ERE without investing

[ThisDinosaur]

I read Alpha Strategy after it was mentioned here in another thread. The book was an excellent economics lesson, but I was initially disappointed with the strategy itself. This could be summarized as, "buy everything you will ever need now, so you don't have to buy it later after inflation erodes your dollars." So, lots of canned foods, then.

I've been reconsidering the strategy lately, though. The homeowners of the rent vs. buy debate can be said to have paid up front for a lifetime of housing, instead of relying on unpredictable investment returns to pay their rent. A solar panel system can be thought of as buying 20 or 30 years of electricity now, before energy costs rise. A big yard made into a garden is a lifetime supply of cheap, healthy food.

How else can this concept be applied to FI? Can it be applied to healthcare/insurance somehow? Does anybody here have a FIRE strategy that isn't reliant on income streams or capital appreciation?

[stayhigh]

What you said, is a typical ERE strategy. You get knowledge, you learn new skills, you replace buying habit by creating habit. You also make investments. By owning a home, garden or solar panel system you invest some money upfront and expect future dividends by not paying bills.

Stock/bond/RE investments are just money streams for things you cannot replace by anything but money (like taxes) or simply can't or don't want to built/create/grow etc. You can replace healthcare by investing in healthy lifestyle. You can also replace insurance by having loads of FU money.

Some people manage to live without money and they are doing fine. Just google it. They problem is to get some items or services without cash and without doing some work for others. You will need them, when you consider ERE, as I suppose you want to continue this lifestyle for decades. How you manage to get a screwdriver? Bike tire? You will build one by your own? For me pretty constant work in exchange for needed items/services it's not a retirement anymore. It's normal life, you just remove one element from work->cash->thing scheme.

[chenda]

This is his book: https://zombieprepdotnet.files.wordpres ... reface.pdf

I've not read it but I think there is clearly limitations to the strategy. You can't buy enough food or medicine for the rest of your life in one go. Perishables and services will need a regular income to sustain.

[Dragline]

Its a good example of a "product of its times", namely the days of high inflation circa 1979-80. So it focused on acquiring hard assets instead of financial assets, figuring inflation was a threat that outweighed all others. And of course it was wrong in that assessment.

Now how many times have you read this forecast from the end of the book in other "financial warning" materials:

"The next decade promises to be the most turbulent decade in this century. The plunder is mounting.
The die is cast. The economic storms are unavoidable, and the outcome for most individuals will be the
destruction of their wealth."

In fact, the next decade, the 1980s, is now viewed as a kind of economic "Golden Era" for investors in financial assets and a generally crappy one for hard assets. The lesson here is actually the folly of trying to predict the future. (This is also why reading "the books of an era" is important, because you can see what kinds of wisdom actually pans out as wisdom and what is just speculation on then-popular memes. The same thing goes on today, just with different memes.)

I do agree that you can lower your future risks by securing certain things now -- its essentially the same principle of buying an annuity, which transfers market risk to an issuer in exchange for a steady stream of payments. But there are trade-offs, as owning something always involves the risk of it not being usable due to any number of man-made and natural calamities. (In the annuity example, you don't have market risk, but you do have counter-party risk if the company fails.)

It's better to think about these scenarios as risk-shifting, not risk eliminating.

[Ego]

I've been reconsidering the strategy lately, though. The homeowners of the rent vs. buy debate can be said to have paid up front for a lifetime of housing, instead of relying on unpredictable investment returns to pay their rent. A solar panel system can be thought of as buying 20 or 30 years of electricity now, before energy costs rise. A big yard made into a garden is a lifetime supply of cheap, healthy food.

I think it depends a lot on perspective. If you fear the future then it might be very attractive to lock-in now to eliminate some of the fear of future unknowns. A lot of people do that. Though the other way to look at it is the lock-in will be the cause of problems rather than the solution. For instance, you've got to choose the place carefully where you buy housing for a lifetime (it doesn't btw) because someday you might decide that you do not want to be there for a lifetime. A big yard can be a pleasure for some (look at George, Jenny and ffj) or a big pain in the ass for others.

How else can this concept be applied to FI? Can it be applied to healthcare/insurance somehow? Does anybody here have a FIRE strategy that isn't reliant on income streams or capital appreciation?

I am in the weird position where I consider myself retired and I will never actually retire. I don't ever expect to work a full-time job again but I will never stop working altogether (except for short breaks ). I look at them as the two ends of the spectrum (full-time vs. zero-time), neither of which are particularly healthy.

[C40]

What you said, is a typical ERE strategy. You get knowledge, you learn new skills, you replace buying habit by creating habit. You also make investments. By owning a home, garden or solar panel system you invest some money upfront and expect future dividends by not paying bills.

In case this wasn't entirely clear, I want to emphasis/echo the SKILLS part of stayhigh's point. When trying to spend less money, many people will think about how to spend more efficiently - how to get a deal, how to buy at the right time. But there are many more ways to have low spending. Developing skill, creativity, and social relationships can remove the need to spend money to acquire things - and sometimes the desire/need to even acquire things at all.

ThisDinosaur mentioned BUYING things. Buying a house to not have to pay rent. BUYING a solar panel to not have to pay electric bill. BUYING land for a garden.

Make sure you're thinking about skills as well.
So you can buy less food, LEARN how to:
- Fish
- Hunt
- Forage/gather
- Garden

So you can buy less things or not have to replace things as often, LEARN how to:
- Come up with creative solutions to "problems" that don't require buying anything. Ideally solutions that just eliminate the problem in the first place rather than doing/having something to solve it
- Make/build/create things
- Fix/repurpose things


There are also other concepts - like building social capital and strong friendships, and learning how to treat people so they want to do/give things to you (I mean being nice to them, not duping them), finding people who love to do things that you need (so they are happy to do them for you), etc..

[ThisDinosaur]

I did list things i'd BUY once, so as to not have to buy them repeatedly the way most do. That's because, as a member of the FIRE community, I have a high savings rate and am accumulating money to invest, which I do. But its occurred to me that dependence on financial products is inherently no less risky than depending on a job. All investing is giving up money in the hopes of getting more back. Sometimes you judge your investments correctly, sometimes not. And a bird in the hand is worth two in the bush.

The last line of Dragline's post is very much what I'm trying to get at: Risk shifting vs. risk eliminating. Your rent or mortgage will go unpaid if you have no job prospects and you overestimated your SWR. A paid off house can be destroyed or damaged leaving you screwed if you have no savings. But if you have a paid off house AND a large sum invested, losing either one alone will not leave you homeless.

Likewise, healthy eating and exercise are the first step in hedging against future health risks, but are not a substitute for health insurance. Young, physically active people are by far the most likely to break bones,get skin cancer, etc.

[Dragline]

Agree with both of previous two posts -- while people typically think of "diversification" only as applied to financial investments, the concept also applies to other assets, health choices and skills. You probably don't want to "put all your eggs in one basket" as to any of them, but instead develop a number of things to basic competencies or levels of accumulation.

Jacob's "S-Curve" blog post summarizes the point of this pretty well: http://earlyretirementextreme.com/bette ... urves.html

I found this very useful, because it also helps you identify when you have "enough" of a particular job, skill, muscle-tone, source of income, pile of lentils, etc.

[Lucky C]

How about applied to dating and finding a spouse?

A lot of people drag out mediocre relationships longer than they should, thinking maybe things are OK enough, but they eventually end up getting tired with it and have to start over with someone new. They go through this repetitive process of spending a lot of money on several dates before they get comfortable enough to spend time at home more often than going out. But then when the relationship ends and a new one starts, they have to spend a lot of money again dating (well they don't have to spend a lot, but that's just how it works for most people).

The alternate strategy is to have a high (but realistic) standard set for someone you could be spending the rest of your life with, and always break things off after just a few dates if it isn't truly great. Then set up more dates with new people as fast as you can. After all, the bigger the sample size, the better! This will result in a lot of spending during your single years on restaurants and entertainment, but of course once you find someone who's marriage material, you're set for life. They may even jump on board ERE 100% and help you get to FI sooner.

[slsdly]

@Lucky C

Out of curiosity, was that how it worked for you? From what I have gathered from others, and experienced myself, it would have been smarter for me to have found a partner before embarking on the FI journey, as she could grow into it as I have (frugal was always a requirement for me). Now I would say I am regarded as a radical... and not in a good way. Although to be fair, I'd hazard my lack of wanderlust is a bigger problem in dating than FI .

[Dragline]

There's another thread about marriage/good spouse qualities: viewtopic.php?f=7&t=6862&hilit=marriage

It's not so much as having a "high" standard, but rather a specific or idiosyncratic standard as to a few basic qualities, like "not placing a high value on consumption". I agree that due to the random nature of relationships, you are better off catching more fish and throwing them back than trying to focus on "the big one" or not throwing back something that wasn't what you wanted.

Starting and ending relationships is like everything else that requires practice -- the more you do it, the easier it gets. But the danger of proficiency becomes in throwing back all the fish just out of habit and staying out at sea fishing forever.

[7Wannabe5]

Dragline said: Starting and ending relationships is like everything else that requires practice -- the more you do it, the easier it gets. But the danger of proficiency becomes in throwing back all the fish just out of habit and staying out at sea fishing forever.

I choose stay out fishing (or maybe more like being the catch-and-release fish?) forever! This week alone, I am getting 2 dinners, 1 breakfast, 3 fancy coffees, IMAX movie, 4 hours of muscle in my garden and $150 towards the purchase of a better bicycle, all the sex, affection and gallant opening of car doors etc. etc. I could possibly want, and everybody seems to be very happy with the arrangement. OTOH, none of the fishermen seem to be inclined to exit my pond for good, and a couple I locked out keep knocking at the gate to get back in, so I might have to either up the cost of admittance, lock the entrance gates while leaving the exit open, or get some better vitamins.

Of course, if I was a frugal gentleman, I might be inclined more towards efficient shopping for female willing to permanently sign on to follow me around carrying provisions in a large bucket strapped on to her head. It really depends on your perspective of your role in the market.

[Lucky C]

For me it just so happened that I never had a long relationship before meeting my wife, who is a far better match for me than anyone I dated. If I had started dating someone who was somewhere in between those other women and my wife in terms of compatibility, I could have easily gotten stuck in the "just good enough" relationship trap, which could have ended up being costly in time & money.

At times I had my doubts that I would find such a good match but I stuck to it, improving my social skills, expanding my options, and trying not to waste time. Finally it paid off in a big way.

When you finally catch a really great fish, like an Old Man and the Sea once-in-a-lifetime catch, the thought of throwing it back should never even enter your mind.

[freedomseeker]

food for though.

I have heard through a couple sources (although I have not verified so take with a grain of salt) that when bank tellers are trained to determine between real and fake bills, they don't put all their focus on testing all the different fakes they have in house. Rather, they work with the real deal, over and over and over and by knowing what is true, they are able to determine anything different, even if they haven't come across it before. Maybe it's just a cute story.

edit* Wow, don't know why I thought this would appear relevant with out explanation. In this context I simply mean ultimate variety sampling doesn't necessarily lead to the fastest pathway to whatever is best.

[George the original one]

When you finally catch a really great fish, like an Old Man and the Sea once-in-a-lifetime catch, the thought of throwing it back should never even enter your mind.

What if you have two fish in the pool and the perfectly-good-one beats the once-in-a-lifetime catch to the hook? You've landed a perfectly fine fish to fill out your limit, yet there's a huge prize still in the pool... do you throw back the fish-in-hand and try for the best one? How hungry are you?

[Dragline]

Does the one you have caught know about the one you are going after?

[OTCW]

It is possible to over think affairs of the heart.

[Ego]

I thought we were talking about fishing.

[Ego]

What if you have two fish in the pool and the perfectly-good-one beats the once-in-a-lifetime catch to the hook?

How Fiction Ruined Love (in the Financial Times )
http://www.ft.com/cms/s/2/905bf850-0588 ... 2c284.html

The primary impediment to having better relationships may be the quality of our art.

To call for “better” art doesn’t mean art that is more moving or colourful or impassioned. The art that deals with love is already all those things and more. What it is lacking are crucial elements of wisdom, realism and maturity. Our love stories excite us to expect things of love that are neither very possible nor very practical.

[Dragline]

I thought it was porn that is now ruining love. At least that's what they tell me. . .