AE's Adventures in Accidental FIRE

[zbigi]

Gold has had a near 50% rally over the past year, I wouldn't be comfortable buying now. On the other hand, I wouldn't be comfortable buying most asset classes at today's prices, so it may just be my bias.

[AnalyticalEngine]

@Lemur - Thanks for the suggestion. I'll look into those asset classes. It is for sure the handful of large tech companies that completely dominate the S&P500 that I want to avoid. Not only because I believe they are a bubble, but also if tech goes down it will be harder for me to find a job so it's an industry I best hedge against.

@zbigi - You are right about gold. There's a reason, I think, Warren buffet is at 50% treasury bills. The 4.5% I'm getting in the HYSA has a real chance at beating the market this year if things get hairy.

Seems like bonds are a safe place to start though, so I might as well buy them first. Does anyone here have an opinion as to if the bond funds should go in a tax advantaged account or a taxable account?

[jacob]

As always, doing your taxes with pencil and paper at least once in your life is a very very very very good idea to understand how the tax-mechanics works. This way you'll get actual numbers which are always better than opinions. I'll do you a favor and not reveal the answer.

Grab a pencil and download and print out https://www.irs.gov/pub/irs-pdf/f1040.pdf ... Also download https://www.irs.gov/pub/irs-pdf/i1040gi.pdf (no need to print it). If you need other forms and instructions, just google e.g. "irs sched b ins pdf" or "irs 1099 form pdf" depending on what you need. Every document has an "ins" and "form" (two separate pdfs). Make sure you get the correct year.

If you're super-enthusiastic, you could build a spreadsheet which would make experimentation a bit easier. The danger here is that usually 0-2 things change each year as congress enacts new laws or previous laws get sunset. So effectively, you'd have to rebuild it every year or at least make sure that it's still valid.

[Jin+Guice]

Hey!

I want to reiterate the power of having really low expenses. You have a ton of money. Retiring for 50+ years is always going to feel weird and scary because it's impossible to predict what will happen in the next 50+ years. Having a job for the next 50+ years is also weird and scary, it just doesn't feel that way because of habit and watching everyone else do it.

What will make it feel less weird and scary is developing a plan and habits for drawing down, needing less money and learning to meet your needs in non-monetary ways.

It is possible... almost easy... to live a live a materially better life than a person who is spending most of their money on an expensive house, an expensive car, expensive vacations, expensive restaurants and expensive stuff they don't use for drastically less money (think <1/10th the amount). People who are doing this are not skilled consumers, much less skilled at living. Once you divorce yourself from it far enough, it appears to be a collective mania rather than normal.

Investment wise, I'm in the same boat as you (except way less money and I also don't plan to ever stop working totally for good), with the same fears and I also do GB.

I second doing your taxes by hand.

[white belt]

If anyone has any resources that can help me grow my understanding here, that would be great. I bought the macroeconomics textbooks Jacob suggested on his reading list and I'm working through those, but I would like additional resources if anyone has any.

There are a few finance podcasts that I recommend. Macro Voices, The Macro Trading Floor, and The Market Huddle are all pretty good. They are useful for getting a range of perspectives from qualified institutional professionals who trade/invest in the market for a living. This will give you an idea of how practitioners think about the market rather than how economists think about it. Whenever they start talking about stuff you don’t understand, you can reference it in textbooks or through internet resources. This is how I leveled up my understanding of the impact of macroeconomics on the real world.

[Smashter]

Does anyone here have an opinion as to if the bond funds should go in a tax advantaged account or a taxable account?

You've probably come across this already, but the Gyroscoping Investing forum is the go to place for questions like this. It's a forum for those who use the Permanent Portfolio. Tyler9000 has chimed in there a lot over the years. It's not the most active place these days, but there's a lot of good content about the Permanent Portfolio and the Golden Butterfly.

As for the tax bit, when I was doing the GB I had the following tax notes in my spreadsheet. Not saying this is ideal, but sharing in case it’s helpful:
- Long term bonds — “put in retirement accounts” 

- Gold (IAU) — “fine in taxable, but better in tax deferred if we have to sell some”
- Short term treasuries — “most likely hold in taxable, probably won’t matter much”
- Stocks — “put them anywhere”

In reality we ended up holding almost everything in retirement accounts because my wife and I had the space for it.

Our family has shifted to more stocks and eliminated long term bonds over the last few years, but we still have a lot of cash and gold. This led us to way outperform the golden butterfly recently, but of course I’m seeing troubling headwinds like everyone else and wondering if we should be a bit more conservative. If I go that route I might just load up on more cash as I still don’t quite understand bond convexity and long term bonds only ever caused me pain.

Ultimately I know all this tinkering is not great for long term performance. If I’m not going to be an active investor I should just pick something and check it a couple times a year.

[jacob]

As for the tax bit, when I was doing the GB I had the following tax notes in my spreadsheet. Not saying this is ideal, but sharing in case it’s helpful:
- Long term bonds — “put in retirement accounts” 

- Gold (IAU) — “fine in taxable, but better in tax deferred if we have to sell some”
- Short term treasuries — “most likely hold in taxable, probably won’t matter much”
- Stocks — “put them anywhere”

Notes need updating. Short term treasuries now pay 4-5% in APY as opposed to the likely ~0% when you made the notes.

Overall, "general recommendations" are borderline useless, because so much comes down to individual tax brackets and whether one's portfolio sees trading turnover or it's all buy&hold forever. For example, gold is taxed as a collectible and as such it's taxed at a fixed rate. You'd get a discount if you're in a higher bracket, but screwed if you're in a lower bracket.

And so on ...

[AnalyticalEngine]

@Smashter - Thanks for sharing your experience and notes on where to invest things. From my research, that seems to line up with my current situation. My current asset allocation was like 50% stocks (in retirement accounts) and 50% cash (in HYSA). My plan was to DCA into bonds in my retirement accounts, but frankly the current market climate has me spooked so I think I will just speed run the bond re-balancing this week. Bonds have been incredibly underwhelming in the 2010s-now, so they may preform better in the future. Gold and stocks are high and volatile atm, so I will have to steel myself when it comes to DCAing from my HYSA into my asset allocation there. This will mean I have stocks + gold in taxable and bonds in 401k/tIRA and then my small cap value in my roth IRA.

@white belt - Thanks for the suggest, I'll check out those podcasts.

@J+G - What I'm realizing is important for me is to actually figure out all the little details of my lifestyle and actually go live them. I am not getting any younger and I'm starting to see how just following old habits is not going to get me to where I want to go. Of course, retiring in your 30s in a little unnerving because it's so young and the future is so uncertain, but I'm not sure how much longer I'm going to last in the tech industry anyway given the crunch in employment, and so that decision may be made for me in the near future anyway.

Designing lifestyle and cutting expenses seem to be the same thing to me now. That is, really the hard part here is figuring out what you want and how to get it. Basically everything else flows from that.

[AnalyticalEngine]

Updates:

1. My contracting job is for Very Important Financial Institution, so I have been learning about the banking system through work. It's complicated stuff, but there are a lot of very smart people working here, which has made me think the system is more robust than I was giving it credit for. Between this and studying finance, I was able to make some trades that have profited me $40k in three months and pushed me over the $1 million NW mark officially. Nevertheless, it was stressful and consuming too much of my attention, so I put everything back into the golden butterfly and I'm calling it good for now while I focus my attention on other things. Still, it was a good learning experience and it made me a lot more confident in living off my savings because trading a bunch made the numbers-on-screen seem more "real."

2. I've been ignoring my spending while focusing on work and I'm trying to reign that in now. Lifestyle creep bug is hard to beat. However, not paying attention to spending did break the scarcity mindset I was stuck in before, and I feel more confident now in my ability to spend on things that improve my life instead of hoarding every penny. And it also cemented the fact I can spend all the money in the world, but if I don't spend it on meaningful things, excess money does me no good.

3. I've also accepted the fact I am extremely burned out and need to do less overall or else I will never recover from the burnout. This has also given the confidence to leave work because recovering from burnout is going to require managing my energy and spending it on replenishing activities, not "obligations" I am "supposed" to be doing (ie work).

4. I've come to the conclusion working from home is overrated and I would rather be in the office for networking if nothing else. I feel like I would be meeting more people and learning more about Very Important Financial Institution if I was seeing coworkers in person. If I do work a paying job, which I will only do so for web of goal reasons and not money hoarding reasons, I would rather be there in person because working from home is starting to feel like a waste of my time.

5. Long-term plan is still to get into quantum computing or perhaps see if I can get an internship in economics for Very Important Financial Institution. Also move somewhere with cheaper rent.

6. More specifics of my attempts to cut spending and integrate activities coming next month.

[Scott 2]

I think the tension created between an extremely low cost lifestyle and a high earning profession contributes significantly to burnout.

When I contracted last year, I used Cook Unity for meal delivery. Decent food, 2 minutes to heat and serve. I wish I'd done similar during my career years.

Same with buying whatever the mechanic recommends, bringing in the housekeeper, skipping comparison shopping, etc. There's a lot of stuff I endured that maybe saved only 5-10k annually.

In hindsight, once I had the skills, putting them aside would have been better aligned to my working needs. Wants change when you step away and are time rich anyways.

So I don't know that I'd frame every expense as lifestyle creep. The only thing I couldn't bring myself to roll back is the housekeeper.

[AnalyticalEngine]

@Scott 2 - I think you are right there. I've noticed these two goals tend to pull me in opposite directions, and it's pretty obvious that if I could do everything I wanted to do while working full time, there would never be a reason to pursue FIRE/quit in the first place. Obviously, there are some people who can manage this, but also being burned out already entails a level of mental energy debt that needs to be repaid somehow. It's also hard to care about saving $20 when I am already past a million but feel extremely burned out.

When I was laid off earlier this year, it was way easier for me to try to save money and care about all these expenses because I had nothing new coming in and I had time to focus on everything else.

[jacob]

I recognize that the availability of "spoons" may be a limit when concentrating full time on a job, but I think you guys could benefit from reading this thread: viewtopic.php?t=10897 If nothing else then just to see the alternative to the "sacrifice/substitute/optimize"-mindset.

[AnalyticalEngine]

@jacob - The yields/flows ties into some other thoughts I've had about burnout, namely that I think burnout can caused by being too future-oriented in a "sacrifice/substitute/optimize" sense. Learning to cultivate happiness in the present moment is a skill I'm certainly working on learning, and I think burnout is caused by deciding to make the present miserable for the future ("sacrifice") and then running out of the spoons required to tolerate drudgery in the present. I'm starting to think the way out of my own burnout is to focus more on what creates happiness in the present moment for me then building the rest of my life around that, whatever that looks like.

[Scott 2]

For me burnout comes down to pacing strategy - spoons as Jacob referenced. Rather than run at capacity, I need a baseline functional reserve - say 30% unallocated. So when the unplanned happens, I have space to ramp up and then recover.

Wearing two hats - competitive high earner and frugal jack of all trades, makes the reserve infeasible. I need to decide which I'm doing and act accordingly.

Some uses of spoons are more efficient than others. I can aim for advantage through systemic alignment. But co-workers are doing the same. At a certain point, I have too many inflexible constraints and am no longer competitive.

I definitely ran into those limits contracting half time. To my peers, 50% availability introduced a liability. I got by on goodwill built up as an FTE. It was clearly dwindling as things went on though. I made for a weak alliance.

Playing below your level can initially seem the answer. Take easier work to create that functional reserve. I tried it early career. In practice, I did not find that to go well. I'd lose my patience with leadership decisions and get sucked into using my reserve. It was even worse, because then you're trying to lead from behind. Far harder and more delicate.


I'd much rather do few things well. So eliminating entire problem spaces - clean house, food, clothes - becomes an obvious answer. It also means giving up control, which is the point.


Anyway, I wouldn't start flying to Japan for long weekends or renting Lamborghinis. But take a ride share over the bus? Absolutely.

There was an evening traveling for work, where I literally walked an hour in 12-18" snow, carrying 2 days of food. This was on top of 4 hours travel and a full work day.

I could've called a taxi and had room service at the hotel. I made things unnecessarily hard.

[grundomatic]

I needed a full year of doing nothing but what I wanted to recover from my burnout. I could not figure out how to do everything I wanted while I was working, either. I think that was my first journal entry.

I think my error was not viewing the job box and my relation to it dynamically. By the end, there was way more "stress" and "misery" as outputs from the job than when I started. The job changed some, but so did I. I should have known from experience to get out sooner.

I totally support you in eliminating anything from your life that is making you miserable, and adding whatever you think will make you happy. I'm just sad @Scott 2 beat me to the LamBROghini reference.

Should we fire up the old MMG and practice drawing reverse fishbone diagrams?

[jacob]

In my [brain] case, spoons are more specialized. There are creative spoons, social spoons, physical labor spoons, management spoons, etc. Burnout for me only happens if one set of spoons is overused in an uninspired way. However, I can often alleviate [this burnout] by using another set of spoons. E.g. burning out the creative spoons at work but then walking to/from through the snow for 1hr each day as a way of resting the creative part of the mind. This way developing the jack-of-all-trades strategy becomes a feature rather than a bug.

What I can't do is solving intellectual problems at work AND solving intellectual problems at home. The intellectual spoons are already in use. Having a job involving hard physical labor would also lead me to scale back or eliminate sports or exercise. A big part of the reason why I've quit jobs in the past was that the job eventually became less interesting than alternatives. For example, I quit physics to write the ERE blog. (It was difficult to think about neutron stars when I was more interested in solving the consumption problem.)

Individual spoon allocation also matters. I don't think people have equally many spoons of each type. I have many "learning spoons" but very few "socializing spoons" for example. Insofar ERE focused and depended on "forming communities" I would be SOL and never get very far with it. I could see myself paying to avoid having to go to meetings or deal with people in order to solve my problems.

[Scott 2]

The pacing model I use is more complicated than spoons.

Executive function is my primary constraint. It's an engine with an unusually small fuel tank (ADHD). When the fuel runs out or the engine stops, my day is over.

Sensory load (autism) is a bucket carried by the engine. The lower I can keep it, the less work required, the more I can do. Overflow the bucket and the engine stalls (shutdown/meltdown). Clean that up quickly (regulate) and often a day can be recovered.

Sleep hygiene and food quality (ADLs, iADLs) increase the amount of fuel my day starts with. Movement (self regulation) tunes the engine. Stimulant medication adds fuel, but at the price of running the engine too hot.

Burnout results from regularly running out of fuel and/or killing the engine. It builds up sediment in the fuel tank, makes the engine less efficient, and puts holes in the bucket. So now I can do less and it costs more. Even minor sensory overload can stall everything. The whole system needs to go offline for repairs.


Spoon theory is a convenient analogy, but this is my actual mental model.

Socialize online, sensory load is nearly zero, so I can go forever. Do it at a baseball game, I might cause several days of acute burnout (dysregulation) in a few hours.

The engine is better at some things (analytical work) than others (creative work). I can play a video game and barely sip on that fuel tank. Try to dance, I might as well throw a match in there.

[suomalainen]

@scott, this reminds me very very much of my daughter who really struggles with “overstimulation”, I think is how she would put it. Do you have any recos for resources that helped you along the way - either with learning about yourself or about tools to help you live in the world as it is?