The ERE Wheaton Scale

[George the original one]

Suze Orman & Dave Ramsey for 3.

MikeBOS hasn't been writing for a couple years.

[Ego]

I want this to be a more or less precise reflection of where people are and where they can/could go, potentially.... I see it as a Dreyfus-exercise (people not knowing exactly what's ahead or behind them in terms of insight).

Hence my desire for an accurate Dreyfus map.

Is this a tool that you will use to direct others or a tool that others will use to direct themselves?

[Tyler9000]

Well the first thing that jumps out to me is that the "spending" column feels written from a straight ERE paradigm (start at the median and go down from there). Where would your typical Boglehead fit with expenses 2x level zero but everything else somewhere around level 3-4?

[black_son_of_gray]

It strikes me that the suggested readings for level 8 would wax spiritual/philosophic.

-Have you eaten your meal?
-Yes
-Then go wash your bowl

This almost fills Ego's "ERE saints" role, but not quite.

[P_K]

This table and the accompanying referenced blogs/books will be extraordinarily helpful. I have often struggled to get people interested in or to understand personal finance/ERE when I have been approached about the topic (or approached others about the topic). I now realize this is because I have always started the explanation with material that has either been too advanced or apparently downright crazy sounding. But this project will help me direct people to the proper materials based on their current understanding of the topic and the table itself can be very useful for anyone looking to self direct as well. I am excited to see how this turns out. I have not read many PF blogs so I cannot add much to the discussion at the moment other than generally agree with how things have been laid out on Jacob’s most recent table.

Kind of frustrating to think about how people will have to pass through so many levels of thinking in order to reach the degree of understanding I would like them to have. But I suppose there is no helping it for most people, and it is better to take a long time to reach a destination than never arrive.

[Fish]

At this stage it's just too easy to pile up money to the <3% level without taking the extra effort to diversify income streams.

There are plenty of people who believe that the PF game is won when expenses reach 6k or accumulated capital to 3-4% SWR. That's enough for someone whose end goal is to retire so they can do whatever it was they couldn't while working. Not to say that any one level is better than another, but note that many things become life-changing when pursued at a high level, like minimalism or martial arts. With PF, the life-changing part comes with the application of systems theory, when the only way to reduce expenses further is to build more internal complexity into life and require all stuff and activities to serve more than one purpose.

I used to think that the idea of living on 6k/year was merely an exercise in extreme frugality (and it is, if you're not level 6-7+ in mindset), but I now recognize that the people who practice it find it an incredibly stimulating and rewarding lifestyle. Why don't people like Jacob and MMM spend more even though they're << 3% SWR? One analogy is mental math, if you're any good at it you might insist on solving the problem in your head instead of picking up a calculator, even if the latter would save time or have better precision. I think the same goes for PF, where at a high level one will find themselves equipped with the skills to solve any problem they are confronted with, so the standard consumer solution is never needed. At this point, low expenses are a natural consequence of being skilled, and the decision to apply skill is devoid of any motivation to save money. Whereas at the lower levels, the carrot of early retirement is needed to change behavior and not throw money at problems.

There should not be any value judgment implied by the PF Wheaton levels. Even level 0 is a perfectly fine way to live your life if satisfied. Often it is being dissatisfied that pushes people to move up the levels (also see "Barriers to Change" in the ERE book). So if level 4-6 is all you need to meet your life goals, that's fine. Above that it becomes a way of life, and not everyone needs that.

The "spending" column feels written from a straight ERE paradigm. Where would your typical Boglehead fit with expenses 2x level zero but everything else somewhere around level 3-4?

Expenses are a reflection of how one approaches problems in life. Higher absolute spending indicates more coupling between the lifestyle and the financial dimension. There is more to personal finance than LBYM (i.e. income > expenses); non-dimensional financial ratios cannot tell the whole story. Accepting the standard lifestyle solution for one's "socio-economic status" is no indication of skill; rather the focus at higher levels must be on understanding needs and the appropriate response to those needs. Including absolute expenses, starting from a median level, acknowledges that. Answering your question directly, I think they would still be level 3-4 in mindset, with a relative deficiency in skill compared to someone who has a median income but manages the same savings rate.

[IlliniDave]

Well the first thing that jumps out to me is that the "spending" column feels written from a straight ERE paradigm (start at the median and go down from there). Where would your typical Boglehead fit with expenses 2x level zero but everything else somewhere around level 3-4?

Well, it is the ERE Wheaton Scale, so really, those of us who are sort of ERE-Boglehead hybrids don't map cleanly, and the pure archetype Boglehead is on a scale that is nearly orthogonal to ERE, and in some cases probably totally disjoint.

[IlliniDave]

...

With PF, the life-changing part comes with the application of systems theory, when the only way to reduce expenses further is to build more internal complexity into life and require all stuff and activities to serve more than one purpose.
...

Fish,

Interesting thoughts! By profession/title I am a "senior principal systems engineer" (sounds grand but really just means I'm both sorta old and sorta good at what I do) and my academic background is in control systems theory (in my profession what we call systems/systems theory is often more of a mathematical abstraction of what I think is generally discussed as systems theory here which seems to take on more of a social slant). Now I'm an engineer, so my knowledge is tainted with practicality, but I intuitively approach many facets of life from a systems perspective.

From where I stand now, I see my situation and path forward as an optimization problem. Inherent to that is a cost function which seeks to take a set of goals and balance how well they are achieved with what it takes to achieve them. Both the goals and the pain of perceived cost are highly personal. As I've aged I've grown to value simplicity highly and given my current/initial state of having a fair bit of money available, using it often allows streamlining and the avoidance of complexity. In other words, at heart I am not a true ERE-er. That was one of the first things I ever said on this forum (if I didn't state it outright, I alluded to it) for the simple reason that avoiding the use of money does not rank at/near the top of my hierarchy. Efficient use of it does.

I agree completely that within the realm of PF, life-changing breakthroughs can be made from the (usually unconscious) application of systems theory. But the absolute minimization of spending is not the only dimension of the problem of lifetime PF. For some that axis is where the Holy Grail lies, which is great. For me the big epiphany has come by whittling away at the position I was starting from and finding an optimal-feeling balance between simplicity, ongoing contentment, and meeting my longer range goals (which include a financial component).

It happens my happy place, when projected onto the ERE-axis (or the collection of ERE sub-axes) from my n-dimensional space of interest, doesn't extend very far along the ERE scale. I'm good with that. My purpose here is not to join the ERE elite. Like all engineers perhaps, I'm here to steal whatever good ideas the pure ERE axis generates that will help me better solve my problem at hand. I have deep respect for people who progress to the upper tiers of the scale. But that's not where my destiny lies. As you said (and I think I said previously) at a certain point it becomes a way of life or an end in itself. For me money is a tool in the toolbox that I'll use without prejudice when it meets my criteria of being the best tool for the job.

I don't recommend anyone follow in my footsteps--in the 2+ decades prior to gaining focus I took a path that was horribly inefficient.

[vexed87]

Cool project. The implications of this could be huge. I have misjudged wheaton levels in personal finance before and it always resulted in burning bridges as far as discussing personal finance with the family and DW... the cooling off period can take a long time for those who are uninterested in PF too, this scale could help avoid that pain completely!

In addition to suggesting reading material relevant to the levels, I suggest adding some of the typical benefits of attaining the respective levels, so that we can use this as a reference of what to communicate to facilitate motivation to advance up the scale without reaching the point where the suggestions appear crazy to the 'student'.

E.g:
Level 1 = Can just about keep up with Joneses
Level 2 = Can easily handle emergency, like job loss with an emergency fund.
Level 3 = Able to pay for vacation with cash.
Level 4 = No longer needs to keep a budget, or buy with credit, has already or is near to paying off the car and house.
5- 6???
Level 7 = No longer needs to work for money.
Level 8 = Can live happily without money forever after

Regarding the burnt bridge reaction, I experienced a burnt bridge reaction to the MMM blog when I first encountered it, I think I was at <5% savings rate at the time with large large credit card debt relative to earnings, at that point I and would have been better suited to reading Dave Ramsey. Interestingly when I had learnt all I could from DR, progressing to the MMM level was still a step too far for me, my concern was knowing I was nowhere near earning MMMs household 6 figure salary so FIRE seemed impossible to me and delayed my progress somewhat. My personal eureka moment was learning that FI could happen on lower incomes too, so I sort of leapfrogged the YMOYL and MMM phase in many respects and went straight to ERE... but applying all the philosophy took time, maybe a year or so, and I still have some ways to go before I reach ERE heaven!

[jennypenny]

Its funny, I experienced a similar burnt bridge reaction to the MMM blog when I first encountered it, I think I was at <5% savings rate at the time with large large credit card debt relative to earnings, at that point I and would have been better suited to reading Dave Ramsey. Interestingly when I had learnt all I could from DR, progressing to the MMM level was still a step too far for me, my concern was knowing I was nowhere near earning MMMs household 6 figure salary so FIRE seemed impossible to me. My personal eureka moment was learning that FI could happen on lower incomes too, so I sort of leapfrogged the YMOYL and MMM blog in many respects and straight to ERE... but applying all the philosophy took time, maybe a year or so, and I still have some ways to go before I get to ERE heaven!

This is my biggest concern with the chart. It's still too linear and IMO doesn't adequately represent how to scale PF/FIRE/ERE to a person's situation. I like the idea of having a chart where a person can find their own "You Are Here" but the fixed numbers still bug me a little and on both sides of the equation. I wish there was a better way to represent non-financial capital succinctly and how it can be used to subsidize a lifestyle. For instance, in that travel column our vacations would look very extravagant, but DH's work-related travel generates a ton of points/miles that allow us to travel frequently for free. When he retires, we'll adjust and probably convert our van into a camper. In both cases, we're at the same spending level but we've used different resources to 'pay' for vacations. I dunno. Maybe I'm just being too picky.

Are you adding other sites like The Dollar Stretcher, Bogleheads, The Simple Dollar, To Simplify, Budgets are Sexy, CheapRVLiving, or non-US sites like Monevator and Simple Living in Suffolk? I send people to Gary Foreman's site in addition to Ramsey's when they are in a hole. I also like Budgets are Sexy for younger people who would be turned off by the vibe at Bogleheads. Not sure how many sites you want to add. It would be good to have at least one book listed for each level since websites tend to disappear.

[JamesR]

@jacob,

One mistake you made - tying ERE levels to blog/forum commenting or blogging.

[Kriegsspiel]

Isn't one of the features of a Wheaton scale that changes of x +/- 2 are incomprehensible to a person at x? Looking at the vacations and interests column, everything after 3 seems interchangeable to me.

[jennypenny]

Maybe in addition to/instead of the vacation and experiences column, there could be a column for insourcing/outsourcing. The scarcity person would be outsourcing almost all aspects of daily life, and it would decrease from there. It would have to imply that the outsourced items were acquired with money. It could list examples like cooking or child care or health expenses or transportation expenses. Basically, more lifestyle examples.

[IlliniDave]

Hmm. I'm also 4-6. Ideologically a 6 aspiring to 7, with many 4 life habits (in large part because spouse) that could benefit from more 5 optimization.

No specific changes to recommend in the chart, but the labeler in me wishes I fit neatly into a category.

Great idea to use this for things like reading recommendations for those who are on the move within the levels. To me this is exactly where such systems become tools to help folks rather than mocking mechanisms. I hope you guys can build on it by attaching more books, blogs, etc. to each number.

Maybe a composite score would suffice? My self rating would be:

Paradigm: solid 5
Spending: right on 4
Savings rate: Depending on how that's defined (net of taxes or gross) I could be anywhere from 6-7. Assuming it's % of gross I'll say 6.
Focus: 5
Retirement Goal: today's goal is a blend of 6 and 7, so I'll say 6.5
Vacation and experiences: N/A*

*Nothing in that column seems to come close to me. I really don't vacation in the traditional sense and currently my "vacation time" from work is being used to audition/refine my anticipated ER lifestyle.

so as an average I get 5.3, which is more-or-less middling.

As jennypenny (I think) said above, putting in numbers for things like household spending really presents a difficulty. There's a similar one with the negative correlation between savings rate and household spending. That's not a criticism/complaint, just an acknowledgement of the complexity of the task.

[jennypenny]

haha, yes that's what I was trying to say. Fixed numbers are important, but not the whole picture. I suppose if this is just focused on FI as opposed to ERE/resiliency, then the fixed numbers work. I always have trouble separating the two concepts.

[jacob]

0) First have some sympathy for the very limited space that the table provides Columns can be replaced with other columns if you think there are more useful ones, but it's not possible to fit more words in there. Furthermore, it's not helpful to scatter level 8 concepts all other the place (e.g. spending efficiency) because it takes a level 6 or 7 to even begin to appreciate what spending efficiency means instead of vehemently disagreeing with the fact that some may be more efficient than others. This also means that the table is meant to be used by others ... not so much as a metric for experts to gauge noobs. The hope is that people read it ... and then use it to conclude that there are people around them who seem crazy or moronic in either direction but that this perception is entirely relative. In particular, after understanding the concept of relativity, some empathy might obtain for different levels.

1) Yes, the plan is to add more blogs, books, ... so tell me where to put them. Due to limited space, they better be acronyms though One reason I like the spending column with actual numbers is that it seems to conform nicely with the other columns so far AS FAR AS BLOGGERS GO.

2) The map is not a race. The map is not meant as a test to pass for a certificate or an achievement award either. It's not like "First you must get under 30k spending to pass level 4". The spending level is meant to be representative for the blogs. We are of course really looking at spending efficiency like this: http://forum.earlyretirementextreme.com ... 322#p99322 ... but that concept is hard to convey in a table with 3-5 words per field. The point is to gauge what people spend on something that on the outside looks like a more or less normal lifestyle, e.g. not under a bridge, not in a mansion.

3) People are not meant to conform to a single level. However, I have noticed that in reality, fields at the same levels OFTEN go together. One might say I arranged them according to my anecdotal biases. But it's not like you find your savings rate or your spending and then go read off your level. That would be totally misunderstanding the point. A full time worker in the food service industry living paycheck to paycheck together with 4 other room mates and barely making ends meat isn't automatically level 5 because they only make 20k/year. They're clearly level 1. Similarly, a doctor with a 200k salary isn't automatically level 5 because they put away 100k. They could be level 1.

4) Levels more than two degrees off aren't meant to be theoretically "incomprehensible" as much as they simply aren't practically considered relevant to onself. Compare goals at level 4 and 6. Lots of heated discussions between "4% because internet" and "3% because history". Less heated between the latter and "4% because Trinity". Or compare levels 4 and 5. Both have 4% SWR but they have them for different reasons.

On the "travel channel", higher levels might be dreams but they are seen as impractical ("what sell my house and car and just move to some other country? I don't think I could") vs ("why would I go backpacking when it's more interesting to go and live among the locals for an extended period?")

5) I also considered putting in savings and networth but then quickly ran into the problem of comparing people who just started vs people who had been saving for a few years. E.g. it would be nice to have a column with FU Money, 10x years of savings, ... 25x, 100x, ... but mostly that just measures how long someone has been saving.

[jacob]

I haven't read much of other pf blogs for almost half a decade now (getting old here), but here's my initial placement. I'll place blog according to what they mainly write/blog about and not where the blogger necessarily are themselves.

To me Ramsey talks mostly about getting out of debt, establishing an emergency fund, and investing in mutual funds for retirement. That puts him as a solid 1 in my book. I generally recommend his books to people whose financial/debt situation is a total wreck.

I actually have no idea about Suze Orman. Level 1 or 2?

From my own delightful interactions with the Boglehead forum many years ago, I get a distinct level 3 vibe. Reducing expenses is still seen mostly as a sacrifice in the loss sense. The focus is (or was?) also of accumulating millions rather than aiming for a SWR at a lower expense level. This is also where I'd put early-retirement.org

I'd put TSD and Dollar Stretcher at level 4. The main focus is on saving money by finding smarter solutions. DIY hacking, etc.

I don't know where to put Suffolk, Monevator, jlcollinsh, GoCurry...

[Tyler9000]

Well, it is the ERE Wheaton Scale, so really, those of us who are sort of ERE-Boglehead hybrids don't map cleanly, and the pure archetype Boglehead is on a scale that is nearly orthogonal to ERE, and in some cases probably totally disjoint.

That's true. One could easily map attitudes towards spending and investing on two separate axes. A blog like MMM would rate very highly on the spending side but lower on the investing sophistication (I don't mean that as a slight, but merely an observation that the predominant advice is to simply buy a single index fund). A forum like BH would rate pretty high on the investing side but probably quite low on the frugality. Where they rank in the overall personal finance space would come down to which quadrant they lean towards.

The thing about ERE is that it's not simply about spending level or investing sophistication. While it seems to me that the typical ERE-er is pretty savvy in both, it tosses in a third orthogonal axis around independence from money systems altogether (that's where the systems thinking comes in). So in many ways it's off the financial chart, which is why many people even very good with money have a tough time relating.

But a 3-D matrix doesn't make for a nice linear reference. I like the concept, and also definitely think that referring people to resources in the appropriate zone (usually one level up from their own to avoid the illusion of mastery) is the best way to help people. I'm intuitively drawn to the behavioral measures, though, as if the goal is to help people self-evaluate I think the absolute numbers may trip a lot of people up and cause them to dismiss the exercise outright.

[Tyler9000]

@Jacob -- I agree with your Ramsey and Boglehead rankings. I'd put GoCurryCracker on the same level of MMM -- they have very similar approaches.

[BRUTE]

ok, brute's levels:

Paradigm: uuhh, 2, 3, 4 and 5, 7, a bit of 8? brute is unsure how these are mutually exclusive
Spending: 6 (household of 1)
SR: All over the place, currently Lvl1, in the past (and hopefully future) 5-6
Focus: 5
Goal: 5
Vacation: 7

judging the matrix, brute thinks that the paradigms aren't at all mutually exclusive, he's using most of them in different parts of his life.

it also seems that Vacation & Experiences is really just vacation, and seems too specific compared to some of the others, at least if it's the only concrete column.

maybe Vacation & Experiences should be split up. brute also missed cooking/fitness, topics that seem very highly represented on this forum, and could be described as experiences.

brute would like to see a Insourcing/Outsourcing column added, as well as Minimalism. for example, it seems that jacob is solving problems like chairs & beds by becoming a carpenter instead of throwing money at them. brute solves them by sitting on the floor and sleeping on a pad.

in brute's mind, in/outsourcing and minimalism are much more distinct parts of ERE than typical spending or retirement goal, which are common to other PF philosophies.

another thing that stood out to brute is, Levels have an inherent value system to humans, where higher is always better. jacob cannot expect humans to perceive all of them as equal, or not try to game the system. if this is the goal, fine. but if the goal is merely "humans who liked saving a lot of money on plane tickets might also be interested in [level + 1], brute would not present the whole roadmap at once, and also not call them levels with numbers.