Quitting when investments=IR of 1 vs income robustness

[thef0x]

Thesis: WFH, side hustle, and entrepreneurs: once you reach FIRE (investments=IR of 1), you should not quit your gig 1, instead you should try to decouple your income and your time/work-cons as much as possible while keeping a disproportionate amount of income from gig 1 (ideally still a score of IR of 1).

Why: a much higher income robustness score, IR +1.

Why not: gig 1 just sucks too much.

Solution: try hard to cross out all of the "cons" on the "pros/cons" list at work and take a pay cut for it, earning back a huge amount of time and freedom from stress, see how it feels, and then re-evaluate. Iterate via systems, automation, perhaps even delegation/hiring to offload the bad while keeping the good (IR +1).

Not straightforward, definitely not possible for all or even most, but you have nothing to lose and income robustness to gain.

Ancillary idea: you do not need to hit investments=IR of 1 if you keep income from gig 1 so long as you're IR 1+ in total. You're achieving the same FIRE number but in a shorter time and with more resilience / less risk. Again, this only works if you're genuinely good with the time you're spending on gig 1 because you'll keep doing it indefinitely at gig1+investments=IR of 1.

I've 180'ed my thinking on quitting gig 1 in the last 30 days because of the income robustness score thread (thank you all) and this is where I've ended up.

I'm really curious what others think -- these are all new ideas for me to stumble through myself so collaborative push-back is really appreciated.

[2Birds1Stone]

Being completely retired is pretty awesome......you couldn't pay me enough to return to work, no matter how easy and highly compensated it was.

The problem with some of these strategies is the goal posts moving. The more=better mentality makes it hard to completely walk away and open yourself up to something completely different.

[J_]

lR-1 what does it mean?

[ducknald_don]

I have to agree with @2B1S, even having a tiny amount of side work seems to bleed into the rest of life. Not having a boss, customers or a business partner is bliss.

[delay]

lR-1 what does it mean?

Found an explanation here: viewtopic.php?t=11914&hilit=income+robustness

To compute, take each independent source(*) of dollar income and divide it by total expenses. If the number is >1, reduce to 1. Add them together.

[AxelHeyst]

@f0x your notation was confusing me a little, or maybe I still don't understand what you mean.
By "Investments = IR - 1" I'm reading "investments equal income robustness minus one", which I don't get.

I think you mean "when your investment returns covers your cost of living", which I would notate as
IR=1 (from investments).

But actually, if you still have the job, the IR=2 because it is
IR = (salary + investment returns)/COL. It's only if you quit that IR=1.

At any rate, I think I get what you mean.

Not straightforward, definitely not possible for all or even most, but you have nothing to lose and income robustness to gain.

Well, you have time as a free human to lose, which ain't nothin'.

However, I think I get your point, which is that if you've already got skills and capital built up in gig1, if you've got a shot at automating it and turning it into a very low time requirement second source of income, it's worth looking in to. I think this is a valuable idea, good thread.

I actually may me meandering my way into something like this. I'm currently working on a side hustle that is based on the skills and some network capital I built up during my career. I'm focusing on building assets that can be sold, not on selling my time. I'm putting time in now to build up an infrastructure that, if all goes will, will bring in >1CoL with very little time input. This would put me at IR=1.5 (my stash covers only half my CoL) with a very low time investment.

The key is that I enjoy the kind of work involved. If I didn't, I wouldn't be doing this.

Ancillary idea: you do not need to hit investments=IR-1 if you keep income from gig 1 so long as you're IR 1+ in total. You're achieving the same FIRE number but in a shorter time and with more resilience / less risk. Again, this only works if you're genuinely good with the time you're spending on gig 1 because you'll keep doing it indefinitely at gig1+investments=IR-1.

Oh, I see, IR-1 isn't IR minus one, it's IR of one. Anyways: yes, I think this is a fine semiERE strategy.

--
My main counter to this is the point that being involved in activity for the purpose of income generation keeps your mind/perspective locked in that 'earning money' phase of life, and might hold you back from moving on to the other phases that are relatively unexplored in our culture. I often think about this and for me it would be the main argument for going fullFI asap.

[thef0x]

Apologies for the confusing representation of the IR score, updated that, appreciate the feedback.

My main counter to this is the point that being involved in activity for the purpose of income generation keeps your mind/perspective locked in that 'earning money' phase of life, and might hold you back from moving on to the other phases that are relatively unexplored in our culture. I often think about this and for me it would be the main argument for going fullFI asap.

I agree completely.

My thought experiment is presupposing a perfectly rational agent who can just "turn off the feels" in inverse proportion of their IR from investments. As others have mentioned, sounds good but as it turns out in empirical reality, it's basically impossible and the cost of any association with gig 1 outweighs the pros of added income robustness. A blank slate and a new beginning has a lot of weight.

I do wonder if we're kinda pre-defining a known unknown, though, with the full jump out of gig 1 when we haven't tried a new way to participate in that gig. If we had, maybe the last 10-20% of time in gig 1 could've been much more enjoyable.

It might be optimal to consider an iterative approach where you still end up quitting gig 1 completely with a phrase out ride that feels way more enjoyable, enhancing your IR during those years of semiERE.

You could call this the "weak" vs "strong" version of the argument:

Weak: we do quit gig 1 but the ride out is modified to reduce freedom-inhibition and work BS while accepting a cut in pay / longer (more pleasant) term to investment income of IR 1.

Strong: Never quit gig 1 if you can get the cons to a level you're okay with because the added income robustness is valuable and lets you ERE before investment income reaches an IR of 1.

And the really reasonable response is: being semiERE is absolutely pathetic to being truly ERE.

I guess I just wonder how blurred that transition can get.

[DutchGirl]

If you quit when you have 25 times your expenses, you are very likely to never run out of money, due to a variety of reasons:

1. It is likely that a SWR of 4% turns out to be too safe for your specific date of quitting. 4% is still safe under very bad market conditions, most people will not retire and meet very bad market conditions immediately, by chance.
2. It is likely that your expenses can be cut some more if the markets are taking a major downturn and you think that it's smart to try and take out as little as you can until the market recovers.
3. You will probably earn some more money over time in very different and maybe unexpected ways.

[J_]

@delay, @AH thanks for explanation. But it still seems to me that using such a formula is a way to make something complex, what in words better can be explained. ( and of course because my simple mind is not used to formulas)

[AxelHeyst]

@dutchgirl, yes, but the idea of income robustness is to mitigate even further risks to autonomy for those so inclined to worry about such things as hyperinflation, secular collapse, and whatnot. You could consider IR to be another branch on a SWAN (sleep well at night) strategy.

Maybe more importantly tt also is another way to think about your Renaissance / polymathy development. How many diverse skills *could* you assemble to cover your expenses? Actually, that's worth underlining: imo, IR isn't primarily about measuring financial security, it's about assessing useful polymathy.

As such, stacking different manifestations of the same skill to generate income from a variety of different specific vehicles/side hustles would be a way of 'gaming' the IR score in a way it isn't intended to be. If the world stopped valuing that skillset, all of those income streams would collapse. Not so robust after all.

[thef0x]

Likewise @Alex, if you did develop a system that generates income with the flexibility to modulate your time/emotional involvement to income in a way that satisfies you, why would you throw that asset away as well just because you got to FI / IR=1 from investment assets?

I think many WFH folks would benefit from trying on the "my job is actually a system" jacket to see if there are ways in which they can start crossing cons off their recurring to-do list while only slightly sacrificing income (in the cost of implementing automated tools to do things for you).

No-code tools like zapier or iftt that connect different systems to perform repetitive work for you. There are services that will instantiate a webbrowser VM to go to a website and gather data for you, organizing it into a pretty spreadsheet. Connect it up with zapier and use a random number generator step to randomize when you send the automated reporting email to your boss. Better yet, save money and learn another valuable skill: python or javascript.

..

Stepping back, my general observation is that we often think of making money as a yes/no binary system where we do our job to make our money and then quit, on / off.

Instead, if we look at gig1 as a system of inputs and outputs with a landscape of configurations, we might be able to move the dials around to obtain increased income robustness and a shorter or more pleasant gig1-to-ERE off-ramp, all while exploring, experimenting, maximizing resources, and learning skills.

In a post covid world, I feel like there's never been more opportunity to make a modified gig1 really work for you (while coasting into ERE).

Edit: @Alex, I read your journal about the edu product and to me it's the perfect example of what I'm talking about. It does take time but it's the kind of time you want to take, even if the garden requires a tiny bit of watering every once in awhile. As you said, it has to work for you.