I have a problem I keep coming across. Should I keep working (making ERE numbers look better and greater) or should I take a leap of faith to experience something out of life(like travel or sailboat living) when things are uncertain and could potentially ruin my career? I keep thinking I should live now, but I think most of us also identify with delayed gratification. Thoughts? Is it better to work 5 years ensuring security late in life or live now (just 30) to experience it while I am young? Ensuring I will need to work down the road?
Keep working or live experience?(18 posts)
Why would there be a need to have that "or" in between? It is not possible to have an "and" instead?!
I don't think it should be much of an issue to work say 6 months a year and the other 6 months you can do whatever you want! Ok, this way you are probably not going to build up a full fledge career, but hey.. you retired anyway.. It has been done before!
I like to use the Grahamanian "margin of safety" to illuminate my thoughts and feelings on this matter for myself. Generally, a wider margin is better, but each individual will have own level of comfort with what is wide enough. If the margin contracts after you pull chocks, you can always go back.
I achieved "FI" at ~35, pulled chocks at ~36, had 3 years of doing what I wanted, when I wanted, but a solid 2 years of that 3 was researching and developing my master's thesis project. Here are some of my thoughts on the experience of coming in and out and in (and out) of ERE:
* 2-5 years "feels" about the right duration for either a solid freedom period, or a capital accumulation period
* an academic objective, no matter how limited, can be seen as a "conventionally" acceptable explanation for a "career gap" in one's resume -- your resume may not matter to you (I don't really care about mine), but unfortunately it matters to other people with whom you may wish to enter a professional work relationship
* one downside to my first post-career freedom period was the lack of contact with collaborators on projects that interested me -- I was jamming on my thesis, which is by definition a solo gig, and my communication and collaboration skills most definitely atrophied -- I recommend finding collaborative projects with the "like-minded"
* I'm in my second Capital Accumulation period now, and managing to have a high level off fun with the project I'm on, though as always I find the upper/structural nature draining -- it's been about 1.5 yrs and I can feel the wear and tear beginning to show itself, thus I'm already looking to terminate this period and enter my second Freedom period (the Nullhof is an example of something I'm ruminating on)
* also wish to disclose that this Capital Accumulation phase has two purely economic sources:
- my margin of safety was high (in 2008 had investment income more than 2x my expenses) but has since contracted -- after my portfolio took some dividend cuts in 2009, my margin of safety was, well, marginally above my expenses -- I wanted to accumulate some capital to widen the margin, so I sought out temporary slavery
- my cash position was low (~10%) and with the stock (and briefly, bond) market retrenchment, I decided that my future periods of freedom could benefit from me accumulating a significant slug of capital and investing it while the market appeared to be in a down cycle -- so I sought out temporary slavery
- and one more non-economic reason for the temporary slavery: I'm temperamentally a contrarian and like to do things when others are not (gives me space and time to
breathe and think when there are no crowds around), so I figure if there is a time to suffer through the workforce, it's when the ranks are thin and there is lots of competition (i.e. rising unemployment) -- the challenge stokes me, and I feel much better working now than I did at the height of dot-boom when sign-spinners were being hired as software engineers -- I distinctly recall an uncomfortable level of excessive (employer) spending, inappropriate hiring sprees, and undue arrogance around technology ventures...the work was easy to find, salaries relatively high for the amount of effort required, and lots of eating and drinking, but the sense of life and struggle was not there, and I craved it
Too many rants from me recently. I will stand down and let others hold forth.
But one note: I have lost touch on this point...is 35-36 considered ERE "proper", by the given definition?
@Steve I tend to think of ERE as the ability to retire within the course of 5 years, rather than the typical 40+ years. It seems to me, that while ERE provides some concrete methods to obtain FI, it will only work for someone when nuanced to that someone's unique situation. Your post exemplifies that.
BTW, I really like the idea of moving in and out of ER. To the point of this topic, I don't plan to ever completely stop "working." I find it a good way to meet people and experience new things/cultures/ideas. In ER, however, I will not be looking for the best paying job within my skillset. I will be looking for unique jobs that enhance my skills, preferably my physical skills like cooking, gardening, boating, etc.
The "and" would be my goal. I love the idea of sporatic contract work, but I think most of that has dried up. You are right, everything has been done under the sun.
Ya, probably not the right definition unless I took the minimalist jump now, but English and acronyms have never been my strong suit.
The problem (maybe just for me) is that having 25X my current living expenses is nearing, but my desire in semiretirment (I don't the right acronym/definition) it to experience new ways of living, and not all of them would be cheaper than the way I live now. Also, I think costs like health care and nomadic living are difficult to accurately predict long term. I might be easy to determine a "max" value per year, but then I no longer have the 25X needed to live.
@Matthew - I think one of the first things about ERE is (briefly) delayed gratification. If you're only one or two years away from FI, then I'd slog through and make certain it was done. To me, I feel that there has to be no question of returning to work because I must... it should only be if I want to.
Now if your personal definition of ERE is more likely "travel for 6 months and then return to work to finance the next 6 months of travel", then that's fine and it's what you should do. For myself, it's too insecure of a lifestyle.
I like a lot this:
"In ER, however, I will not be looking for the best paying job within my skillset. I will be looking for unique jobs that enhance my skills"
basically turns out to use ER to build a better version of ourself... I totally love this way of consider it.
I don't think a lot of retired people are actually "retired" - at least not at 35. They are writing books, running blogs, running small businesses, doing off hand consulting work. The freedom is the freedom from 9-5, 50 weeks a year, for 40 years.
I realized the other day (and it was a revelation) that I am already retired. I quit my job and started a small business 4 years ago, and I realized that I could work 20 hours a week, 40 weeks a year and keep putting money away.
This also solves the career gap issue - I am a business owner- they don't need to know how many hours I worked at it. Not that this is very important to me right now - but it might become if I needed health insurance badly and needed to be employed to get it.
The average bear (most people who work at a job and do the mainstream way of life) involve themselves with time frames of this nature:
Time spent on Working to have either a career or just keep on keeping on bringing in the bacon: 40-45 YEARS
Time spent on paying off a mortgage to own a home: 30 YEARS (or if you refi'd or bought again--infinity).
Time spent on buying a vehicle (per vehicle) 5 Years (average loan, but also 72 or 84 months, thus creating loads of negative equity in the vehicle).
Time "wasted" watching TV: 5 or 6 hours per day.
Now tell me the mainstream outlook is not a trap of many sorts.
These examples are but a few of how people are trapped into the dictated way of life we are trained to follow.
If you like 84 for a lifespan (and I really do being currently 65!!), then assuming you stop some of the madness at age 60, you have done the "I owe my soul to the company store" routine.
That is what I stuggle with. I am willing to work sporatically, but I don't want to "have" to after I make the leap and I don't care to give up the security of a high paying career to end up flipping burgers because someone thinks my skills are out of date after several years of doing what I want.
Retired is when you have enough cashflow to cover your living expenses for the remainder of your life. Enough that you can pursue your muses without the requirement of having to keep pursuing them. I think people do achieve financial freedom by 35, but they also pursue businesses etc. because what covers all the bills today might not cover them in the future and tend to have extra energy to do things. Also, ERE usually requires the individual to scale down their cost of living to make the wealth last nearly indefinitely.
My philosophy is to cover all my needs with a substantial margin of safety. If I "want" something. Then I work for it. The problem with financing wants with financial independence is that wants are, if not infinite, then quite large. At some point, you gotta decide when enough is enough. Otherwise, you'll 2 years of work to have an extra bathroom, another 2 years to buy a boat, then 2 years for an annual off-continent trip, ... soon you'll be back to the middle-class lifestyle.
@Matthew: I can relate to your problem. Depending on how much I want to spend, the required nest egg changes significantly, right? That said, you can come up with some figures which reflect your expectations NOW. If there's a good chance you'll have kids, consider that cost as well. I don't think you can ever earn enough to cover all your future wants. No matter how large your nest egg, there will always be occasional moments of doubt where you think, if I only had earned $x more, then I could have bought... Also, life is a learning curve, so better start trying things out ASAP.
That said, try to see if you can't combine some sort of a career with an experience of retirement. Gradually downscale one and grow the other, as you learn about the life you want to lead. Contract work is great for this, and it can't be all gone.
Why isn't the ERE lifestyle considered a full time job ? You run it like a bank, reduce expense to maximize profits, learn to invest, lend money to society, etc. Pretty much a business right there, and solid one, which is under your control.
Returning to the typical 9-5 seems kinda of weird at this point.
The ERE lifestyle is really all about finding ways to pay yourself while you are having fun.
You need the right mindset, which among other things is figuring out how you can develop multiple streams of passive income that will cover your monthly expenses (hopefully with a wide margin of safety) now and for the rest of your life.
If you love to travel, for example, figure out how you can make passive income while traveling. If you love to sail, figure out how you can make passive income while sailing.
If this was easy, of course, everyone would be doing it. But it's very satisfying when you make it happen because it's so challenging to pull off in practice.
Take a multi-year, multi-decade view. Also read a lot to get ideas and inspiration from others who have come before you.
Books I highly recommend (which will cost you money to buy, but are well worth the investment in my opinion) include:
The Top 10 Distinctions Between Millionaires and the Middle Class (Smith)
Safe Strategies for Financial Freedom (Tharp)
Wealth Buys Freedom (Scott)
If you can get your expenses down to $1K or $2K a month, for example, all you need is $2K to $3K a month of passive income and you are financially free. You will be making money while you are sleeping, traveling, sailing, or whatever it is that you love to do.
@Cashflow "The Top 10 Distinctions Between Millionaires and the Middle Class (Smith)"
Here's my summary of that book:
Hi Cashflow, what sources of passive income are you using, if I may be so curious? :-)
@Cashflow: thanks for the book recs... Tharp's trading books have been excellent I'll be sure to pick that up.
@Marius "what sources of passive income are you using"
I use publicly-traded securities in the form of a well-diversified portfolio of stocks. I'm looking at adding bonds in the form of either ETFs or funds.
I've considered other asset classes over the years, but didn't invest in them for one reason or another. Directly-owned real estate (e.g., single family homes) turned out to be too illiquid and hands-on for me (I'm a passive investor). Instead, I owned publicly-traded REITs (real estate investment trusts) for a few years. I got into and out of the REITs with near perfect timing that was due to dumb luck (i.e., I don't read stock charts or do technical analysis).
I keep a year's supply of expenses on hand in the form of cash so that I'm not forced to liquidate any stock positions when the market is down (i.e., I get to time my withdrawals when the market is up). I paid off my mortgage awhile ago and pay my credit card balances in full each month.
I continue to work as a freelancer (which technically isn't passive income). Every dollar I bring in as earned income means one less dollar I have to withdraw from my stock portfolio. This allows my stock portfolio more time to grow and it also lets me add money to my tax-advantaged accounts (e.g., 401K and IRA).
I'm continuing to look for additional streams of passive income that are compatible with my lifestyle and personality. I consider many ideas and reject nearly all of them, which is OK since I'm waiting for the "perfect pitch" (as Warren Buffett puts it).
I like your idea of working as a freelancer to allow your portfolio to grow more.
"Passive income" sounds great. But sources are hard to find. Most that aren't regular investments or MLM schemes are only passive if you put in a lot of work in the beginning or hire someone to take care of them. (royalties from creative work, vending machines, renting out garages, sports infrastructure, etc). I hope to find ideas in this forum!
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