I and/or DW does not have a stable job?
2) How will I achieve FI if I get a divorce?
3) What happens if my home depreciates in value and your workplace transfers you to a new office out state?
4) What if there are chronic unexpected healthcare expenses in the immediate family?
5) What if your mother, father, brothers or sisters need some financial help?
6) What if you have disadvantaged children and need lifetime family support?
7) What if my company freezes my defined pension plan at 50?

These are real life problems, how you react and plan of them can make or break your FI dreams.
it's unrealistic and impractical to plan for everything to go wrong to go wrong.

bling
Posts: 294
Joined: Sat Jan 21, 2012 12:49 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by bling » Sun Apr 29, 2018 9:30 am

KlangFool wrote:
Sat Apr 28, 2018 7:32 pm
B) It is the same with the job offer. There are not many job opportunities out there for me. And, for the job that needs me, there are not many out there that can do the job. I have 30+ years of experience in my area. For jobs with a lower requirement, they would not hire me because they believe I would leave as soon as a suitable job shows up. I am overqualified.

KlangFool
can't your control this by omitting it on your resume? instead of saying 30+ years experience, say 10+.

also, i find it a bit ironic that companies won't hire you because you would leave for a better job. the very reason you are taking a pay cut is presumably because there are no jobs! the company should be ecstatic to get an experienced worker at a discount, even if it was temporary.

KlangFool
Posts: 10744
Joined: Sat Oct 11, 2008 12:35 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Sun Apr 29, 2018 9:50 am

bling wrote:
Sun Apr 29, 2018 9:30 am
KlangFool wrote:
Sat Apr 28, 2018 7:32 pm
B) It is the same with the job offer. There are not many job opportunities out there for me. And, for the job that needs me, there are not many out there that can do the job. I have 30+ years of experience in my area. For jobs with a lower requirement, they would not hire me because they believe I would leave as soon as a suitable job shows up. I am overqualified.

KlangFool
can't your control this by omitting it on your resume? instead of saying 30+ years experience, say 10+.

also, i find it a bit ironic that companies won't hire you because you would leave for a better job. the very reason you are taking a pay cut is presumably because there are no jobs! the company should be ecstatic to get an experienced worker at a discount, even if it was temporary.
bling,

1) It does not work. Younger hiring manager afraid that I will be too good and can be a threat to replace him/her. Over the last 10+ years, all those that hired me is older than me.

2) It is more efficient not to waste my time with those employers. If it is a problem to hire someone with 30+ years of experience, I do not want to waste my time dealing with them.

KlangFool

KlangFool
Posts: 10744
Joined: Sat Oct 11, 2008 12:35 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Sun Apr 29, 2018 10:00 am

bling wrote:
Sun Apr 29, 2018 9:24 am
2pedals wrote:
Sat Apr 28, 2018 9:13 pm
KlangFool, I like your simple rules. Many folks are moving along in life and things are working out quite nicely but things can change. This post makes me think about some uncomfortable things in life such as:

1) How will I achieve FI if I and/or DW does not have a stable job?
2) How will I achieve FI if I get a divorce?
3) What happens if my home depreciates in value and your workplace transfers you to a new office out state?
4) What if there are chronic unexpected healthcare expenses in the immediate family?
5) What if your mother, father, brothers or sisters need some financial help?
6) What if you have disadvantaged children and need lifetime family support?
7) What if my company freezes my defined pension plan at 50?

These are real life problems, how you react and plan of them can make or break your FI dreams.
it's unrealistic and impractical to plan for everything to go wrong to go wrong.
bling,

With a family that almost everyone saves 30+% of their gross income and many choose to help each other, almost everything that is on that list happened. And, the family pooled the resources and help each other out in many of those cases.

For example, my niece' house in Houston was flooded. The family pooled the money and send her money to fix her house.

I am not saying that this is the right way or the only way. I am just saying that in some culture/community, there is a way to deal with this.

KlangFool

2pedals
Posts: 650
Joined: Wed Dec 31, 2014 12:31 pm

Re: KF's simple rules to achieve FI [Financial Independence]

Post by 2pedals » Sun Apr 29, 2018 10:50 am

bling wrote:
Sun Apr 29, 2018 9:24 am
2pedals wrote:
Sat Apr 28, 2018 9:13 pm
KlangFool, I like your simple rules. Many folks are moving along in life and things are working out quite nicely but things can change. This post makes me think about some uncomfortable things in life such as:

1) How will I achieve FI if I and/or DW does not have a stable job?
2) How will I achieve FI if I get a divorce?
3) What happens if my home depreciates in value and your workplace transfers you to a new office out state?
4) What if there are chronic unexpected healthcare expenses in the immediate family?
5) What if your mother, father, brothers or sisters need some financial help?
6) What if you have disadvantaged children and need lifetime family support?
7) What if my company freezes my defined pension plan at 50?

These are real life problems, how you react and plan of them can make or break your FI dreams.
it's unrealistic and impractical to plan for everything to go wrong to go wrong.
Maybe unrealistic to plan for everything that can go wrong, not so much to at least think about and minimize the risks associated with the most major items in your list of "things that go bump in the night". For example, if you or your DW are in a field that have lower job security (like KF) it is prudent to plan for job loss. If you have failing health is it prudent to plan for significant increases in medical expresses, taking SS early, use pension lump sum if available. If your family needs financial help it is prudent to plan for that as well. If you are having spousal issues .... etc .....etc.

These items are all different emotionally. They commonly all place significant strain on your ability to reach FI. How you adjust an individual FI plan to each one the events are different. It is not unrealistic to adjust a FI plan for some of things that more likely to to go wrong for your individual situation. Most likely some of these items can be placed in a "wait and see" approach and do not need to incorporated into your FI plan. Before they are placed in a category of "wait and see" they all should be considered with an open mind. I believe that job loss is one of most difficult items to deal with.

Nate79
Posts: 3756
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: KF's simple rules to achieve FI [Financial Independence]

Post by Nate79 » Sun Apr 29, 2018 11:07 am

KlangFool wrote:
Fri Apr 20, 2018 2:53 pm
Folks,

The followings are some of the rules that I used. It may work for some folks. On this thread, I will compile some of them and provide the reasoning and thought behind those rules. You should adjust them based on your own circumstances.

I am an engineer. So, I am biased towards my income and circumstances, And, I am limited by my life experience.

Rule #1
Save 1 year of your current annual expense every year. Then, you could be FI in about 25 years even with 0% real growth.

Rule #2

Do not overspend on house, car, and college education. At engineer's income level, as long as he/she do not overspend on those large expenses, he/she can save 1 year of annual expense every year.

Rule #3

Use "Pay Yourself First" saving method. Auto-deduct from your paycheck and save and invest the proper amount. Spend the rest.

Rule #4

Contribute as much as possible to the tax-deferred accounts. Put the tax savings to the Roth IRAs and the taxable account.

Rule #5

Do not save for college education

Rule #6

Invest using all-in-one funds such as lifestrategy or target retirement fund. Do not go into slice and dice until your portfolio is 6 figures or bigger.

Rule #7

Pick an asset allocation between 70/30 to 30/70. At this saving level, it is good enough.

KF Rule for buying a house.

1) 20% down payment plus 30 years fixed rate mortgage. The PITI monthly payment has to be 20% to 30% lower than monthly rent.

2) The net worth excluding house has to be at least 2.5 times the price of the house.

Some of the parameters to be adjusted for the individual circumstances.

A) Targeted FI numbers -> 25 to 50 times your current annual expense depending on when you want to be FI. In my case, I use 25 times because I am older. And, if and when I withdraw social security, it could cover about 50% of my annual expense.

B) The annual saving rate in term of your current annual expense -> I use 100% because I have no job security. You could pick a lower number if you have better job security and you could expect to work longer

C) The return rate -> I use 0% real return. You could use a more optimistic number of 1% or higher.

For my housing rule.

1) I use PITI at 20% to 30% lower than rent in order to account for the additional financial risk and maintenance cost of house ownership.

2) I use net worth excluding the house at 2.5 times of the house purchase price. You could use a lower number if you believe you are at a lower risk.

KlangFool
Wow, interesting thread. Thanks KlangFool for starting this and listing out your rules. I can really respect the live within your means and savings mentality along with preparation for the worst to happen.

Concerning rule #5, do not save for college education. Personally, for us college education is the parents responsibility and taking out loans is not an option. Our child will go to a reasonably priced school that we can afford. If the market crashes, we lose our job, and we have no savings for college our child will not go or will need to find a way to get it paid for on their own. So we save a reasonable amount ($300/month) to get state tax advantage and should cover college expense at a reasonable in state college. Other college cost savings methods will be used. Remainder of extra money goes to taxable account. But over funding the 529 is not reasonable in my opinion. If saving in the 529 hurts our retirement funding we will just have to work longer. I can not risk not having money for when our child goes to college and saving in the 529 is the most tax advantage account to do so BY FAR (especially with a 9% state tax.....). But we also max 401k and Roth IRA's so good news is we don't really need to make the decision between retirement funding and saving for college.

Concerning when to buy a house. I think when buying a large asset it is more useful to build the rule compared to income level vs net worth. Buying a home in the long term is a better choice in my opinion. Being a life long renter is not a wise financial choice in most circumstances in my opinion. Buying a home locks in the cost of your housing expenses over the long term and if you buy a reasonably priced home as compared to your income you are more likely to be better off than renting (especially in the case of your rule where you choose a house where the PITI is cheaper than renting). Certainly if everything goes bad at once, you run out of emergency funds, etc having a mortgage can be a burden but there are some advantages. Foreclosure time can be long - you will still have a roof over your head. Bankruptcy is an option. On the other hand if you are in the same circumstances but you are a renter you are going to find yourself living on the street really fast.....

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Sun Apr 29, 2018 11:33 am

Nate79 wrote:
Sun Apr 29, 2018 11:07 am

Wow, interesting thread. Thanks KlangFool for starting this and listing out your rules. I can really respect the live within your means and savings mentality along with preparation for the worst to happen.

Concerning rule #5, do not save for college education. Personally, for us college education is the parents responsibility and taking out loans is not an option. Our child will go to a reasonably priced school that we can afford. If the market crashes, we lose our job, and we have no savings for college our child will not go or will need to find a way to get it paid for on their own. So we save a reasonable amount ($300/month) to get state tax advantage and should cover college expense at a reasonable in state college. Other college cost savings methods will be used. Remainder of extra money goes to taxable account. But over funding the 529 is not reasonable in my opinion. If saving in the 529 hurts our retirement funding we will just have to work longer. I can not risk not having money for when our child goes to college and saving in the 529 is the most tax advantage account to do so BY FAR (especially with a 9% state tax.....). But we also max 401k and Roth IRA's so good news is we don't really need to make the decision between retirement funding and saving for college.

Concerning when to buy a house. I think when buying a large asset it is more useful to build the rule compared to income level vs net worth. Buying a home in the long term is a better choice in my opinion. Being a life long renter is not a wise financial choice in most circumstances in my opinion. Buying a home locks in the cost of your housing expenses over the long term and if you buy a reasonably priced home as compared to your income you are more likely to be better off than renting (especially in the case of your rule where you choose a house where the PITI is cheaper than renting). Certainly if everything goes bad at once, you run out of emergency funds, etc having a mortgage can be a burden but there are some advantages. Foreclosure time can be long - you will still have a roof over your head. Bankruptcy is an option. On the other hand if you are in the same circumstances but you are a renter you are going to find yourself living on the street really fast.....
Nate79,

<<Personally, for us college education is the parents responsibility and taking out loans is not an option.>>

In your case, if the parent pays for the college education but has no money for retirement, is the kids obligated to financially support the parents?

<<On the other hand if you are in the same circumstances but you are a renter you are going to find yourself living on the street really fast.....>>

It is easier to move to somewhere else to find a job as a renter.

KlangFool

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by randomguy » Sun Apr 29, 2018 9:01 pm

KlangFool wrote:
Sat Apr 28, 2018 8:03 pm

3) None of that pays enough to make a difference. My annual expense is 60K per year.

<<As perspective, I say this as a healthy highly trained37 y/o married, 2 kids, sole income earner, with a net worth of about 450k in a LCOL area. >>

4) I am 50+ with 20 times my annual expense. I am down to my last few years towards FI.

KlangFool
Of course it is enough to make a difference. 9/hr (local mcDondals)*80rs(2 workers)*50 weeks = 36k. That will be half your expenses. Work 60 hours week or get that big raise to 12 hr (i.e. I am betting you can get all sorts of data entry jobs from a temp agency that pay that) and your covering even more of your expenses. That is one of the benefits of living a moderate lifestyle. Getting a job as network architect can be hard. Getting a job as bagger isn't.

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by jharkin » Mon Apr 30, 2018 6:04 am

KlangFool wrote:
Sun Apr 29, 2018 9:50 am

bling,

1) It does not work. Younger hiring manager afraid that I will be too good and can be a threat to replace him/her. Over the last 10+ years, all those that hired me is older than me.

2) It is more efficient not to waste my time with those employers. If it is a problem to hire someone with 30+ years of experience, I do not want to waste my time dealing with them.

KlangFool

KF...

Ok, maybe telecom is different that software development, but I have never run into the roadblaocks you have.

First off I have worked for bosses younger than me, and I have had employees older than me... many times. At one point my second level boss was almost 10 years younger (superstar overachiever that made Divisional VP by age 30)... Wasn't an issue as long as I produced. Same thing right now I have one guy working for me who is 5 years older than I am and has more technical experience. Again, has never been an issue as our personalities match well.

I think its probably more of a personality mismatch with that specific manager. Which happens. You move on to the next offer.

Second, people remove older and non relevant jobs from their resume ALL the time. Any good resume writing guide tells you to do that, while you are tailoring for each role you apply to. I am also starting to see - especially on LinkedIn - lots of people taking the graduation years off their degrees, etc.

Third, If you are having trouble getting technical roles at your age have you considered going after management jobs? or Project/program management? Those skills are much more transportable across specialties in tech. As long as you know the basic development practices, SDLC, quality management concepts, metrics & reporting, etc it shouldn't be too hard a leap to take.

Program management especially is an easy area to move into, even if you dont have lots of people management skills, and people in these roles tend to be older as it relies a lot on industry know how and influencing/negotiation skills that just take time to develop.. Take a PMP certification class, along with CSM or related, and it should be easy to land a PM job. I have actually moved from being purely technical, to people management, and now to infrastructure services, process and program management and I really enjoy it.


Disclaimers -
I may be younger than you (I am early 40s) so this may be easier said than done.
My perspective is on the software side - if you are the hardware side of tech you might face hurdles I am not aware of.
I also live on the east coast, where "ageism" doesn't seem as bad as some people talk about it being in the valley.

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Mon Apr 30, 2018 8:02 am

jharkin wrote:
Mon Apr 30, 2018 6:04 am
KlangFool wrote:
Sun Apr 29, 2018 9:50 am

bling,

1) It does not work. Younger hiring manager afraid that I will be too good and can be a threat to replace him/her. Over the last 10+ years, all those that hired me is older than me.

2) It is more efficient not to waste my time with those employers. If it is a problem to hire someone with 30+ years of experience, I do not want to waste my time dealing with them.

KlangFool

KF...

Ok, maybe telecom is different that software development, but I have never run into the roadblaocks you have.

First off I have worked for bosses younger than me, and I have had employees older than me... many times. At one point my second level boss was almost 10 years younger (superstar overachiever that made Divisional VP by age 30)... Wasn't an issue as long as I produced. Same thing right now I have one guy working for me who is 5 years older than I am and has more technical experience. Again, has never been an issue as our personalities match well.

I think its probably more of a personality mismatch with that specific manager. Which happens. You move on to the next offer.

Second, people remove older and non relevant jobs from their resume ALL the time. Any good resume writing guide tells you to do that, while you are tailoring for each role you apply to. I am also starting to see - especially on LinkedIn - lots of people taking the graduation years off their degrees, etc.

Third, If you are having trouble getting technical roles at your age have you considered going after management jobs? or Project/program management? Those skills are much more transportable across specialties in tech. As long as you know the basic development practices, SDLC, quality management concepts, metrics & reporting, etc it shouldn't be too hard a leap to take.

Program management especially is an easy area to move into, even if you dont have lots of people management skills, and people in these roles tend to be older as it relies a lot on industry know how and influencing/negotiation skills that just take time to develop.. Take a PMP certification class, along with CSM or related, and it should be easy to land a PM job. I have actually moved from being purely technical, to people management, and now to infrastructure services, process and program management and I really enjoy it.


Disclaimers -
I may be younger than you (I am early 40s) so this may be easier said than done.
My perspective is on the software side - if you are the hardware side of tech you might face hurdles I am not aware of.
I also live on the east coast, where "ageism" doesn't seem as bad as some people talk about it being in the valley.
jharkin,

1) Thanks for the suggestions. They do not work for me.

2) I found a new job every time. It just took 1 year or longer.

3) For the latest round, I have unsolicited contract offers and a job offer from Linkedin. I have no offer from any jobs and contracts that I applied.

4) My time is over anyhow. If I am laid off from my current job, I probably retire or semi-retire.

<<Third, If you are having trouble getting technical roles>>

5) I am a network architect in my current role.

KlangFool

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by FoolMeOnce » Mon Apr 30, 2018 9:47 am

jharkin wrote:
Mon Apr 30, 2018 6:04 am
KlangFool wrote:
Sun Apr 29, 2018 9:50 am

bling,

1) It does not work. Younger hiring manager afraid that I will be too good and can be a threat to replace him/her. Over the last 10+ years, all those that hired me is older than me.

2) It is more efficient not to waste my time with those employers. If it is a problem to hire someone with 30+ years of experience, I do not want to waste my time dealing with them.

KlangFool

KF...

Ok, maybe telecom is different that software development, but I have never run into the roadblaocks you have.
I've seen it in the legal field. Not that a younger manager is afraid of their job being taken by a more experienced new hire, though I don't doubt this and it fits with what my tech-industry friends tell me. But around 2009-12, when the economy was down and slowly recovering and there were far more lawyers than legal jobs in my geographic area, I knew people involved in hiring decisions who received applications from very experienced and over-qualified candidates for low-paid staff attorney positions that are typically filled with recent graduates. The hiring decision-makers I knew tended to steer away from the over-qualified applicants, assuming that they would leave at the first opportunity of a better-paying position somewhere else. Why spend time training someone who is much more likely to leave soon?
Last edited by FoolMeOnce on Mon Apr 30, 2018 10:26 am, edited 1 time in total.

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by willthrill81 » Mon Apr 30, 2018 9:49 am

I find it interesting that so many on this forum talk about age discrimination impacting 50-somethings and older, but then I also hear regularly that 20-somethings can have a hard time breaking into various industries due to a perceived lack of experience.

I think that everyone thinks that they have it hard for one reason or another.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Mon Apr 30, 2018 10:10 am

willthrill81 wrote:
Mon Apr 30, 2018 9:49 am
I find it interesting that so many on this forum talk about age discrimination impacting 50-somethings and older, but then I also hear regularly that 20-somethings can have a hard time breaking into various industries due to a perceived lack of experience.

I think that everyone thinks that they have it hard for one reason or another.
willthrill81,

1) Years of experience is useful up to a point. If you exceed X number of years, it is harder for the employer to understand where you fit. This is the problem of being very good in your area.

2) Once I reach my FI number, I can pick and choose whatever project that I want to work on. There is some very tough problem that needs my level of expertize. I had just solved a XaaS problem that was stuck for months. I solved it in a few weeks.

3) You probably face the same problem by having a Ph.D. There are not as many jobs that require a Ph.D. But, those that need a Ph.D., nothing less will do.

KlangFool

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by willthrill81 » Mon Apr 30, 2018 10:24 am

KlangFool wrote:
Mon Apr 30, 2018 10:10 am
willthrill81 wrote:
Mon Apr 30, 2018 9:49 am
I find it interesting that so many on this forum talk about age discrimination impacting 50-somethings and older, but then I also hear regularly that 20-somethings can have a hard time breaking into various industries due to a perceived lack of experience.

I think that everyone thinks that they have it hard for one reason or another.
willthrill81,

1) Years of experience is useful up to a point. If you exceed X number of years, it is harder for the employer to understand where you fit. This is the problem of being very good in your area.
I can partly see that, but my point is that the 'age problem' doesn't just impact one side of the age spectrum.
KlangFool wrote:
Mon Apr 30, 2018 10:10 am
3) You probably face the same problem by having a Ph.D. There are not as many jobs that require a Ph.D. But, those that need a Ph.D., nothing less will do.
It's true that there aren't many fields that require a Ph.D., which is probably good because fewer than 2% of the American populace has one, but there isn't a replacement for a Ph.D.

In my discipline, I could leave the public sector for the private sector at any time and likely increase my income by 50-100%. But I don't want the accompanying stress and workload, and I'm satisfied with what I currently have.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Mon Apr 30, 2018 10:29 am

willthrill81 wrote:
Mon Apr 30, 2018 10:24 am
KlangFool wrote:
Mon Apr 30, 2018 10:10 am
willthrill81 wrote:
Mon Apr 30, 2018 9:49 am
I find it interesting that so many on this forum talk about age discrimination impacting 50-somethings and older, but then I also hear regularly that 20-somethings can have a hard time breaking into various industries due to a perceived lack of experience.

I think that everyone thinks that they have it hard for one reason or another.
willthrill81,

1) Years of experience is useful up to a point. If you exceed X number of years, it is harder for the employer to understand where you fit. This is the problem of being very good in your area.
I can partly see that, but my point is that the 'age problem' doesn't just impact one side of the age spectrum.
KlangFool wrote:
Mon Apr 30, 2018 10:10 am
3) You probably face the same problem by having a Ph.D. There are not as many jobs that require a Ph.D. But, those that need a Ph.D., nothing less will do.
It's true that there aren't many fields that require a Ph.D., which is probably good because fewer than 2% of the American populace has one, but there isn't a replacement for a Ph.D.

In my discipline, I could leave the public sector for the private sector at any time and likely increase my income by 50-100%. But I don't want the accompanying stress and workload, and I'm satisfied with what I currently have.
willthrill81,

Yes, but if the college tuition bubbles burst, the job market will be flooded with Ph.D. from the colleges. Then, it will be a buyers market for Ph.D.

That was the problem with my industry. 1+ million employees were laid off in a span of 6 to 8 years.

KlangFool

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by willthrill81 » Mon Apr 30, 2018 10:41 am

KlangFool wrote:
Mon Apr 30, 2018 10:29 am
willthrill81 wrote:
Mon Apr 30, 2018 10:24 am
KlangFool wrote:
Mon Apr 30, 2018 10:10 am
willthrill81 wrote:
Mon Apr 30, 2018 9:49 am
I find it interesting that so many on this forum talk about age discrimination impacting 50-somethings and older, but then I also hear regularly that 20-somethings can have a hard time breaking into various industries due to a perceived lack of experience.

I think that everyone thinks that they have it hard for one reason or another.
willthrill81,

1) Years of experience is useful up to a point. If you exceed X number of years, it is harder for the employer to understand where you fit. This is the problem of being very good in your area.
I can partly see that, but my point is that the 'age problem' doesn't just impact one side of the age spectrum.
KlangFool wrote:
Mon Apr 30, 2018 10:10 am
3) You probably face the same problem by having a Ph.D. There are not as many jobs that require a Ph.D. But, those that need a Ph.D., nothing less will do.
It's true that there aren't many fields that require a Ph.D., which is probably good because fewer than 2% of the American populace has one, but there isn't a replacement for a Ph.D.

In my discipline, I could leave the public sector for the private sector at any time and likely increase my income by 50-100%. But I don't want the accompanying stress and workload, and I'm satisfied with what I currently have.
willthrill81,

Yes, but if the college tuition bubbles burst, the job market will be flooded with Ph.D. from the colleges. Then, it will be a buyers market for Ph.D.

That was the problem with my industry. 1+ million employees were laid off in a span of 6 to 8 years.

KlangFool
Whether a 'college tuition bubble' actually exists or not is a topic for another thread. I'm somewhere on the fence about how big of a problem it is. But even if it's real and it did 'burst', the number of those with a Ph.D. who could do what I could in the private sector are very few.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by 2pedals » Mon Apr 30, 2018 11:35 am

It's foolish (not Klangfoolish) to not have a plan for someone that is past prime and/or in a field and/or industry that does not have good job stability.

I have known waaaayy too many engineering close family members, friends, colleagues and engineering management folks that have lost their jobs in their prime at around age 48-55. Many of these folks have a very difficult time getting a new job, tend to lose their new job quickly and never do replace their salaries and benefits after they were laid off. I am an overqualified senior engineer for my current job and consider myself very lucky to not have been laid off.

My Daughter a fresh engineering graduate from a "good engineering" school was offered a job. During the interview the hiring manager (to the horror of HR) said she was needed to replace a very experienced senior employee that just got laid off 6 months ago. She did not take the job.
Last edited by 2pedals on Mon Apr 30, 2018 12:09 pm, edited 1 time in total.

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Mon Apr 30, 2018 11:57 am

2pedals wrote:
Mon Apr 30, 2018 11:35 am
It's foolish (not Klangfoolish) to not have a plan for someone that is past prime and/or in a field and/or industry that does not have good job stability.

I have known waaaayy too many engineering close family members, friends, colleagues and engineering management folks that have lost their jobs in their prime at around age 48-55. Many of these folks have a very difficult time getting a new job, tend to lose their new job quickly and never do replace their salaries and benefits after they were laid off. I am an overqualified senior engineer for my current job and consider myself very lucky to not have been laid off.

My Daughter a fresh engineering graduate from a "good engineering" school was offered a job. During the interview the hiring manager (to the horror of HR) said she was needed to replace a very experienced senior employee that just laid off 6 months ago. She did not take the job.
2pedals,

<<I have known waaaayy too many engineering close family members, friends, colleagues and engineering management folks that have lost their jobs in their prime at around age 48-55. Many of these folks have a very difficult time getting a new job, tend to lose their new job quickly and never do replace their salaries and benefits after they were laid off. >>

1) I am sorry to say that this phenomenon is not limited to the engineering folks. My brother-in-law has a BS in Accounting and an MBA. He is PMP certified. This is happening to him too.

2) But, many folks in their 30s believe that life can only go well from now on. So, they buy a house at 3 times or higher of their gross income. Some even upgraded their houses in their 40s. Then, their earning peak out and stays flat and unstable. Throw in a recession and they are wiped out.

3) The house buying season in Spring is upon us. We will have many threads asking whether they can afford to buy the houses. Many folks will recommend buying the house assuming that their earning will grow forever. Then, we will hit a recession. The story repeats itself.

4) The pyramid is narrow at the top.

A) Not many reach the top.

B) Those reaching the top may not stay at the top.

C) Make hays while the sun is shining. Save those hay for the rainy days.

KlangFool

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by bling » Mon Apr 30, 2018 5:41 pm

2pedals wrote:
Mon Apr 30, 2018 11:35 am
I have known waaaayy too many engineering close family members, friends, colleagues and engineering management folks that have lost their jobs in their prime at around age 48-55. Many of these folks have a very difficult time getting a new job, tend to lose their new job quickly and never do replace their salaries and benefits after they were laid off. I am an overqualified senior engineer for my current job and consider myself very lucky to not have been laid off.
on the other hand, engineers generate a high income and it's not that hard to become FI well before you're 50. heck, if you follow rule #1 in this thread you'd be FI by the time you're 50 if you started right after college at 22.

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by willthrill81 » Mon Apr 30, 2018 5:47 pm

bling wrote:
Mon Apr 30, 2018 5:41 pm
2pedals wrote:
Mon Apr 30, 2018 11:35 am
I have known waaaayy too many engineering close family members, friends, colleagues and engineering management folks that have lost their jobs in their prime at around age 48-55. Many of these folks have a very difficult time getting a new job, tend to lose their new job quickly and never do replace their salaries and benefits after they were laid off. I am an overqualified senior engineer for my current job and consider myself very lucky to not have been laid off.
on the other hand, engineers generate a high income and it's not that hard to become FI well before you're 50. heck, if you follow rule #1 in this thread you'd be FI by the time you're 50 if you started right after college at 22.
That would only be strictly accurate if your income was the same at 22 as it was 20 years later. Only rarely is that true. That's why the general advice to save 10-15% of one's gross income is often insufficient; many people's income increases significantly in their 40s and 50s, and if they maintain a relatively low, constant savings rate, they will have a much harder time achieving FI. That's why many recommend that half of your raises should go straight toward savings.
Yet the reality is that saving something like 10% of your income also implicitly means you’re spending the other 90%, and continuing to do so over time means you’ll also be saving (only) 10% and implicitly increasing your standard of living by 90% of ever raise you receive in the future. As a result, your standard of living rises as fast as your retirement savings, which means the amount needed to reach retirement gets larger and larger given the retirement costs to be supported, and in the end it’s surprisingly difficult to ever reach retirement at all as the goal forever outpaces the savings to reach it!

By contrast, an alternative approach is to try to spend “just” 50% of each pay raise you receive in the future (implicitly saving the other 50%). The end result of such an approach is that increases in the standard of living are more controlled and rise far more slowly, savings grow exponentially (to more than 20% of income within just a decade, even from a starting point of 0%!), and you can even retire early… all while feeling like your lifestyle is steadily rising as you’re still committed to spending more every year, just not increasing as rapidly as saving 10% of your income (and spending the rest)!
https://www.kitces.com/blog/dont-save-1 ... -tomorrow/
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by Jags4186 » Mon Apr 30, 2018 5:50 pm

KlangFool wrote:
Mon Apr 30, 2018 11:57 am
2pedals wrote:
Mon Apr 30, 2018 11:35 am
It's foolish (not Klangfoolish) to not have a plan for someone that is past prime and/or in a field and/or industry that does not have good job stability.

I have known waaaayy too many engineering close family members, friends, colleagues and engineering management folks that have lost their jobs in their prime at around age 48-55. Many of these folks have a very difficult time getting a new job, tend to lose their new job quickly and never do replace their salaries and benefits after they were laid off. I am an overqualified senior engineer for my current job and consider myself very lucky to not have been laid off.

My Daughter a fresh engineering graduate from a "good engineering" school was offered a job. During the interview the hiring manager (to the horror of HR) said she was needed to replace a very experienced senior employee that just laid off 6 months ago. She did not take the job.
2pedals,

<<I have known waaaayy too many engineering close family members, friends, colleagues and engineering management folks that have lost their jobs in their prime at around age 48-55. Many of these folks have a very difficult time getting a new job, tend to lose their new job quickly and never do replace their salaries and benefits after they were laid off. >>

1) I am sorry to say that this phenomenon is not limited to the engineering folks. My brother-in-law has a BS in Accounting and an MBA. He is PMP certified. This is happening to him too.

2) But, many folks in their 30s believe that life can only go well from now on. So, they buy a house at 3 times or higher of their gross income. Some even upgraded their houses in their 40s. Then, their earning peak out and stays flat and unstable. Throw in a recession and they are wiped out.

3) The house buying season in Spring is upon us. We will have many threads asking whether they can afford to buy the houses. Many folks will recommend buying the house assuming that their earning will grow forever. Then, we will hit a recession. The story repeats itself.

4) The pyramid is narrow at the top.

A) Not many reach the top.

B) Those reaching the top may not stay at the top.

C) Make hays while the sun is shining. Save those hay for the rainy days.

KlangFool
KF,

When did you develop these rules and how long have you lived by them? Serious question, not a “gotcha”.

Catfish Plumber
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Re: KF's simple rules to achieve FI [Financial Independence]

Post by Catfish Plumber » Mon Apr 30, 2018 6:20 pm

KlangFool,

I have only read the first page or so of this thread, but I wanted to stop and let you know how similar your initial rules are to my situation. Notable differences are we put 3.5% down on a first time homebuyers loan and we weren’t at the 2.5x house value in net worth at the time. We just recently passed that multiple and are nearing paying off the loan. In our case I am happy with the outcome but I definitely see great wisdom in and highly recommend saving 20% before borrowing for a house. I am also more optimistic on expected returns, although I counter it with a “just do some more paid work” strategy if calamity strikes. My “retirement” involves producing things that may or may not bring in income as is so I feel I have plenty of buffers.

Great list, and I can definitely see it as a great starting point for anyone feeling lost or overwhelmed regarding finances.

KlangFool
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Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Mon Apr 30, 2018 6:31 pm

Jags4186 wrote:
Mon Apr 30, 2018 5:50 pm
KlangFool wrote:
Mon Apr 30, 2018 11:57 am
2pedals wrote:
Mon Apr 30, 2018 11:35 am
It's foolish (not Klangfoolish) to not have a plan for someone that is past prime and/or in a field and/or industry that does not have good job stability.

I have known waaaayy too many engineering close family members, friends, colleagues and engineering management folks that have lost their jobs in their prime at around age 48-55. Many of these folks have a very difficult time getting a new job, tend to lose their new job quickly and never do replace their salaries and benefits after they were laid off. I am an overqualified senior engineer for my current job and consider myself very lucky to not have been laid off.

My Daughter a fresh engineering graduate from a "good engineering" school was offered a job. During the interview the hiring manager (to the horror of HR) said she was needed to replace a very experienced senior employee that just laid off 6 months ago. She did not take the job.
2pedals,

<<I have known waaaayy too many engineering close family members, friends, colleagues and engineering management folks that have lost their jobs in their prime at around age 48-55. Many of these folks have a very difficult time getting a new job, tend to lose their new job quickly and never do replace their salaries and benefits after they were laid off. >>

1) I am sorry to say that this phenomenon is not limited to the engineering folks. My brother-in-law has a BS in Accounting and an MBA. He is PMP certified. This is happening to him too.

2) But, many folks in their 30s believe that life can only go well from now on. So, they buy a house at 3 times or higher of their gross income. Some even upgraded their houses in their 40s. Then, their earning peak out and stays flat and unstable. Throw in a recession and they are wiped out.

3) The house buying season in Spring is upon us. We will have many threads asking whether they can afford to buy the houses. Many folks will recommend buying the house assuming that their earning will grow forever. Then, we will hit a recession. The story repeats itself.

4) The pyramid is narrow at the top.

A) Not many reach the top.

B) Those reaching the top may not stay at the top.

C) Make hays while the sun is shining. Save those hay for the rainy days.

KlangFool
KF,

When did you develop these rules and how long have you lived by them? Serious question, not a “gotcha”.
Jags4186,

Which rule?

1) I always save about 1 year of expense every year since I started working. This comes from my culture/country/community. Everyone lives that way. So, this is normal.

2) I am very conservative in buying a house. My first house was less than 1.5 time my gross income and I could pay off the mortgage at any time. I could not remember my exact net worth at that time. I do not know whether it was 2.5 times or greater. It should be.

3) The part that I messed up was investing. I gambled on Telecom stock and I was 100% stock 10+ years ago. I lost 50% of my whole investment 10+ years ago. So, I adopted my investing rules about 10+ years ago.

KlangFool

md&pharmacist
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Re: KF's simple rules to achieve FI [Financial Independence]

Post by md&pharmacist » Mon Apr 30, 2018 6:34 pm

To get 25 years in retirement by saving 25 years at 0% returns, that assumes no inflation over the retirement years. After 25 years of retirement, things will cost double.

KlangFool
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Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Mon Apr 30, 2018 6:42 pm

md&pharmacist wrote:
Mon Apr 30, 2018 6:34 pm
To get 25 years in retirement by saving 25 years at 0% returns, that assumes no inflation over the retirement years. After 25 years of retirement, things will cost double.
md&pharmacist,

Check the math. It works for the constant inflation rate. You can check whether it works for other inflation models too. The math works even if the constant inflation rate is not 3%.

<<ThriftyPhD,

I just did the math. It works perfectly if the inflation rate is constant.

Let's assume the inflation is 3% and the starting expense and saving are X.

For year 0, the expense is X and the saving is X. After 25 years, the saving grew to X(1.03)^25

For year 1, the expense is X(1.03) and the saving is X(1.03). After 24 years, the saving grew to X(1.03)*(1.03)^24 = X(1.03)^25

For year 2, the expense is X(1.03)^2 and the saving is X(1.03)^2. After 23 years, the saving grew to X(1.03)^2 * (1.03)^23 = X(1.03)^25.

And so on..

After 25 years, the expense is X(1.03)^25. The investment is a summation of all the investment over 25 years = 25X(1.03)^25. It works for any expense and any constant inflation rate.

KlangFool>>

KlangFool

Jags4186
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Re: KF's simple rules to achieve FI [Financial Independence]

Post by Jags4186 » Tue May 01, 2018 7:25 am

KlangFool wrote:
Mon Apr 30, 2018 6:31 pm
jags4186 wrote:
Mon Apr 30, 2018 6:31 pm
KF,

When did you develop these rules and how long have you lived by them? Serious question, not a “gotcha”.
Jags4186,

Which rule?

1) I always save about 1 year of expense every year since I started working. This comes from my culture/country/community. Everyone lives that way. So, this is normal.

2) I am very conservative in buying a house. My first house was less than 1.5 time my gross income and I could pay off the mortgage at any time. I could not remember my exact net worth at that time. I do not know whether it was 2.5 times or greater. It should be.

3) The part that I messed up was investing. I gambled on Telecom stock and I was 100% stock 10+ years ago. I lost 50% of my whole investment 10+ years ago. So, I adopted my investing rules about 10+ years ago.

KlangFool
Interesting.

I'd like to ask a few more questions:

1) Does your wife work? If not, has she ever worked? If so, when you were married how did you keep your expenses and/or savings constant when you had an increase of expense?
2) Have you always saved 1 years expenses or have you at times saved significantly more than that?
2) How have you adapted to increases/decreases in expenses and income.

For example:

You buy a new car. Even if it is a modest $20,000 car that would significantly increase your expense for a year. Do you save a portion of these expense every year and include it in your yearly expenses even though it's going into savings for a future expense? What Dave Ramsey calls a "sinking fund"?

You have a child, either your wife stops working or you take on daycare expenses.

Your kids are in college--you say presently you are saving nothing and living off your portfolio. The "savings" is cash flowing college, correct?

Have your real wages always been higher? You say you currently make about $150k/yr HHI. Were there times when you were making $200k/yr HHI? If you spent say $75k, saved $75k, and sent $50k to the taxman, how would you adapt to dropping to $150k HHI?

Thanks in advance!

KlangFool
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Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Tue May 01, 2018 8:10 am

Jags4186 wrote:
Tue May 01, 2018 7:25 am
KlangFool wrote:
Mon Apr 30, 2018 6:31 pm
jags4186 wrote:
Mon Apr 30, 2018 6:31 pm
KF,

When did you develop these rules and how long have you lived by them? Serious question, not a “gotcha”.
Jags4186,

Which rule?

1) I always save about 1 year of expense every year since I started working. This comes from my culture/country/community. Everyone lives that way. So, this is normal.

2) I am very conservative in buying a house. My first house was less than 1.5 time my gross income and I could pay off the mortgage at any time. I could not remember my exact net worth at that time. I do not know whether it was 2.5 times or greater. It should be.

3) The part that I messed up was investing. I gambled on Telecom stock and I was 100% stock 10+ years ago. I lost 50% of my whole investment 10+ years ago. So, I adopted my investing rules about 10+ years ago.

KlangFool
Interesting.

I'd like to ask a few more questions:

1) Does your wife work? If not, has she ever worked? If so, when you were married how did you keep your expenses and/or savings constant when you had an increase of expense?
2) Have you always saved 1 years expenses or have you at times saved significantly more than that?
2) How have you adapted to increases/decreases in expenses and income.

For example:

You buy a new car. Even if it is a modest $20,000 car that would significantly increase your expense for a year. Do you save a portion of these expense every year and include it in your yearly expenses even though it's going into savings for a future expense? What Dave Ramsey calls a "sinking fund"?

You have a child, either your wife stops working or you take on daycare expenses.

Your kids are in college--you say presently you are saving nothing and living off your portfolio. The "savings" is cash flowing college, correct?

Have your real wages always been higher? You say you currently make about $150k/yr HHI. Were there times when you were making $200k/yr HHI? If you spent say $75k, saved $75k, and sent $50k to the taxman, how would you adapt to dropping to $150k HHI?

Thanks in advance!
Jags4186,

1) My wife was working before the kid was born. She stopped working about 1 to 2 years after the kid was born. She is a stay-at-home spouse until the kids leave for college. We had made this decision that one of us will be the stay-at-home spouse when we have a kid. It could be me or her. And, the other spouse will make enough money to support the whole family.

A) Both of our families have many kids that are autistic. We believe we give our kid a better shot if one of us stay at home.

B) We believe that it is not financially rewarding for both spouses to work.

<< If so, when you were married how did you keep your expenses and/or savings constant when you had an increase of expense?
2) Have you always saved 1 years expenses or have you at times saved significantly more than that?
2) How have you adapted to increases/decreases in expenses and income.>>

2) I cannot spend the money that I do not have. For example, even though my household income is 150K but we auto-deduct 60K from our paycheck, we only have 60K to spend. Then, how could we spend more? We could only spend less. So, effectively, I only have the gross income of 90K.

3) We adjust the increase in the income by increasing the auto-deduction of my paycheck accordingly in the beginning of the year.

4) The expense can only be less because I do not have the money to spend more.

<<You buy a new car. Even if it is a modest $20,000 car that would significantly increase your expense for a year. >>

No. My emergency fund is big enough. If I need to buy the car, I just buy the new car. Then, I cut my spending over the next few months to refill the emergency fund.

<<Your kids are in college--you say presently you are saving nothing and living off your portfolio. The "savings" is cash flowing college, correct?>>

Yes.

<<Have your real wages always been higher? You say you currently make about $150k/yr HHI. Were there times when you were making $200k/yr HHI? If you spent say $75k, saved $75k, and sent $50k to the taxman, how would you adapt to dropping to $150k HHI?>>

It does not matter what my income is. I decide how much to save and auto-deduct from my paycheck. So, effectively, my "gross income" is lowered. If I have a bonus, I allocate 50% to my expense and save 50%.

Please note that I am an engineer. As an engineer, we have higher than normal folks' starting pay. So, I always have a higher income than median household. My "Pay Yourself First" saving bring me down to a median or slightly higher than median household income.

The easiest way to explain this is

1) Instead of having 150K household income, the "Pay Yourself First" reduce the gross income to 90K.

2) I live in a household with 90K gross income.

Those statements apply regardless what my household income is.

This is normal in my country/culture/community. The average gross saving rate for the whole country is 30+%.

KlangFool

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Re: KF's simple rules to achieve FI [Financial Independence]

Post by jharkin » Tue May 01, 2018 8:15 am

bling wrote:
Mon Apr 30, 2018 5:41 pm
2pedals wrote:
Mon Apr 30, 2018 11:35 am
I have known waaaayy too many engineering close family members, friends, colleagues and engineering management folks that have lost their jobs in their prime at around age 48-55. Many of these folks have a very difficult time getting a new job, tend to lose their new job quickly and never do replace their salaries and benefits after they were laid off. I am an overqualified senior engineer for my current job and consider myself very lucky to not have been laid off.
on the other hand, engineers generate a high income and it's not that hard to become FI well before you're 50. heck, if you follow rule #1 in this thread you'd be FI by the time you're 50 if you started right after college at 22.
^^

This is the path I am taking. I haven't been saving quite to KF level my entire career, but now in our 40s back to 2 incomes we are, and I expect that so long as I stay employed in tech, by 50 I will reach the point that I'm effectively FI... i.e. I can payoff whats left of the mortgage, and have enough in IRAs that if I got laid off I could just work part time jobs for the benefits and coast to SS eligibility. With the kids taking loans to get though college.

If I stay in tech beyond that, Ill be able to cashflow college and early retire after they graduate... say 56-58.

I guess I have had luck on my side, as I managed to stay employed though both the dotcom and the great recession... Also my wife works in a field that's basically recession proof and while she will never make more than half what I do she will always have a job and has access to pensions. So her income acts as a backstop safety net and the pensions act as an extra diversification tool in our retirement income planning.

Jags4186
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Re: KF's simple rules to achieve FI [Financial Independence]

Post by Jags4186 » Tue May 01, 2018 9:39 am

KF,

Let me ask this question then:

What is your rule for “necessary” living expenses vs discretionary? If you’re living on $75k a year and all of a sudden have a decrease in income so that you can only live on $60k, how do you cut $1k+ a month from your expenses so easily?

KlangFool
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Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Tue May 01, 2018 9:51 am

Jags4186 wrote:
Tue May 01, 2018 9:39 am
KF,

Let me ask this question then:

What is your rule for “necessary” living expenses vs discretionary? If you’re living on $75k a year and all of a sudden have a decrease in income so that you can only live on $60k, how do you cut $1k+ a month from your expenses so easily?
Jags4186,

<<If you’re living on $75k a year and all of a sudden have a decrease in income so that you can only live on $60k, how do you cut $1k+ a month from your expenses so easily?>>

1) Please note that by controlling my major purchases, a major portion of my expenses is discretionary.

2) My annual expense is 60K. My housing expense is 20K. My utility and other stuff are about 20K. So, 20K of my expense is discretionary. This is consistent across the years. By controlling the major expenses, I can eat out regularly and have plenty of discretionary expenses. I do not feel that I am living a frugal life. I have plenty of money to spend.

3) I do not live with 75K of annual expense. So, I have to use my 60K example.

<<how do you cut $1k+ a month from your expenses so easily?>>

4) Why would I cut my expenses? My emergency fund is 1 year. Even if I am unemployed, I do not need to cut my expense until 1 1/2 years later.

5) I have no income so I could not save. I still spend the same amount.

The whole goal of having rule #1 is to be able to live a consistent lifestyle in spite of occasional unemployment of 1 year or longer.

KlangFool

wrongfunds
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Re: KF's simple rules to achieve FI [Financial Independence]

Post by wrongfunds » Tue May 01, 2018 1:43 pm

How does one get housing expenses (PMI+taxes+maintenance+insurance+association fee etc) to be only $20K with $450K house? $1667 per month takes care of it all?

KlangFool
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Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Tue May 01, 2018 1:51 pm

wrongfunds wrote:
Tue May 01, 2018 1:43 pm
How does one get housing expenses (PMI+taxes+maintenance+insurance+association fee etc) to be only $20K with $450K house? $1667 per month takes care of it all?
wrongfunds,

1) It is not a 450K house. It is around 400K.

2) My PITI is around $1,800 per month.

KlangFool

LiterallyIronic
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Re: KF's simple rules to achieve FI [Financial Independence]

Post by LiterallyIronic » Tue May 01, 2018 2:06 pm

KlangFool wrote:
Tue May 01, 2018 1:51 pm
wrongfunds wrote:
Tue May 01, 2018 1:43 pm
How does one get housing expenses (PMI+taxes+maintenance+insurance+association fee etc) to be only $20K with $450K house? $1667 per month takes care of it all?
wrongfunds,

1) It is not a 450K house. It is around 400K.

2) My PITI is around $1,800 per month.

KlangFool
But that's a lot closer to $22k than is to $20k, and that's not even including maintenance or utilities.

KlangFool
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Re: KF's simple rules to achieve FI [Financial Independence]

Post by KlangFool » Tue May 01, 2018 2:10 pm

LiterallyIronic wrote:
Tue May 01, 2018 2:06 pm
KlangFool wrote:
Tue May 01, 2018 1:51 pm
wrongfunds wrote:
Tue May 01, 2018 1:43 pm
How does one get housing expenses (PMI+taxes+maintenance+insurance+association fee etc) to be only $20K with $450K house? $1667 per month takes care of it all?
wrongfunds,

1) It is not a 450K house. It is around 400K.

2) My PITI is around $1,800 per month.

KlangFool
But that's a lot closer to $22k than is to $20k, and that's not even including maintenance or utilities.
LiterallyIronic,

I do not budget. I save enough and spend the rest.

KlangFool

golfCaddy
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Re: KF's simple rules to achieve FI

Post by golfCaddy » Tue May 01, 2018 3:00 pm

willthrill81 wrote:
Mon Apr 23, 2018 12:10 pm
jharkin wrote:
Mon Apr 23, 2018 11:43 am
Rule #2 I think is impossible for 90% of people. I know when we bought a house our total non-house NW was maybe 1/3-1/2 of the house value... but it worked out OK and 10 years later we are closing in on your rule.
It's not impossible for most, but it's certainly impractical. Most following this would be at least in their 40s before they could own a home, and many would be in their 50s. There are many non-financial reasons to buy a home much younger than that, and in many areas of the country, it makes financial sense to buy rather than rent for 10-20 years while building one's net worth. I'd rather be 10-20 years into a 30 year mortgage in my 40s or 50s than just starting down that path.
Exactly, how does it make sense for anyone to start a 30 year mortgage in their 40s and 50s? At that rate, they won't finish paying off their home until their 70s or 80s.

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Re: KF's simple rules to achieve FI

Post by KlangFool » Tue May 01, 2018 3:17 pm

golfCaddy wrote:
Tue May 01, 2018 3:00 pm
willthrill81 wrote:
Mon Apr 23, 2018 12:10 pm
jharkin wrote:
Mon Apr 23, 2018 11:43 am
Rule #2 I think is impossible for 90% of people. I know when we bought a house our total non-house NW was maybe 1/3-1/2 of the house value... but it worked out OK and 10 years later we are closing in on your rule.
It's not impossible for most, but it's certainly impractical. Most following this would be at least in their 40s before they could own a home, and many would be in their 50s. There are many non-financial reasons to buy a home much younger than that, and in many areas of the country, it makes financial sense to buy rather than rent for 10-20 years while building one's net worth. I'd rather be 10-20 years into a 30 year mortgage in my 40s or 50s than just starting down that path.
Exactly, how does it make sense for anyone to start a 30 year mortgage in their 40s and 50s? At that rate, they won't finish paying off their home until their 70s or 80s.
golfCaddy,

Why do you assume that someone cannot pay off their 30 years mortgage at any time? I have a 30 years mortgage in my 50s. I choose not to pay off my mortgage until my kids finished college and I reached my number. But, I have enough money in my taxable account to pay off the mortgage at any time.

KlangFool

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Re: KF's simple rules to achieve FI

Post by willthrill81 » Tue May 01, 2018 4:05 pm

golfCaddy wrote:
Tue May 01, 2018 3:00 pm
willthrill81 wrote:
Mon Apr 23, 2018 12:10 pm
jharkin wrote:
Mon Apr 23, 2018 11:43 am
Rule #2 I think is impossible for 90% of people. I know when we bought a house our total non-house NW was maybe 1/3-1/2 of the house value... but it worked out OK and 10 years later we are closing in on your rule.
It's not impossible for most, but it's certainly impractical. Most following this would be at least in their 40s before they could own a home, and many would be in their 50s. There are many non-financial reasons to buy a home much younger than that, and in many areas of the country, it makes financial sense to buy rather than rent for 10-20 years while building one's net worth. I'd rather be 10-20 years into a 30 year mortgage in my 40s or 50s than just starting down that path.
Exactly, how does it make sense for anyone to start a 30 year mortgage in their 40s and 50s? At that rate, they won't finish paying off their home until their 70s or 80s.
I never said that it did make sense. On the contrary, I think that it usually doesn't, which is what I said. I said that I'd rather be 10-20 years into a 30 year mortgage (i.e. only 10-20 years left) in my 40s or 50s rather that taking a fresh one out then.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

wrongfunds
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Re: KF's simple rules to achieve FI [Financial Independence]

Post by wrongfunds » Tue May 01, 2018 5:16 pm

You either have the money for paying off the mortgage or have the money for 20X (or whatever is your multiplier) expense. You can't double count that money.

You should modify the 30 year mortgage rule to say "take 30 year mortgage but use 15 year payments" then you could finish paying it off before reaching 70 or 80.

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