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to answer the article's question: $440k. done. here's the rationale: $200k pays off all the debt i have: mortgage, car, everything, and should leave me with

to answer the article's question: $440k. done. here's the rationale: $200k pays off all the debt i have: mortgage, car, everything, and should leave me with $50K in a working capital cushion. i would continue to work on something, because i'd go crazy if i didn't, but it'd likely be another startup idea of some sort. maybe work on student incubation. $240k goes in a ladder of 1 year certificates of deposit at $20k each. at around ~4% interest, each one will yield an income of ~$800/month. i can leave that in the bank, or take it out as income. given that we're at record low interest rates, that rate can be expected to go up. it's not the best rate that could be earned, but it's a guaranteed rate. my monthly expenses once housing and car payment are removed are right at $300. $800/month leaves me $500 for food and incidentals, assuming i don't have other income. no, it's not lavish, but it works. and every single penny i make from paying work i can then blow on hats. of course, if i just keep rolling the yield back into the CD by retirement age (i'm thinking 55) each CD will be worth $70K, yielding 2800/month. so in short, if my fuck-off-you money is $440k, i'm in pretty good shape for the rest of my life.

mechanical_fish 18y ago
The word inflation is conspicuously missing from your analysis. There's a reason why people bother with stocks instead of just plopping all their money in CDs. (You could buy inflation-adjusted bonds. Last I heard, though, they were running slightly negative yields because of all the other people who want to buy inflation-adjusted bonds.) The other problem I see here is that this is a steady-state analysis. If you sustain one event that requires you to deplete your capital (like, say, a sudden surge in inflation, a sudden fall in interest rates or market values, an illness... or, god forbid, you decide to get married or have a kid or move to a nicer house) you will immediately suffer an income hit that will require you to go back to work. You should consider budgeting for such things. Having said that: If you have the discipline to follow this plan, minor holes and all, you'll be in better financial shape than the vast majority of the planet. (Obligatory investment-book recommendation: William Bernstein, The Four Pillars of Investing.)
- sfamiliar 18y ago
  you're quite correct -- there is no mention of inflation. this is mainly because i don't know how to not work. i've tried it. i fail pretty hard at not working. but at the point where you have this steady income, any job you take contributes strongly to your personal wealth -- much more so than if you didn't have the debts settled and the regular income. any extra income from work (that i didn't blow on hats, mind you) would go into a managed fund, most likely an index fund. days like today though happen periodically, and individual stocks require the kind of detail work that isn't cost effective at those amounts. i make more money working than the growth i would see in the stocks having spent the same time on it. all that said, if the current project gets picked up ...
abstractbill 18y ago
... certificates of deposit at $20k each. at around ~4% interest, each one will yield an income of ~$800/month. Shouldn't that be "each one will yield $800/year"? That makes the total $800/month.
- deleted 18y ago
  [deleted]
- sfamiliar 18y ago
  each one would yield $800/year, true, however you put one in a month such that they come up at the end of the year. 12 CDs, one for each month, each yielding $800/year. sorry if that was unclear.
ojbyrne 18y ago
Taxes are also conspicuously absent.
- hugh 18y ago
  When you're only earning $800 a month, taxes should be pretty negligible, surely?

mechanical_fish 18y ago

The word inflation is conspicuously missing from your analysis. There's a reason why people bother with stocks instead of just plopping all their money in CDs. (You could buy inflation-adjusted bonds. Last I heard, though, they were running slightly negative yields because of all the other people who want to buy inflation-adjusted bonds.) The other problem I see here is that this is a steady-state analysis. If you sustain one event that requires you to deplete your capital (like, say, a sudden surge in inflation, a sudden fall in interest rates or market values, an illness... or, god forbid, you decide to get married or have a kid or move to a nicer house) you will immediately suffer an income hit that will require you to go back to work. You should consider budgeting for such things. Having said that: If you have the discipline to follow this plan, minor holes and all, you'll be in better financial shape than the vast majority of the planet. (Obligatory investment-book recommendation: William Bernstein, The Four Pillars of Investing.)

sfamiliar 18y ago
you're quite correct -- there is no mention of inflation. this is mainly because i don't know how to not work. i've tried it. i fail pretty hard at not working. but at the point where you have this steady income, any job you take contributes strongly to your personal wealth -- much more so than if you didn't have the debts settled and the regular income. any extra income from work (that i didn't blow on hats, mind you) would go into a managed fund, most likely an index fund. days like today though happen periodically, and individual stocks require the kind of detail work that isn't cost effective at those amounts. i make more money working than the growth i would see in the stocks having spent the same time on it. all that said, if the current project gets picked up ...

abstractbill 18y ago

... certificates of deposit at $20k each. at around ~4% interest, each one will yield an income of ~$800/month. Shouldn't that be "each one will yield $800/year"? That makes the total $800/month.

deleted 18y ago
[deleted]
sfamiliar 18y ago
each one would yield $800/year, true, however you put one in a month such that they come up at the end of the year. 12 CDs, one for each month, each yielding $800/year. sorry if that was unclear.

ojbyrne 18y ago

Taxes are also conspicuously absent.

hugh 18y ago
When you're only earning $800 a month, taxes should be pretty negligible, surely?