Optimising Income in Pursuit of ERE

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Optimising Income in Pursuit of ERE

Post by asap531 » Thu Mar 16, 2017 5:58 pm

Hi folks,

I've read Jacob's book a number of times, and have been following ERE principles for some time.

I have a friend who asked me an interesting question which I was unable to answer. I'd appreciate some guidance from the community on how best to address it.

"Question: Should I defer gratification and take on a high paying job that I don't enjoy to reduce my time to FI?
The logic being I can build up a really good capital base and then leave the job for something else."

For some context, my friend is passionate about value investing (and has a decent track record), and this is what he proposes to pursue when he has reached FI.

His opportunity cost financially is as follows:
Option A. Recruitment consultant - est. salary of $250k post-tax and expenses (he's very good)
Option B. Stock analyst for a fund - est. salary of $60k post-tax and expenses
Note, hours are similar in both.

As you can see, there's a big differential between the two choices.

My gut feel was that the ERE principle does not advocate pain or stress in the short term to the pursuit of FI; it is fundamentally about managing your expenses, and your time frame to retirement should hinge on your savings rate (%).
However, I wasn't able to pinpoint a section in the book or the blog or a forum post that addressed this point.

I went through a similar trade off when contemplating offers at the start of my career from Investment Banks and Consulting Firms, but decided that the hours and lifestyle were not worth the increased income levels.

Note, we both understand that FI is more about controlling your expenses, which is why it is accessible to everyone.

Any guidance would be appreciated!

Last edited by asap531 on Thu Mar 16, 2017 6:27 pm, edited 1 time in total.

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Re: Optimising Income in Pursuit of ERE

Post by Fish » Thu Mar 16, 2017 6:21 pm

The below quote is what I believe to be the canonical view on the subject. If the income-generating activity becomes a way of life the need for accumulation is reduced. ERE also stresses pursuing goals homeotelically in goal-space so job-you-dislike-to-FIRE-earlier is a solution to be improved upon.
jacob wrote: Modern career workers talk a lot about work-life balance. One is bad but necessary and the other one is pleasant and the balance is about maximizing utility.

Early retirement is about frontloading the work in order to get lots of life later on.

ERE, the way I see it, is to make it possible to eradicate the distinction between work and life. It goes somewhat beyond the naive "you just gotta find a career you're passionate about"-strategy. It's more of a "you gotta find a way to live=work you're passionate about"; and ERE is a suggestion for that way.

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Re: Optimising Income in Pursuit of ERE

Post by BRUTE » Thu Mar 16, 2017 9:11 pm

brute would definitely take the high-paying job. it will cut 75% off TTFIRE (time to FIRE) compared to the other. instead of 10 years, it could be done in 2-3. then there's 7-8 years left where the friend can do whatever for fun, like taking that other job.

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Re: Optimising Income in Pursuit of ERE

Post by pukingRainbows » Fri Mar 17, 2017 7:24 pm

I've been thinking about this question a lot actually.
My initial thought is: How much do you detest the work? And how does that balance against the compensation? How long would you need to do it for? And then your decision flows from there.

In addition to this though, I think it's important to consider what you plan to do after reaching FI.

If you plan on doing something "extreme" like biking across Asia on a unicycle, then maybe you need to get there sooner than later so you're young and healthy enough to do it. And so then the sacrifice of your present life enjoyment would be worth it. However, if you're just imagining yourself with more freedom and no financial pressures, then I don't see the need to rush things if you can reach that point eventually while doing something you actually enjoy.

In general, I don't see the need to rush to FI unless you dislike your job. So if you have the choice to pick a job you actually like, I would rather do that.

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Re: Optimising Income in Pursuit of ERE

Post by Dragline » Fri Mar 17, 2017 8:44 pm

+1 on "not a race".

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Re: Optimising Income in Pursuit of ERE

Post by Scott 2 » Fri Mar 17, 2017 9:17 pm

I find it hard to believe someone who is so good at recruiting to warrant 250k a year, can't find a job working for an investment firm paying more than 60k a year. At the very least, I'd expect them to have the soft skills to rapidly turn that into a six figure career.

It's not like they want to be a yoga teacher. Time to change jobs.

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Re: Optimising Income in Pursuit of ERE

Post by James_0011 » Sat Mar 18, 2017 9:14 am

It depends what you value. If you actually like where you live and what the job is don't worry about making a ton of money. On the other hand if you don't like the job (or any job), and want to move or do something time sensitive after ere - go for the money.

Personally, I decided to go for the money even though I don't like the work that much. This is because I don't like any job or situation where people are telling me what to do, and my post ere plans will work better if I am still young.

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Re: Optimising Income in Pursuit of ERE

Post by thrifty++ » Sat Mar 18, 2017 6:34 pm

I think it really comes down to the ratio between how stressful the job is and how much money it provides. Looking at your particular example - $250k after tax is a shitload. And I dont believe recruitment would be particularly stressful. I have certainly done far more stressful jobs for far less. But I do find it hard to believe to be honest. That salary doesnt make sense. But if it is true - hell yes go for it!

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