How Much Money To Start Off?

[anewbiewannabe]

Yanno I was going to say that unless they are among the younger of us (maybe still if they were) that they shouldn't frugal themselves out of entertainment experiences they might want. They are fortunate to be in a good position. More of us on here aren't in such positions. As long as there aren't too many 1/2 mil motor mansions taking up the free camping spaces that some of us really need then so what. Good onya IGBT as ya seem like decent folk even if ya might bring out some envy in us.

 

[ArtW]

definitely agree, when you worked that hard for what you have, you should enjoy it for sure

 

[USExplorer]

35 grand will last me five years of wandering at my typical rate of spending. Right now I have about six grand saved up and I feel affluent.

As long as you are fairly healthy, you should have no problem finding a seasonal job in a national park or campground.

The farther you live from the edge, the less adventurous life is. Much of what you learned over the course of a stable career must be unlearned for your mind to be opened.

 

[gcal]

We started this lifestyle with $1.4 million but are only spending about $25k a year and that is as a couple so I think you would be fine.  Perhaps your tastes are finer than ours though.  We eat a lot of rice and beans and stay at free campsites.

Just wondering - how do you invest 1.4 million and only end up with a yearly income of 25k? OK, let's get wild and say that state and federal taxes are another 5k, so that's an annual yield of 30k. On 1.4 mil. that 30k is just barely over 2%. If that's the best your broker can do for you, fire him. Then, hire an auditor to find out where the money he's been embezzling from you went. Even if you only invested in bluechips and left it there to draw dividends, you should be seeing at least double that.

 

[Bster13]

Just wondering - how do you invest 1.4 million and only end up with a yearly income of 25k? OK, let's get wild and say that state and federal taxes are another 5k, so that's an annual yield of 30k. On 1.4 mil. that 30k is just barely over 2%. If that's the best your broker can do for you, fire him. Then, hire an auditor to find out where the money he's been embezzling from you went. Even if you only invested in bluechips and left it there to draw dividends, you should be seeing at least double that.

IGBT is being conservative (smart man/women!) in their withdrawal strategy.  In the early retirement community 4% is the often referenced "safe withdrawal rate."  Historically the market has returned 7% in a well diversified portfolio that minimizes fees and expense ratios.  With 3% historical inflation, that leaves 4% for spending each year (inflation adjusted).  He/She is most likely getting much better than 2% returns each year with their portfolio (and most folks in the early retirement / financial independence community do not have brokers that act as a parasitic drag on your portfolio with their fees.  You should have fired your broker a long time ago.  ), they're just only ~spending~ 2%.   Remember, it's not about what you make but what you save (or don't spend in this case since they are retired). You can read more about it here:

http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/

I am 38 years old and about to pull the trigger following the same loose guidelines as IGBT.  He/She is in great shape as their withdrawal rate is <2% (25,000/1,400,000 = ~2%) or in the early retirement community "as sure as it will ever get to never running out of money during retirement."  

Using a 50/50 split between whole market index stock and bond funds with some other common assumptions, he/she has a "100%" chance of not running out of money after all 30 year periods in history, modeling through the various sequential returns (from www.cfiresim.com):

 

[Bster13]

And 1.4mil ~is~ a lot of money, but for those of us who choose to live a frugal lifestyle while socking away decent salaries, it is possible to retire early and live purely off passive income (it doesn't get any more passive or easy to make an "income" than from capital gains and dividends. It's even easier than rental income though that is a viable way to go as well).

I have some orthopedic problems that will only get worse over time so I'm not willing to count on any other source of income from physical labor like workcamping, though it is appealing as it would get me on the road sooner. Because of my situation I choose the stationary lifestyle for a few extra years to save and invest my pennies. As we get older sources of passive income (SS is passive income as well and we all appreciate that) become more and more important as our health declines.

For those of us without big portfolios we can still use IGBT's strategy, but on a smaller scale to pay for "chunks" of our budget indefinitely. To never have to worry about mail forwarding bills again, with whole market index fund investing you would need: $6,000 invested ($20 / month for service * 12 months = $240 / yr. To generate $240 per year in passive income you'd need $240/.04 = $6,000). To never have to worry about a cell phone bill again, with whole market index fund investing you would need: $15,000 invested ($50 / month for service * 12 months = $600 / yr. To generate $600 per year in passive income you'd need $600/.04 = $15,000).

 

[AngryVanMan]

Just wondering - how do you invest 1.4 million and only end up with a yearly income of 25k? OK, let's get wild and say that state and federal taxes are another 5k, so that's an annual yield of 30k. On 1.4 mil. that 30k is just barely over 2%. If that's the best your broker can do for you, fire him. Then, hire an auditor to find out where the money he's been embezzling from you went. Even if you only invested in bluechips and left it there to draw dividends, you should be seeing at least double that.

I sincerely doubt IGBT or most who are pursuing fiscally conservative financial independence are wasting money on a broker, at most they might have a fee-only advisor.

With the estate tax exemption of around $5.4 million per person, a couple could pass on quite a legacy to future generations or worthy-cause endowments by keeping the nest egg growing during retirement while keeping lifestyle inflation in check.

 

[anewbiewannabe]

Just wondering - how do you invest 1.4 million and only end up with a yearly income of 25k? OK, let's get wild and say that state and federal taxes are another 5k, so that's an annual yield of 30k. On 1.4 mil. that 30k is just barely over 2%. If that's the best your broker can do for you, fire him. Then, hire an auditor to find out where the money he's been embezzling from you went. Even if you only invested in bluechips and left it there to draw dividends, you should be seeing at least double that.

You must have missed part of this: "The dividends on the stock PORTION are MORE than $25k."

All of this convo is way off topic and none of our business anyway.

There's decent investment strategy in the conversation that really deserves it's own thread.

 

[IGBT]

Yes, I think you guys covered it, but we are spending $25K and the portfolio is growing by $80K, thus at the end of the year maybe we have $1.45 million.  But if inflation is 3% then the next year your expenses might be $26K.  Still, at a 2% withdrawal rate I expect our nest egg to actually get bigger even as we take money from it.

This of course doesn't count days like today where the market was down 2.5%, meaning our stock portfolio portion of our investment was down almost our yearly spending amount in just one day.  Easy come, easy go!  

It took me awhile to be able to stomach losing $25,000 in one day, but now it really doesn't bug me that much.

And we do not use a broker or investment advisor or any such.   Vanguard total stock market funds and SPY shares (a sort of ETF that represents the S&P500 and has good volume and an expense per year of only 0.09%

Figure if you had a financial advisor charging you 1% to manage your money.  He puts you in some actively managed funds that charge an additional 0.75%.   Your spending is 2% of your portfolio but your FA and funds are taking an additional 1.75%.  Essentially you are paying your advisor the same salary you pay yourself each year. There are a lot of suckers that do that though.

 

[rvpopeye]

So any of you savvy investors going to help paragone figure out how much money he needs to start out ?

 

[Every Road Leads Home]

This of course doesn't count days like today where the market was down 2.5%, meaning our stock portfolio portion of our investment was down almost our yearly spending amount in just one day.  Easy come, easy go!  

It took me awhile to be able to stomach losing $25,000 in one day, but now it really doesn't bug me that much.

You guys are living my dream life.  My goal was to retire with a million by the time I hit 40. I got disabled and will have been out of work for 5 years by the time I return this Winter.  Hopefully return, it's not set in stone.  I was on track to meet that goal too. I'm now raising my goal to retiring with 1 million by the time i'm 45. I'm well on my way and stand a good chance of making by 40 still.  Unless we have a market crash, then it could take a few years for the accounts to rebound. I'm set up to ride out the crashes though, my bills are cheap, mortgage is paid and always keep a cash reserve.  

I started investing 6 years ago and had I started when I was 18 I'd already have made my goal!  I too, had lots of trouble on the down days at first, I can lose 8k on a bad day. Over the years i've learned it evens out and then some.  

Congrats to you for reaching such a situation, where you can truly sit back and relax and still earn money.  Everyone should try and learn about the stock market. After you get past all the fears depicted about it, it's really a wonderful tool when used right.

 

[Every Road Leads Home]

I'm just a little nervous getting out there... Fear is a bitch. Testing the job market and such when I had a steady paycheck for the last 10 years.  Wondering if $35,000 (say $30,000) is enough to hold me over until I can find a temp gig. That is my only fear getting into this lifestyle. Sorry for the rambling....

I guess I am looking for some reassurance and hand holding saying "relax, it's going to be alright"....hahahahhaha... Fear is a bitch...

Thank you for any help you guys can provide.

John

I think having six month worth of expenses for living on the road should be enough and a year's worth or more ideal.  So if it costs you 1000 a month to live mobile then $12000 gives you a years expenses covered, if it costs you 2,000 a month than having $24,000 is a good number.  You can then use that towards repairs, food, emergencies, etc if you are out of work for any stretch of time. If you're working right away, all the better, then you'll ever even have to touch it.  

If you're planning on working and hitting the road with $30k, I think you're going to have an amazing time with no financial stress.

 

[akrvbob]

This is way off-topic, investing for the future is a great topic--but MUST have it's own thread. Future off-topic posts will be deleted.
Bob