Two years later! Post-FIRE check-in with graph and lessons learned [M 39: Net worth 3.7M → 3.0M]

Disclaimer/Warning – I made my money in the tech industry with a higher than average wage. I know this is not fair and this triggers some people, please move on if you are not interested in post-FIRE progress of a former high wage-earner. I have nothing to gain by sharing this. I´m doing this anonymously and want to share what I've learned/experienced with the community. I also use this as a forced point of reflection.

Recap

Original FIRE day post - Today is the day! With thoughts, numbers, and graphs [M 38]

One Year check-in post - One year later – Check in & graph [M 39: Net worth 2.6M → 3.7M]

I’m not going to rehash my process up to leaving traditional employment, but to summarize – I took me 10 years of work to reach 500k net worth (NW). Then in the next 6 years I was able to grow to a NW of 2.5M, reaching my targeted 3.3% withdrawal rate to give me 87k (pre-tax) annually to live off of.

I have the following investment allocation

• 45% S&P 500 and growth index
• 10% Tech funds
• 15% International
• 15% Small cap
• 10% Speculation individual investments
• 5% Bonds (2.5 year bond tent for surviving a recession)

My updated budget for FY2022 was 89k.

The last year at a high level

Net worth graph updated to include the last year

Investment performance

Whew! This has been a rough last 6 months, my net worth had gone a high of 4.15 million, before plummeting to 3.05M, a loss of 26%. That hurts.

But this is something that is planned for. I had planned a 2.5 year "bond tent" to withdraw from while the market is severely down, as it is now. This allows me to pull money that should hold it's value in a bear market, without pulling from investments that are down, allowing them to fully recover in time.

What I had not planned on is bond funds dropping as much as they did with the recession.

• VFISX down 3.4% on the year (fine with this one)
• VBILX down 10.5% on the year
• VCORX down 10.8% on the year

VBILX and VCORX are not sheltering the money as well as i had hoped, especially given that the S&P 500 is down ~20%. That means those funds were not earning when times were good, and only sheltered half the loss that the S&P suffered.

This also slightly reduces the length of how long the bond tent will last. After the eventual recovery, I will certainly rework how I keep my "recession protection" money. A lesson learned.

At the start of the year, I looked at what I had that I felt was overvalued in my porfolio and needed rebalanced into other funds. I had two that were concerning to me:

• Tesla (subsequently down 43%)
• Netflix (subsequently down 69%)

I had a problem of a large capitol gains on both of those, and I didn't want to balloon my budget via taxes. I decided to only sell enough to generate 25k in taxes (20k being unbudgeted for). So, I decided to sell Tesla, as i figured it was more likely to have a sudden crash in 2022, hah, whoops. Upon reflection, the correct call would not have been to sell the Netflix instead, but to sell both. If I have a really well performing investment that is overvalued, i can´t worry about the taxes as part of my budget, but instead look into that as a hit on the earned value. Another lesson learned.

Housing decision

As stated in my 1st year checkup, i had not originally planned on buying a house as part of the FIRE process (but considered it a possibility). Fears of inflation and rising rental costs in my desirable MCOL city triggered me to buy 16 months ago. I´m really glad that I did, looking at rent prices now, I´d be close to already being priced out of this city.

Having the largest portion of my budget locked in, having it not growing with inflation and my budget is huge! Going into the purchase, i did have some concern as the mortgage payment is about 22% higher than i was paying in rent. Rent amounts have now grown more than that amount, so crazy.

Budget and actuals

Budget this last year was 90k. I withdrew 108k, but also had earned 37k to pay back into the pot, yielding a net of 71k withdrawn.

The 37k is earnings from an app I have developed post-FIRE. It’s a niche app that I find fun/challenging to build and spend anywhere from 20-50 hours/week working on. This is earnings I had not factored into my FIRE plan, and I certainly work on this because I want to, not for the additional money. I could make far more with a real job.

The 18k more than budgeted withdrawn is from the additional taxes of the investments sold mentioned above.

Largest components of the 108k spent

• 32.5k taxes
• 28k mortgage
• 8k home improvement
• 5.8k car payment / insurance
• 4.1k Health insurance
• 3.3k Utilities (Power, gas, water, sewer, internet, trash)

With inflation, my budget should increase to 98k. But with my net worth hurting as it is, I´m adjusting it to a new baseline 3.3% of my investable net worth, 92k for the next year.

Life

The second year was a far less of a transition than the first year.

The house I purchased was a bit of a fixer upper, I´ve probably spent 500 hours on major house work the last year. Having the free time to learn the process and do the work myself has been key as i certainly don´t have the budget to hire the work to be done. YouTube is an amazing resource to learn everything required to do the work yourself, what a time we live in.

As mentioned above, I spend a large portion of my free time on my niche app development. It´s now grown to the point where I need to seriously consider expansion. Doing this in a way that maintains what I´ve worked so hard for is key. We will see how this develops with next year´s check in.

I still love the freedom to climb, hike, snowshoe, bike, or whatever activity I want on my own schedule and when the conditions are ideal. This has continued to allow me to be in the best shape of my life without really trying.

As stated in last year´s check-in, moving to a new city as part of COVID has made the social aspect a real challenge. Upon reflection, I developed comfort in COVID condition routines. I need to push myself to go out with a more purposeful attempt of building new friendships.

Wrap-up

This FIRE process is certainly at an interesting crossroad. What happens in the market the next year will be key. I´m sticking to the plan, let´s see how it works out.

I hope this was helpful or interesting for some of you. Feel free to ask me any questions and I´ll do my best to respond for the next few days. After that, I won´t log on to this account until another check-in next year.

Edit: I'm done with responding to this year's post, I'll see you next year!