Optimising Income in Pursuit of ERE
Posted: Thu Mar 16, 2017 5:58 pm
Hi folks,
I've read Jacob's book a number of times, and have been following ERE principles for some time.
I have a friend who asked me an interesting question which I was unable to answer. I'd appreciate some guidance from the community on how best to address it.
"Question: Should I defer gratification and take on a high paying job that I don't enjoy to reduce my time to FI?
The logic being I can build up a really good capital base and then leave the job for something else."
For some context, my friend is passionate about value investing (and has a decent track record), and this is what he proposes to pursue when he has reached FI.
His opportunity cost financially is as follows:
Option A. Recruitment consultant - est. salary of $250k post-tax and expenses (he's very good)
Option B. Stock analyst for a fund - est. salary of $60k post-tax and expenses
Note, hours are similar in both.
As you can see, there's a big differential between the two choices.
My gut feel was that the ERE principle does not advocate pain or stress in the short term to the pursuit of FI; it is fundamentally about managing your expenses, and your time frame to retirement should hinge on your savings rate (%).
However, I wasn't able to pinpoint a section in the book or the blog or a forum post that addressed this point.
I went through a similar trade off when contemplating offers at the start of my career from Investment Banks and Consulting Firms, but decided that the hours and lifestyle were not worth the increased income levels.
Note, we both understand that FI is more about controlling your expenses, which is why it is accessible to everyone.
Any guidance would be appreciated!
Sam
I've read Jacob's book a number of times, and have been following ERE principles for some time.
I have a friend who asked me an interesting question which I was unable to answer. I'd appreciate some guidance from the community on how best to address it.
"Question: Should I defer gratification and take on a high paying job that I don't enjoy to reduce my time to FI?
The logic being I can build up a really good capital base and then leave the job for something else."
For some context, my friend is passionate about value investing (and has a decent track record), and this is what he proposes to pursue when he has reached FI.
His opportunity cost financially is as follows:
Option A. Recruitment consultant - est. salary of $250k post-tax and expenses (he's very good)
Option B. Stock analyst for a fund - est. salary of $60k post-tax and expenses
Note, hours are similar in both.
As you can see, there's a big differential between the two choices.
My gut feel was that the ERE principle does not advocate pain or stress in the short term to the pursuit of FI; it is fundamentally about managing your expenses, and your time frame to retirement should hinge on your savings rate (%).
However, I wasn't able to pinpoint a section in the book or the blog or a forum post that addressed this point.
I went through a similar trade off when contemplating offers at the start of my career from Investment Banks and Consulting Firms, but decided that the hours and lifestyle were not worth the increased income levels.
Note, we both understand that FI is more about controlling your expenses, which is why it is accessible to everyone.
Any guidance would be appreciated!
Sam