I’m in a cash crunch, and it doesn’t feel good. After buying my house in 2023 and living paycheck to paycheck for six months, I promised myself I would never return to this state. Yet here I am. Part of it is just bad luck, but part of it comes down to poor planning on my end. I never expected a $20,000 capital call to land right in the middle of the winter holidays.
During my latest bout of financial hopelessnes, that unwelcome feeling where no matter how hard you try, you just can’t seem to get ahead, I had a realization. Even though my investment portfolio is up with the S&P 500 this year, I still feel defeated by a string of surprise expenses, especially with my car repairs piling up and no clear end in sight.
Theoretically, I should feel fine. If the stock market hands you big wins, those gains should outweigh a few thousand dollars in unexpected bills. But that’s not how the psychology of money works. That's not how building extraordinary wealth works either.
Cash flow and investment gains are two completely different financial animals with different uses and different emotional effects.
Let me explain, especially if you want to FIRE.
Cash Flow Is For The Present, Investment Gains Are For The Future
Imagine you’ve got a $1 million portfolio that’s up 15%, or $150,000. Great year. Pay up for a slice of cheddar cheese with your next burger and celebrate. You barely lifted a finger and your net worth meaningfully increased.
Now let’s say your car coughs up a $2,000 repair, and your house throws in a $8,000 plumbing problem for good measure. In theory, you could sell $13,000 of stock to cover the $10,000 in after-tax expenses. Easy.
But emotionally? It feels terrible.
- You’re robbing your future self of compounding. And we all know stealing is bad.
- You’re triggering capital gains taxes you didn’t need to pay if you had enough cash flow.
- You’re violating the purpose of those investments – long-term financial security.
Cash flow is meant to handle the chaos of everyday life. Investment gains are meant to build freedom over decades, not put out today’s fires.
This is why you can be up six figures on paper and still feel financially stressed from a few thousand dollars of unexpected bills. This is one of the big negatives of early retirement nobody talks about.
Where We Get Into Financial Trouble: Co-Mingling Funds
Some people struggle to build more wealth because they use investment accounts as giant catch-all slush funds. There’s no separation of purpose.
If your retirement money becomes your emergency fund, college fund, car repair fund, and vacation fund, you guarantee long-term underperformance. Once you start “borrowing from your future,” it becomes a habit.
This is why a mortgage is so effective. It forces you to save even though you can't resist eating after 8 p.m. You pay it or you lose the house. No mental wiggle room.
The idea of “saving and investing the difference,” over decades as a renter is comically hard. There is always something to spend money on, other than your investments. As a result, housing insecurity sometimes follows.
To protect yourself, build virtual barriers between accounts.
Creating Barriers Between Present Money and Future Money
The more you can compartmentalize your money, the better.
1. Have a dedicated cash-flow bank. This is where your paycheck lands, rent comes in, and bills get paid. Its purpose is liquidity, not return. Sure, your banker would love you to open an investment account and multiple other financial products. But try to keep it simple with your cash-flow bank.
2. Keep investments at a different institution. The more steps it takes to transfer money, the less likely you’ll raid your future. Personally, I keep all but one of my investment portfolios with Fidelity, which is separate from my cash-flow bank, Citibank. I've got my rollover IRA with Citibank, but I can't withdraw the money without penalty, so it doesn't matter.
3. Use illiquid investments strategically. Private funds, venture capital, and private real estate deals lock your money up for 7-10 years. You can’t panic-sell or dip into them emotionally. The forced illiquidity is a feature, not a bug. The capital calls make you dollar-cost average over a 3-5-year period, even during downturns, and invest for up to a decade. The longer you can stay invested, usually, the better.
Every dollar meant for the future should stay as far away from your cash-flow account as possible. This way, the money can compound without interruption for longer.
A Middle Ground: Earmarking a Slice of Gains
If you must link the two worlds due to cash flow problems, do it intentionally.
You could allocate 5–10% of annual investment gains for life’s inevitable surprises.
Example:
Portfolio: $1,000,000
Gain: $150,000 for the year
Allocation for surprise expenses: $7,500 – $15,000 (5% – 10% of gains)
You still retain $135,000 – $142,500 in long-term gains and you avoid beating yourself up over every broken appliance or medical bill.
If you don’t end up using the entire “surprise” fund? Reinvest it, of course.
Tough To Go From A Saver To A Spender
For over 25 years, I’ve kept cash flow and investments separate. It has worked wonders for building wealth. So having to even think about selling risk assets to pay for annoying repairs feels like breaking a sacred rule.
Selling Treasuries before maturity to pay bills and buy stocks was already difficult enough. Selling stocks that might 3-5x in five years to pay surprise expenses feels awful.
Imagine selling $25,000 of a future winner just to pay off a car loan that’s already annoying you. Then imagine realizing you missed out on another $100,000 in gains because of it. This is a real possibility when investing in private AI companies today.
Then again, these tech stocks could just as easily nosedive. And if they do, you might actually feel relieved that you took some profits off the table to cover life’s necessary expenses while you had the chance. But given stocks go up ~70% of the time in any given year, your opportunity cost of not staying invested will likely continue to grow.
FIRE Is Tough On Cash Flow
If you’re FIRE, you no longer have the comfort of a steady paycheck. Sure, you might have a couple of side hustles, but consistent active income is gone. If you've given the gift of FIRE to your spouse or partner, then you really don't have anybody to depend on.
After buying a new house a couple years ago, my cash flow took a big hit. This was a self-inflicted wound due to desire, which is the cause of all suffering. I’ve been grinding my way back with solid progress. However, I’m still about a year out, assuming the stock and real estate markets cooperate.
If you want to feel like a poor millionaire, try living with razor-thin or even negative monthly cash flow. It doesn’t matter what your net worth is. Tight cash flow makes everything feel stressful.
If you want to feel like a rich millionaire, you need two things:
- After-tax cash flow that comfortably covers at least 120% of your monthly expenses, and
- A minimum of 12 months of living expenses that you can tap without breaking a sweat.
That’s the difference between living wealthy and simply having a high net worth on paper.
Give Yourself Some Grace After 20 Years Of Discipline
If you’re still in the first 20 years of your financial independence journey, keep your cash flow and investment gains strictly separate. Let your winners compound untouched.
But if you’ve been disciplined for decades, it’s OK to occasionally tap a small, predefined slice of your investment gains to smooth out life’s bumps. After all, the whole point of saving and investing for so long is to not worry about money, rather than feel financially hopeless when something goes wrong.
For most people, the optimal wealth-building strategy is simple: Use cash flow for the present. Use investment gains for the future. And don’t let one ruin the vibe of the other.
Over the past year, I’ve had to accept that my cash flow simply isn’t what it used to be. As expenses rise with inflation and income tapers off, the only realistic way to handle surprise costs and still take care of my family is to tap more and more into investment gains. And frankly, that’s exactly how it’s supposed to work once you’ve retired from a day job.
It’s just tough to rewire the mindset after a lifetime of relentlessly saving and investing for the future. But I'm trying my best to change.
Readers, do you separate how you use cash flow versus investment gains? Do you worry that tapping investment gains for too many different expenses could weaken your financial discipline over time? If you're planning to FIRE, are you prepared for the uncomfortable reality of feeling cash-flow-crunched more often than you'd like? And when the time comes, do you think you'll actually be able to sell risk assets to fund your lifestyle in retirement?
Get Your Year-End Financial Checkup
One tool I’ve leaned on since leaving my day job in 2012 is Empower’s free financial dashboard. It remains a core part of my routine for tracking net worth, investment performance, and cash flow.
My favorite feature is the portfolio fee analyzer. Years ago it exposed that I was paying about $1,200 a year in hidden investment fees – money that’s now compounding for my future instead of someone else’s.
If you haven’t reviewed your investments in the last 6–12 months, now’s the perfect time. You can run a DIY checkup or get a complimentary financial review through Empower. Either way, you’ll likely uncover useful insights about your allocation, risk exposure, and investing habits that can lead to stronger long-term results.
Stay proactive. A little optimization today can create far greater financial freedom tomorrow.
Empower is a long-time affiliate partner of Financial Samurai. I've used their free tools since 2012 to help track my finances. Click here to learn more.
Not sure if I’m missing something – but surely there should be an emergency fund to cover situations like this to avoid having cash flow issues?
From what I’ve seen from other FIRE forums, the typical numbers being suggested are between 1-2 years worth of expenses in near cash so that you avoid having to sell during stockmarket dips. That said, you would still need to replenish the emergency fund which will require selling some investment gains if you hold stocks or other forms of income.
Yes, the $1,900 car repair expense was covered through cash flow. But to buy a $50,000 – $115,000 car cannot be covered through cash flow. It has to be covered through selling Treasury bonds, which is considered part of my emergency fund. But even selling Treasury bonds yielding 4%+ risk-free feels bad to pay for a depreciating asset, or even the $1,900 in car repairs if I didn’t have the cash flow.
That’s true – but that’s the trade-off for not having to work for an income. Another option is to increase passive income sources; but that also takes time & effort & capital. I think the ear-marking a set % as you suggest makes sense; that way you’re ensuring that your emergency funds are replenished in a consistent manner without having to feel too bad about depleting your original investment portfolio.
Phsychologically speaking, it would be amazing to have interest/dividends/rental incone coming in at 5% of your nest egg every year to meet your expense needs during retirement. But unless you have an enormous nest egg this would require a sub-optimal asset allocation to achieve that kind of yield (you need the capital appreciation of stocks to offset inflation or else the real value of your nest egg and 5% is depleted over time). This means it’s unrealistic for most to meet their expense needs with interest/dividends/rental income alone. That income is beneficial because it offsets some of the capital you need to sell, but selling capital is necessary. I have not reached my retirement number yet but I’ve thought about it this way: At the beginning of every year I would rebalance my nest egg among dividend-yielding investments and various stock index funds. As part of this annual rebalancing I would set aside my 4 to 5 percent cash for expenses in the upcoming year. In theory that should work right?
I just retired at age 59, so “officially FIRE”, but not as early as many. Our goal (my wife and I) is to live entirely from interest and dividends for at least the next 5 years, continue to invest and shift funds from one bucket to a more advantageous bucket.
For instance, we own a rental property that generates about $25K per year in free cash flow and clears $20K after taxes, insurance, HOA fees. Now that we’re retired, we’ll be hiring ourselves for the 1st time in 20 years (for this LLC) and drawing a “guaranteed” payment of $17,200 to fund our Roth IRAs for the next few years. We don’t have any other W2 income.
We decided to move to a lower cost of living, lower tax rate state. We’re closing on a house in Wyoming the end of December and will be leaving high tax Washington state. Shifting funds from our cash and taxable funds to purchase an appreciating asset and a new home is a no brainer. It’s not like we’re headed to Vegas to play roulette. It’s merely reclassifying one type of asset to another, and at close the same ROI with less risk.
Once Social Security kicks in, we expect to make close to an additional $60 – $65K in inflation adjusted dollars. That would bring our total annual income to about $185 – $200k just from SS and dividends & interest.
Ideally we’ll be able to leave principal untouched and continue to invest indefinitely to the point that our holdings increasingly generate free cashflow.
Having achieved FIRE in March of 2025 at the age of 45, I pushed working through the weird COVID times and burnout an additional 5 years past the age of 40 which I set for myself for stepping away from having a W2 job. I’ve been a terrible manager of my finances in terms of wealth building through 401(k) or investments and rather built CD ladders and moved onto treasuries when I realized the tax benefit (once again far too late). While I blame the intensity of my former job for not having the bandwidth to invest and being scared of losing my earnings in a scenario as we saw in the financial crisis, I fled to safety with the goal of creating passive income based on a lifestyle or annual budget that once achieved could basically be a foundation of safe funds earning interest thar can meet my family’s needs. My strategy is to keep those funds totally untouched and adjust and keep track of our annual budget and not take on additional expenses until they can be met with passive gains OR now at the beginning stage of my own business, should it succeed and as I earn I will become more risk tolerant buying investments and maybe a bigger home.
What strikes me is that we have friends who live in wonderful homes who say they can’t go out to eat, or take a vacation or etc., since all of their earnings go into the cost of upkeep, tax and HOA. For us we are OK to live modestly, have the freedom of our minds to pursue our own direction and ability to spend on experiences.
But that also meant sending our daughter to public school instead of private school, are we robbing our child of a brighter future? I don’t know that. But as we are comfortable having the treasuries provide the annual budget the balance there I won’t touch, now that I can start to take on risk investments, depending how that goes, that then becomes the $ we can consider to open up new spending channels for maybe a new apartment, educational options, etc., so I found the safety of the treasury backstop (in fire retirement) to be healthy for my sense of security.
Once again I was a terrible investor and left a lot of $ on the table not participating in the market over the past 10 years. But with at least a secure FIRE achieved I met the goal and can try to learn from my perceived mistakes and work on my risk-adverse tolerance, maybe it’s like a muscle that needs to be stretched. Continuing to be educated through this community at FS and everyone’s individual circumstances and commentary, let alone Sam’s passionate engagement.
Thanks for sharing! And even though you’re a self proclaimed to be a terrible investor, you still achieved FIRE at 45, so that’s great! Did you take that leap of faith in March 2025 and lever job? If so, what are your days filled with now?
Your friends actually kind of sound a little bit like me. We have a nice house. But cash flow was very tight in the first six months, and it’s tight again right now. So once again, I’ve got to figure out a way to build back that financial safety net. But it’s getting harder with less energy and AI disrupting publishing.
But the struggle is also rewarding and fun sometimes!
Yes, I took the leap in March, and left my job of 20 years. I had a great salary etc., but looking at time with my child and the focus of showing up for my family, to experience time with my parents and siblings and friends not distracted with stress was something more valuable than numbers in a bank account.
Something I learned was that in business relationships stick, the good connections you’ve made tend to wish to keep in touch and from there you can sometimes chart a new chapter. So with my sense of time and space, I started my own business and its a new challenge but enjoyable as its an adventure without a boss or the pressure of colleagues who may undermine you or just that haunting sense of responsibility that is baked into the American work ethic ethos.
Another good aspect of living within the treasury means as our annual budget as in business I am not seen as a hungry person in terms of deal making or etc., the clients feel this, that as I’m not overly agressive as our means are covered, the business I am able to secure is done so in a way where the client can feel no pressure at all. It’s kind of a super power in business to present this kind of attitude so maybe in this next chapter I can find some new success without the very intense grind.
Outside of the new business model I’m working on, I’m able to make art, show up as a dad, visit art galleries and museums, participate in therapy and seek out experiences that I sort of put on a to do shelf, which could mean just hanging out at the beach for a day or a hike. It’s really weird, sitting somewhere, and experiencing this place as there is no where else to be, you have to sit with yourself and find comfort not in movement but stillness.
I related to that sense of struggle Sam as I was grinding until the very last day of my w-2 and I have the sense of urgency as lived experience for all those decades of work, I love your pluck, as oftentimes its that sense of positivity to meet and exceed the challenge that enables us to meet it.
congratulations! just, please, dont be one of those guys that says they achieved FIRE just to say they have just opened a business
I appreciate you sharing this – we have a slightly related cash flow tight/even negative situation after a move, and it’s just a weight. Selling even a few shares of nicely appreciated portfolio to make ends meet temporarily makes me wonder how to manage the feeling in retirement. we won’t have an income style portfolio like you prefer, don’t want to manage rentals etc – just equities. the emotional sensation of selling x# shares, even if the “math” declares that the remaining shares will be similar or likely higher value year after year (on average) even accounting for the shares sold, with an appropriate withdrawal %. emotionally, i have the feeling i’m going to transition to counting shares instead of $ and feeling stress when that number goes consistently downward (no reasonable cash inflow will exist to purchase more shares). any retiree/early retiree able to share some thoughts on how they became comfortable with the withdrawal process? any good article links? when and how do you begin to emotionally trust that retirement math…
It’ll be tough to shift to decumulation mode for sure.
https://www.financialsamurai.com/how-to-decumulate-wealth/
You may enjoy this too: https://www.financialsamurai.com/permission-to-live-it-up-in-retirement-granted-the-new-5-swr/
The good thing also is that the tax treatment of retirement dollars is more favorable than working folks.
While I agree with some of your arguments, you seem to imply that selling investments to cover small emergencies will always hurt compounding. That’s true in a narrow sense but ignores practical reality: if you don’t hold any reserve, you will have to sell sometimes. Being rigid about never selling is idealistic, not practical for most people.
You downplay the fact that proper planning includes expected expense buffers and forecasting your cash needs, not just categorically separating everything. I agree that separate accounts can help discipline. But if your “cash flow bank” is earning near zero while inflation runs hot, just having it separate doesn’t mean it’s optimally managed as part of an overall plan. Safe liquidity and returns need to be balanced. In other words, you seem to over-romanticize strict separation and illiquidity as a virtue, instead of treating cash reserves as a managed part of a broader plan. In essence, building a sensible emergency fund that isn’t part of your long-term investments is a prudent thing to do, just as planning for recurring and surprise expenses as part of your cash-flow forecast. Don’t treat every investment gain like sacred, but don’t treat every emergency as justification to deplete your future either.
Thanks for your thoughts. What type of liquidity system do you have to pay for expenses, assuming you are also FIRE?
Do you regret buying your recent home a few years ago? It’s come up several times in your posts with a negative sentiment. But if you could go back, would you still buy the home?
Not yet. Here’s a one year recap. https://www.financialsamurai.com/reflecting-on-a-year-after-purchasing-a-house-i-didnt-need/
I kind of did a follow up after the second year with my post on buying a home with a big lot or nice views.
https://www.financialsamurai.com/big-lot-or-amazing-views-which-home-offers-more-value/
I feel a great amount of satisfaction to be able to purchase a realistic dream home to provide for my family. At the end of the day, that’s my number one purpose, and to see my kids run around in the front or backyards safely due to an enclosed property feels priceless.
The best time to own the nicest home you can afford is when you have the most heartbeats at home. After the kids go away to college or whatever, it’s not like you’ll want to buy a bigger nicer home. Instead, most people just keep what they have or downsize.
I’m just trying to keep things real and balanced. I think providing a more realistic picture is more helpful to people considering, versus just saying how awesome everything is.
What is your homeownership situation? And do you have plans to buy a nicer home?
Thanks for the reply, Sam. I have also been considering buying another home but the numbers just don’t make sense right now.
I bought a house at 27 in 2021 with my girlfriend of 6 years. We have been house hacking so our mortgage is covered. But now we are engaged to get married next year and we want more privacy. A couple options we considered are:
– Stay in our home but no longer house hack. It’s a 4 bed 2.5 bath, which just feels too big for us two and two dogs (with no plans/desire for children right now). We also want to experience a new city/area.
– Rent our house and buy a smaller home (would feel too cash restricted similar to how you’ve posted after buying your recent home)
– Rent our house and rent in another city (seems most feasible at this point, especially if we just want to experience a new city/area).
There’s a few other considerations, but I guess we will see how we’re feeling after the wedding. I’ll also add, we would like to FIRE by age 40-42.
Rightsizing feels great if you have the opportunity to sell at a profit. We write sized our home in 2017, buying a 40% cheaper home that was about 20% smaller and it felt great.
I can relate. Grew up very lower middle class. Plenty of poverty in my background. By nature, I am a long-term deferred gratification personality. I will say that during challenging times when things seize up and irrational things happen , there’s nothing like cash. I view it like insurance. You hope you never have to use it, but it’s incredibly valuable when the unexpected happens. Those events can last many years. Staying power is critical. At our age, it’s not about optimizing, but rather being the last man standing. You appear to be a personality that wants to take care of family members if they are truly in need. Performing admirably is probably in your DNA. This makes the need for cash even more important ,just my two cents.
It’s definitely in my DNA to take care of my family. It is my #1 priority. But I’m assuming it’s in almost every parent’s DNA to provide as well, so my situation is nothing special.
I’m really going to work on my cash management next year. I must.
Articles like this are great because they speak directly to the financial anxieties many of us share, especially around spending down our accounts. It makes me wonder if most people might benefit psychologically, even if not mathematically, from putting a portion of their portfolio into a SPIA. In my own experience, no matter how much my net worth grows, the steady cash flow I receive each month (rental income and labor) does more to ease my financial stress than anything else. Weird stuff.
Weird stuff indeed!
****
A SPIA is a Single Premium Immediate Annuity.
Here is the simplest way to understand it:
Definition
A SPIA is an insurance product where you give an insurer a one time lump sum, and in return, they start paying you a guaranteed stream of income immediately—usually within 30 days to 12 months.
Why people use SPIAs
• Guaranteed income you cannot outlive (depending on the payout option).
• Simplicity: no ongoing decisions once purchased.
• Higher payout rates than most bonds or CDs because they include a mortality credit (you’re essentially pooling longevity risk with other policyholders).
• Protection from longevity risk: great for people worried about running out of money.
Key characteristics
• Immediate payouts (unlike deferred annuities).
• Fixed for life, though you can choose period certain or joint life options.
• Irrevocable: once purchased, you typically cannot get your lump sum back.
• Payments depend on:
• Age
• Gender
• Interest rate environment
• Payout option (life only, life with period certain, cash refund, joint life, etc.)
Example
You give an insurer $500,000 at age 65.
In return, they might pay you $33,000 per year for life (just an example).
If you live to 95, you come out ahead.
If you die at 70, the insurer wins—unless you chose a refund option.
When SPIAs make sense
• You want guaranteed, lifelong income.
• You don’t want to rely solely on markets.
• You are healthy and expect to live a long time.
• Rates are reasonably high (better payouts).
When they don’t make sense
• You need liquidity.
• You have health issues reducing life expectancy.
• You want to leave more assets to heirs (unless using a refund option).
• You expect high investment returns elsewhere.
I can’t scroll on this site any longer without full page videos popping up. Over and over. I love the content but it’s getting hard to see it.
That’s happening too when I read AppleNews. Yuck.
Not worth it to lock up money in investment vehicles that purport to “democratize” wealth building categories that have been unavailable to the masses. Look at the poor suckers that flushed down their $ with Yieldstreet now Willow Wealth.
I don’t have any investments or much experience with Yieldstreet, save for an interview years ago. But I do know investing carries risk, and I assume that not all of Yieldstreets investments were loss making. Feel free to clarify.
So far, I’ve had some decent luck with my private investments. Some have done well, like my Rippling investment in a venture capital fund, and my OpenAI and Databricks investments in Fundrise Venture (+40% YTD).
Some, like several private real estate investments in a fund, have done piss poorly or have gone to zero after the Fed started aggressively hiking rates in 2022. It’s a shame, as the fund was doing great up to then. That is why we diversify.
Asset allocate appropriately and know your risk tolerance and objectives. I know for a fact that if I didn’t invest in private investments, I would have sat on excess cash for maybe 15 years due to fear, and missed out on significant gains over cash, since.
I think it’s less about diversifying and allocation percentages vs avoiding outright fraud.
BlackRock, one of the world’s largest asset management firms, has reportedly lost over $500 million in a massive loan fraud allegedly orchestrated by an Indian-origin CEO, according to a detailed report by Bloomberg. The accused, Milind Mehere, CEO of YieldStreet’s subsidiary “BlackOcean,” is said to have masterminded a fraudulent scheme involving bogus shipping loans. These loans were presented as asset-backed and creditworthy, but investigations have revealed they were based on fictitious transactions and unverified collateral.
The scheme came to light when YieldStreet, which manages alternative investments, started facing increasing defaults on its shipping portfolio. BlackRock, an investor in one of YieldStreet’s funds, bore the brunt of the losses. The Bloomberg report calls it a “breathtaking fraud,” with fabricated deals, missing vessels, and fake documentation forming the basis of the alleged deception.
While Mehere has denied wrongdoing, regulators and legal authorities are closely examining the case, which highlights severe lapses in due diligence and risk management even among sophisticated institutional investors.
“They claimed they were going to democratize access to the types of deals only the rich had,” Williams said. “In reality, they created a high-risk trap for investors.”
Yikes! Seems like the truth will eventually come out then.
Hard to detect fraud a lot of the times, hence why investing in the S&P 500 is often the safer and better bet long term.
I understand this feeling well especially in terms of cash flow this time of year. I have to figure out my estimated taxes and come up with cash to pay property taxes as well. Even though I do my best to plan ahead and have cash reserved for these purposes, it’s an annoying and logistically tricky cash flow challenge. Sure I could sit on the cash I need all year, but I like to invest it so that it’s working for me up until I need to sell. But then yeah taxes come into play on the sale, etc so it’s a bit of a juggling act. At least I feel grateful that I’m comfortable enough to DIY my investments so I get to save on paying for an advisor in that regard.
With your portfolio and NW I would think you have 1-2 years of expenses (500k-1M?) in a MM or short term treasuries (still making 3-4%). A 20k capital call would be felt as nothing. Also you could take advantage of market selloff or RE crash.
You have arrived! You have built tremendous assets. Seems like you should be structuring your port for allowances. You put too much pressure on yourself. Not every dollar needs to be multiplying x10. It is OK to have 9 million in the market or locked in RE, and have 1 million set aside in low risk assets that are liquid. That 9M is still doing plenty of work for your future.
Sam – at your stage it is OK to relax and enjoy!
“A 20k capital call would be felt as nothing.” That would be the case if I had $20,000 in cash lying around. But I don’t. So taking a percentage of investment gains is a solution going forward.
Yes, I definitely separate cash flow from investment gains, but I’m still working, so it’s easier to commit to spending only earned after-tax income (net of 401k, 529, and brokerage contributions). I have felt a crunch since our last home purchase ate into much of our liquidity, plus the mortgage, taxes, and insurance are higher, so rebuilding a 12-month reserve hasn’t been fun. I’m rigid about the bucket approach and keeping firm barriers between current and future income, but a big part of that is because my spouse is a spender and has pushed me in that direction. One side of our family always has a hand out, too. It’s fine when it’s elderly parents who need something like medicine, but when it’s a sibling who wants help with a new car, it’s not fine, so we need boundaries in the form of separate financial buckets. I suppose that when I FIRE, I will have a hard time feeling cash-flow-crunched, which is why I’m not FIREd yet. I am hoping to FIRE once I have 30x my expenses. My spouse, because of their family of origin, may never retire, but they say they are okay with it.
Did we marry the same person? I feel like I could have written that post, lol.
I have separate accounts for my comp (bonus goes to investment accounts) and all expenses vs investment accounts. It’s so funny, any time I have to hit that account (recently 529 to pay tuition) I still get that sick feeling. I absolutely agree with your sentiment and I try my hardest to not touch – but of course sometimes I have to- it’s called life.
Dave, what a coincidence that you mention the 529 plan. Because I’m literally in the middle of writing a post about it and how when the time comes to use the funds to pay for tuition etc., I might not be able to do so!
Will you have enough in your 5 to 9 plan to cover everything?
1 kid graduated 1 junior 1 freshman (out of state at ucsd) – returns have been great and has been enough. Son did ROTC which will now result us having even more $$$ for med school of youngest if she still wants to do that route. Had about 400k contributed and was about 800 current value + distributions used. Will use some left over to fund IRAs… happy to answer any questions questions about my experience.
Currently funding myself for the next generation (grandkids one day?) at 10k which is the NYS tax deduction
Nice! $800,000 total in 529 plans for three kids or $800,000 each?
I’ve got about $490K and $415K for each of my two 529 plans, and I’ve stopped contributing with the hopes the gains keep up with the rise in college costs.
I might have contributed too much, but I also expect an eventual 10-20% correction again, so maybe not.
Was 800 total. Which has been too much – but not by much.
Now time to plan for next gen even though they don’t exist yet lol
Each kid has a little over $500K in 529 and are entering college imminently. State school will cost $40k per year all in and private will be $100K per year all in. Very possible kids will take 5 years to graduate. We are currently struggling to decide whether to blow all the money on one private undergrad degree or go public school and have some funds left for grad school. $400K to $500K is outrageous for a bachelors degree but the this is one decision where my wife and kids are focused on quality and fit over ROI.
We are a frugal family with frugal kids but when it comes to education, money is no object it seems.