The great majority of posts about strategies to F.I.R.E. focus on the single individual, you. What if you are in a couple? Trying to force a particular lifestyle into anyone is a recipe for disaster but at the same time I do not think that someone frugal is going to date someone that lives beyond their means, for sure is not going to last. What I convey is that if you are on the path of financial independence, you would probably find an affinity with someone that is like-minded, the couple will have to discuss the edges of their financial life together, not if they want to buy the third gigantic tv with credit card debt.
It is also true that every couple manage their finances their own way: someone might consider each person salary part of one unique family budget, others might keep everything separated and share some bills. I have never asked my friends what strategy they use, would be interesting to know to which conclusion they arrived and why. For sure there is no consensus out there.
The other day I was reflecting on the journey I did with my wife and then (as usual) my mind started to wonder: can you implement, and optimise, a financial strategy that is focused on the couple instead of the individual?
Ahahahahahah, obviously not!
Looking at the numbers, the probability of finding the right soulmate AND keep the couple together for the long term is not that great. To create a plan on this basis might sound like designing a strategy to stay rich after winning the lottery. During the first (sigh!) lockdown, Josh TheReformedBroker Brown reminded his audience to stay strong…as a couple, because a divorce is a financial catastrophe and he is right.
English people call “breadwinner” the primary or sole income earner in a household. I find it weird if not ugly. It triggers me like when they say see you later and they mean see you tomorrow. Digression aside, there is a word because in a lot of couples, especially couples that are able to save money, that is the reality. Having a ‘couple-optimised financial plan’ does not make sense if 80% of the couple income comes from one source.
My plan is to optimise when there are two careers. Actually, the plan is out there and what me and my wife did was not even planned, at least not explicitly so. I listened many interviews to entrepreneurs, males, that while they were building their business had their wife sustain their family with a stable job.
I have always been pretty conservative in my career choices, I never took the high risk – high reward path…mainly because I do not think I have the talent and definitely I do not have the willingness to outwork the competition. But this choice allowed me to play the role of the wife in above example, letting my wife to follow more ‘speculative’ careers. After a burnout in a corporate role in Switzerland (something that is amazingly common in the country), she followed her passion and had various roles in fashion. In that regard, she was already F.I.R.ING since salaries in fashion are so low (if you manage to get something) you have to live out of something else (in this case, my salary), the only difference is that she had to work 10 hours/day, weekends included, not exactly a retirement-like passion project.
Earlier this year she started to work for a start-up launched by one of her friends; part of the salary package included equity in the company, effectively the other side of the barbell in our FIRE strategy. In finance jargon, this is a barbell because the weights (the proceeds of our work) are concentrated in the extremities: you have my salary on the safe side and the start-up equity option on the very risky side. I do not have a Government sponsored or University tenure safe-like job but I am 90% confident my skills can, at least in the next 10 years, provide me a salary in a defined range; so far they proved to be resilient to the Covid-19 disruption, Treasury job market was open and active while other sectors were furloughed.
On the other side, we now need the start-up valuation to 10x in the next four years (or later) to then have the choice of cashing in and move to early retirement (or at least…me :)). I know probabilities around start-ups, it is a long shot…but not as improbable as winning the lottery; after weeks of debates around the US election, I am well aware how difficult is for people to understand probabilities, ahahhaahah. In short, it is good to have this ‘free’ option on top of our saving plan.
As I wrote, I understand is hard to properly plan for this; on the other hand, I think is important to position yourself as much as you can in the situation where you can collect these ‘free’ options. If you have low fix costs, you can accept a job that pays a lower fix base but higher equity / bonus / commissions and bet on yourself. If you do not have your favourite car that you paid like a condo, you can accept that job opportunity overseas more easily. If you start to save early and build a saving base, compounding will work for you while you concentrate on something other than your underfunded retirement account.
As many things in life, being in a couple gives you options and restrain them at the same time. When me and wife decided to move out of Switzerland, we had to find a place where both of us could find a job (and we both speak the language and like the weather and and…). If your other half career is well rooted in a place, you have the freedom to pursue more risky goals but the opportunities have to be in that specific location. For this same reason, I am not as bearish as many out there about the future of big cities like London or NYC: having multiple opportunities concentrated in one place generate more than the sum of those options.
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