The ERE Wheaton Scale

[GandK]

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.

[jacob]

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.

That's my goal with this project. I don't wish to mock people or bring them down. (At least not insofar they don't deserve it I'll still DK those who deserve it) ... As far as haphazard and yet sincere edumacation goes, I try to direct people to either Dave Ramsey, GRS/TSD, MMM, or myself according to where I think their personal level currently are. I'd certainly welcome more author suggestions in column three. However, I don't want to be exclusive! I know how it sucks to be ignored.

Where should I put various authors in col 3? E.g. Brave New Life, jlcollinsnh, gocurrycracker, mikeBOS, ... ?

I've realized, through painful experience, that sending people to the wrong Wheaton level is seriously counterproductive. Indeed, being at "land's end", I'd rather send anyone to the interior [levels too low] that send them my way [levels too high]. I think it's better that people have superior fundamental/foundation skills that playing with fire they don't understand. Given my pathetic social skills this often turns into a "Uh oh ... stop recommending me/ERE right now, other fan-person, yo dude, you should go to <insert appropriate Wheaton level>. You can imagine how our/my Thanksgiving events go. Lots of tongue biting whenever X-person emphatically states that "nobody can survive on min. wage" ...

[enigmaT120]

Is 48K really the median U.S. spending, or the median income?

[jacob]

It's the median household/consumer unit (2.1 persons) income. Given that savings rates are ~0%, it's the median spending too. However, the median/person spending is lower than expected. Around 25k, so about a quarter of the average software engineer income who seem to represent the average FIRE acolyte income.

[GandK]

Where should I put various authors in col 3? E.g. Brave New Life, jlcollinsnh, gocurrycracker, mikeBOS, ... ?

Of those, I have extensively read only jlcollinsnh and gocurrycracker.

I would put gocurrycracker at 5 with MMM (the site, not the guy, who is likely higher). That is, both my spouse and my 28yo stepson are 4s aspiring to 5, and they're drinking in these guys' writing. They're not at all interested in jlcollinsnh's stock series, which is "a lot of detail about a subject I don't need a lot of details about." I... don't know what that says. They may never be interested, honestly. 6-level detail about a 4-level subject. Nerds only? Not sure.

G and I teach Dave Ramsey occasionally. I'd put his work at 3 with GRS, and would definitely give it to a 2 who was looking for more cowbell. Especially a religious 2.

Drawing a blank right now on other bloggers. I'll go dig through my RSS feeds later on and see if any other finance bloggers have obvious territories.

[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.