I read a brief summary of the contents and these ideas were mentioned by John Holt and john Gatto many years ago. I loved Holt’s How children fail because it made me realize how adults fail also. I read his books when I was pregnant and it changed my thinking about education completely. I think the most pivotal 15-20 years of our lives are highjacked from us. It’s very difficult to discover who we are. what makes us each special and what we are meant to do if we’ve spent all that time in a “robot factory” (school).

The only school I succeeded at was the school of hard knocks. Which provided all I needed to accomplish what I have today…

Jacob, I was wondering if you could address the topic of liability insurance (how much to carry, if at all, for ERE minded folks) in your next post. My question (in the Can I retire young) post was rather convoluted – I just would like to know if personal liability insurance as well as health insurance is something the ERE budget includes..

Jacob – how do you think your life would be different if you’d read this book 10 years ago?

I think higher education has been a bubble that is beginning to deflate. What’s the point of accumulating $100,000 of debt for a degree in a relatively non-marketable field? Why has tuition gone up at substantially higher rates than the rate of inflation for years and years? And finally, what’s the point of encouraging everyone to go to college if that means you have to offer remedial reading and math?

@ enid,jacob: I am not an asset protection attorney, but I have been sued once (I was ultimately dismissed as a defendant– after 2 years). Jacob, you have publicly disclosed having a portfolio of at least $300k, yet you have no liability insurance. Perhaps you guard your assets in some other way?

Lawsuits are not based on common sense, or right vs. wrong– they’re based on the fact that an entity has assets that can be readily seized. Even if your nest-egg were depleted due to legal fees, you still have earnings potential (probably your largest asset). As your nest egg would be gone, you’d be back working again, and up to 25% of your disposable income can be garnished. I guess that wouldn’t be too much of a problem for you, since you saved around 80% in the past employment, but it would slow down you’re move to re-retirement. Also, I may be mistaken about this, but I think that in California your spouse’s wages can be garnished to pay your debts, even if the spouse is not involved in the claim (and vice-versa). So realize that the attack on your assets may not even stem from your own actions.

My experience has shown me that one cannot reliably prevent being named in litigation– but one can reliably reduce the effects of such an event. I submit that asset protection is an important part of financial planning, particularly for the ERE crowd.

@Jacob – I apologize, sincerely. I must have wrongly inferred that amount.

Jacob,

I can’t believe you don’t carry any liability insurance! Is this something you would consider carrying at all in the future, as your net continues to grow and you rely on it in old age? I would not describe myself as a scared person in general, but I have recently witnessed a close friend being frivolously sued and she might have to give up her assets and declare bankruptcy (auto). She too only carried the minimum, as did I (I now carry 50/100/50 for a few dollars more in premiums).

At least would you consider carrying more into auto insurance, since if you ever caused an accident (these things unfortunately happen, as in my friend’s case) and someone claims to have neck/back/whiplash etc. and runs up hospital bills like crazy (as is happening to my friend) then you would have some barrier of protection. I live in southern cali, and the number of frivolous hospital-related lawsuits over MINOR car accidents here are just awful. A person can easily lose their entire life savings over something like this.

Also, do you carry any health insurance? I don’t at this point… I trust your analytical ability to take calculated risks, which is why I’m so interested to read your “philosophical take” on insurance. It would be a very interesting read.

Astounding…

@enid – I asked the high commissioner in charge of our insurance (DW) exactly what our numbers are. Our liability coverage is 100/300/50. Our comprehensive is very low and our deductible is very high (if damaged, we’ll just buy a new car or preferable not have a car anymore). I have a HDHP with an HSA (described elsewhere on the blog) with a $4500 deductible. Also, I take great care not to be unhealthy which significantly lowers my odds. In more general terms, due to obsessive contingency planning, accidents (unforeseen things) pretty much never happen to me. I operate under the principle, that if anything is physically possible, it will happen and so I make accidents impossible to happen. So statistically speaking I’m wasting money buying insurance (hence always asking for the highest deductibles).

@ Jacob,

But in the event of unforeseen medical emergencies (such as cancer, for example) would the health insurance that you have (HDHP) cover everything given that you can pay the deductible? I’ve never heard of HDHP but will definitely be looking into it. It’s a bit of a downer topic, to be sure, but there are so many unpreventable/unforeseen medical problems that can really drain a person’s savings. Like you, I plan to pay the highest deductible and just take care of my health, but I would still like the peace of mind of knowing that I’m covered.

@ Mo,
Wow, I can definitely see the logic behind not carrying *too* much insurance. I just have a very humble nest egg at this point, and don’t plan on ever purchasing balloon insurance (or anything over 50/100k range) in liability which I only have for auto. Is an IRA considered a protected asset like a house? I’m one of those rare people with NO assets whatsoever (no house, beater car, few material goods to my name) but I own a few humble CDs. I was initially pretty frustrated when I realized that such assets are not protected. So that means that frugal savers are pretty much not as protected by our society as spendthrift debtors. Weird laws, whatever.

@enid – Look into it. I have some old posts on HDHP and HSAs.

@Robyn – I think that only holds for 1 in 20. The rest are going in for schooling so they can get degrees with the minimum amount of actual learning (“will this be on the test?”) so they can exchange their degrees for good jobs to pay off their student loans.

@Jacob – thank you for your responses. I do apologize if my tone was a bit too panic-stricken (i.e., irrationally fearful of the various “risks” in PF-verse) in my previous comments. I’m already an INTJ who becomes defensive at the thought of losing control, or what little “control” I have over my own humble existence in the form of my equally humble finances. I was also recently in an auto accident and was shortly afterwards caught in a riptide at a beach (unpleasant to say the least!) and thus I’ve been in a rather existential frame of mind lately. Applied to PF, not a good combo! Heh.

Ironically, I feel a lot better after finding out this tidbit of info: According to the National Safety Council, one’s yearly chances of dying from external causes (accidents) were 1 in 1,755 in 2002. One can assume that being frivolously sued *and* at the same time losing all of one’s assets is around the same odds. (Being sued by the RIAA is 1 in 1,840, as a reference point.) I guess this NSC statistic, oddly enough, comforts me because it puts all the other financial-disaster “what if”s into perspective.

I guess what I’ve realized is that *everything* in life is a calculated risk. Nothing is completely safe. Sometimes ‘safer’ is the best we can do. Which is why I respect the fact that you contingency plan/save/invest/strategize in a really hardcore way (the most hardcore I’ve seen yet). I’m in my 20s and I’m planning on making sacrifices that I hope will pay off in my late 30s and 40s onward, and your ERE philosophy is totally in line with that hope. Cheers.

The value if a college education I something I’ve been thinking about a lot, lately.

Attending a state university for six years, earning a bachelors and masters degree would cost approximately $150,000 at in-state rates.

Studies show that the average person with a masters earns $2.5 Million more than the average person with just a high school diploma.

If I had that $150k saved up and instead of spending it on child’s college, invested the money in an index fund, that money would be worth about… $2.5 Million.

Now, if I spend the $150k on college, my child could conceivably earn the higher income and invest enough of his/her income to also have $2.5 Million saved/invested at the end of his/her career.

The biggest difference seems to be that a college graduate’s higher income contributes to a higher level of consumption, higher tax contribution, and greater impact on government finance indicators (GDP, etc…). There’s definitely an incentive for our government to encourage people to get a degree.