Walked out on my 45th birthday

[45th Birthday]

I've been lurking on here awhile and have finally decided to toss out my first post, an introduction.

I owned a company which I sold on my 45th birthday. I cleaned out my office that day and left. That was two years ago.

I spent a fair amount of time the first year tying up loose ends connected with the sale.

In the meantime, I started networking to find private equity investments. So far, I have only invested in one, but that came with a part-time job (work mostly from home), small salary, and health coverage.

I've also become involved in my community.

Exercise takes a big part of my time, and I enjoy it. Don't golf, but am learning. I'm afraid it takes too much time.

Managing the money is my other "job." I also enjoy that, don't take too many risks, and analyze all moves carefully.

I also get to spend time with my kids (now 14 and 16) before they leave home in a few years.

We travel a fair amount when school schedules allow and spend the summers at our second home in a relatively remote but very attractive place.

No regrets, really. The stress was getting to me, and I worked from the time I was in grade school. Sometimes I look at what people my age are doing (running companies, running for president, etc.) and think I'm not contributing enough, but that thought passes quickly.

Financially, I will never have to work for money as long as I live. I planned this carefully. Our annual spend is about $350k and net worth is about $14 million.

My only issue is what kind of example this lifestyle sets for my kids. They will not be gifted large sums and will not inherit much at all until they are 30 and older, so they will have to get out and work hard to live the way they did as children.

We have discussed it with them, and they say they know our situation is unusual, but I'm not sure they are really old enough to truly understand. My fear is that this might have a negative impact on them as they become adults.

 

[kevin92610]

I am in the same position (about half the networth) but I also wonder about the impact on my kids of having dad around all the time. Wish I had a good answer on this one but my kids are 14, 17, 19.. so I am still seeing how it plays out. I do worry what kind of example it sets when my kids see me around the house so much and so available... but we have made it very clear that there is no charity here and that they have to find their own way. On the flip side I see the value of being available for my kids and being very involved in my kids lives. We are much closer and we talk a lot more. So in the end I am hoping that it all balances out.

Welcome aboard. kevin

 

[socca]

My only issue is what kind of example this lifestyle sets for my kids. They will not be gifted large sums and will not inherit much at all until they are 30 and older, so they will have to get out and work hard to live the way they did as children.

We have discussed it with them, and they say they know our situation is unusual, but I'm not sure they are really old enough to truly understand. My fear is that this might have a negative impact on them as they become adults.

You have a right to be concerned. Of my three step-brothers, two of them have never worked a day in their lives. They just waited around until my wealthy step-father died and then collected their inheritances. One of them used to call my step-father every Christmas Eve and beg for his inheritance early. This abysmal behavior is what most likely led my step-father to leave a large sum to my mother - an unusual occurrence. He also set up trusts (e.g., a Q-tip) which ensure that my mother is financially secure for the rest of her life.

If your goal is avoid encouraging an entitlement mentality in your kids, then you'll have to make clear to them that you expect them to earn a living, and structure their inheritances accordingly. You may need the advice of a good estate planner if you don't have one already. Your wealth can open doors for your kids if properly managed, but it can also slam those same doors shut!

 

[chris2008]

Point out to your kids that what you can do after your 45th birthday is the result of what you did before your 45th and that this equation will also apply to their lifes.

Teach them financial responsibility. There are a lot of recommendations for books on this at this forum.

 

[chris2008]

You might also find some ideas here:
http://www.early-retirement.org/forums/f28/spilling-financial-beans-kids-35445.html?highlight=kids

 

[Dawg52]

Welcome and congrats on your success. No advice I can give as I'm single and......well uh.....don't have a portfolio of that magnitude.

 

[Leonidas]

I retired at 45, kids were 13 and 16 at the time, and while you're net worth beats mine silly I think I can safely rely on not worrying about working for a living ever again.

It appears that we have some of the same concerns about how our kids will deal with Dad's unusual situation. I'm not sure how well my philosophy on it will work out, but the oldest will be 20 at the end of the Summer and he seems very grounded at the moment (youngest is currently a ball of raging teenage-male hormones so the jury is still out). But the oldest is frugal to a near extreme (LBYM in the vernacular here). He and I drove all of his stuff back from school last week and our conversations on the trip were focused on school and his friends. He most admires the guy who is paying his own way while running a small business he started in high school, and the one he least respects is the kid whose well-to-do mom is paying all the bills and who takes advantage of her generosity in foolish ways.

I was FI long before I retired, but I really enjoyed what I did it and it felt good to know there were days when I made a small part of the world a better place for others. But by the end, the bureaucracy and politics had maxed out my stress level and I was thinking more about how it would be better for my kids to have a more accessible father while they were still young as opposed to future memories of how hard I worked.

All I try to do with them is be honest about the whole thing. I worked hard for a lot of years (started in grade school like you), made some good decisions, and had some luck. The balance was weighted too heavily toward work for years and now I'm correcting that for their well-being and my own.

 

[ERD50]

Point out to your kids that what you can do after your 45th birthday is the result of what you did before your 45th and that this equation will also apply to their lifes.

Teach them financial responsibility. There are a lot of recommendations for books on this at this forum.

+1

I'm not in the financial neighborhood of the OP, but the general approach applies. My kids saw that I worked late almost everyday, sometimes had to take work along on vacations, got up and went into work almost every saturday, had to walk uphill both ways..., well, you get the point.

And, they know I spent a lot of time on investments, and looking for ways to optimize our resources (sweat equity, doing a lot of my own maintenance, general LBYM), etc. So they know that my FIRE did not come simply because I 'got rich and quit'. They realize I had to work for it (and yes, a lot of things fell in place, but I could not have taken advantage if I had not not done the prep work).

So, they 'get it', I think. You can't really preach too much, that won't sink in. But set an example, and take advantage of any opportunities to throw in some ideas. My kid was 'stuck' helping me on a home project last year, so I used the time to discuss risk/reward in the stock market, reinforce the 'no-free-lunch' concepts, etc. A little at a time.

So far so good.

-ERD50

 

[macdaddy]

I've known so many families in the OP's position. You have to hope your kids develop a strong work ethic. You should volunteer or work at something you enjoy to show them that work is valued even when you are FI. I've never seen the attitude of "I worked hard so now I can be a bum; but you don't get a dime and had better bust your ass if you want to make it too" be successful among families with that much wealth. It will just lead to resentment or worse. Success is meant to be shared with the people you love. I would encourage that attitude of "work and contributions to society are important; do what you love; our family wealth may be able to help open doors for you".

 

[socca]

Success is meant to be shared with the people you love.

If success means money, it's possible. If success means achievement, it's not possible. The kids need to find their own mountains to climb. If they don't, they'll turn into lazy parasites drowning in a sea of excess consumption. I've seen it happen. It's not pretty.

 

[growing_older]

I've seen this go both ways. FI families who raise grounded and responsible kids and FI families in which the kids feel entitled and expect family money make their way in life without any real effort or skills on their part. Reasons for the difference are complex and have a lot to do with the people and attitudes involved. Never have they had anything to do with Dad having more time available to spend with the kids. If you've worked your way into a position where you can spend more time with kids - by all means go for it. It's probably the best thing you can ever do for them and a wonderful chance for you to enjoy them growing up, which is all too fleeting.

 

[firewhen]

My concern is what you spend each year. Most of us here can live for many, many years on $350k. I could not even begin to imagine spending that much each year.

They are probably accustomed to a large lifestyle. Seeing you retired will likely have less of an impact than the spending they are used too.

When I RE, my kids will have experienced that we got there by LBYM, and are very knowledgable about that. I do not think RE will change their financial view of the world.

You are not going to give them money until they are 30+. Will you continue your spending on them until then? It may otherwise be a difficult transition until then for them.

 

[45th Birthday]

Thank you for your replies.

To address some of the issues raised:

There are trusts set up and they will be supported through age 25 only while enrolled full-time in school. The level of support is not set up to replicate their lifestyle today. We have already had conversations about how when they are not with us they will not travel as well, for example.

After 25, they are on their own until age 30, at which time they get 1/3. At 35, they get another 1/3, with the balance at age 40.

This only if my wife and I are gone. While we are alive, we control everything and intend to support their education, but they will not receive any money until we are dead.

Medical needs of course would come before everything else.

We have not discussed any of the arrangements with them, and they have no idea how much money we have (nor would a specific dollar amount mean anything to them). One time my younger one said something to the effect that “we are rich,” and I told her we were not. She did not disagree; I think she was testing me.

I am teaching them about finances, the stock market, etc., but one is more receptive than the other and we don’t want to force the issue.

They know I worked from a young age and worked long hours earlier in my career.

I don’t think we live beyond our means, and we are somewhat frugal. For example, both our cars (we only have two) are five years old, and we will keep them for at least one more year. We don’t do our own cleaning, lawn work, etc., but I will fix a leaky toilet myself and we painted our summer home interiors ourselves.

I think we could probably spend more and still be OK long-term, but we are spending about what we always have and see no need to change that now.

Compared to their peers, we are probably somewhat but not significantly above average in lifestyle, so how we live does not come across to them as unusual, although they are aware that there are many in the world who are not as fortunate.

Maybe the best thing to do is to keep reinforcing the message that they need to work hard if they want to enjoy success.

 

[bright eyed]

If you use the time you have with them to share your insight, knowledge and work ethic - your kids will be very fortunate. If you spend your time with them spoiling them and giving them everything they want (which we are all tempted to do but sometimes can't because of financial constraints or ethical ones) - then you will get a spoiled child.

I'm stunned at how some of the wealthy parents (at least on tv - think "sweet sixteen") relish in their ability to spoil their children silly. It will be fun to have a follow up show in 20 years to see how these kids turn out...

Anyhow - congrats to you - at least you have plenty of time to figure out what you want to do!

 

[ERD50]

...

One time my younger one said something to the effect that “we are rich,” and I told her we were not. She did not disagree; I think she was testing me.

I am teaching them about finances, the stock market, etc., but one is more receptive than the other and we don’t want to force the issue.

...

Maybe the best thing to do is to keep reinforcing the message that they need to work hard if they want to enjoy success.

That's fine, but I think that one point may need to be expanded on a bit. Yes, it takes hard work to enjoy success. But... I think a kid needs some specifics, in order to put that in perspective. Kids often just do not have perspective, even (especially?) on things that seem perfectly obvious to us.

Very, very few people make an income to support $350,000 in annual spending. I think the kids need to understand just what it takes to reach that level, that very few are able to do it, and more specifically, what kind of lifestyle they could afford on a typical starting salary -even if they get a good education in an in-demand field and do well. Some real numbers would help - $XXK salary is $YYK after taxes, SS, Medicare, etc; a nice apartment is $A/month, food, car insurance, gas, maintenance, etc, etc, etc -

Also consider that it would not be unusual for one of you to live to be 95. In that case that your kids would not get any inheritance until they are 64 and 66. Sooo, if you are going to hold to that, your kids need to understand that their lifestyle is up to them, and understand what it takes to get there. I know you said you've discussed some of this. I'm just saying - don't assume that they 'got it'. I'd be very surprised if it sunk in at that level, but I could be wrong.

-ERD50

 

[Meadbh]

Congratulations on your success as an entrepreneur. I'm sure you worked your butt off to get there. But your kids probably didn't see that and now are at risk of believing that the way they live is commonplace.

I think a fast dose of reality is in order. I suggest you all, as a family, start volunteering at the local food bank, homeless shelter, etc. Send your kids on volunteer trips abroad. When they realize how much misery there is in the world, they may develop a much stronger social conscience. Check out Me to We - Home (started by a 12 year old).

 

[socca]

I think a fast dose of reality is in order. I suggest you all, as a family, start volunteering at the local food bank, homeless shelter, etc.

A nice idea, but perhaps a touch idealistic. I have yet to meet a wealthy person who hasn't erected all sorts of barriers (both physical and mental) to contact with the 'lower classes'. Many wealthy folks do, however, leave large sums of money to charitable organizations they hope will make a positive impact on the world (especially if their children don't appear destined for such a role).

 

[kevin92610]

I take a similar approach to "45th birthday" with my kids and so far it seems to be working. My oldest just finished his first year of college and he is very frugal with his money. He get's $200/mo while in college, for expenses, and never asks for more. If he runs out, he eats in the dorm and doesn't go out. He plans to get a job for his sophomore year so he can have extra money. He also, tells us of kids that get a $2000/mo allowance while at school. He can believe how spoiled they are and doesn't have much respect for them. He seems to have figured out that life at home is good but that he needs to make it on his own. He knows he will not have as much money as we do when he starts his career but he seems to be more than ok with that prospect.

Personally I think 45th Birthday has a pretty solid approach... of course, only time will tell.

Side note: We put a sign my oldest son's room (as a joke) when he was in high school that read "checkout time is 18 years old"... I think he has taken it to heart. He even passed it down to his younger brother when he left for college.

Regards, Kevin

 

[Milton]

This only if my wife and I are gone. While we are alive, we control everything and intend to support their education, but they will not receive any money until we are dead.

I guess the essential question is why? I.e., with all that money, why aren't you prepared to give any of it to your children before your own deaths? It's pretty clear that you could easily afford to do so.

I am not implying that you are misers, or that you should give any money to adult children. I am merely suggesting that you give the above question due consideration, so that - when your kids are a bit older - you can explain your position to them in an honest way that lets them know that they are 'on their own', but (hopefully) doesn't create resentment.

We have not discussed any of the arrangements with them, and they have no idea how much money we have (nor would a specific dollar amount mean anything to them). One time my younger one said something to the effect that “we are rich,” and I told her we were not. She did not disagree; I think she was testing me.

By any reasonable standard, you are rich (your children are not. Is that the distinction that you intended to draw?). Sooner or later, your daughter is going to learn the truth. It's probably best that the information comes from you.

I don’t think we live beyond our means, and we are somewhat frugal.

I agree. Annual expenses of $350,000 are more than the great majority of people can relate to, but they only represent 2.5% of your net worth. I don't see any reason why you should feel pressure to cut back.

P.S. A few links that may be of interest:

(1) Camp Teaches Newly Rich to Manage Wealth : NPR (see further Richie Rich 101 - Los Angeles Times);

(2) Seattle Times: New Money;

(3) http://inspiredwealth.com/files/An_Interview_with_Aileen_Miga_about_Sudden_Wealth_Coaching.pdf;

(4) Children & Money.

 

[45th Birthday]

I guess the essential question is why? I.e., with all that money, why aren't you prepared to give any of it to your children before your own deaths? It's pretty clear that you could easily afford to do so.

I am not implying that you are misers, or that you should give any money to adult children. I am merely suggesting that you give the above question due consideration, so that - when your kids are a bit older - you can explain your position to them in an honest way that lets them know that they are 'on their own', but (hopefully) doesn't create resentment.

There are several reasons. Number one, so we don't create a sense of entitlement. Beyond that, one of us or one of them might need access to funds for long term care. Or perhaps a grandchild some day might have expensive needs. Or maybe they are well off on their own and we decide to give most of it to charity. Also, there are tax issues associated with large gifts while we are alive.

I don't foresee having to explain not giving them money at all. I don't intend for them to know how much there is until they are much older if ever. And I want the message to be that they have to make it on their own in this world.

By any reasonable standard, you are rich (your children are not. Is that the distinction that you intended to draw?). Sooner or later, your daughter is going to learn the truth. It's probably best that the information comes from you.

Not really. By not rich I mean we do not live a lavish life. And we don't have things "rich" people do like a large estate, private jet, yacht, etc. We are comfortable. And she already knows that. Compared to other people where we have our primary and secondary homes, we are very average.

Thanks for the links.

 

[Milton]

I don't intend for them to know how much there is until they are much older if ever.

If you keep your personal consumtion within reason, that sounds quite possible.

By not rich I mean we do not live a lavish life. And we don't have things "rich" people do like a large estate, private jet, yacht, etc. We are comfortable.... Compared to other people where we have our primary and secondary homes, we are very average.

$350,000 p.a. should buy a lot of comfort! But I agree, everything is relative.

 

[retire@40]

Could you give us a summary budget for your $350K annual spending? I'm just trying to reconcile that amount to your definition of "frugal."

 

[FUEGO]

Could you give us a summary budget for your $350K annual spending? I'm just trying to reconcile that amount to your definition of "frugal."

I'm curious, too. "Inquiring minds want to know" as they say. Does that $350,000/yr figure include taxes?

And are you in a high cost of living area (NYC, CA, etc)?

 

[kevin92610]

not sure why the big concern. "Frugal" is relative to how much you have. In this guy's case, I agree... $350K a year is very frugal. he isn't even living off all the interest he earns on his investments and is spending well below his means. And as he points out.... for where he lives he appears to have less than those around him.

I am in a similar situation... do my kids know we are comfortable, yes. do they know how much wealth we have, No. Do they have to earn the things they really want, Yes. Do we splurg on family vacations, yes. Are there others where we live that appear to have considerably more, yes.

Why don't I want my kids to know how much I am worth... because I don't want to instill a sense of entitlement in my kids. If they are fortunate enough to acquire as much wealth as I have, I would hope they will have learned to respect what they have and not go out and blow it all. By the same token, if at some point down the line they end up getting a sizable inheritance from me then I hope that by having made them earn their own living they will have developed enough respect for money that they will use it responsibly.

regards, Kevin

 

[Milton]

Could you give us a summary budget for your $350K annual spending? I'm just trying to reconcile that amount to your definition of "frugal."

I wouldn't if I were him. Why should he have to account to us for his spending?

I'd be willing to bet that every one of us blows money on some things that others would consider questionable. I certainly do, anyway.