I’m excited for 2020, in large part because I’m now working a job that pays more than my previous job and happens to also give me experience with the things I’d really like to do in software. Given the higher pay, it’s likely that I’ll achieve a 60% savings rate this year. Some of that will be scheduled for giving, and some of that will be scheduled for travel, but I should be seeing my investments grow substantially. Whereas $60,000 invested translates to $200/month using the 4% rule, thus providing the average wage in Nepal, $120,000 invested translates to $400/month, thus providing the average wage in Thailand. I’ve begun to think of this is the various “levels” of independence, though I’ll need to do my research about the higher numbers. It’s possible I might hit the Thai level this year, even ignoring what money I have in cash.
I guess what still bothers me is that my goal of generating $1,000 per month still doesn’t accomplish a tremendous amount in the United States, even if it’s more than enough in some other countries. It would pay my rent, utilities, and possibly even my food in one sweep right now, but from another perspective, it just might barely buy you health insurance for a family of four on the open exchange. There’s a reason that families in the FIRE community are usually shooting for $1.2 million dollars invested: $4,000 per month does a lot more than $1,000 per month.
But this really just raises the bigger picture: there are different levels of independence. For some people, retirement isn’t truly an option. And that’s been true throughout most of history. The fact that we live in a country where this is even possible, and possible with a high degree of probability, is incredible. The fact that in three years I can invest enough to earn the average salary in certain countries is insane. Imagine somebody in a mystical foreign land who, in three years of just building software, has enough to move to the United States and generate a passive $55,000 per year. Holy crap! So some perspective is definitely in order.
- Social safety nets provide levels of freedom. The fact that you can get food from food banks and help from Social Services is one of the most basic elements of not hitting the bottom. Not all countries have this, and not all countries do it well. Many would not call this independence, but I’d hardly care if I needed these services. It’s “independence” from cold hard death. It’s also why I’m not a libertarian.
- Having money set aside. Bad stuff happens, money can sometimes help. Maybe it’s a car repair or a prescription that costs a few hundred dollars. Having a little money set aside can go a long way.
- Having an emergency fund. Similar to the note above, but an emergency fund is usually geared toward having X number of months of expenses set aside. This is usually a sort of “unemployment” fund, and it does just that: allows you to survive a layoff or being fired. It buys you time before you need to be employed again. In other capacities, it might be able to replace a vehicle, allow for sabbaticals, etc.
There are many cultural and social elements I haven’t discussed here, such as having family around to help out, but this gets really complicated, so I’m sticking to the basics. Once you get into the territory of investments, the scope changes a little bit.
- < $10,000 saved/invested. This is like an emergency fund for your emergency fund. This is where most households are at. It’s a good place to be.
- $50,000-60,000 invested. Your money is growing with the markets! There is substantial room for this to grow, especially if you are young.
- $100,000-200,000. Even more room to see growth! You’re dealing with the price of whole houses in certain parts of the country. Count your blessings.
- $300,000. The aforementioned generation of $1,000 per month via the 4% rule. In some places this would pay the rent on a 3 bed/2.5 bath. It might pay for a family’s health insurance, but whatever it does for you, hopefully it isn’t your beer money.
- $600,000. Generates $2,000 per month. I could practically retire on this, except I might want a little more for health insurance for 1 individual. It might pay rent on a mid-sized house in a higher cost of living location, such as Denver.
- $900,000. Generates $3,000 per month. In some parts of the country, this could easily provide for a family. Need some extra cash? Get a job at the local grocery store. Congratulations, you’re basically covered. Still not as useful in an HCOL, but living in an HCOL is a systemic risk, and because you’re smart you’ve probably made sure to move away from those by this point anyway.
- $1,200,000. Generates $4,000 per month. Remember HCOLs are not your friends. Since $4k is more than some people will ever earn per month, you really need to be grateful for this. As an individual, it’s way overkill. You may as well just spend your life traveling. As a family, you’re set, unless you have some serious medical issues, or you have a million kids (but why would you do that to yourself?!) Find a nice little city you like and settle down, or don’t, just be like the couple from Millennial Revolution who travel all the time.
- $2,000,000. Go home, you’re done. Surrender your right to complain. Enjoy life.
Now, I’ve covered some of this before, but for some reason it’s always exciting to talk about.
Some people will look at $1,000 per month and say, “That doesn’t get you anywhere! You can’t do anything with that!” Which is, of course, the spirit of defeat. Oh, gee, it’s so terrible, I’d ONLY have $300,000! Oh, man, that’s just…that’s awful. It’s like I could pay my rent and more every month in a big recession after being laid off. Or my family stays insured. You know, you’re right, why pursue financial independence? May as well just have $0 in the bank. We’re just all little guys who can’t get ahead.
Or take $2,000 per month. “You can’t live in Denver off that much! You can’t have a family off that much!” Oh, gee, you’re so right. Oh, it’s just…having $600,000 in the bank is just terrible, it’s just not enough for anything! I really wish I’d bought that Porshe instead and lived my life more by buying consumer junk that’s worthless now. It’s like if unethical things start happening at my work, or I start having to work too many hours, I can simply walk away from a toxic job and not really have to worry about finding another job just like it! It’s like I have the power to negotiate time off to be with my children or a sick parent, or I have money to help said sick parent out! Just terrible. May as well just have $0 in the bank since $600,000 doesn’t do very much.
I’m being cheeky, of course. But this is literally how some people think! “It’s not ‘enough’ so what’s the point?”
But think of it as degrees of freedom.
Yeah, I’d love to have $1.2 million. Will I ever have the much? I don’t know. But that’s not going to stop me from shooting for $300,000. I’ve also come to accept the fact that that I may just have to keep working if I want a family. The investments still add degrees of freedom, and if I stay in software, I can simply scale back my hours to spend more time with my kids. Having to put retirement off until the kids are out of the house is not the worst thing in the world. In fact, not being able to retire with kids belongs on one of those “first world problem” lists.
I think society is full of defeatists who think kids have to be outrageously expensive, and I’ve seen that people believe this at all income levels. This tells me that people earning a lot of money are paranoid and simply think there is even more they have to do for their kids when the money is there. Their children’s expenses are commensurate with income. It’s like the primitive human brain is so worried about raising children that no amount of money will ever assuage it from rest, so you get people earning $200,000 per year who still think kids are expensive. Their costs are variable, I believe, and going to the doctor’s a lot can be expensive, but I refuse to believe that you can’t be a great parent on a budget. People pull it off all the time, all across the world.
Now, $1,000 where I plan to go is more than enough. And if you want to go overseas, you do need to remember the cost of flights to visit the motherland so you can see family. And that’s currently baked into my plan. But what if I spend time traveling and then my desire to stay overseas shrivels up? What if circumstances force me back? Eh. I guess I come back. It’s important to stay flexible. I’ve had some changes of heart with software lately where I’m realizing that, although it’s not my deep passion, it is somewhat infinitely curious to me, and when I can approach it devoid of all the garbage work philosophy in ‘Murica, I can actually see myself enjoying it for a long time to come. It has the power to make a difference in the world, and that would be a key motivation for me to continue learning. I plan to write about this sometime, but suffice to say right now, you don’t have to be sold out and passionate to still enjoy something.
Over the past year or so, I feel like I’ve had a growing desire to work with missionaries. I, personally, have absolutely no desire to BE a missionary, as there is absolutely nothing about pastoral work that appeals to me, but I feel that what I’m hoping to do is closely related to what missionaries do. I’ve also been intrigued by the stories I’ve heard. One friend’s dad gave up a lucrative database job to answer the call. After over a decade overseas, they came back, and although it took a long time to resettle in, he did eventually get back into his old industry. It makes me think, “What are the challenges faced by people who give it all up to answer the call?” I feel like the financial knowledge in the FIRE community would be especially relevant to these people, and even the plethora of young people who really want to go overseas and make a difference. Why keep taking expensive little missions trips, when you can go and stay for longer periods of time? $150,000 invested translates to $500 per month, and that’s enough to live off of in some of those group missionary compounds. And that’s a pretty doable sum if you make decent money and start in your early 20s. A lot of people could seriously kick my ass if they tried. Is it strange to say that my hope is that people would?
I’ll probably be researching more of his over the next few years.
The take-aways:
- Don’t be a defeatist!
- HCOLs are a joke. Just research Vancouver house prices. Denver is getting pretty bad, too, unfortunately 🙁
- Saving and investing money is not an all-or-nothing proposition. Money simply provides degrees of freedom. Which ones are most important to you?