The dangers of low expense lifestyles?

[thrifty++]

@Jean - I find it hard to understand how you are FI if you have been studying since before 2010. Curious how it was possible to accumulate?

[Jean]

I accumulated mostly during the phd. I saved about 60'000. I bought a house for 115'000 and I rent it for 750 a month.

[stayhigh]

What is the worst thing that can happen to me? I will run out of money? Well, most 9to5ers have no money too. I'm gonna die? Everybody gonna die one day! But before all that bad things happen, I'd like to enjoy my life as much as possible - not spending my best time locked inside the office.

Of course. But EREers have money. We are not like other 9to5ers! You cannot prepare for everything. But this is an odds game. What I got from RPF is a reminder that skating close to the edge may be too close. Maybe not all the ERE stars will line up perfectly. Creating a little buffer and improve your odds for success may be suitable for some, but maybe not you.

Having cash buffer, healtier lifestyle, some usefull skills and little material need puts odds game into ERErs favour in SHTF scenario I believe.

[RealPerson]

What is the worst thing that can happen to me? I will run out of money? Well, most 9to5ers have no money too. I'm gonna die? Everybody gonna die one day! But before all that bad things happen, I'd like to enjoy my life as much as possible - not spending my best time locked inside the office.

Of course. But EREers have money. We are not like other 9to5ers! You cannot prepare for everything. But this is an odds game. What I got from RPF is a reminder that skating close to the edge may be too close. Maybe not all the ERE stars will line up perfectly. Creating a little buffer and improve your odds for success may be suitable for some, but maybe not you.

Having cash buffer, healtier lifestyle, some usefull skills and little material need puts odds game into ERErs favour in SHTF scenario I believe.

That is true. This discussion is simply about the size of the buffer. The smaller the buffer, the less room for error or bad luck.

[BRUTE]

@ Brute: A worthwhile question. It is instructive to look at the experiences of women taking time out to have children, people taking a "career gap" to go travel, and of people sidelined due to illness or industry restructure.

brute took a bit over a year off as a career gap. then he went back to work pretty much immediately. maybe depends on the local job market. or maybe a year is not long enough to "fall out" of that bucket.

[Seppia]

It's hard to conceptualize how a low expense lifestyle can be "dangerous".
The one thing that is careless is blindly planning for a 25x super low expenses stash, all in VTSAX (80% of which in a 401k) and quit working without possessing any additional skill "because Trinity".
The unfortunate thing is that many MMM / FIRE wannabes seem to do just that.

[James_0011]

I wouldn't take advice from a religious fanatic, but that's just me.

[Eureka]

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.

[TopHatFox]

On portfolio management, I just read The Intelligent Asset Allocator by Bernstein. My portfolio with two total market funds and 100% equity stands to shame. lol

Will need to update.

It seems the hardest part about FIRE is raising the capital. Investing in a well-diversified, low-fee portfolio takes much less time. It takes a professional money manager maybe an hour to make a shit portfolio into a suited one. Then, even with 6-12 asset classes in retirement and taxable accounts, rebalancing once a year doesn't take very much time either. This accumulation difficulty is likely what makes low-expense FIRE tempting for many.

[Dragline]

Don't believe the hype -- its the saving rate that matters the most, not getting wound up about particular portfolios. See https://seekingalpha.com/article/405978 ... -investing

Leave your funds alone and keep reading/studying until you find something that you are willing to stick with for a decade or more AND feel that you do not want to do any more research. One of the worst things you could do is changing investment strategies every time you read another book about investing.

[Salathor]

I didn't listen because I usually don't like audio or video on the internet, but does he seriously suggest a lean retirement is unsafe because you can't get $15 martinis or helicopter rides and you'll crave them when you're an old person?

I'm still working, but I will NEVER buy a $15 (inflation-adjusted) martini. I'd rather be sober.

[BRUTE]

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.

[BRUTE]

I didn't listen because I usually don't like audio or video on the internet, but does he seriously suggest a lean retirement is unsafe because you can't get $15 martinis or helicopter rides and you'll crave them when you're an old person?

yes he does. his particular examples likely won't strike gold with any humans but himself, but brute thinks there's something to be said for increasing future flexibility. individuals change over time. "locking in" a certain minimalist lifestyle could be problematic when desires change in the future. the argument brute doesn't really buy is that it is even possible to "lock in" and then become unable to ever make any more money, unless tragedy strikes (and tragedy can strike 9 to 5ers just as well). in fact, brute thinks that ERE especially, but MMM also, would make the average 9 to 5er MORE flexible in the future.

[BRUTE]

Don't believe the hype -- its the saving rate that matters the most, not getting wound up about particular portfolios. See https://seekingalpha.com/article/405978 ... -investing

wow, that puts everything in perspective a bit. brute continuously feels like he's wasting tons of money and not saving very much, but maybe only because he spends too much time on this forum, where a 50% SR is smiled at politely. 43% of Americans don't have $400 for an emergency. even among six-figure income earners. wow.

[IlliniDave]

Don't believe the hype -- its the saving rate that matters the most, not getting wound up about particular portfolios. See https://seekingalpha.com/article/405978 ... -investing

wow, that puts everything in perspective a bit. brute continuously feels like he's wasting tons of money and not saving very much, but maybe only because he spends too much time on this forum, where a 50% SR is smiled at politely. 43% of Americans don't have $400 for an emergency. even among six-figure income earners. wow.

Have to agree with the excerpt you quoted from Dragline. The advice I always give younger people when they ask (lifted from Dave Ramsey) is the best thing you can do for yourself financially is learn to say, "No," to yourself. Just by sheer luck I managed to avoid the worst of the chase-the-next-strategy pitfall (my first 15 or so years only had 2-3 choices in 401k, and after that was mostly too lazy/preoccupied with life to fiddle with it) BRUTE could go visit bogleheads.org on occasion where they believe someone like me is in need of intervention since only the psychologically disturbed would ruin their life by consigning themselves to the wretched scrooge-like misery inherent to a savings rate higher than 20%. That helps mitigate feeling like a slacker around here.

[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).