What is your FIRE number? Your expected FIRE expenses?

[Ego]

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.

Oh, yes, we agree there. I thought we were discussing:

Low spending & moderate amount of savings to last....... vs .......Medium spending & high amount of savings to last

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.

I was looking at it from the perspective that fish outlined here:

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.

Death by a million cuts. Jacob's extreme frugality allowed him to get out before the stress, lack of sleep and general crap of a high paying job caused him to deteriorate health-wise. Thankfully, that's what we did as well. Some few people (you?) find jobs that allow them to maintain outlier health while earning very high wages, but most high-wage jobs demand a level of commitment that leaves little time and energy for self-maintenance. Something's got to give in order to accumulate the nest egg and health (mental and physical) is the thing that usually gives.

So what happens then? Post retirement the high-saver tries to make up for all that time they spent in their office chair, which is better than his/her peers who are still working, but worse than it could have been had they gotten out sooner with a lower standard of living.

Who is more likely to have done the things that allowed them to avoid a hip replacement in the first place?
Who is more likely to overdo it trying to make up for lost time and damage their hip?
Who is more likely to have the varied skills that allow them to find alternatives to hip replacement?
Who is more likely to be in worse shape pre-hip-replacement and suffer more post-replacement?
Who is more likely to have the most good years between retirement and hip replacement?

It all goes back to which yardstick we use to measure a good life. Security is one possibility. Anti-fragility another. Love? Joy? Happiness? Meaning? Each of us uses our own yardstick.

[steveo73]

Who is more likely to have done the things that allowed them to avoid a hip replacement in the first place?

I don't see this as being at all clear cut. I work out regularly but my shoulder for instance is toast. It hurts regularly. I also have a dogdy knee. You get injured over time from working out.

Who is more likely to overdo it trying to make up for lost time and damage their hip?

I think that this is a subjective point but I think working out too much over time like what I do is probably more likely to cause issues in later life.

In stating that I think working out is important. You are less likely to have a whole bunch of other issues arise.

It all goes back to which yardstick we use to measure a good life. Security is one possibility. Anti-fragility another. Love? Joy? Happiness? Meaning? Each of us uses our own yardstick.

This is a little bit different to the topic we are talking about but I agree the concepts discussed here are more about choosing your own path and being comfortable with that.

[Seppia]

So what happens then? Post retirement the high-saver tries to make up for all that time they spent in their office chair, which is better than his/her peers who are still working, but worse than it could have been had they gotten out sooner with a lower standard of living.

Who is more likely to have done the things that allowed them to avoid a hip replacement in the first place?
Who is more likely to overdo it trying to make up for lost time and damage their hip?
Who is more likely to have the varied skills that allow them to find alternatives to hip replacement?
Who is more likely to be in worse shape pre-hip-replacement and suffer more post-replacement?
Who is more likely to have the most good years between retirement and hip replacement?
.

I kind of agree here, but I think in some way you're dodging the question.
While it is clear that you're much less likely to suffer certain injuries if you pull the trigger early, some things can be unavoidable.
I don't know think about a bike crash.
I think what steveo is trying to say here is that with the lowest spending you have less buffer in case of a catastrophic event.

[steveo73]

I think what steveo is trying to say here is that with the lowest spending you have less buffer in case of a catastrophic event.

Exactly. Shit happens. The more optimised you are the less ability you have to decrease spending.

[theanimal]

I think what steveo is trying to say here is that with the lowest spending you have less buffer in case of a catastrophic event.

Exactly. Shit happens. The more optimised you are the less ability you have to decrease spending.

Que? So spending more allows you a bigger buffer?

Nobody is advocating for zero savings. What people are advocating for is minimal spending with medium to high savings*.

*Which you can accumulate more of by having lower expenses.

I think what Ego is advocating is that you are arguing on the premise that the activities one participates in as a non-salary worker are prone to catastrophe, when the real damage and the highest risk comes from sitting at a desk all day. What's more dangerous, sitting at a desk for an additional 5 years to accumulate surplus money you'll likely never need or jumping out 5 years early and biking multiple times a week?

I really hope I never become the person that picks the former.

[Seppia]

no, I don't think in any was it was suggested that "spending more is better"
The initial point was "I you spend as little as possible you're making yourself more resilient".

It's in part true (you need less income to support you, so basically any job could do, while a bigger spender cannot survive on McDonald's salary for example), but one also has to consider that if you plan your total savings accordingly (let's say the very basic "save 25-30 times annual expenses") then any unexpected expense becomes potentially catastrophic.

It's basic math.

Mr. A spends $5,000 per year
He has a total of $125,000 in productive assets

Mr. B spends $24,000 per year
He has $600,000 in productive assets

Is mr. A safer?
If everything goes right, maybe yes. He needs less to support his lifestyle and he could save a lot of money even by working at McDonald's.

Anything goes wrong?
Not sure about this.
An unexpected $15,000 expense would cut out 3 years expenses for A, not even one year for B.

[7Wannabe5]

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.

You have identified a likely very fertile area for personal growth. Congratulations!

Mr. A spends $5,000 per year
He has a total of $125,000 in productive assets

Mr. B spends $24,000 per year
He has $600,000 in productive assets

Is mr. A safer?

Imagine that you meet two people hiking on a path that leads into the woods. Person A has a pack full of gear and a look of grim determination, and Person B just has a knife and a canteen and is whistling a merry tune. Is Person A safer?

Also, you have to be thoughtful when comparing two stocks that are inherently different. Money invested in the stock market will tend towards exponential increase over time with no further investment of life energy. Your stock of physical health will tend towards steady decline over time, even with high level of continued investment of life energy. So, if the purpose of your system is something like maintain SWR at 3% and physical health at level of "can bike 80 miles/day with reasonable ease" then you will obviously have to devote relatively more life energy to Stock Health than Stock Money into the future to fulfill your purpose.

Also, an event such as "hip replacement" is an expected symptom of fragility, not an unexpected change in environment. Something has the characteristic of being anti-fragile if it tends towards responding positively in the event of change. Resilience is the ability to readily bounce back to equilibrium when there is change in the environment. Robustness measures the ability to remain impervious to change in the environment. It's not an easy concept. For instance, I think that my investment in growing fruit trees on vacant lots in an economically depressed neighborhood which experiences a good deal of transition is anti-fragile because if the neighborhood gentrifies, I can sell my land at a profit, or build on my land and rent at a profit, and if real estate tanks again, I can keep harvesting my growing orchard and pick up more land at bargain prices. So, it seems to me that the more you are able to regard what you have to offer on the market(s), any which way it goes, as being like unto how I regard my land, the more anti-fragile you are. Something like that.

[7Wannabe5]

Another cup of coffee loaded.

Maybe what I am thinking is that in order to have an overall system that is anti-fragile you have to have the same element as a flow into your stocks in one market, and a flow out of your stocks in another market. IOW, if you are a buyer in the market in one of your sub-systems and a seller in the market in another one of your sub-systems then you will more likely be anti-fragile to changes in that market. So, if your "retirement" plan includes plans for self-employment, as well as plans for living off of investment income, then you will increase your anti-fragility, whereas increasing your level of savings only increases your robustness.

[IlliniDave]

Que? So spending more allows you a bigger buffer?

Nobody is advocating for zero savings. What people are advocating for is minimal spending with medium to high savings*.

I think the better way to say it the more money you *can* spend, the more buffered you are. It's basically the ratio of assets to the no-kidding minimum survival expenses you have that qualifies degrees of conventional financial independence. Say a person has a hard floor of $12K/yr in expenses but assets that will support $30K/yr, and with all going well he decides to spend the $30K each year. Since in a pinch he can cut his lifestyle to $12K, that means he's got up $18K/yr he can throw at whatever vagaries the universe dumps on his plate without overtaxing his assets. If the same guy sized his assets for $12K/yr only, any upward perturbation puts him in the position of potentially drawing more heavily on his assets than they can sustain.

In general there is a cost to gaining the asset margin, and I don't think you can say that gaining the margin is objectively better or worse than a leaner approach since it all gets weighed/measured in a context where emotion/temperament, very individual considerations, are significant.

[7Wannabe5]

Okay, here's another simple reason why Person A is better off than Person B. If you consider investment risk rather than could be expected spending event and surmise a possible scenario where the market falls by 50% and both A and B wish to recover their SWR, if both Person A and Person B are capable of going back to work and earning $20/hr on the employment market in order to recover same level SWR, then Person A will only have to go back to work for an additional 3125 hours, but Person B will have to go back to work for an additional 15,000 hours in order to feel equally secure and happy.

[ThisDinosaur]

Here is what I mean by scarcity mindset:

Fish linked to a quote from Jacob about how ERE pros "never talk about their money" while beginners focus on income as a scarce resource to be replaced by investment income, which is also scarce [i.e., finite]. Fish's first two paragraphs portray mindset I would like to evolve beyond:

"..desire to quit working...job is only source of income...measure of success is never having to work that job again...heavy reliance on investments to meet post-FIRE expenses...boat is burned upon arrival...job makes life miserable in the present...still feel like its not enough...no intrinsic desire to learn how to invest, it is reluctantly studied anyway."

@Jacob, maybe the book and blog aren't aimed at exactly that question, but it does seem to be aimed at changing mindset/behavior from consumer to ... something else. I think I'm past the crowbar maneuver. Now I am worried about how I'm going to cover long term high deductible health insurance for my kids if something unexpected and terrible happens. My desire for a wide safety margin may be interpreted as a scarcity mindset.

@Ego, I study you and 7Wannabe5 as "small nut" ERE role models. The truth is, that with my current savings I could *probably* proceed with something resembling my bare minimum post-FIRE lifestyle. But it would be very tight, with no margin of safety, and probably no private health insurance. I think you linked some info once about the quality or affordability of healthcare in Singapore (?). I researched that with interest. Two problems: 1) my wife and I both have family in the states, so permanent expatriation is probably not realistic for us. and 2) Jacob's description of minimalist FI travel-bloggers with too much optimism and no margin of safety is a good example of the type of person I am not. I am risk averse with respect to finances, so it will be very difficult for me to avoid wanting to save *just a little more.*

[jennypenny]

Here is what I mean by scarcity mindset:

@Jacob, maybe the book and blog aren't aimed at exactly that question, but it does seem to be aimed at changing mindset/behavior from consumer to ... something else. I think I'm past the crowbar maneuver. Now I am worried about how I'm going to cover long term high deductible health insurance for my kids if something unexpected and terrible happens. My desire for a wide safety margin may be interpreted as a scarcity mindset.

I know you asked jacob, but my two cents ... Once you've been doing this a while, you develop other resources that you can tap instead of always having to spend money to address a problem. If your kids are school-aged, think of how you develop a network of other parents that you can tap when you need sudden child care or a ride to an activity or special sports equipment or something. Now expand that to other areas. It's not that we don't think or talk about money, but we think and talk about other resources just as much. Money becomes only one resource among many.

As far as the health thing, that's trickier. Stuff happens, and you're on the hook for at least your OOP and deductible. Are you worried about paying for health care premiums or paying for health care? IMO, if you have kids a bigger nest egg is a good idea if possible (not millions, but a little extra for each -- I wrote about how we've handled it somewhere, I'll see if I can find it). It's tricky right now because I have no idea what will happen with obamacare if it becomes financially unworkable.

FWIW, we have some pretty severe health issues here and use an HDHP with a decent prescription plan. Our medical costs seem to top out at around $20K/year (not including special dental work or braces). There are other incidental costs like OTC medications that are required and some monitoring equipment, neither of which is covered. Our total expenditures for everything are around $25-30K/year for our family of five. That's a painful number, but it won't bankrupt us and will go down somewhat as the kids get older. Hopefully, that gives you some idea of what costs might be if one of your kids developed a serious issue (it includes a few hospitalizations every year and lots of medications, so it's probably close to a worst-case scenario wrt ERE).

[Ego]

Say a person has a hard floor of $12K/yr in expenses but assets that will support $30K/yr, and with all going well he decides to spend the $30K each year. Since in a pinch he can cut his lifestyle to $12K, that means he's got up $18K/yr he can throw at whatever vagaries the universe dumps on his plate without overtaxing his assets. If the same guy sized his assets for $12K/yr only, any upward perturbation puts him in the position of potentially drawing more heavily on his assets than they can sustain.

In general there is a cost to gaining the asset margin, and I don't think you can say that gaining the margin is objectively better or worse than a leaner approach since it all gets weighed/measured in a context where emotion/temperament, very individual considerations, are significant.

Agreed, there is a cost to being unable to spend $30k a year if catastrophe hits. And we can't predict the future so we can't know for sure if the skills learned while living at $12k will be more or less valuable than the physical and psychological costs of earning the extra money.

My point: There are also costs to choosing the $30k/yr lifestyle over the $12k/yr lifestyle. 12k demands Macgyver skills where 30k buys a buffer. How much per year do those Macgyver skills add? Over a lifetime? Also, $12k demands the cultivation of monk skills (ability to find joy from nothing) whereas $30k buys entertainment/activities. How much per year do those monk skills add? Over a lifetime? Third, falling from 30k to 12k hurts.

A bigger buffer is not always better.

ETA: I should mention that we have a buffer that continues to grow. We are doing both. But each year I live the ultra-low-cost lifestyle I appreciate the skills over the buffer more and more.

[7Wannabe5]

Is high deductible health insurance for children very expensive? Kids are generally pretty healthy, so I would imagine that high deductible would be a bargain compared to low deductible since it would negate all the mothers who rush to the doctor for a diaper rash and rush to the emergency room for the croup. My DD25 used to sometimes fret/complain that I never took her to the doctor. Generally, I regard use of medical/dental professionals and facilities as a sort of in and out with specific agenda commando mission.

[jacob]

@ThisDinosaur - Yes, from consumer (earn-buy or spend-buy) to something else.

The above discussion (mainly on this page) seems to be about whether it's better to have a lot of apples (and almost no oranges) or a lot oranges (and almost no apples). That's a bit of a false dilemma though. Given an amount of fruit, I'd prefer an even distribution of apples and oranges. Having an effective choice increases optionality and optionality decreases cost and improves resilience.

If you're all-money and need money to solve all problems, then you need a lot of money because you'd be spending it even in cases where the efficiency is low. Conversely, if you're all-handyman and need to work to solve all problems, then you'll be working all the time because you need to even if the problem could be solved more easily with money.

In more concrete/anecdotal terms, the way out of scarcity thinking is to diversify your solution space. When I retired from physics in 2009, I already had some experience with copy-editing. This was a job I found on craigslist on a Saturday morning, applied to, and had a couple of hours later. It was based on my experience with writing scientific articles. Because of all the other skills (or whatever the politically correct non-elitist term for ability is these days ), my cost of living was low enough that I could in principle cover all my expenses by working 4 hours per week if I had to, see http://earlyretirementextreme.com/my-4- ... -week.html

In the event of a broken hip, I also had 150k in the bank at the time. So in the event of a hip fracture, I had the money that were otherwise meant for FI to use on surgery. In the event of losing my freelance editing gig, I had the 150k in the bank to be FI. Of course, a twofer would have hurt me more, but that is less likely.

The other important observation was that it was hard to scale the editing job up. For example, if my monthly expenses had been around $2000 like the median person instead of $500, I would have had to work 20 hours per week and I might not have been able to find that much work. In that case, problem would be critical. However, it's a lot easier to find $500/month than it is to find $2000/month.

Later on, I started fixing up bikes. This was mostly for fun and I quickly learned that my monthly income limit would be something like $100/month. However, by the 3% rule, that corresponds to a "nut" of $40,000. This means that I could take 40k out of the bank and compensate for that with the bike hobby. Also, bike fixing is a marketable skill. I became the go-to guy at a shelter for the more technical problems. It's conceivable that I could have turned that into a "real job" as a bike mechanic.

Moving on. The blog+book eventually started making money. I didn't expect that (it's a rockstar profession) and it has never made over 40k ... so again, if 40k is what you spend, blogging for a living is extremely unlikely. OTOH, if 5-7k is what you spend, it's not entirely unrealistic. Shortly thereafter my financial rants landed me a real job in finance. This certainly paid more than 40k. I stayed for a few years. When I stopped, I was offered a few hundred bucks to do some furniture repair within one week.

So based on this experience, I strongly feel that I'm capable of picking up a low-medium three-digit income whenever I need it. This removes the scarcity mentality for me. I think doing this requires two attributes: 1) You need to develop some skill to a level where it's beyond what people believe they can figure out on their own on youtube. This means you gotta put a few hundred hours in. Of course, the more money you're looking for, the more hours. (My finance job was not based on few hundred hours). 2) You need to actively look for ways to turn that skill into cash.

I find that many are content to do none of the above and that many who are content to do (1) often have no interest in doing (2). I feel inherently driven to become good enough that people offer to pay me and I consider this payment a validation, so 1+2 comes natural to me. If that combo doesn't feel natural to you, I highly recommend trying to make it so anyway. I think that having at least one (and better several) marketable skills and selling one of them at least once will do a lot to remove scarcity thinking because you now know that you don't need to have all your eggs in the stock market basket hoping that as long as the basket is big enough, at least some of the eggs will survive.

In that regard, I do recall that the single-salary accumulation-crowd ("I need a gazillion dollars to feel safe and the stock market will always provide") suddenly became very quiet in 2008/09 after shooting down the idea of diversified income sources before that. They became loud again with the QE-based recovery, but ... it kinda goes to show what their risk is and how they feel about it when TSHTF.

I think a lot of people in the accumulation mindset will outright dismiss this idea, e.g. "Why should I bother spending all this time making $100/week knitting fake beards when I make $1000/week in my day job. Waste of time!". They're still in an accumulation and salaryman mindset and don't recognize the value of diversification when it comes to income yet. A workman mindset would never complain in such a way.

One can imagine a metaphor. Having just one money-making skill, it's like walking into a forest only recognizing the apples and figuring one better needs to pick as many as possible. Having many skills, it's like recognizing many sources of food in the forest, roots, leaves, berries, ... it's hard to feel that food is scarce then. However, it's still good to have a stash of food stored even if you can go out and find food whenever, because you might fracture your hip, eh?

[BRUTE]

@jacob: how would one decide between making more money at higher pay at the job vs. learning skills/making less money in another profession? i.e. if jacob had a $200k/yr finance job, and could learn to make furniture for $0 or repair it for maybe $40k/yr, how would jacob decide which one to do?

[Seppia]

I think a lot of people in the accumulation mindset will outright dismiss this idea, e.g. "Why should I bother spending all this time making $100/week knitting gasmasks when I make $1000/week in my day job. Waste of time!". They're still in an accumulation and salaryman mindset and don't recognize the value of diversification when it comes to income yet. A workman mindset would never complain in such a way.

I am lucky I always valued being financially independent, so I started working part time during weekends at age 14 in a restaurant cuisine.
Cooking skill acquired!
I also did a lot of other stuff that required very little skill (cleaning services, factory, etc) during summer times. These taught me a very valuable skill though: the understanding of the real value of money (and how not to waste it).

But.

As I started my regular career after my masters degree I have stopped adding other skills.
I have gained a bit of fat, etc.

Other than cooking, where I would be able to handle a main chef job in a mid size, mid range Italian restaurant almost anywhere in western countries (I speak no Asian languages), I have no other marketable skills.

I'm forcing myself to add some (namely: I'm one certification away to be able to be a professional dive master), but the thing that's been slowing me down so far is that my actual career brings in too many apples to give up yet.

So I perceive as suboptimal, at the moment, to devote too much time to add other skills (it would impact either my life or my main job).
When I reach what I consider a good stock of apples, it will be time to start learning to recognize oranges and berries as well.

i am not sure if the reason I believe the above is that I'm still behind in personal development (I probably am) or because I'm correct.

Edit: I see I have the same doubt BRUTE is talking about

[jacob]

@brute - Better pursue such things homeotelically (more or less means that the side-effects are aligned with the main goal, see book for details) until you have the time or energy to go in an entirely different direction. E.g. during my career, I spent practically all my free energy/time on physics. However, there were skills in the academic pursuit of physics (writing and publishing papers) that could be spun off into editing. It was probably not entirely random that this was my first gig. Conversely, my trip into finance was strongly based on the numerical/programming skills I had from physics. It's really just a deliberate (homeotelic again) expansion of the web of goals.

For example, I suggest someone who's strong in programming and knows a modicum of investment planning would do well in tax prepping. It's something that's useful for oneself if taken to the $0 level and which from that point can easily be expanded into seasonal work which pays enough so that someone, even a raw first year beginner, spending <$10k/year can live off of it (by working through the tax season).

PS: Whereas bikes and wood were almost entirely virgin areas for me where I had almost 0 compatible/aligned hours of experience to draw on. Metaphorically speaking, the suggestion is that if you understand how to invest in funds, you use that knowledge to diversify into more/different funds; you don't initially take a flyer and figure out how to diversify into convertible preferreds or timberland or something similarly arcane.

[7Wannabe5]

jacob said: I think a lot of people in the accumulation mindset will outright dismiss this idea, e.g. "Why should I bother spending all this time making $100/week knitting fake beards when I make $1000/week in my day job. Waste of time!". They're still in an accumulation and salaryman mindset and don't recognize the value of diversification when it comes to income yet. A workman mindset would never complain in such a way.

The funny thing is that you can get locked into any mindset. Once I was successfully supporting myself through self-employment, my mind-set became "This is great. I will never work for the man again." , but I was still locked into thinking "I am a rare book dealer." When I found myself having difficulty supporting myself and two kids in college, I took a step back in perspective and starting engaging in retail arbitrage as well as dealing in books. Then stepping back and realizing what I really didn't like about having a salaryman job was the commute and the 40 hour/week commitment as opposed to "working for the man" allowed me to expand my options to part-time/flexible/temporary employment by others within walking/biking distance.

One can imagine a metaphor. Having just one money-making skill, it's like walking into a forest only recognizing the apples and figuring one better needs to pick as many as possible. Having many skills, it's like recognizing many sources of food in the forest, roots, leaves, berries, ... it's hard to feel that food is scarce then. However, it's still good to have a stash of food stored even if you can go out and find food whenever, because you might fracture your hip, eh?

Great metaphor. Also true that "If all you have is a hammer, then everything looks like a nail." What can eventually happen is that you will find your limiting factor in achieving your purpose may become your ability to not accept other people's offers to pay or partner with you in order to make money with your time/life-energy. Like how I have too many teachers trying to get me to substitute for them and I had too many men who wanted to buy me dinner, but I need time to read, garden and wander about drinking coffee in my robe. However, I still think spending hours of life-energy following Iskra Lawrence's diet and workout practice would be a better way to ameliorate hip fracture risk than spending an equivalent amount of time sitting in an office getting paid to perform actuarial calculations related to hip fractures. I know, I know, why not do both if possible (sigh.) If I had enough investment income to support myself that would offer another degree of freedom. That is why I am here, and I intend to do exactly that, with only my permaculture project as higher priority, and subject to minor distractions and side-tours, such as my interest in applying systems theory to the realm of sexuality.

[steveo73]

I think the better way to say it the more money you *can* spend, the more buffered you are. It's basically the ratio of assets to the no-kidding minimum survival expenses you have that qualifies degrees of conventional financial independence. Say a person has a hard floor of $12K/yr in expenses but assets that will support $30K/yr, and with all going well he decides to spend the $30K each year. Since in a pinch he can cut his lifestyle to $12K, that means he's got up $18K/yr he can throw at whatever vagaries the universe dumps on his plate without overtaxing his assets. If the same guy sized his assets for $12K/yr only, any upward perturbation puts him in the position of potentially drawing more heavily on his assets than they can sustain.

In general there is a cost to gaining the asset margin, and I don't think you can say that gaining the margin is objectively better or worse than a leaner approach since it all gets weighed/measured in a context where emotion/temperament, very individual considerations, are significant.

Exactly. The idea that the less you spend the safer you are without returning to work is I think false. It's more fragile. You are safe in that there are more jobs that could cover your spending but that means work.

There was one other idea which was that because ERE types tend to live differently to the median person there is the opportunity to earn more money from those skills. I don't think that this is applicable in my case despite utilising those techniques to lower my spending.