Tricky situation

[HI Bill]

Besides the illiquid nature of the investments, the situation is 'tricky' because the OP isn't willing to give up lifestyle for life. You can have more $, or you can have more years without w$rking. But you can't have both, no matter how much you desire them, unless you win the lottery!

 

[Route246]

I have this situation with an illiquid asset. I consider it zero until it gets unlocked. It unlocks in August and is trading publicly now after waiting 12 years but it is potentially a very huge chunk of money that is yielding 40-50x my original outlay. At that point it becomes part of my net worth. For now it is zero.

Thanks OldShooter.

Agreed, hope is not a strategy, however, not that simple to sell as my largest investment is a private company that would have to approve any resale of their shares and they do not allow that currently. It’s a very promising business and valuation has already increased significantly but until they do an IPO or get sold, it is illiquid.

 

[HarveyS]

Two cautionary tales.
First, I had an illiquid investment in a private firm. All was going great - production going fine, major sports endorsements and use of the product, product on the retail shelf at large, multinational retailer, etc. Then the CEO decided to steal a big chunk of the working capital. Company collapsed exceedingly quickly. I got a nice tax loss for my initial investment.

Second. Good friend spent 20 years at a private firm and was a large shareholder via some manner (I don't know the details). In a power grab, he was forced out and lost all his shares. Company ended up selling within a year and the shares he lost were worth multiple millions.

S**T happens. Prepare thyself. I think OldShooter and Sparky gave great advice.

 

[Montecfo]

Just an observation. Your spend in essence assumes the private investments work out. You said cutting back assuming they won't seemed extreme.

I would call it prudent since they do not generate income.

As someone who worked in venture funded companies which did not IPO, I would echo some of the cautionary tales.

Best of luck. It is challenging. But don't miss the benefits of reducing burn.

 

[DrRoy]

If the private investment opened up, it would support spending of about $200K/yr. I suggest you start fitting in to that now.

 

[Koolau]

I hate to be a Debbie Downer, but spending seems to be the issue. You need to find SOME way to cut expenses. Otherwise, I don't see how you retire any time soon. I think it's that simple. Only you know how to do that. With that kind of spend, there must be some slop you can take out. Good luck.

 

[pacergal]

Most of the folks here got to ER by LBYM.
Your expenses are way beyond your income.
Can your wife apply for disability?

Increase your spend if and when your illiquid investment pays out, otherwise count it as zero.
My suggestion:
Look at your income only and figure out how to live with that.
Or retire and utilize the 2.7 mil as your figure.
Do not count on the private investment until it actually pays out.
Investigate wife applying for SSDI

Good Luck and I hope your private investment does pan out for you in the future.

 

[LateToFIRE]

H
...early 50s and married, no kids. Lost motivation at work and things aren’t getting any better. Income has been going down a lot over the years but is still pretty decent, except with inflation doesn’t feel like it.

We are currently spending more than my work income, rest covered from investments.

Now comes the tricky part: while I don’t hate my job, I am burnt out and feel like I am wasting my life. Becoming stressed about “time”, ie feel like the remaining good years are ticking away while doing something I no longer enjoy and it keeps me from doing things I would want to do such as traveling and living in other countries for some time.

This is the financial situation:

401k: 1M
Roth IRA: 350k
after tax investments: 1.4M
Private illiquid investments: 3M (incl. significant unrealized gains)
Real Estate: 2M with 1.35M mortgage

Expenses: approx 260k pa, need min 320k pre-tax; Job income approx 200k


So there is a good amount of assets but majority is illiquid and high risk, can’t easily cash out of those.

Clearly I could not afford to walk away from my job and continue current lifestyle but just waiting and hoping for a home run could result in frustration if one day I “wake up, am 60 and nothing changed”...

I can identify with several aspects of your situation. Like you, I've had and still have some big, chunky, higher risk, assets that could be material to my financial future, ranging from investment real estate to private equity to start-up business ventures to angel investments.

I've also been through periods of burn-out from high-intensity, results-driven work. And as a consequence of variable/volatile compensation, and living in a VHCOL area, have at times allowed expenses to exceed income, sometimes by a lot, sometimes for extended periods.

As I think you've probably surmised, this higher risk, higher spending approach is not the norm on this forum where steady saving, conservative investing, and live well below means are commandments - all for very good reasons I should add - given priority for most is to reduce uncertainty and risk rather than maximize NW.

So anyhow, I hit a severe burn-out wall at about your age (~10 years ago). Too much pressure, too much stress, too little joy, no work/life balance, and far too little reward relative to efforts. At that point, I had the RE talk with DW. What if we liquidated whatever we could, hit the eject button, move away from our VHCOL home and lifestyle, and just FIRE'd at 50 to what would have still could have been a very comfortable mid-range lifestyle, which is what you could do right now on your liquid assets and home equity.

To get to the punchline, I have stayed in it another 10 more years. For one, it gave me a chance to reach for the next level career-wise. Second, it allowed our assets to continue to grow, practically tripling over this time. And allowed me to see which of our investments were duds and which were golden from a R-planning perspective. There is now simply much greater financial certainty - though far less time to utilize it.

In order to address the burnout I had to make some real changes, especially these mental shifts:

(1) Embraced FIRE as a viable option. Committed that if at any point I (or DW) became miserable again, would do what was needed to punch out. Eliminating that trapped feeling made a huge emotional difference and lifted a big weight.

(2) Committed to altering the work-life balance equation, with greater prioritization of family and health. Recognized that without these two things, the money was going to be worthless.

(3) Recognized my own significant commercial value - which shifted my mind away from fear and towards more positive, expansive thinking.


To sound kinda flaky for a second, by shifting my mental approach, this resulted in greater intentionality and personal growth. And interestingly, during the past 10 years I've unlocked some of the best commercial performance of my career.

Has it all gone smoothly - definitely not! But, making this transition gave me the tools with which to confront all the various challenges and decisions that needed to be made.

Hope some of that helps. I'm not saying what you should do. Just encouraging you to really step back, take a deep breath, and not look at your choices in such a binary way. And include DW - don't make these choices in a vacuum or assume you know what they'd be willing to do.

 

[Koolau]

And include DW - don't make these choices in a vacuum or assume you know what they'd be willing to do.

I can't over emphasize this aspect of FIRE. DW must be happy with the decisions you make or you won't be happy.



When I finally pulled the plug the only thing that slowed me down was insuring that DW was on board. I (internally) made my decision on a Thursday but DW and I talked it over on Friday and the weekend. The start of the next week was when I informed my boss. But DW had veto power. YMMV

 

[rodi]

Some thoughts. Take them or leave them.

1) You should figure out how to live within your income. You stated:

The expenses are unfortunately not a typo and mostly are property and service-related (house cleaning, food delivery, gardener etc).

Seems like those ***ARE*** areas that you can cut. Many by shopping around for better prices. Or by changing some of your landscaping to require less gardener time (or, what many here do - push the lawnmower yourself). And food delivery is easy to solve... Either get ready to prepare food and cook it yourself... or learn to cook (it really isn't that hard.)

2) The illiquid asset should not be in consideration until it is liquid. It's up there with an expected inheritance... don't plan on it because things can change.

3) You mention you're in a commission based field. I assume sales of some kind. You mention that business (the sector you are in) is down... can you make a move to another sector? Don't discount it till you really look into it. Resetting your career could correct two things - 1) your lessoning income and 2) your issues with the current workplace burnout.

I'm wishing you the best with the illiquid private investment - but I also observed my ex-BIL invest in various ventures. Not only did they all go bust, on one they tried to sue him for some of the debt remaining when the principals all walked away. He lost over a million, while leaving my sister (a teacher) to pay all the household bills. (A big part of why they divorced.) I'm sure your investment is better than the stuff he invested in - but until it is tangible, it should not be part of your plan.

 

[ready2enjoy]

Many thanks to everyone for all the thoughtful responses. Will be looking into ways to cut spending, a process we actually started a while ago. It will be tough to get expenses down below income as the discrepancy has widened so much but just as an fyi, there was a time our expenses were over 300k but there was also a time when I made well over 500k…. Those were the days…..

PS: when I say it will be tough to get it below income, I mean without selling real estate and downgrading, which at the moment is something we try to avoid. If it looks like it will be necessary, of course we will do that, just not ready to go there just yet.

 

[RetiredHappy]

Many thanks to everyone for all the thoughtful responses. Will be looking into ways to cut spending, a process we actually started a while ago. It will be tough to get expenses down below income as the discrepancy has widened so much but just as an fyi, there was a time our expenses were over 300k but there was also a time when I made well over 500k…. Those were the days…..

Coming from another angle. I didn't come across this website until we have been retired for awhile. We have never LBYM as like you, we were big income earners and spenders. We spent $350K to $400K each year while we were working. But we had the income to support our spendings so it was never an issue. We are tracking to cutting down our spendings this year to about $200K before taxes but we have retirement income to support our expenses.

The key is to get your spending down to what you make, plus being able to set aside savings from your working income.

 

[LateToFIRE]

Many thanks to everyone for all the thoughtful responses. Will be looking into ways to cut spending, a process we actually started a while ago. It will be tough to get expenses down below income as the discrepancy has widened so much but just as an fyi, there was a time our expenses were over 300k but there was also a time when I made well over 500k…. Those were the days…..

PS: when I say it will be tough to get it below income, I mean without selling real estate and downgrading, which at the moment is something we try to avoid. If it looks like it will be necessary, of course we will do that, just not ready to go there just yet.

Can totally relate - our expenses right now are well over $300K, but we do have a concrete plan to bring that down to under $300K shortly after the big R. For sure, gaining confidence that I can FIRE had everything to do with hyper-analyzing the expense side. The asset side is easy enough to know, expense side often a mystery.

Probably, the home is a big fixed cost. Again, like you we employ a small army to tend our home(s) - housekeepers, gardener, landscaping, lawn care, pool care, etc. Important to know what all that costs and what can be cut back in a crunch.

By the way, agree with folks that are saying ignore the illiquid asset - I have had more deals killed right at the finish line than I have hands and toes to count. It ain't never done til the volumetrically challenged they/them sings and then some.

 

[Retired Expat]

In response to other answers: my wife can’t work due to health issues, which is also part of the reason why expenses are high. Unlikely she will be able to start working again.

The expenses are unfortunately not a typo and mostly are property and service-related (house cleaning, food delivery, gardener etc). Difference from income to expenses is covered from investments.


The “cut the cord at 55” would result in either having to significantly downgrade our living situation or it can work if the private investment works out as hoped for. And yes, hope is not a strategy; which is why I am trying to figure out at what point to make changes.

Selling the house and moving someplace cheaper in expectation that investments go bad seems a bit extreme at the moment but planning for the “what if”. Also again, giving up on a very low interest rate mortgage isn’t what I would want to do unless necessary.

Don’t sell your home or cut expenses “in expectation that investments will go bad” but to reduce the need to earn more money. Sold my expensive CA home and moved to Uruguay. Lifestyle is equivalent expenses are less than half.

Sure traded in the Lexus SUV for a BYD, gave up the pool and tennis court and joined a club that offers all of that plus a great gym etc. We never want to give up things or take steps backwards, but a simpler less cluttered and less material life is not a step back but forward I have come to realize.

That being said I am retired 10 years now and we are on vacation in Europe for a month while still young enough to enjoy it and walk alot. Just choices….