Wealth, money, numbers

[Lillailler]

I have just done my annual investment and income review, and things look good according to the numbers. Total investments have increased in value by more than my earnings for the year from my employment plus self-employed side-job.

I should be feeling rich and smug, but I'm not.

One issue may be that I tell other people that wealth is not money in the bank and in the markets, but the home in a nice place, the comfortable and reliable means of transport, the enriched life with agreeable and stimulating friends, art and music, plentiful 'flow' experiences, and of course the insurances, available money, and other arrangements which mean those things can be sustained even in the face of the normal setbacks in life. Anyway, if that is wealth, the numbers on my spreadsheet don't give me the feeling of wealth. Whatever the numbers say, they seem too abstract, too detached from everyday reality to make a connection to: they are simply marks on paper, intangible in a way that real wealth is not.

Another issue is that for a long time I have lived with a fairly rigid rule of adding to savings and not spending or borrowing against them (I haven't been frugal by ERE standards but have avoided pretty well the most common errors which keep people living paycheck to paycheck).To turn money into wealth - in the sense described above - gives me negative, rather than positive feelings. To the extent I get joy from my savings, it is through having them, not through using them to obtain wealth. But there is no point whatsoever having a mountain of money if you never turn it into useful and enjoyable wealth - after all you can't take it with you.

TL:DR version: There is no point having money if you never spend it, but if you are emotionally invested in having money, then when you spend it, it is gone, so you feel get a negative emotion, so that you might just as well not spend it. But if you never spend it, you might as well not have it. But if you didn't enjoy having it, you wouldn't accumulate it either, so there would be nothing to spend (or not spend).

Anyone else have the same confusing feelings?

[James_0011]

Could you explain it more?

I don’t really understand your thesis. To me, the point of having money is to free myself from a job so I can spend time doing things I care about.

[daylen]

Like with all things in life.. balance. Money is just one tool in the tool shed.

[BlueNote]

I think these feelings are natural because getting to FIRE requires a different set of financial priorities than does being FIRE. It's good that your feelings have rallied around the savings process and that you recognize that those feelings aren't congruent with the withdrawal phase. This means that you're preparing for the next phase, it's better than not being aware and then spending years saying just-one-more-year while wasting time working when you could be doing whatever else. After reading other people's journals it seems that more than half who get to FIRE struggle with the first 1-3 years due to the big change, not just financial but finding things to do, feeling important, feeling scared of losing it all etc. It's an amusing problem, from the outside, when one is rich enough to just retire at a very early age but can't get out of the savings/working groove. Maybe we can call this Ebenezer Scrooge syndrome because when you suffer from it you can't enjoy the money, can't enjoy the next phase of life yet still have strong motivation to accumulate, work and live super frugal.

[suomalainen]

I think there is a fallacy in your final paragraph. What if the point of accumulating money for some is to accumulate money? Scorekeeping, if you will. Also, I think the question for you is whether “you are emotionally invested in having money”. In other words, do you prefer at this point to have your cake or eat it? Regardless of the answer, just because you prefer one thing now doesn’t mean you will “never” prefer the other.

[jennypenny]

There is no point having money if you never spend it ...

I look at it differently. For me, it's more like insurance to make sure a lack of money is never my downfall. But I also think of accumulated money as having two levels. The big kitty is as I said -- it's umbrella insurance against all the big stuff that might happen and a self-insured version of social security and disability insurance. Get a plan in place for this and stick to it (I think this is what Fish means wrt money being a solved problem).

Then there is a person's working capital or functional capital (I call it my 'local' capital) ... the level most people reach not that long after finding ERE when they get to a high level of savings and are flush with cash. To my mind, that money is there to make sure that you don't make decisions based on money or cost, or not solely on that. That's the best part about ERE for me -- making sure I make decisions based on a cost/benefit analysis that is balanced and not just a financial cost/benefit analysis.

If you can't make decisions based on a 'whole life' c/b analysis yet, you either aren't quite there financially or you haven't internalized that part of it yet. You can recognize when people have crossed that line. I see it in the sometimes agonizing decisions people relate in their journals -- agonizing because it's more difficult to make decisions when money is only one contributing factor in the decision and not the only factor.

It can be harder to keep score in the non-financial areas of your life and with other types of resources. Oftentimes, I think people continue to focus on the accumulation phase exactly because financial progress is the easiest to measure. Areas like emotional health are more nebulous therefore more frustrating to track, especially for the analytical types who are drawn to ERE. I'd argue that once you have enough local capital and you're well on your way to FI, it's best to start focusing on improving other areas of your life even if it means burning some cash. The better you get at ERE, the less cash it will take to make those improvements.

[7Wannabe5]

I think it is easier to consider these sort of systems problems with examples not in your direct experience. So, maybe think about it in terms of 3 chubby 16 year old girls sitting around a high school lunch table in Kenosha, Wisconsin in January 1958 making plans to lose weight and get a date for the prom in May. Let's say the two metrics would be fit into a size 8 dress and don't let potential prom date get to second base before prom night. Consider how the feelings of success in alignment with S-curve maximization might combine with technique of negative ideation and peer competition to inhibit maximization of initial stated/shared goal of Have a Wonderful Time at the Prom!

[Farm_or]

At least you are thinking about money. But be careful with your thoughts, because it sounds like you are tipping on a dangerous edge.

What is money? It's hard to define because different people come across it different ways. It is simply a medium of complex bartering.

I have a friend that is early retired the same age as me. His nest egg came from his grandfather. Mine came from the sweat of my brow.

We both did very well with investment this past year. He came home with a shiny new mustang convertible. I leave my "winnings" invested to keep working.

Why not use it? Because you are either working for money or it is working for you. I am using it in a different way, delaying gratification. I'd rather have it potentially gaining in value instead of a mustang that is sure to decrease.

It's the only way that I can continue to enjoy the real "wealth" you describe. Without sufficient reserves, all of those other more "tangible" life experiences are less likely.

[George the original one]

For me, it's more like insurance to make sure a lack of money is never my downfall. [...]

Then there is a person's working capital or functional capital (I call it my 'local' capital) ... the level most people reach not that long after finding ERE when they get to a high level of savings and are flush with cash. To my mind, that money is there to make sure that you don't make decisions based on money or cost, or not solely on that.

Yup, that's a pretty good summary of how I treat money. The limit of working capital is "if I choose to spend it on new goal x, how does that affect spending on goal y". In practical terms, it has meant forsaking most distance travel experiences and concentrating on local locations during my gap years until retirement pension income begins... in other words, not a big deal unless travel is your highest priority, in which case one would spend accordingly.

I think people do overemphasize the working capital a bit though compared to the overall quality of life equation. Perhaps because money is easy to quantify compared to low stress, lack of drama, and ease of exploration that FI should bring.

[jacob]

I think people do overemphasize the working capital a bit though compared to the overall quality of life equation. Perhaps because money is easy to quantify compared to low stress, lack of drama, and ease of exploration that FI should bring.

This! I think whenever one hasn't encountered a negative experience on a given domain (here, not having money; but also e.g. measles) for a while, there's a tendency to ignore the cost or relevance of whatever prevents it from happening. That was a little abstract. More concretely, there are many people who say they value family and experiences more than money. Consequently, they have little to no money, and so they can't afford to take time off from work and go and see their family in the first place; nor can they afford they dream vacation, because they're continuously blowing the money on a cable subscription to the sports channels and shopping at Kroger instead of Aldi. There are people stuck in bad relationships because they can not afford to move out "before they get some money put aside". It somehow escapes them that this is the same plan they had last year.

They can't afford their highest priorities exactly because money is their lowest priority!

There are two mindsets of money. One where money is for spending. The other where money is for potential spending. Both are workable mindsets, but the latter will typically include the former and therefore be a better mindset. If the latter lacks the former, it leads to a situation where the person won't spend anything because they wish to retain the ability to spend. This is either mental ... or the fact that there's not enough money yet. Compare it to the situation in which the US military prefers to fight two conventional wars simultaneously. This is to avoid being strategically backed into a corner having no forces left if already engaged on one front.

[jennypenny]

I think people do overemphasize the working capital a bit though compared to the overall quality of life equation. Perhaps because money is easy to quantify compared to low stress, lack of drama, and ease of exploration that FI should bring.

This! I think whenever one hasn't encountered a negative experience on a given domain (here, not having money; but also e.g. measles) for a while, there's a tendency to ignore the cost or relevance of whatever prevents it from happening.

While I agree with this, I also find it interesting how there's a definite divide on the forum on this issue based on whether one had kids or not. I'm not sure why that is. Maybe it's that the more people you add to the equation, the more compromises one has to make to keep everyone happy? Or maybe it's that life with kids can be more unpredictable? I don't know. I doubt it's simply that people with kids don't fully comprehend ERE or that they are too soft-hearted to stick with the extreme part of ERE.

[Clarice]

While I agree with this, I also find it interesting how there's a definite divide on the forum on this issue based on whether one had kids or not. I'm not sure why that is. Maybe it's that the more people you add to the equation, the more compromises one has to make to keep everyone happy? Or maybe it's that life with kids can be more unpredictable? I don't know. I doubt it's simply that people with kids don't fully comprehend ERE or that they are too soft-hearted to stick with the extreme part of ERE.

Not to hijack the thread, but... I agree with that so much, especially, if you embarked on ERE after you had a kid and locked yourself into certain arrangements. For example, I do not have what it takes to take away DD's ballet and it's a few jacobs right there. I stumbled upon it not realizing how much money it was. I took her dutifully to a swimming class. She said she didn't like the pool because it was wet. Hard to argue. I took her to a soccer meet up and her instinct was to run AWAY from the ball. Then I took her to a ballet lesson and 5 minutes into the class it was apparent that in that random bunch of 5-year-old girls she was the best. Kind of by far. 7 years down the road, she is not the best anymore. It's extremely competitive and expensive, but she loves it and we are locked! Sorry for the rant!

[suomalainen]

@jp Hmm. When I was younger, before I was married, I remember looking at a family with kids in their teen years and wondering to myself "Why don't they just do X?" Now that I'm on the other side, I find myself trying hard to not be utterly dismissive of people without kids telling me how I should just do this or that and it would solve whatever problem I'm currently grappling with.

There is certainly a quantitative difference between families of 1, 2, 3, 4, 5 or more. And complexity, I think, does not increase linearly with each additional member, given that the number of relationships do not increase linearly (1, 3, 9, 15, etc). But there is also a qualitative difference. Part of it is what @clarice and @jp allude to. I think what it comes down to is this idea of shared lives and shared visions. It's easy to "share" your own life and vision with yourself. It's a bit harder with an equal partner. And I think it's impossible with those who are just vastly more immature than you (i.e., kids). Sometimes I just stare at my teenager in disbelief thinking "why don't you get this? how can you be so dumb?" As @halfmoon's wise DS once said about halfmoon's and her DH's vision: "this is your dream, not mine". That one sentence is one of the most powerful things I have read about parenting, perhaps ever, anywhere. I don't know exactly why it struck such a deep nerve in me, but it has, and it has caused me to compromise my dreams to give my wife and kids theirs (even if theirs are also compromised).

As many on this forum would agree, people who are actually, really, truly "ERE" do not see their lifestyles as a sacrifice. But do children have the capacity and maturity to embrace the deeply philosophical aspects of ERE? Are they able to bring to bear their experience and perspective to say "getting this new xbox won't actually bring me happiness any more than this pot of lentils, so I should save my xbox money to enable me to buy many pots of lentils". Given that most adults cannot get there, why would we expect children to do so?

[7Wannabe5]

While I agree with this, I also find it interesting how there's a definite divide on the forum on this issue based on whether one had kids or not. I'm not sure why that is. Maybe it's that the more people you add to the equation, the more compromises one has to make to keep everyone happy? Or maybe it's that life with kids can be more unpredictable? I don't know. I doubt it's simply that people with kids don't fully comprehend ERE or that they are too soft-hearted to stick with the extreme part of ERE.

My kids still occasionally grumble to others within earshot of me on the theme of "Did you know that it is legal to pay your own children less than minimum wage if they work for you? I do." Children used to become marginally productive worker assets within the household system around age 6. Now they are dependent pets until around age 26. The reason why people with children or spouses with varying temperaments have to go less extreme with ERE is due to the fact that majority investment in productive assets is outside of the household. So, focus is simply on getting kids to the point of independent rather than productive. Having at least one parent at home, engaged in a business in which the children can participate, completely changes the dynamic. There is actually is an amusing video, floating somewhere out in internet land, made by my daughter and her best friend when they were both working for me as teenagers, in which I am portrayed as a hapless slacker whose business is only surviving due to the heroic efforts of my XNTJ offspring. My son, when I left him to work alone in some warehouse space I rented one summer, would call me and say things like "Hey, where are those shipping envelopes I told you I needed? Get on it."

This same sort of shift is apparent in the behavior of children in some very good Montessori-like kindergartens where I have helped out. If I had my life to do all over again, two things I would definitely do differently would be that I would have started my own business(es) at a much younger age, and I would have assigned my children productive tasks with appropriate benefits and degree of autonomy* at even earlier ages. Of course, I obviously still have little inherent interest in productive assets held at a distance, so MMV.

*The reason why many children only perform household chores grudgingly is that they are usually offered little autonomy and poor motivation "...because you are a member of this family. That's why!" Who wouldn't rebel against being bottom caste worker in a communist system?

[Sarouel]

*The reason why many children only perform household chores grudgingly is that they are usually offered little autonomy and poor motivation "...because you are a member of this family. That's why!" Who wouldn't rebel against being bottom caste worker in a communist system?

That's quite an interesting point. Do you have any ideas, how one could give them more -and what- autonomy and better motivation?

[wolf]

I found this Workbook from Tony Robbins about "The Psychology of Wealth".
https://www.tonyrobbins.com/pdfs/Financ ... rkbook.pdf
Of course wealth is more than money. He describes some of it in that text.
It helped me to put money and numbers in perspective and set it in the right context.
Feeling "wealthy" is most of all a psychological and mindset issue.
However, that doesn't mean, that you can forget the ERE principles and live a life without any money restrictions. But it definately helps you to enjoy the journey and feel "wealthy" before and after.
All the money in the world won't give you the feeling of "wealth", unless you decide it by yourself.
So, IMO, it must be a balance (better integration) between psychological AND practical aspects.
Well, the text is just a few pages and would be possibility to think about wealth, money and numbers.

[Seppia]

I look at it differently. For me, it's more like insurance to make sure a lack of money is never my downfall. But I also think of accumulated money as having two levels. The big kitty is as I said -- it's umbrella insurance against all the big stuff that might happen and a self-insured version of social security and disability insurance. Get a plan in place for this and stick to it (I think this is what Fish means wrt money being a solved problem).

Then there is a person's working capital or functional capital (I call it my 'local' capital) ... the level most people reach not that long after finding ERE when they get to a high level of savings and are flush with cash. To my mind, that money is there to make sure that you don't make decisions based on money or cost, or not solely on that. That's the best part about ERE for me -- making sure I make decisions based on a cost/benefit analysis that is balanced and not just a financial cost/benefit analysis.

If you can't make decisions based on a 'whole life' c/b analysis yet, you either aren't quite there financially or you haven't internalized that part of it yet. You can recognize when people have crossed that line. I see it in the sometimes agonizing decisions people relate in their journals -- agonizing because it's more difficult to make decisions when money is only one contributing factor in the decision and not the only factor.

It can be harder to keep score in the non-financial areas of your life and with other types of resources. Oftentimes, I think people continue to focus on the accumulation phase exactly because financial progress is the easiest to measure. Areas like emotional health are more nebulous therefore more frustrating to track, especially for the analytical types who are drawn to ERE. I'd argue that once you have enough local capital and you're well on your way to FI, it's best to start focusing on improving other areas of your life even if it means burning some cash. The better you get at ERE, the less cash it will take to make those improvements.

My favorite post of the year so far.
Thanks JP!

I think I am precisely stuck into the “let’s focus on the financials” mainly because I have a short term tax reduction that bumps up my net salary approximately 35%, but there is definitely something else.
DW and I could survive without a job on a 3% swr tomorrow with some basic, not-extreme-at-all expense cutting, or (even better) just move to a lower stress job that covers expenses (our mid term plan) without ANY risk.
The “oh I still have three years of tax break” is probably an excuse not to take drastic decisions.

[Lillailler]

Thanks for the thoughtful replies:
@JP re children, I think there is a big difference because as a parent your goals need to include goals for - and of as they grow up - your children and there will be conflicts with the 'Extreme' part of ERE. Similar of course applies to being married, but adults are (should be) easier to negotiate with/for than children.

@wolf: Thanks for the link. I used to have one of Tony Robbins's books, but I sold it (!) a few years back when I downsized my possessions. This worksheet seems to hit just the right space for me.

@jacob: I think the gap I have to cross is between money as potential spending 'at some unspecified date in the future when I have enough saved to go back to consumerism / frittering' and potential spending as in, 'when it needs to be spent, I can choose to spend it'. I will work on it.

[conwy]

wealth is not money in the bank and in the markets, but the home in a nice place, the comfortable and reliable means of transport, the enriched life with agreeable and stimulating friends, art and music, plentiful 'flow' experiences, and of course the insurances, available money, and other arrangements which mean those things can be sustained even in the face of the normal setbacks in life.

Permission to quote you to friends/colleagues?

[Lillailler]

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