What is your FIRE number? Your expected FIRE expenses?

[steveo73]

From http://forum.earlyretirementextreme.com ... php?t=3509:

The beginner perspective is still focused on money-as-scarce-resource so they're focused on replacing the scarce resource from their job with a scarce resource from investments.

A common reason for pursuing FIRE is the desire to quit working. Using the extreme early retirement (E-ER) approach, the job is the only source of income, and the measure of success is never having to work that job again post-FIRE. Result is a huge accumulation target (2-4% SWR) and heavy reliance on investments to meet post-FIRE expenses. The job is the vehicle to freedom but the boat is burned upon arrival.

E-ER combined with an intense desire to quit working leads to a serious scarcity mindset during the accumulation phase. The job makes life miserable in the present. A person could have 20+ years of expenses saved and still feel like it’s not enough. Even if there is no intrinsic desire to learn how to invest, it is reluctantly studied anyway. Is this success?

Now consider an ERE approach with multiple uncorrelated and pleasant sources of income which can be used to meet expenses. The stash is no longer essential to FIRE. It is only a safety net. Is the E-ER accumulation target still appropriate here? Would something lower still work? I’m convinced that the suggested 3-4% SWR accumulation target for ERE has a deliberate side-effect of allowing enough time for developing living skills and alternative streams of income before FIRE.

At the extreme, multiple side incomes + no savings would work from a cash flow perspective, though the lifestyle is now tightly coupled to the side income. It’s a valid solution but the Internet Retirement Police will appear if you dare to call it FIRE. Still, does the distinction really matter if the primary goal of quitting the job was accomplished?

Now, the most radical proposal. Integrate the job into the web of goals! Eliminate the need to quit working. Although this might be a completely unmarketable concept in personal finance (or at least the early retirement sphere), it does seem that the highest form of wealth is possibly not measured in terms of money or even freedom from work. For someone with the beginner perspective of money-as-scarce-resource, true wealth is the appreciation and enjoyment of one’s vocation and life in general. This kind of mindset is arguably not well-suited for FIRE so avoiding the pitfalls of E-ER might be the best strategy until perspective increases.

This sounds great but I don't believe it's applicable for 99% of people. The idea that you build up enough savings from your job with a reasonable savings rate is applicable for basically 90% of people. I only state 90% because possibly some people don't earn enough money to have a high savings rate.

I think ERE has some flaws - namely too low spending and too low a targeted WR. I think the really low spending is not going to be realistic over time. At the same time I think you can get by with a higher WR rather than say 3%. The concepts though are spot on and the process to me is robust.

I estimate my FIRE expenses as 30k-50k per year. That is for two people in Australia. Our age pension is about $38k for two people. My target is about $710k but I split that up a bit. So $400k and a paid off house to get to 60 and the remainder in my Super account (accessible at 60).

We have plenty of buffer in those figures as we can downsize, get the age pension or inherit. If I was looking at a 3% WR I'd be looking at a total of $1.3 million.

My chance of success in cFireSim is about 75% up until 60 and 65% for 30 years. I feel really comfortable with those figures with the buffers that we have.

[CactusSurfer]

I'm aiming for $500,000 in investments plus a paid-for property of some sort, with a retirement budget of $1,000 per month. This may sound a bit conservative, but I have a very hard time believing that a 3-4% withdrawal rate will continue to be safe in the future.

[theanimal]

Wheaton levels of understanding reveal themselves once again...

Great post, Fish.

[Fish]

@steveo73: This is not directed at you personally, but at the vibe of your post. I wanted to address it because your views seem quite prevalent in terms of ERE not being practical.

Let’s do a thought experiment. Observe that a median (income) person, with a median lifestyle (standard of living), and with median behaviors (skill of living) cannot FIRE. It is financially impossible. We can infer that in order to FIRE, one must deviate from the median in some meaningful way.

The common narrative with E-ER is usually high income coupled with median expenses. Note expenses = (standard of living)/(skill of living). Fortunately, there is still a path to FIRE because the math is relative, not absolute. However, when RE, the high income job is lost and the only comparative advantage remaining for this person is their above-average savings. Without it, they’re sunk. The FIRE lifestyle is tightly coupled to investments. At least there is also the option of working a median job if investments don’t pan out.

Now compare to an ERE person. We’ll suppose a median income and median standard of living (middle-class lifestyle). Their advantage is their higher skill of living which results in below-median expenses. They also manage a similar savings rate and FIRE accordingly. However, the skill of living remains in retirement, so the comparative advantage is retained. The low expenses results in significantly more optionality in terms of income-generating activities that can "move the needle" so to speak. This can more than compensate for poor investment performance. If not relying on investments, FIRE becomes very robust if not anti-fragile.

I sense that high income people pursuing FIRE are prone to feel that they deserve a secure, high-quality retirement by virtue of having resisted the pressure of scaling consumption to their "socio-economic status." But as we can see from the thought experiment, the only relevant levers are income, standard of living, and skill of living. Unless our income/expenses equation is somehow incorrect or incomplete, there is no other path. Therefore, to increase robustness of the E-ER FIRE plan, one must: (1) supplement investments with other income sources, (2) reduce standard of living, (3) or increase skill of living. The concept is simple but implementation is not.

[steveo73]

@Fish - I understand what you are stating but I don't really agree with all of it.

If the assumption is that the median person can't FIRE I think that assumption firstly needs to be looked at. I don't think that statement is true if we change FIRE to retire. I'm 43 now. I'm not ever going to be a 30 year old retiree. I will till retire a lot earlier than most people. The average retirement age in the US is I think 62 and the rest of the world 66. I should be retired by say 47. So I consider myself someone who is basically retiring early but the point to me is that retirement is a continuum. Some people retire really early and some people retire late. On average though most people retire in their 60's.

In stating that yes you have to differ from the median to retire early. Some people strike it rich. Some people save a lot of money. Some people start multiple businesses. There are different ways.

I also get the comment regarding skill of living but I think that this statement needs to be looked at a little as well. Skill of living to me implies some special knowledge when I think that is really bullshit. Myself and my family have implemented lots of little things that would fit into skill of living but none of it is hard. I ride a bike and don't have a car. We don't buy coffee's outside all the time. We don't buy lunch or dinner. We cook our own food. I use Linux at home and build my computers. I get stuff for free on the Internet. The practicalities aren't really that esoteric.

The point that you make is that because I follow an ERE lifestyle is that I can parlay that into income-generating activities and investments are therefore not that important. I think that this is where we differ in our viewpoints or philosophy when it comes to retirement. I don't think that it's so easy to make more money. I think it's easy to get a job that would pay me more than enough to live off because I don't have high expenses.

Your last point is where I think an ERE approach based on really low expenses may suffer. To be clear I think that this is where the issue may arise.

Unless our income/expenses equation is somehow incorrect or incomplete

You can really push down expenses but there is the chance that this can go belly up. For instance say you spend $10k per year but most of your big costs are split between yourself and your wife. You end up getting divorced and now your expenses are $20k. This is where I think an ERE approach can be difficult to maintain. I also just used one possible example of some outside event impacting your retirement. If we are talking about an anti-fragile approach a really low expenses approach in my opinion is actually very fragile.

But as we can see from the thought experiment, the only relevant levers are income, standard of living, and skill of living. Unless our income/expenses equation is somehow incorrect or incomplete, there is no other path. Therefore, to increase robustness of the E-ER FIRE plan, one must: (1) supplement investments with other income sources, (2) reduce standard of living, (3) or increase skill of living. The concept is simple but implementation is not.

I think that what you've said here sounds right but the issue is that there are limits. So when you state increase your skill of living. How does that relate to needing a hip transplant for instance. I don't think it does. What if you already eat cheaply and live in a one bedroom place ? If your expenses are too low and you have no buffer points then those other options aren't really going to work. They have limits. Supplementing investments with other income sources is probably correct but that may mean going back to work.

I'm cool with those options but I think you need to think through the practicalities in more detail rather than philosophising about it. I also don't believe it's so easy to earn income outside of your job. That sounds a lot like work to me. If you can do this then I'm completely cool with it. I for instance I would love my children to find jobs that they love. In my case though I actually like my job and I have it way too easy at the moment but it's not something that I want to do for 40 hours per week or even 20 hours per week.

[Seppia]

To keep it simple, it is clear that it's a lot easier to sustain a lifestyle that demands little expenses.
Not exactly rocket science, the math is evident.
I also agree with steveo that assuming forever low expenses eliminates a big source of buffer.
Lastly, I think the biggest gains to be made by improving "skill of living" are obtained just eliminating the big stupidities.
As in everything the marginal utility of additional effort is decreasing.
Just rent a proper size apartment instead of a too big one, buy a second hand gas efficient car and use it as little as possible instead of leasing a gigantic tank.
Congratulations, you just saved an additional $1000 per month.
The increased efficiencies made by eating beans 5 times a week instead of 2 are obviously less.
So clearly adding skills such as cooking, home repair and in general learning to do stuff will improve your resiliency, but the gains get smaller and smaller

[7Wannabe5]

In one of his posts, Jacob writes about the decreasing spending part of ERE as mostly just being a matter of learning/mastering home economics. Since my first full-time job as an adult was being a housewife, I came to this realization or developed these skills prior to ever earning a full-time living in the employment market. Since I have also supported myself through self-employment, it seems to me that the only difference between reducing expenses through frugal/home-economical practice and increasing income through self-employment is whether or not you exert your effort in a social realm.

A simple example of this would be to imagine that the animal is living alone at his lovely cabin site, and he keeps chopping more wood than he is using in the moment himself, so it piles up and piles up, and then eventually somebody who needs some chopped wood happens by his place and sees the piles of wood and knocks on his door and offers him $X for some of his stock of wood. Maybe this sort of thing starts happening on a semi-regular basis, so then the animal develops a rational expectation that he will likely derive an $X/month from his wood-chopping "business." OTOH, it is pretty apparent that even if the animal remains in a socially isolated condition, his own stocks of wood, wood-chopping skill, and musculature will increase over time to a maximum limited by other factors such as availability of wood to split, storage area, genetic ability to increase upper body strength, tools at hand, etc. etc. When a person derives their income from investments in the stock market, there is a component of active management of the investment account which is like the wood-chopping, but there is another component which is the equivalent of the animal choosing to rent out his ax to a neighbor who wants to start his own wood-chopping business while the animal rests and reads comic books.

Anyways, my point is that if you are confident that the Stock Market is a neighbor you can trust to be productive/honest enough to provide you with an average 3% withdrawal rate on your loan of money/ax then it will be the case that once you achieve that level of savings you will be able to spend much of your time reading comic books, and you will not have to perform any of your own home economic tasks such as wood-chopping in a social venue where you might hope or expect to receive some cash in trade. However, if your highest level goal is something like achieve fulfillment/happiness through resilient Renaissance lifestyle development and practice, the essential question becomes can a person feel happy/fulfilled without engaging in some form of productive work and/or removing himself completely from the social venue? IOW, it has been my experience (perhaps not widely applicable) that if engaging in a certain amount of creative work is necessary for happiness/fulfillment AND having some level of social interaction is necessary for happiness/fulfillment AND you continue to act in accordance with these two premises post-retirement AND it is not the case that every individual in your social circle is more skilled and more frugal than you in every realm of existence, it will be the case that you will find yourself de facto earning some amount of self-employment income at some juncture, so you would likely benefit by including this in your planning or it is likely that you may spend too long working at a job you do not enjoy in order to save too much money and too long wondering why you aren't feeling super happy and fulfilled spending your whole day reading comic books once you have afforded yourself that luxury.

[ThisDinosaur]

So, how does one eliminate the "Scarcity Mindset?" I gather that this entire website and accompanying book are designed to answer that question. But I have trouble reading between the lines and extrapolating from abstractions. I am acutely aware that I am a naive beginner who doesn't "get it."

[7Wannabe5]

ThisDinosaur said: So, how does one eliminate the "Scarcity Mindset?" I gather that this entire website and accompanying book are designed to answer that question. But I have trouble reading between the lines and extrapolating from abstractions. I am acutely aware that I am a naive beginner who doesn't "get it."

Most of us do not live in a culture where money is in short supply. Most people around us have so much money or available credit that they are inclined towards using money as the most efficient solution to most problems. Take the example that steve073 gave of needing a hip replacement. Instead of instantly fretting about how to come up with the $10-$40,000 necessary for such a procedure, I might ask myself how best to prevent such a need, what people used to do in the days before hip replacements were invented/marketed as solution, what creative alternative solution I could hack together using old-fashioned solution mixed with modern resources/knowledge about problem?

There are a lot of people who make some part of their living by frightening other people into behaving like every situation is an emergency. For instance, if your roof starts leaking you can use black goo, a tarp and a couple buckets and take the time to figure out your next step, or you can pay somebody else to fix the emergency condition of potential wood rot for you right away!!! One thing that occurred to me recently due to my reading on systems theory is that it might be the case that in the vast majority of situations where you are using money to solve a problem it is also likely that you are making decisions too quickly, and in the remainder of the situations it comes down to whether or not you derive pleasure from exercises that could be readily described as "re-inventing the wheel." If so, you might find yourself standing in front of the bucket of black goo on sale for $21.99 which you were considering using to safe yourself $2199, and wondering if you could make something cheaper yourself by cooking up tree resin. -lol

[BRUTE]

Skill of living to me implies some special knowledge when I think that is really bullshit. Myself and my family have implemented lots of little things that would fit into skill of living but none of it is hard. I ride a bike and don't have a car. We don't buy coffee's outside all the time. We don't buy lunch or dinner. We cook our own food. I use Linux at home and build my computers. I get stuff for free on the Internet. The practicalities aren't really that esoteric.

it may be said that the sum of all these activities is the skill of living. it doesn't have to be intricate or secret knowledge. but does steveo73 think the median human would give up their car for a bicycle, start using Linux, or learning the (really extremely trivial) skill of making good coffee?

maybe the word skill is a bit high-brow, just like when Jacob talks about humans being "intelligent enough for ERE". it's more of a propensity. some humans find it interesting and fun to engage in all this stuff, and it happens to make them resilient and frugal. others not so much.

I also don't believe it's so easy to earn income outside of your job. That sounds a lot like work to me.

brute completely agrees, but that's likely because steveo73 and brute are conditioned (or born) to be salary based. in modern western society, salary thinking is just the default. very few individuals successfully adopt any other way of thinking, especially those from a certain lower-middle upbringing (good grades, good college, good job).

it's likely that those humans who engage in true handyman (or whatever Jacob calls that quadrant in the ERE book) type business would find it equally difficult to get a "good paying job" and work it for 30 years straight. it might be personality, upbringing, skill set, interests that jive or clash with the structure of such a job..

brute is pretty deterministic about these things. he's yet to meet a successful salaryman that became a successful handyman, or the other way around. most humans stay the way they've always bin in the grand scheme of things. brute himself completely and utterly failed at making this transition. it's just not for him.

[7Wannabe5]

brute is pretty deterministic about these things. he's yet to meet a successful salaryman that became a successful handyman, or the other way around. most humans stay the way they've always bin in the grand scheme of things. brute himself completely and utterly failed at making this transition. it's just not for him.
Top

I think BRUTE is likely overly deterministic in his definition of handyman or workingman (as Jacob defined quadrant in book.) Since BRUTE is a minimalist tech-roamer free-market anarchist who values efficiency, the only (as far as I know) things BRUTE routinely takes responsibility for maintaining are Zone 000 (his mind), Zone 00 (his body) and his slim Zone 0 (home) consisting of his portable belongings including technology tools. So, how could BRUTE possibly make money on the margin, selling anything by the hour/product, and thereby earn some workingman status?

Off the top of my head:

1) BRUTE could walk into a public park, set up a sign that says "Tabata Interval Workshop" next to a can for donations and proceed to demonstrate his method for maintaining his body in the social realm.

2) Since roaming is part of BRUTE's routine, and transportation is one of the major costs included in the price of any good, BRUTE could transport any goods readily available where he currently lives which are not readily available at his next location.

3) BRUTE needs meat. I assume BRUTE currently spends money to purchase his meat. BRUTE could quickly scout for 5 outlets likely to provide him with high quality meat in his current location, then he could quickly assess what any of those establishments were currently lacking that could quickly be fixed with his technology skill/tool set. For instance, perhaps one very fine meat outlet does not even have an internet presence that would alert other paleo-roamers of its existence. Then BRUTE could offer to barter his skills for meat. (I actually worked for meat myself a number of years ago, because my third sister needed a babysitter for her son, and my brother-in-law ran a gourmet butcher shop.)

4) BRUTE could steal and develop my concept for an umbrella that is also a metal detector and use the detector end of it to find coins and jewelry whenever he gets too bored with reading comic books, and then he could quickly convert it into an umbrella whenever he saw a charming young woman on the sidewalk during a sudden downpour, and then he could lure her back to his rude den with something from his pocket full of shiny metal prizes.

See how easy! I already have BRUTE exercised, transported, fed, entertained and even possibly f*cked with no need to tap his current supply of $$$ and no essential change in his current lifestyle.

[BRUTE]

7Wannabe5 is like 50% of the reason brute loves this forum

brute has done 2), if not with any routine. electronics sold in countries with high import taxes, sometimes up to 100% profit. somewhat limited, because brute can explain 2 laptops in his carry on to customs, but not 5.

could, could, could. brute is under the impression that potential is mostly an illusion, at least to him.

brute hasn't been formally diagnosed with autism/assburgers, but he's anti social as fuck. brute could post that Tabata sign, or talk to that butcher, but honestly, he never will. in this regard it feels very deterministic. if one is born/raised/groomed/whatever to be very social, those things are likely not just not stressful, but even fun.

as an example, the getting laid: even though brute could likely get laid a lot more if he was trying, it's actually so stressful for brute to be around demanding humans that the cost outweighs the benefit most of the time. in other words, the marginal utility of human contact is extremely low for brute. thus he pays a premium to be alone as much as he can. this somewhat traps him in the salaryman role vs. the working man, who needs a certain amount of sociability to gain new business.

[jacob]

@ThisDinosaur - No, the ERE blog/book wasn't really designed to answer that question. If anything, it was an intellectual exploration of what the actual questions in the field of personal finance and lifestyle design were in the first place. Remember, it was written at a time (in the twenty-zeroes) when financial independence generally meant/required having a million dollars and early retirement was something only a few high income people achieved in their mid-forties at the very earliest. It was a time when the way to grow networth was through compound interest and regular monthly contributions over a couple of decades of career work speeding it up with recreational coupon clipping, solid budgeting, and a perverse interest in knowing a thousand ways to save a dollar here and a dollar there. It was before FIRE blogging was even a thing.

90%+ of the blog was written between 2007 and early 2010. Same for the book. Compared to this list or compare to the dozens of FIRE blogs that exist today. http://rockstarfinance.com/best-early-retirement-blogs/ ERE effectively began and finished up before every other blog on this list even existed.

Much of the standard advice wrt FIRE today was first presented on ERE: That savings rate was the variable that mattered. That one should focus on the big three, namely, housing, transport, and food when it came to expenses instead dozens or hundreds of small ones like cellphone bills, ziploc bags, and DIY detergent. And to a large degree that FI is possible at any level of expenses. While the last one is really an YMOYL idea, ERE was the first to make a specific/heavy point of it on the internet. (Also, consider that the "1 jacob" budget is below the inflation-adjusted Joe Dominguez budget ($6k in 1998 money) ... this is likely due to the systems-theory difference.)

Now everybody takes those ideas for granted to such a degree that most people have no idea where they first came from. There's even an App to illustrate how savings-rate relates to years in the work force. No need to do the math in detail (like I did in the book) or hack an approximation with a spreadsheet which is how other bloggers used to do confirm my graphs (save from a few fellow nerds who actually replicated my derivations in detail).

Many readers back then (2007-2010) told me they came and stuck with ERE because the ideas were new and interesting and that they had learned all they needed on other blogs about how to budget, open IRAs, negotiate fees away, and that long lists tips and tricks weren't that inspiring anymore. Basically, it was an advanced crowd who had all the basics down. I wrote the blog with that audience in mind and I wrote the book for those core readers never expecting it to take off like it subsequently did.

Essentially, the book was way-waaaayyy ahead of its time (and it still is). Also, the blog was written for "the advanced reader" because back in 2010, those few were the only ones really interested in FIRE. By advanced reader, I mean those who had already learned everything there was to learn about how to make a budget, how to make a savings plan, and how to perform 500 different frugal tips and tricks, ... People who were already post-scarcity but wondered if that was all there was to personal finance.

So THAT's the audience that the blog/book was originally designed for.

Now, FIRE has subsequently become pretty common in the personal finance space. You can even win a blogging award in it without having to compete in "best new entrepreneur blog", "best retirement/geriatric care blog", or some equally ridiculously inappropriate category. I largely credit MMM for popularizing FIRE. I'm only vaguely familiar with nerd-lore, but maybe in terms of analogies in the pf-space, I'm Wozniak and he's Jobs. Okay, maybe I'm pushing too far/close to computational godliness, but I don't think I'd be offending much of any people who's been around for the past 10 years if I say that ERE was the dominant FIRE blog in the first generation (where the focus was on technical innovation), and MMM has been the dominant FIRE blog in the second generation (where the focus has been on design and user-friendliness). When I wrote my final blog post (save for a handful of later diary updates) in 2011, MMM had about 500 RSS subscribers (how one kept track in those days). I had about 5000. I suggested my readers move on to MMM and bumped him to 2000 over night. After that he really--really kicked ass and figured out how to sell it and his current readership is much much higher than mine ever was (I figure more than 10x of my peak). I never really cared that deeply about selling it. I did try for a while but quickly realized that my clown-tolerance is relatively small as these things go.

I think MMM does a superb job at getting people out of the scarcity mindset. (Maybe because he's within a couple of Wheaton levels of the white belt practitioners, see much lamented table in other thread ) As does a few other bloggers when they talk about a mindset of abundance (a meme that's started happening over the past few years). I never really cared about writing about this stuff because I was already much past post-scarcity as was my readers when I was still writing. Now, we have the ERE forums which can be of some help for beginners, but for historical reasons you'll find very little of that stuff developed on the blog or in the book. This is where Wheaton levels become important. MMM is close enough for those who figured out the basics to hook up. The gap to the ERE book/blog is still too large.

Interestingly what has happened since 2010ish given the present growth in popularity of the subject is that ERE gets to deal with questions/comments like either being told that applied systems-theory is absurd or useless; and if not, that I should use my "intelligence" to figure out a way to communicate all the thousands of hours of experiental knowledge within a short paragraph so the average reader can become an expert in three easy steps; while Pete gets to deal with people who want to know about "the Mustachian way to find a good housekeeper" or which is the "Most Mustachian Tesla Model"?

Phew! That got much longer than the few lines I initially wanted to spend on it, but I figured that some historical perspective would be in order. What you see on the ERE blog is essentially grad school research notes on what at the time was an entirely new field. What you see in the ERE book is the resulting dissertation.

Whereas what you see in FIRE blogging today are "entrepreneurial" popularizations (but vastly better than what I ever did) of a few of the core ideas presented in that dissertation.

(A few key people in the [FIRE] blogging crowd have publicly (Trent Hamm, Go Curry Cracker, and MadFIentist) or privately (can't say, but even bigger) admitted that the ERE book has served or still serves as a key inspiration for personal strategy and/or blogging ideas to them. This is good, because that's what was part of my intention for writing it. It was never really intended to serve as a beginner's book. I'm glad but also surprised when it does work in that capacity but I'm not surprised when it doesn't. I did briefly attempt to write such a [101] book in 2011 but the effort faltered because I never really felt all that qualified at that point because of this problem.)

[vezkor]

I was surprised to see Pete bought a brand new electric car, last week. A little bit of me died, inside, but I'm sure his next post will explain why!
MMM was great to get started with, definitely for levels 1-3... but for people aiming at 75%+ savings rate, you need to learn the principles behind ERE.

[jacob]

@ThisDinosaur - As for how-to ... maybe this way?

http://www.marketwatch.com/story/could- ... 2016-09-27

This is similar to how I started from noob in late 2000. I had already learned to live out of a suitcase since moving to Switzerland for grad school. For 1 year, I only bought food, train tickets (long distance relationship), and a couple of books. It was super hard back then in the beginning. I was thinking of all the things I missed; I focused on finding substitutes; it was work and it felt like a sacrifice. However, within some months, the scarcity mentality flipped. I began to focus on what I had rather than what I missed. Now, it's practically nothing to me. In the past year, I've bought a pair of pants, some router bits, and a couple of pliers. And I haven't missed a thing or ever wanted to go shopping. The things/or shopping entertainment experience I didn't get back then because I didn't know how to w/o buying them, I now live/solve problems by other means. I don't even think about not-shopping.

Not saying that this (or the link) is the only way, but crowbar-level "boot camp" may work.

PS: For more along these lines, search "buy nothing year" or "spending nothing year".

[Dragline]

More on Flanders here if you are interested: http://podcast.farnoosh.tv/2015/10/cait-flanders/

[Ego]

So, how does one eliminate the "Scarcity Mindset?"

This is a really great question!

I believe it is important to look at how mindsets get set. We humans naturally compare ourselves to others.

https://en.wikipedia.org/wiki/Social_comparison_theory

So, surround yourself with people who skew the average in the direction you want to move. One of the great things about this forum is the company we keep. There are lots of outliers here who do just that for me.

And I think this gets to the heart of stevos point...

I think ERE has some flaws - namely too low spending and too low a targeted WR. I think the really low spending is not going to be realistic over time. At the same time I think you can get by with a higher WR rather than say 3%.

Cover your nut
http://forum.earlyretirementextreme.com ... php?t=3557

Operating on a small-nut existence is more anti-fragile than operating on a medium-nut / higher savings existence for a few reasons:

1) For many the difference in the health-effects of working full-time to save a small-nut vs. medium-nut is significant. That additional damage done in the accumulation phase to build a nest-egg that will cover a lifelong-medium-nut makes one more fragile in retirement.
2) Hedonic-adaptation makes it hard to go from medium to small-nut living. It is harder for medium-nuts to cope with catastrophe. Bigger they are, harder they fall.
3) The skills learned over a lifetime of small-nut living pay dividends in the event of catastrophe.

[Seppia]

@jacob

Reading this post I came to think (again) the same that I thought while reading your book.
Your most impressive quality is the ability to synthesize complex things and de structure them in a collection of easily understandable thoughts.
To say it simply, you are able to eliminate all the noise and just distill the core.

I will be grateful to MMM because he's been the approachable badass who made me interested into the PF subject, but I can easily understand why many still are inspired by your book most of all.

Edit: sorry for the monster quote and thanks for editing it out

[steveo73]

it may be said that the sum of all these activities is the skill of living. it doesn't have to be intricate or secret knowledge. but does steveo73 think the median human would give up their car for a bicycle, start using Linux, or learning the (really extremely trivial) skill of making good coffee?

I agree that those things are the skill of living. It's amazing that so many people will never do this. I'm on the edge of pushing this stuff whilst typing into my fancy keyboard and using my fancy computer (ala MMM).

maybe the word skill is a bit high-brow, just like when Jacob talks about humans being "intelligent enough for ERE". it's more of a propensity. some humans find it interesting and fun to engage in all this stuff, and it happens to make them resilient and frugal. others not so much.

It is a bit pretentious.

brute completely agrees, but that's likely because steveo73 and brute are conditioned (or born) to be salary based. in modern western society, salary thinking is just the default. very few individuals successfully adopt any other way of thinking, especially those from a certain lower-middle upbringing (good grades, good college, good job).

it's likely that those humans who engage in true handyman (or whatever Jacob calls that quadrant in the ERE book) type business would find it equally difficult to get a "good paying job" and work it for 30 years straight. it might be personality, upbringing, skill set, interests that jive or clash with the structure of such a job..

brute is pretty deterministic about these things. he's yet to meet a successful salaryman that became a successful handyman, or the other way around. most humans stay the way they've always bin in the grand scheme of things. brute himself completely and utterly failed at making this transition. it's just not for him.

You may be right in the reasons for this but the point comes back to it not being as easy as stated to just go and earn more income from for instance knowing how to set-up my home computer so that it runs great. I like those skills that I've developed. I just don't believe that they are easily turned into income. They do save me money.

[steveo73]

I think ERE has some flaws - namely too low spending and too low a targeted WR. I think the really low spending is not going to be realistic over time. At the same time I think you can get by with a higher WR rather than say 3%.

Cover your nut
http://forum.earlyretirementextreme.com ... php?t=3557

Operating on a small-nut existence is more anti-fragile than operating on a medium-nut / higher savings existence for a few reasons:

1) For many the difference in the health-effects of working full-time to save a small-nut vs. medium-nut is significant. That additional damage done in the accumulation phase to build a nest-egg that will cover a lifelong-medium-nut makes one more fragile in retirement.
2) Hedonic-adaptation makes it hard to go from medium to small-nut living. It is harder for medium-nuts to cope with catastrophe. Bigger they are, harder they fall.
3) The skills learned over a lifetime of small-nut living pay dividends in the event of catastrophe.

I don't really believe this. I'll give an anecdotal example. I have a friend who can live off nothing. I really don't think he would care if he had to live in a tent on the beach. He would just go surfing and live off as little as possible. He'd probably do that better than myself. At the same time he has no savings at all with 2 young kids (1 & 3 yo's) and a partner. He just spends money when it comes in.

I think it's much more likely to be anti-fragile if you can lower your spending and you have a decent amount of savings. I think the classic example is if you need a hip replacement. You can't spend less and that is going to hammer your budget. The person with medium savings can pull back and they may adapt fairly easily. The only point that is giving me pause to think here is your first point. I'm not sure if you can actually quantify your point and my feelings are that other factors are probably much more important such as diet and exercise. I don't believe though in working too long unless you enjoy it.