Part 1: Awakening
My journey started about 3 years ago with reading 4HWW, which opened my mind to the possibility of early retirement. At the time, we were overwhelmed new parents, and life without the 9-5 sounded really nice! After a misguided pursuit of FIRE that lasted a few intense months, I found YMOYL, then MMM, then ERE.
Each of these resources provided additional perspective and refined the vision of the FIRE concept. MMM contributed a deceptively simple and mentally sticky portrayal of FIRE as a race to 4% SWR. While this was a
particularly useful tool for understanding the feasibility of extreme early retirement, I'm really glad that ERE has helped me move beyond this by providing an even more compelling life vision.
jacob wrote:Here's something else to ponder. Stoic in its modern form means living an austere form of life. However, in its original form it meant living in harmony with nature. A life without friction. The point of ERE is to reach this state. This is a life where you don't have to struggle for anything. Just by living the way you are, all your wants and needs are satisfied automatically.
Part 2: Moving beyond FIRE as an objective
The "race to 4% SWR" mental model of FIRE has a simple and attractive proposition: work for X years and you will never have to work again. However, if this is paired with the common perception that work is unpleasant and to be avoided, it is also extremely limiting. In accumulation, it means always looking to the future and never being fully satisfied in the present. Money is viewed as a scarce resource because the ability and willingness to generate earned income is not commensurate with expenses. The need to take is stronger than the desire to give, resulting in insecurity. Better pad that SWR because going back to work is unthinkable. It took me a really long time to overcome this and reconsider that necessary activities need not be unpleasant.
I think there's also Wheaton levels of ERE perception corresponding to stages of competence(*):
1) ERE seems universally unappealing. Viewed as sacrifice in the loss sense.
2) Is still unappealing to self, but can understand why some people might do it.
3) Advantages outweigh disadvantages. Pursue ERE with FIRE as motivation.
4) No perception of sacrifice. Automatic ERE-consistent behavior.
I started at stage 2 and consider myself somewhere between 3 and 4 now in terms of perception. In terms of actually applying ERE concepts to life, I'm still at best consciously (in)competent at the systems thinking aspect. But I can at least see that the real point of the 21-day makeover is not to save money and the ultimate purpose of ERE is not retirement in a traditional sense. The makeover is a training exercise(&) for beginners (novice systems thinkers) and the talk of retirement is really quite clever in the sense that it works at both stage 3 and 4. Someone at 3 will see retirement as freedom-from while someone at 4 sees it as freedom-to. The makeover is really "applied ERE" at the technician level, where a side effect of following the steps is the reduction of money-dependence to a level where its acquisition is no longer a burden. (And the ultimate goal, I believe, is for the student to learn something about systems thinking by reflecting on why the steps worked as well as they did.) But the bigger picture will be obscured so long as the goal is freedom from work.
(*)To be fair, I don't believe ERE philosophy is a necessary condition for reaching stage 4. I think it's also possible to get there by reading YMOYL or MMM, but you would need to read between the lines because those resources place more emphasis on asset-dependence. ERE is more explicit about developing/using other forms of capital and is extreme enough to emphasize continued value generation in retirement.
jacob wrote:I think martial arts is the ideal metaphor. Just like Dreyfus, we start with technique. Wax-on, wax-off. Then we put techniques together in kata or moves. Then we do a little sparring with our combos. And finally, we realize that "technique" was just a learning tool.
Part 3: Everything seems different, but nothing has changed
Honestly, I never did the makeover.(^) But I've read the ERE book 7-8 times now (each time at a slightly different level) and slowly internalized the principles to the point where I reflexively know the "ERE book move" for any life situation I encounter. Sometimes I take Jacob's advice and sometimes I don't. My_Brain_Gets_Itchy suggested that true mastery can only be achieved by breaking with the master and fitting the principles to one's own personality and temperament. Although I'm definitely not there yet, I already know that's the path I'm going to take.
(^)We still live in the same house. Work the same jobs. Drive the same cars, though much less and to the point where car-free is feasible, though inconvenient since the initial conditions were not systems-optimized. However, we now maintain all our stuff and acquire new stuff pre-depreciated where possible. The ecological benefits of buying used often weigh more on the decision than cost. Thanks to specialist jobs, we have never been terribly off financially (pre-enlightenment savings rate = 40%, with 1 child) but by paying off debt, eliminating wasteful spending and applying ERE principles we've been able to enjoy an ever-increasing quality of life at lower operating cost (current savings rate = 66%, with 2 children).
However, the most meaningful single change is having integrated work/career into the web of goals. The job is much more enjoyable if it is more than a paycheck and source of FIRE fuel. I think if you are doing any one activity 9-5 AND that activity only serves one function AND that activity is required, dissatisfaction will quickly build. The internal complexity is almost a requirement for the career to be sustainable.
In our capital-intensive, relatively high expenses case, overcoming "scarcity mindset" requires acceptance that the lifestyle is leveraged. This means not taking our abundance for granted, and recognizing it is something to be enjoyed while the financial environment permits it. It also requires a willingness to "step down" if needed to a level of consumption that is more appropriate to our ability and willingness to produce if that changes. Our budget is about 50% wants including travel, childcare and charity. At 3x minimum wage, total operating cost for our family of 4 is very manageable on either of our specialist salaries but the required capital buy-in (30 years at minimum wage) is intensive enough that we would choose to live differently if starting again from zero. It's all about the initial conditions! Nevertheless, lowering our operating expenses provides a huge confidence boost that we didn't have before ERE. As for now we'll continue to fill our specialist niches and bank the surplus.
Part 4: Possibilities for future personal development (financial dimension)
Where am I going? That's a great question. I almost intended this to be a "So long, and thanks for all the fish" post, but in the process of writing I realized that I still have personal finance goals. Maybe "goals" is too strong of a word. They're more like aspirations without any strong motivation behind them. Dissatisfaction is needed to get things done...
1. Achieve "true FI" in the one-dimensional sense, i.e. 3-4% SWR. It's currently ~10% at wants level and ~5% at need level. I don't need to put any special effort into this one. It'll happen on its own.
2. Develop a pleasant source of side income that can cover at least 10% of expenses. Maybe when the kids are a little older? (We have two children < 5.)
3. Write a PF blog? No thank you! Novice me thought this would be a great idea but I really don't have enough creativity and interest to contribute any technical innovations. On that topic of innovation, I do think the 3% SWR target is overkill, particularly if earned income is to cover expenses in "retirement" and if various personal and societal safety nets are present, i.e. the converse of the concerns in this post. With the right attitude and a sufficient amount of human capital, it would probably suffice to be only slightly ahead of the average person if you don't mind the possibility of sharing their fate. And on another note, PF/FIRE theory still interests me and I'll continue to discuss it here.
4. Learn to invest, or outsource it? This is my greatest weakness in the PF dimension. For now I'm determined to make this issue irrelevant by focusing on earned income.
5. Continue simplifying our financial lives with a target of zero input. Selling the investment real estate was a great move. We come out ahead with the standard deduction from not holding mortgage debt, which is a nice convenience at tax time. Even on the little things, not chasing the last dollar on phone and internet service makes a big improvement to quality of life with minimal detrimental impact. The desire to minimize input on financial matters is related to the vision of not needing to struggle for anything.
6. Figure out the appropriate financial rules given the objectives. I'm still unlearning some well-intentioned advice that is geared toward Wheaton Level 3 or 5, for example the rule of thumb that one can never save too much money in retirement accounts. Not a bad idea at 20% savings rate, but needs to be reconsidered when at 50%+ savings rate and early retirement is a possibility. Trying to strike a balance between optimality and simplicity with things like backdoor Roth IRA contributions. Part of me doesn't want to care(%), but I'll work out these rules to put the mind to rest.
(%)Because properly investing the nest egg (see #4) has a much higher return on effort.
Part 5: Reflection
My experience is more of an inner journey where a fresh perspective completely changed my approach to life even though the external circumstances remained the same.
Before this all started, I was living a blissfully abundant life. I never really felt scarcity even though debt was a financial straitjacket and half of my waking time was consumed by work. The lock-in occurred when we had children and the remainder of the time disappeared too. No money, no time, no optionality. What a lonely, desperate feeling I will never forget.
Personal finance, in particular the ERE book/blog/forum, has helped me shed the lock-in and recover that feeling of abundance. For the first time in years, I don't daydream anymore about what I'll do when I finally FIRE, or make endless mental projections about when I'll be FI, nor waste thought on similar silly things. I've finally reached a point where it makes no difference to me whether I am retired or not. Having this inner peace wrt FIRE is invaluable, absolutely precious. I would not trade it for anything, not even my "number."
A final word on motivations. I'm not really writing this journal for myself. All are welcome to comment but I'm not writing to seek comment. The purpose of sharing my story is to provide a voice to a minority view (perhaps even previously unstated?) that some other state besides retirement can be a satisfactory destination for the FIRE journey. If there were more/louder voices along this line, I would have been content to leave this unwritten and unpublished. But given how much I silently struggled with these thoughts and issues over the past three years, I wish to share this story with everyone, including the lurkers, in case it might be of the slightest help for even one of you find your way.
tl;dr Thanks Jacob for putting an end to the period of restlessness 4HWW caused in my life. Your book and your ideas were well worth it.