{ in·deed·a·bly }

adverb: to competently express interest, surprise, disbelief, or contempt

The red pill

This is your last chance.  After this, there is no going back.

You take the blue pill and the story ends. You wake in your bed and you believe whatever you want to believe.

You take the red pill and you stay in Wonderland and I show you how deep the rabbit-hole goes.

Remember that all I am offering is the truth. Nothing more.

Marriage counselling.

Recommended by divorce attorneys, forensic accountants, and religious leaders the world over.

Optimists might describe it as the end of the beginning. Pessimists see it as the beginning of the end.

A couple’s “last best hope”.

Lincoln used this phrase shortly before his country descended into an attritional and expensive civil war.

Many survivors would describe divorce in a similar way.

Delivering freedom to some. Creating wounds that will never heal for many.

A recently divorced former colleague once described the experience as:

Imagine reliving every fight you have ever had.

Again.

All at once.

In front of an audience.

Each party’s perspective selectively portraying events, so that they appear in a favourable light.

Innocent victim. Long-suffering martyr. Noble saviour.

Not caring that the counsellor is a referee, not a jury.

The ‘safe space’ for honest discussion today providing ammunition for the legal proceedings of tomorrow.”

Their cynicism is understandable. The three year’s spousal support the courts ordered they pay to provide lifestyle continuity to their well educated and once high flying former spouse, who had chosen to pursue a loss-making lifestyle business rather than continue to ply their lucrative trade.

Revenge is a long-tailed business.

In many cases, marriage counselling may not resolve the issues. Not every problem can be solved.

However, it undoubtedly provides clarity about how and why each participant came to be in the room.

The assumptions. Chasms. Communication problems. Decisions. Disconnects. Fractures. Judgements. Mis-alignments.

A tale of two people who once believed they were united and following a consistent direction of travel. Their paths gradually diverging. The gulf between their ultimate destinations widening with each step.

Some are willing to stop. Ask for directions. Backtrack. Make a new plan.

Others relentless push onwards. The illusion of progress more important than an enjoyable journey.

Eventually, they may reach their desired destination. Quite possibly alone.

Most will discover that what they find differs from what they expected.

Life is funny that way.

Double, double, toil, and trouble

It is often said that we each reside within our own little bubble.

We subconsciously choose who and what we listen to. Seeking out voices that reaffirm our own beliefs and support our opinions.

Our world view becomes recursive. Any rough edges gradually smoothed away by the continual refinement and repetition of our selections.

We become conditioned.

Voluntarily brainwashed.

Anyone who has been in a long term relationship can usually predict, with a reasonable degree of accuracy, how their partner would react to a given piece of news or circumstance.

This anticipation can become a shortcut.

Eliminating the need for the sort of interesting discussions that folks have during that magical initial “getting to know you” part of a relationship.

Each person’s backstory consists of a finite number of anecdotes and opinions. Eventually, that well runs dry and repetition creeps in.

Taking that shortcut can be a trap, introducing assumption and complacency, when a meaningful discussion would have been the wiser course.

A few months ago I noticed my lady wife was reading one of those Financial Independence articles in a magazine.

They all follow a familiar pattern:

  • A slightly disbelieving overview of the FIRE concept.
  • The ubiquitous profile of Barney, and occasionally some other bloggers.
  • Ending with a mocking conclusion about how joyless a life of packed lunches and without lattes must be.

I’ve often been puzzled by the absence of true Millionaire Next Door style financially independent retirees in these articles. The plumbers and dentists who built up a real-world business and then sold up to fund a comfortable retirement spent doing whatever comes next.

Same concept, but a more relatable case study. Perhaps retired business owners are harder to find?

The red pill

Believe it or not, I had never spoken to my lady wife about Financial Independence. This may surprise some readers, given the content of some of my stories.

Suffice to say the subject of money has long been loaded topic in the indeedably household.

Weekly household operating costs are covered by a joint bills account, to which we each contribute a fixed amount that was determined long ago.

The bulk of our respective finances are managed separately. A storied history of disagreements evolved into a “don’t ask, don’t tell” arrangement.

I suspected that on the topic of Financial Independence, our self-selected bubbles and world views would markedly differ.

After years of contentedly taking the blue pills from The Matrix, I wondered what it would be like to live dangerously. To take Neo’s red pill, and ask my lady wife what she thought of the article.

I will begin by taking the shortcut. Anticipating what she would likely say. What follows are my words, not hers.

At the end I will reconcile how accurate I was with what she actually said, when I eventually asked her.

Had I fallen into the assumption trap?

Is it possible to resume taking the blue pill, after trying the red one? Sometimes the genie can’t be put back in the bottle.

Fair warning, this seemed like a good idea at the time. What distinguishes bravery from stupidity is the outcome, not the intent.

Superhero backstory

Every superhero has a backstory, containing the keys to understanding how they came to view the world the way they see it.

My lady wife grew up in a traditional household where the father worked and the mother didn’t.

Money was tight. The currency of power and control.

That all changed when illness ended the father’s career.

Aged in her mid-fifties, the mother suddenly had to return to the workplace to support her family. She lied about her age, and took a job working the night shift at an aged care facility.

Money was tighter. Still a tool of control. The balance of power now altered.

The mother taught her children some important lessons:

  1. life is unpredictable, so be prepared for anything
  2. never give anyone else control over your money

There used to be a third lesson: home ownership means you will always have somewhere to live that nobody can take away from you. This proved to be untrue.

As is the case for all of us, the lens that my lady wife views the world through is heavily influenced by her upbringing.

Sometimes because of it.

Sometimes in spite of it.

What is acceptable?

What is normal?

What is right?

A civilian’s view of Financial Independence

An appreciation of my lady wife’s perspective is necessary to understand her responses below.

Branded common sense

The core tenant of living below your means and saving for the future are self evident truths that are as old as time.

Financial Independence is just a modern day marketing label to make basic common sense appear new, sexy and saleable.

Contribution to society

It takes a huge investment of time, effort, money and commitment to establish a career.

Teachers. Doctors. Police. Even garbage men make a valuable contributions to society every day.

For somebody to voluntarily withdraw, refuse to provide service, undermines that investment.

It short changes the individual. It also cheats the society who helped subsidise their education and fund their careers.

Transitioning from one career to another might be ok, providing they continue to make a contribution to society.

Escaping to a life of leisure, particularly if that life will be financed by state benefits or the age pension, is particularly self indulgent.

Becoming a net taker from society by choice, rather making a meaningful contribution.

One decision from disaster

Our livelihood and well-being are often at the mercy of faceless decision makers we will never meet.

Corporate board members. Fund managers. Politicians.

Decisions about automation, downsizing, offshoring, outsourcing, redundancy, relocation, and strategic direction have direct tangible impacts on thousands of workers.

How many of those poor wretches shown on the news this week, as they filed out of the Deutsche Bank offices carrying their belongings, saw unemployment coming?

Yesterday they had performance objectives. Deadlines. Career aspirations.

Today they are joining the dole queue. Or moving abroad in search of work.

Competing with numerous others for a shrinking pool of jobs, a long term trend that Brexit has hastened.

While still having to feed their family. Pay the mortgage. Fund the nursery fees.

Make hay while the sun shines. It always rains eventually. Tomorrow it could be you clearing out your desk.

No way back

People who pursue geographic arbitrage, selling up in the city to move out to a village in the countryside are short-sighted.

Supply and demand mean the property prices in the city will likely appreciate at a faster rate than those in the middle of nowhere.

This makes the journey a one-way trip.

At least those people still own a house they can live in.

People who sell up to become slow travelling nomads have taken a double dose of stupid pills.

Living the high life while pissing away their nest egg. Fun while it lasts, but what happens when the money runs out?

When they get too old or too sick to continue travelling?

By then they will be unemployable. Left with no option except to return as a burden on society. Relying on tax payers to bail them out.

The numbers don’t add up

How can anyone earn enough in the first 10-20 years of their career to fund the remaining 40-60 years of their lives?

Particularly when they are planning to spend down that nest egg to support themselves?

Most people start at the bottom, earning peanuts, and slowly climb their way up the career ladder.

The kind of ridiculously low passive income levels cited only work if the person already owns a paid off house. How many Londoners in their late 20s or 30s have a paid off anything?

Owning a paid off house AND additional investments capable of covering 25 times their annual expenditure is implausible.

Perhaps they inherited a house? Or hooked up with a somebody who already owned one? Otherwise the numbers simply don’t add up.

The most tax-advantaged way to save is into a pension. Which, by definition, they can’t touch until they are old and grey. How do they plan to support their families between now and then?

Many of these “early retirement” proponents must have a safety net or undisclosed sources of income.

If they have a spouse who is still working, then they have someone who will cover the shortfall when they run out of money. That allows them to take risks and be irresponsible in a way that a normal reader could never hope to emulate.

Perhaps their backup plan is a future inheritance from parents and grandparents?

Sabotaging their children

Part of every parent’s responsibility is instilling a strong work ethic in their children.

How can that be accomplished when all the children see is their parents loafing around at home all day, without doing anything productive?

Even worse are the self-indulgent parents who would pull their kids out of school and drag them around the world travelling for months on end.

Unless the parents were qualified teachers, their children’s education will inevitably be harmed.

Leaving them lagging behind their peers who do regularly attend school.

Their futures sabotaged. Traded for happy snaps and travel stories.

Their friendships and social groups reduced to the disposable single-serving variety.

They are out to get you

How many times has the government changed the rules?

Raised retirement age?

Change the basis of taxation on rent or dividends?

It isn’t paranoia, the government really is out to get you.

What happens when Boris means tests the age pension and sells off the NHS to the Americans?

How about if Corbyn nationalises everything and imposes a wealth tax?

People who let their skills and networks atrophy are dinosaurs. Sleepwalking towards financial extinction. It won’t take much to push them over the edge.

Reconciling with reality

It turned out I wasn’t far off in my predictions of how my lady wife would respond. The level of vehemence varied, but for the most part my sense of direction was about right.

The “contribution to society” point didn’t feature in her response. This surprised me, as contributing and giving back is important to her.

I had missed out her loss aversion. If she knew for sure that she was going to need cash for something, no matter how far in the future, then she felt it would be foolish to invest the money in anything that might lose value.

The other additional point she raised was the fact that an early retiree is financially hamstrung. They are unable to financially assist family members when they most need it. By conscious choice and design.

Perspective is a wonderful thing

It was refreshing to hear the perspective of someone who exists outside of the Personal Finance bubble.

Most points raised by my lady wife are valid.

Some I wouldn’t express in quite the same way, but agree with the general sentiment.

Others I disagree with entirely.

It is worth remembering that we all have different perspectives, and interpret the same scenario in different ways.

For example, I see myself as a business owner who consciously adopts a seasonal working pattern. My investment income buys me the luxury of time to hang out with my kids and indulge passion projects.

By contrast, my lady wife sees a frustrating layabout idler, who is setting a bad example for our kids. A Stay-At-Home-Dad when convenient. Ever drifting between perfectly good jobs, yet unable or unwilling to stick with any of them.

Both perspectives are valid.

Personally I think the former makes for a much better story than the latter!


References

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10 Comments

  1. Phil Money Mongoose 12 July 2019

    I’m surprised a bit when the numbers not adding up argument is raised since this is perhaps the easiest to work out. I always imagine, what would be the finances of a person who earns a comfortable amount (higher than median) saves and invests sensibly (but not to extreme FIRE advocate levels) and retires at the normal retirement age in comfort but not luxury?

    How much would this person earn over his entire working life, from say 20 until 65? If I say take the post-tax income per annum to be £30k (which I would guess should be around 80th percentile), then £30k x 45 working years = £1,350,000.

    I would then say if I could accumulate this sum at whatever age, I would be easily set for life provided I lived sensibly.

    • {in·deed·a·bly} 12 July 2019

      I can see both sides of the argument Phil.

      When viewed through the lens of someone who lives in a high cost of living location, the numbers play out something like this:

      Of course a family also needs to eat, pay bills, etc so the true purchasing period would be much longer.

      Meanwhile the median savings rate is low, less than 5%. Only the top two deciles who manage to save more than 10% of their income. Granted most people spend more than they need to, but frugality will only get them so far.

      Rolling all those figures together creates a narrative something like this:

      A person like me manages to save somewhere between 5% and 15% of their income. They are supposed to concurrently survive, pay the mortgage, and yet somehow squirrel away the equivalent of 21 year’s wages (25 years expenses * (1 – 15% saving rate)) so that they can stop working and watch unemployment television all day.

      What they forget is that living and working locations are a choice.

      Also that once the mortgage is paid off, their second highest outgoing reduces considerably.

      Neither point ever gets highlighted in the articles, instead the focus is on lattes and brown bagging lunch.

      For mine, everyone can benefit from the financial discipline that comes from seeking Financial Independence. However Financial Independence is well out of reach for the majority of the population.

      We all have some degree of choice, but the harsh truth is that most people simply lack the marketable skills necessary to achieve the income levels required to make it a reality.

  2. David Andrews 17 July 2019

    Stumbled across your blog from thefireshrink. I agree that the numbers for FIRE are implausible for a lot of people. However, for some it’s achievable. Here’s a brief summary of my story. I’m 46 and through hard work and a significant amount of luck in the timing of my birth I think I’m just about able to hit the FIRE button. I went to University and had no fees to pay, I worked 18 years in a job with a final salary pension scheme ( alas I was made redundant from that job in 2014 and my DB scheme is now deferred ). My old job offered plentiful overtime before I started my family which helped my clear my mortgage in 5 years ( I bought the house in 2003 ). I’ve always lived below my means and invested as much as possible into my ISA and SIPP. I now have my own (mortgage free) house (soon to be rented out) and half a (mortgage free) family home owned with my partner. I earn just above the 40% income tax threshold and I am presently using salary sacrifice to pay 40K into my pension each year. My outgoings are rather low ( although I still have child care to pay for ), I make my own lunches and cycle to work. Once the rental income from my house starts coming in I think I think I can quit and live comfortably.

    • {in·deed·a·bly} 17 July 2019

      Thanks David. Congratulations on your commendable financial achievement, I wish you well in finding contentment and fulfilment throughout the next stage of your journey.

      The FI dream is certainly attainable by some, but oversold to a great many more.

      The maths is straight forward: earn a lot, spend a little, invest the rest wisely, then leave it alone.

      The challenging part is finding a vocation that is both lucrative enough and rewarding enough to make the journey tolerable. Then striking a happy medium between housing costs and commuting times, time that we can never get back. Get either of those decisions wrong and endure a lifetime of working misery.

      For mine, the optimal path is finding something that earns enough while making us happy enough, then working towards Financial Independence at a pace that allows an enjoyable lifestyle to be lived. It might take a bit longer, and be a bit less direct, but the contentment factor makes any delay worthwhile.

      • David Andrews 17 July 2019

        Thanks for the reply. I agree that the the FI journey isn’t attainable in a lot of circumstances. Also, once the numbers (mostly add up) it can be the start of another tricky decision. I have a son in primary school so that limits my ability to chuck in the job and go travelling. Ideally I’d either reduce my hours in my permie job or go contracting for a few months a year. It is very nice to be in a position to have options. I suspect I’ll continue to be afflicted by “one more year syndrome” and maybe put the extra income into a decent nest egg for my son.

  3. weenie 21 July 2019

    I love the red pill or blue pill reference to FIRE because that’s how I would explain how I came to be on the FIRE path. But many people (including your wife) find it very difficult to get over their scepitcism and mistrust, even when faced with the numbers.

    I recall mentioning MMM and what he had achieved at work one time and my boss at the time just replied ‘Don’t believe everything you read on the internet!’

    I genuinely feel that none of my friends will actually ‘believe’ until I actually show them that I’ve done it and FIRE. A couple of them do ask me how I’m getting on with my early retirement plan but aren’t interested enough to know what I’m actually doing.

    • {in·deed·a·bly} 21 July 2019

      Thanks weenie.

      Retirement is ultimately a very personal leap of faith. The retiree will have enough money, or they won’t, but the outcome is only certain in hindsight.

      Continuing to earn while there is money available provides reassurance while postponing that fear of the unknown. A variant of the FIRE communities “one more year” syndrome.

  4. Renae 28 July 2019

    I think the Red Pill that knowledge about FIRE provides is to open our eyes to what we spend, why we spend it, and whether the choices we make with our spending will ever let us comfortably retire. Whether we choose to retire or not, bringing consciousness to our spending is the greatest reward to come from understanding FIRE I think.

    • {in·deed·a·bly} 28 July 2019

      Well said Renae.

      Self awareness in all its forms is a skill that, where we choose to apply it, can only lead to better informed decision making.

What say you?

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