Poll: I'm in my 30's and have almost a million, what should I do next?

[Spanky]

The answer is simple -- stay the course!! whatever it may be.

 

[W2R]

That's one benefit of semi-retirement. I haven't taken many afternoon naps in a while since I've been busy doing other things. They do help take the edge off and give me more energy for the second half of my day.

I think I'll go take a 30 minute snooze right now.

I am just finishing a 1-week vacation, one of the highlights of which has been napping! After a couple of days touring Mobile, I returned home and promptly took a vacation from my vacation... slept and surfed the net for a couple of days. The naps were delicious. I love feeling caught up on my sleep.

While no where near $1M - still have over $100,000 in my old co. stock. It is highly thought of and is a major stock pick at this time...according to many. I have a target price where I will cash out - that target price may be to optimistic....I am thinking of pulling half and diversifying........but, still have been sitting on my hands to not be impulsive - this is in a tax deferred account so no problemo w/ taxes..... decisions - decisions?

You sound like you would be so much more comfortable with more diversification. You aren't being impulsive - - you appear to have good reasons. So, give yourself permission to do this! Sell and diversify now. In fact, give yourself permission to sell ALL of it and diversify, if you want to. Remember the old song: "What goes up, Must come down..." and so it is with stocks.

 

[audreyh1]

While no where near $1M - still have over $100,000 in my old co. stock. It is highly thought of and is a major stock pick at this time...according to many. I have a target price where I will cash out - that target price may be to optimistic....I am thinking of pulling half and diversifying........but, still have been sitting on my hands to not be impulsive - this is in a tax deferred account so no problemo w/ taxes..... decisions - decisions?

Donzo - I have done a great deal of thinking on this very topic.

I once remember hearing some radio advice (in Austin, I think it was a Dell employee calling in) that whenever your company stock doubles, sell half or 1/3 as a diversification strategy. This, overall, is probably a good idea. You need to keep enough company stock to enjoy the growth potential, but after big run ups you had also better take advantage. This of course runs counter to the no more than 10% of investments in company stock. But the fact is that unless you are willing to take a big risk with something like company stock you miss the big potential pay out. (The killer, of course, is that it's "potential" until it's realized).

I think first, I established a target price where I would start to divest for diversification purposes and to fund my retirement portfolio. And then I established several subsequent targets where I would divest more. This process worked well, as the company stock would cycle up and down and my strategy helped me take some off the table as it neared the top of a cycle.

Now, I was one of the lucky ones in that my company did not have a huge run up and then crash and burn 1999-2000 like many did. For a lot of people that run up was a one time event. My company seems to have it's own 2-3 year cycles. I have seen it cut in half many times, but then go on to new highs within 2 to 3 years. So my divestment strategy helps me harvest as it reaches the highs in its cycles. It takes a lot of patience.

Audrey

 

[Donzo]

Donzo - I have done a great deal of thinking on this very topic.

I once remember hearing some radio advice (in Austin, I think it was a Dell employee calling in) that whenever your company stock doubles, sell half or 1/3 as a diversification strategy. This, overall, is probably a good idea. You need to keep enough company stock to enjoy the growth potential, but after big run ups you had also better take advantage. This of course runs counter to the no more than 10% of investments in company stock. But the fact is that unless you are willing to take a big risk with something like company stock you miss the big potential pay out. (The killer, of course, is that it's "potential" until it's realized).

I think first, I established a target price where I would start to divest for diversification purposes and to fund my retirement portfolio. And then I established several subsequent targets where I would divest more. This process worked well, as the company stock would cycle up and down and my strategy helped me take some off the table as it neared the top of a cycle.

Now, I was one of the lucky ones in that my company did not have a huge run up and then crash and burn 1999-2000 like many did. For a lot of people that run up was a one time event. My company seems to have it's own 2-3 year cycles. I have seen it cut in half many times, but then go on to new highs within 2 to 3 years. So my divestment strategy helps me harvest as it reaches the highs in its cycles. It takes a lot of patience.

Audrey

Audrey, thanks for the feedback. I am thinking of setting an in-between target price to take out some $ to diversify maybe 33% and then set the next target. I agree it takes patience, I need to remember that this is money I won't touch for several years, prob 10 - then again having it spread out in an index fund(I plan on leaving it fully in stocks) increases my chances of growth.......an investors work (thought) is never done!

 

[clifp]

While no where near $1M - still have over $100,000 in my old co. stock. It is highly thought of and is a major stock pick at this time...according to many. I have a target price where I will cash out - that target price may be to optimistic....I am thinking of pulling half and diversifying........but, still have been sitting on my hands to not be impulsive - this is in a tax deferred account so no problemo w/ taxes..... decisions - decisions?

If you have the money in a self-directed IRA (i.e. brokerage) consider writing covered calls on a large portion of it.
If the stock goes up you get an excellent return if goes down you have some downside protection.

 

[dusk_to_dawn]

In your 30's with almost a million........I would say keep doing what you are doing. Read some books like Bernstein's four pillars, coffeehouse investor, only investment guide you'll ever need, millionaire next door, etc. You don't need to read every book out there on personal finanace, but reading a few and making sure you are controlling investment expenses and personal expenses would seem to be a good strategy. Congrats and think back about your first 10,000. The next 10,000 was much easier, right? After your first 100K, the next one was easier, right? Well, hopefully your next million will be easier than your first. Hell, at this rate, you may want to start reading some books on how to handle early retirement if that's what you want to do.

 

[LOL!]

Ahh, the afternoon nap is written up in the NYTimes:
http://www.nytimes.com/2007/02/25/business/yourmoney/25wcol.html

Now, out of Greece, comes permission to do exactly that. A study of more than 23,000 adults shows that those who napped for about 30 minutes each week had a 37 percent lower risk of dying from a heart attack than those who did not.

 

[firewhen]

After your first 100K, the next one was easier, right? Well, hopefully your next million will be easier than your first.

There is an expression that goes something like this:
your first million is difficult but all your second million takes is time.

At 10% money doubles in 7 years, or in 10 years at 7%. Even if you are not adding to your stake, it should keep on growing. What does happen is that any additional savings becomes secondary. Even if you save $20,000 per year, the growth on $1 million or 2, etc. is so much greater than any savings most of us can do. The key is starting the money pile and feeding it regularly so that it eventually takes on a life of its own.

 

[runchman]

There is an expression that goes something like this:
your first million is difficult but all your second million takes is time.

I heard it as "The first million is hard, the second million is inevitable"

- John (waiting to hit the first one still!)

 

[unclemick]

That first mil is a really really pesky number - over and under three times:

1. late 90's 2. coming out of the post 2000 dip and 3. recovering from Katrina expenses/moving inland.

Let's hope the third times a charm.

heh heh heh - what was it J.P. Morgan said about the market - "It will fluctuate"!

 

[Slarty]

I can relate to this situation since my DW is still in her 30's and we have a NW of $1.4 M. I'm in my early 40's. Our NW is on a rocket ship at the moment, but that's because we are in high pressure high responsibility jobs at mega-corps and we're saving 62% of our income right now. We now pay more in taxes than what one of our salaries was 5 years ago, which feels almost disorienting at times. 8)

My hope was that once I hit $1M I would not be as stressed at work when dealing with the ego/political maniacs that many of my peers are. The work itself isn't a stressor for me. So, now we are in the mode of discussing whether we should ER or take easier jobs, or maybe do part time consulting. The idea would be to take less stressful jobs that are part time in order to make enough money to live off of while letting our current stash grow for the next 10 years. So, savings from income would go to zero, but we'd have less stress and more time. Or, should we just stick it out in our current jobs for a few more years and build the stash up faster? Or, should we start our own company so we can work at what we want at our own pace without having to make huge profits? Maybe another option is to stay in our current roles, but try changing companies a couple more times to see if we can find a better corporate culture. Another option is for my DW to still pursue her career a few more years and then I go off to "explore" to find something more interesting for us to do where we can make enough to maintain our current lifestyle.

We're fortunate to have these options and we've worked hard and sacrificed for them so this is an important decision for us. Am I all over the map on this or what!? This site is helping us work through it all so thanks for everybody for that.

 

[firewhen]

My hope was that once I hit $1M I would not be as stressed at work when dealing with the ego/political maniacs that many of my peers are. The work itself isn't a stressor for me. So, now we are in the mode of discussing whether we should ER or take easier jobs, or maybe do part time consulting. The idea would be to take less stressful jobs that are part time in order to make enough money to live off of while letting our current stash grow for the next 10 years. So, savings from income would go to zero, but we'd have less stress and more time. Or, should we just stick it out in our current jobs for a few more years and build the stash up faster?

I can relate to most of the above. I do know that however much I stress about work, it is less than it might otherwise be because I have FI behind me. I still stress about it, but even as I am writing this I know that I have a safety net under me. It is like the guy in the circus--flying on a trapeze is stressful but less so if there is a net under you.

I have rejected the idea of part-time work because I figure if I am working it might as well be full-time to maximize my earnings and minimize the time I need to do it. The one thing I do not know, and there have been threads about it, is when will I be ready, and emotionally able, to pull the trigger.

 

[SteveR]

I can relate to most of the above. I do know that however much I stress about work, it is less than it might otherwise be because I have FI behind me. I still stress about it, but even as I am writing this I know that I have a safety net under me. It is like the guy in the circus--flying on a trapeze is stressful but less so if there is a net under you...

It is a nice feeling!

Be careful though. FI can be a moving scale. If you reach it using conservative expenses estimates and liberal market returns it can lul you into a false sense of having it made. If you ER too early you might end up having to work to supplement you income down the road if reality does not agree with your calculations. One way around this is by "feathering the nest" a bit to compensate for calculation errors and a desire to live a little bit higher on the expense ladder. As in all things, it all depends on your personal wants, needs, desires and abilities.

FI is a wonderful place to be...it sure gives one a different outlook on life when the BS bucket fills up at work. Knowing you can print out that resignation or retirement letter without loss of a thing except the BS is priceless.