Time and money are both finite resources, but many people expend them poorly. The average American has $3,500 in their bank account and will spend one-third of their life at work. These realities are not lost on a large number of cognizant investors and savers challenging the mold of the “40 hours for 40 years” philosophy commonly found in business.
The result is the FIRE movement — a movement focused on financial frugality and independence. Its members are generally focused on pursuing an early retirement. The idea is that some of the thousands of dollars they’re spending could be put to work in pursuit of an early retirement.
The FIRE movement has become associated with a sort of scrappy subculture of financially literate Millennials. It’s all about spending little and living in the margins. A subsection of the FIRE movement is known as fat FIRE. This sub-movement has many of the same goals as its namesake, with the difference being that the pile of money is bigger (as in multi-million dollar retirements and the ability to afford lofty luxuries).
The conversations of upper class people (the rich) are being magnified on /r/fatFIRE. Some of the posts are, as you’d expect, a little detached from reality. Others are elitist. However, many are insightful. This subreddit deserves the distinction as a unique place where you can find literal rags-to-riches stories, ask for feedback on portfolios and participate in insightful discussions about accumulating and maintaining large amounts of wealth.
So, Bullish decided to compile a list of the best of /r/fatFIRE for 2020:
1. Entrepreneur sells 38% stake of company and bags $1.9 million, asks other rich people for help
It’s not everyday that an entrepreneur sells a double-digit portion of their company and bags $2.3 millon. So when they do, they probably want to make sure they’re doing everything right. /u/SnooSuggestions7655 took to /r/fatFIRE to ask how not to “blow all the money” from a recent transaction. He sold 38% of his company to a private equity fund for 1.9 million euros ($2.3 million).
Many of the commenters noted that /u/SnooSuggestions7655’s recently acquired multi-millions would probably not be immediately life changing. One redditor said that investing the approximately $2 million in stocks would yield positive results and get him closer to a proper fat FIRE.
Word to the wise: If you come into a large amount of money, it’s probably a good idea to use it to saddle meaningful expenses and then spend the rest of it investing in tried and successful investments.
2. College student makes 8-figure income; posts about lessons learned
In August, a well-to-do 20-something college student took to /r/fatFIRE to share important lessons learned from his pursuit of wealth accumulation. /u/WasKnown makes an annual income of $2.5 million a year and indicated he took advantage of the stability created by his family’s financial status to generate his own lucrative income. Among /u/WasKnown’s lessons were:
- Success reveals true friends and helps you identify fake ones.
- Celebrating accomplishments is important and many people will try to diminish yours.
- Capital dominates relationships, meaning that social situations are dictated “by which person has more money.”
- Intergenerational wealth is usually a net negative for all parties involved.
Word to the wise: Money has the power to change people. However, much of the ‘changing’ will be as a result of lessons learned along the path to accumulating that wealth.
3. A real rags-to-riches story: from welfare to millions by 31
A 31-year-old took to /r/fatFIRE to share a literal rags to riches story. User /u/big_bae_throwaway had their son at 18 while living on welfare and pursuing an education. After graduating, they began working in sales for a scrappy startup earning a$25,000 salary.
After leaving that job, this reddit user hit a home run at their second job, which compensated them in both salary and commission. This helped them make over $1 million in annual income in the last four years. The vast majority of /u/big_bae_throwaway’s net worth is now in savings, home equity, real estate and other investments.
Word for the wise: Rest easy knowing that some of your tax dollars are going to work in meaningful ways. The welfare system catches a lot of flack, but when it works – it can change lives and produce productive contributors of society.
4. Corporate types share tactics for negotiating higher incomes and advancing
In December, /u/OneMoreTime5 started a thread intended to get corporate-types in the /r/fatFIRE community to share tactics to negotiate higher incomes and advance in their careers.
Many commenters suggested making your manager look good, network beyond your team and take on challenging roles whilst at work. Other commenters observed that securing promotions and advancing would typically require them to leave the company. /u/DistanceMachine suggested getting “a competing job offer that you would be comfortable leaving for.”
Though several commenters voiced their disappointment about this new paradigm, commenter /u/eightiesguy put into perspective: “No matter how invested you may be in a job, eventually it’ll be just two to three bullets on a resume.”
Word to the wise:You might take the value you’re adding elsewhere to have your worth recognized. Be prepared to look for other positions in order to secure raises and advance in your sector.
5. When should inheritance be passed down?
In November, /u/chubbynotfatfire took to /r/fatFIRE for advice about inheritance. Their question was simple: should you pass down millions to your children? If so, how? On the subreddit, inheritance questions have become a common staple of discussion.
The post racked up 196 comments in the days after it was posted. One response from /u/kinnavenomer, the son of a high net worth individual who received a sizable inheritance, was particularly a standout. His parents started teaching them about finance from a young age and he then began making a sizable annual tax-free gift. Over a period of time, this money stacked up to a pile of cash worth over $400,000, intended to buy him a house and some extra cushion.
One critical lesson that /u/kinnavenomer tried to impart on the original poster and readers was that the value of a dollar needs to be “taught and reinforced.” He added that money “falling out of the sky” is seldom a good thing. However, once a beneficiary (namely a child, grandchild or other person) proves that they’re not going to burn the money or make poor decisions, an incremental gifting of an estate would be wise.
Word to the wise: Don’t give money to people who won’t respect the value or importance of that gift. Constructive estate planning is crucial for high net worth families.
6. One online business owner asks about “taking chips off the table”
A startup founder with an online business which generates over $30 million of revenue a year took to /r/fatFIRE to inquire about how he could realize some of the paper gains from his private business. The company has seen robust growth during COVID-19, but /u/midwestmillion noted that he hasn’t been involved in daily operations for two to three years. He said he was considering selling 30% of the company to increase his personal wealth.
The reddit user then delved into a few things he has considered: employee stock plans, a private equity approach or a sale of stock to a publicly traded company that his company is partnered with. Commenters shared all kinds of resources, including thoughts from an investment banker, one entrepreneur’s personal experience with creating an employee stock plan and a talk by a prominent CEO taking money off the table at every funding round. However, a general consensus was to contact an investment banker in that reddit user’s region to help iron out the details.
Word to the wise: Money making ventures make for money-related problems. It’s important to realize the value of the things you’re creating as to minimize the downside. Also, It is critical to ask questions and pay for expertise when it’s critically important.
For more of the best of reddit, check out our post ranking the best financial reddit threads of 2020.