“now you know what’s possible, let me tell you what’s required”
In a parallel universe, I would like to think this would be the intro to RetireInProgress monthly update instead of Russillo Life Advice. If you do not know what I am talking about, check out this clip from the movie Boiler Room (unfortunately is very poor quality, the relevant part is the one Russillo uses as intro or 1:17 in the video).
Mr RiP excel sheet not only provides a boatload of data to understand where an high saving rate can bring you, it has the graphs to deliver the message in the most effective way. Who would have thought that a library full of board games would be the ’20s equivalent of Ferrari car keys thrown on a table…and yet here we are.
When I discovered his blog some years ago (he was only doing text posts back then) sure enough my first reaction was “yeah dude, you earn a gigantic salary, obviously you can save 60% of it“. Which is the textbook example of avoiding the ‘what is required’ part of the equation. When they will introduce the Take-the-shortest-shortcut-that-requires-the-least-effort-to-accomplish-something at the 2050 Olympics watch for me on the podium. I am a f’ing pro.
Some months ago I realised that combining mine and my wife salary we are actually around that level, so what’s the excuse now, I asked myself?
By now you might think how stupid I am if it took me so long to arrive to that conclusion. Well, part of it can be explained with the fact that our trajectory was not exactly linear but closer to the most volatile asset out there, we moved countrieS and changed six jobs combined in the last three years alone. The other one is that as much as you think you have your numbers under control, having or not having a spreadsheet is a game-changer. Even me writing “around that level” will mean different things to different people out there (CHF 200k equivalent? 300k equivalent? pre-tax? post-tax?): the point of this post is to discuss saving rates (and other FIRE stuff) not my family income in detail.
A family budget
I went to live with the person who eventually became my wife three months after I met her. Today we manage our finances the same way we did back then: we share big expenses but we have basically separate accounts for everything. I receive my salary and I spend it as I see it fit and she does the same. Even if we met in Switzerland, we had the most un-Swiss way to deal with this; the Swiss way would be to sum all shared fixed costs, like rent and bills, and divide them by two. It might sound easy but is not: think about grocery shopping, you do not have a fixed amount per month so what you do? You split the bill every time you go to the supermarket? You keep the bills and then do a summary at the end of the month? How romantic is that?
The plan is quite simple: whenever there is something to pay and we are together, one of the two pays the full bill. Can be a dinner, grocery, our daughter clothes, you name it. I pay once and then she pays the next time, or I pay three times in a row and then she pays four. It honestly feels weird even to write it, because there is not really a plan behind it. Ultimately things evens out in a way that is fine for us even if we do not know if it is 50:50 or 60:40 or whatever other ratio is good for that particular moment in time.
It felt so natural to us to do what we do that I was surprised when I realised that not every couple follow a similar path. It is definitely not something you discuss with your friends over a beer, like “great hearing about your holidays, might I ask you how you split your mortgage?”. For some reason it seems as well gender-specific: while I discuss about stocks and strategies with a lot of my friends, I rarely ask how much their company pays them while my wife knows her friends salary to the penny.
It works for us because we had the same relationship with money before we met. Or better, we were quite close and then converged to a spot where I learned from her and she did from me. This is what is required. And it is easier said than done, it is the exception and not the rule. A guy even wrote to Russillo about it and his podcast is probably the farthest thing on the planet from personal finance.
The Russillo example
This guy is in a long term relationship with a girl and everything is fine; at a certain point of their relationship, they agree to put money on the side to eventually have a down-payment to buy a house. But he also discover that she is in debt with her credit card…and boxes from online shopping keep on arriving at their door. What to do, he ask Ryen?
If you do not think that this is a common situation out there, here some facts: Klarna did the latest round at 46B valuation, Square bought Afterpay for 29B, Affirm market cap is 25B. The ‘buy now pay later’ companies are so big because they are so effective in pushing you to buy more, even when you do not have the means. If you think playing the Tinder game is hard, imagine doing it while bringing your financial advisor questionnaire at every first date.
There are two aspects that I think are not well presented, if mentioned at all, in the FIRE community about high saving rates: you need to be in two (not more, not less) and you need to be in tune.
Two is the magic number
This is easy to explain (right?). The housing costs are way lower for a couple than two singles because you can share a lot of rooms…actually all, even the bedroom. The difference between a couple and two friends is that, unless you are a character of OldSchool, at a certain point you grow up and want your independence; most likely your career path drift from the one of your best friend, so you are forced to share with a person you do not have a strong prior relationship…and you have limited patience for their dirty dishes abandoned in the sink or for their remarks about the fact you do not clean enough: it works both ways and one day you will say ENOUGH.
If you are already in a couple you go out less often and you are fine doing ‘cheaper’ dates like a walk in a park. As a single, you might want to live alone but still craving social interaction, even with the other guys you decided not to live with. A beer here, an Uber there…and you doubled your monthly expenses. Or you can simply be like me and hate cooking.
Any number above two means kids and so more costs. Unless you are so lucky to have grandparents living next to you and willing to help full time.
Three is better than one here.
WeTune
Great, now you found your soulmate. Do they share your financial ideas? Will they share them down the line, after you changed your mind? Fact is, people relationship with money changes over time and being stuck in a couple that is not in sync is worst than being alone. Will you sacrifice an happy relationship on the altar of ‘frugality’? Just find the right soulmate, that’s what it takes…and I leave to you to decide how big that ‘just’ is.
My Experience
When I was a student, my parents were giving me some money here and there but as you can imagine they were never enough. So you try to work in the places you would normally want to hang out: bars and clubs. When you do not manage, you work on weekends because a) you are paid more and b) you have an excuse to go out on weekdays when usually clubs are cheaper. When you finally receive your first salary, you are done with the hustling and the cheap shit: you spent years looking at other guys rollin and now it is your turn.
One year after I had my first job, I moved to Luxembourg: a place so dull you get more money you can spend. Challenge accepted. I met so many Europeans that came and went that after a short period of time, every weekend was a good excuse to take a plane or a car and go visit them in every possible city. One day a friend in Italy told me that for a very very special occasion he brought his girlfriend to Amsterdam for two nights; he told me about the restaurants, the clubs, things they did. In my mind I was “good for you, that’s what I call a weekend, not a special occasion”.
I never run into debt, I never lived above my means. I simply did not see the point of putting aside a couple of hundreds every month when the year later I would have that much added to my salary anyway. I was working in finance and did not understand the concept of compounding, great life!
The Scott Galloway dilemma
Prog G once said that while you grow, career wise, you should also grow the people you hang out with. Taken at face value, this is bullshit advice. What he actually meant is that you should always look for people that can stimulate and challenge you: your primary school pal might be the most lovable item on the Planet, but if he is still stuck in your 1000 souls hometown, would he push you to reach your potential (if that’s your goal, obviously)?
The problem with Scott advice is that usually more success, more intelligence, more street smart means more money. My life in Luxembourg felt normal because everyone around me was doing the same. When you work in finance, you learn pretty fast that the easy money are in the fees you charge your customers. Trading is hard: while everyone tries, you know quite well the odds and therefore you do it with limited capital, just for fun. You save only to to have some capital to trade and be ‘part of the game’. In those years you feel immortal, the trajectory is only upward; forget the London Investment Banking juniors, we were working 4 hours a day max: the place was terrible but not so terrible to say “let me save 70% of my salary and in TEN years I’ll be out”…life was just good enough.
My Wife
Fast forward some years and I am in Geneva with my then girlfriend – now wife. The move from Luxembourg to Switzerland reminded me of Johnny Depp line in Blow (pun intended): I went in with a Bachelor of marijuana, came out with a Doctorate of cocaine. I went to Luxembourg to get a bachelor in Time Out, came out of Geneva with a master in How To Spend It. My wife attended one of those Swiss private university where you can find Kim Jong Un sit next to you. A guy from her class FIREd at 30…because his father left him enough money that a job was not a plan for him.
Here I was again, deep into a situation where having your wedding featured on Brides was somehow normal. Multiple times we found ourselves as the only non-founders/entrepreneurs sit at the table. The road to financial independence was via creating your company…or managing the money of someone who did. A bit of peer pressure, a bit of peer soothing.
Our Road to FIRE
Slowly you start to realise how futile all of this is. $100 a month for a Peloton is not much in vacuum but it adds pretty quickly: Peloton, 4 streaming platforms, Athletic Greens, my wife Soho House membership, at the end of the month how high are your fixed cost?
My career flattened. I have way less patience for boring, useless tasks. This FIRE thing gave me another point of view. Instead of things, or experiences, we are buying flexibility. There are interesting successful people that do not own a Rolex collection, can you believe that? And luckily enough, I can laugh about it with my wife!
If I saved back then, I might not be here cursing in three languages everyday at my boss’ boss. But I would also not have those memories. All considered, I actually prefer how it went. And to put things into perspective, the low saving rate was not even close to the biggest financial mistake I made, selling my apartment in Luxembourg was! Yes, I bought one at the high of the Great Financial Crisis, when I was basically the only buyer in town, and then sold it once I moved away from Luxembourg, only because the idea of having to deal with a letting agency was too much of an hassle in my mind. Had I HODL, I would have more than 10X the initial down-payment in less than 10 years.
You should save when you are young because it helps to build a great habit. At the same time you should not feel bad if you do not because there are more important things in life, especially at that age. There is a famous (in Italy) coming-of-age book, where the teen protagonist says:
"If one afternoon I can go play or go out with a girl I like, why the hell do I have to stay at home and transcribe Latin scripts from the translator or pretend to read the summary of philosophy? The reality is that I find myself sacrificing the happy seventeen year old me this afternoon to a possible bald and overweight myself, fifty year old satisfied, who opens the garage door with the remote control and inside has a nice car, a wife who probably cheats on him with his accountant and two twin children with bobbed hair identical in all to the Nazi children on the Kinders packages (The Nutella maker). Everyone inside the garage, maybe not. Let's say more or less around. That is, surrounded. Everywhere the question is: is a horror of these proportions worth more than the sun and ice cream this afternoon? More than any girl?"
I read this book when I was sixteen, it probably had a too strong influence on me. But again, if you are thinking about retirement at 28, you are not 100% normal neither.
Non-negotiables
I realised if someone would offer me the possibility to not work ever, and live anywhere in the world with the requirement that I would not be able to travel ever again, I would never accept. FIRE exposes the diminishing returns at the top but also the non-negotiable at the bottom. World is too big and varied and amazing, we (me and my wife) have so many friends, and relatives, scattered in some many places that we cannot stay still. 2021 was such a pain in the arse that made us almost quit this stupid island and its border controls (in Europe you can still move around without having to spend hundreds in useless tests). While I was in love with Ryanair in my 20s, in my 40s, with a toddler, is a no thank you.
Living in England, for us, means either Zone 1 or Zone 2. That’s it. We have to be close to airport, theatre, friends (again), office. There is no way I will learn at 40 to drive on the wrong side. I would rather go back to Luxembourg.
I will buy an Eightsleep as soon as I can. I stayed one year without buying clothes and then I saw a very expensive pair of shoes and I bought it. Or I offered it to my wife. Fuck it. Once we were in NYC and I spent $400 for 2 tix to watch a random NBA game, I do not even remember who the other team was. But I still remember how happy I was.
After the last few months review, we are saving 35% of our salaries. With our daughter at nursery 5 days a week and the closest relative living 4000km away, so every date has the added ‘nanny bonus cost’. Not exactly the ideal moment to engage in such a review 😉
Barring a miracle, I will FIRE…as your father did. And I guess is fine (so far).
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