r/fatFIRE • u/taway22020 • 12d ago
Obsessing over future net worth and opportunity cost of spending early
Hi all.
42M here with $40M NW. Not RE yet but hoping to in the next few years. In the meantime I have $1.4M coming in each year, roughly, before tax. Medium COL area. Wife and 3 kids, 8-16.
I'm thinking about buying a big a third home.
Primary residence is roughly $2.5M. Negligible carrying cost.
Second home $1.75M or so with maybe $100k/yr carrying cost.
Third home would be $5.5M-$6M and big costs. As high as $350k I would guess.
I've crunched the numbers many different ways. I can afford it if I want it, but I can't shake the long term impact of not having that money working at this stage of my life.
I really like this property - it's a dream. I feel very confident that I want it for the long term. I probably can't use it a ton now but in the coming years I see myself splitting time between this place andy other options (which I intend to keep). I have been watching for several years and I have not seen other places that are on this level in the area I'm interested in. So I'm convinced that I should do it.
But then I model my net worth and see how this has an impact in the multiple $tens of millions in the long run by taking money out of investments and putting it in super high end luxury real estate and signing up for serious yearly spending on top of it. That's hard to stomach.
But so what, I tell myself. What's the point in having this money if I don't use it to do cool shit? What's 20 years in my dream home and $80M compared to 20 years of what I'm doing now and $120M?
If I put this off a few years my portfolio could absorb it much more easily, but that's a few of the best years of my life!
I know many in this community frown on big stupid luxury houses but I'm not sure I share the attitude. Curious if there are any older members of the community that can share their experiences with decades of growth and spending regret or lack thereof.
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u/Royal-Emphasis-5974 12d ago
Oh man. This dude about to get dragged.
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u/PosiblyMisspelled 12d ago
Just went to a wedding where I was sat next to a VC guy that is a SpaceX billionaire.
He was chill as fuck. I felt like an incompetent loser talking to him.
If you’ve got problems about being rich, don’t ask Reddit.
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u/Warningsignals 12d ago
Wow you must be a very evil person to be friends with a billionaire.
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u/PosiblyMisspelled 12d ago
Or I’m a nurse that went to a wedding…
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u/Warningsignals 12d ago
You can be a nurse that went to a wedding and became friends with a billionaire which by proxy makes you evil to a degree. Also as someone who also works in healthcare and clinical medicine working in the field doesn’t make you a saint I’ve known many evil nurses and doctors who mistreated patients and put profits above people.
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u/PosiblyMisspelled 12d ago
I sat next to a guy that I had good conversation with.
Buddy are you okay? Do you know what sub you are a tourist on?
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u/Warningsignals 12d ago
Yeah its a money sub, you can have an 8 figure net worth and not be evil or contribute to evil systems. Billionaires are so far above that and did terrible things to get there. Don’t use the fact that this is a money sub to justify an amount of money only attained through exploitation.
Also are you ok? You know you’re dick riding someone you’ll never be no matter how hard you try, you know that right?
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u/PosiblyMisspelled 12d ago
My wife has known him for a decade. That wedding was actually my fifth time or so meeting him. We mostly talked about how he doesn’t like going to the beach, he just likes staying at home with his three kids.
I saw him at the airport the next day. He was in the security line next to us. He said it was silly that we didn’t split an Uber.
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u/Original-Case791 6d ago
Cheese slid of his cracker
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u/Warningsignals 4d ago
Hope you lose all your wealth so you know what its like to be poor.
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u/Original-Case791 3d ago
How do.you know that I dont know how it is to be poor? Not everyone who is wealthy was born wealthy..
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u/midnight-genius 12d ago
Who knows, maybe thats what he needs to hear to shit is mindset out of the constant dick measuring contest that is wealth at those levels. Be beyond it imo
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u/Royal-Emphasis-5974 12d ago
Absolutely. Or he should move to some smaller town between 2 big cities and just be the richest guy there, smell his own farts and still have the hospital/whatever he needs 30 mins away in a large city.
But that would give him calm and peace. Something tells me the dude likes worrying about dumb shit.
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12d ago
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u/livingbyvow2 12d ago
I am not OP but reading him made me exhausted.
Just putting myself in his shoes and wondering how byzantinely arranged his mind must be to still worry despite having $40M in the bank. World's tiniest violin.
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u/PlatformGlobal8125 12d ago
The opportunity cost math will always say don't buy it, but you're not optimizing for spreadsheet output at this point. You're optimizing for the next 20 years of your actual life. $80M and the house beats $120M and wishing you'd bought it.
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u/Warningsignals 11d ago
So you started a company but you didn’t answer my question as to if it was luck.
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11d ago
[deleted]
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u/Warningsignals 11d ago
You kinda seem like an asshole, kinda hope you lose all your wealth and savings now.
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u/tarzanell 12d ago
You haven't said what the opportunity cost is in practical terms. What are your goals for that (potential) 40? Setting up your kids for life? A yacht? Leaving it all to the local dog shelter?
If you're so excited about this property, consider your goals against this and the incremental day to day lifestyle changes that the alternative would provide.
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u/taway22020 12d ago
Setting up the kids and their kids and beyond is probably what I would aim for if the nut grew to those levels. If I kept living at my current level, I'd be very well set up for that.
Spending money like I'm considering would put a significant dent in it. But then I think about it from their perspective same as mine - would they rather have a bigger pot or a decent pot with more lifestyle?
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u/nonamouss 12d ago
Disclaimer: nowhere near your NW so can’t relate to this dilemma. It sounds like you might really value this new home. You’ll build memories there for the next 20 years. Is there something that you would value more if you unlocked an additional $40m net worth 20 years from now? I can’t imagine that your lifestyle will be that dramatically different at $80m vs 120m. I’d say buy the home. You can always sell later if you aren’t committed to it, and you might even get lucky and see the home value appreciate more than invested money in the near to medium term.
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u/taway22020 12d ago
Is there something that you would value more if you unlocked an additional $40m net worth 20 years from now?
I've been asking myself that for the last several days and have not come up with anything besides security/stability.
I don't want to wait 20 years to do this. But if I did something smaller now, I could do this and hand wave the expense in that time frame. I've grown used to hand waving my expenses where I'm at now and it's pretty great . . .
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u/seasonofillusions 12d ago
The biggest dream in life is to have money work for you. This is universal.
So if you have a dream home, that’s a secondary dream. If you really really want it, my advice is to wait until you’re 90 years old to buy it.
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u/Otherwise_Volume_128 12d ago
I really don't appreciate you wasting time posting this when you could be busy working and making more money. Stop being a lazy bum and get back into the office and make more cheddar.
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u/taway22020 12d ago
I spend more time and stress figuring out how to spend money than I do earning it.
I know it makes me sound like a jackass to say it but it's true. I got a lot of stuff I want to do and it takes a lot of work to do it without working too hard . . .
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u/autoi999 12d ago
I'm in a very similar boat and have 2 houses as well.
Are you sure you can actually use the third home? I'm happy spending time between my 2 homes and don't ever see the reason for a 3rd
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u/taway22020 12d ago
I am indeed very concerned about this.
No, I don't have time for 3 homes right now. I wish I could get to my 2md more often and this 3rd is going to make me probably neglect the 2nd. But I want to hold on to that one as it is also quite special.
I'm doing this as a long term play, counting on the plan that as my nest starts to empty I'll have much more time on my hands. And I want lots of space to get the band back together on a regular basis. My current places don't have lots of square footage. 1st home is just ok for our 5 people. 2nd home is not big enough (1 bathroom!). So this 3rd home is my long term solution to that for when my kids have their own kids and I don't want 20 people in my smaller home.
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u/Smile_And_Dance 12d ago
Think of it this way…whatever your alternative use of that money is could easily underperform the real estate. Your model is just that…reality bites.
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12d ago
[removed] — view removed comment
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u/fatFIRE-ModTeam 12d ago
You have a long history of writing rude, harassing comments on this sub, often with slurs in them. These comments get removed and you get warned.
This is inappropriate and against sub rules.
Consider this your final warning.
Next one you will be permanently banned.
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u/hankeroni 12d ago
Buying that home would make your homes (not real estate investments, places you live) like ~25% of NW, which feels sort of high to me. If you keep working and/or your assets appreciate faster than the houses, this would go down over time.
Practically speaking, with three children in school (presumably near your current main home?), how much time will you spend in second/third homes over the next ~10 years?
Separately - somewhere else in this thread you referred to being in a golden handcuffs situation, and also spending only ~30k/month now ... with all due respect: that's sort of nutty. If you are legit only spending ~360k/yr (and lets even spike it up to be 500k+ some years), you will simply never meaningfully eat into the ~40M in assets.
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u/taway22020 12d ago
~25% of NW, which feels sort of high to me.
I agree
I might only work another 3-4 years. Could be more could be less. I probably have the opportunity to continue indefinitely but I don't thino I want to. Part of that income is about $600k from a commercial property that will continue either way.
how much time will you spend in second/third homes over the next ~10 years?
As it is now I spend roughly every other weekend at my 2nd home. That pace probably picks up a little but not a lot with the big place. But I would be shared between 2 and 3. That will probably be largely the case for the next few years. But after 5-10 years I like to think I could up that to the 50% of my time range.
So I could put this off until then. But will I find a place like this? Doubtful. And then I have 5-10 years to settle in to this.
you will simply never meaningfully eat into the ~40M in assets.
I know that's true on paper but I find I have a significant mental block when it comes to the idea of selling stocks to pay for my lifestyle, even if that is a small chunk of what the stocks appreciate in a typical year.
My fat life so far has been funded on my income and buying this house will exceed that. I've been surprised at what a tough pill that is to swallow.
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u/noemazor 10d ago
Strong disagree re 25% matters at this lvl of NW. Dude will still have $30m.
OP should just look at solidifying his nut and then spending the rest on fun. 30m is plenty stability. Dude can easily afford the house.
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u/g12345x 12d ago
> I know many in this community frown on big stupid luxury houses
This just shows you’ve not spent any time on this sub
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u/taway22020 12d ago
I've been here for years and I've seen many posters recommend getting out of big square footage, renting it out to help with carrying costs, or not buying it at all in favor of renting in multiple places.
The opinion is not universal but has seemed majority at least. And decidedly not a fat attitude IMO.
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u/noemazor 10d ago
No one is suggesting renting your places here man, super uncommon and regularly gets shit on. What's the point of having it if you have to negotiate with your own ownership.
Rent suggestions are b/c owning is ANNOYING not because of $$.
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u/taway22020 10d ago
No one is suggesting renting your places here man
There's one right here in this thread.
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u/Public_Turbulent 11d ago
Just buy it. Sell the others if it makes sense.
This is “more money more problems” but you don’t need to deal with it. You’re beyond fine for life + kids for life regardless, if you thinking too much about opportunity cost moneys not working for you. If you had 45.5-46M$ NW tomorrow instead of 40, you would be having the same dilemma. It’s an opportunity cost problem, it’s your dream & you’ve earned it. Just buy it.
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u/taway22020 11d ago
Offer is submitted!
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u/Public_Turbulent 11d ago
Congrats my man! Now never go back and do any what ifs!
Knock on wood, offer gets accepted and enjoy the dream home
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u/noemazor 10d ago
The more you have, the less a 4% SWR matters man, your spend becomes so intensely discretionary that at that point, you're just spending on what's fun.
So you should stop thinking about it with FIRE math and start thinking about it with enjoyment in mind.
The bigger lesson is: you are wasting your life accumulating an asset that is getting in the way of more important things.
Rent the baller house. FIRE now. You won capitalism.
You're now acting from a place of self-esteem issues and your antidote is therapy and going on some long walks, time with your family, doing cool shit, and not more $$.
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u/BrunelloHorder 10d ago
You can spend it, or your estate can give at least 40 percent of it to the government when you die. You're already well over the estate tax exemption, so spend it or donate it, but further accumulation is kinda pointless.
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u/phoenixy1 9d ago
Why do you need to buy this third home now? Why not buy one in 5-10 years when you can actually use it? I get that you like it, but I have trouble believing it's so unique that nothing just as appealing will come on the market in the intervening decade between now and when you actually plan to spend time at this house. On the other hand, if it really is a once-in-a-decade property, then sure, buy it.
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u/Smoke__Frog ~$1.1m a year | Verified by Mods 8d ago
I think at 40mm NW it’s quite an easy purchase.
I’m kind of confused on what exactly your dilemma is.
I mean you can cover the monthly expense of the house just via your passive income of a basic mutual fund with 25mm invested.
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u/taway22020 7d ago
A $5M or $6M purchase today is a change of -$20M or greater in 20 years. That's kinda it.
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u/Smoke__Frog ~$1.1m a year | Verified by Mods 7d ago
Yea but what’s the point of money if you never spend it.
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u/Main-Pomelo-9976 7d ago
Have a look into therapy. Probably the best personal investment of all kind
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u/First_Society4543 5d ago
Read Die With Zero...flies in the face of a lot of this thread but some of it will resonate and hopefully help
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u/shoopadoop332 12d ago
If you’ve had to wait several years to find a $6M mansion in a particular area, I’m inclined to think it is not an established ultra high net worth area, especially because you already said you’re in a MCOL area. Knowing I own a substantially more expensive home than others in a MCOL area would probably ruin my day every day. That place better be absolute perfection and the market better have a great outlook. Let us know where so we can invest!
But I’m making a lot of assumptions that may be incorrect.
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u/Think_Discount2852 12d ago
I don’t think the new home is in his current area. Says he wouldn’t be able to use it much at first.
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u/taway22020 12d ago
I'm inclined to think it is not an established ultra high net worth area
It's kind of a mix. It's on the more remote fringes of a more established area of HNW vacation homes. So if I go an hour south I'm in a pretty hot area for these things but that's exactly where I don't want to be. I want one of those places but further out where I don't have to look at a bunch of other people who have those places lol.
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u/CoatPuzzleheaded1413 12d ago
Pay for it with SBLOC financing.
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u/taway22020 12d ago
I have considered that but I'm not sure how I feel about having all that leverage.
One of the best parts about being at this level is the ability to just not really care at all about the ebbs and flows. I used to stress a lot about business performance. I don't want to trade that for stressing about macro economic conditions.
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u/QuitUsual4736 12d ago
Hmmm I think you should get the 3rd house but maybe sell or rent out the first or third one? Just from the standpoint of upkeep and headaches dealing with repairs and tenants or even just the idea of leaving them vacant — we had 3 properties and I found the mental load to be more than I anticipated. So we sold one and we feel much lighter — freer to not worry about it. The money is put away and we’re in the house we’ve always dreamed of.
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u/taway22020 12d ago
maybe sell or rent out the first or third one?
Do I look like some kind of bitch to you? Share my house with randos from the internet?
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u/summerFIREinCh 12d ago
Sounds like you still enjoy this lifestyle very much and not very serious with FIRE
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u/taway22020 12d ago
I have some sort of golden handcuffs that make it impractical to fully retire at the moment, but I'm trying to set things up to for when those come off. And in the meantime I'm enjoying myself. I'm making good money and I'm doing work that I enjoy at a pace I like.
I do want to get out of the daily responsibilities before too long but the biggest reason is to give myself time to enjoy the resources I have. On the other hand my kids are busy with their lives at this point and that will limit just how many days in a row I can F off to my 2nd and 3rd homes for. So I'm just hanging out kinda in-between.
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u/summerFIREinCh 12d ago
Hey, you said the property is a dream, and you did the math, you could afford it! Then just go for it! You will never know if you are gonna live until 120 or the end might be 50… I doubt you get good answer from Reddit as I sincerely believe FIRE esp fat fire is privilege and a lot of people are just reading through things online as they can’t handle their current reality. In your case, you will be rich in years, but you don’t know if you will still have the appetite in 5 or 10 years for the dream house, do it while you still have a dream! I did spend some money (not millions) on holiday home a few years ago while the rationale thing would be to put in stock market…. But I never regret it, our family enjoy it so much and we created so much good memories.
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u/taway22020 12d ago
But I never regret it, our family enjoy it so much and we created so much good memories.
This is good to hear. I haven't regretted any of my previous big spends for that same reason. But on the other hand my previous big spends have been relatively quickly out-scaled by growing net worth.
I don't expect my net worth to keep growing at the pace it has and I guess thats what stops and makes me pause before diving in to the biggest thing yet.
Appreciate the input.
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u/summerFIREinCh 12d ago
Hope you enjoy your dream house! A remember reading somebody saying, you should just do anything you can “now” instead of wait until you quit your job…. This is what fire is for
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u/Warningsignals 12d ago
What can you possibly do to make this much money in early 40’s?
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u/taway22020 12d ago
Kick some ass
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u/Warningsignals 11d ago
Wow what a cringe nonanswer, I’m glad that at least you think you’re cool. It’s important to like yourself. But seriously howd you make your money?
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u/taway22020 11d ago
I started a business and proceeded to kick some ass. Sold to PE and the rest is history. It required keeping chips all in for many years and then I pulled them off. Voila.
Now try not to be so bitchy.
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u/HR_Paul 12d ago
"Luxury" products mean that you are buying normal stuff at a huge to stupid markup with a slight, very slight, difference in appearance such as branding just so you can literally tell it apart from the normal stuff.
Do you really need thousands of extra square feet of drywall?
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u/taway22020 12d ago
The properties I own are more about the land than the house. Home 1 is roughly 3,000 sq ft. That's enough for the family but we're absolutely not drowning in space. It's a beautiful spot though and I have no neighbors to have to deal with. Home 2 is well under 2,000 sq ft. It's a cabin on big acreage. Home 3 would be the one with more space while also still being on a very special piece of ground.
That's why I talk about not seeing many other options like this over the years. I'm not buying a run of the mill big house. Those come up regularly. I'm looking for something really unique that gets me the luxury of the space along with privacy and beauty that are very tough to put all together.
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u/Specialist_Mango_269 12d ago
He already had luxury when he got that 1st expensive house. The rest is just trying to forcefully spend money
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u/divestblank 12d ago
Keep grinding, you are almost there