Fish's Enlightenment

Where are you and where are you going?
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Fish
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Fish's Enlightenment

Post by Fish » Sat Jan 28, 2017 7:39 am

The title of my journal might be exaggeration, but I recently reached a meaningful milestone in my PF journey and I'm sticking with it. Enjoy the story! :mrgreen:

Part 1: Awakening

My journey started about 3 years ago with reading 4HWW, which opened my mind to the possibility of early retirement. At the time, we were overwhelmed new parents, and life without the 9-5 sounded really nice! After a misguided pursuit of FIRE that lasted a few intense months, I found YMOYL, then MMM, then ERE.

Each of these resources provided additional perspective and refined the vision of the FIRE concept. MMM contributed a deceptively simple and mentally sticky portrayal of FIRE as a race to 4% SWR. While this was a
particularly useful tool for understanding the feasibility of extreme early retirement, I'm really glad that ERE has helped me move beyond this by providing an even more compelling life vision.

From viewtopic.php?t=3509
jacob wrote:Here's something else to ponder. Stoic in its modern form means living an austere form of life. However, in its original form it meant living in harmony with nature. A life without friction. The point of ERE is to reach this state. This is a life where you don't have to struggle for anything. Just by living the way you are, all your wants and needs are satisfied automatically.

Part 2: Moving beyond FIRE as an objective

The "race to 4% SWR" mental model of FIRE has a simple and attractive proposition: work for X years and you will never have to work again. However, if this is paired with the common perception that work is unpleasant and to be avoided, it is also extremely limiting. In accumulation, it means always looking to the future and never being fully satisfied in the present. Money is viewed as a scarce resource because the ability and willingness to generate earned income is not commensurate with expenses. The need to take is stronger than the desire to give, resulting in insecurity. Better pad that SWR because going back to work is unthinkable. It took me a really long time to overcome this and reconsider that necessary activities need not be unpleasant.

I think there's also Wheaton levels of ERE perception corresponding to stages of competence(*):
1) ERE seems universally unappealing. Viewed as sacrifice in the loss sense.
2) Is still unappealing to self, but can understand why some people might do it.
3) Advantages outweigh disadvantages. Pursue ERE with FIRE as motivation.
4) No perception of sacrifice. Automatic ERE-consistent behavior.

I started at stage 2 and consider myself somewhere between 3 and 4 now in terms of perception. In terms of actually applying ERE concepts to life, I'm still at best consciously (in)competent at the systems thinking aspect. But I can at least see that the real point of the 21-day makeover is not to save money and the ultimate purpose of ERE is not retirement in a traditional sense. The makeover is a training exercise(&) for beginners (novice systems thinkers) and the talk of retirement is really quite clever in the sense that it works at both stage 3 and 4. Someone at 3 will see retirement as freedom-from while someone at 4 sees it as freedom-to. The makeover is really "applied ERE" at the technician level, where a side effect of following the steps is the reduction of money-dependence to a level where its acquisition is no longer a burden. (And the ultimate goal, I believe, is for the student to learn something about systems thinking by reflecting on why the steps worked as well as they did.) But the bigger picture will be obscured so long as the goal is freedom from work.

(*)To be fair, I don't believe ERE philosophy is a necessary condition for reaching stage 4. I think it's also possible to get there by reading YMOYL or MMM, but you would need to read between the lines because those resources place more emphasis on asset-dependence. ERE is more explicit about developing/using other forms of capital and is extreme enough to emphasize continued value generation in retirement.

(&)From viewtopic.php?p=126128#p126128
jacob wrote:I think martial arts is the ideal metaphor. Just like Dreyfus, we start with technique. Wax-on, wax-off. Then we put techniques together in kata or moves. Then we do a little sparring with our combos. And finally, we realize that "technique" was just a learning tool.

Part 3: Everything seems different, but nothing has changed

Honestly, I never did the makeover.(^) But I've read the ERE book 7-8 times now (each time at a slightly different level) and slowly internalized the principles to the point where I reflexively know the "ERE book move" for any life situation I encounter. Sometimes I take Jacob's advice and sometimes I don't. My_Brain_Gets_Itchy suggested that true mastery can only be achieved by breaking with the master and fitting the principles to one's own personality and temperament. Although I'm definitely not there yet, I already know that's the path I'm going to take.

(^)We still live in the same house. Work the same jobs. Drive the same cars, though much less and to the point where car-free is feasible, though inconvenient since the initial conditions were not systems-optimized. However, we now maintain all our stuff and acquire new stuff pre-depreciated where possible. The ecological benefits of buying used often weigh more on the decision than cost. Thanks to specialist jobs, we have never been terribly off financially (pre-enlightenment savings rate = 40%, with 1 child) but by paying off debt, eliminating wasteful spending and applying ERE principles we've been able to enjoy an ever-increasing quality of life at lower operating cost (current savings rate = 66%, with 2 children).

However, the most meaningful single change is having integrated work/career into the web of goals. The job is much more enjoyable if it is more than a paycheck and source of FIRE fuel. I think if you are doing any one activity 9-5 AND that activity only serves one function AND that activity is required, dissatisfaction will quickly build. The internal complexity is almost a requirement for the career to be sustainable.

In our capital-intensive, relatively high expenses case, overcoming "scarcity mindset" requires acceptance that the lifestyle is leveraged. This means not taking our abundance for granted, and recognizing it is something to be enjoyed while the financial environment permits it. It also requires a willingness to "step down" if needed to a level of consumption that is more appropriate to our ability and willingness to produce if that changes. Our budget is about 50% wants including travel, childcare and charity. At 3x minimum wage, total operating cost for our family of 4 is very manageable on either of our specialist salaries but the required capital buy-in (30 years at minimum wage) is intensive enough that we would choose to live differently if starting again from zero. It's all about the initial conditions! Nevertheless, lowering our operating expenses provides a huge confidence boost that we didn't have before ERE. As for now we'll continue to fill our specialist niches and bank the surplus.


Part 4: Possibilities for future personal development (financial dimension)

Where am I going? That's a great question. I almost intended this to be a "So long, and thanks for all the fish" post, but in the process of writing I realized that I still have personal finance goals. Maybe "goals" is too strong of a word. They're more like aspirations without any strong motivation behind them. Dissatisfaction is needed to get things done...

1. Achieve "true FI" in the one-dimensional sense, i.e. 3-4% SWR. It's currently ~10% at wants level and ~5% at need level. I don't need to put any special effort into this one. It'll happen on its own.

2. Develop a pleasant source of side income that can cover at least 10% of expenses. Maybe when the kids are a little older? (We have two children < 5.)

3. Write a PF blog? No thank you! Novice me thought this would be a great idea but I really don't have enough creativity and interest to contribute any technical innovations. On that topic of innovation, I do think the 3% SWR target is overkill, particularly if earned income is to cover expenses in "retirement" and if various personal and societal safety nets are present, i.e. the converse of the concerns in this post. With the right attitude and a sufficient amount of human capital, it would probably suffice to be only slightly ahead of the average person if you don't mind the possibility of sharing their fate. And on another note, PF/FIRE theory still interests me and I'll continue to discuss it here.

4. Learn to invest, or outsource it? This is my greatest weakness in the PF dimension. For now I'm determined to make this issue irrelevant by focusing on earned income.

5. Continue simplifying our financial lives with a target of zero input. Selling the investment real estate was a great move. We come out ahead with the standard deduction from not holding mortgage debt, which is a nice convenience at tax time. Even on the little things, not chasing the last dollar on phone and internet service makes a big improvement to quality of life with minimal detrimental impact. The desire to minimize input on financial matters is related to the vision of not needing to struggle for anything.

6. Figure out the appropriate financial rules given the objectives. I'm still unlearning some well-intentioned advice that is geared toward Wheaton Level 3 or 5, for example the rule of thumb that one can never save too much money in retirement accounts. Not a bad idea at 20% savings rate, but needs to be reconsidered when at 50%+ savings rate and early retirement is a possibility. Trying to strike a balance between optimality and simplicity with things like backdoor Roth IRA contributions. Part of me doesn't want to care(%), but I'll work out these rules to put the mind to rest.

(%)Because properly investing the nest egg (see #4) has a much higher return on effort.


Part 5: Reflection

My experience is more of an inner journey where a fresh perspective completely changed my approach to life even though the external circumstances remained the same.

Before this all started, I was living a blissfully abundant life. I never really felt scarcity even though debt was a financial straitjacket and half of my waking time was consumed by work. The lock-in occurred when we had children and the remainder of the time disappeared too. No money, no time, no optionality. What a lonely, desperate feeling I will never forget.

Personal finance, in particular the ERE book/blog/forum, has helped me shed the lock-in and recover that feeling of abundance. For the first time in years, I don't daydream anymore about what I'll do when I finally FIRE, or make endless mental projections about when I'll be FI, nor waste thought on similar silly things. I've finally reached a point where it makes no difference to me whether I am retired or not. Having this inner peace wrt FIRE is invaluable, absolutely precious. I would not trade it for anything, not even my "number."

A final word on motivations. I'm not really writing this journal for myself. All are welcome to comment but I'm not writing to seek comment. The purpose of sharing my story is to provide a voice to a minority view (perhaps even previously unstated?) that some other state besides retirement can be a satisfactory destination for the FIRE journey. If there were more/louder voices along this line, I would have been content to leave this unwritten and unpublished. But given how much I silently struggled with these thoughts and issues over the past three years, I wish to share this story with everyone, including the lurkers, in case it might be of the slightest help for even one of you find your way.


tl;dr Thanks Jacob for putting an end to the period of restlessness 4HWW caused in my life. Your book and your ideas were well worth it.

elegant
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Re: Fish's Enlightenment

Post by elegant » Sat Jan 28, 2017 3:37 pm

That was a great read. Thank you. Looking forward for more..

steveo73
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Re: Fish's Enlightenment

Post by steveo73 » Mon Jan 30, 2017 3:48 pm

Interesting read. I can't relate to not looking forward to FIRE. I can't wait until FIRE. I work for the money. I also really struggle with worrying about side income. I don't see the point. This could be because I'm predominantly lazy.

FIRE though for myself like yourself will just happen. I'm not saving extra or pushing myself or anything like that. I just live in alignment to my beliefs. I really like MMM though. His idea of maximising happiness is exactly how I feel. I just try and make predominantly rational decisions.

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Fish
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Re: Fish's Enlightenment

Post by Fish » Sun Apr 02, 2017 11:58 am

For the first time in 3 months, I had a "numbers day" and spent half an hour to check how things were going financially. This was a break from past practice of being hyper-aware, and it has been rather nice not knowing or caring. I suspected that expenses might creep up without feedback, but as it turns out the frugal habits are ingrained and expenses did not increase when following our instincts and living according to our own nature.

While numbers are the subject of the day, here are ours (TTM values):
FIRE income index: 2.29(*)
Savings rate: 66%
Net worth: 10.5% SWR(+)

(*)Based on earned incomes of 1.63 and 1.36, and investments = 0.29. We have joint finances, and because we are measuring income relative to total household expenses, this is really a composite score for the household which accounts for diversification of income due to having two wage-earners.

(+)Childcare is included as an expense, though it might be more appropriate to treat it as an adjustment to income because it's a cost of working. It's currently 25% of our expenses.

I finally eliminated a YMOYL-ism in the spreadsheets and depreciated the cars to zero, recognizing that we would never sell them to raise funds for FIRE. The only non-financial asset tracked now is the house, which per convention is also not considered part of NW for purposes of FIRE.

Despite the abysmal NW relative to expenses, it is certainly possible to FIRE today at 4% SWR if we were willing to make some changes to our lifestyle... such as switching to non-organic food and dropping the exotic vacations (and another big one, raising our preschool-age children ourselves instead of outsourcing their care). 3% SWR would require some sacrifice or more serious application of ERE. The easiest thing would be to sell the house and move to an area where housing is less expensive, but we're not intent on that.

The numbers are not anything contemplated with great frequency. Instead, what does get attention is all the inefficiencies of daily life, and how the design can be improved. Instead of thinking about FIRE, I spend more time thinking about how to fit life goals into the current lifestyle and pondering the legacy that we're going to leave behind. Wealth is not thought of solely in financial terms anymore. For example, we consider our children a form of wealth even though they're strictly a financial liability. The more important value is embedded in our relationships, knowledge, skills and systems.

Some entrepreneurial/business reading was mentioned in another thread. At present, starting a business will not be part of the plan. There's more important work to be done.

Did
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Re: Fish's Enlightenment

Post by Did » Mon Apr 03, 2017 4:48 am

Funny we think not having children to be one of our most important assets, and our resolve and logic in not having them one of our greatest strengths. I think many men who live lives of quiet desperation do so in part due to following this age old routine.

Of course others live deliberately and find joy in little ones etc. Good luck to them.

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cmonkey
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Re: Fish's Enlightenment

Post by cmonkey » Mon Apr 03, 2017 7:36 am

Fish wrote:
Sun Apr 02, 2017 11:58 am
For the first time in 3 months, I had a "numbers day" and spent half an hour to check how things were going financially. This was a break from past practice of being hyper-aware, and it has been rather nice not knowing or caring. I suspected that expenses might creep up without feedback, but as it turns out the frugal habits are ingrained and expenses did not increase when following our instincts and living according to our own nature.
This is great. I have wondered if it's possible to transition from hyper-aware to not caring as much anymore. Your statement gives me hope!

Jason
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Re: Fish's Enlightenment

Post by Jason » Mon Apr 03, 2017 8:06 am

I'll give a big fucking Amen to that. I have found that hyper-awareness leads to burn out. It also leads to despair if you backslide on spending or your income decreases.

I am just trying to control myself. If I can do that, things will improve.

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Fish
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Re: Fish's Enlightenment

Post by Fish » Sun Jul 16, 2017 3:42 am

There was a part of Vicki Robin's interview which really resonated with me, where she redefined financial independence away from "set for life" to "freedom to spend life energy as desired". As time passes, I am finding her latter vision of FI increasingly relevant. Although not mathematically precise, it gets to the point of what FIRE is all about, and sidesteps the issue of whether X% SWR is safe enough to last a lifetime. This transforms FI from a problem of having enough capital, to one of constructing an agreeable lifestyle where inflows and outflows of value are matched.

By this measure, I'm thoroughly convinced that I'm already FI - that is, as long as I'm willing to work. ;) Accumulation of capital isn't a concern anymore. I don't have a "number" though I have some peace of mind knowing that if it really came down to it, we could meet all basic expenses at a 3% SWR by becoming financial ninjas and raiding the retirement accounts.

Producing excess value while living in alignment with one's nature also has the interesting consequence that money is no longer a scarce resource. It just flows towards you, and there's always more than enough. Compare with previous mindset of "needing" 25-33x expenses to get away from job; more money was always needed and its safety was always a concern. That's no way to live.

Now when spending money, I no longer mentally 33x the amount and kick myself for pushing out my FIRE date that much more. In fact, I'm not really tracking expenses or NW anymore. There's some stupid stuff creeping in there like spending $20 on four scoops of ice cream during a recent weekend, or eating at a restaurant purely for convenience. However, these treats are still infrequent enough that they should not have a latte effect. Definitely not very ERE though. :|

An exciting development is that DW and I are finally on the same page with respect to personal finance! After all this time we met in the middle with her focus gradually going up +2 Wheaton levels and mine going down by the same amount. For expenses/standard of living/etc. she's no longer pursuing upgrades and I'm not seeking downgrades. Although nothing really changed on the surface, at least it's now a stable (comfortable) equilibrium rather than an unstable one. I'm impressed many couples here are able to reach agreement on a vision for a low-expenses lifestyle.

Slowly working my way through Jacob's investing curriculum. I have a hunch that the answer will be TSM due to preference for fire-and-forget solutions.

TomBombadil
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Re: Fish's Enlightenment

Post by TomBombadil » Sun Jul 16, 2017 2:10 pm

A final word on motivations. I'm not really writing this journal for myself. All are welcome to comment but I'm not writing to seek comment. The purpose of sharing my story is to provide a voice to a minority view (perhaps even previously unstated?) that some other state besides retirement can be a satisfactory destination for the FIRE journey. If there were more/louder voices along this line, I would have been content to leave this unwritten and unpublished. But given how much I silently struggled with these thoughts and issues over the past three years, I wish to share this story with everyone, including the lurkers, in case it might be of the slightest help for even one of you find your way.
Isn't that kind of the "ERE as philosophy" in contrast to ERE just a "shortcut" to FI point of view?
From what I have seen and read over the past year it seems to occur sooner or later to a lot of the major advocates for FIRE. E.g. MMM sometimes writes that his blog is only about living a good life and the financial part is only there to attract readers. It just seemed to me that ERE is as you mentioned a bit more explicit about that. Maybe because FI is reached faster and the focus can thus also be shifted faster. All in all the aspects you mentioned seem to be the same for myself to be reading (and starting to get involved) here.
Looking forward for more of your thoughts.

7Wannabe5
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Re: Fish's Enlightenment

Post by 7Wannabe5 » Mon Jul 17, 2017 9:38 am

Just wanted to chime in that I appreciate your occasional musings on theory. Probably because I represent a different minority voice, and I also believe myself to be stuck (or, perhaps, more like "crashed" at the moment) somewhere below systems-level. Interesting that you've gone back and read the book 7 or 8 times. Based on prior success in such realms as cooking and calculus, I was thinking that I might do an exercise in which I apply "beginner's eyes" to personal finance. Maybe start by skimming something written by Dave Ramsey (boring as that seems), and then do the initial exercises in YMOYL, and/or the 21 Day Makeover, etc, etc,

classical_Liberal
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Re: Fish's Enlightenment

Post by classical_Liberal » Thu Jul 20, 2017 8:25 pm

@ Fish
Excellent post and insight. Per usual, I seem to have progressed my thinking in a similar fashion as you. Since reaching a point of knowing that my "traditional" (60ish+) retirement is very secure, my thoughts have shifted more towards how I will fill the gap over the next couple of decades. Certainly working very for the next few years to save until FI is an option, but only one of a great many. I look forward to seeing how this new found balance impacts your decisions going forward.

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