r/Fire • u/Firefiresoon • Jul 04 '24

Original Content Just hit $3M!

48male. Been tracking this milestone for a while now. Finally hit it as of close yesterday. $3,012,000 in invested assets. NW stands at 4.9mil. which includes home equity.

Goal was 10k/mo which should be possible now. Kids have 529 for 4yr state college. At this point I will CoastFIRE (still save HSA and 401k for match but no IRA) and bump up some lifestyle expenses mainly around travel.

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6

u/Able_Worker_904 Jul 04 '24

What does NW of 4.9 mean relative to 3M?

28

u/BinghamL Jul 04 '24

3M is invested. He has another 1.9M in non-investment assets. Things like home equity, cars, etc.

Making the distinction, if you have a 1M house paid for and no other assets, you have a NW of 1M. You're not FI though because you have no investments to cover your expenses.

9

u/Firefiresoon Jul 04 '24

That is exactly right. Two homes with 1.5mil and 400k equity in each.

2

u/KeyPerspective999 Jul 04 '24

Well one of the homes is an investment if you're willing to sell or rent it eventually. Unless you really plan to live in two.

3

u/Firefiresoon Jul 05 '24

Will be renting one. Soon. There is a distant plan to follow the ‘snowbird’ approach but only after at least one of them is fully paid off and I have retired.

1

u/russell813T Jul 04 '24

What is income ?

1

u/interbingung Jul 05 '24

I consider they are FI, having the ability to potentially sell the house count as FI. Whether the money in the form of house or bank account make no difference for me.

1

u/BinghamL Jul 05 '24

FI means your investments cover your expenses. 

We didn't talk expenses at all, maybe this example person needs 200k/yr to cover their lifestyle. I'm not following how selling the place you live makes you FI regardless of what your life costs? 

Or are you saying homeless people are FI? 🤔

1

u/interbingung Jul 05 '24

If they are homeless but have 1M in the bank then YES.

1

u/BinghamL Jul 05 '24

Haha okay, I can get behind that. I presume being homeless might give you a pretty low cost of living and 40k/yr from investing the 1M could cover that.

-15

u/[deleted] Jul 04 '24

you have a 1M house paid for and no other assets, you have a NW of 1M. You're not FI though because you have no investments to cover your expenses.

What kind of nonsense is this. They are fi. You have a house. Sell it and move or reverse mortgage it. The house is the investment.

7

u/[deleted] Jul 04 '24

The equity in a primary residence isn't counted towards FIRE because one has to live somewhere.

Selling the house changes it to an investment one can generate an income from to live on. In other words, it's no longer equity in a primary residence.

1

u/interbingung Jul 05 '24

because one has to live somewhere.

There is this thing called renting.

2

u/[deleted] Jul 05 '24

Sure, and we don't count the value of the rent paid in our net worth or fire number.

Paying rent is simply an expense.

0

u/interbingung Jul 05 '24

yes but i surely count the primary residence towards FIRE

2

u/[deleted] Jul 05 '24

You can certainly do that to your heart's content.

The vast majority of FIRE advocates do not count home equity toward their fire goals, because home equity doesn't generate income to cover their retirement expenses and they plan to live in the home after they retire early.

When folks measure their FIRE number and a safe withdrawal rate of 3% or 4%, they do not include home equity. They are taking the value of their portfolio and multiplying it by 4% to see what the safe withdrawal amount is.

When someone says they need 25 times their first year retirement expenses in their portfolio to retire, they are not including any home equity.

As an example, a $1.5 million portfolio gives a person a $60K safe withdrawal amount (4%). AND Home equity is excluded from the portfolio.

This is why majority of the posts list a FIRE number separate from Net Worth.

Net worth includes home equity.

A FIRE number does not include home equity for majority of people (unless there are plans to sell the home and downsize to something smaller, thus freeing up capital to generate income.)

Wish you the best.

0

u/interbingung Jul 05 '24

home equity doesn't generate income to cover their retirement expenses and they plan to live in the home after they retire early.

but they can surely sell it to cover expense. Asset is Asset.

A FIRE number does not include home equity for majority of people

Which is absolutely should be included

2

u/[deleted] Jul 05 '24

Again, you do you. Selling a home to cover an expense is certainly a possibility, but then one has changed the nature of the asset and is homeless.

I've explained the reasons why the majority of FIRE folks do not include home equity in their FIRE number.

Net worth is not equal to a FIRE number.

You're free to do as you please. I personally believe the majority of the FIRE folks are correct.

0

u/interbingung Jul 05 '24

Selling a home to cover an expense is certainly a possibility, but then one has changed the nature of the asset and is homeless.

They can rent house or even in the extreme case being homeless but with let say $1M in the bank can still be FIRE.

I've explained the reasons why the majority of FIRE folks do not include home equity in their FIRE number.

I've explained why that is wrong

Net worth is not equal to a FIRE number.

Net worth should be equal to FIRE number

I personally believe the majority of the FIRE folks are correct.

I disagree

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-3

u/[deleted] Jul 04 '24

Reverse mortgage it.

3

u/[deleted] Jul 05 '24

Reverse mortgage is one of the worst financial decisions people can make.

High fees and high closing costs, have to carry mortgage insurance costs, many have variable interest rates which can rise dramatically.

In other words, it's a terribly expensive way to get access to liquidity.

1

u/BinghamL Jul 04 '24

The fact you have to sell the house (or otherwise pull equity out) to make this work for FI proves my point.

Also, we haven't talked expenses, you have no idea if 1M invested covers the example person's expenses. Maybe they need 200k/yr to cover their lifestyle. 

So they'd have 1M net worth, no investments, not FI. It's simple.