Mmmm…
When the dessert cart rolls around after dinner, difficult decisions must be made.
“If I eat the tiramisu… then I won’t have room for gelato*… And what is this? A complementary serving of limoncello!?”
In economics parlance we might call this gastrointestinal dilemma the opportunity cost; When we choose one option, we lose any potential gain or enjoyment from alternatives.
A couple recent articles highlighted the financial opportunity cost of not working, either short term for raising children or long term for (early) retirement. These articles inspired me to recalculate the opportunity cost of our own decisions.
The Center for American Progress evaluated taking a few years off to raise children, and concluded that you should work instead, because parenting has zero financial value (and on those extra difficult days, maybe even negative value ;) ) Sounds like progress to me.
The Finance Buff discussed how early retirement is the ultimate luxury purchase.
I’ll buy that ;) When we decided to retire in our 30s, we chose to forego the income we could earn in our 30s, 40s… 80s…
After nearly four years of early retirement, this cost already exceeds $5 million.
More, More, More!
I had a pretty good thing going, financially speaking.
I already had the corner window office, where I could lounge in my giant leopard print bean bag chair and enjoy the small nature preserve outside my window. It even had room to park my bicycle next to the wet bar.
A promotion was likely in the coming months, and perhaps another after that. It was even suggested this could be immediate if I would only reconsider my resignation. A good friend now receives 6-figure bonuses and an even more generous stock package after his latest promotion. Or I could have responded to interest at other companies and earned even more, plus a healthy sign on bonus.
I regularly flew around the globe in Business Class, stayed in 5 star hotels, and ate world class meals on expense accounts, all while meeting with CEOs, CTOs, Vice Presidents, and other experts in their fields. All of those frequent flier miles and hotel points would surely have been worth a hefty sum.
I often leveraged business trips for discount vacations. Once when I had a work trip to Taipei, we also booked Winnie a flight with miles. She went a week earlier to visit friends and family, and afterwards we spent Christmas and New Years Eve on beaches in Koh Samui, Thailand. Our total cost was close to zero.
I walked away from years’ worth of stock options, and the stock has more than doubled since (related, perhaps?) Had I continued to work, I could have exercised these options for at least $400,000.
And of course, our cost of living has increased substantially. Rather than continuing to contribute 70-90% of my salary to new investments each year, we’ve spent nearly $200k. All of our dividends and interest have been spent rather than reinvested, and I even sold a little stock when we were in the baby factory.
All together, with spending, salary, bonus, stock, and airline & hotel points, our net worth is at least a million bucks less than if I had continued working. Of course Winnie would have to go back to work as well.
“More, more, more!,” it never gets old.
Value of a Dollar
People do interesting things for a million bucks: assassination, drug smuggling, marriage, sacrifice of values and soul… so $1 million must be a pretty big deal.
An extra million would allow us to spend $40k more per year (4% rule), about 80% more than we spend now.
Since we are already living our dream life, I’m not even sure where we would begin to spend more.
Others have offered helpful spending suggestions:
– We could buy our dream house (sounds likes a nightmare!)
– We could live in the Bay Area (wow, you must really hate me)
– We could fly 1st class (we sometimes do this now)
– We could get a yacht (this is already in our plan)
– We could buy a few BMWs every year and throw them away (h/t TFB. But I like the idea of burning fat stacks of cash more)
– We could hire staff to fulfill our every need (managing staff sounds like a full time job!)
Why are you just standing there?! Get back to work!
Other than the boat, none of these things are remotely interesting. The marginal value of more dollars is basically zero. In practice, we would invest this surplus in the stock market as we do with the rest of our portfolio.
By the time we reached normal retirement age, this extra $1 million would have grown to more than $5 million, assuming a 7% annual return. When we look at the opportunity cost of retirement, it isn’t just today’s dollar that we choose to forego. It is also all of the future income that dollar could earn.
Value of Time
It’s nice to know how much this little holiday has cost so far. I guess.
But bean counting is only one side of the evaluation. How do we determine the value of our time? People like to say that time is money, but they are two completely different currencies.
The choice isn’t just whether to have more money, it is whether or not to sell years of your life to have that money. What are your remaining days worth? How many days do we even have? Unless the value of your time is zero, the opportunity cost evaluation is incomplete.
During these past four years, I’ve had more naps and played more guitar than during the previous 20 years combined. Economic value = zero.
I’ve traveled slowly through numerous countries, completely free of work baggage or schedule limitations. Economic value = 0.
We’ve spent countless hours together as a family. Economic value = 0.
I’ve studied subjects that are most interesting and inspiring (and sometimes financially rewarding), completely independent of profit motive or career needs. Economic value = 0.
Freedom = priceless.
Recently we were parading through the Prague Castle and came across a nice man resting in the relative cool of a stairwell. There were no escalators or AC when this place was built 1,150 years ago, and the heat and exertion had obviously taken a toll. At age 70, this was probably his last International holiday. How many dollars would he trade to have the energy and stamina he took for granted in his 30s?
15 months ago our son was born, and I’ve witness first breath, first steps, and first words. Being constant companions continues to be a great privilege. Certainly not all parents would see this as a positive thing, but how many dollars would many fathers trade for another chance to play ball with their young boy?
(Thank you Harry Chapin, who died much too soon at the age of 38, the same age I retired.)
We can always trade time for more dollars. Maybe one day the reverse will also be true.
Abundance
Four years ago I asked myself, “Do you want to work another four years for an extra $1 million?”
“$685/day is decent money”, I replied. “But is isn’t super model income. It won’t change your life. Frugal choices early in life enabled compound interest to do its thing, so now you can do yours.”
The concept of enough is critically important.
If you don’t have enough, you have no choice. You work or you don’t eat.
If you can’t (or won’t) grasp the concept of enough, there is no choice. The quest for more rules all. (“He who dies with the most toys wins.”)
But for someone with enough to fund their desired lifestyle, the relationship between time and money is completely transformed. Frugal choices early in life allow you to buy freedom at a discount. (This seems to be particularly annoying to head hunters.)
If I continued to work**, sure, we might have more money. I might also be dead.
Instead, we chose freedom. And there will never be a bill. No payment must be made. No bill collector will come calling.
Our only cost is our fairly modest yet luxurious travel lifestyle of $40k/year or so, which is why opportunity cost is my favorite kind of cost.
Conclusions
4 years ago I walked out of the office for the last time. Had I continued to work instead, we would have at least $1 million more than we do now. Just compounding that to retirement age would exceed $5 million. That is the opportunity cost of not working, a real luxury.
But what is the value of time? Unless it is zero, this math is incomplete.
Once you have enough saved and invested to fund your desired lifestyle, the relationship between time and money is completely transformed. More money changes life very little at that point, while time and freedom change everything. Economic concepts like opportunity cost become little more than philosophical musings, with the same price tag.
There is no need to spend the rest of our lives filled with regret, pining over some old paycheck. Instead, our remaining days are for living in abundance, with the occasional difficult decision about what to have for dessert.
* Admittedly this is a bad example. As everyone knows, there is always room for gelato.
** Dear headhunters. I’m available for a CEO position with a golden parachute clause, a seat on the board of directors with $100k+/hour income and annual meeting in Hawaii, or a position in Congress with a lifetime pension even if I resign after the first day in office.
How much More $ would it take to keep working after FI?
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Another great post! It all boils down to making the decisions that are right for you. Our baby is two years old now and we are both staying home with her. We planned well to make this happen but that included some lifestyle adjustments. I am also a fortunate recipient of an education grant with stipend which I believe will reduce the opportunity cost while my career as an Engineer is on hold. My husband works part time. We are in mini-retirement. Jobs will be there when we need them. In the meantime, we love our freedom. Life is good.
I love that you both took a mini-retirement to enjoy being parents. Not many people have that chance.
How much have you gained writing this blog compared to the salary you gave up ?
Roughly… probably earned 3% of what I would have earned by continuing to work.
The freedom to live life as you choose is important. Too many people spend a lifetime living the life they thinks others expect them to live. Only at the end do they realize they wasted a beautiful life. It’s not just travel or retirement either. Some people get great pleasure from their business. An artist may live for their art. They should keep doing what brings them fulfillment instead of living what they think others say they should do. And, OMG! Working only to have a few more dollars is insane. If the work makes you happy, fine. But there is no dollar value on time spent with family and friends.
I’m pretty sure we would agree to that golden parachute deal to you. :-) While most of us pursuing FIRE probably wouldn’t keep working for for five more years to add an extra million, looking at this kind of math, it is easy to see why a lot of people end up working that “one more year.” And As a generally risk-averse person, I especially understand why a little extra cushion is tempting. But, it just makes me all the more grateful that we’re a little ahead of schedule with our savings, and so we can retire on time next year knowing that we have enough… And a little extra. :-)
I totally agree. That “one more year” trap is dangerous, but if you run the numbers and your risk is low, you’ve got to pull the trigger.
The trap it’s so dangeares especially when you have kids in school and can’t go anywhere more than few months …..
I have been doing the “one more year” since 2020. I ran the numbers and my financial consultant said I was good to retire in 2020. I didn’t pull the trigger. We ran the numbers again in 2021, it was still a go. We ran the numbers in 2022; numbers were even better. I called HR to ask about retiree group health Insurance which was the reason I hadn’t pulled the trigger. I now have a date in 2023. I will be pulling the trigger. I have this blog along with Root of Good and Millionaire Educator blogs; His and Her Money and Afford Anything podcasts, and numerous books and magazines, to thank. Thank you, Jeremy!!!
How much enough? That answer will be different for each individual. It’s ironic that we all trade time for money but we can’t buy time with money. After a recent sudden passing of a co-worker (shameless self-plug: http://www.tawcan.com/life-reflection/), I asked myself why we don’t value time more. We all seem to think that there’s always a tomorrow each day. But do we really know that for sure? Sure you can earn $1M more if you work for an extra year, but that’s also one year less you won’t get back. Like you said, you can’t take a nap in middle of the day, you can’t travel slowly through different cities/countries, and you can’t spend most of the day with your newborn. We came into this world without any money and we can’t bring any when we pass. How much is enough? When do we say it’s enough?
Opportunity cost is a personal calculation, so it makes sense to weigh the $5M you gave up as one value bucket and everything else you gained as the other value bucket. Too bad it’s not as easy as a math argument, since that might make it a little easier to compute. Instead, we each have to do that hard work to compute our own value of financial independence. The sooner you start to figure out what that’s “worth” the better!
I too worked in the finance field, but did not retire until age 58. We are now home free and have been traveling the world since 2011. Currently in Spain and Portugal for 90 days, then off to Romania. I like that your blog concentrates on finances, so does mine, but not as well.
I worked toooo long, making the opposite decision as you. I could have been with my mom in last years more, but I worked. I never had your salary, bonuses or your size stock options. But I did very well living below my means. We now cannot spend all that our savings generates annually in dividends.
I applaud you gutsy decision to retire so young and am a true fan of GoCurryCracker.com. Congratulations!
Where can I find your blog ?
Spot on. I was going to reply to tfb’s post but did not. What would be an ideal life? If you had a job with no office politics , which you can get up every day in the morning looking forward to doing, then you can continue working. At this point you are not equating time with money because you will do this job even if you are paid nothing because you think that is the best use of your time. Think Warren Buffett for example.
Now realistically 99.9% of us do not fall into that category. You if you work you are gaining dollars but you are stressing about office politics, lack of recognition, the fact that some do no work but take all credit etc. Every time there is a layoff around you, it makes you recognize how important F U money is.
Love the concept of ‘enough’. One thing I am currently worried about it is how do you transform your thinking from ‘others dictating how you spend time’ to ‘you dictating how you spend your time’. I am worried whether I would be another slob just binge watching all day and do nothing.
Love to hear your thoughts on a recent study that came out stating, people who work longer tend to live longer.
Anyways, thought you might like this quote that I read somewhere.
Three stupid stages of life:
Teen Age: Have Time+ Energy.. but No Money
Working Age: Have Money + Energy…but No Time
Old Age: Have Time + Money …. but No Energy
I needed to read this today I did the “one more year” last year and almost got sucked in again. And I get offers for more work (and different work) at least once every few weeks. When it has been all that you do, it takes real will to just say no. I have also been questioned about “wasting my doctorate” to no longer use it while retiring early (since I am in my 40’s). I am using my doctorate (and I still adjunct teach online for now) but it gave me the freedom to walk away from having to go to work. Now I choose my work and as you say – freedom = priceless. Love following your travels and dessert and beverage choices! Off to go kayaking on this fine Monday morning – freedom IS priceless.
I would rather “waste” a doctorate than waste my entire future trying to live up to other people’s expectations for my life. Kayaking sounds much more fun.
How interesting that somebody else hears the same comment about “wasting” a doctorate! I hear that from my parents all the time. I’m also in my 40s and planning to retire early, but my parents– who grew up with occupation, war, and immigration–cannot imagine why one would willingly leave a tenured position. I understand where they are coming from (given their backgrounds), so I just keep reassuring them that there is indeed life after gainful employment, as long as we’ve been frugal and smart with our earnings.
Thanks for responding Julie! I’ve been following the comments wondering if others might respond! I follow some physicians that have retired early or who are planning to retire early and they would certainly be “wasting” their doctorates too (and I’m sure there are many others out there with advanced degrees in the FIRE crowd as well). I left two jobs where I had tenure and two where I was tenure track and it was the best feeling ever!
There are a few of us physicians out there who hope to “retire” early. I wouldn’t necessarily consider it a “waste” of a doctorate, but having financial freedom certainly gives us the opportunity to work part-time or spend more energy with other interests or hobbies.
Definitely! I work part-time now (by choice) and love still being connected for now. Couldn’t do it without a doctorate!
Wow! I’ve also been told that I’m “wasting” my doctorate since I just retired at 46. Maybe we should start a club? It could be the “rejecting the consume-more mindset club”!
Freedom isn’t free! But at least you don’t have to work for it anymore either. What price do you put on that opportunity cost of touring Europe when you are 40 years younger? I am sure 5 million would be quickly spent by many to have youth in retirement. Enjoy Europe!
You have a very uncanny ability to put things in clear perspective. I know this firsthand. ;) Hope others can see and benefit from your view and apply some of it in their day to day lives toward FIRE. Always a great read. Thanks.
Once I reach my financial goals, I’m done. Or at least I say that now. I have no idea how I’ll feel once I get there. A little more risk-adverse? I think I’ll be able to pull the plug with ease, but only time will tell.
The concepts outlined in Harry’s article and this article are very intriguing. There is an opportunity cost with everything we do – but as usual it goes both ways. Your decision from 2012 is essentially with two possible outcomes:
On one hand, you could have worked 80 hour weeks for 5 more years and gained 10 years of experience and that $1 million. But you would not have had freedom to do your own thing.
On the other hand, you could have simply enjoyed your free time, knowing that you have a limited amount of time left on earth – you could have been gone early or you could be here in 2096.. But this costed you $1 million ( or $5 million in a few decades)
I believe that a lot of people choose option one. Worst of all, they decide to spend a large portion of their income, which is why they stay on the treadmill for decades. Perhaps this is why some resent you – the realization that they could have had your lifestyle if they had saved more, and avoided waste ( like burning through a new BMW every couple of years for example). But now they are stuck in the rat race for longer than their physical bodies can sustain it.
As an owner of equities this is good for me however, because when someone buys products, he/she generates revenues and profits, and then dividends to be sent to me.
Anyways.. Enjoy your vacation… Are you going to England, with the pound at 31 year lows
DGI
Should we decide to retire in the U.S., we know we’ll need more money. Deciding when enough is enough might be difficult for us because we’re both natural savers that like to see our accounts increase. This post is a great reminder of how important our freedom is and we’re thoroughly enjoying our freedom right now. If we start working again, I’m sure that will help us realize we have enough, sooner rather than later.
Dead on Gcc. Knowing you have enough is an important concept misunderstood by many in the States. They’ll work themselves until death or disability.
For me, I’ve probably had more fun being “early retired” in the last 6 months than I had in the previous *5 years*….and it cost me very little in terms of dollars. The cost was mostly about the time!
Thank you for the Ugly Kid Joe video! I was honestly thinking about that particular rendition this morning after a Tawcan post reminded me of the song. I was thinking it was Faster Pussycat, but I stand corrected. Now my brain can’t decide whether to have “Nonstop to Nowhere” or “House of Pain” on repeat.
I’m the fool working for that extra million after FI. I should have it by 45. The whole FIRE concept is relatively new to me, and with kids starting school and a pretty great job, it makes the most sense for our family. Love to hear what you’re doing with yours, though.
We do have tentative plans for some long-term international experiences after or as a transition to retirement in a few years.
Best,
-PoF
My wife and I are trying to figure out when enough is enough. I’m four years from a great military retirement. I have several paid off rental properties (which makes me realize again I need to spend some time looking at your tax posts, taxes are killing us!!), but my wife tells me I’ll go crazy without a “real” job. I think I’ll go crazy with one.
Blogger and world traveler sounds like the perfect “real job” to me.
Congrats on having that job.
I think I’ll join you.
We are in a similar situation. =) Probably a smaller military pension, but also have good rental income. Mr. Mt got out 4 years ago and we are “work optional” now. He is taking a full year off of work. And it has been awesome. But is it a little weird too. Especially coming out of the military. Going from having so many things decided for you to almost unlimited options. Way to go setting yourself up with the rentals! We love our rental income. =)
Very touching post (even before you broke out Cat’s in the Cradle to pull at our heartstrings).
Life is all about trade-offs, and is sounds like you made the right choice. Thanks for the great post.
I can’t be 100% sure until I actually get to try ER, but I’m pretty sure it would take a very significant bump in my salary for me to get back to work afterwards. Realistically, I’d probably consider re-working a couple years for 5 times my current salary.
but GCC Jr. could have inherited an eight figure sum! And you could have added 2-3 jobs to the American economy with your spending instead of funding the livelihoods of hundreds of people in SE Asia! So selfish GCC :)
We did add at least two jobs to the American economy ;)
I think what is selfish is the Americans that just spend everything and do NOT think of the future. They the are the ones who will be using public assistant programs. My concern is of ones that have saved more than enough to fund the lifestyle they want and will they have to bail out the unprepared?
I’m struggling each day on the right time to stop working. It all comes down to what level of spending we want to have in retirement. I wish I would have started earlier but at age 44 we still have a net worth of about $1.2M. We could check out now, sell our primary home and live in our second home (paid for) with a pretty good amount of security. I’ve decided to go to 50 for a number of reasons. It will help us get to a much safer income level, it coincides with our daughter going off to college (529 plan fully funded by then), and I’m in my peak earning years. All that being said, the amount of comfort I have that it really doesn’t matter if I lose my job etc, is a benefit that can’t be understated.
Great post, as usual.
Research has shown that post $75k per year in income (probably $80-$90k in today’s dollars by now) the value of the additional dollar diminishes or is even zero in perceived happiness.
Intriguingly, that’s also around the spot where marginal taxes start taking a big bite out of your income. So for very little extra happiness you’d have to generate a lot of extra pre-tax income. Then why not retire early? Especially when the target income can be further reduced by state-of-the-art frugal techniques without compromising heppiness at all.
So, a noticeable increase in happiness would have to get you waaayyyy past that threshold, hence, I would probably ask for a similarly extravagant pay package as Mr. GCC to entice me to work longer than I really have to.
The one reason to accumulate more is to not increase consumption but to decrease the withdrawal rate for those on the slightly risk-averse side of the scale (me included) to have some safety margin in case the economy goes sour right the month we retire. If it makes you sleep better during retirement it’s worth the extra year or two of working. Especially if economic growth and earnings growth are stagnant, stocks seem a bit expensive now (Shiller CAPE), bonds yield zero or negative real rates and we are in truly uncharted territory.
If you’re able to have access to a Deferred Comp plan or HSA, you can stave off the worst effects of the tax man (for a while ; ).
I’m with you on the safety margin thinking. I would hate to make all my retirement plans only to have to unretire due to sequence risk. So if I have to stay working for another 1,2,3 years (will be a max of 3 years), I’m ok doing it knowing the peace of mind it should bring. Plus I don’t dislike my career…but do want to get out and travel like the folks here I’m so jealous of. 3 months in Hawaii, 3 months home, 3 months in Portugal, 3 months home, etc…. : )
“jealous”: There is much marvelous content on the internet. Well made 4K Ultra HD videos that are a visual and intellectual feast to watch on a ‘smart’ big screen at home. Recipies, social media and so forth. The arm chair traveller has never had it so good. Combined with local walking / running and a smidgeon of imagination and one has 90%+ of the benefits of travel with none of the dreary aspects.
So far I’ve been offered almost double my previous salary and I turned the position down because the weather was too nice outside at the time.
I think a silver parachute, any old C-level executive position and a private jet would entice me to return to work temporarily, just so I could know what that feels like for a year or two (hear that headhunters?).
Otherwise, I’m just not that interested in trying particularly hard to make more money since we also have “enough” in our FIRE stash as is (as this new-found blog income is more icing on the cake that keeps growing on its own). Maybe my attitude will change once the kids are older and busy with their own pursuits (in 2 years? 5? 15?). Maybe we’ll get bored of traveling. Maybe I’ll find a perfect job that piques my interests and motivates me to show up on a routine basis. But probably not.
This post is analogous for people who are close or nearing retirement: vis a vis >>> when to take social security benefits. I’m currently 56 but will be taking SS benefits when I reach age 62; I will not wait until age 70 like the majority of financial articles recommend.
Reasons for me are similar to what was presented by Jeremy in this post: use the money you can get while you still have physical capability and are able to move/travel/hike/kayak/etc. Stop working when you’re still able to see and do things/hobbies you enjoy. Should you wait until age 70 when time has taken it’s various tolls on your body? Money is of very little use when you’re sitting in a rest home and drooling while watching re-runs of I Love Lucy.
Also, you don’t have to spend the SS when you begin receiving at 62; these proceeds can be invested just like a regular paycheck.
GCC: Great post.
Thanks
The freedom to watch I Love Lucy whenever you want though (sans drool) = Priceless
: )
Enough isn’t black and white. You are comfortable at $40k a year. Can you make it work at $35k a year? I bet you can. If your assets can give you $45k a year, do you not know how to spend extra $5k a year on some experience you like? I bet you can as well. Should you quit when you have enough for $35k, $40k, or $45k? That’s the question. Between retiring at 38 and retiring at 42 but with 80% more available for the next 40 or 50 years, you chose the former. Another person may very well apply the concept of deferred gratification and choose the latter. 42 is still quite early and they open up more possibilities and enjoyment for the next 40 or 50 years. Neither would be a wrong decision.
Enough is the level of spending that each individual decides works for them. Keep in mind that $40k is already a ridiculous amount of money for a small family. Once we meet basic needs like decent shelter, good food, good relationships, and fulfilling work (like blogging and traveling maybe), the increase in expenditure becomes irrelevant. You could do it, and you might “enjoy it”, but it won’t keep you significantly happier in the long term. Recognizing “enough” is what so many people have trouble doing, that’s why 99% of the mainstream never will.
Our decision to FIRE in two years time is not driven by economics but much more by the impact on our children. Specifically, our eldest will be completing elementary school then. Our relocation to a new area and new school for him will be an easier transition as he will be starting middle school at the new location. Will an extra two years savings and stock options and bonus help us going forward? Of course. But it is not the main driver of our plan. We could FIRE now to be honest.
The time we will have to travel, be much more engaged with our kids journey at school and pursue our real passions of the outdoors beats all the salary, bonuses and shitload of stock options we will leave on the table. We will also leave a ton of stress on that same table so it better have four strong legs to support it.
Absolutely loved paragraph # 3 and # 4 of your conclusions section. That part is a keeper for my resignation letter if you don’t copyright it by then. Thank you for a great post.
Outstanding blog post. The problem for many people is maturity, in the sense that they are usually much older than yourselves when they come to the conclusion that you guys did (enjoying life versus saving more.) I found myself in many ways in the latter position. My wife went out early at 57 but I waited until 60, always wanting to work “just one more year” in a job I had learned to hate. Even then it probably would not have happened except for ankle surgery that put me down for months, cementing my decision to stop at that point.
Applying the 4% rule we could be spending a lot more than we do, but we are enjoying a very nice debt-free life as it is. We travel for 4-5 months out of the year although we are seriously thinking of going homeless and traveling for 12 or full-time. Do we need more? I wouldn’t turn it down if I won the lottery, but that is a want, not a need at this point. Enjoying life on your own terms, and not someone else’s, is the key to a very satisfying life.
Love your blog; keep up the great work. And continued safe travels, my friend.
Love this post. My husband and I retired early 11 days ago having decided to focus on value focused living rather than accumulation. We walked away from good, and good paying, jobs because we realized time was irreplaceable. We sold most of our stuff and hit the road.
It’s a bit scary deciding when you have enough to leave the workforce (hopefully for good) but for us it came down to figuring out what we valued most. Turns out it wasn’t wealth.
No regrets so far.
Yeah that’s a great analysis, and it captures a conversation we have fairly often – which is, When we hit our FI number and can start our Lifestyle Change, if everything is “comfy” why wouldn’t I work another year? Mrs. SSC will probably still be teaching, she may/may not find a job outside of Hosuton, and if I can get another $60k or more of bonuses, why give that up? It could be a little more cushion for us is Mrs. SSC’s take.
I keep telling her, I can’t buy days like this to walk the kids to school, and then go sit in my kayak trying to figure out how to catch some fish, enjoying the sun, wind, and being on the water. I keep reiterating to her that when we hit our number and my last options pay out in july 2018, I’m out.
That is what our FUlly Funded Lifestyle Change is about. Just getting to spend more time with each other, the kids, playing banjo, fishing, and whatever else we choose. I don’t see myself doing one more year, it’s just not worth it.
My life is not complete if I can’t afford to hire a talking monkey that give me praises and bring me refreshing beverages every meal. By my non-scientific calculation, a butler of this caliber is worth at least $5,000,001.
Even though we haven’t retired, your blog inspired us to change our work location to the place we wanted to retire and it’s been the best decision ever. No longer home owners, we are free some the hidden cost of home ownership. Yes, it will take us 3 years to recover from the move, but we will be in a better position for our final retirement in 10 years with some mini-retirements in there. Thanks for posting and keeping us motivated to live the dream.
I’m new to your site, so forgive me if this has been covered already. What are your plans to provide for your child’s education (both through high school but more importantly, the cost of a 4 year university education)?
You’ve done the math for spending 4% of your portfolio per year (presumably using dividend income and returns instead of tapping into principal) to make your portfolio last 45+ years, but what happens when you have to find $250k for college?
Love your philosophy and admire your courage for being able to step off of the accumulation of wealth treadmill.
It would take a heck of a lot of cash and some deeply and extremely unfilled desire to keep me working after FI. As for calculating the value of time after FI, what’s wrong with giving it the same value as the hourly rate you have achieved in your career, including compound interest at 7%? That would mean, at FI, the opportunity cost of not working is zero–and is just about exactly how you value it in a real as opposed to strictly mathematical terms.
“can’t buy time with money”. One can. Two can better than one too. We am confident we have by retiring. The time saved by not working we can afford to spend on attending to our physical, and mental, health. And at a lower monetary cost.
I love this blog. It makes me dream. But you know, if you own your own business, and you dictate your own schedule, and work doesn’t feel like it’s sucking you dry, then life’s not so bad. We make enough to live a very comfortable, yet not extravagant, life. Sometimes I wonder what I’d do with myself if I retired. I guess we’d travel, but we already travel. And whenever we do travel, I am always ready to get home and back to work by the end of the trip. I enjoy my business and I get fulfillment from it. And it is affording me the opportunity to build wealth which I likely won’t ever spend, but can change my family tree. To each his own, I guess.
Another fantastic post! Thanks, really look forward to reading new ones. What a great point, everyone treats not working as having no value. Really looking forward to my last day next year.
I 100% agree with you. Time is priceless. The freedom to do whatever is one of few ways to reach highest level of satisfaction in my dictionary. How much is really enough? I am on the way to reach my own financial independence. Just wait a little for me :)
Amazing article. Thanks for sharing.
Never thought to actually analyze the cost of retirement in dollar amounts. A great post that characterizes how expensive retirement can be but the free time you gain from it I bet is worth so much more than $5 million over the coming years.
That is some expensive retirement! We have about a year to go to fulfill our “FI Bucket”. But we’ll most likely continue working for a bit to build up a fund to buy a home/investment property overseas in the future. It will all depend on when a future child enters our lives as one of us plan to stay home at that point. Our situations at work have gotten more bearable so that makes it easier to stick to our goals and probably harder to pull the plug but once we met our financial goals, we are out!
I did tell wifey that I want to put money aside to buy music equipment. I’d work a few more months for that!
I knew in 2010 that we wanted to get out of the rat race early. We sold almost everything we had in 2014 and moved to Costa Rica to live on a small retirement check that my wife had and the dividends from a stock portfolio we had put together over 4 years. Was it easy to see 80% of your income disappear after leaving a good paying tech job? No. But the personal freedom was so great. I was 44 and my wife was 50. After almost 2 years, I’ve went back into my field doing shift work, but still living in Costa Rica. I work three weeks in Alaska and have three weeks off in Costa Rica. Removing a lot of the “stuff” from our lives has freed us up to live differently.
nice. I work 2×2 in ak and live in ak. 35yr old & thinking is time to start saving more.
Well put. Like PoF, I’m relatively late in the FI game. I probably have about 10 more years to go. The toughest part is getting the family on board. I am still wondering about getting kids through school without active income (very easy to succumb to the peer group).
I do realize that one may not necessarily have the energy to travel and see the world later in life. Good motivation to crank up the savings rate now.
This was spot on. When we retired almost exactly one year ago, we calculated what retiring early would cost us. Continuing to work to a “normal” retirement age would have padded our accounts by nearly 1.5 million. In the end, we decided that trading 10 more years working for a bigger pot of money at the end just wasn’t worth it.
Some couldn’t understand how we could give up so much money.
We have no regrets, and haven’t looked back
The big thing I regret is not starting to save sooner so I could have FI and taking out those student loans, which basically create the need for me to work for at least another decade so I won’t be able to FIRE until I am at least 50 if not 55. Early compared to most, but not early enough. In the interim, however, I have a job that allows me to travel the world. It isn’t a substitute for what we would really do in RE, but it makes the time I keep working as tolerable and even enjoyable.
Good post GCC. We can define FI either by income (passive income exceeding annual expenses, metric preferred by Dividend investors) or by retirement assets as indexers prefer (exceeding some multiple of expenses, min. 25 as the 4% rule advocates). No matter how you define FI, once you cross that milestone, a different mindset takes over. This mindset is about building ‘safety margin’ and unlike the FI targets, there is no upper limit for this. One may be happy with 100-110% income coverage but for others it may be 150% or more. For indexers, the multiple some want is 40+ while others are satisfied with 25-30. Opportunity cost enters this analysis only because of our increasing ‘need’ for ‘sufficient’ safety margin, though ironically, what was sufficient a year ago may not appear so today. What we have achieved tends to get undervalued compared to what we want to achieve, and when that is achieved, it becomes undervalued again because it is what we already have!
I think that, once you have reached FI, there’s no need to continue obsessing over earning money. Your lifestyle is funded and the rat race is over. There’s no way I would work an additional couple of years to earn more money later! I’m achieving FI to earn back my time, which is more valuable than money.
Amen!
A few go on to Financial Dominance.
GCC, thanks for another great post. Question for you: my girlfriend and I are both U.S. citizens approaching 30, and have jobs in the SF Bay Area that we are ready to leave in favor of the adventure of starting a new life abroad. We are nowhere close to being able to “retire” as you have, and so would have to find new means of supporting ourselves as we can’t yet live off of investment returns. I will have savings of roughly $90k by the end of this year along with another $50k or so in Roth IRAs. We are more interested in first creating a new life in one new country for now and finding ways to support ourselves there rather than continually traveling the world (even though we also hope to do that later on). We are open to trying to secure jobs in the new country ahead of time, if necessary, though we’re also open to arriving without jobs in hand if the visa-situation would be amenable to that.
We are starting our research to see what countries around the world:
– would not be extremely difficult to obtain long-term or permanent residency either via buying property (I know you’re generally not a fan, though I was considering the possibility of using it as an income source through AirBnB rentals) or through work visas.
– have a high quality of life/cost of living ratio with a favor on our $USD (e.g. Mexico).
– favorable tax situation
– favorable/friendly environment to foreigners starting our business in their country
Would you have any trustworthy and current resources (e.g. books, websites, specific people etc.) that you would recommend I refer to in my research on finding our next home, wherever that may be in the world? Thank you!
GCC – I too have to compliment you on the excellent choice of the Ugly Kid Joe version of Cats in the Cradle, no disrespect to Harry, of course. I’ve loved that version since my teenage hair band days of the early 90’s…there was always something so haunting in their version, like you could feel the anger and resentment of their lead singer and just know that he had those terrible childhood memories of missing his dad.
Anyway, that song always provides great motivation for me to finally close the deal and exit Corporate America for good at year’s end. The OMY game will come to an end and my two boys will get the best of me, and not just the rest of me…
Keep up the great work, always educational and always inspiring!!
Money that you can’t even reasonably spend that steals your time doing things you value is worthless money. You could have more stuff, but freedom sounds so much better.
Totally agree with you. Time is priceless. I can’t wait until I reach my financial independence. Accumulated about $200K so far and it is growing a lot faster than I expected.
“** Dear headhunters. I’m available for a CEO position with a golden parachute clause, a seat on the board of directors with $100k+/hour income and annual meeting in Hawaii, or a position in Congress with a lifetime pension even if I resign after the first day in office.”
Well, those both sound great and all… but also likely come with a fair supply of B.S. everyday. I’d stick with what you got there GCC, seems like its a good thing!
I am 54 and can retire end of this year with $47000 pension plus I currently have about $5500 a month in net cash flow after all expenses. But I donot want to retire another 8-10 years. First reason is inflation will cut into my pension part because pension is not inflation indexed. Rentals will be fine because rents are raised every year and I have fixed rate mortgages. The main reason is that I like going to work and look forward to it most days. This country has lots of opportunity, which I recently found out with rentals. I came to the US in 1986 with no money, and even supported family back home all these years and never made 6 figures. My networth is 1.8 million mostly due to rental properties bought during the downturn. My wife works and is also frugal although kids are not.
I want to add to above that we did this with normal work lives and saving 30 to 40%. We live in a nice neighborhood in a 2200 sq ft house worth $600000. Already paid for one kid’s college and will pay for the other one also. We maintain a good middle class lifestyle but think before we make any purchase if we need it and then shop around for it. We drive 6 and 20 year old Toyotas and do not need a BMW. We travel and vacation once a year and entertain. We might eat out for convenience or order in but not on a regular basis. We have supported our family back home (parents) sine late 1980’s. Parents have their own pension in India but it is not enough because the cost of progress there has been high inflation. None of us have yet made 6 figures in any year. Current total income is about $150000. It was much lower in the past. I still feel that we could have even done better if we moved more aggressively buying properties in 2011-2015 than we actually did. We played little too safe having 5 properties paid off and 5 on mortgage. This is a great system where I can get a loan without any collateral, without any bribe, and without big family connections. You still need down payment though. None of us worked too hard but still did ok because of opportunities of downturn. Warren Buffet says buy when there is blood in the streets whether it is stocks or houses.
“Selling your time for money.” Sounds like you hated your work. And that’s the real shame, there. If you love what you do for income, truly value and love it, and hate your days off more, then why would you stop working? I would do all the same things with my time whether or not I was getting paid for it. THAT’S the true measure of a successful life. I’m glad you’re enjoying your time, but what sucks is that you never found a suitable job, and think that running away from work is the answer to happiness.
Sorry you hate your time off. That’s a real shame.
It sounds like you should keep working and donate 100% of your income to charity. Then your actions will truly match your words and you can find true happiness.
There is nothing better than choosing what your day will be. I do believe some time should be used to do things for others or a non profit group. I always believed that a job was a means to an end not one’s identity.
many people i know love their work and the opportunity it brings them constantly to meet new and young people. Sorry you hated your job
Steve I think that when someone makes it their personal goal to retire or become FI that is very personal and it sounds a little like you are upset that someone has the luxury to choose to spend their time making money or letting their money work for them. Yes work is a JOB and a lot of times the workforce is NOT a great place to spend one’s time when time is of high value. Your comment sounds angry and I happen to agree with Matt that work is a means to an end goal. Everyone has a different goal so I suggest that if work makes you happy than do it. Not everyone can retire early and still live a great lifestyle so as an early retiree keep on working. Just don’t be upset with others that value different things.
Matt R
this is going to sound crazy, so hear me out… but did you know it is possible to meet new and young people outside of a job?
ps: didn’t hate my job
“Other than the boat, none of these things are remotely interesting. The marginal value of more dollars is basically zero.”
… if you spend them on yourself! Do you ever wish you had put in an extra year and given the proceeds to some worthy altruistic cause? I think almost everybody would agree that you don’t OWE anybody such a generous act, but it seems like a hell of an opportunity to put your stamp on the world.
As somebody about 50% of his way to FI/RE, planning for potential altruism is becoming a growing concern, and is making it much easier to motivate myself for the daily grind in the meantime.
I don’t feel any need to leave a stamp on the world.
But there will be plenty of dough left over when we are done using our portfolio.
Hi, I stumbled across your site and I agree with most of your statements. I basically did the same thing as you about a decade ago but built it on different assumptions. You seem to have faith in the US Stock Market to generate your dividends. I di-vested from the US Stock Market about 10 years ago and bought a couple of multi-units and use this for passive income. Yes, I know the tax advantages are in your favor. Even though I agree if one is disciplined, by renting you can save a ton of money.. at least I did. However, I just didn’t like the fact I wasn’t in control of my living habitat. Therefore, I blended the concept of renting and wanting to control my living situation. I bought a couple of multi-units and my tenants pay my mortgage. So, I feel I have the best of both worlds where I live rent-free and mortgage-free but still own my property. Granted, I had to put 25% down on my property but the ROI was about 5 years and that has passed 5 years ago. Even though the stock market is outrageous and over-inflated, and you guys are making a great dividend, I found it hard to invest in US companies that treat their employees like slaves and would outsource their mother if they could. I don’t want to make a profit off of other US worker’s misery. So, I rent in a very hot rental market but I just keep my rates reasonable (probably 30% below rental market value) for the working class to be able to still live in the city. So, far, most of my tenants get it and great.
I still work but it is if I want to. Since I am single, I could have retired in my 30’s. I never found my soul mate to travel the world like you guys did so I work on and off on computer gigs where I take 11 months off or 3 months or 8 months off. However, I travel over the world and hike, take care of my properties, and gardens, volunteer on projects to save parks, green spaces, AT trail maintenance, etc. I like to still keep my head in the game even though I am considered an “old” consultant… it doesn’t matter because I am at my prime with my skill set mixing business skills with my technical skills.
Consequently, I think what are doing and explaining to Americans there is a world out there to explore and this is how you do it, is great. The irony is when Americans that travel the world and “get it” don’t want to live in the States any longer. So, it is great you are giving really good advice and inspiration to people.
Keep Up the Good Blogging… :)
Karen
Congrats on leaving it all behind!
Freedom really is priceless, but I do love my San Francisco home. Almost done building a deck facing the ocean. It’s been my dream.
Happy traveling!
Sam
Congrats on a different lifestyle. I agree with full time parenting and home schooling. My wife stayed home to home school our 3 children, I did sports and music, took Friday’s off to play golf with my daughter after her piano lesson. I chose a career of helping people get through their physical and sometimes emotional problems. Physical Therapists are also counselors.
I chose this as a life long profession and feel I have had an impact on peoples lives. My wife did not work, we still saved. I have been sharing your posts and the other FIB’s (financially independent bloggers) with my oldest daughter who is saving more than 50% of her income, does not want to buy a house and loves to travel. My youngest daughter trained to be a professional ballet dancer decided it was not for her and will be going back to school. I see her getting married and raising a family before starting a career.
I enjoy traveling every now and then especially if it involves hiking, mountain biking, kayaking but I also feel an obligation to help others get back to being able to do what they want to do even if it is grinding away at a 9-5 job. I work 3 days a week, I have a 30 min session with my patients and it really is a foreign language I am speaking to them when talking about not working so hard for possessions but rather having the time to heal and enjoy life a little more. Many of the injuries I treat are overuse injuries from too much time at a computer to overdoing it physically and getting injured.
You are doing a great service letting people know that TIME is more valuable than MONEY!
Just love reading your posts, keep it up!
Clay
I really respect you from taking time away from the grind to be a parent. Not many people can do that, and out of the ones that can, not many would choose to walk away from such a successful lifestyle. It is very respectable, and I truly admire your values with family.:) Great post
Thank you.
It is possible that we’ve been able to spend more waking hours with Jr in his first 1.5 years than many parents are able to in 18. We are really fortunate.
Great Post !!!
What a great way put money, time, and life in proper perspective.
Freedom = Priceless. (Wow!)
I never knew about relating time, money and life until I read book “Your money or your life”. Reading that book was a “A Ha” moment for me. It also taught me about defining what is “Enough”.
Financial freedom is a Noble and Worthwhile goal. You do things out of JOY, not out of NECESSITY. I am pursuing it. I am 38 and I believe I will get it done by 48.
I get inspired more pursue FI by reading article like this. I feel I am making right choices ( being frugal, saving, investing) reading article like this to reach FI.
Thank you.
You are so right: there is ALWAYS room for gelato. :)
I’m not sure the folks who are concerned about ‘wasting a doctorate’ or other high-income opportunities are necessarily of the consume-more mindset. I think much of what we do comes from our experience more than our knowledge. My mother-in-law is 80 and still working. Born during the depression, raised on a farm, and widowed in her mid-30s to raise a daughter by herself. She is an admirable woman who pushed strong business values onto her daughter, and both are adamant that early retirement is “too risky” regardless of the actual facts of the situation. I’m fiscally conservative, like most who frequent financial blogs, and am working with my adviser to get a 2nd opinion on whether I have ‘enough’. I’m likely 2-3 years away from where I’m comfortable calling it a career, but that’s likely 4-5 years early for my wife to be comfortable, and my mother-in-law will be scandalized when she hears that news. ; ) But a good friend of mine smartened me up about 4 years ago. I told him I’d work until 70 (when my SS maxes out) because I make good money and like the work, most of the time anyway. He asked me a most insightful question: “Do you like the work more than family? Travel? Golf? Vacations? And if the answer to those are ‘no’, then I have another question for you – how many people 70 and older do you see with the energy to travel the world or play golf whenever they want?” It was an epiphany, and I’ll be forever grateful.
So I’m jealous of those of you who have managed the early retirement thing, and I’m applauding you at the same time. Save me a seat – I’ll be there soon!!
I’m going through and reading so many of your posts now. So witty and on point. Time. The ultimate wealth alongside health. Thank you!