We set aside $2 million in a few short years – do we double down to reach $10 million, or live life now?

One of the most believable aspects of living a fatFIRE life is deciding how much you actually need versus how much you want. While this might seem like a textbook first-world problem, it’s still a problem all the same for those who are trying to live to retire early enough to live to the fullest. 

In the case of one Redditor and his wife posting in r/fatFIRE, they are looking at whether, after saving $2 million, they can take a sabbatical and walk away from a few of their “side gigs” for a while. In this potential scenario, they would live comfortably off what they have put away, all while (temporarily) saving less. 

This is a pretty unique scenario where you have a Redditor who essentially earns the salary of two full-time roles while the spouse also earns full-time money, so plenty of cash is available. 

The Sabbatical Idea

The original post shows that this couple has an approximate net worth of $2 million, excluding their primary residence. The couple earns around $700,000 pre-tax to achieve this net worth, with a $130,000 yearly expense burn with their full-time nanny. According to their math, this allows them to save around $400,000 annually after taxes. 

However, there is a caveat here as 50% of their net worth is $1 million in a property (not the main property) that only yields a 3.5% net cap rate. In other words, they will not get much richer off this property and half of their net worth is not liquid. 

As far as salaries go, the Redditor’s wife earns around $200,000 pre-tax, while the original poster has a FAANG W2 role for $250,000 and moonlights as an ABS 1099 consultant, earning around $250,000. The wife is also beginning a side business, though it hasn’t turned a profit yet. 

The couple has a three-year-old son and plans to grow their family while the wife’s family lives abroad. This is an important distinction, as the couple could move to the wife’s parents’ country, where they would likely be given a home and land. 

Given all of the math, the Redditor is arguing for a “sabbatical FIRE,” which is a new term for most of us. The plan would be to drop two of the three combined roles in the next 12 months and then live off the one paycheck. They think they can live “hand to mouth” on a single income without touching their $2 million principal, which will continue to grow even without adding additional savings. 

As a bonus, if everything goes wrong and they can’t find a job post-sabbatical, they also own a $4,000 monthly property in Europe, where they could move to downgrade their cost of living. 

What’s The Next Step

What we don’t know from the original poster, outside of being a 29-year-old male with a 27-year-old wife, is at what age they plan to retire. Whether or not to take a sabbatical seems entirely dependent on that number, and we never learn what it is. 

This said, the real hiccup here is that if they take the sabbatical, their investments will continue to earn, but not increasing this number will delay retirement for an undetermined period. If anything, during this period in the Redditor’s life, in their 20s and 30s, is a prime time to grind and make money. 

With children so young and more family (hopefully) on the way, taking a sabbatical now seems ill-advised. The 5-month-old won’t truly appreciate the dad being home all day, and it delays FIRE plans overall. The big concern is that walking away now will only make it harder to return to work, while the reverse isn’t as true. 

If anything, there is room to scale back the work and maybe do slightly less consulting or something else that will allow for more 5-9 PM free time that might help with overall mental health. Still, taking a break at this moment in life seems like an unnecessary idea. 

If anything, see if you can negotiate with your work to take a month or two off work, travel, and find a mental break before returning. If you will, test the waters to see what a sabbatical could be like before fully diving in. The other alternative is to wait until you have another child, take parental leave or FMLA, and see what life is like over three months at home. 

The post We set aside $2 million in a few short years – do we double down to reach $10 million, or live life now? appeared first on 24/7 Wall St..