The dangers of low expense lifestyles?

[black_son_of_gray]

One of the worst things you could do is changing investment strategies every time you read another book about investing.

maybe this is actually a necessary phase in maturation as an investor. it seems to happen to pretty much every human that starts out investing, until they've heard most ideas and no new books gives them sudden confidence in something completely different any more. kind of like human teenagers are "in love" with a different human teenager every weekend.

Similarly, I am actually quite thankful that I started investing in 2007 just before everything started to tank. I only had a couple hundred dollars invested, but it felt like a lot at the time, and the roller coaster ride that ensued gave me valuable experience. (i.e. skin in the game)

Considering how long it has been since a big downturn or recession, a fair number of aggressive savers may have fully accumulated their stashes and FIREd without ever going through that kind of experience. I would argue that pushing through a period of investment upheaval is probably also a necessary phase in maturation.

[Seppia]

The unfortunate thing is that many MMM / FIRE wannabes seem to do just that.

How could this be unfortunate? Then they will face challenges and aquire new skills as need arises along the way, enabling them to be more in charge and have way more interesting lives than elsewise.

Or do you think the RPF example of someone retiring early and then suddenly waking up 20 years later with an inbred dog with allergies and a wife with bad teeth is very common?

My guess is that lots of stuff happened during that period enabling the early retiree to handle the situation (and any other unforsen situation) just fine.

Of course, the world is full of opportunities and in civilized market based economies it's fairly easy to go back to work and find a way to survive.

I think optimism is very positive in general, but if you're smart enough to save 2/3 of what you make, why would you want to be overly optimistic?

I think the current mindset of
"I don't care that valuations of USA equities are high, the stock market always goes up, so I'll just pull the plug and go live in Ecuador" + the blind fate in the 4% rule* is prone to potentially put some people faced to some tough reality checks in a relatively short time frame.

It's a LOT harder after 4-5 years of early retirement to just go back to work and make the same 6 figures you were making before. Society is not that used to people quitting work for that long.
Maybe in some tech jobs (at least today, who knows in the future), but definitely not in most jobs.

Or maybe stocks have reached a "permanently high plateau" and everybody will be fine (didn't work out super great the last time thought that was the case though).

*there's people working off of the 4% rule in Europe, without considering the much higher taxation and many other factors.
In Italy, for example, you're taxed a fix 0.2% of you invested assets every year no matter how they did, plus capital gain and dividends are taxed 26% (no matter how much you're making this way, or if it's long/short term).
A year ago I tried to talk a fellow Italian out of keep stashing money (euros) in an S&P500 fund, when the dollar was at a historic high, and USA valuations had one of the largest valuation gaps VS euro stock in history.
See any danger here?

[TopHatFox]

One solution for that would be to not have all our $ in mostly large-cap US equities. I think JL Collins did a post in the US market valuations. Though now that I think of it, his allocation is oversimplified. Useful to get people started.

Mom's find ways to get back into the workforce. It can be done. With all the new time available, self-employment is possible too. Maybe working a "timeless" job would be particularly useful. Coding would not be that. Financial planning would be.

All of this considered, just save a decent buffer and avoid the pitfalls. But do it for the chance of emergency, not helicopter rides above the Grand Canyon lol

[Farm_or]

Managing losing, developing discipline and adhering to long term goals only comes easier with experience.

So many professional money managers can tout about beating the market in bullish times, but the odds are against them in the long term.

Living without luxury and money working for you instead of the opposite? Very dangerous lifestyle indeed. Much better to own many plastic widgets than to accumulate funds for essentials.

[James_0011]

I was also thinking about the mom thing. My own mom went back into the workforce after ten years or so out of it just fine. I feel like opportunity will always be there, especially if you're flexible (willing to move).

[ducknalddon]

Maybe in some tech jobs (at least today, who knows in the future), but definitely not in most jobs.

I think Tech is probably one of the worst ares for returning, if your skills start to lapse or you get a few grey hairs it's over.

In Italy, for example, you're taxed a fix 0.2% of you invested assets every year no matter how they did, plus capital gain and dividends are taxed 26% (no matter how much you're making this way, or if it's long/short term).

I suspect this is a higher risk than many think, in the UK and I guess the US we have a fairly benign investment regime, that could change quite quickly. Not that I'm against taxing dividends or capital gains but any progression in the system could be removed under a punitive approach.