Reached the (fake) two comma milestone

[dvalley]

I just checked the balances today and I've quietly reached the two comma milestone However, I'm designating it as fake because it includes equity (not value) in the primary residence

Probably not worth posting about it but since I can't tell anyone in real life a little virtual gloating is in order

 

[NW-Bound]

It's OK. With RE equity included, it's net worth and not investable assets. It's not fake.

Now, if you go out to celebrate, will the restaurant bill cause you to lose that 7th digit?

I hope you have a better margin than that, because the market can knock off tens of thousand off your stash in a single day easily.

 

[MichaelB]

Probably not worth posting about it but since I can't tell anyone in real life a little virtual gloating is in order

It’s a big achievement and worth celebrating, especially amongst forum friends who understand and appreciate what it takes to get there.

 

[CRLLS]

Keeping track of both "net worth" and investments that can be/are being used for income is a good thing. Don't ever think that the NW 2 comma club is a fake number. It is real, and your milestone achievement should make you feel good. So, "CONGRATULATIONS!"

I too, have nobody but my wife to celebrate such milestones with. If the others only knew!

 

[Red Badger]

Congrats (not fake). Others here might accuse you of fudging (or worse). The brick (or wood, stucco, etc) pile might not be part of your portfolio, but it's fair to consider it part of your net worth. In our case, it (the house) is earmarked, if needed, for LTC payment for DW. I have an alternate plan for me that precludes any LTC costs.

In either case, great news onthe 2 comma milestone!

 

[dvalley]

Now, if you go out to celebrate, will the restaurant bill cause you to lose that 7th digit?

Ha! Good point, I'd better celebrate at TacoBell just to be safe

It’s a big achievement and worth celebrating, especially amongst forum friends who understand and appreciate what it takes to get there.

Keeping track of both "net worth" and investments that can be/are being used for income is a good thing. Don't ever think that the NW 2 comma club is a fake number. It is real, and your milestone achievement should make you feel good. So, "CONGRATULATIONS!"

I too, have nobody but my wife to celebrate such milestones with. If the others only knew!

Congrats (not fake). Others here might accuse you of fudging (or worse). The brick (or wood, stucco, etc) pile might not be part of your portfolio, but it's fair to consider it part of your net worth. In our case, it (the house) is earmarked, if needed, for LTC payment for DW. I have an alternate plan for me that precludes any LTC costs.

In either case, great news onthe 2 comma milestone!

Thanks everyone! This forum has played a big role in helping me get to this point. When I joined the forum my total NW was about $350k. The plan for the residence is to sell it and use the equity to pay cash for a house in a LCOLA.
The equity (on edit) stands at $370k right now. Of course, it's all just paper money- equity and equties both so any market fluctuation can affect the current NW in either direction but it was kinda cool to see the two commas for the total NW for the first time.

 

[ceciledian]

We have to add our separate 401ks together to get to 2 commas. I hope that counts!

 

[Dtail]

Congrats on your achievement. The 2nd mil gets easier. lol

 

[SecondCor521]

Congratulations!

It's important to distinguish between net worth and FIRE stash for obvious reasons, but that home equity is still valuable from a FIRE standpoint, because eventually, with a paid-off house, you can spend less money to get the same standard of living because you don't have to come up with the cash flow for the mortgage payment. That lower cash flow need can also unlock some nice tax benefits, such as ACA tax credits, child tax credits (which had stricter income limitations before this year), etc.

 

[bw5972]

We have to add our separate 401ks together to get to 2 commas. I hope that counts!

If you are roommates then no. If married then yes.

 

[Offgrid Organic Farmer]

Congratulations.

I served 20-years on Active Duty in the US Navy, right before they forced me onto pension. I got to playing with the numbers, ... for a 401[k] to give me a monthly income equal to my pension, how much would I need to have in that 401[k]?

At that time, I also owned Rental Real Estate [a Triplex] that gave us a reasonable monthly income. We knew the assessed value of that Triplex. But that would have been the same if it was a Single-Family residence with zero monthly income.

So I went back to the idea of sizing a 401[k] that would provide the same monthly cash flow.

The way I looked at it, I was also in the 'two comma' crowd when I retired from the Navy.

That was back in 2001. We have since sold that Triplex property and we bought a farm where we have been living. 2 years ago we bought a commercial building, with two store front businesses as tenants, and we have been remodeling the upstairs. Next month we will have one additional retail space [the lease ink is drying], and eleven residential apartments. No debt and the monthly income will be a great deal more than my Navy pension.

I wish you luck

 

[Lawrencewendall]

Congrats! Isn’t the feeling awesome?

 

[Choices]

Congrats! Just don’t let on to any in- laws.

 

[cooch96]

Bravo!

Your post inspired me to check Zillow. Looks like you got me beat by months. If I include RE equity and subtract DW’s car loan, I’m only at $0.92MM. Still, that’s a little closer than I thought I’d be.

 

[RobbieB]

Oh yeah, nothing fake about home equity. If you don't move around a lot a home just rocks.

Residential real estate here rents for ~ $1/sq-ft/month. My house would rent for $1400/mo or about 17 grand a year. It's worth $400,000 and at 1%/yr maintenance would be 4 grand a year.

That's 13 grand of dough to blow -

 

[Texas Proud]

Let's hope that if it goes back below it comes back quickly...


I went over barely years ago and then the crash... was WAY down for years...



Do celebrate as it is an achievement...

 

[Dtail]

Let's hope that if it goes back below it comes back quickly...


I went over barely years ago and then the crash... was WAY down for years...



Do celebrate as it is an achievement...

Unless the celebration takes him under...

 

[street]

Very nice.

 

[brucethebroker]

It's OK. With RE equity included, it's net worth and not investable assets. It's not fake.

I agree. Net worth means nothing until it generates cash at your FIRE. Will you be cashing in your home equity at that time? If not, then the 2 commas are nice, and you should be proud of them. But invest able assets & the income they generate are what makes the world go round when you no longer want to work, IMO.

 

[dvalley]

We have to add our separate 401ks together to get to 2 commas. I hope that counts!

If you are roommates then no. If married then yes.

Agreed, it counts if you see yourselves as partners in life. Congrats!

Congratulations!

It's important to distinguish between net worth and FIRE stash for obvious reasons, but that home equity is still valuable from a FIRE standpoint, because eventually, with a paid-off house, you can spend less money to get the same standard of living because you don't have to come up with the cash flow for the mortgage payment. That lower cash flow need can also unlock some nice tax benefits, such as ACA tax credits, child tax credits (which had stricter income limitations before this year), etc.

Great point, thank you

Congrats on your achievement. The 2nd mil gets easier. lol

Thanks. With my luck who knows but I sure hope so!

Congratulations.

I served 20-years on Active Duty in the US Navy, right before they forced me onto pension. I got to playing with the numbers, ... for a 401[k] to give me a monthly income equal to my pension, how much would I need to have in that 401[k]?

At that time, I also owned Rental Real Estate [a Triplex] that gave us a reasonable monthly income. We knew the assessed value of that Triplex. But that would have been the same if it was a Single-Family residence with zero monthly income.

So I went back to the idea of sizing a 401[k] that would provide the same monthly cash flow.

The way I looked at it, I was also in the 'two comma' crowd when I retired from the Navy.

That was back in 2001. We have since sold that Triplex property and we bought a farm where we have been living. 2 years ago we bought a commercial building, with two store front businesses as tenants, and we have been remodeling the upstairs. Next month we will have one additional retail space [the lease ink is drying], and eleven residential apartments. No debt and the monthly income will be a great deal more than my Navy pension.

I wish you luck

Thanks and what a great success story!

Congrats! Isn’t the feeling awesome?

Thanks. Honestly it hasn't really hit me I guess but it sure is nice to log into Personal Capital or Mint and see those two commas

Congrats! Just don’t let on to any in- laws.

Ha! no in-laws anymore...if it wasn't for the divorce my 2 commas would be the real 2 commas by now

Bravo!

Your post inspired me to check Zillow. Looks like you got me beat by months. If I include RE equity and subtract DW’s car loan, I’m only at $0.92MM. Still, that’s a little closer than I thought I’d be.

Yeah, the prop values are back to being pretty high here...kinda scary but hey the ups and downs are all part of the journey and we should celebrate little milestones in life.

Oh yeah, nothing fake about home equity. If you don't move around a lot a home just rocks.

Residential real estate here rents for ~ $1/sq-ft/month. My house would rent for $1400/mo or about 17 grand a year. It's worth $400,000 and at 1%/yr maintenance would be 4 grand a year.

That's 13 grand of dough to blow -

Haha! Thanks Robbie. Yeah Central CA is getting up there in value too.

Let's hope that if it goes back below it comes back quickly...

I went over barely years ago and then the crash... was WAY down for years...

Do celebrate as it is an achievement...

Thanks...and yeah I totally agree.

Unless the celebration takes him under...

Haha, the celebration only happened in my head and here. DD's too young to tell and no one else I want to let in on it. A bit sad but...meh

Very nice.

Thanks!

I agree. Net worth means nothing until it generates cash at your FIRE. Will you be cashing in your home equity at that time? If not, then the 2 commas are nice, and you should be proud of them. But invest able assets & the income they generate are what makes the world go round when you no longer want to work, IMO.

I completely agree, hence my cautionary 'fake' title to this
I'll sell the house in FIRE and use the equity only to buy a property (hopefully with some acerage) in a LCOLA. However, the way I see it is, hey no one else bought the house for me, many people around here would love to own a place but can't afford it. I pay a good chunk of my paycheck every month to keep it so I'm going to have a small celebration for the NW achievement in life. There was a time when my NW was $0

 

[Lawrencewendall]

Does anyone else do this?

Add all guaranteed sources of income /4*100

To me, it’s equivalent of a portio. Any downfall to this?

 

[Offgrid Organic Farmer]

I agree. Net worth means nothing until it generates cash at your FIRE. Will you be cashing in your home equity at that time? If not, then the 2 commas are nice, and you should be proud of them. But investable assets & the income they generate are what makes the world go round when you no longer want to work, IMO.

I have been at Duty Stations for a little as 3 years at a time, that did not stop me from owning Real Estate. Every Real Estate that I have owned, provided a positive monthly cash flow.

I would not wait for retirement for that.

 

[SecondCor521]

Does anyone else do this?

Add all guaranteed sources of income /4*100

To me, it’s equivalent of a portio. Any downfall to this?

I do something similar. I calculate my gross WR based on my FIRE stash. I then calculate my outside sources of income (I call it NPI, or non-portfolio income) and express it as a WR. I then subtract the second from the first and look at my net WR.

So for an arbitrary example, if I had a $1M portfolio and was spending $40K, but had NPI of $15K, then I would consider my gross WR to be 4% but my net WR to be 2.5%. I consider the latter to be more my "real" WR.

As far as downfalls, I think one has to evaluate how "guaranteed" those sources of income are. If you have a military or government pension, that's pretty guaranteed. If you have a side gig that relies on a quirk in the economy, maybe that isn't as guaranteed. There are even regular debates about how guaranteed Social Security is.

One thing that people regularly do is discount those outside sources based on how reliable they think they are. For example, I personally include Social Security, but I give it a pretty hefty haircut to try to account for the risk that it will be reduced before I reach the age where I can collect my benefit.

Obviously nothing is completely guaranteed in life, so you rolls your dice and takes your chances. But in general I think those income sources are worth evaluating as one goes along in life. Currently my WR is 3.37% and my NPI is 1.17%, so for me it's about one third of my spending and therefore significant to account for.

I account for it, by the way, not as a way of relying on it, but making my future calculations more reasonable. When I retired I assumed NPI of 0%, and slowly realized that my actual situation was trending better than planned. When I realized why, I was able to adjust my plan and therefore make what I feel are better decisions based on a more accurate plan.

As a real life example, I will need to sell a portion of my taxable account to fund the rest of my 2018 expenses. I only want to sell the minimum required to fund my life through January 2019 so as to minimize capital gains tax and maximize the amount I can Roth convert and still maintain my target tax situation. If I sell based on my gross WR%, I will likely sell too much. I should really sell based on my net WR% and that should be more accurate. If I have that hypothetical $1M portfolio, that would mean a sale on gross WR% of $33.7K/2 or $16.8K instead of $22K/2 or $11K.

 

[copyright1997reloaded]

I just checked the balances today and I've quietly reached the two comma milestone However, I'm designating it as fake because it includes equity (not value) in the primary residence

Probably not worth posting about it but since I can't tell anyone in real life a little virtual gloating is in order

Congratulations!

Not to make you nervous about the market, but a little history: I hit the two comma milestone in January 2000. The market peaked March 2000, two months later. Fortunately I was gainfully employed so I was able to continue investing.

I hit the 2X mark August 2007. The market peaked October 2007, two months later.

I won't tell you when/if I hit the 3X mark.

Just saying.

 

[Dtail]

I do something similar. I calculate my gross WR based on my FIRE stash. I then calculate my outside sources of income (I call it NPI, or non-portfolio income) and express it as a WR. I then subtract the second from the first and look at my net WR.

So for an arbitrary example, if I had a $1M portfolio and was spending $40K, but had NPI of $15K, then I would consider my gross WR to be 4% but my net WR to be 2.5%. I consider the latter to be more my "real" WR.

As far as downfalls, I think one has to evaluate how "guaranteed" those sources of income are. If you have a military or government pension, that's pretty guaranteed. If you have a side gig that relies on a quirk in the economy, maybe that isn't as guaranteed. There are even regular debates about how guaranteed Social Security is.

One thing that people regularly do is discount those outside sources based on how reliable they think they are. For example, I personally include Social Security, but I give it a pretty hefty haircut to try to account for the risk that it will be reduced before I reach the age where I can collect my benefit.

Obviously nothing is completely guaranteed in life, so you rolls your dice and takes your chances. But in general I think those income sources are worth evaluating as one goes along in life. Currently my WR is 3.37% and my NPI is 1.17%, so for me it's about one third of my spending and therefore significant to account for.

I account for it, by the way, not as a way of relying on it, but making my future calculations more reasonable. When I retired I assumed NPI of 0%, and slowly realized that my actual situation was trending better than planned. When I realized why, I was able to adjust my plan and therefore make what I feel are better decisions based on a more accurate plan.

As a real life example, I will need to sell a portion of my taxable account to fund the rest of my 2018 expenses. I only want to sell the minimum required to fund my life through January 2019 so as to minimize capital gains tax and maximize the amount I can Roth convert and still maintain my target tax situation. If I sell based on my gross WR%, I will likely sell too much. I should really sell based on my net WR% and that should be more accurate. If I have that hypothetical $1M portfolio, that would mean a sale on gross WR% of $33.7K/2 or $16.8K instead of $22K/2 or $11K.

I would think that many use their calculated net WR% with possibly some differences as to using discounts.
I know for us we would not be able to retire just using a gross WR. I believe the general WR discussions across boards uses a net WR concept.
For us, how much % of our non discretionary expenses are covered by non portfolio income is also a consideration.