What is your FIRE number? Your expected FIRE expenses?

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black_son_of_gray
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Re: What is your FIRE number? Your expected FIRE expenses?

Post by black_son_of_gray »

Did wrote:Getting the same outcome for less money just makes sense. You can't argue with it. There is no downside. And yet it isn't something most people think about: being inefficient is seen as a sign of success even if you are paying for the inefficiency using a high income you get at work because you are so good at being efficient there.
Exactly. My impression is that most of Western society is spendthrift* (i.e. it is the default relationship with money) but simultaneously believes they are in fact thrifty**. From their perspective, people like those on this forum are different/weird/incomprehensible or just have a highly undesirable lifestyle. Meanwhile, from a historical perspective, or if you broaden to include people in the third world/less "developed" countries... people have always been striving to get the absolute most bang for their buck, so to speak.

Maybe because I live in a particularly high cost of living/high income area in the US, but I'm constantly aware of how inefficient people's lifestyles are.

*A great word: "A spendthrift is someone who spends money prodigiously and who is extravagant and recklessly wasteful, often to a point where the spending climbs well beyond his or her means."
**This probably includes many poor Westerners, but there is certainly a subset of the 'poor' who are extremely resourceful and efficient.

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Ego
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Re: What is your FIRE number? Your expected FIRE expenses?

Post by Ego »

Fish wrote:
Ego wrote:Do skills trump all? Should we be striving for a FIRE number of zero?
It's up to each individual to decide what their material needs are. The typical E-ER narrative of "less is better" makes sense when using our wasteful consumer culture as the baseline, but it can be taken too far, especially if people intentionally deprive themselves of things they want only because there is a synergy with lower absolute expenses enabling even earlier retirement. If one is ERE-minded, the ultimate goal is not to have very low needs (Level 1), but to meet needs and wants using the full web-of-goals approach (Level 3).
Intentionally deprive?

Many of us have had that ah-ha moment where we realized that buying a Gucci dress or a red Porsche will bring us a little bit of status and pleasure in the short-term but the ultimate cost is much higher than the satisfaction of the desire. So we focus on more reasonable material needs. Is it possible that some people look at every material need in the same way we look at Gucci/Porsche?

In that same post I linked to Jacob's writing on standard of living. It makes for interesting reading. Since we are using standard of living as the ultimate measurement of (skills + home(tools) + cash expenses) in this thread, I think it makes sense to ask..... why are we doing that?

Is that the correct measurement? If not, then what is?

It is possible to become so enamored with the math involved in reaching FI that we devise a mathematical formula to satisfy that enamoration. We don't like the fact that the truly important measurement cannot be measured with math.

IlliniDave
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Re: What is your FIRE number? Your expected FIRE expenses?

Post by IlliniDave »

Ego wrote:
Fish wrote:
Ego wrote:Do skills trump all? Should we be striving for a FIRE number of zero?
It's up to each individual to decide what their material needs are. The typical E-ER narrative of "less is better" makes sense when using our wasteful consumer culture as the baseline, but it can be taken too far, especially if people intentionally deprive themselves of things they want only because there is a synergy with lower absolute expenses enabling even earlier retirement. If one is ERE-minded, the ultimate goal is not to have very low needs (Level 1), but to meet needs and wants using the full web-of-goals approach (Level 3).
Intentionally deprive?

Many of us have had that ah-ha moment where we realized that buying a Gucci dress or a red Porsche will bring us a little bit of status and pleasure in the short-term but the ultimate cost is much higher than the satisfaction of the desire. So we focus on more reasonable material needs. Is it possible that some people look at every material need in the same way we look at Gucci/Porsche? ...
That's a discussion I have a lot. While there are indeed a small minority who have an essentially pathological aversion to spending money (the financial equivalent of a hoarder, perhaps), for many of us it's simply a matter of finding balance. Unfortunately both sides tend to draw an unflattering caricature of the other when discussing the idea (either the crazy cheapskate wallowing in abject self-denial and misery or the lazy, stupid spendthrift mindlessly tossing money around like the flower girl casting petals before the bride). And as discussed elsewhere it's often a matter of efficiency in achieving a given result, with the set of dimensions over which optimization is attempted being greater than just money (there is money, time, safety, enjoyment, opportunity costs, etc. that all get weighed). In a culture like ours where money is easily available it's arguable that many are habituated to relying on it first even when in a multidimensional space it's a detrimental approach, no question. But spending money is not intrinsically a poor decision. That's what it's for.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by jacob »

@Ego - SoL is not a good measurement, but it's a common measurement.

It has been shown many times/by many academics, that SoL vs happiness is not a linear function and that in almost all societies maximum potential happiness is reached when one is doing better (that is usually measured financially though) than 2/3 of the [local/regional] population. The exception is very low income (I think under $10000 per year, but I might be completely off here... maybe it's $5000 or $1000) where everybody is just unhappy.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by cmonkey »

BRUTE wrote:what about the ability/tendency to give up on desires? what's so great about a high standard of living? isn't it much more efficient to just not desire one?
+1 to this. I think happiness is really what everyone is striving for and a high standard of living is one of the most accepted ways of boosting happiness.

Running water, ready access to food and a roof over your head are the pillars of what most here would call a high standard of living. Beyond that, we aren't too picky But again it's a spectrum with everyone taking their own spot on it, all the way from camping in the Appalachians, to living in a van, apartment buying/managing, to buying and renovating a house.

Ego wrote:Do skills trump all? Should we be striving for a FIRE number of zero?
Depends on how far down the rabbit hole you go. That monk may be doing it right, but its certainly possible to go too far. That guy was/is extremely skilled in the art of monetary avoidance. Should we strive to go that far?

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Ego
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Re: What is your FIRE number? Your expected FIRE expenses?

Post by Ego »

jacob wrote:The exception is very low income (I think under $10000 per year, but I might be completely off here... maybe it's $5000 or $1000) where everybody is just unhappy.
Who is everybody? It is people who arrived at the below $1000 against their own will.

How many of the below $1000 people arrived there by design? Plotted the course. Set the sails. Steered toward it.

Ricard is a good example of someone who did just that. When his brain is put in a scanner he measures off the charts happy.

I am not saying everyone has to do the same. I am saying that it is useful to realize that others who objectively measure as happier than me may look at my FIRE number in the same way I look at the guy with fifty Rolls Royces in his garage.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by jacob »

@Ego - For the academic studies, I'm talking population wide sampling. In general. Not outlier/exceptions.

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Ego
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Re: What is your FIRE number? Your expected FIRE expenses?

Post by Ego »

@jacob - Understood. I am calling into question the useful of using population wide sampling to determine FIRE numbers. I think it is a terrible metric. The people who come here are not average so to compare ourselves to the average person is not only not helpful, it is harmful.

For some reason that Krishnamurti saying you like so much comes to mind.

7Wannabe5
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Re: What is your FIRE number? Your expected FIRE expenses?

Post by 7Wannabe5 »

Ego said: Consider that the the happiest person ever measured by fMRI lives in close proximity with many others, literally begs for his sustenance and owns nothing but the clothing on his back. There must be a lesson there.

Do skills trump all? Should we be striving for a FIRE number of zero?
Two observations. First, the example you offered fails the "What if everybody did it?" test, although I would agree that it passes the "What if more people did it more?" test. I am reading a gardening book written by a Buddhist monk, and she started gardening when some anonymous person noticed that the temple plantings were suffering and left a note that said "Plants need water." If everybody begged for food or scavenged it from dumpsters (another thing more people should do) then most or all of us would starve. Secondly, I've become pretty cynical or "So what? Big deal." about people exhibiting the ability to manipulate their own biochemical/emotional states through various means and methods. I think this is because there is a tendency to attach value judgment to the means/method. For instance, runner's high vs. the euphoric state attained through shibari or meditation vs. smoking some opium. Maybe this is because I've spent a good deal of time in the company of people who suffer from bi-polar disease. People with bi-polar disease can be kind of like the canaries in the coal mine of human happiness and misery. Bi-polar disease, which is essentially a hormonal disease ( thus causing hyper-or-hypo function in various drives), is also very well correlated with high IQ.

OTOH, probably due to the fact that I am a bit cuckoo-bananas, I am trying to get my spending level even lower than $9000/year, and I don't think this is possible without some creative application of methods of internal emotional control. For instance, yesterday I saw that somebody had set fire to the free mini-library on the urban farm across the street from my camper-garden. This made me feel very angry. Then it made me feel afraid that somebody might torch my camper while I was sleeping in it. If everybody was like that monk, except for one psychopath with a container of gasoline and a box of matches, then that wouldn't be a best case scenario either, but I am not going to go lock myself up behind some gated community out in the suburbs just because I had a frightening thought. I will just buy a smoke detector and be brave.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by jacob »

@Ego - Oh, I agree.

There comes a point when the weakness of such measures should be recognized and where they should not guide actions. I recall a guy on the forum once---many years ago---trying to use WEIRD-based psychology research to prove that we couldn't be happy or whatever it was. I think he came out of the lesswrong forums, but whereever it was, his idea was to "use science" to maximize his happiness. If all you have/trust is a hammer, ... and all that.

I think the same goes for complicated accounting. The map is not the territory. And I think with full-on ERE in particular we lack good mapping techniques. Trying to further complicate a poorly fitting technique is not going to make it better. That's like spending time trying to increase the precision on an inaccurate instrument rather than finding a more accurate instrument.

This is also why I generally dislike giving out specific numbers or specifics in general. Specifics are too easy to put into the wrong context (map).

On the other hand, to communicate in the first place, we do need to have some concepts in common. I can share my numbers and everybody else can share theirs as long as we all acknowledge than my numbers (apples) shouldn't be directly compared to yours (oranges).

Pretty much the same reason that two businesses (say General Electric and FlexSteel) can't be compared simply by looking at their respective financial statements.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by Fish »

Ego wrote:Since we are using standard of living as the ultimate measurement of (skills + home(tools) + cash expenses) in this thread, I think it makes sense to ask..... why are we doing that?
Very relevant link to the ERE blog post. I don't think anyone here is confusing quality of life with standard of living. I hope not. It's just that one is qualitative and the other is quantitative (and conducive to math). The only reason to bring this into the equation is so that we can have some measure of the value that skill adds to one's life, even if it's solely in the financial dimension. If we must discuss finances, instead of using Level 1 concepts like savings rates and WRs, we could be using a Level 2/3 concept of skill that starts measuring a person's ability to apply ERE ideas to their life. For example, consider two people with a 75% savings rate and 3% WR. One could have a nondimensional (Skills / Standard of Living) = 0, meaning they spend money as effectively as the average consumer paying retail, while the other could have (Skills / Standard of Living) = 0.5 or 0.67 meaning 50% or 67% of equivalent consumer spending has been replaced with skill, or alternatively they are getting 2 or 3 times the bang for the buck. Doing this as part of a total calculation of standard of living also shows how useful their skills are in the context of their lifestyle. For example, one might get their food for nearly free using extreme couponing, but if they're still paying retail to live in a McMansion and drive a gas-guzzling SUV for their 50 mile commute, it will rightfully be reflected in their composite skill level. Even if they're at 75% savings rate and 3% WR.

By adding skill level to the discussion we move people toward Level 2/3 thinking. Otherwise, the discussion stops at savings rate and WR and people will only focus on the mathematical levers for those equations - higher income, lower absolute expenses, and the size of their brokerage account. While low expenses can be a proxy for skill, a skill level calculation is useful for measuring skill, especially for those who are already near the expense floor.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by jacob »

Another way of breaking it up might be to use something like the DuPont equation

Quality-of-Living/Capital = (Quality-of-Living/Standard-of-Living) * (Standard-of-Living/Cost-of-Living) * (Cost-of-Living/Capital)

Yeah! I think I just had a moment of insight there ... because now ...

Quality/Capital = Appreciation * Skills * SWR ... or Quality = Appreciation * Skills * SWR * Capital, where Capital is all the different kind of capital one can apply, e.g. financial savings, social, technical, ...

Not sure what SWR means in terms of technical capital, but I can kinda see how it would work for social capital. Maybe ...

But again ... this is building toy models; but we do this because it occasionally leads to insight.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by Ego »

jacob wrote: On the other hand, to communicate in the first place, we do need to have some concepts in common. I can share my numbers and everybody else can share theirs as long as we all acknowledge than my numbers (apples) shouldn't be directly compared to yours (oranges).
I agree. There is a problem in any growing movement that extends beyond Wheaton-scales. New ideas clash with firmly held but highly questionable (or outright wrong) commonly held beliefs. The leader is faced with the tightrope dilemma of maintaining integrity / honesty while recognizing that some people react to symbols (monk living in a cave) and just don't want to be part of anything that is seen as extreme or out of the ordinary. Expand the base or be true to self.

I have a great deal of respect for the way you've walked that rope so I won't shake it any more. :D

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by Scott 2 »

.Do skills trump all? Should we be striving for a FIRE number of zero?
The risk in relying entirely on skill is the age related decline of physical and mental faculties.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by BRUTE »

Ego wrote:The leader is faced with the tightrope dilemma of maintaining integrity / honesty while recognizing that some people react to symbols (monk living in a cave) and just don't want to be part of anything that is seen as extreme or out of the ordinary. Expand the base or be true to self.

I have a great deal of respect for the way you've walked that rope so I won't shake it any more. :D
brute agrees. it's refreshing these days to see a "thought leader" (brute shudders) not sell out, look for the viral growth, monetize everything, have an email list and an online course.. even many FIRE types are doing it. as much as brute likes capitalism, this commercialization of personality and ideas bothers brute and makes him dislike those people.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by 7Wannabe5 »

@jacob: Another brilliant model for the tinker-toy web-building kit!!!
Not sure what SWR means in terms of technical capital, but I can kinda see how it would work for social capital. Maybe ...
I have a good example for you. This morning, one of my poly-amours literally said "I feel like I owe you some money, because I paid a therapist for the kind of help you are giving me (dealing with fall-out post-divorce mid-life crisis etc.) , but that didn't work as well." He also suggested to his multi-millionaire stock investor housemate that he ought to hire me for a high-paying job opening with his business, noting "but then you would have to give up that damn hard-scrabble farm you like so much." I don't want a full-time job or cash in exchange for therapy services, but I took some empty water jugs and a very nice, big Indiana Jones style gardening hat that the housemate offered me, and some socks, cherries, coffee and towels that the Cowboy offered me. So, if we estimate the price of a short-round of therapy at $2000, and the total value of the items I received at $20, perhaps the current valuation of my social capital held in the Cowboy Fund would be around $1880. One question to answer would be does social capital tend towards appreciating, depreciating or holding steady over time without further deposits/withdrawals? For instance, if the Cowboy and I amicably parted company at this juncture, could I call him up 5 years from now with reasonable expectation that $1880 or services/goods/etc, of similar value would be made available to me? I think the answer in my specific example would be "Yes.", and I think the general answer would be that it would depend on the "character" of the person with whom you invested social capital and the benefit (happiness?) they continued to derive over time from the capital you invested. Of course, the example I offered is a rare instance in which transfer of social capital is overtly discussed and similarly valued by both parties involved. The fact that this sort of thing does not happen to me only every once in a while, but very frequently, and in all sorts of social contexts, is why I tend towards feeling quite secure with a fairly low level of financial capital.

Why do people who inhabit pretty much the highest standard of living want to come hang out with me at my dangerous urban area, hard-scrabble farm camper? It is probably because my Quality of Life is the same or higher. Life is more pleasant, or pleasing, at my hard-scrabble camper than it is in the land of Lexus and $800,000 homes.

Fish
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Re: What is your FIRE number? Your expected FIRE expenses?

Post by Fish »

From http://forum.earlyretirementextreme.com ... php?t=3509:
jacob wrote:The beginner perspective is still focused on money-as-scarce-resource so they're focused on replacing the scarce resource from their job with a scarce resource from investments.
A common reason for pursuing FIRE is the desire to quit working. Using the extreme early retirement (E-ER) approach, the job is the only source of income, and the measure of success is never having to work that job again post-FIRE. Result is a huge accumulation target (2-4% SWR) and heavy reliance on investments to meet post-FIRE expenses. The job is the vehicle to freedom but the boat is burned upon arrival.

E-ER combined with an intense desire to quit working leads to a serious scarcity mindset during the accumulation phase. The job makes life miserable in the present. A person could have 20+ years of expenses saved and still feel like it’s not enough. Even if there is no intrinsic desire to learn how to invest, it is reluctantly studied anyway. Is this success?

Now consider an ERE approach with multiple uncorrelated and pleasant sources of income which can be used to meet expenses. The stash is no longer essential to FIRE. It is only a safety net. Is the E-ER accumulation target still appropriate here? Would something lower still work? I’m convinced that the suggested 3-4% SWR accumulation target for ERE has a deliberate side-effect of allowing enough time for developing living skills and alternative streams of income before FIRE.

At the extreme, multiple side incomes + no savings would work from a cash flow perspective, though the lifestyle is now tightly coupled to the side income. It’s a valid solution but the Internet Retirement Police will appear if you dare to call it FIRE. Still, does the distinction really matter if the primary goal of quitting the job was accomplished?

Now, the most radical proposal. Integrate the job into the web of goals! Eliminate the need to quit working. Although this might be a completely unmarketable concept in personal finance (or at least the early retirement sphere), it does seem that the highest form of wealth is possibly not measured in terms of money or even freedom from work. For someone with the beginner perspective of money-as-scarce-resource, true wealth is the appreciation and enjoyment of one’s vocation and life in general. This kind of mindset is arguably not well-suited for FIRE so avoiding the pitfalls of E-ER might be the best strategy until perspective increases.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by FBeyer »

Fish wrote:...
Now, the most radical proposal. Integrate the job into the web of goals!...
My current job was literally enticing due to web of goals, although I hadn't found ERE by the time I applied for it, so I didn't think of it that way. The idea is the same though: get paid for something I'd love to do anyway.
I think it's only a radical idea if you compare those who are already knee deep in their current 'career' with those who are about to leave university. Several people here are trying to incorporate their first/next job into their web of goals.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by vexed87 »

I'm aiming for £175k before I pull the plug on my 'career'. A paid off home would be nice too, but I'd rather put my efforts into becoming self employed and working in a field I enjoy more and on my own terms, so while I'll be happy with a 3% withdrawal rate when I pull the plug, I'll still aim to get my SWR as low as possible and live as much as possible on cash flow.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by Gilberto de Piento »

$600,000 in investments plus a paid off house would cover everything I need.

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