This post is from a discussion in a thread by @RoamingFrancis about his housing situation.jacob wrote: ↑Sun Nov 14, 2021 5:06 pmI skyped with Vicki Robin a couple of years ago. She told me that Joe Dominguez's approach was the "render unto Caesar's [that which is Caesar's]". IOW you need to "put on your own oxygen mask first". Extreme FI is ridiculously easy. Get it done. Once you rendered unto Caesar for 5 years, you're done.
RF's situation and @jacob's response, made me think of several people I know for whom extreme FI is not ridiculously easy. It's not bc living frugally is a problem. It's bc of living circumstances and income.
What I'm not trying to rehash is the old argument that "FI is only possible for high-income software engineers" or "if you were raised in the projects, and are a single teenage mother with 8 children, FI is impossible, so therefore it is not a valid solution for anyone."
What I do want to point out is that FI in 5 years by practicing frugality is only possible if you already have access to a relatively high paying job, are not buried under a mountain of student (or other) debt and already possess advanced investing knowledge or are comfortable treating index funds like a high interest savings account. There are some other factors as well, such as not having tons of dependents or a crippling health problem, but who I want to address here are people for whom the logic behind FI is specifically possible, but the numbers aren't quite accurate.
Why am I bringing this up? I want to say again that 5 years is a long fucking time to do something you don't want to do. It's difficult and dangerous for many people to pause their true selves for 5 years while they "pay unto Caesar" doing something that doesn't align with what they'd like to do*. Retire in 5 years assumes you don't fall into any of the easy traps like 1 more year syndrome and maintain 100% commitment to something that you don't like doing for 5 years.
*To be fair to Jacob's advice from the other thread, I think what he is getting at with the "pay unto Caesar and apply your own oxygen mask first" lines are that it's not a bad thing for a young person to compromise a little bit of their values to earn their freedom from the things they'd rather not do and help others, especially when this is possible in a fraction of a lifetime, which I agree with. As always this is meant as an in forum post, so I'm assuming you're not going to be like "this other internet guy on the ERE forum added some nuance and it's harder for some people than first internet guy said, so I'll just go buy that Hummer with the cocaine rims, case closed."
The math behind a 5 year retirement is a little shaky when you don't already have a "high-paying" job and aren't already a master investor. To retire in 5 years 1 must save 5x=33(1-x)** or x = ~87% of their income. At $7k that's ~$54k a year (~67k if you use the JAFI). The median individual income in 2020 was $35,805.
**As always please make sure I'm not fucking up the math, math people
At this point in the argument, the common advice is that if you have a low income, and are really dedicated to retiring early, it is advisable to concentrate on skill building and job searching to find a higher paying job, rather than simply staying put and saving forever.
I totally agree with this. The problem is that this takes time, effort and often financial resources. The lower down social ladder one starts, the more difficult this is going to be.
In addition to this, one effectively needs to get the equivalent of a BA in finance by themselves, figure out an investment strategy and start investing. It is certainly possible to do this within the 5 years one works, but now one needs near total devotion in these years to retiring early. Work 40 hours a week AND reduce expenses to the bone AND spend most nights and weekends studying finance. To a select minority this is going to be a really fun challenge, but to a lot of people this is going to be highly undesirable.
Reducing expenses also takes effort. A lot of us had years of cheapskatery under our belts, but to those who don't this present an extra time and energy commitment.
I'm not bringing all of this up to be discouraging, I'm saying that initial conditions matter, and for those with less than ideal initial conditions, 5 years to retire early is going to be either extremely challenging or impossible EVEN IF they are able to reduce expenses to $7k a year.
I bring this up now bc, as we look to expand the scope of ERE, I don't think telling people that retiring in 5 years is easy is a *great* idea (again, not saying @jacob was doing this in the original post I quoted, which was specific advice directed at a specific forum member who had asked for advice).
Well, you all know what my solution is.
For those who are not high-income earning seasoned investors, spreading this process over a number of years of part-time work is, imo, a more feasible solution. Once spending is lowered, taking advantage of some of the extra time now gives more time to learn new skills for work, more time to lower expenses even further, more time to learn about investing and more time to enjoy your life so that FI does not become the sole focus of your life. It also allows you to take advantage of higher income years ahead after you have re-skilled and take advantage of higher investment returns you earn as you learn to invest (the disadvantage is lower starting capital, but the original 5 year plan with learning investment assumes you don't start earning returns until after you retire).
I think that, for those in less advantaged starting positions, spreading the retirement period out over a longer period of time gives more opportunities and makes the end goal more feasible and the process of getting there more desirable. As always my point isn't that ERE or FI is wrong, it's that the framework ERE outlines has benefits much greater than trapping it within the narrow FI or 'FI first' bounds.