I do not have a lot of inspiring thoughts these days. I spent the last two weeks teaching my daughter how to pee in a pot: despite the huge effort needed, there are not big lessons to get out of it…outside what is already my mantra “Trust the Process”. After a week, me and wife we were ready to give up, killed by the constant stress and lack of results. Plus we did not really know what process we had to follow. A credible book mentioned three days; another, research based one mentioned several months. Three days later, something literally clicked in my daughter mind and off she went, easy-peasy.
At my (virtual) office, my bosses are stressed by the lack of return in our fixed income portfolio AND the inflation scare that brought yields up…if you see the incongruence welcome to the club, you can provide me your address and I will send you the membership card (I cannot really write more on this even if it would be a very interesting topic…but I still need my job).
I have discovered the FIRE movement not a long ago, probably around four years, and the most interesting part for me is that there are now some guys that are living, or lived, the “retire early” stage for a while. Is it like they expected? This post is a great example I found; so far, it is the only post I read, so my following considerations will be based on that.
“Happiness seems to be loneliness And loneliness killed my world”
Retirement is usually viewed as financial issue: do you have enough money to retire? What is the probability that you will outlive your savings? But life is not a spreadsheet and Excel has not (yet) an happiness formula. If you look at it from a financial point of view, livingafi.com early retirement was a success and yet his post perfectly describes that problems can come from different places. Shortly after reading that post, this tweet appeared on my timeline:
Again, 1. 2. and 3. can be managed with financial education if you want but what about 4. and 5.? When I first moved to London I thought about Brewster’s Millions, a stupid movie I saw on tv when I was 10. How much money would I need to get bored in London? There are so many things to do, and the same thing has so many ‘levels’ of fruition; think about a Premier League game: already getting a ticket is no small feat, but then you can watch it from a very far, high seat to a hotel suite-like lounge. Same for concerts, theatre, clubs…not to mention membership clubs. And food? So many restaurants, so many choices.
I am not even talking about lifestyle creep here, I do not care doing things to show off, it is just stuff I would like to experience. I love snowboarding, I could never say no when a colleague proposed to me to go heliskiing; I went to Maui to surf. Once you can afford it, even if sometimes it is a bit of a stretch, you go for it. And most likely than not you do it with your friends/partner. Imagine growing up, sharing those dreams with your pals, working hard and once they propose it to you…sorry, I am frugal now. Imagine saying that to yourself. The line between a useless waste of money (or a month closer to your retirement) and “fuck it, I will do it because I can” is thinner than you think. Is it not the point of the whole thing, being happy? Would you be happier having that trip to snowboard in Japan or retire at 52 instead of 53?
Look, I know it is hard to generalise, but I assume if you have a big enough salary to retire early that you studied and spent your early careers surrounded by folks that have that drive, and that you had the same drive too, to be successful…and I bet no one in their twenties had as a measure of success to live the life of a McDonald manager minus the job. When I got my degree, finance was the highest paying sector (other than being a pro baller); I met a fair share of people that told me their goal was to become rich in the fastest possible way and based on their research the way to do it was investment banking, so there they went. By now, some of them realised how stupid (and ruinous for their life) running on that treadmill was, but my point is that once you start to save aggressively to escape the office life, you social life is already set. At least this is an adjustment that you can do gradually while you are still working, shifting to (new?) friends that share your same frugal mentality, but it is not easy.
I think that Livingafi.com experience with his partner is quite common. At least for a generation like mine, pre-online dating lads that found their love in their social circle. In short, you have the same problem described above with your friends, only that here breaking up is not that easy. Maybe now that the FIRE idea is out there, is it possible that some people will be struck by the frugality lightning soon enough to already find a suitable partner…but again what if while you are working you realise that actually what you do is not that bad and instead of living like student you can enjoy a bit your salary? What if the contrary happens for one of the two? Lot of marriages fail, nothing to do with FIRE. But this is most likely a choice led by one side of the couple, and it is such a big (and unconventional) decision that I see the odds of success not that great; I do not want to imply that this will make it a less good of a choice, does not make it easier neither, whatever the prior discussion you might had. Think about how many doctors smoke. Again, ain’t no livin in a spreadsheet.
Relationships that you bring along your journey are more important than the journey itself. As Prof Galloway says, we are prone to think in 0s and 1s, work like shit to maximise your salary and then stop working forever. What if the truth is a bit in between? Should you justify your choices with your friends? Hell no. Would you be more conform to social rules (i.e. have a job) help your social life? Yes. This is the way it is: live YOUR dream and be prepared to be questioned by others. The more unconventional your dream is, the harder will be to find someone to join you.
What if life throws you a non-financial curveball?
Sequence risk, a bear market longer than ever before, historical correlations that are not relevant anymore, I see all of these as financial issues. What about other risks?
Livingafi.com got a medical problem. What if you have more kids than planned? What if you thought you did not want to have kids but now you want? My father is still working at 70 because he dreads the idea of being stuck at home with nothing to do, being unproductive, but also because he knows quite well how expensive health care costs can be for elderly people; my mom stopped working when I was born, so my father savings have to cover for her as well. And my father is probably the most responsible person on Earth, probably to his detriment as well since his risk aversion prevented his savings to work as much as he did. Retirement can be a financial nightmare. Early retirement has compounded issues compared to the standard one. Lean FIRE is an irresponsible joke to me.
The 4% rule has a lot of fallacies, probably the less discussed one is about medical inflation. I do not want to sound as an ‘inflation truther’ here but I think we can all agree that each person exposure to medical bills is directly correlated to their age; not only that, but the older you get the FATTER the risk tail become, i.e. if you draw the short straw you will have to pay a bigger and bigger amount. This means that no matter your preferences, as the clock tick your ‘personal good basket’ will diverge more and more from the official CPI one. The 4% rule has been tested against CPI, not against a faster growing inflation rate.
If you had asked me ten years ago how much nursery costs per month, I would have give you a random number. If you asked me how many kids I would want, the correct answer would have been “In three years time I will meet my future wife and she will decide”. One MONTH before my wife delivered, I was sure me and her could manage to look after my daughter working from home one day per week (please keep in mind that all of this happened before the VID even existed). The end of the story is that no matter how smart you are, today you are way closer to Jon Snow than to yourself in ten years time. You do not know what you will want, let alone what the situation will demand out of you.
My optimistic outcome for Lean FIRE is what happened to Livingafi.com, you took a long, nice sabbatical and then you are back to work. I will cover the pessimistic outcome in the next point.
Finding back a job
When I was 27, a friend introduced me to a couple that wanted to take a sabbatical for a year to do a world tour. Being in Luxembourg, they had ‘normal’ jobs, paying let’s say €50k/year (just to say they had to fund their trip with their savings, no rich parents behind). The planning was a mini-FIRE ante litteram, now that I think about it was really interesting: for example, they knew they could only afford 2 ‘expensive countries’ (I remember one was Japan). None of their job would allow them a proper sabbatical but they were confident they would be able to jump on the job wagon easily once back, despite what I thought at the time would be a terrifying gap year in their CVs (how would you explain that?? How naïve I was). Turned out that their forecast was 50% accurate: the girl found an even better job than before while it took the guy way more than he planned and finally had to accept a lower position, same industry, he had before leaving. No recession happened in those years.
Great anecdote. In broader terms we can agree that the older you are, the harder it is to find a job; the longer you are out of the job market, the faster your skills perish and get outdated. As Livingafi.com highlight in his post, he is also probably the only FIREr who did not have a side-hustle. Great for him that after five years, he was back where he left but if I were you, I would not bet on it. Either you plan to have another income producing non-job when you retire, either you have a quite big margin of error baked in your saving nest plan.
The VERY good news for the FIRE community is that, if one day you are forced to retire early (a.k.a. you get sacked and no one wants to hire you back), you land in a spot that is 10000000 times better than the general public thanks to your savings. You have time to consider your options and maybe even invest in yourself and learn a new skill.
Conclusion
When I first learned about FIRE, my reaction was: “shit, if I would retire now I would spend 90% of my time doing passive stuff like reading or watching tv”. Reading about people that had this interest and this side project and this thing and…and…and…made feel quire empty. I am not planning to retire anytime soon (unless my wife start-up goes to the moon) but this journey made me re-discover multiple interests I had and thought were not there anymore.
I also found this bit from Naval:
Everyone’s curious about something. Sometimes it gets drilled out of you, but humans are creative. Nobody wants to sit there and do nothing all day (that gets boring). A big part of success is finding your natural self-directed curiosity and following it.
F**k that no one wants to do nothing all day. There has never been so many incentive to be passive these days! Even if you like playing videogames, you can go on Twitch and watch someone else playing. As the Netflix guy said, their competitor is sleep…not you stopping to stare the screen because have to do 100 push-ups. We live in a weird world…
What I am reading now:
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