Part-Time Work Extreme
Everytime I think I have a new ERE idea, I reread the book and that rat bastard Fisker has beat me to it. There's nothing in this post that isn't in the book. However, the post highlights ideas that the book only mentions in passing.
I believe that the central tenet of ERE/ FIRE is that the normal approach of working 40 hours a week for 40+ years is unsatisfying and unnecessary. The means to escape is frugal living.
The FIRE movement has popularized what I will refer to as the standard method.* Work at a (preferably) high-paying job, accumulate a sum of money between 25 and 35x living expenses and retire from paid work forever. In practice, we admit that the path may not look exactly like this. Perhaps there are more questions to life than what the proper savings rate and SWR is, but most ERE/ FIRE members subscribe to the standard method.
*When I call this method standard, I'm referring to the standard method within the FIRE community. This is not the standard method for the population at large.
I'm proposing that there are many alternatives to the standard method that still align with the goals and philosophies of FIRE/ERE. I propose a mixed strategy of part-time work coupled with accumulation. While this strategy is certainly not disallowed by the FIRE gods, they don't spend much time expounding upon its advantages.
What's the point of ERE/ FIRE? Ignore the secret environmental agenda for a minute, and focus simply on personal gain. I believe the point of pursuing these strategies is to wrestle back control of your own time from the pernicious marriage of the Protestant work ethic and unabashed consumerism. In other words, the goal is to free yourself from doing work you don't enjoy, accomplished through the means of eliminating consumerist tendencies.
If this is the goal, reducing expenditures is akin to freedom. I've long wondered what expenditure level corresponds to absolute freedom. I've arbitrarily decided that it is equal to $7,250 a year. $7,250 is the annual salary of an American minimum wage worker ($7.25/ hour) working 20 hours a week for 50 weeks out of the year. Yes, there are taxes ($554.70, assuming no state tax) weighted against earned income credits to consider ($506 in 2018), but this obscures the simplicity of the number.
At the $7,250 expenditure level, the absolute least freedom you can have is working at McDonald's for 20 hours a week in a job that you don't have to give a shit about.
Of course, there are other scenarios. Where I live, the lowest-paid library job is $10/ hour. This job does not require a college degree and is often held by teenagers. At 20 hours a week this corresponds to $10,000 a year. This is an ~38% increase, which means a 38% reduction in hours worked is now feasible. I would posit that a $10/ hour position is readily available to anyone who can show up most days on time (not visibly stoned or drunk) and follow orders with a competency/ completion rate of around 50%. I think for most FIRE/ ERE members, working in a library instead of a McDonald's would constitute more freedom, as I imagine the lowliest library employee garners more respect from the general public than the lowliest fast food worker, for a barely perceivable increase in responsibility.
At this level of income, our intrepid slacker also qualifies for Medicaid. When retirement time rolls around, they'll receive a whopping 90% of their income in SS and also receive Medicare.
Note that this strategy only depends on hourly wage and expenditure rate. It also implicitly depends on the availability of part-time work. If one is sufficiently skilled enough to earn $145/ hour, then one could work 1 hour a week.
5 hours a week at this expenditure level gives us perhaps the more reasonable $29/ hour. Leading economists believe this is the exact pay rate of Mexican fisherman.
Note also how powerful expenditure is, particularly at low rates of pay. An extra $1,000 a year is equal to ~3 hours a week at the minimum wage and 2 hours a week at $10 an hour. A reduction has the same effect in the opposite direction.
The average ERE/ FIRE reader may not be interested in greasy slacking and sub-librarianism. They may want better insurance and have somewhat higher expenditures. They aren't likely to be too keen on relying on government programs for healthcare and retirement. Given the standard method mentality, I think the intrepid slacker method would represent failure. The point is that failure still looks a lot like freedom.
I've highlighted this other extreme not to expressly recommend it, but to point out that there is another "early retirement" option that is rarely discussed in the FIREsphere. For a great reference that promotes this method, check out the excellent New Escapologist magazine that Jacob contributed to.
I believe using a strategy that falls somewhere between these two strategies is very powerful. Some people will stilll want to go with the standard method, just as some people really do find a well-paid job they enjoy doing for 40 hours a week for 30-40 years. Others will no doubt be fine with the riskier but more free NE/ intrepid slacker method. However, I don't think many of those committed to either camp consider the alternate way. I'm pursuing an in-between strategy, and so I'd like to pontificate on its advantages.
But, before I do so, I'd like to briefly explain why I chose this method. I'm secretly a dedicated careerist and my chosen career is music. I love playing music, and I hope I keep enjoying it as much as I do now for my whole life. It is possible to make money as a musician, but it is difficult. I've watched many of my friends turn music from something they loved doing to something they did just for money. They end up working very hard to be poorly compensated to play music they don't really like. There are exceptions to this rule, though they are rare. Luckily, I found success and disenfranchisement at a young age as a sound engineer. I was disenfranchised at 24 and then committed career suicide by giving up my studio gig. If I'd already discovered FIRE, I probably would've stuck it out for another 10-15 years and then quit, but at the time I didn't realize this was an option.
I'll quickly define my strategy. A mixed strategy is pursuing early retirement at a more relaxed pace. A high savings rate is still recommended, but a full work week is not. Full-time work is allowed for a few years, but it isn't recommended for very long.
There are numerous advantages to this strategy compared to the standard approach. The biggest is that it allows a lot of freedom right now. What if you only had to work 2 days a week with 5 days to do as you pleased? Working a low-paying job you may enjoy is no longer saved as an afterthought for retirement. It becomes part of the plan. Many jobs are enjoyable for a few years. Why not work a well-paying job for 3 years, do the job part-time for a year, take a year off, and then work a low-paying but more enjoyable job? Removing yourself from the mindset of being enslaved to your job to reach FIRE is freeing.
This method also provides an introduction to self-managing your own time and distance from your career. Many people derive a large part of their identity from their profession; I know I did. Losing this identity can be painful. There is also the difficulty of switching from a structured schedule to completely self-guided time. All of a sudden, you become your own boss--only to realize that you're simultaneously a lazy employee and a dick boss. Unless you're a paragon of motivation and self-discipline, perhaps a limit on your free time and some structured activity, through part-time work, isn't such a bad thing?
A mixed strategist is much better suited to take advantage of career diversity than a standard strategist. This is because the mixed strategist isn't tied to one career. If your goal is to FIRE as soon as possible it make sense to specialize in one field and climb the ladder as high as you can as quickly as possible, while spending as little money as possible. However, if you're willing to take a little longer in order to obtain some freedom now, it is more likely that you'll pursue a multitude of careers. It is possible to have one specialty and simply work it in a part-time manner or take several mini-retirements/ sabbaticals.
However, a multitude of other possibilities exist. Become a specialist in 5 fields, perhaps maintaining enough knowledge to consult or find occasional work in all fields. Work 3 different jobs at once. Work an easy job that pays poorly in between working difficult/ boring jobs that pay well. The combinations are endless. The point is to maximize enjoyment along the way and perhaps even make money doing something you like or care about. Someone with a multitude of skills who changes jobs often will not be sunk if they lose a specialist job. They will have an easier time reentering the workforce in the event that their investments fail, because they have been recently employed and have practice attaining new jobs/clients.
I'm only speaking for U.S. citizens here, but the tax code is set up to benefit those with earned income and those with low expenditures. I'll get into tax dodging in a later post, but assuming you just earn money and pay taxes without any tricks, it's worth mentioning that the percentage of your income taxed increases as your income increases. Someone who earns a high amount for 5-10 years will pay much more in taxes than someone earning a low to moderate amount for 20-30 years. A low- to moderate-income earner is also able to take advantage of federally subsidized health care. A very low-income earner can take advantage of the earned income tax credit. There are some tax tricks to lower taxable income (I'll have a separate post on this later) but all of these max out after a certain income level.
Another advantage is time to learn about investing. In my opinion, investment is the weakest link in the FIRE chain. Barring major catastrophe, all other ideas in FIRE are more or less under the FIRE seekers control. However, investment is not. I do not think betting 50+ years of retirement on a buy and hold index strategy with no other understanding of investment is a good idea. I don't think many people are intuitively good investors. Yet investment returns are paramount to FIRE. One must be able to obtain 3-4% annual returns for life to FIRE. I do believe one can learn to do this with reasonable assurance (though I am not capable of this yet), but it takes time. Perhaps a lot of time. Working part-time or taking years off in between full-time jobs provides ample time for research. Accumulating assets over a number of years provides time to experiment and gain experience while the stakes are still relatively low. The market has been up for the last 9 years. How many of us have experienced a market downturn? Experiencing this when one is not fully retired has its advantages.
In the same vein, DIY skills also take time to learn and implement. It's a lot easier to lead a more "balanced" life when not busy working all of the time. We are free to pursue passion projects and skills which may not generate income now, but may later. We are free to learn how to garden, repair plumbing issues, paint the house, mend garments and learn how to make our own laundry detergent. We are free to build our social networks and attend workshops where we meet those who possess skills we wish to attain. Many of these things are not difficult, but who wants to do them when we are exhausted from working 40+ hours a week? Correcting bad habits that we've picked up from our pre-FIRE lives also takes time and mental energy. Against all popular belief, getting in shape generally takes several years. Starting that process after 5-17 more years of bad habits will only make it that much harder.
Working for money or taking care of children and a household while a spouse works for money is the major activity for most adults in our society. In many ways, it's the major way we contribute to society. I think this model is flawed; however, it is unlikely to change in our lifetime. Dropping out of paid work completely could be alienating. While I'd encourage people to become unconventional enough to step outside of this way of thinking, working for pay is still an important part of our lives. It allows us to gain skills that are difficult to acquire other places as well as socialize with people we may never meet otherwise. It is the standard and easiest way to get a large group of people to commit to a collective project where everyone shows up on time and works towards a common goal.
Income tends to be higher in certain portions of life. It's generally easier to negotiate a higher salary at 35 than 25, and I imagine it's even easier at 45. Some of this is tied to work experience and loyalty to a company/ career. A longer career of part-time work will allow the possibility of higher salaries during traditional peak earnings years.
If someone wishes to speed things along 10 years into the mixed strategy, they can always pursue an early retirement extreme strategy. Imagine how much easier this would be with 10 years of living expenses already saved, 10 years of career experience gained, and 10 years of frugal living already in the rear-view mirror.
I'll also briefly defend my method in the face of the intrepid slacker method. I think most of us have some ambition to do more with our lives than take the path of least resistance. It is not impossible that this would be a lucrative path, but in the world we live in, most difficult jobs produce enough income that it’s possible to save some of it. There are also many things that cannot be accomplished or are difficult to accomplish without money (starting a business for example). “Fuck-you money” is a powerful ally when change is needed. There will be DIY masters and minimalists who have no need for income above the minimum threshold, but life long instances of these are rare.
The point of this post isn't that one method is better than another or that anyone is doing it wrong. My goal is to point out that there are other paths to freedom if one is willing to think outside the box of the outside-the-box thinkers.