7M NW, suggestions mind shift and planning for next phase of life

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deemma
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7M NW, suggestions mind shift and planning for next phase of life

Post by deemma »

Bogleheaders, I would love to learn from your experience, wisdom, and perspectives in a judgement free, troll free, and non cynical way if you are open to that.

Context
  • $7M+ NW, mid 40s, spouse and 2 kids in middle school.
  • NW distributed as 75% broad market index funds, 15% house equity, 15% cash. I have never invested in bonds, and do not anticipate being ready to start that now. Cash has built up due to a large severance payment and not investing new money for about 1.5 years.
  • Yearly combined comp $800K+ with my comp about 80% of it in big tech. This is a new thing, we were making 300-400K for the last 10 years.
  • Zero debt. Grew up poorer than dirt, always LBYM. Yearly expenses are ~$70K in a HCOL area.
  • Okish spending money, admit that we could spend more. We both need to see value in the money spent though. For example, fine staying in an ok hotel at $200 a night versus a more luxurious one at $400 a night even though the additional cost is (probably?) inconsequential. Mow my own lawn since mowers want $75+ and it takes me 45 mins to DIY even though I get zero enjoyment from it.
Situation
We're thinking of moving from the States to Canada for family reasons. Anticipating $2.5M+ CAD for a house in a location that works for us. As part of the move, total yearly comp would likely drop to ~$500K USD.

Questions:
  • How would you feel about the financial situation given that stock market "could" drop 50% or more. The tech gravy train could end at any moment. More than half of my future comp is tied up in RSU stocks that vest monthly over a 4 year period.
  • Don't troll or judge please [not flexing or anything like that], logically feel ok financially. Emotion is a different story. Spending 2.5M+ on a house is more than I'd ever dreamed realistic. Spending more than $5K on a family of 4 vacation is a difficult mental hurdle. Buying a vacation house seems amazing in theory, but a burden and risky in practice. Is it really ok to open up the purse strings to luxury? If you've been in the same position with similar poor kid background, did you ever get over the poor kid mentality, always hustling, optimizing costs, DIY, discount codes, $ as a primary factor in decisions etc? If so, how??
  • How the heck do canadians afford $1M+ houses when the average income is so low comparatively to the US?
  • How to move millions of dollars from USD to CAD in an exchange rate/tax efficient way?
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tc101
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by tc101 »

Buying a vacation house seems amazing in theory, but a burden and risky in practice.
It can be a big burden, plus you feel like you always need to go to that same place on vacation. I think it is easier and more fun to rent a vacation house where ever you want, when you want, and not worry about the upkeep, taxes, insurance and so on.
. | The most important thing you should know about me is that I am not an expert.
SantaClaraSurfer
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by SantaClaraSurfer »

Nowhere near your NW, but have recently leapt multiple income brackets.

Answering your question on spending. We divide all our money up into what you could call buckets.

Every month the allocations go out in percentages.

So, if after all the core basics are covered (Savings / Retirement / Kids / Family / Charity), we have allocated 10% of the remainder to vacation budget, then, that's the budget we have for vacations.
HomeStretch
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by HomeStretch »

deemma wrote: Sat Sep 11, 2021 11:09 amWe're thinking of moving from the States to Canada for family reasons. Anticipating $2.5M+ CAD for a house in a location that works for us. As part of the move, total yearly comp would likely drop to ~$500K USD. …

… Spending 2.5M+ on a house is more than I'd ever dreamed realistic. Spending more than $5K on a family of 4 vacation is a difficult mental hurdle. Buying a vacation house seems amazing in theory, but a burden and risky in practice. Is it really ok to open up the purse strings to luxury? …
Are you moving, buying a CND primary home and selling your US primary home? Or are you planning to have 2 homes that will account for $3.5 million of your current $7 million net worth?

If the latter, consider running projections to calculate how much 2 houses will increase your annual expenses and, in turn, how the higher expenses coupled with your CND income drop by 1/2 impacts your planned retirement date. Also factor in your job security.
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cchrissyy
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by cchrissyy »

i'm similar to you in age and not wanting any bonds until now. but i want to suggest something which might help with the feeling that you need to be cautious because the good times will end.

pick a number which equals 10 years expenses. maybe 20 years. and put it in another account. this sounds like what your cash is already doing, except, put it to work a little better than that. I chose the vanguard tax managed balanced index (VTMFX). i don't know if you are a US or CAN tax payer so maybe that's not the right fit for you. but anyway, you can be 100% stock in your primary brokerage portfolio and 50-50 stock bonds in the security net you keep separate and never touch and hopefully you learn to trust that even if your job ends and the RSUs turn to dust, your whole family is covered for a whole decade, or two, or three, that's up to you. but i think even tho this idea is just mental math, it might help overcome the feelings and decisions that are coming from the scarcity you grew up with.
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nimo956
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by nimo956 »

deemma wrote: Sat Sep 11, 2021 11:09 amHow to move millions of dollars from USD to CAD in an exchange rate/tax efficient way?
I’ve been happy using Transferwise to convert AUD into USD. The overall fees are about 1/4 that of a bank.
50% VTI / 50% VXUS
Sam_957
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by Sam_957 »

Related to spending money question - try hiring the lawn guys every other week and see how you like it. I avoided it for a long time, but wife started working and decided to go for it. Surprised that I have no regrets about it now.
My other vehicle is an index fund.
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ClevrChico
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by ClevrChico »

deemma wrote: Sat Sep 11, 2021 11:09 am If you've been in the same position with similar poor kid background, did you ever get over the poor kid mentality, always hustling, optimizing costs, DIY, discount codes, $ as a primary factor in decisions etc? If so, how??
We're at probably half your numbers with a similar background, and I'm still the same hustling, DIY, thrifting, frugal person I've always been. Any money spent due to lifestyle creep is always kid related. My background has kept my investing conservative, having seen so many people lose so much, and I'm at 25% bonds.

I also worked for an extremely wealthy person (billionaire?) that still wore a Casio watch and wore K-Mart clothes. They did splurge on several vacation homes, but they still had the poor kid mentality.
chassis
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by chassis »

deemma wrote: Sat Sep 11, 2021 11:09 am Bogleheaders, I would love to learn from your experience, wisdom, and perspectives in a judgement free, troll free, and non cynical way if you are open to that.

Context
  • $7M+ NW, mid 40s, spouse and 2 kids in middle school.
  • NW distributed as 75% broad market index funds, 15% house equity, 15% cash. I have never invested in bonds, and do not anticipate being ready to start that now. Cash has built up due to a large severance payment and not investing new money for about 1.5 years.
  • Yearly combined comp $800K+ with my comp about 80% of it in big tech. This is a new thing, we were making 300-400K for the last 10 years.
  • Zero debt. Grew up poorer than dirt, always LBYM. Yearly expenses are ~$70K in a HCOL area.
  • Okish spending money, admit that we could spend more. We both need to see value in the money spent though. For example, fine staying in an ok hotel at $200 a night versus a more luxurious one at $400 a night even though the additional cost is (probably?) inconsequential. Mow my own lawn since mowers want $75+ and it takes me 45 mins to DIY even though I get zero enjoyment from it.
Situation
We're thinking of moving from the States to Canada for family reasons. Anticipating $2.5M+ CAD for a house in a location that works for us. As part of the move, total yearly comp would likely drop to ~$500K USD.

Questions:
  • How would you feel about the financial situation given that stock market "could" drop 50% or more. The tech gravy train could end at any moment. More than half of my future comp is tied up in RSU stocks that vest monthly over a 4 year period.
  • Don't troll or judge please [not flexing or anything like that], logically feel ok financially. Emotion is a different story. Spending 2.5M+ on a house is more than I'd ever dreamed realistic. Spending more than $5K on a family of 4 vacation is a difficult mental hurdle. Buying a vacation house seems amazing in theory, but a burden and risky in practice. Is it really ok to open up the purse strings to luxury? If you've been in the same position with similar poor kid background, did you ever get over the poor kid mentality, always hustling, optimizing costs, DIY, discount codes, $ as a primary factor in decisions etc? If so, how??
  • How the heck do canadians afford $1M+ houses when the average income is so low comparatively to the US?
  • How to move millions of dollars from USD to CAD in an exchange rate/tax efficient way?
Congratulations.

What are your annual living expenses? NW of USD 7m, correct? House price in CAN of CAD 2.5m, correct?

Stick with your frugal habits on daily/monthly expenses. Splurge on vacations. My wife's and my view.

Don't buy a vacation home. It's a wasteful sink of time, effort and money into an underutilized asset. My opinion, others will disagree, with 100% certainty. Instead of buying a vacation home, stay at 5 star hotels on vacation. Rent the most luxurious VRBO or Airbnb on vacation.

Regarding moving, do what you want/need.

Regarding the market, you don't control it. If you have fear of the market, load up on cash, bonds and low volatility dividend stocks.
expatish
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by expatish »

We moved to Vancouver BC for DH’s job but kept our US accounts (Fidelity) in the US and just opened new ones in CA. Definitely sit down with a cross-border CPA before making any decisions. Living in Canada will be likely be more expensive, as I’m sure you know, but it’s fantastic, as long as you prepare and plan accordingly (e.g. neither country recognizes the other’s tax-free accounts (Roth/TFSA), mortgage interest not deductible, foreign acct reporting requirements (FATCA/FBAR) to stay on top of, etc). Good luck with your decision.

:sharebeer
Afty
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by Afty »

deemma wrote: Sat Sep 11, 2021 11:09 am
Situation
We're thinking of moving from the States to Canada for family reasons. As part of the move, total yearly comp would likely drop to ~$500K USD.

Questions:
  • More than half of my future comp is tied up in RSU stocks that vest monthly over a 4 year period.
Are you planning to transfer within the same company, or to find a new job in Canada? If it's to transfer, at least where I've worked, they adjust your salary for the local market but don't touch your granted-but-not-yet-vested RSUs. So the drop in total comp may not be as much as you'd think since you're getting the majority from RSUs.
privateer79
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by privateer79 »

we're probably ~80% of your net worth but I'm in a similar situation career wise...

"How would you feel about the financial situation given that stock market "could" drop 50% or more. The tech gravy train could end at any moment. More than half of my future comp is tied up in RSU stocks that vest monthly over a 4 year period."

I view it with a "make hay while the sun is shining" mindset....the market is going up, those soon-to-vest RSU's are really highly valued... you're getting paid alot to work next year, so keep working..... if the market tanks next year you're going to get paid a lot less due to RSU's loss in value, so that would be a sign that its time to hang it up.

you're dressed up at a party, having a good time, the bar is still open, so have another free drink, because good times don't last forever :sharebeer
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BolderBoy
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by BolderBoy »

deemma wrote: Sat Sep 11, 2021 11:09 am Questions:
  • How would you feel about the financial situation given that stock market "could" drop 50% or more.
I'd feel crushed if that happened. Crushed that I had ignored that possibility and guarded against it to some degree by not having a 100/0 AA.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
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Wiggums
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by Wiggums »

2.5M CAD is about 1.97M. I understand being frugal and that is your choice. I don’t cut my lawn, because I feel like I’m inhaling the exhaust fumes. The cost of the house is not aligned with being frugal. The good news is that you can afford it. What is your plan when your portfolio doubles? I’m suggesting that you will have a hard time spending down your portfolio later. we are excellent savers and horrible spenders. You might have the same problem. Something to think about when you do estate planning.
"I started with nothing and I still have most of it left."
Topic Author
deemma
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by deemma »

Thanks for all the replies. To answer some questions:
  • currently live in the states. Pay tax in the states only.
  • If we move, the idea is to make Canada the permanent location. Would sell current primary residence in the states.
  • I think I could transfer to Canada from within my current company. It is true that only base salary is adjusted and the RSU component would stay the same. This was a major driver for negotiating a higher RSU grant. This is risky due to how much comp could drop if the market drops. A good amount of the adjustment is my spouse would likely stop working.
  • The 2.5M CAD for a house in Canada is definitely not frugal. However, it's a recognition that we should live a little as we're on the back half of life now. Housing in this area of Canada is also frighteningly expensive. 2.5M isn't as grand as one might imagine.
  • Legacy is not important to me. A little important to spouse. Sure, we'll help the kids, but my intention is to leave them a few hundred K and ideally pass with 0 NW.
Would welcome recommendations on cross border CPAs and smart ways to do money conversion at this scale.
trek83
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by trek83 »

You’ve worked hard & have accomplished a high level of Net Worth - sincere congratulations.

Yearly expenses of $70K in a HCOL area is extraordinary

I can identify with the frugal mindset & growing up poor - although mine was in a LCOL area & parents were frugal & budget minded, so

I did not really feel poor or deprived. But now, it is a struggle to spend $ on myself, and sometimes others.

Generosity toward others helps cure that — at least I think so.

Don’t buy a vacation house - Rent instead of Own ( IMHO ). More choices, less hassle.

I know nothing about living in Canada, and USD conversions. Canada has many beautiful places.
wish_to_retire
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by wish_to_retire »

Congrats. I'm 44 and NW of 2M+. What work do you do ? I want to increase my comp 😀
Topic Author
deemma
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by deemma »

House paid and kids now in public school so it keeps costs low. I'm not 100% sure I'm expenses because we don't really track it tightly.

I've been a software engineer and product management leader. Big tech tier 1 companies pay the best by a large margin.
LFKB
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by LFKB »

Live a little OP. What is your end goal in accumulating wealth if you’re going to live like someone with a fraction of your assets? Unless your only goal is to pass on assets to your kids then spending $70k a year on $800k of income and $7M of assets if a bit ridiculous.

The reason those Canadians can afford those homes is because they use leverage and aren’t as fearful of spending as you. You may consider that foolish but that’s the reason.

Good luck
smectym
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by smectym »

LFKB wrote: Sat Sep 11, 2021 11:54 pm Live a little OP. What is your end goal in accumulating wealth if you’re going to live like someone with a fraction of your assets? Unless your only goal is to pass on assets to your kids then spending $70k a year on $800k of income and $7M of assets if a bit ridiculous.

The reason those Canadians can afford those homes is because they use leverage and aren’t as fearful of spending as you. You may consider that foolish but that’s the reason.

Good luck
Probably good advice. But actually spending money just to “live a little” is kind of boring, or potentially even embarrassing. If I went out and bought some $70,000 SUV “because I can,” I would feel like a an idiot driving it home.

We don’t chintz on vacations, and we give the kids a lot of money. After that we’re short on spending ideas, and in this market, the assets keep piling up anyway. It’s a bit annoying. A 50% crash might be refreshing
CletusCaddy
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by CletusCaddy »

deemma wrote: Sat Sep 11, 2021 7:42 pm Thanks for all the replies. To answer some questions:
  • currently live in the states. Pay tax in the states only.
  • If we move, the idea is to make Canada the permanent location. Would sell current primary residence in the states.
  • I think I could transfer to Canada from within my current company. It is true that only base salary is adjusted and the RSU component would stay the same. This was a major driver for negotiating a higher RSU grant. This is risky due to how much comp could drop if the market drops. A good amount of the adjustment is my spouse would likely stop working.
  • The 2.5M CAD for a house in Canada is definitely not frugal. However, it's a recognition that we should live a little as we're on the back half of life now. Housing in this area of Canada is also frighteningly expensive. 2.5M isn't as grand as one might imagine.
  • Legacy is not important to me. A little important to spouse. Sure, we'll help the kids, but my intention is to leave them a few hundred K and ideally pass with 0 NW.
Would welcome recommendations on cross border CPAs and smart ways to do money conversion at this scale.
Are you in the Bay Area now? If so then you probably already live in a house worth $2M USD (whether renting or owned outright). So trading it for one in Canada isn’t really a change in consumption. And it’s the true consumption expense that you should be considering, not the $2M price tag. It’s not like the $2M goes poof after you buy the house. You’ve just converted some of your NW from liquid investments to illiquid home equity. But it’s still part of your NW.

What is your plan to spend down the $7M over your remaining lifetime if you have no intention of leaving much to the kids? Are you going to give it all to charity in one go?
If not, that’s $200k per year in spending, every year for your remaining expected lifespan, assuming no more savings and no real returns (neither of which are good assumptions). So what’s your plan for tripling your spending every year? If you have no such plan, you should recognize the reality that you will be passing down millions of dollars to the kids and prepare yourself for that eventuality with a sound estate plan.

I am at your income level but younger with less net worth. One way to justify spending money is that money that you spend doesn’t just disappear, it gets circulated in the world and keeps the system going. Paying the landscaper to do your lawn puts food on his table for his kids.
Last edited by CletusCaddy on Sun Sep 12, 2021 4:52 am, edited 1 time in total.
ace_it
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by ace_it »

Did you visit the Canadian sister of this site: https://www.financialwisdomforum.org/forum/

You may want to read up on the Norbert's gambit: https://www.financialwisdomforum.org/fo ... f=29&t=198

Make use of the TFSA as soon as you can for both you and your spouse. Study the RRSP and the spousal RRSP.

A 2.5M house in the GVA is not going to be one of those stand out mansions. In other places, it will be very attractive. Even in the GTA, 2.5M will get a very nice SFH, now.

Sounds like you may want to get familiar with the Canadian tax code, the tax treaties between the two countries, and how IRS will look at and handle the transition of your residency. Please talk to a few accountants who specialize in these areas.
Topic Author
deemma
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by deemma »

I recognize the "problem" of spending the money prior to passing. There are two things stopping us from spending more:
1. Childhood extreme scarcity and needing value for amount spent. The price tag isn't as relevant as the value received for the price. This mentality is not easily (for us) changed. I'm trying the reverse budget (must spend +$2K a month), it's not (yet?) working. A "splurge" this year was to set AC temp at 76 instead of 78 and spend almost 3K on a weeks worth of accommodation :) Both of these don't move the needle at all.

2. We're not consumers. There isn't a whole lot we want or need to buy. Currently, we have a ~2005 honda vehicle that functions fine. Open to replacing it, but prices are (temporarily?) high and nothing strikes our fancy at the moment. There is also limited utility since we're still WFH and have another newer vehicle. Combo of the the poor kid and value mentality.

Finally, the $7M feels like a mirage. During the corona stock market drop, we were around $4M. +$3M in such a short and unique time doesn't feel real. If we drop again to $4M, thing look different with the need to shell out +$1M on a new house compared to what we have now.

Maybe therapy or some other way is needed to get over the emotional hurdles.

Other:
1. Im not in the bay, which I consider VHCOL. Refused to relo to the bay because the extra costs not worth the +15% comp.

2. Sources of highly competent accountant/tax advisors experts at the US/CAD intricacies very welcome.
leland
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by leland »

ClevrChico wrote: Sat Sep 11, 2021 2:50 pm
deemma wrote: Sat Sep 11, 2021 11:09 am If you've been in the same position with similar poor kid background, did you ever get over the poor kid mentality, always hustling, optimizing costs, DIY, discount codes, $ as a primary factor in decisions etc? If so, how??
We're at probably half your numbers with a similar background, and I'm still the same hustling, DIY, thrifting, frugal person I've always been. Any money spent due to lifestyle creep is always kid related. My background has kept my investing conservative, having seen so many people lose so much, and I'm at 25% bonds.

I also worked for an extremely wealthy person (billionaire?) that still wore a Casio watch and wore K-Mart clothes. They did splurge on several vacation homes, but they still had the poor kid mentality.
Perhaps not adding too much value, but at somewhere not near OP NW or billionaire NW, I own multiple Casios so I can mix it up :) My investment mix is probably pretty similar, which I've been meaning to adjust.

Good news is that you have more than enough funds to dial up consumption and still be protected in the event of a downturn. I don't know if this internet poster can bless your plans but if you wanted to throw it all in now you'd be fine, especially if spending $70k/yr, or even if you doubled or possibly tripled that. Maybe talking to a fee-based financial advisor would provide the comfort that you're in great shape to spend money on some of the big rocks as the basic stats you laid out indicate minimal risk even if you didn't earn another dime.

But more seriously have similar struggles, did not grow up truly poor, but definitely had conversations about 'changes' after parents lost their jobs, unexpected costs hit, etc. I've managed to drop some uber-extreme thriftiness by establishing a safe luxury budget (scotch is that vice in multiple ways) that is my money to invest in fun. That said I still enjoy optimizing costs and finding some deals, but now will only DIY things for fun or learning. For me it helps to think of that cost optimization time as hobby time, it may not be a hobby people understand with your account balances, but it's still one. That might be justifying frugality, but if you like it that's ok. Just because you're rich doesn't mean you can't still enjoy a good deal. Just try to remember to spend the money you have to create the life you want. I acknowledge far easier to say than do :)
LFKB
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by LFKB »

smectym wrote: Sun Sep 12, 2021 2:21 am
LFKB wrote: Sat Sep 11, 2021 11:54 pm Live a little OP. What is your end goal in accumulating wealth if you’re going to live like someone with a fraction of your assets? Unless your only goal is to pass on assets to your kids then spending $70k a year on $800k of income and $7M of assets if a bit ridiculous.

The reason those Canadians can afford those homes is because they use leverage and aren’t as fearful of spending as you. You may consider that foolish but that’s the reason.

Good luck
Probably good advice. But actually spending money just to “live a little” is kind of boring, or potentially even embarrassing. If I went out and bought some $70,000 SUV “because I can,” I would feel like a an idiot driving it home.

We don’t chintz on vacations, and we give the kids a lot of money. After that we’re short on spending ideas, and in this market, the assets keep piling up anyway. It’s a bit annoying. A 50% crash might be refreshing
Well, I'm not telling him to waste money on things he doesn't appreciate. I'm telling him that if there are things he wants or that would improve his lifestyle he should go ahead with them.
EfficientInvestor
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by EfficientInvestor »

deemma wrote: Sun Sep 12, 2021 11:46 am Finally, the $7M feels like a mirage. During the corona stock market drop, we were around $4M. +$3M in such a short and unique time doesn't feel real. If we drop again to $4M, thing look different with the need to shell out +$1M on a new house compared to what we have now.
You made a statement in the initial post that you don't own any bonds. However, this more recent statement above makes me think you might want to consider some bonds, at least with a portion of your account that might be used to fund a new house.

If you are reluctant to take the foot off the gas in regard to the aggressiveness of your portfolio but also want to start introducing some diversification, you could consider using the WisdomTree Efficient Core ETFs like NTSX. They are 90% stock and 60% bonds. So you give up a little stock allocation and replace it with a portion of bonds that can provide a meaningful ballast during a stock correction.
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dziuniek
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by dziuniek »

Throw a cool mil into Hedgefundie's Excellent Adventure portfolio :twisted:
Get rich or die tryin'
fourballs
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by fourballs »

With regard to your first two questions, we have half of our portfolio in real estate, in very prime locations in VHCOL areas. The forum is not bullish on owning rentals, but I'm familiar with it and comfortable with the choice. Also, our kids will most likely work in those areas and it's highly doubtful that they'd be able to afford those houses on their own. Esp in CA, it's not a bad idea to lock in property tax rate due to Prop 13. My houses are easy to rent due to their locations so even in an economic downturn, I can manage the risk. I would not consider owning a vacation home unless I'm in it for the appreciation, so it would still end up being an investment rather than a family luxury. It's also a lot of work managing a house just for occasional use. I would just rent for vacations and that way I'm not tied down.

I also came from poor. You can't tell anything from the way my kids and I dress or from the car I drive until you look up our address. We do live in a fairly luxurious primary residence, and it's totally worth it. We also value time savings and convenience, so I *will* spend money if it saves me a lot of time and makes life easier and happier. I outsource all the yard work; when we go out to eat we go to nice restaurants; when something is broken I hire someone to fix it. My spouse and I DIY'ed a lot before and the results were usually pretty terrible, and many times we ended up injured, or totally exhausted, and the savings were so inconsequential in the long run so I learned to leave certain things to professionals which makes all parties much happier. I also don't hesitate when I need to hire instructors for our kids (top notch piano teacher, voice teacher, math tutor). We have 0 interest in luxury cars or designer shoes or bags or anything. My kids wear hand me downs and we absolutely abhor waste. For family vacations we don't stay at crazy expensive places but we do value clean, and if we have our parents with us we may splurge a bit (like $1000+ a night lodging) because our time together is precious and the parents are getting old.
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celia
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Re: 7M NW, suggestions mind shift and planning for next phase of life [in Canada]

Post by celia »

To get good responses on the Canadian questions, I suggest you edit the thread title by adding:
[in Canada]
to it, so you can attract the people here who know Canada.
dunk1234
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by dunk1234 »

deemma wrote: Sat Sep 11, 2021 11:09 am Mow my own lawn since mowers want $75+ and it takes me 45 mins to DIY even though I get zero enjoyment from it.[/list]
At $400k/year, you make ~$190/hour on a 40-hr work-week basis. If you trade an hour of your time for $190, then you are losing $90 for every hour you spend mowing your lawn (1hr lawn services cost: $100 (190-100=90)).

You don't like mowing your lawn, so why are you paying $90/hr for that displeasure?
random_walker_77
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by random_walker_77 »

deemma wrote: Sat Sep 11, 2021 11:09 am
  • How would you feel about the financial situation given that stock market "could" drop 50% or more. The tech gravy train could end at any moment. More than half of my future comp is tied up in RSU stocks that vest monthly over a 4 year period.
  • How to move millions of dollars from USD to CAD in an exchange rate/tax efficient way?
Personally, I'd increase cash/bonds so that stocks to bonds is more like 60:40, given the marginal utility of each additional dollar goes down. At 4+M, you have the option of walking away and taking a *long* sabbatical at any point, nearly without heed to financial consequences. To mitigate downside risk, I'd want to have less in stocks, because you don't *need* massive growth.

For efficiently exchanging to CAD, someone mentioned Norbert's gambit above, which is interesting to read about. From what I understand, these days it's a lot easier to just open an Interactive Brokers account and use their FX trading to buy CAD at spot rates. Their commission is $2 per 100K USD, with a minimum of $2. For smaller amounts, maybe xe.com, but their exchange rate will be worse and probably inferior to interactive brokers for over 10K USD. You could also look into transferwise, but I haven't seen anything as inexpensive as interactive brokers (IB).

If you do use IB, pay attention to the rules. One free withdrawal per month. Nominal fees for subsequent withdrawals. You'll also want to push money in from your brokerage to avoid long hold times on funds that are pulled in via ACH. There's a thread on interactive brokers somewhere around here...
taojaxx
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by taojaxx »

So your NW is $7Mn, you make $800k/year and you worry about money to the point of mowing your lawn and posting here with questions? You need two things:
An international tax attorney before you move to Canada.
And a shrink to unlock your mind from money matters.
Better lucky than smart.
taojaxx
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by taojaxx »

dziuniek wrote: Wed Sep 15, 2021 1:43 pm Throw a cool mil into Hedgefundie's Excellent Adventure portfolio :twisted:
I second that. I did it. Fun ride.
Better lucky than smart.
neverpanic
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by neverpanic »

deemma wrote: Sat Sep 11, 2021 11:09 am
  • Zero debt. Grew up poorer than dirt, always LBYM.

    Mow my own lawn since mowers want $75+ and it takes me 45 mins to DIY even though I get zero enjoyment from it.
One of the family values was never to pay anyone for work you could do yourself. I used to enjoy cutting grass. Then one day I decided I wasn't going to cut grass anymore.

It's OK to be wealthy and it's OK to hire people for tasks you're fully capable of doing. It's also OK to continue to be extremely frugal even though you do not have to be. You have the flexibility to live as you wish.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by AnnetteLouisan »

neverpanic wrote: Sat Sep 18, 2021 6:29 pm
deemma wrote: Sat Sep 11, 2021 11:09 am
  • Zero debt. Grew up poorer than dirt, always LBYM.

    Mow my own lawn since mowers want $75+ and it takes me 45 mins to DIY even though I get zero enjoyment from it.
One of the family values was never to pay anyone for work you could do yourself. I used to enjoy cutting grass. Then one day I decided I wasn't going to cut grass anymore.

It's OK to be wealthy and it's OK to hire people for tasks you're fully capable of doing. It's also OK to continue to be extremely frugal even though you do not have to be. You have the flexibility to live as you wish.
I know someone w a close to 10M net worth who pinches pennies until they scream. But he’s active, healthy, has a country home and enjoys the challenge of getting good deals.
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deemma
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by deemma »

Thanks for all the replies.

We're starting to be more relaxed about money. It's a mind shift, these things take (us) time.

Some follow ups:
  • Doing the lawn myself does not cost me money. The thought process of comparing hourly wage to anything you spend time on is interesting, but does not resonate with me. In that one hour I spend not doing the lawn, I do not make my hourly wage doing something else. Ultimately, this is an "annoying" value proposition - am I getting value for my money that I need to get over.
  • Surprised the majority opinion seems to be we're in the FU money position. About 15 months ago, Our NW was around 3.5-4M. IF we choose to spend +2M on next house, we're doing well but not in FU territory. Are folks thinking any 50%+ dip in stocks is unlikely to happen or will last a short amount of time?
  • The cash position is in lieu of investing in bonds. Rates can't drop further (can they??) Do you currently view bonds as a way to maintain the real value of money? I'm (naively) concerned that bonds will lose value at a faster rate than inflation. I also value having a good portion of cash to invest in a downturn (stocks or permanent residence of things fall off the cliff as they did circa 2008.
Aged Maduro
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by Aged Maduro »

I would not move to Canada in your situation. $2.5 million for a primary residence is far too much and the high taxes will wreak havoc on your long term wealth building. With your net worth you can move to some beautiful, low tax areas of the Unites States like Wyoming or Montana and live like a king for the rest of your life.
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by random_walker_77 »

deemma wrote: Mon Sep 20, 2021 9:53 am
  • Surprised the majority opinion seems to be we're in the FU money position. About 15 months ago, Our NW was around 3.5-4M. IF we choose to spend +2M on next house, we're doing well but not in FU territory. Are folks thinking any 50%+ dip in stocks is unlikely to happen or will last a short amount of time?
A dip in stocks is inevitable, but no one can reliably predict when it's going to happen. Note that there is precedence for a 85% drop in stocks too, which is why it's important to keep some money in cash/bonds/CDs etc

I think you definitely have money to walk away from anything you don't want to be doing. You likely have enough to FIRE, depending on expenses. In your 40s, I think a 2% withdrawal rate is pretty darn safe. i.e. 50x earnings. You'd get most of that from dividends alone, and it's arguably a perpetual withdrawal rate. In the US, for a healthy family, I'd add 25-30K/yr as a conservative stand-in for healthcare costs. Unsubsidized health insurance is expensive! In Canada, I've no idea, but am under the impression that you could budget a lot less for medical expenses.

At 5M + paid-off house, if you're at 50x expenses, you're likely to have reached escape velocity. Your average growth will greatly exceed average spending and overcome sequence-of-returns risks. In other words, you'll survive just about any worst-case scenario, and in 30 years, the odds are good that you'd have more than 10M.

The big item is expenses (including everything, medical, taxes, and "lumpy" expenses like roof replacements, car replacements, and college tuition). If you've got 40x expenses, I think you're good to retire. At 50x, I think you're conservatively quite safe to FIRE.

Just as the payment on a 50 year mortgage isn't that much higher than the payment on a 30 year mortgage, the safe withdrawal rate for 50 years isn't that much lower than for a 30 year term. To help figure out what's safe, it's interesting to examine a perpetual withdrawal rate, which would be the lower bound on what the safe withdrawal rate might be. I thought that Otar's paper on perpetual withdrawal rates was informative:
http://retirementoptimizer.com/Whitepapers/PerpDist.pdf
Ramjet
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by Ramjet »

If you went from 3M or 4M to 7M in a short period of time you should lock in some of those gains with bonds IMO, do that and you will be in "FU" territory for all intensive purposes
wrongfunds
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by wrongfunds »

taojaxx wrote: Sat Sep 18, 2021 4:31 pm So your NW is $7Mn, you make $800k/year and you worry about money to the point of mowing your lawn and posting here with questions? You need two things:
An international tax attorney before you move to Canada.
And a shrink to unlock your mind from money matters.
This is not fair. Since OP is making $800K/year, only after the NW is $20M you could say the above. To put it differently, $7M does NOT support the lifestyle commensurate with $800K income. Now I am not saying that OP has that lifestyle but if we are going to comment about "needing shrink" then you need that kind of assets for that income.
smitcat
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by smitcat »

wrongfunds wrote: Mon Sep 20, 2021 10:53 am
taojaxx wrote: Sat Sep 18, 2021 4:31 pm So your NW is $7Mn, you make $800k/year and you worry about money to the point of mowing your lawn and posting here with questions? You need two things:
An international tax attorney before you move to Canada.
And a shrink to unlock your mind from money matters.
This is not fair. Since OP is making $800K/year, only after the NW is $20M you could say the above. To put it differently, $7M does NOT support the lifestyle commensurate with $800K income. Now I am not saying that OP has that lifestyle but if we are going to comment about "needing shrink" then you need that kind of assets for that income.
First post by OP says this...
"Zero debt. Grew up poorer than dirt, always LBYM. Yearly expenses are ~$70K in a HCOL area."
Dottie57
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by Dottie57 »

If OP can’t say FU with 7mm in investments, I don’t know anyone who say FU.
wrongfunds
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by wrongfunds »

smitcat wrote: Mon Sep 20, 2021 3:39 pm
wrongfunds wrote: Mon Sep 20, 2021 10:53 am
taojaxx wrote: Sat Sep 18, 2021 4:31 pm So your NW is $7Mn, you make $800k/year and you worry about money to the point of mowing your lawn and posting here with questions? You need two things:
An international tax attorney before you move to Canada.
And a shrink to unlock your mind from money matters.
This is not fair. Since OP is making $800K/year, only after the NW is $20M you could say the above. To put it differently, $7M does NOT support the lifestyle commensurate with $800K income. Now I am not saying that OP has that lifestyle but if we are going to comment about "needing shrink" then you need that kind of assets for that income.
First post by OP says this...
"Zero debt. Grew up poorer than dirt, always LBYM. Yearly expenses are ~$70K in a HCOL area."
I am not sure how that helps. Regardless of the annual expenses, with the annual income net worth has lot more to go up before OP can ignore his annual income. If I were in OP's shoe, I will keep on grinding too. Call me greedy but I will not voluntarily walk away from that kind of money, I would NOT be asking for advice here though.
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by cchrissyy »

deemma wrote: Mon Sep 20, 2021 9:53 am Surprised the majority opinion seems to be we're in the FU money position. About 15 months ago, Our NW was around 3.5-4M. IF we choose to spend +2M on next house, we're doing well but not in FU territory
I'm unclear about the proposed housing expense if you move.
would you be pulling $2m out of the portfolio to buy it?
if yes i understand your hesitation
or,
is it a house priced at $2m, and you will roll your current home's equity into that?
if yes, then the expense is much less, and you could even realize some market gains to pay the remaining balance to zero. i think that would feel very good for you because 1) your monthly commitments get smaller 2) it locks in some of the gains that felt unreal



to repeat my earlier advice, I think some of what you describe, where recent gains feel unreal, can be solved by setting up a new account and investing much more conservatively there than in the rest of your portfolio.
the point is not that it should be bonds, or cash, or any other particular vehicle. The point is you would have a brokerage account at company X which rises and falls 100% stock like you are used to, and you have another account at company Y which you never check and never touch, but you learn to trust "we have 20 years of expenses at company Y".
My advice for that account was a 50-50 balanced fund but it hardly matters as long as it's pretty conservative and you don't mess with it. The point is to feel secure no matter how your job and stock portfolio are doing.
60-20-20 us-intl-bond
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8foot7
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by 8foot7 »

You sound worried that that 7 will turn into the 3 or 4 it was in early 2020. Well, this is easy. Sell some, take the risk off the table.
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deemma
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by deemma »

Thanks everyone for the continued discussion:
  • I realize we are fortunate to have accumulated assets and be in a good position with current work and compensation.
  • Current work is very good from wlb perspective. It also feels "irresponsible" to walk away from the current comp. It's almost my first decade of earnings all in one year.
  • The next house will likely cost an additional +2M even after selling current home. This will be an intentional big expense to enjoy the money we've worked hard for. A lot of this is to avoid unnecessary commutes (work, school, and just general out and about on the weekend) while enjoying nice kitchen, bathrooms, and good remote work and studying environments on a daily basis.
  • Converting stocks to cash (or equivalent) has been considered. Would have to pay gains tax and trying to avoid that. We also have the "problem" of several hundred K in cash with more coming every month. It's a ridiculous analysis paralysis problem. Convert stocks to cash as more cash comes monthly? Keep the incoming as cash, and leave the invested where it is and risk a big downturn?
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deemma
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by deemma »

cchrissyy wrote: Mon Sep 20, 2021 5:26 pm The point is you would have a brokerage account at company X which rises and falls 100% stock like you are used to, and you have another account at company Y which you never check and never touch, but you learn to trust "we have 20 years of expenses at company Y".
Resonates. I'm doing this by "default" with the built up cash position and keeping newly earned money in a savings account. What type of investments would you do for the capital preservation account?
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by Starfish »

.....
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cchrissyy
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by cchrissyy »

deemma wrote: Mon Sep 20, 2021 7:12 pm
cchrissyy wrote: Mon Sep 20, 2021 5:26 pm The point is you would have a brokerage account at company X which rises and falls 100% stock like you are used to, and you have another account at company Y which you never check and never touch, but you learn to trust "we have 20 years of expenses at company Y".
Resonates. I'm doing this by "default" with the built up cash position and keeping newly earned money in a savings account. What type of investments would you do for the capital preservation account?
I recently did exactly this.
I picked Vanguard Tax Managed Balanced Fund , which I am holding at Vanguard, whereas the rest of my investments are ETFs at Schwab.
60-20-20 us-intl-bond
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Re: 7M NW, suggestions mind shift and planning for next phase of life

Post by random_walker_77 »

deemma wrote: Mon Sep 20, 2021 7:04 pm
  • Converting stocks to cash (or equivalent) has been considered. Would have to pay gains tax and trying to avoid that. We also have the "problem" of several hundred K in cash with more coming every month. It's a ridiculous analysis paralysis problem. Convert stocks to cash as more cash comes monthly? Keep the incoming as cash, and leave the invested where it is and risk a big downturn?
In my experience, it's easy to let fear of taxes distort behaviors in a way that's ultimately quite unhelpful. Put another way, don't let the tail wag the dog.

I'd recommend that you figure out where you'd like to be, and then start taking steps to get there. Maybe don't do it all at once, but at least move 1/3 of the way there.

If I were you, I'd think about it this way: your first 3M is very important. That's an endowment that can cover almost all of your expenses and will cover your retirement. The next 2M is still important, but not quite as critical. It positions you to clearly retire early, like tomorrow. That last 2M after that is certainly nice to have, but not as life-changing. It buys you security, can upgrade your lifestyle, and accelerates the growth of your funds enabling you to easily upgrade your lifestyle for the occasional splurge. Spending 1M more than you need to on a house feels like a big deal right now. But consider this, even if you lost your job and didn't work another day, there's a pretty good chance that in 10 years, you could spend $2M and still have more than $8M left afterwards.

Basically, you've got it made. Just don't take too much risk for the sake of acquiring more cash that you don't really need.
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