Replacing Fear With Flexibility

As we mentioned back in our very first post, the primary focus of this blog is to help you avoid the financial mistakes we’ve made in the past. And over the years, we’ve made A LOT of mistakes:

  • We purchased our first home in the summer of 2007, at the peak of the housing market; a decade later we're down six figures on this adventure
  • Three years later, in what turned out to be the bottom of the market, we bought two brand new cars and a luxury wedding instead of investing in the stock or real estate markets
  • We didn't invest much during the rebound years from 2010 – 2014, but the small amount we did invest was in high-cost active funds
  • We made every mistake in the book on our rental real estate project with our tenant from hell 
  • We purchased a new home in 2016, right after the housing markets fully recovered in our area

That's a lot of mistakes, and costly ones at that. I recently listened to the ChooseFI episode featuring Big ERN discussing sequence of return risk, and considering I'm just a few months (weeks??*) away from pulling the early retirement trigger, you'd think this discussion would have me quite afraid… but this is simply not the case. Instead, I'm more optimistic about our FI status than ever!! With our history of mistakes, and propensity for bad investment timing, why the hell would I be optimistic? Am I an idiot?!

No!!!** The truth is, people have a tendency to remember their bad decisions more than their good. When things go right, you barely remember them. But when they go wrong, it's all you can think about.*** For the wife and I, lowering our annual expenses helped raised our savings rate to the point where the mistakes above were mere bumps in the road, rather than roadblocks. What's more, each mistake taught us a new lesson on how to hedge against them in the future.

What If The Market Crashes… Right After We Retire?

Sequence of return risk is a concern. Mad Fientist had a nice discussion of it back in 2015, and Big ERN has an entire series dedicated to it. The idea is that if you have back luck, the market could crash and stay depressed for the first five or more years of your early retirement, creating a perfect storm that causes your portfolio to be one of the few failures of the 4% rule. Scary!

I'm not afraid, however. Given our track record, I'm simply going to assume this will happen to us. Knowing our luck, if I pull the trigger in January, a 20%+ market bear should happen just a few months later. Rather than worry, I'll simply focus on what's in my own circle of control. With low expenses and a bit of flexibility, we can afford to be unlucky! How?

Instead of retiring in January, I could work an extra year or two to reach Fat FI, brute forcing my way past sequence of return risk. This is a perfectly viable option: a 3.33% withdrawal rate is, according to J.L. Collins of The Simple Path To Wealth, “as near a sure bet as anything in this life can be.”

While straightforward, working longer to reach Fat FI is absolutely not the right option for me. I really can't stand my job right now, and the thought of being in a cubicle prison for another year or two makes me absolutely miserable. Besides, even if I did hold out for Fat FI, it would likely be unnecessary in the long run. We've seen time and time again that perfection is the enemy of frugality. If there's a good chance I'm already FI, I don't want to keep working longer just for the hell of it.

Instead, to hedge the risk, I'll test the early retirement waters a little earlier, while the wife continues working one more year. She enjoys her job a bit more than I do, so this makes sense for us. Even on a single income, our low cost of living ensures our savings rate will still be over 60% for that additional year. Should the inevitable market crash happen, she'll continue buying shares on sale.

After the additional year, if markets are still on sale, maybe the two of us will trade places. Remember: my worst case scenario is everyone else's everyday scenario: I go back to work. But I wouldn't go back into the previous rat race: instead of a high stress, high-paying job, I'll take up something I actually enjoy instead.

Get Paid To Do What You Love!

By careful design, our lifestyle costs us only $25k per year. Month after month we've systematically reduced our expenses. We paid off our mortgage and live in a low-cost of living area. In FI, we'll qualify for the best healthcare and college tuition subsidies, and we'll be in the lowest possible tax bracket. What this allows is for our entire luxurious middle-class lifestyle to be funded on a near minimum wage salary. How can I gamify this?

I enjoy working out but hate paying membership fees. What if I become a part-time trainer at the gym? Pick up certification, teach some courses? I'd get free gym membership, help others achieve their fitness goals, stay in top physical shape, and get paid to do it.

I love coffee, but hate paying coffee shop prices. What if I become a part-time baristo at a local café? I'd get to work in a relaxed environment, meet new people, drink coffee, and get paid to do it. Many of the larger coffee chains even provide pretty sweet benefits… win-win!

I like going to Disney World, but hate paying the ridiculous ticket prices… you get the idea! By having such a low-cost of living, I can play the “how can I get paid to do what I love” game, even if the pay is mediocre by traditional standards. I'll never need the salary (or associated stress!) of a high-paying corporate job ever again.

How About A Side Hustle?

I don't need to make a full $25k a year to combat sequence of return risk, however. I'd only need to supplement a few thousand dollars a year, hence part-time or seasonal work becomes an option. In fact, this amount is so low, I could mow lawns or give piano lessons a few times a month and come up with an extra $5k a year!

The key here is to replace FEAR with FLEXIBILITY. I'm not the guy who's going to sit on his butt in retirement and watch Netflix all day long.**** I'm going to be working on things I'm passionate about, like creating new content for this blog, writing a book or two, and producing music. With time and hard work, some of these passions could easily become profitable side hustles!

We're not afraid of sequence of return risk. Or black cats.
We're not afraid of sequence of return risk. Or black cats.

Worst case scenario: we pull the early retirement trigger now, start a family, never make a dime on side hustles, and have to go back to work doing something we enjoy for a little while down the road, if necessary. Remember the FI milestones we defined? If the market drops 20% the day after we pull the trigger, we're simply Flex FI, and our probability of having enough money drops down to a still respectable 82%. As I discussed with Brad and Jonathan on my ChooseFI milestones podcast episode, I'd rather claw back the extra years of FI now and have a great chance of success than continue working in my cube farm for a few more years out of fear.

But What About HEALTHCARE?!

Nothing causes fear quite like healthcare. This is a popular (and somewhat controversial) topic I'm asked about all the time. For the wife and I, we do indeed have healthcare premiums baked into our $25k annual spend that correspond to the current ACA subsidized rates. They're quite affordable because our “income” (money withdrawn for our annual spend) in FI will be so low.

If the ACA is repealed, we’d consider moving to a state that had its own health exchange. For example, MMM had affordable high-deductible coverage in CO long before the ACA existed, so I know it’s possible! If the ACA sticks around but the subsidies are reduced, we'd need a bit more cash to stay insured. Luckily, all the solutions I proposed above for sequence of return risk above apply just as well to this scenario!

What's more, the wife and I have also been maxing out our HSA accounts for quite a few years now, so we have a nice healthcare cushion. Enough to where we could stay put for quite a few years and see if the healthcare situation stabilizes here in FL. If we're able to stay in good health for a while longer, our HSA investment balances will continue to grow, providing an even larger safety net for us as we age.

The key here is to once again replace fear with flexibility, and of course, do what you can to stay healthy! I refuse to stay handcuffed to a large employer simply for the piece of mind of health coverage. Instead, I'll take my chances and handle changes as they occur.

Hell, with all the extra free time I'll have in FI, I'll be able to add another hour or two of fitness to my schedule every day, trading a risk that is outside of my circle of control (what if healthcare law changes?) for one that is completely inside my circle of control (what if I sit on my ass in a cubical for 10 hours a day as my health deteriorates?)


So what do you think? Should I keep working in my cubicle, packing away cash for another few years as my health declines and my morale plummets in a job I loathe because I'm afraid of never making another dime in my 60+ year retirement? Or should I take the plunge and move on to something meaningful, something I'm actually passionate about?

Here's the thing: you can't prevent every possible negative occurrence. There are many forms of risk you'll need to balance between on your journey to FI. Sequence of return risk is one example, but it's also relatively small in the grand scheme of things. It helps explain a small proportion of failures in the Trinity study's 4% rule.

If you love your job, have a great work-life balance, and don't mind working extra years to increase your chances of success by an extra percentage point or two, then, by all means, go for it. But this just doesn't resonate with me. My advice? Prepare as you would for any other life change, do your due diligence, and then handle issues as they occur. Don't let fear scare you away from making your move.

  • What if the ACA goes away?! I'll move to a state with a health exchange.
  • What if the stock market loses 50% of its value?! I'll go back to work for a year to take advantage of the sale!
  • What if social security goes away?! That's OK – I wasn't counting on it anyway!
  • What if Bogle's crystal ball is right and returns over the next decade are lower than average?! Good thing my annual expenses are low enough to supplement with a small side hustle.
  • What if one day I wake up broke?! If I've already reached FI once, I'll do it again – faster and with fewer mistakes the second time around!
  • What if the world ends in horrible nuclear winter or an asteroid impact?! Well then, I'm sure as hell glad I didn't spend my last few years in a cubicle!*****

You get the point. We've already been through so much on our Financial 180 that these things just don't scare us anymore. Shit happens. Be flexible. As an investor, you just can't get rid of risk altogether. The best you can do is trade one form of risk for another.

In engineering, we multiply the probability of occurrence of any given risk against the cost associated with that risk to determine a relative ranking. Risks that aren't high enough on the radar get put on the back burner. If those unlikely risks turn into actual issues, management transforms said issues into “opportunities”. This is just a fancy way of being flexible.

In our case, each issue we encounter on our journey will turn into a valuable learning “opportunity”, and a great new post for this blog! You might want to subscribe – it could be a wild ride!


*I might not make it longer than a few more weeks of full-time employment – now that my 401(K) is vested, my tolerance for dealing with BS in the workplace is surprisingly low.

**The wife begs to differ. But for other, non-financial reasons.

***Have you ever purchased something only to watch it go on sale a few days later? This happens so often that we joke the items actually go on sale because we purchase them.

****OK, at least not every day.

*****Cubicles get such a bad rap. Are they really that bad? Yes. Yes they are.

Interested in starting your own Financial 180? You've come to the right place. The math is easy: create a gap between what you earn, and what you spend. If you can save half your income, your working career will only be around a decade long! Want to shorten it even more? Read on to see exactly what expenses the wife and I cut from month to month. Track your progress against the milestones of FI, and gradually build up your own savings snowball. Check out the books and links in our resources section and jump-start your journey to FI. The you ten years from now will be glad you did! Ready? Start here.

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28 thoughts on “Replacing Fear With Flexibility”

  1. Yes! I see so many fearmongering posts about FIRE and it’s frustrating. That’s like telling someone not to drive a car because *what if* they get in an accident. We can’t predict the future. If something changes, we adjust. Simple. If that means going back to work for a while, that’s fine.

    1. Exactly! It seems like many of us in the FI community work years longer than necessary to raise success rates by just a few percentage points. My retirement is going to last 60+ years… I’m pretty sure I’ll earn some money somehow along the way!

  2. Whoa, this blog just got PG-13. Great post! I don’t think buying a house in 2016 was a mistake but I know you need items for your lists 🙂 I’m looking forward to hearing the adventures of a wild and free Joel!

    1. You’re damn right it got PG-13 in here! I think you’re on to something- FI Gone Wild: The Adventures of a Wild and Free Joel! :-p

      As for the house we purchased in 2016 – this was less than optimal because we waited until the peak of the local housing market. Our house hasn’t changed in value since we bought it over a year ago. With hindsight, we would have purchased in 2010 for $80k cheaper, instead of purchasing two new cars…

  3. Man, I still can’t believe you turned it around so quickly and are now that close to pulling the plug – super jealous! I’m still a few years away from a comfortable FI number, but I’m getting more and more tempted into the sorts of casual employment you talk about where I would just need to cover my expenses and could leave my investments alone to grow without much more in the way of contributions.

    We’ll see how my thinking evolves on that and if I can continue to bear the office drone lifestyle…

    1. I am quite thankful to have a good paying engineering salary, a wife who’s on board with FIRE, and no significant starting debt… I know the 180 can take a few years longer for most folks.

      I think the ‘casual employment’ idea has tons of merit. Once your expenses are low, every job in the universe becomes a seemingly ‘great paying’ job. If you can move into a nice work-life balance, the need to rush to FI goes away. Besides, FI is never the goal- it’s a side effect of a healthy financial lifestyle!

      Hoping you transition to something more comfortable soon – from one office drone to another.

  4. Great read and we’re looking forward to the two word, “I Quit!” post and the adventures that will bring to you guys.

    I had a co-worker recently quit, tired of the political games and environment, and move to a lower-cost of living area out of the state. Within a month, he was offered a part-time work remotely position with the same company, but on his terms. This is in an old-school / traditional work environment in banking that has never historically accepted this sort of an arrangement. You just don’t know what opportunities will be made available until you fully declare your independence!

    1. I already have a draft of my “I Quit” article in the works! 🙂 Right now I’m stuck in the golden handcuffs game… “I hate my job, but if I stay for three more weeks, I get my $5k year-end bonus. If I stay two weeks after that, I can have my 401k maxed out for the year. If I stay a month after that, I can front load Roth IRAs for next year. And just three weeks after that, I can…”

      Awesome story about your coworker – you truly never know what opportunities lie ahead until you take the plunge! I think I need to set a firm exit date and stick to it.

      1. Ahh, the golden handcuffs. I’d stick it out through front loading the IRAs. There’s Thanksgiving and Christmas coming which will put everyone in a good mood and you will have plenty of time off to help break things up. Make sure you use up all your sick days/PTO if you can’t cash it out!

  5. Love this post, it aligns with a lot of the same reasons we’re taking a “Gap Year” well before FI. There’s just a relentless optimism in me that says life will work itself out just fine (and a little bit of data to support that thought).

    Lately, I’ve been referring to my situation as “One Fewer Year Syndrome” and it sounds like you might be in the same boat.


    1. The gap year is a great idea; if I had taken one earlier on my journey I’d be significantly less burned out than I am right now!

      I like the narrative the gap year provides: rather than saying I’m going to ‘retire early’, I could say I’m going to take a year off to decompress from stressful office life. Then I’ll spend a few years writing books or music, likely making some money along the way. I’ll take a few more gap years on and off between other passion projects, and the cycle will continue.

      The internet retirement police would probably say “He’s not FI/RE, he’s working.” But to me, it’s only considered work if there’s somewhere else I’d rather be!

      1. Yeah, I don’t think I’ll ever qualify under the strict IRP “retirement” rules. It’s like they expect people to stop working and then just sit on their couch for 30 years!

        There’s definitely a chance our gap year extends into some kind of non-traditional work arrangement, but going back to full time might make sense to. As you mentioned, the feeling of burn out will hopefully be reset by that point.

  6. Hi Joel,

    Your work situation is similar as mine. I understand your feeling. Trust your instinct and it will never go wrong!


    1. Thanks Ben! There’s a good number of us in this community who are rushing through the journey to FI because we are miserable in our current jobs. It’s one thing if it’s a short sprint on your last year, but if you’ve still got years to go, it’s easy to burn out. Better, in my opinion, to use FU money to help create a better work-life balance during the journey, even if that causes the journey to take a bit longer. I am working on a future post on this topic – stay tuned!

  7. Wow you guys are reaching your goals pretty quickly! My husband and I sat down virtually (he works in a different city now) and we looked at our numbers and we were surprised how it grew! We scratched another FI milestone goal off our list, but we still can’t retire early because well, mortgages (rental + current house)!

    Realistically our FI goal is around $750,000 like you, but we made it $1.2M because we want a big cushion for international trips, living abroad, and kids (none so far though).

    1. It’s been a better than average few years in terms of investment returns! We’re a full year ahead of what all my projections expected. Nothing wrong with having a nice cushion – if you guys are happy with your current work-life balance, keep on rockin’ it!

  8. Oooh, awesome post! I’m liking the thought process around your retirement date. We are a bit away from or FI, but as I consider our plan, I think I will need to find a balance between being conservative/potentially getting caught in the “one more year” syndrome vs. accepting risk and willing to be flexible if our plans come tumbling down due to market crash or other unforeseens. I’m looking forward to following your next few months/years!

    1. Being flexible is one of the superpowers of FI! A quote by Confucius that comes to mind: “The green reed which bends in the wind is stronger than the mighty oak which breaks in a storm.”

  9. Disney World – if I recall, they have a seasonal employee plan where you work something silly low like 80 hours per YEAR and get an annual pass plus a handful of free passes for friends & family. I used to work at EPCOT and remember meeting lots of retired part-time employees who worked there just for the free passes for their grandkids. It was also a fun job because they have a company intranet portal thing that lists extra shifts, so you can pick up a random shift checking IDs at a nightclub (back when Pleasure Island was a thing), or serving snacks in a different park, or driving a golf cart around delivering luggage at a resort. Never a dull day 🙂

  10. Very thought provoking post that raises many of the questions for those that are on the threshold of pulling the W-2 plug. Perhaps Fat Fire will relieve the strain of the health insurance dilemma.
    If your costs are down to $25K, does this factor in the future healthcare premiums? Another blogger on ChooseFI was talking about budgeting $20K or so for healthcare. If that’s the case, another $350K designated toward health care would put many people in FAT FIRE and be in the 3.5% rule.

    Thanks for taking the lead. I’m just steps behind you.

    1. We do have healthcare premiums baked into our $25k annual spend, they correspond to the current ACA subsidized rates, or roughly $1500 per year. They’re affordable because the money we withdraw in FI will be so low! As discussed above, we have contingency plans should the subsidies dry up in coming years.

      Budgeting $20k per year for health insurance alone sounds crazy to me… that’s like doubling our FI number. We’d move to another state or even country before budgeting that much! This is another perfect example of choosing flexibility over fear. Cheers!

  11. Very enjoyable article. Your poor timing was entertaining to read, no offense! I hate that you had poor timing but hey, it was the basis for a great article!
    I’m with you on healthcare costs, it’s a HUGE concern of mine. When it comes to early retirement I have only two major issues; healthcare costs and property taxes (I reside in TX where property taxes are enormous!).
    If I can get these two figures out I’ll be on FIRE!

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