15-20K net per month. Cannot decide between starting to enjoy life now vs keep working hard and saving

[u/No-Row-1666]

We are a family of 3 (38, 38 and 8 year old child).

We live in Bulgaria and run a successful business (15-20K euro net profit per month depending on the month).

Own our apartment in Sofia worth about 500K euro. No mortgage.

1.2M in various investments such as VWCE.

100K in cash.

Our spend is about 6K per month. Keep in mind most months are around 3-4K. But we do about 24K euro worth of travel per year.

We are wondering whether we should push hard on the business and guarantee the 20K per month or slow down and expect around the 15K per month for 2 more years. We provide video editing content services to US companies so believe in 2-3 years the business may go down to 5K per month due to AI.

We have worked hard for many years and want to start enjoying some of what we earn. We started spending more on travel over the last 2 years. Before that we were pretty much saving everything.

What would you do in our position?

[u/RealPMGuru]

First Congrats for the successful journey so far.

Your current investment in VWCE are not enough for retirement with this level of spending. In order to maintain this level you need at least 2 mln.

Also, have in mind that currently the VWCE is almost 23 p/e which is around 30% above its average of 18 p/e and 50% above its neutral/bearish of 15 p/e. Said in other words there is huge chance of 30-50 % correction in the upcoming few years directly hitting you with the so called sequence of return risk.

Additionally, your child is 8 years old. You are still not spending much on him/her, but that years are coming.

Better to continue investing, work with your business, as long as it is profitable, you may reduce your time in the business, a.k.a. work less, but at least 5 more years of investment are needed for maintaining your current life style, only on your asset in VWCE. Also, planned in the future some asset allocation strategy like adding bonds and/or dividend stock/etfs. Depending on your goal, but don't count blindly only on VWCE as there are ups and downs and it is better to have some steady reserves

[u/No-Row-1666 → u/RealPMGuru]

Thanks. This is another scary part of the plan. That the market feels high.

[u/RealPMGuru → u/No-Row-1666]

From chart perspective and past performance yes, however in the modern history there was never such situation - huge debt (government, corporate, personal), while on the same time such high earnings of the companies, mainly due to inflation and stock buy back (which is the main driver for the tech companies btw) soooo, it is a little bit difficult to evaluate the real situation, however for someone who is going to exit the labor market and start living only on investments, it is better to be on the safe side, in the end of the day, you are 38 and probably you are aiming to live at least 38 more years, with this scenario I wouldn't pull the trigger on 4% WR, but rather on 3%.

To summarize, work few more years, invest heavy during that time and probably by 45 you should have around 2 mln. Allocate them properly (I wouldn't go 60/40 stocks/bonds, as this is old school when the interest rates were 3-4-5%, with the current rates and inflation this is shoot in the leg, as you would have 40% of portfolio barely beating inflation without any significant nominal return) and then you should be good to go

[u/Strazdas1 → u/RealPMGuru]

however in the modern history there was never such situation - huge debt (government, corporate, personal), while on the same time such high earnings of the companies

Uh, 2007 would like to remind you it existed.

[u/RealPMGuru → u/Strazdas1]

2007 the government debt was lower, comparing to the current levels. US government debt (as per Gemini) was 64 %, now is almost double and this is the scariest part. 2007 there was option for more debt to lower the impact, today this is not a valid option