From Spinoza's (1632-1677) "On the Improvement of the Understanding").
"Lastly, to endeavor to obtain only sufficient money or other commodities to enable us to preserve our life and health..."
The question is what is “only sufficient money?
In the forums we all know that the answer depends on one’s time horizon, one’s estimate what yield one thinks to get on his savings, ones guess about inflation. But most of all it depends on what one is spending every year “to preserve our life and health”.
For me it was enough when I could continue the same (rather frugal) lifestyle as I had developped in the six years working to my FI.
Now, thirteen years later and practicing ERE lifestyle for allmost two years, I notice that I have much more than “sufficient money”.
I saw following
1- I don’t hardly suffer from inflation, my (average) spendings decline every year
2- Technical- and size (living in smaller houses) improvements cuts my electricity and heating costs
3- Beeing FI, I get proceeds out of my hobby projects
4- My deposits rate is about 4,5% but my withdrawal rate is 2%, so my fund is automaticly growing.
I see the same happening with Jacob.
So my question is are we too conservative in computing our starting fund before we plunge in the freedom of financial independence?
What's enough?
Well, I suppose it depends upon individuals' risk profiles. Some of us want to ensure a certain margin of safety, despite understanding that the likely outcome of a convservative approach is having more than strictly necessary funds.
In my case, I want to ensure that I will NEVER need employment again. I've discovered that, independent of the current economy, being 50 is a deal killer for most employers. It may be contrary to law to discriminate, but that doesn't mean it doesn't happen. That's why I think Tim Ferriss is being too blythe about the ability to return to status quo ante after a mini-retirement or a failed entrepeneurial experiment. Some times you cannot get back to square one in the world of jobs.
In my case, I want to ensure that I will NEVER need employment again. I've discovered that, independent of the current economy, being 50 is a deal killer for most employers. It may be contrary to law to discriminate, but that doesn't mean it doesn't happen. That's why I think Tim Ferriss is being too blythe about the ability to return to status quo ante after a mini-retirement or a failed entrepeneurial experiment. Some times you cannot get back to square one in the world of jobs.
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secretwealth
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My short answer is yes. I'm planning a much higher SWR and lower inflation rate than are usually discussed on this forum. However, my plan is more short-term oriented as I'm looking more to semi-retirement and changing my profession.
I think risk aversion is an inevitable human trait, so people will inevitable err on the side of caution. When it comes to early retirement, that may mean working several years more than necessary.
I think risk aversion is an inevitable human trait, so people will inevitable err on the side of caution. When it comes to early retirement, that may mean working several years more than necessary.
Yes, we live in an uncertain world. Chances are you will have one or more "abnormal" years at some point that could be considerably more expensive, particularly when you are older. Your risk of mortality tends to double about every eight years.
Spinoza - as a man -- may not ultimately be a very good model since he worked as a lens grinder in a dark attic, which apparently led to his death of a lung-related illness at the age of about 44.
I think I'd rather be on the safe side -- you can always give it away if you find that you don't need or want it.
Spinoza - as a man -- may not ultimately be a very good model since he worked as a lens grinder in a dark attic, which apparently led to his death of a lung-related illness at the age of about 44.
I think I'd rather be on the safe side -- you can always give it away if you find that you don't need or want it.
I plan on having a huge safety net for two reasons.
One, there are too many variables 40 years out. Healthcare? Maybe we have unbelievable healthcare then, but it requires cash. Or, I need to leave a steadily freedom eroding U.S. (I really hope note)
Two, I would hate to have to go back to work at a wage significantly less than I make now. Make the cash while I can. Talk about hating every day. This low wage would be more likely the further you are from your last job.
One, there are too many variables 40 years out. Healthcare? Maybe we have unbelievable healthcare then, but it requires cash. Or, I need to leave a steadily freedom eroding U.S. (I really hope note)
Two, I would hate to have to go back to work at a wage significantly less than I make now. Make the cash while I can. Talk about hating every day. This low wage would be more likely the further you are from your last job.
Exponential growth just throws everything off.
You can plan for "just enough" and hope nothing goes awry for multiple decades.
Or you can plan for just a little bit extra. But then that little bit, if you planned well, piles up on itself year after year until you've got a lot extra.
For me, it's not that much more work for me to create a big cushion that will then multiply itself over the decades. So, why not? At a cost of about six months more work I get a little safety net that will snowball on itself, and when I'm 70 I'll be able to afford to use dollar bills as toilet paper. Or at least pay my health insurance.
You can plan for "just enough" and hope nothing goes awry for multiple decades.
Or you can plan for just a little bit extra. But then that little bit, if you planned well, piles up on itself year after year until you've got a lot extra.
For me, it's not that much more work for me to create a big cushion that will then multiply itself over the decades. So, why not? At a cost of about six months more work I get a little safety net that will snowball on itself, and when I'm 70 I'll be able to afford to use dollar bills as toilet paper. Or at least pay my health insurance.
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George the original one
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Like Chad said...
We bought a second house back in January, ultimately to live in once I can exit employment. It was an estate sale... the deceased had little money and couldn't afford a doctor (or felt ashamed to need a doctor) when there was a leg injury. Gangrene set in and a blood clot did the deed at an all too-young age of 59.
Now I'm fairly certain that if the former owner sought medical care as friends and family had urged, the money would not have mattered in this instance. However, it was an obvious pyschological block that prevented the owner from seeking treatment.
I do not intend to have a similar fate!
It would also be terribly annoying to run out of money at, say, age 80. Few people that old are going to find a job because they won't be quick enough or bright enough or strong enough, yet they find they are "full of life".
We bought a second house back in January, ultimately to live in once I can exit employment. It was an estate sale... the deceased had little money and couldn't afford a doctor (or felt ashamed to need a doctor) when there was a leg injury. Gangrene set in and a blood clot did the deed at an all too-young age of 59.
Now I'm fairly certain that if the former owner sought medical care as friends and family had urged, the money would not have mattered in this instance. However, it was an obvious pyschological block that prevented the owner from seeking treatment.
I do not intend to have a similar fate!
It would also be terribly annoying to run out of money at, say, age 80. Few people that old are going to find a job because they won't be quick enough or bright enough or strong enough, yet they find they are "full of life".
Hmmm -- my parents pulled that trick of outliving their money, healthly things that they are. Good thing for them they had at least one frugal child.
Of course, running out of money at 80 HAS to be much less risky than living in a haunted gangrene-death house. Or at least that is what I have been told . . .
Of course, running out of money at 80 HAS to be much less risky than living in a haunted gangrene-death house. Or at least that is what I have been told . . .