Re: Decentralizing FI for strategic reasons?
Posted: Thu Jan 19, 2023 9:13 pm
Right on AH, got it.
Well, if not already clear from my comments above I really like what you fleshed out there! What you proposed seems to me to be the most robust way to approach semiERE as it seems to be the best of both worlds, with just a timing emphasis of skills before financial capital. I could see this approach being superior for a ton of people who enjoy some type of work or a project(s) that doesn't pay a super high rate, but still want to eventually end up in a position with a broad WoG life system that has a meaningful stock of financial capital.
Appreciate your thoughts @J+G, I always like hearing your perspective on this topic given your very unique life approach.
Perhaps I see a wider range of outcomes regarding medical issues, non-medical personal issues, or projects that come up that could require larger $ spending needs. Like I said above, it’s not inevitable. Many people won’t have such needs. And perhaps I’m overestimating such costs – I err conservative when planning, for sure. I just don’t know the future and have known a few people with fairly adverse outcomes in life that limited their ability to do things.
Remember my comments were specifically around people who had relatively (to spending) low savings levels and no intention to accumulate capital, not those slowly accumulating. This is a key point that may not have been clear above, based on how I was using the semiERE phrase. And the 50x was NOT some target I was advocating pursuing, just an example of two extremes.
But I’m not sure I agree with the idea that 10x of an already-very small level of annual spend, say $75-100K, really makes one’s lifestyle similarly robust as someone that has $750K-1M. In a lot of outcomes, that’s fine. However, if you find yourself simultaneously with large ongoing healthcare costs AND you are unable to work many jobs, you might find yourself quite restricted. Not begging in the streets, but perhaps more than desired and avoidable given a bit more effort to accumulate $.
I don’t know though – I don’t have a strong opinion on what the right number is. $75K seems too small to me. Maybe the diminishing returns has mostly set in by $250K, and that’s fine. I’m not arguing a particular number (and certainly nowhere remotely close to $1M), just that 10x off a very small level of spend seems a bit low for MY comfort level given how much variation there is in future outcomes like healthcare costs and more. And your point of the life tradeoff is duly noted, finding the balance here is critical and there are definitely people that vastly over-save and lose years of their life in a crappy job environment in an effort to alleviate anxiety about the future.
My guess is we’re all mostly on the same page of not falling to any of these extremes. I left full-time work below half of standard FI level to pursue my muse, and didn’t look back. (It sounds like?) you still expects to accumulate some financial capital. And so on. It’s a spectrum. Your comments about 17x and 33x not being as different is kind of my point here - I'd agree that the gap between 33 and 17 is hugely different than 50 and 10. Neither of us is advocating either.
IMO the most robust strategy is to address both of the extreme issues @jacob noted to each side – the stash side shouldn’t bet the farm that st0nks are going to go up and right forever, and the skillz side shouldn’t assume they will always and forever be able to string something together until the day they die. Both = more robust. Multi-pillared approach.
Looping back to the original post, I'm curious if anyone has any push-back on AH's original strategy. Assuming equal emphasis on skills long-term, it seems like a good balance between the boundary cases of 1) structuring a lifestyle that yields just enough to support needs but having little financial stocks built and 2) the extreme save to 33x+ while giving up years of life in a suboptimal job, not building skills along the way, and developing severe burnout approach.
As noted above, one downside of the OP's posited approach is less time for financial compounding to work. Another is the risk that none of your current projects end up yielding anything material such that you have to end up grinding more at suboptimal jobs/gigs down the road. Assuming one is course correcting in real time, I don't know how likely that really is, but it comes to mind. A final is that assuming one is a moderate income earner or higher with very low costs (80%+ savings rate), in a lot of cases it just won't take all that long (~3 years) to grind from 10x to 25x and you can just be done with the whole FI thing, which frees up more time to focus on skills and following your interests. For a lot of people, 3 years of effort is going to be worth the jump in security and increased options brought about, but as discussed throughout this thread there are tradeoffs and individuals will vary in their analysis here.
Well, if not already clear from my comments above I really like what you fleshed out there! What you proposed seems to me to be the most robust way to approach semiERE as it seems to be the best of both worlds, with just a timing emphasis of skills before financial capital. I could see this approach being superior for a ton of people who enjoy some type of work or a project(s) that doesn't pay a super high rate, but still want to eventually end up in a position with a broad WoG life system that has a meaningful stock of financial capital.
Appreciate your thoughts @J+G, I always like hearing your perspective on this topic given your very unique life approach.
Perhaps I see a wider range of outcomes regarding medical issues, non-medical personal issues, or projects that come up that could require larger $ spending needs. Like I said above, it’s not inevitable. Many people won’t have such needs. And perhaps I’m overestimating such costs – I err conservative when planning, for sure. I just don’t know the future and have known a few people with fairly adverse outcomes in life that limited their ability to do things.
Remember my comments were specifically around people who had relatively (to spending) low savings levels and no intention to accumulate capital, not those slowly accumulating. This is a key point that may not have been clear above, based on how I was using the semiERE phrase. And the 50x was NOT some target I was advocating pursuing, just an example of two extremes.
But I’m not sure I agree with the idea that 10x of an already-very small level of annual spend, say $75-100K, really makes one’s lifestyle similarly robust as someone that has $750K-1M. In a lot of outcomes, that’s fine. However, if you find yourself simultaneously with large ongoing healthcare costs AND you are unable to work many jobs, you might find yourself quite restricted. Not begging in the streets, but perhaps more than desired and avoidable given a bit more effort to accumulate $.
I don’t know though – I don’t have a strong opinion on what the right number is. $75K seems too small to me. Maybe the diminishing returns has mostly set in by $250K, and that’s fine. I’m not arguing a particular number (and certainly nowhere remotely close to $1M), just that 10x off a very small level of spend seems a bit low for MY comfort level given how much variation there is in future outcomes like healthcare costs and more. And your point of the life tradeoff is duly noted, finding the balance here is critical and there are definitely people that vastly over-save and lose years of their life in a crappy job environment in an effort to alleviate anxiety about the future.
My guess is we’re all mostly on the same page of not falling to any of these extremes. I left full-time work below half of standard FI level to pursue my muse, and didn’t look back. (It sounds like?) you still expects to accumulate some financial capital. And so on. It’s a spectrum. Your comments about 17x and 33x not being as different is kind of my point here - I'd agree that the gap between 33 and 17 is hugely different than 50 and 10. Neither of us is advocating either.
IMO the most robust strategy is to address both of the extreme issues @jacob noted to each side – the stash side shouldn’t bet the farm that st0nks are going to go up and right forever, and the skillz side shouldn’t assume they will always and forever be able to string something together until the day they die. Both = more robust. Multi-pillared approach.
Looping back to the original post, I'm curious if anyone has any push-back on AH's original strategy. Assuming equal emphasis on skills long-term, it seems like a good balance between the boundary cases of 1) structuring a lifestyle that yields just enough to support needs but having little financial stocks built and 2) the extreme save to 33x+ while giving up years of life in a suboptimal job, not building skills along the way, and developing severe burnout approach.
As noted above, one downside of the OP's posited approach is less time for financial compounding to work. Another is the risk that none of your current projects end up yielding anything material such that you have to end up grinding more at suboptimal jobs/gigs down the road. Assuming one is course correcting in real time, I don't know how likely that really is, but it comes to mind. A final is that assuming one is a moderate income earner or higher with very low costs (80%+ savings rate), in a lot of cases it just won't take all that long (~3 years) to grind from 10x to 25x and you can just be done with the whole FI thing, which frees up more time to focus on skills and following your interests. For a lot of people, 3 years of effort is going to be worth the jump in security and increased options brought about, but as discussed throughout this thread there are tradeoffs and individuals will vary in their analysis here.