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Author: whyohwhyoh Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5068  
Subject: FIRE mid-year update 2008 Date: 7/1/2008 1:57 PM
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Here is a mid-year update on our retirement goals....

--Net worth down almost 1% since 1/1/08. Now at 5.3 NW/AI at age 34.

Current Portfolio:
31% Picked Stocks (Top 4 holdings: SSD, BMY, BWLD, BUD)
8% Stock Options
17% 401k Mutual Funds (75% S&P500 index fund)
37% California Real Estate (Our House Value*0.93-Mortgage)
7% Fixed Income (Savings, CA-exempt MM)

2008 Notes so far:
Funded one 2008 Roth and one 2008 ERA so far. On par to fully fund 401k.
Tough market so far with the S&P500 dropping 15%.
Upward adjustment to AI.
Increase in stock option value, BUD and BWLD have saved our net worth.
Poor choice in dumping money into bank stocks a few months ago.

FIRE at age 40 is looking impossible, but it is only a goal. Now with 2 kids, a 3+ month vacation later this year, and the desire to purchase a larger house will definitely affect our financial strategy over the next 12 months.

NW/AI historical chart
http://pic40.picturetrail.com/VOL362/677161/15775683/3236302...

2007 Update: NW/AI=5.3
http://boards.fool.com/Message.asp?mid=26243566

2006 Update: NW/AI=4.6
http://boards.fool.com/Message.asp?mid=24999370

2005 Update: NW/AI=3.7
http://boards.fool.com/Message.asp?mid=23507890

2004 Update: NW/AI=2.5
http://boards.fool.com/Message.asp?mid=21842676

2003 Update: NW/AI=1.4
http://boards.fool.com/Message.asp?mid=20380221

--
whyohwhyoh
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Author: 1putt100 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4620 of 5068
Subject: Re: FIRE mid-year update 2008 Date: 7/1/2008 10:58 PM
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whyohwhyoh,

I wonder if it would be better to track the ratio of Net Worth / Annual Expenses i.e. NW/AE instead of NW/AI. I believe this gives you a better idea of how close you are to FIRE. Once you reach a ratio of approximately 25-30 of NW/AE you are pretty much there. The logic being that your income could go up a lot in the next few years, but your expenses could hold relatively steady. I don't think you should be punished with your ratio just because you got a raise or a big bonus. Just a thought...

1putt100

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Author: whyohwhyoh Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4621 of 5068
Subject: Re: FIRE mid-year update 2008 Date: 7/2/2008 12:47 PM
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NW/AE is an option, but AE is harder to define and track, difficult to predict into the future, and needs to be adjusted for various unknown inflation factors. I picked AI since it is an easily calculatable number that, at least for me, is somewhat predictable and steady going forward. It naturally climbs with inflation, just a little faster than inflation. I am using gross base annual income.

As we get closer to FIRE we can start to evaluate our current and future annual expenses and determine a more accurate target.

I'm looking at NW/AI of 15 as a conservative target.

--
whyohwhyoh

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Author: 1putt100 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4629 of 5068
Subject: Re: FIRE mid-year update 2008 Date: 7/6/2008 11:51 PM
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I guess my challenge is that my current NW/AI is acually around 7 or 8 at age 37. I could get fired from my job, be forced to work for minimum wage and my "FIRED" ratio by your calculation goes up to 100 to 110 or so, when my situation has acutally worsened substantially... The ratio really doesn't make sence to me... Whereas by calculating by useing my net expense (my accustomed to living expenses) it really dousn't matter what I make, it matters what me and my wife are used to spending.

My 2 cents worth...

1putt

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Author: VikingErik Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4646 of 5068
Subject: Re: FIRE mid-year update 2008 Date: 7/9/2008 8:04 PM
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I could get fired from my job, be forced to work for minimum wage and my "FIRED" ratio by your calculation goes up to 100 to 110 or so, when my situation has acutally worsened substantially.

Exactly. And the converse is that getting a raise lowers the "FIRED" ratio even though it means better financial shape. NW/expenses is a much better measure than NW/income.

- Erik

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Author: whyohwhyoh Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4649 of 5068
Subject: Re: FIRE mid-year update 2008 Date: 7/10/2008 2:36 PM
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As GAI changes I adjust the entire chart historically so there is no raising or lowering at the GAI adjust points. Just adjust the abitrry scale on the Y-axis.

The reason for NW/GAI was to avoid plotting NW directly, thus maintaining some privacy without detailing exact $ figures.

Maybe NW/GAI2008 would be better, no adjustments going forward.

--
whyohwhyoh

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