Damn it Feels Good to be a Gangsta

Where are you and where are you going?
Jin+Guice
Posts: 1276
Joined: Sat Jun 30, 2018 8:15 am

Re: Damn it Feels Good to be a Gangsta

Post by Jin+Guice »

The Shockingly More Complicated Math:
jacob wrote:
Sun Nov 14, 2021 5:06 pm
I skyped with Vicki Robin a couple of years ago. She told me that Joe Dominguez's approach was the "render unto Caesar's [that which is Caesar's]". IOW you need to "put on your own oxygen mask first". Extreme FI is ridiculously easy. Get it done. Once you rendered unto Caesar for 5 years, you're done.
This post is from a discussion in a thread by @RoamingFrancis about his housing situation.

RF's situation and @jacob's response, made me think of several people I know for whom extreme FI is not ridiculously easy. It's not bc living frugally is a problem. It's bc of living circumstances and income.

What I'm not trying to rehash is the old argument that "FI is only possible for high-income software engineers" or "if you were raised in the projects, and are a single teenage mother with 8 children, FI is impossible, so therefore it is not a valid solution for anyone."

What I do want to point out is that FI in 5 years by practicing frugality is only possible if you already have access to a relatively high paying job, are not buried under a mountain of student (or other) debt and already possess advanced investing knowledge or are comfortable treating index funds like a high interest savings account. There are some other factors as well, such as not having tons of dependents or a crippling health problem, but who I want to address here are people for whom the logic behind FI is specifically possible, but the numbers aren't quite accurate.

Why am I bringing this up? I want to say again that 5 years is a long fucking time to do something you don't want to do. It's difficult and dangerous for many people to pause their true selves for 5 years while they "pay unto Caesar" doing something that doesn't align with what they'd like to do*. Retire in 5 years assumes you don't fall into any of the easy traps like 1 more year syndrome and maintain 100% commitment to something that you don't like doing for 5 years.

*To be fair to Jacob's advice from the other thread, I think what he is getting at with the "pay unto Caesar and apply your own oxygen mask first" lines are that it's not a bad thing for a young person to compromise a little bit of their values to earn their freedom from the things they'd rather not do and help others, especially when this is possible in a fraction of a lifetime, which I agree with. As always this is meant as an in forum post, so I'm assuming you're not going to be like "this other internet guy on the ERE forum added some nuance and it's harder for some people than first internet guy said, so I'll just go buy that Hummer with the cocaine rims, case closed."

The math behind a 5 year retirement is a little shaky when you don't already have a "high-paying" job and aren't already a master investor. To retire in 5 years 1 must save 5x=33(1-x)** or x = ~87% of their income. At $7k that's ~$54k a year (~67k if you use the JAFI). The median individual income in 2020 was $35,805.

**As always please make sure I'm not fucking up the math, math people

At this point in the argument, the common advice is that if you have a low income, and are really dedicated to retiring early, it is advisable to concentrate on skill building and job searching to find a higher paying job, rather than simply staying put and saving forever.

I totally agree with this. The problem is that this takes time, effort and often financial resources. The lower down social ladder one starts, the more difficult this is going to be.

In addition to this, one effectively needs to get the equivalent of a BA in finance by themselves, figure out an investment strategy and start investing. It is certainly possible to do this within the 5 years one works, but now one needs near total devotion in these years to retiring early. Work 40 hours a week AND reduce expenses to the bone AND spend most nights and weekends studying finance. To a select minority this is going to be a really fun challenge, but to a lot of people this is going to be highly undesirable.

Reducing expenses also takes effort. A lot of us had years of cheapskatery under our belts, but to those who don't this present an extra time and energy commitment.

I'm not bringing all of this up to be discouraging, I'm saying that initial conditions matter, and for those with less than ideal initial conditions, 5 years to retire early is going to be either extremely challenging or impossible EVEN IF they are able to reduce expenses to $7k a year.

I bring this up now bc, as we look to expand the scope of ERE, I don't think telling people that retiring in 5 years is easy is a *great* idea (again, not saying @jacob was doing this in the original post I quoted, which was specific advice directed at a specific forum member who had asked for advice).


Well, you all know what my solution is.

For those who are not high-income earning seasoned investors, spreading this process over a number of years of part-time work is, imo, a more feasible solution. Once spending is lowered, taking advantage of some of the extra time now gives more time to learn new skills for work, more time to lower expenses even further, more time to learn about investing and more time to enjoy your life so that FI does not become the sole focus of your life. It also allows you to take advantage of higher income years ahead after you have re-skilled and take advantage of higher investment returns you earn as you learn to invest (the disadvantage is lower starting capital, but the original 5 year plan with learning investment assumes you don't start earning returns until after you retire).

I think that, for those in less advantaged starting positions, spreading the retirement period out over a longer period of time gives more opportunities and makes the end goal more feasible and the process of getting there more desirable. As always my point isn't that ERE or FI is wrong, it's that the framework ERE outlines has benefits much greater than trapping it within the narrow FI or 'FI first' bounds.

theanimal
Posts: 2627
Joined: Fri Jan 25, 2013 10:05 pm
Location: AK
Contact:

Re: Damn it Feels Good to be a Gangsta

Post by theanimal »

The 5 year FI sprint is based more on the 4% rule meaning the savings rate would be 80% as it is 25x expenses and not 33x, which pertains to 3% WR. So with that, any income would reach FI in about 5.8 years (not factoring in any possible gains on investments made during this time). If I remember correctly, for the 7 years or so Jacob was working as a physicist, he didn't make more than 30k until the final 2 years. ERE is not based on a high income lifestyle, but it certainly makes it easier to reach FI.

Jin+Guice
Posts: 1276
Joined: Sat Jun 30, 2018 8:15 am

Re: Damn it Feels Good to be a Gangsta

Post by Jin+Guice »

@theanimal: I think the crux of this argument comes down to whether or not you consider 5 years a long or a short time to earn your freedom. I appreciate that Jacob is the OG and he didn't do it on a $100k programmer salary like all of those who came after.

The original math may have been for 25x expenses, but Jacob has def thrown down for the more conservative number for a long time, and that quote about "5 years to FI" is from the other day. Also, 25x is 83%, which still requires 41k and 5.8 years is not 5 years, again point being, that the goal posts begin to move a bit if you don't thread this needle perfectly.

My point is not that a person who doesn't have a high salary can't retire in 5 years or to nitpick about how it might take someone else an extra 10 months over Jacob. If someone with a median salary or lower is like "fuuuuuck yes, I'm retiring from this bitch in 5 years, let's fucking get this paper and eat some motherfucking dumpster lentils. You can catch me at the fucking library finance section, peep these fucking spreadsheets, heaux." then I think it is possible by all means.

But I think in the decision of whether to just buckle down for 5 years and do this or whether to try to take another path, it's useful to acknowledge that 5 years is not guaranteed for all situations and enthusiasm levels. To me, the difference between "just work for 5 years and live frugally" and "re-skill, re-employ and then after however long that takes, work for 5 years, live extremely frugally and study finance in most of your free time" is sort of a deal breaker, but 5 years is already too long to me anyway. If it were the ONLY option, I would feel differently.

2Birds1Stone
Posts: 1596
Joined: Thu Nov 19, 2015 11:20 am
Location: Earth

Re: Damn it Feels Good to be a Gangsta

Post by 2Birds1Stone »

If someone really wants to live on $7k a year then they can obviously just choose to work 1 day a week at any job that would allow them to do so and skip the accumulation phase. Shit you can probably beg/panhandle $19.18/day in minimal time time if you're creative enough.....ERE isn't for everyone, extreme early retirement isn't for everyone, FIRE isn't for everyone. There's a gigantic spectrum of individuals and goals here.......you can just find a nice non-violent country to go to prison in and call yourself ERE'd after one night of bad decisions.

User avatar
Lemur
Posts: 1612
Joined: Sun Jun 12, 2016 1:40 am
Location: USA

Re: Damn it Feels Good to be a Gangsta

Post by Lemur »

I recall one of the 3 pillars in the ERE book was "find meaningful work." How this is defined means a lot of things to a lot of different people.

Anecdotally, I've always found that meaningful work in the philosophical sense doesn't pay well....it is the way this capitalistic system is setup I guess? To my values, meaningful work would be things that actually help people and communities or art. I actually suck at most forms of art but I appreciate it very much! Anytime an art becomes marketed, commodified, and competed, is it no longer true art? Maybe intent matters - art that was not meant to sell ends up being true but an artist that intends to sell has to bend his ideas, thoughts, and creativity to the market? I.e. "radio" songs vs personal ones. Writing a non-fiction book with intent to profit from royalties...etc.

Anyway that was a bit of a tangent. What I meant was that finding meaningful work that also pays well sounds like a real diamond in the rough. Perhaps one could just trick themselves into believing their EvilCorp work is meaningful but anyone halfway intelligent will just know they're lying to themselves. :lol:

But savings rate is always king no matter what quadrant of income is chosen (Salaryman, Businessman, Renaissance Man, Working Man).

It is funny, because nowadays I find this pillar extremely important for new folk to ERE because my EvilCorp job has given me an existential crisis throughout 2021. But it has also enabled me a six figure salary so...we can't have our cake and eat it too.

But Semi-ERE has been a much appreciated discussion over the years. You don't know what you don't know and I never realized this was an option and I wasn't wise enough to consider it an option from the beginning - mainly because I must have glossed over the meaningful work pillar because my focus was making money lol. Meh it was worth it though and admittingly I don't regret - I am in the 5-6% SWR range if I quit full-time work right now. It wouldn't take much labor for me to get the other funds I needed.

Due to the Semi-ERE discussions, Option #2 was born in my spreadsheets:

Option 1.) Keep suffering at Evil Corp until <4% SWR is reached.
Option 2.) Stop EvilCorp and combine varying degrees of income producing work combined with whatever you managed to accumulate so far.

Option 2 example: The amount of income producing work you need to do depends on how much you managed to accumulate. For instance, if you spend $20,000 a year and managed to save $250k before having an existential crisis and quitting your job in a blaze of glory, you could do 4% on the savings + only needing to make $10k a year.

Jin+Guice
Posts: 1276
Joined: Sat Jun 30, 2018 8:15 am

Re: Damn it Feels Good to be a Gangsta

Post by Jin+Guice »

@Lemur: Thanks for your response (sorry I didn't thank you before I replied @theanimal!). I want to reply to what you said using a mental model I made up.

First I define "The System" as an intangible entity that embodies everything I wish I could change about our culture/ the society. It is totally defined by me and subject to change as I learn new information and change and grow as a person. We are all raised by The System and live in The System. We are all part of The System. I am part of The System. No one controls The System or works to defend it, though it does benefit its members in certain ways, and the members work to defend the parts of it that benefit them. It also harms us in specific ways, which we are blind to, by design. I think The System is basically Plato's Cave version Jacob, but I don't want to define his metaphor or make mine subjective to his, so maybe they're just cousins?

Since The System is all around us and designed to trick us, it colors everything we do. It steals every human need and desire and uses it for its own ends. It tells how we satisfy the needs and it defines how we think about everything we do.

Why the fuck am I talking about this abstract concept that exists only in my mind?

Once you define The System you can start trying to take your own needs and desires back from it.

Take meaningful work. The System tells you to pursue meaningful work so it can pay you less. It tells you the other choice is to pursue highly paid work that is without meaning. The System also defines what activities are work and when, how and where we are "at work."

Now I ask myself how I can take the concept of work and meaningful work back from The System. I'll start by noting that I am working when I engage in any activity that is needed for my physiological, social or emotional survival or that grants me access to material possessions or services that satisfy a perceived want or need and that these wants and needs can extend to things that help others (since contributing/ helping is a want of mine).

Work is meaningful when I derive pleasure from it or when it creates meaning for me. Meaning and work are again abstract self-defined concepts that can change. I aspire to do only work that is meaningful and to create a situation where work and play are indistinguishable.

So now that I have thought about how The System defines work and meaningful work to me and I have my own working definition trying to define it outside of how The System defines it, I can say that I think it is possible to find meaningful work that is paid, though there is a trade off between meaningful work and pay. The correlation between meaningful work and paid work is negative but the correlation is < -1 (i.e. not perfect). Any paid job will have some meaning and it is very difficult to find any work in which all components are always meaningful.

So you can "hack" the separation between meaning and work by maximizing the interaction* of both variables instead being forced to chose between the two.

*I think this has a strict mathematical meaning and I think I'm still using it correctly, but I might be using it wrong... sorry I am fucking rusty. Something about a covariance matrix...maybe?

Now let's take art. The System tells you that art can either be made for renumeration or for its own sake. Every once in a great while, someone can make art that they like and accidentally get paid for it, but this makes them gods, not like you or I. Way to go System, Art is now your bitch.

I am a musician and I know a lot of artists and most of them think like this. They decide they are not real artists unless they derive their income exclusively from their art, but they can not do this bc they must make the art that they believe in and mere mortals cannot become successful artists. You can certainly waste your whole life trying though. If you do have the misfortune of deriving your income from your art for a time, you must sacrifice everything to it, bc a real artists sacrifices everything for their art.

I've also seen chart topping producers and songwriters and artists write a song. I've seen songwriters make song writing decisions based on radio rules and/ or what they thought would make the song more popular. I never once met someone who could so remove themselves from the process that it was no longer a song that flowed from them, in their style, which was presumably at some point derived from becoming a fan of music that they liked. What I did see was a lot of these same people make themselves miserable by devoting their lives to chasing the ego gratification of another hit song AND millions of dollars (though not everyone with hit songs and/ or money was doing this). A major label exec rejected The Beatles bc "guitar bands were over" but a major label also financed every second of The Magical Mystery Tour.

It is possible to make art you like and get paid for it. The way our current economy is set up, it is very difficult to do this in a way where you make all of your money from it, though it appears to be possible (looking at you Amanda Palmer). The key is to make art your bitch. If you want to make great art, you're going to have to put in some time and effort. If you want to make money from your art, you're going to have to put in some time and effort. It is possible to make an artistic decision based on what you think someone else will like and still make art that is true to you and your artistic vision. If you don't let The System define success as an artist for you, it is possible to be a successful artist and still be able to feed yourself.

Anyway, sorry if this response comes off as harsh, I'm not trying to criticize your response @Lemur, it just made me think about this mental model that I've been into lately and I wanted to share it.

And yes I am aware that my mental model is 100% the exact metaphorical plot of The Matrix.

Maybe the Wachowskis and I both just listened to too much Rage Against The Machine.

Lemur wrote:
Wed Dec 01, 2021 8:54 pm
Due to the Semi-ERE discussions, Option #2 was born in my spreadsheets:

Option 1.) Keep suffering at Evil Corp until <4% SWR is reached.
Option 2.) Stop EvilCorp and combine varying degrees of income producing work combined with whatever you managed to accumulate so far.

Option 2 example: The amount of income producing work you need to do depends on how much you managed to accumulate. For instance, if you spend $20,000 a year and managed to save $250k before having an existential crisis and quitting your job in a blaze of glory, you could do 4% on the savings + only needing to make $10k a year.

Thanks for mentioning this. I haven't talked about this much, bc I am not a great investor, but I should think about it and write a thing about it.

User avatar
Lemur
Posts: 1612
Joined: Sun Jun 12, 2016 1:40 am
Location: USA

Re: Damn it Feels Good to be a Gangsta

Post by Lemur »

@Jin+Guice

None taken - art/music are really out of my domain of knowledge so probably a poor example for me to choose when trying to define what meaningful work is. When someone defines what meaningful work is, they're projecting their own values. If anything, I feel educated in your abstraction because it reminds me that people have different values for one and two - the definition of "the system" reminds me of something important in Plato's Cave regarding the shadows on the wall.

We all see these shadows on the wall in Plato's cave but where you might see a Crocodile, I might see an Alligator. Someone else might not even see a reptilian at all. So how we define the 'system' and what we see in the shadows is really a projection of what our version of truth is and how we define reality... The values we need to cultivate to leave the Cave is different from person to person.

jacob
Site Admin
Posts: 15906
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
Contact:

Re: Damn it Feels Good to be a Gangsta

Post by jacob »

Jin+Guice wrote:
Wed Dec 01, 2021 3:55 pm
But I think in the decision of whether to just buckle down for 5 years and do this or whether to try to take another path, it's useful to acknowledge that 5 years is not guaranteed for all situations and enthusiasm levels. To me, the difference between "just work for 5 years and live frugally" and "re-skill, re-employ and then after however long that takes, work for 5 years, live extremely frugally and study finance in most of your free time" is sort of a deal breaker, but 5 years is already too long to me anyway. If it were the ONLY option, I would feel differently.
I'm wondering how much of this is hedonic adaptation to adjusting the baseline expectations. Ten years ago, the baseline expectation was 35+ years in the salt mines. 5 years to FI was an extraordinary deal and even 25 was considered pretty sweet. Retiring at 57... imagine that if you can! Now the complaint is that it might take 7 or 12 years given various situations and levels of enthusiasm. I must be getting old 8-)

I'm telling you, when I was young, we ate gravel three meals a day and walked to work uphill both ways. FIRE'ing at the age of 45 was still worthy of :o :shock: attention. These days that doesn't even raise an eyebrow,...

guitarplayer
Posts: 1300
Joined: Thu Feb 27, 2020 6:43 pm
Location: Scotland

Re: Damn it Feels Good to be a Gangsta

Post by guitarplayer »

jacob wrote:
Thu Dec 02, 2021 2:21 pm
[...] and walked to work uphill both ways.
that was real funny :)

7Wannabe5
Posts: 9369
Joined: Fri Oct 18, 2013 9:03 am

Re: Damn it Feels Good to be a Gangsta

Post by 7Wannabe5 »

When I was young the majority of the better half of the population didn’t have a job.

Jin+Guice
Posts: 1276
Joined: Sat Jun 30, 2018 8:15 am

Re: Damn it Feels Good to be a Gangsta

Post by Jin+Guice »

7Wannabe5 wrote:
Thu Dec 02, 2021 3:22 pm
When I was young the majority of the better half of the population didn’t have a job.
Yes, thank you my ride or die jobs are lame homie.
jacob wrote:
Thu Dec 02, 2021 2:21 pm
I'm wondering how much of this is hedonic adaptation to adjusting the baseline expectations. Ten years ago, the baseline expectation was 35+ years in the salt mines. 5 years to FI was an extraordinary deal and even 25 was considered pretty sweet.
Haha, my entire journal/ "blog"/ semi-ERE version J+G is about my reaction to that information and how it's possible to spend less or no time in the salt mines.

Also, being underwhelmed by what being an astrophyscist actual is and working a job you actively dislike are not the same, so they suggest different solutions.

If I was smart enough to figure this shit out when I was still fresh in the music industry I would've almost definitely stuck it out for 5-10 years, bc that shit was fun as fuck. But I realized I would fucking die if I tried to live that life for 35+ years and dissatisfaction seemed to set in around 20. Since I assumed that I had to do a career for most of my life, I quit to try to figure out something else to do. I think changing the knowledge of what's possible also changes the solution set.

I also started trying to avoid the salt mines at 18. I assumed I wouldn't spend any time in the salt mines and would just be poor. My parents were frugal, but being a musician or working in the music industry was my initial reason for being frugal. No one in my family or that I knew had ever been successful at anything like that, so I assumed I was signing up for a lifetime of poverty which lead to all the initial extreme frugality shit I did like not having a house, sleeping at work a bunch, sleeping at on friends' couches, sleeping in parks, saving every dime I could to buy 800 guitars (which was how I used to "invest"), taking a job where I made $7/ hour in NYC. The only other piece of information I had was that I knew I didn't want to lead the kind of lives the people I grew up around lead, which they had assured me would lead to a lifetime of poverty and loneliness.

It sincerely never occurred to me that I could use frugality to be rich or work less (working was just what you did, out of obligation to...uh...???...something important).

I didn't start my salt mine job until 3 years after I found MMM and started saving. I opted IN to the salt mines bc of FIRE. 10 years ago I never thought I'd spend a second in the salt mines, bc I already knew how to be homeless and was having a great time.

And these are the people I'm always trying to address. People who haven't retired yet who opted IN to the salt mines or who were desperately looking for a way out and then decided to stay IN longer but who are dissatisfied and wondering what to do about it. The people I was trying to address in the last post are people who haven't yet opted IN, but are considering it and are considering what and how to do it.

I think to most people who've managed to live a life outside of the mines, 5+ years is daunting, and will result in them not considering anything else about this life that could be beneficial to them and lead to them further entrapping themselves in the salt mines at a later date. I think being honest about the fact that someone who doesn't have some of the prerequisite skills faces potentially putting in >100% more time than 5 years would also expand the scope of who this would appeal to.

I'm not asking for a change to the original method or an update to the book or grand renouncement of "5 years until retirement." This is my update to everything in my little corner of this world and expanding the appeal of this is part of my mission.

The only way you could get me to do my salt mine job for 5 years straight is if I thought it was the only way. I'll admit that even going to school for 4 years, doing salt mines for 5 years and then learning about investing for ???? (another 4 years, assuming I put as much effort into that as my job and school?) is still a pretty kush deal, and fuck man, thanks for figuring that shit out and telling everyone, that shit changed my fucking life.

Working 35+ years as an astrophysicist probably sounds like a pretty good deal to a lot of people too... just not to you (@jacob).

I figured out a different way too, and I think to some people it may be a better way still. Or maybe it just is for me.

white belt
Posts: 1452
Joined: Sat May 21, 2011 12:15 am

Re: Damn it Feels Good to be a Gangsta

Post by white belt »

Jin+Guice wrote:
Wed Dec 01, 2021 2:17 pm
Why am I bringing this up? I want to say again that 5 years is a long fucking time to do something you don't want to do. It's difficult and dangerous for many people to pause their true selves for 5 years while they "pay unto Caesar" doing something that doesn't align with what they'd like to do*. Retire in 5 years assumes you don't fall into any of the easy traps like 1 more year syndrome and maintain 100% commitment to something that you don't like doing for 5 years.
I think a lot of this preference for traditional FIRE vs semi-FIRE comes down to individual temperament and culture.

On the individual temperament side, there are clearly some people who prefer structure and routine (MBTI blah blah blah). For those people, working a job for 5 years that is at least somewhat interesting/engaging isn't all that difficult, especially when the default in our culture is for people to work for 40+ years. I'd say I fall into that category because I've been working for ~6 years and it's only in the past year or so that I started to question why I still am doing it. I'd even go as far to say that the younger you are, the more likely this is a good strategy, because it'll probably take several years to even figure out who you are or what you really want out of life.

On the other end of the spectrum, there are of course people like you (ENTP?), who prefer excitement/novelty/rotation/optionality. These people will find the idea of 5 years straight of full-time work unpalatable. 7WB5 also comes to mind as an example of this. If you are trying to turn work into fun and fun into work, then a traditional FT career path won't appeal to you.

In terms of culture, I'm still new to the SD stuff so I won't butcher the colors here. But basically if you come from a culture where you are expecting to work a job that is "rewarding" like in arts/humanities/activist circles*, then you are going to have a hard time working FT for 5 years. If you just treat a job as something you do to make money**, then you will have an easier time finding suitable work (I think Mike Rowe of "Dirty Jobs" fame talks about how no one dreams of being a sanitation worker when they are a kid, but many of those people still have satisfying careers).

* = The (career==identity) cultural meme makes things harder to disentangle. E.g. You don't just do accounting, you are an accountant. You don't just do art, you are an artist. Nevermind that one person can simultaneously be an artist, accountant, chef, gardener, musician, repairman, etc.

** = I'm not expecting for someone to have the skill to construct a lifestyle around web of goals immediately after discovering ERE, so I think just treating a job as a way to make money isn't the worse characterization to start out. After a few years of skill development and introspection, that person will have the capability to redesign their lifestyle in accordance with higher Wheaton Levels.

jacob
Site Admin
Posts: 15906
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
Contact:

Re: Damn it Feels Good to be a Gangsta

Post by jacob »

Fair point. I'd also say MBTI [something P... something J]. For FT workers the most common argument against FI is "but I don't make six figures wah wah", but for PT workers, it's a different argument:

Insofar one does not struggle to make ends meet as a part timer, the FI counter-argument is "why should I work for 10000 hours to become FI when I can just work 4 hours for the week and take the rest of the week off?" It seems like just how 30x is thought of as a money spigot for those who are FI, those who can control their own hours to a large extent and come and go as they mostly please think of spending a few hours at work here and there as their kind of money spigot. If savings do accumulate they're more likely to be spent on an extended non-work period. There used to be a site called whywork.org a couple of decades back arguing that position. There's no need to engage with investments or "evil capitalism" so that also solves the political problem.

This was the manual: https://www.amazon.com/How-Survive-With ... 895629683/

It's essentially the workman quadrant while being superfrugal.

The counter-counterargument is that this lifestyle can get "old" after a few decades. Think old waitress or handyman. Rather the issue seems to be one of mourning lost potential of what could have been as people who have worked or invested more have more options open to them. Not as many stories though.

zbigi
Posts: 978
Joined: Fri Oct 30, 2020 2:04 pm

Re: Damn it Feels Good to be a Gangsta

Post by zbigi »

(EDIT: feel free to ignore this post, I see that what I wrote was already covered in a discussion that ensued).



--------------------------------------------------------------------------------------------------------------------


Jin+Guice wrote:
Wed Dec 01, 2021 2:17 pm

The math behind a 5 year retirement is a little shaky when you don't already have a "high-paying" job and aren't already a master investor. To retire in 5 years 1 must save 5x=33(1-x)** or x = ~87% of their income. At $7k that's ~$54k a year (~67k if you use the JAFI). The median individual income in 2020 was $35,805.
This is under assumption that your average post-tax return on capital is 3%, right? Which, under current market conditions, feels like you'd need to basically live and breathe finance and investing for at least a couple of years, until you reach a skill level necessary to attain that. Most people have neither the interest nor mental faculties to get to that level. Not to mention that, for people without the interest, it will feel like just another job on top of the 5 year grind - but one with much more uncertainty and stress.


Of course, there are alternatives to investing in securities, most popular one being real estate. But, RE is not a solution for everyone - I for one would love to get into RE, but my area is predicted to lose 20-50% of population in the next 3 decades (the glut of post-war baby boomers will die off, and current generations make babies at way below replacement rate), which makes it a terrible area.

Jin+Guice
Posts: 1276
Joined: Sat Jun 30, 2018 8:15 am

Re: Damn it Feels Good to be a Gangsta

Post by Jin+Guice »

@whitebelt:

Yes, the preference is definitely based on temperament.
jacob wrote:
Fri Dec 03, 2021 8:49 am
It seems like just how 30x is thought of as a money spigot for those who are FI, those who can control their own hours to a large extent and come and go as they mostly please think of spending a few hours at work here and there as their kind of money spigot. If savings do accumulate they're more likely to be spent on an extended non-work period. There used to be a site called whywork.org a couple of decades back arguing that position. There's no need to engage with investments or "evil capitalism" so that also solves the political problem.

This was the manual: https://www.amazon.com/How-Survive-With ... 895629683/

It's essentially the workman quadrant while being superfrugal.

The counter-counterargument is that this lifestyle can get "old" after a few decades. Think old waitress or handyman. Rather the issue seems to be one of mourning lost potential of what could have been as people who have worked or invested more have more options open to them. Not as many stories though.
This defines the boundaries. One aims for a savings rate as close to 100% as possible and the other saves nothing. Both try to work as little as possible. My larger point has always been that, using the tools ERE gives, there are a world of possibilities IN BETWEEN the boundaries and locking yourself into either one might not be the best option for many people, for a host of factors including reasons that go beyond savings rate and time spent working.

Work less now and still retire in 20 years instead of 35+. Have two money spigots, work and investment returns.

Thanks for reminding me to include the other (work as little as possible, don't save) boundary in my own definition of retiring early though...I know a lot of people who do or have fit that bill. The people I know are largely service industry workers, so old waitress or bartender, and the problem that most of them seem to face is a midlife crisis (though I'm 34, so I see this happen between 30 and 40 usually) where some part of them believes they should "grow up" and "get a real job." This is also coupled with the belief that "Capitalism is evil," but if you get them drunk enough, most of them will admit that they would love to be investment billionaires, but that their actual belief is "only rich people can get ahead, a normal person like me could never accrue enough wealth for it to make a difference in my life."


@zbigi: Haha, ya, thanks for putting that actually. I also felt I was gentle in my assessment of what it takes to learn to be an investor, but I didn't want to make my assumptions to harsh. What I was trying to get at is that learning to invest and learning a skill that is renumerative enough to get a >80% savings rate are both non-trivial tasks that take a non-trivial amount of time. If someone is near the beginning of their journey and lacks one or both of these skills, saying "it only takes 5 years!" leaves out these two non-trivial factors. MAYBE this information would lead someone who has difficulty sticking something out for a long time to consider a different path.

I think a lot of the pushback might be bc some of the things I said are similar to the arguments we all hear a lot about why FI isn't a worthwhile goal. Like "oh it actually takes 7.32 years, gotcha frugtards, I told you this was impossible! 5 years? What a fucking joke, you were wrong, everything you said is invalid, enjoy your lentils losers." What I'm actually saying is this idea is so powerful that if you applied it in a totally different way, it would still work amazingly well, and when you are deciding how to apply it, you might want to have more full information....

7Wannabe5
Posts: 9369
Joined: Fri Oct 18, 2013 9:03 am

Re: Damn it Feels Good to be a Gangsta

Post by 7Wannabe5 »

jacob wrote:those who can control their own hours to a large extent and come and go as they mostly please think of spending a few hours at work here and there as their kind of money spigot.
Exactly!
jacob wrote:It's essentially the workman quadrant while being superfrugal.

The counter-counterargument is that this lifestyle can get "old" after a few decades. Think old waitress or handyman. Rather the issue seems to be one of mourning lost potential of what could have been as people who have worked or invested more have more options open to them. Not as many stories though.
I would argue that it can just as easily be micro-version of "businessman" quadrant or "salaryman" quadrant or inclusive of enough variation to qualify as "Renaissance man" quadrant.

Also, extending options indefinitely through finances can lead to becoming my multi-millionaire friend who never retired and died just short of 80 never having exercised any of these options.
Jin+Guice wrote:This defines the boundaries. One aims for a savings rate as close to 100% as possible and the other saves nothing. Both try to work as little as possible. My larger point has always been that, using the tools ERE gives, there are a world of possibilities IN BETWEEN the boundaries and locking yourself into either one might not be the best option for many people, for a host of factors including reasons that go beyond savings rate and time spent working.
I'm totally feeling you on this, but as noted previously, we have almost exact same MBTI type. A frugal genius-IQ ENTP friend of mine I used to live with was the same way. Unfortunately, a late life marriage to a young prostitute with expensive tastes did eventually almost wipe him out financially.

I don't think that investing is evil; I just think it is the MOST capital intensive business you could get yourself into. For instance, instead of studying investing, you could study math and then be a tutor for $30/hr and spend $10,000 to buy a truck to haul scrap metal around in and make pinecone wreaths and sell them on Etsy.

jacob
Site Admin
Posts: 15906
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
Contact:

Re: Damn it Feels Good to be a Gangsta

Post by jacob »

7Wannabe5 wrote:
Fri Dec 03, 2021 12:02 pm
I don't think that investing is evil; I just think it is the MOST capital intensive business you could get yourself into.
It is. It's actually ridiculously stupid-level levels currently. Earnings yields on public securities are something like ~3% (P/E around 30-40). For private equity, P/E is more like 2-3.

A post from when yields were somewhat saner, almost historically average, for a very brief moment: https://earlyretirementextreme.com/earl ... 85000.html

In particular, if people were talking about a 10% or 20% rule rather than a 3% or a 4% rule, I bet strategies would change a lot. Another way of framing this entire discussion is in terms of personal discount rate vs market rate.

Bicycle7
Posts: 97
Joined: Tue Jun 22, 2021 1:37 pm

Re: Damn it Feels Good to be a Gangsta

Post by Bicycle7 »

I am really appreciating this discussion, it's helping me work out where I am right now in my life.

Currently, I have a job where I pick and choose job assignments online (ranging from a few hours to a few weeks). While I really enjoy the freedom and somewhat enjoy my job, I find myself more often than not deciding to work only 5-20 hours a week. Sometimes I do want to work more, but am unwilling to take the longer term assignment or the one further from my home that are available.

I too am having a hard time accepting 5+ years of full time work. Though, I also certainly don't want to be working this job, or another like it, when I'm 50.

I am working to develop more streams of income, or find a job that is a better fit of my skills/interests and pays more.

classical_Liberal
Posts: 2283
Joined: Sun Mar 20, 2016 6:05 am

Re: Damn it Feels Good to be a Gangsta

Post by classical_Liberal »

My response from the RF linked thread. Reposting because it's important to this conversation as well IMO.
classical_Liberal wrote:
Fri Dec 03, 2021 12:29 pm
(SemiERE is more than trying to keep busy in retirement), It was also a way to place a line in the sand over how far one will compromise. The longer the timeframe one renders unto Caesar, and the larger amount of money one has, the easier it is to get sucked into the lower Wheaton level traps. See 1960-70's boomer gen trends vs 2020 boomer gen trends. Also, see the average college student at 20 vs them at 40.

It may be a slippery slope argument, but mostly it just goes back to someone being an amalgamation of the five people you spend the most time with.

It's hard for someone who doesn't have wealth to imagine how the process of accumulating wealth, and then eventually having an excess, can change thought process and lifestyle.

Those who can avoid these traps tend to have the predominant personality type(s) of this forum. For others the struggle to maintain vision in the cave is real and dangerous.
Just adding to this, if one does fall into lower Wheaton level traps during accumulation of money, it takes a lot of effort to get rid of those "bad habits". Worshiping too long and hard at the alter of accumulating wealth changes your religious denomination, so to speak. Put another way, it's easier to not smoke cigarettes' if you have never been addicted to them.

How pursuit and acquisition of FI, particularly super FI (in which a hands off approach of managing capital can succeed), impact a persons mental, emotional, philosophical state negatively is something mostly ignored here. But it is a huge issue.

Jin+Guice
Posts: 1276
Joined: Sat Jun 30, 2018 8:15 am

Re: Damn it Feels Good to be a Gangsta

Post by Jin+Guice »

But You Should Probably Still Save a lot of Money Though:
2Birds1Stone wrote:
Wed Dec 01, 2021 4:43 pm
.......you can just find a nice non-violent country to go to prison in and call yourself ERE'd after one night of bad decisions.
jacob wrote:
Fri Dec 03, 2021 8:49 am
The counter-counterargument is that this lifestyle can get "old" after a few decades. Think old waitress or handyman. Rather the issue seems to be one of mourning lost potential of what could have been as people who have worked or invested more have more options open to them.
I'm usually here to argue that the basket of assumptions and skills ERE provides are valuable outside of the standard FIRE framework. I think that, in the context of the world we live in, extreme frugality and skill building make it so working at a full-time job, saving all the money one needs and then living off of the investment proceeds, all in one sprint, is not the only option for escaping from the workforce early.

But based on the responses to my past post, I want to make it clear that the goal of semi-ERE is not to work as little as possible. Like ERE, the goal is to achieve a state in which "there is no sharp distinction between work, play, leisure and recreation." For most people I still think saving a lot of money is a helpful in reaching this goal.

In the world of early retirement options there are two endpoints. Work as much as possible to condense the amount of years worked into as short a time as possible, or work as little as possible so that as few hours per week are spent working. I believe the ERE book phrased it as "work 40 hours a week for 5 years or work 5 hours a week for 40." I think of semi-ERE as all points in between these possibilities.

For some the regular ERE/ FIRE route will be the way to go and for others the "Gert," work as few hours per week and save nothing method will be the way to go. But for everyone in between...

Why save a bunch of money? Traditional FIRE sees savings as a stock that investment income flows from. This is a potential for Semi-ERE, using investment income to supplement earned income to further reduce working hours. This also increases resiliency by proving two sources of income which are independent of each other.

However, a stack of cash provides more than a means of investment income. Money also provides optionality and security. Expanding optionality and security are two of the biggest advantages of semi-ERE.

What do I mean by optionality and why is it important? Hate your current part-time job? Quit. Suddenly need to double your budget to take an exciting adventure or opportunity that comes into your life? Good things you have 11x living expenses saved. A business opportunity comes up that you needs some extra start-up capital?

What do I mean by security and why is it important? Suddenly have a medical emergency? You have enough stacked to pay off your high-deductible insurance. Is it important to you to have an extra couple hundred to help out a friend in need? Are you facing a problem where spending some money today will save you thousands in the future?

One of MMM's more famous posts is "Safety is an Expensive Illusion." A more precise if less effective title would be "Absolute Safety is Impossible. Purchased Safety is Subject to Diminishing Marginal Returns. No Refunds." All else equal, more money will always provide more investment returns, more safety and more optionality. But all else is never equal. Unfortunately, I can't provide with a nice neat Yx expenses number to tell you when you where optionality and safety are maximized and when you have reached official semi-retirement. I'm assuming that ERE readers will be familiar with the concept of "enough." Financial optionality and financial security are only one kind of optionality and security and choosing those forms, foregoes other forms. For most readers who grew up in the first world of our current time, having multiple years of expenses saved will greatly expand optionality and security, with diminishing results past a certain point (which I believe is much lower than the proverbial millions or 40x, 33x or 25x expenses that many people assume).

Having a large war chest of financial capital allows the saver to exploit the many things money provides, which go beyond the ability to enjoy not working at some far off point in the distant future as well as investment returns.

Post Reply