If you read my last post a few months ago, you know that [and why] I decided to put a moratorium on blogging and instead decided to take up an interesting offer to go and do ‘rocket science’ as a quant in Chicago.
Let me tell you: Having access to all these trading tools, data, and computer infrastructure and spending the day developing financial models sure-as-hell beats discussing the exact meaning of the word “retirement” with some semantics-yahoo or having to see the “living in a van down by the river”-joke for the Nth time posted on some popular internet forum by someone who doesn’t understand budgeting or basic retirement math. Forsooth(<- I haven't used that word for a while), having a quad-monitor setup beats sitting with a calculator at home reading 10Qs and writing an occasional comment/post about it and potentially switching position to a new stock every 2-3 years. There's "reading and writing about airplanes and then there's getting a chance to fly them for real". I think I'm experiencing what extroverts refer to as fun-fun-fun. Here I hurry to say that my version of introvert fun-fun-fun involves something like the above; not lying face down in a pool in a Thai beach resort half-passed out from drinking too much beer after a particular masterful karaoke(*) impression. I'm more the type to lie face down on a keyboard after a particularly productive coding session.
(*) Karaoke --- a Japanese word that I think means something like "shamefully embarrassing".
Overall, changing track was a good decision.
Occasionally (maybe once a month or so) I get an email out of the blue (i.e. "Hi, I just discovered your blog ...") from someone who made some ERE- or YMOYL-like choices twenty or thirty years ago and who are still going strong. That is, they learned to live well without spending much money and then saved the rest to render them financially independent. Often these emails come with interesting stories about what said person has done. Anything from being a ski-guide to pictures of their home in the tropics, to living in a tent on Hawaii for a year, winning chess championships, going back to college, learning a new language, moving to other countries, studying the combined works of some philosopher, running a monthly marathon, to living on a boat.
We gotta keep in mind that 1) ERE is not rocket-science---any critically thinking person should be able to come up with the not-so-complicated concept that saving a much higher fraction of one's paycheck will allow one to retire (become financially independent of earned-income) much earlier than the default 10%; 2) For every writer telling his or her story there are 500-1500 non-writers out there independently doing what the author is writing about.
This should help some folks separate the message from the messenger. The idea that I should somehow be representative of living frugally and being financially independent and that everything about saving and investing money stands and falls with my personal decisions is therefore ridiculous. I'm a sample size of 1 out of 1500. (As any statistician will tell you, you can't conclude anything about the distribution from N=1.) Add to that the other dozen books that have been written over the past two decades and it suggests that there are 10000 people out there doing this or one in 30000 (I'm only counting Americans). This also explains why odds are low that you personally know someone who is FI/RE. However, much like the temperature in your backyard doesn't prove or disprove global warming, whether you personally know anyone who FI/RE'd doesn't prove or disprove the possibility of it. Math does that. Ask your CFP how the numbers work out.
The thing I've learned about writing/blogging is that some popularity is good [because you get to see some interesting people you otherwise wouldn't have met], but too much popularity is bad [because a lot of people you'd rather avoid get to see you]. For example, if you're living in the 16th century, discussing your round earth theory with fellow scientists is good. However, being publicly known as the round-earth guy will get you burned at the stake. In general, I don't think humanity has changed much since then. The life-lesson I've learned from this is to avoid politics or challenging the average person's assumptions. This is also why I don't really feel compelled---let's say, I’m rapidly giving up on the idea—to “save” [insert cause] anymore. Most if not all problems in the world today have economic or technological solutions which could be adopted if everybody just agreed to get it done. It’s just that those problems (e.g. starvation, war, species extinction, …) are not considered worthwhile by enough people.
However, with this experience I now know I’m not the one to get people to agree on what’s important. I’ll leave that to someone else who’s more skilled in salesmanship and politics. My sphere of competence is providing technical solutions, not psychological solutions, so I should stick to that.
Hopefully this lesson will stick.
So I guess I’ll just do what most people do: outsource the job to charity rather than personally suffer the abuse that comes with doing politics.
Some of you might be interested in how our budget has changed moving to Chicago.
Three words: Reverse sticker shock.
Health insurance dropped from $99/month to $85/month. I’m still using an HDHP/HSA for now. As has been discussed here many times before (yet a woefully large number of people still seem ignorant of this kind of insurance), the HDHP/HSA solution is ideal for a healthy person with massive (six figure) financial means. The deductible on those plans is typically $5000/year. This means that should you get cancer or something equally serious which will max out your entire deductible year after year (that is, you’re REALLY REALLY sick and likely to die), even a mere $100k will still last two decades.
Note: That we’ll switch to corporate (tax-subsidized) health insurance once I qualify. Unlike the last one, this company actually provides spousal coverage which is cheaper than two HDHP/HSAs.
RV insurance obviously fell away. The car insurance dropped in price as well—drivers in Chicago might be crazy but they’re apparently not as bad as the Californians. Gas is slightly cheaper, but the car is rarely driven anymore. We’ll probably sell it in a couple of months.
Food is cheaper.
The cheapest rent in Chicago starts at $600/month w/o utilities. It’s practically impossible to find anything under this(*). We’re at $875 in a 1BD apartment with heat and water included. With more time we could probably have scored one of the cheaper units—that is the cost of ignorance/not living in the area/having to find something quick (weighed against the higher cost of temporary living); we might move into something better (less expensive!) next year. Gas and electricity barely comes out at just a little bit over the connection fee. So housing costs have increased by roughly $300 total or $150/month per person.
(*) However, housing is cheap compared to the other places we’ve been looking (Oregon and New Hampshire, FYI). Non-fixer-uppers in Chicago proper seem to start at $125 with fixer uppers around $75k. Reduce by $25k if you’re in the burbs. This is certainly worth considering. We’d just pay cash.
Sports have been reduced to $0 whereas subway (my ticket to daily entertainment) has increased from $0 to $90 so that’s a wash. I should start biking soon.
So to be very conservative, my budget has increased by about $100/month standing at about $650-700/month.
Seeing as the market recently went up [to a point I now consider overvalued or bubbleishly bullish with analysts calling for low forward P/Es despite profit margins at a historical highs—shouldn’t they know better?!], my withdrawal rate is still under 2.5%.
This means I can easily eat whatever increases in health insurance that may come along as I get older.
Actually, if we combined the household savings (as many more traditionally inclined (read: older than 50) folks seem to insist on), both DW and I would be FI now. DW is thus spending some time figuring out what she wants to do in terms of career, making the right choice, etc.
I’ll write a new update if/when something interesting happens …
(Keep your eyes on the forum for possible meet-ups around the country in the future. There’s one in LA tomorrow.)