No Worries

Jared Dillian just released a book about personal finance (?) called No Worries – How to live a stress free financial life. Who’s Jared? I am not sure how to describe him, he worked in finance, has a paid daily newsletter about finance but he also lives in South Carolina (not really a “finance” place) and writes about many things. I discovered him via Jason Buck: I love Jason and if he says to check out this Jared-guy I’d do but…I have mixed feelings about him. He is too American. Like those “the European minds cannot understand” memes: correct, going deer hunting (already) with a machine gun that would be overpowered even in the Ukranian war (!!), yep that I really do not understand.

I did not read the book and most likely won’t. But Jared is doing the usual podcast marketing round to promote the book and offered a few interesting takes to add to the neverending FIRE convo.

FI vs RE

It’s been five years that I have been tinkering around FIRE and I reached a few conclusions. My conclusions. For the time being.

Financial independence matters…no matter your age, job, or career. Financial independence means flexibility, a plan B, if something happens related to you or your main source of income, morphing into a Plan A. It is a spectrum. It can be more or less relevant to you but it cannot be a zero. I guess if you are reading this, the chances that it is a zero are pretty pretty slim. anyway. Financial independence means being able to do something irrespective of the financial incentives related to it. Everyone should pursue it but, considering the trade-offs involved, there cannot be a one-size-fits-all type of path.

I would consider Jared financially independent.

Early retirement is the bit that gets the bad rap. Reasonably but sometimes unreasonably.

Did you ever read the book About A Boy? It is (almost) the story of the son of Mariah Carey, a guy who can live out of the royalties of a Xmas song his father wrote and therefore has never worked a day in his life. The centrepiece of the story is how miserable the guy’s life is until he finds a purpose. The book came out 20 years ago, way before the (FI)RE concept was born. The idea that you can be unhappy even when financially independent is not that novel.

Making fun of purposeless retirement is stupid because it is like making fun of people eating pizza with pineapple toppings, everyone already knows it tastes like shit. The mistake I make (and maybe Jared too?) is to confuse a purposeless retirement with one that has a purpose but I do not see it, either because I do not understand it or I do not like it. The guy at Monevator said it best: early retirement is your choice and luckily enough, there is no way in which your choice can impact my life. You are not even using taxpayer resources, you are living out of your savings.

What I find interesting is how we judge (alleged) purposeless early retirement as a society. Yes, I just watched Saltburn. Plot of the movie: someone sees a bunch of people living a definitively purposeless life and… decides to kill everyone to take that experience for himself. The protagonist has mental issues but the movie works because it winks at “what would you do in the same situation?”. After the movie came out, rich kids started to dance naked in their (parents) mansions and post vids online as a flex. It is like that Arrested Development meme, we know that a purposeless life is miserable and it never worked for others but…

The critique is about lack of purpose or lack of resources?

Think about modern-day monarchies. Not only those guys found a purpose to justify their role to themselves, we plebs found one to justify their role to ourselves.

The Big Thing

Being financially independent means removing the stress of financial problems. To get there you have to lower your “burn” as Scott Galloway calls it, what you spend every month. In this sense, Jared and the FIRE community are on the same page: big expenses matter.

The FIRE movement was started by geeks who were earning A LOT and did not know what to do with it. Because they are geeks. This was a new phenomenon, as previously, those who earned large sums of money were mainly motivated by financial gain. Exceptions included athletes who pursued their passion and ended up wealthy due to their excellence. The geeks, on the other hand, were engaged in stressful and unhealthy work, spending long periods alone in front of a computer screen. It is not surprising that they realized this was unsustainable in the long term and sought an alternative. Ultimately, they took control of their finances by avoiding simply keeping their money in a bank account.

The OG FIRE-ers did not have the big expense issue because they did not care. They had a long-term sustainable income issue and the solution was to make their money work for them.

But this (probably?) was the conversation fire-starter around expenses for other high earners: whatever the profession, if you earn a top 10% salary, you are stressed AF. If you compound to that the stress of having to continually generate a high income to cover expenses, it becomes a recipe for disaster. Achieving financial independence doesn’t necessarily mean changing jobs; it’s about realizing that even if something were to happen to your current job, everything else would still be manageable.

In this sense, financial independence should always be the goal. It is a very convenient Plan B when shit hits the fan. The lower your burn, the easier it is. Big expenses matter because they are either difficult to cut (house mortgage(s), school fees) or are huge value destroyers (car, boat, etc): in both cases, it is really hard to unwind the trade.

Unfortunately, at a certain point it becomes impossible to say whether the additional dollar franc is better spent or saved. If you spend too lavishly you risk regretting it big time but if you are too conservative you waste the most scarce of the assets: time. The puzzle to solve is not about adding the second tennis court vs the third sport car, it is having that third room for your kids/home office that you can afford only in 9 out of 10 scenarios. I cannot make perfect, universal examples because here by definition we are moving away from basic necessities; we all have our priorities but I think you get the point.

The spectrum of people that have to deal with these choices is broad: even if I double my current salary I would not jump into another category (there is a weird, impossible to summarise, anecdote about this. My wife got close to the mum of my daughter’s “boyfriend”, they most likely earn up to double than us and yet they live on the same floor as us).

The silver lining here is that tech is helping in shifting once fixed into variable expenses. I do not own a car but I can get one with a few clicks, and the price is tailored to my specific need at that moment. Same for holiday rentals vs a second home purchase. These solutions work both ways, meaning I can turn my second home into a cash-generating asset if needed. If only there was a way to temporarily move kids out of my balance sheet (I AM KIDDING!)…

You decide how much money you make

In short, Jared argues that if you decide to be a teacher, you should not complain about your salary. You knew from the beginning what you were looking at.

It is probably a very cynical way to see it but it is not technically wrong. We have plenty of data, not only about the average salary for a profession but also their distribution (it is easier to get the average if you are a doctor compared to an actor).

Considering that we are talking about stress, or lack of it, I think it is useful to frame this conversation about overall stress: if you become a mercenary, you probably have solved your financial worries but…

Would it be possible to quantify not remuneration alone but remuneration per unit of stress? Sort of Sharpe index?!?

If you hold a mid-management position, is it always worth pushing for a promotion? Or is it mid-management the worst possible point, where you have the most issues per level of salary?

There has to be a curve, no? Ok, in many finance jobs the analyst position is probably the one where you have to eat the most shit but:

• the bottom of that ladder is like the top of almost any other ladder so…very context-dependent?
• the analyst role has a short shelf life, you cannot spend a decade as an analyst anyway

I recently discovered that Mr Arnault, the CEO of LVMH and top 5 richest lads in the World, has a longstanding second-in-command who was born a few km from my birthplace. It is a classic small-town story, he’s slightly younger than my parents so they have some friend of friends in common (apparently he was running after one of my aunties as a teenager…). I am not sure how much my idea is warped by Succession but one evening I told my mum “For sure I envy his sons but I do not envy him” and she replied “are you crazy? X and Y told me that he own this giga-villa in Greece and they often occupy it for free because anyway he is always busy and cannot use it”….which was exactly my point.

Is it always worth pushing for it, especially when you have no reasonable expectation to get the top seat? I am not sure how many people are open to admitting that, if they knew it, they would not have chased it. Maybe I am just trying to justify myself here. I never had a serious burnout but I have experienced a good amount of stress. If stress is inevitable, then the question is not about going for it but how to handle it in the best possible way.

In conclusion, we might be indeed in control of our financial destiny but this does not come without (serious) consequences.

Antifragility

Does financial independence make us more or less antifragile? (I guess it depends on how we use it)

Am I correct in thinking that financial independence allows me to suffer more “positive” stress than “bad”?

Work is not painful in itself but because of misalignments between actions and outcomes. It’s the 20 meetings to agree that I can move my pen from the left side of the desk to the right one, the series of 10 committees to present a single idea, the authorisation process to let me work from 6pm to 7pm instead of 3pm to 4pm one day a week so that I can bring my daughter to a dancing class.

I recently read this post called “How to live an asymmetric life“. Do we even need the concept of financial independence, then? Or this is just another guy idealizing his own reality?

Sometimes I think that financial independence will allow me to try more things, work/career-wise; other times I realise it is just another excuse: what prevents me from doing the hard thing already today?

Cheap Fucks

While living in London, I developed contempt for people pursuing the cheap fuck FIRE in the UK. Someone could rightly say why would I care if someone in a random place (definitely not London) on that island decided that living out of £28k/year budget is a great life? Most likely, I distract myself from thinking about why I don’t do the hard thing myself.

I agree with Jared (and Nick Maggiulli) that the way to “get there” is not by skipping the daily latte. You have to grow your income to a normal level…which in Brit terms means moving to London or, even better, outside the island..sorry lads, truth hurts. It is not an issue confined to the UK, the median Italian salary is as well too low to achieve a non cheap fuck financial independence (unless you pick a girlfriend that comes with a rent free apartment attached, yes I am looking at you).

What drives me crazy about Jared, and Americans in general, is their obsession with tips (Jared preferred way to define a cheap fuck is someone that does not tip well). Why don’t we agree that everyone should be paid a normal salary and when I go to a bar, the price I see is the price I have to pay? Is it that hard? I just watched an episode of Seinfeld where Jerry and Elaine debate for 30 minutes the correct amount to tip the guy that collects luggage at the airport: can we make tipping as outdate as that guy’s job? Can we make tipping great again, as I will tip you if you do something that is truly exceptional? Oh well, I just left a country where they drive on the wrong side of the road so…not holding my breath on this either.

It took them 5 years but finally my parents put Netflix on their tv. My father recently retired so their are in a heavy spending review: in accordance, they took the subscription with ads. I know their budget worries but when they told me about Netflix I immediately thought about Ramit Sethi. They live in a big, mostly unused, house: isn’t downsizing a 30k decision compared to saving €20/year from Netflix? Then I realised that staying in the same house where they lived since they got married has, understandably, more value for them than the minutes lost watching ads (which is an upgrade anyway compared to ads on Italian commercial tv).

What I am reading now:

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