Decentralizing FI for strategic reasons?

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AxelHeyst
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Decentralizing FI for strategic reasons?

Post by AxelHeyst »

A common (but not universal) story is people accumulate to some FI number, and then then quit, and then they wind up making income anyway. So, they oversaved.

But, accumulate to FI math makes sense, and conceptually its easy to grasp. So it's a robust way of achieving FI and money security.

However, if one is capable of navigating a bit more uncertainty, and is willing to commit to getting one's skills up faster, then there exists another path. The path of FI as secondary order yield, a side effect of a well put together WoG.

This path looks like skill up on postconsumer praxis and get CoL down very low, and save up some FU stash, something like 5-10 years at minimum, up to 20 years. At this point, if you're FTE, quit, probably. This is the first milestone: five to ten years of runway with a VLCOL means you never have to FTE again.

Do watchu gotta do to heal thyself and recover from whatever it was you had to do when you were FTE.

Then: commit to to the learning journey of building a WL7 level WoG. Build a web of skills with homeotelic loosely coupled goals and be working on closing loops and making everything in your life make sense and work together, and maintain yourself in a stance of being open to serendipity etc...

...and the idea is to spin up multiple sources of secondary-yield, i.e. incidental, income, that covers and then exceeds your CoL. To be generating in excess of expenses as a side effect of living a life the way you want to live.

This is exceptionally difficult to paint a picture of, I think, because everyone's WoG will be very unique structurally if not topologically, and so there aren't any simple directions to give, unlike with fire, where you can just say "Once your CoL is n% of stash you can quit, although you should do your own homework on withdrawal strategies etc, don't be an idiot".

But this FI-as-side-effect approach sounds more like loosey goosey handwavey stuff. "Figure out VLCOL, then get an FU stash, then do your best to speedrun the ERE curriculum to WL7 and then you'll have figured out multiple sources of incidental income. Whether or not you are FI according to FIRE math is only academically relevant."

The thing is, you have to do it fast. Maybe it just seems fast. It's not that most people take a long time, I think it's that most people run up to WL5 very quickly rapidly and then stop there. It's not that it intrinsically takes a long time to get to WL7, it's that most people simply aren't even trying to get past WL5 optimizer stage, because why?

It occurs to me that the carrot of FIRE is very distracting. The problem is that it is at WL5 ish. So if it really is the carrot of FI that attracts you to ERE, well, you get the reward at WL5. And then for most people there is no other visible carrot. The reasons for going on to WL6 or 7 or whateverthehell 8+ is are... opaque, fuzzy, even repellent to some. So you get the carrot at WL5, and then you're good, and you're basically done.

Which is fine, of course, but I think the fact that so many people are content with WL5 and stop there gives the impression that making it to WL7 is a) very difficult, b) takes a really long time and c) basically no one does it.

c) might be true, but I think a and b aren't *necessarily* true. I think it's just a matter of staying on the path and maintaining momentum, and soon enough you'll get there, if that's what you want.

The easiest way to stay on the path I think is to decentralize FI as a goal, to avoid getting stuck in the FI-at-WL5 trap. Instead of putting FI as the goal at the end of the FTE phase after which one's real life begins, put FI as a likely effect somewhere down the road *as a result of having lived your real life for several years already.*

This takes away this huge milestone of apparent freedom that, honestly, has a lot of baggage associated with it for many people, this word 'retired', and is truly difficult to navigate.

By ending one's relationship with traditional FTE with only a FU stash (let's define this as 5-20xCoL, enough for breathing room but not enough to consider yourself FI-forever), this sends a signal to yourself that while yes, you've just made a big change in your life and everything is different now, you're not completely independent, you don't have total freedom of action yet! There is still work to do.

Yes, take a nice long break, go travel overseas, do a thruhike, live in Baja for a winter, put it all out of your head for a bit, signal to yourself that you're entering a new phase of your life, but then, as my friend Arti would say, Keep F'ing Going. Keep developing your skills. Explore activities that you enjoy and are meaningful to you that might have some renumerable component.

If the FU stash gets lower than you like, explore different options for earning: seasonal work, part time work, freelance, side hustle, job-as-skills-learning-experience, etc. Be open to serendipity.

At first, you might be w*rking more than you'd like, or the type of thing you're doing for $ isn't exactly what you'd like. If it weren't for the money, you wouldn't do it. But compared to the FTE version of yourself, you've got abundant surplus time and life-energy, and you're constantly improving your skills, your WoG, etc. So with every year, your relationship with generating $ improves. You find multiple streams. You find yourself doing less of what you don't like, and more of what you do. Serendipity compounds. You work on your inner game to ensure to protect yourself against zemblanity. Instead of working towards this big overnight flip of a switch (pulling the trigger on FTE because FI), a discrete change, you're constantly working on improving and tweaking and tuning, a much more gradual and certainly non-discrete process of development.

At some point, you notice that you aren't doing anything you don't like to do. Your stash isn't at n%SWR yet, but that's fine, you're content with how your WoG is set up. This is the second major milestone.

A few years later, you notice that your stash is below n%SWR, in fact it happened a few months ago and you didn't notice. Oh hey, neat, how about that. This is the third milestone, which is epilogue.

Your life doesn't change: it already did.

--

Okay. Criticism? What's naive about this? Are there non-obvious ways this fails?

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Re: Decentralizing FI for strategic reasons?

Post by jacob »

AxelHeyst wrote:
Thu Jan 19, 2023 11:43 am
The thing is, you have to do it fast. Maybe it just seems fast. It's not that most people take a long time, I think it's that most people run up to WL5 very quickly rapidly and then stop there. It's not that it intrinsically takes a long time to get to WL7, it's that most people simply aren't even trying to get past WL5 optimizer stage, because why?

It occurs to me that the carrot of FIRE is very distracting. The problem is that it is at WL5 ish. So if it really is the carrot of FI that attracts you to ERE, well, you get the reward at WL5. And then for most people there is no other visible carrot. The reasons for going on to WL6 or 7 or whateverthehell 8+ is are... opaque, fuzzy, even repellent to some. So you get the carrot at WL5, and then you're good, and you're basically done.
I think the WL table should be hacked up. There's a distinct difference between 1-5 and 6-10. Call them Tier1 and Tier2. I believe 6-10 are all similar but that 1-5 in its current form is distinctly orange. IOW, there's one Tier2, but there are several Tier1s leading to the same Tier2. Comparative advantage just happens to be how the fish justify the water (or swimming) to themselves in orange.

Tier2 (or WL6-10) is conceptually different and therefore harder than Tier1 because it requires going broader whereas Tier1 just requires going deeper and becoming better at what you already know. I think this is also why many stop---why there's such a huge moat between 5 and 6 of whatever value-system---because they've reached the end-point of Tier1.

The corresponding green WL1-5 would likely also have a local maxima where people have become fully interdependent with their community of choice; and consequently see decoupling from that [community currency] in order to broaden access, optionality, and control as a step in the wrong direction.

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Re: Decentralizing FI for strategic reasons?

Post by 7Wannabe5 »

Not non-obvious, but the factors that work together to provide for VLCOL are the most likely weakness in this design. IME, making incidental income is easy, almost osmotic, because not asking for much from stream that averages much larger, but variations in expenses are more likely to be relatively large for same reason. For example, if VLCOL is $6000/ year, unexpected medical expenses might double yearly outgo, whereas for median income earner, same expense would only be 20/25% of yearly outgo.

Also, something like 3 layers or independent parachute options for any non-trivial very frugal tactic based on non-financial capital might also be warranted. For instance, if you are currently paying only $250/month for shelter, having 3 independent plans for continuing to only pay $250/month for shelter is more important at VLCOL level than having 3 different back-up plans to earn however much more might be needed at easy market rate.

Final note, also not non-obvious, a purely passive financial stream can continue to drip into your accounts while you are in a coma. Almost everything else in your lifestyle design/ web of goals is going to depend on your physical and mental health being intact.

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Re: Decentralizing FI for strategic reasons?

Post by Ego »

AxelHeyst wrote:
Thu Jan 19, 2023 11:43 am
However, if one is capable of navigating a bit more uncertainty, and is willing to commit to getting one's skills up faster, then there exists another path.
Over the years I have seen many examples of people who worked to become FI and then discovered that they dedicated so much of their lives to the persuit of financial security that they lost the ability to adapt, change, remake themselves, learn new things or see serendipity when it was kissing them on the lips.

On the other hand, I've seen very few examples of people who retired too soon with too little stashed away and regretted their decision to get out early.

Certainty/uncertainty - Security/insecurity - well-being/unwell - self-worth/self-doubt

Fortunes are made everyday selling people the illusion of things that cannot be bought at any price and must be earned.

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Re: Decentralizing FI for strategic reasons?

Post by 7Wannabe5 »

Ego wrote:On the other hand, I've seen very few examples of people who retired too soon with too little stashed away and regretted their decision to get out early.
True, but the Mom in me tends towards wanting to offer "the kids" more conservative advice. which on second thought is kind of odd, because if one of my own kids came to me and said "I've got "$10,000 in the bank, I'm off to see the world!", I'd be like "Yay, have so much fun!!" ...unless they expected me to take care of their pets while gone :lol:

I guess, I just want to make it more than abundantly clear that if your goal is anything resembling conventional FIRE, look away. look away, from the highly experimental and dubious goings on in my "strategy." Do that instead which are the things that jacob does!! Warning, warning, old lady in purple doing "whatever" with the extra years, etc. etc.

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Re: Decentralizing FI for strategic reasons?

Post by Dave »

AxelHeyst wrote:
Thu Jan 19, 2023 11:43 am
it's that most people simply aren't even trying to get past WL5 optimizer stage, because why?
I appreciate the thought put into this post and think it covers some interesting ground and presents an interesting approach (decentralizing FI). The follow-up comments make sense to me too, especially @jacob's comments about the large gap in 1-5 and 6+, and @Ego's notes of people stalling out upon reaching certain financial goals.

As someone who is sitting at around the 6 or 5.5 range, it made me reflect a bit.

One answer is just that, as has been said before, the distribution of various Wheaton levels is going to be a pyramid and naturally you're going to see a very large drop off as you move up. In any endeavor you're going to see fewer and fewer people climb up the ladder of expertise. There is only so much time in life, abilities and interests vary, and most people just aren't going to become elite at much of anything. Some may argue that it wouldn't take that much time or intelligence to become WL7+, but I'm not sure I agree with this. The higher WL people on these forums, and the off-forum examples we sometimes talk about are exceptional people (in the context of the consumer society most of us were raised in) in terms of IQ, abilities, and ambition. Breaking past conditioning and developing a wide swath of skills as a busy adult is not a trivial matter and I'm not sure most people are up for it, so naturally they will find a best fit along the spectrum that suits them best. Not that they can't go higher, just that it's sort of a natural equilibrium given their past conditioning and current circumstances.

Another other piece - or perhaps an input to the prior - is diminishing returns. My wife (and me to a lesser extent) falls into this to a degree. You get a LOT of the benefits by just going to say WL5. There is a whole universe of difference between the first 5 and latter 5, but from where she sits as someone that likes her job, isn't a slave to the system, and is well-off financially, the downside of staying put isn't very high and the upside of trying to cram more skills building into a fairly full life isn't so (from her viewpoint) big. This isn't irrational. Layer partner considerations where 1 partner is like this, and this may hold a partner willing to go further back a bit, and we've seen this on the forums several times.

My final thought, perhaps as a bit of push-back is, it also seems to me like to some degree you (AH) are trying to suggest playing the game on hard mode by not just pushing through a few years of traditional income earning to a stronger FI status. Now, I get it - high level ERE is NOT about being FI and having a big stash - it's about much more. I'm not trying to shove the wrong paradigm down here. But to some degree, there is a meaningful amount of extra strength to a life system with 50x savings AND a broad set of monetizable skills/streams of value creation compared to one with 10x savings & the same others.

What you are proposing still gets to you the the point where you are securely FI, and in the end there may not be a difference. But for someone who can live exceptionally cheaply and is smart enough to climb to high WL, it seems like becoming FI is fairly trivial over 5-7 years. And that FI dimension can be conceptualized as any other activity with which one can develop expertise/mastery. Not one to worship, but a viable goal and path to develop as a single phase/leg of the journey. Perhaps distasteful, like I found college, but valuable still in creating the life one wants.

Still, I do get your point about the risks of being trapped at WL5, and thus how decentralizing it may make sense. It might depend on the person, but for me I always just wanted to have this done, especially given the significant effects of asset compounding and the impact those extra 10-20 years might have.

I've always heard and respected @Ego's comments about people who sort of stagnant after achieving FI and how not leaving so much slack may help drive/force growth, but I'm not convinced that everyone - especially those people who would be motivated enough to climb to high WL - would necessarily find achieving FI status stagnation-inducing. I suspect they would likely move on to their next phase after some period of consolidation.

I could very well be wrong, though - I'm not high WL and maybe I'm an example of the risks being talked about :lol:.

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Re: Decentralizing FI for strategic reasons?

Post by jacob »

Some further reflections based on @Dave's comments.

[Individuals] concentrating on semiERE or ERE1 tend to be exceptionally skilled to the point where "making money" (as opposed to some other capital) losses relevance. Because these [individuals] can always go make some [other] capital outside the prevailing orange/money system.

However, going with 7wb5's concerns. What happens when such skills, typically technical or physiological, can no longer be supported due to age or decline ... what then. Methinks, maybe the semiERE crowd is betting on youthful energy in the same way that the FIRE crowd is betting on their stash.

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Re: Decentralizing FI for strategic reasons?

Post by Ego »

@7W, conservative advice doesn't suit you. :D
Ego wrote:
Sun Oct 09, 2016 2:21 pm
Years ago one of my Navy Seal friends who had just returned from Mountain Warfare training told me that the instructors drilled into their heads the fact that it is easier to stay warm than it is to get warm. Same goes for weirdness. It is easier to continue being weird than to get weird. In other words, it is hard to transition from normal to weirdo. We just stayed weird.
The longer one is cold, the harder it is to get warm. The longer one is forced to act normal, the harder it is to be weird. The longer one endures the stagnation imposed by FTE, the harder it is to not be stagnant.

That said, I agree with@Dave that not everyone will stagnate post FI. It makes me want to think about who will not stagnate and why.

As someone past 50x, I gently disagree with the idea that it buys a meaningful amount of extra strength. Lose aversion is insidious.

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Re: Decentralizing FI for strategic reasons?

Post by AxelHeyst »

Dave wrote:
Thu Jan 19, 2023 2:49 pm
What you are proposing still gets to you the the point where you are securely FI, and in the end there may not be a difference. But for someone who can live exceptionally cheaply and is smart enough to climb to high WL, it seems like becoming FI is fairly trivial over 5-7 years. And that FI dimension can be conceptualized as any other activity with which one can develop expertise/mastery. Not one to worship, but a viable goal and path to develop as a single phase/leg of the journey. Perhaps distasteful, like I found college, but valuable still in creating the life one wants.
Yes, the way I think about these different approaches is not that one is inherently better than the other, but that each approach is simply an option that ought to be considered. If there are a few different basic explicit approaches, say, that clues you in to the fact that there is more than one way to skin a cat and that you should put some earnest effort into deciding which approach is right for you.

Insofar as FI-first is perceived as an obligatory early gate to get through, the realization that there are more than one way to play this game might not occur to someone. Where this post came from for me is that even though I'm one or two years down the path of semiERE, I'm still noticing FI-first default thinking embedded inside my head. Conceptualizing a path that from the beginning was FI-incidental is helpful for me to think through how to make decisions about my life now.

It's also useful for when life throws curve balls, to be able to adapt one's strategy. In early 2020, I was FTE and on a path to FI. If I could go back and have a chat with January 2020 Axel, I'd be tempted to tell him to avoid making that one risky career decision, reconsolidate on the BIM stuff, which would have avoided my layoff in 2021, and stick it out for another 3 years and then be 33xFI right meow.

As it was, I *did* get laid off... but the semiERE framework that forumites had laid down before me (JnG, c_L, 2b1s, Bsog?, et al) gave me an option other than finding another FTE which almost certainly would have sucked more than the job I'd left.

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Re: Decentralizing FI for strategic reasons?

Post by Ego »

jacob wrote:
Thu Jan 19, 2023 3:53 pm
What happens when such skills, typically technical or physiological, can no longer be supported due to age or decline ... what then. Methinks, maybe the semiERE crowd is betting on youthful energy in the same way that the FIRE crowd is betting on their stash.
I consider myself lucky to have had the Soylent Towers experience where we witnessed and sometimes participated in these end of life situations involving both those with great means and those with nothing. We came away believing that the suffering differential between the two was less than the weaknesses caused during a prolonged accumulation phase.

That said, the world is changing fast so that calculation will almost certainly change. The Goldilocks amount of skills vs emergency funds is not an easy calculation. Skills have a self reinforcing nature that is similar to but more broad-spectrum than compound interest, so I err on the side of skills.
Last edited by Ego on Thu Jan 19, 2023 4:37 pm, edited 1 time in total.

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Re: Decentralizing FI for strategic reasons?

Post by AxelHeyst »

jacob wrote:
Thu Jan 19, 2023 3:53 pm
However, going with 7wb5's concerns. What happens when such skills, typically technical or physiological, can no longer be supported due to age or decline ... what then. Methinks, maybe the semiERE crowd is betting on youthful energy in the same way that the FIRE crowd is betting on their stash.
Perhaps... but again, FI-as-side-effect is part of the strategy I'm suggesting here. The strategy I'm suggesting is not to have an FU buffer and then merely generate 1xCoL in income and just maintain that position. The strategy is to steward one's assets and flows in such a way that FI-levels happen eventually. Not in the 5 years doable with tradERE, sure. But also not the 40years of standard retirement planning. Maybe more like... 10-20? It's a spectrum, individuals can dial in their level of ambition to generate income how they like.

The risk of losing ability to generate income due to age or decline needs to be balanced with the risk of one's stash failing due to inept stewardship, major economic kerfuffle, etc... and then finding oneself twenty years from one's last remunerable activity and at a loss for how to generate income again. semiERE in my view isn't the other end of the extreme, it's more of a middle path. Skills and stash.

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Re: Decentralizing FI for strategic reasons?

Post by chenda »

AxelHeyst wrote:
Thu Jan 19, 2023 4:37 pm
The risk of losing ability to generate income due to age or decline needs to be balanced with the risk of one's stash failing due to inept stewardship, major economic kerfuffle, etc... and then finding oneself twenty years from one's last remunerable activity and at a loss for how to generate income again. semiERE in my view isn't the other end of the extreme, it's more of a middle path. Skills and stash.
+1

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Re: Decentralizing FI for strategic reasons?

Post by Dave »

@7wb5/@jacob’s 2nd point is one that I haven’t heard a compelling answer to from the semiERE crowd.

Odds are such an approach will be just fine, at least for a very long time. But people do sometimes develop very serious conditions that massively change resource requirements even early in life, and more so for people later in life. We can and should try our best to be healthy, but there is no guarantee. Living off a very modest income and various other yields will work best when your health is strong, but such yields might not be enough if some condition arises. In that case, having a larger stock of financial capital would go a long way in helping deal with the problem. This seems increasingly important as we age, and the decentralized approach @AH proposes will likely build up such a stock by the time we reach old age.

But in the event something does happen earlier in life, or if someone in your family or care requires additional care that is multiples of your normal spend, it seems a point of fragility.

That’s one example of why I think having 50x saved makes you more robust. It’s not that it prevents all problems. It’s that there are a few problems (only?) it can deal with (at least rapidly and reliably), thus why it’s another tool in the kit.

This extra capital also can be useful in certain projects. Say you’re trying to do what Paul Wheaton did and create some sort of space that requires land, structures, and equipment. Maybe his is cheap. But it’s not hard to conceive of other projects that would require more. Maybe you have great fundraising skills in your skillset that could help raise the capital, but having funds yourself would improve the odds of success and ability to influence said project.

That sort of thing.

Seems to me there are a few things having the financial capital really helps with, but I agree with you guys that there are legitimate risks in seeking and achieving FI. Things like that loss aversion and more are things to put serious consideration into for those who achieve FI, as we don't want to be slaves to a stash of digits stored in the interw3b.

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Re: Decentralizing FI for strategic reasons?

Post by Dave »

AxelHeyst wrote:
Thu Jan 19, 2023 4:37 pm
Skills and stash.
Amen to that. The ole "Do both!" Good stuff.

And to your prior comment, definitely agree that more options being there and available is good. It's been really cool to see these other alternatives get fleshed out. I'm not much of an innovator and I really respect all of you that have forged such interesting paths.

My background leans towards the stash side - my big interest is investing, the activity of stash management - but I do work on the skill side as well. Maybe it's just where I'm at, but I see clear benefits to both. I don't want to pick 1.

But some of the comments above definitely make me reflect more on the challenges of being stash-focused. Especially @Ego's comment about his learning from Soylent Towers. There's going to be a lot of variation in how all of that manifests for each person, but serious things to think about.

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Re: Decentralizing FI for strategic reasons?

Post by AxelHeyst »

Quoting myself to clear up a potentially implied stawman [that I made] against tradERE:
AxelHeyst wrote:
Thu Jan 19, 2023 4:37 pm
The risk of losing ability to generate income due to age or decline needs to be balanced with the risk of one's stash failing due to inept stewardship, major economic kerfuffle, etc... and then finding oneself twenty years from one's last remunerable activity and at a loss for how to generate income again. semiERE in my view isn't the other end of the extreme, it's more of a middle path. Skills and stash.
tradERE is skills and stash too! It's an order of sequence thing.

tradERE: "some necessary skills > FI stash > megaSkillz time because RE. Within five years of beginning, time spent doing stuff that sucks is very close to zero".

semiERE: "some skills > megaSkillz time because semiRE > FI stash. Within 5 years of beginning, time spent doing stuff that sucks is very close to zero." It's just an order of sequence thing.

semiERE leaves compounding interest earnings from an earlier start date on the table, but you start developing skill network and a robust WoG earlier. tradERE is the opposite.
Last edited by AxelHeyst on Thu Jan 19, 2023 6:20 pm, edited 1 time in total.

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Re: Decentralizing FI for strategic reasons?

Post by Dave »

Ah, thanks for the clarification AH, appreciate that and apologize for any strawman and irrelevant comments.

I must have forgotten or never fully understood what was meant by semiERE. I didn't realize it was purely a sequence thing - I didn't realize FI was an explicit goal of semiERE and that it just was a difference sequence of priorities.

Your comments make more sense to me more now, and yeah it seems the relative tradeoff then is about what sort of compounding (financial assets or skillz) you want to prioritize, and what is a person's preference given various individual considerations.

Some of my earlier comments therefore don't make sense, as I was talking more to the idea of never seeking to accumulate a meaningful stash.

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Re: Decentralizing FI for strategic reasons?

Post by mathiverse »

Thanks for writing this out, AxelHeyst!

I think the ideal is, as always, to do both. DLJ exemplifies this as he went to a VLCOL (or rather stayed there even) while pursuing zeroth order goals that were not FI and he accumulated to FI with a FTE at the same time. He had VLCOL and a FI stash when he quit. Many people have only one or the other. There aren't many people on this forum who spend at the JAFI level, let alone the Jacob level even if you look at pre-FI and post-FI people. Maybe some people would get to FI sooner if they decentralized FI because they'd get to VLCOL much faster and their money would go further? For some, maybe it's a more homeotelic path to FI than FTE.

In my case, I sucked at accumulation and skill building at the same time. It appears that with semiERE and a decentralized FI type life, I'll still reach FI within three years of quitting (which I did in mid-2021) at a much lower expense level than I would have had I stayed working. I didn't want to continue FTE right now, so this is a good option for me. There is definitely the risk that something goes wrong and FI becomes unattainable forever and I really missed the boat by quitting. I'll deal with that if it happens.

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Re: Decentralizing FI for strategic reasons?

Post by AxelHeyst »

@Dave - I actually meant that *I* had accidentally implied a strawman against tradERE that I wanted to clear up.

And historically, I'm not sure semiERE *has* implied inevitable FI. I don't recall any of the semiERE threads explicitly stating that an aim is to achieve FI incidentally at some point. So your comments are definitely valid to be thrown into the discussion, as it's an important distinction I think.

semiERE has always been understood as an umbrella term for a whole spectrum of approaches that prioritize living life now and exiting intolerable FTE circumstances. The motto of semiERE might be "whiteknuckling is not worth it! Quit now and do anything else if the suffering is so bad!" It's about as close to YOLO as it gets around here. If your FTE gig is not intolerable, if it's not so bad, then I agree that just doing tradERE is for many people the most advisable route.

I suppose my OP was about fleshing out one form of semiERE which is constructed in such a way that FI-level stash is inevitable at some date in the future, but it is achieved with multi-nodal WoG serendipity rather than the direct approach of FTE.

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Re: Decentralizing FI for strategic reasons?

Post by Jin+Guice »

Really enjoying this thread and the ensuing discussion.


When I say semiERE I mean everything in between roughly "5 hours a week for 40 years and 40 hours a week for 5 years." So it includes a boundary case where you never save a penny, but that is only the boundary case.

I also note, as @Ego did, that *most* people who have the exact skills and discipline it takes to reach FI at an early or semi-early age tend to go back to work again to earn even more money. I think this will be true of semiERE people who hit FI as well. I think *most* semiERE people will eventually hit FI incidentally, although it is not a strict requirement.


I take issue with the "what if medical emergencies happen!" example. Due respect to 7w5 who I know is dealing with actual medical emergencies. I think it is a pretty rare case where 50x CoL saves your dick and 10x doesn't.... although this is also a boundary case, so more like 17x doesn't save you but 33x does. Not that it won't happen to somebody, just that it will be rare bc most medical emergencies, to my knowledge, are relatively cheap when it comes to years of CoL saved or relatively expensive when it comes to the amount of money you will likely make in your whole life.

There is no amount of money that safeguards you from medical emergencies. Except for the perverse effects @Ego points out, more money helps you in almost all scenarios for anything.

But what you give up is your life. The question of what amount of life to give up for what amount of security is personal. But I think raising the demon of medical emergencies is misleading.

I also want to point out that the plan most of us were sold, that most people are following is to work for >40 years with almost no savings. A plan entirely dependent on youthful vigor forever. While our social safety net is certainly not great, it does still exist to a certain extent for rare and pernicious medical emergencies in a lot of cases.

semiERE gains a lot of its resiliency from someone remaining in the work force. I think this is true in the case of *most* medical emergencies where it will be easier to continue to work in some limited fashion if someone is already working in some fashion rather than not working at all.


Also want to again endorse the very high benefits of VLCOL. It is a game changer no matter which ERE or non-ERE you follow.

7Wannabe5 wrote:
Thu Jan 19, 2023 12:26 pm
Also, something like 3 layers or independent parachute options for any non-trivial very frugal tactic based on non-financial capital might also be warranted. For instance, if you are currently paying only $250/month for shelter, having 3 independent plans for continuing to only pay $250/month for shelter is more important at VLCOL level than having 3 different back-up plans to earn however much more might be needed at easy market rate.
I am literally in this situation and this has been my conclusion as well. lentilDaddy 4 lyfe.



Welp, gonna go back to swinging on a porch swing while mixing my band's punk rock ep and then lift some weights while I've still got some youthful vigor left this evening... hope the rest of you are enjoying that extra years CoL to the same extent.

mathiverse
Posts: 788
Joined: Fri Feb 01, 2019 8:40 pm

Re: Decentralizing FI for strategic reasons?

Post by mathiverse »

Good point that semiERE may not have explicitly included making any more than COL each year. My own semiERE plan includes FI in short order.

For some people, the decentralized FI plan will look similar to what Fish described in the "Deliberately Coasting to FI" thread. The ease of this depends on the absolute number 5x - 20x expenses really is. The higher, the easier. (However, check out AxelHeyst's numbers for an example where an even lower level of assets with enough expense reduction gets someone really close even without a super high absolute number.)
Fish wrote:
Fri Dec 23, 2022 4:26 pm
coasting [(and I'll add semiERE)] might be a viable strategy if expenses aren't optimized to start. For example, if you have accumulated 15x, realize that is 30x if spending can be cut in half.

To put numbers to it: suppose spending is 30k, and savings is 450k (that is, 15x). Instead of grinding it out to 900k savings, one could try coasting on 15k earned income, while drawing the other 15k from savings (which is appropriately invested to sustain the 3.3% WR). Then the challenge is to reduce spending to a target of 15k while maintaining the part-time income as a backup. If successful, FI is obtained with an ERE income score of 2.0.

More abstract way to think about this style of "coasting" by expense reduction (coast-ER):
* If at 50% of goal assets, it takes a 50% reduction in expenses to become FI.
* If at 66% of goal, a 33% reduction is needed.
* If at 75% of goal, a 25% reduction is needed.
* If at 80% of goal, a 20% reduction is needed.
* If at X% of goal, a (100-X)% reduction in expenses is needed.

So if savings rate is relatively low (<60%) and expenses are not yet optimized, at some point in accumulation the expense reduction to become FI will become attractive compared to more accumulation. And it's not necessary to replace the entire spending with PT income either, only the portion of present expenses that can't be covered by investment income when coast-ER starts. (Note: An appropriate WR needs to be chosen to match the retirement horizon.)
Decentralized FI is less risky the bigger your stash at the point you quit FTE. It also may be a faster route to FI for people who do stall on expense reduction during accumulation.

As I write, maybe the insight is that this can be just another way to skin the cat of lowering expenses which WL4+ thinks is better than increasing earnings anyway. And as mentioned, it is still better to radically lower expenses while accumulating if you can.

Also here is a journal from the poster, Matt3121, who (forced by health reasons) did what Fish describes: quit his job (for health reasons) with a decent sized stash already and was FI in short order due to expense reduction: viewtopic.php?t=11079.

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