Simple FIRE Plan

[WestLake]

1. Max 401K

2. Max Roth IRA

3. Buy starter home on 15 year mortgage, when that is paid off, turn it into a rental and buy another with a 15 year.

4. Never buy a new car nor keep credit card debt.

5. Any excess savings go into DRIP stocks.

[cons]

Agree with all except I woould remove 3 and 5.

3 - Personally, I wouldn't want to continue going into debt by leveraging a rental. Also, being a landlord isn't for everyone. In some parts of the country, real estate is too expensive to get a positive cash flow out of a rental. Real estate isn't very liquid either.

I would replace 3 with:
Maxing out a taxable brokerage account with low cost and tax efficient equity mutual funds

5 - Personally, investing in individual stocks, whether they're drips or not, isn't for me. Most are better off with equity mutual funds.

I would replace 5 with:
Building up a cash reserve for an emergency fund

It obviously wouldn't be in that particular order, however, those would be my five KISS fire steps.

[ERhoosier]

+1 on 1, 2, & 4 re CC debt.
SOMETIMES new car can be reasonable buy IF bought at solid discount & held for several years. Price of good clean used cars is high now. Often the "savings" of a used car get eaten up in cost of fuel (usu worse mpg for similar newer car), higher medical pmts in auto insurance (fewer safety features), and cost of major repairs can turn old car into a money pit (e.g. just-1-more-repair syndrome). I generally buy new (going easy on the options!!) & hold for years. Bought my prev car new & held for 8yrs. Had similar (if not lower) overall outlays than certain relatives who dumped huge $$$ into repairs (tranny, engine, etc.). Current car (midsize 4cyl) is 4yrs old & my depreciation is less than what at least 2 diff relatives have put into their older used vehicles over that time- plus my gas savings of 27-28mpg vs their 15-17mpg (suburban driving).

+1 on DRIP stocks IF you stick with solid blue chips and monitor closely. Many once solid blue chips have ended up bust over the years. Most might be better off with mutual fund or ETF focused on consistent dividend payers, and reinvesting the dividends.

#3 is not for me. Real estate investment & management can be tough. Back in mid-80's I felt lucky to break even in sale of my 1st house. And trying to rent it in that market would have been a huge negative cash flow. Tried investing in a rental in 90's & again felt lucky to loose only a few $1,000's over 3yrs depsite putting in lots on time on it.

[SumDay]

Again, it sounds good to me too, except for the real estate. Not a big fan. I know many do well with it, but it's not for me. I'd rather w*rk another 5-10 years (seriously).

[truenorth418]

I agree with the rental real estate comments. I would replace that one with: buy least costly home you feel comfortable with, and, if mortgaged, pay mortgage off as soon as possible. Then instead of mortgage payments, pay the same amount monthly into a broad market index fund.

[WestLake]

Yep, I'm a real estate guy, it's worked well for me. I would add that you can deduct up to $25 000 (unless you are high income) in depreciation, taxes, interest, repairs et al, whereas you can't do that with a taxable investment account.

Also you are not totally dependent on stocks, bonds etc.

[foxfirev5]

Quote:

Originally Posted by ERhoosier +1 on 1, 2, & 4 re CC debt. SOMETIMES new car can be reasonable buy IF bought at solid discount & held for several years. Price of good clean used cars is high now. Often the "savings" of a used car get eaten up in cost of fuel (usu worse mpg for similar newer car), higher medical pmts in auto insurance (fewer safety features), and cost of major repairs can turn old car into a money pit (e.g. just-1-more-repair syndrome). I generally buy new (going easy on the options!!) & hold for years. Bought my prev car new & held for 8yrs. Had similar (if not lower) overall outlays than certain relatives who dumped huge $$$ into repairs (tranny, engine, etc.). Current car (midsize 4cyl) is 4yrs old & my depreciation is less than what at least 2 diff relatives have put into their older used vehicles over that time- plus my gas savings of 27-28mpg vs their 15-17mpg (suburban driving). +1 on DRIP stocks IF you stick with solid blue chips and monitor closely. Many once solid blue chips have ended up bust over the years. Most might be better off with mutual fund or ETF focused on consistent dividend payers, and reinvesting the dividends. #3 is not for me. Real estate investment & management can be tough. Back in mid-80's I felt lucky to break even in sale of my 1st house. And trying to rent it in that market would have been a huge negative cash flow. Tried investing in a rental in 90's & again felt lucky to loose only a few $1,000's over 3yrs depsite putting in lots on time on it.

+1 - #3 - I'm not a landlord type - it amounted to another job. #4 - agree on cc debt, however the new car is a completely different issue. After decades of high mileage usage I will only buy a new car that I want and drive it for an extended period of time. #5 - I'm firmly in the low cost mutual fund camp on this one.

[pb4uski]

Quote:

Originally Posted by WestLake 1. Max 401K 2. Max Roth IRA 3. Buy starter home on 15 year mortgage, when that is paid off, turn it into a rental and buy another with a 15 year. 4. Never buy a new car nor keep credit card debt. 5. Any excess savings go into DRIP stocks.

Reasonable plan - the difficulty is in the execution.

I'm not into real estate either but it works well for some. I'm just not into the hassles of being a landlord.

[David1961]

My five steps would be:
1. LBYM
2. LBYM
3. LBYM
4. LBYM
5. LBYM

[samclem]

Sounds okay but:

#4. Good quality, dependable new cars can now equal the thriftiness of used cars. I'd replace your present #4 with "Buy economical cars and keep them for at least 10 years before selling."

#5. DRIP plans can be okay, but they aren't anything special. And it's difficult for a beginning investor to get sufficient diversity in holding with individual issues. For most investors I'd say "Pay yourself first and invest 25% of your income in low-cost broadly diversified mutual funds."

#3. Some people like to manage individual properties, other people prefer to get some other type of second job.

[LA Dave]

3 rentals is how i'm retiring. no more mortgage so it all goes to pay for expenses. a little work but keeps me busy and can't beat the cash

[obgyn65]

I would add 6. Work at least 10 years for SS benefits and Medicare.

Quote:

Originally Posted by WestLake 1. Max 401K 2. Max Roth IRA 3. Buy starter home on 15 year mortgage, when that is paid off, turn it into a rental and buy another with a 15 year. 4. Never buy a new car nor keep credit card debt. 5. Any excess savings go into DRIP stocks.

[militaryman]

I am not so sure about the new car thing ---- Last go around it worked out like this for me
I had a paid off 2011 Hyundai Elantra (35,000 miles) that I wanted to dump ---
1. It had been repaired after a collision that caused substantial damage ($4500)
2. It had hail damage (not terrible but noticeable)
3. Elantra was due to have new tires all the way around ($1000) Brake wear was probably at less than half left as well as other maintenance approached.

I received an offer in the mail from my GM CC that offered to up the rebate dollars that I had accrued ($248) to $3000 if I bought a car in the next couple weeks

So I took my 2011 Elantra to dealership and negotiated a $11500 dollar trade price (even with the hail damage) on a 2013 Chevy Sonic LT Auto/turbo ( paid $5000 cash -- (no debt of course!)(all taxes/title included) after trade$$ and GM rebate$$ was applied for the new 2013 Sonic)

BTW -- Elantra and Sonic MSRP's were very close to the same and are very comparable cars and they had similar features and options.

I owned the Elantra 21 months. So basically I paid $238 month to drive the Brand New Elantra for 21 months and it was always under warranty and I never had to do any maintenance to it except change the oil.

If I can get the same offer in two - three years on another comparable GM car then I will probably trade the Sonic and take the offer because it means I get to always drive a newer, dependable, warrantied, vehicle that I never have to do any maintenance to.

That to me is worth $250ish a month and I bet by the time you figure out all the associated costs of paying for and maintaining a used vehicle then I am really probably paying a very small premium to keep myself and my family in cars that look new, drive, go and stop like new and have the latest safety features.

also I find insurance is usually a wash as USAA rates for the new cars I add differ little in comparison to using a 5-7 year old car