It seems almost par for the course – if you are in the FI community, you have a number, a special number, 25 times your annual living expenses, and once you “hit” that number, you’re FI. There’s a fat FI number, a lean FI number, probably a hundred other ways to do it. I find myself instinctively pulling back when those conversations start. Knowledge is power, and I should become more knowledgeable so I can be more powerful, but…I can’t. Here’s why.
1. I have no idea how much money I will need.
When I was 24, my salary was $2700 a year. I lived in Ukraine as a Peace Corps volunteer, and I lived pretty well. If I had calculated my FI number then, it’d be $67,500. And at the time, I really didn’t have a sense that that might not be enough. I didn’t know anything about car insurance, or health insurance, or even what my student loan payments would be once I made enough money to make payments. I didn’t know that my boyfriend’s mother would eventually move in with us and become wholly dependent on us. I didn’t know gas could get above $2 a gallon. I didn’t even have a cell phone.
When I was 30, we had a new baby, I was in graduate school, our family made something like $30K a year. That seemed like enough; my FI number at that point would have been $750K. We shared a car, we house hacked. “Kids are only as expensive as you make them” seemed like a reasonable thing to say, and Sonya really only cost us maybe a hundred bucks every month for those first few years. I did not know the cost of preschool, or that my kids were going to be the kind of children with voracious appetites for sports and music. I didn’t know that fairly standard birthday parties can cost hundreds of dollars. I didn’t know anything about summer camps or Disney World. I couldn’t imagine a yard big enough that we would need a riding lawn mower.
At 35, we were probably making $50K. It definitely seemed like enough. We bought an affordable house, I met with a retirement guy who said that we were saving enough for retirement if we expected to live off that same salary. One car, two jobs, two kids. I hadn’t considered physical therapy copays for my youngest daughter. I had never heard of a jugular foramen schwannoma, and I didn’t know that the value that I would get from my kids being on the gymnastics team meant I would happily pay $2400 a year for it. I did not know that it is customary to give teachers Christmas presents, or the cost of creating a yard that my family loves to frolic in. I had never heard of Justice, a store designed with the sole purpose of separating parents of pre-teen girls from their money. I didn’t realize that when you stop at a fast food place because you’ve been driving for 6 hours and have 6 to go, feeding a whole family costs $40 instead of $12. I didn’t know that the cheapest used saxophone at the music shop in town is $545.
I’ve proven myself to be incredibly naive when it comes to future costs. In theory, we are done having kids, my husband only has one mother (but other family members!), and with Sonya entering fourth grade next year, I have a good sense of kid costs. Except I don’t. I’ve heard tell of high school band trips to Florida, of overnight summer camps. I think I have college figured out (they can go to the college where I work for free), but…do I? Do I really? Am I so dumb as to think that kids get less expensive over time? Have I learned nothing?
The house is in okay shape, but for how long? When are we going to need to redo the roof, what about paving the driveway? The push mower broke last week (my husband fixed it, thank heavens), how long until we need a new one? The dishwasher has been on its last legs for 6 years now. What happens if Viv needs braces, or there’s a teen pregnancy to deal with? Drug or alcohol addiction, divorce, termite infestation, house fire? PSLF doesn’t actually forgive my loans?
I haven’t calculated a FI number because I have no idea what my living expenses will be for the rest of my life. I can’t know.
2. Shouldering family responsibility is important to me.
Last week, my 6-month-old nephew went into the hospital with pneumonia. I am so grateful that I live close enough that I was able to pick up his older brother and bring him home with us for a few days so his parents could concentrate on caring for the baby. This meant that we spent more money on gas, on food, on little things than we would have otherwise, and it is something I did not think twice about. I will not think twice about it.
But to calculate a set FI number means to believe that your living expenses now will stay more or less the same in perpetuity. What about when a sibling has a surprise brain tumor and you need to buy plane tickets or rent an Air BNB for a month to help when she goes through surgery (this was not something I did, but rather something I was the forever, forever grateful recipient of)? What about flying somewhere suddenly for a funeral, or taking in a relative who is going through a divorce and needs help getting back on their feet?
And it extends beyond family – when your neighbor gets sick and they can’t afford to send their kids to gymnastics. As a community member, don’t you step up?
I do. And calculating a FI number based on whatever I’m doing now means that I either have to calculate for every possible contingency, or I have to say that I won’t participate in my loved ones’ lives in this way. The former seems impossible, and the latter is not acceptable to me.
3. The stock market sucks a lot.
Don’t get me wrong, I’m depending on the stock market in a lot of ways. But there have been downturns and there have been crashes, and a quick look at global history can show times when entire countries fall to pieces. My husband’s grandfathers both committed suicide when they lost everything after the fall of the Soviet Union. What if you spend your entire life banking on the idea that “it’s always showed these kinds of returns, so it always will show these kinds of returns,” and then you’re left with nothing?
I know, this isn’t really a problem with calculating the FI number, but it is something that worries me about retiring early. There simply aren’t guarantees with any of this, and pulling yourself out of the job market feels like placing a lot of faith into an institution over which you have zero control.
But with regard to the FI number – the amount of money you have in investment accounts may go down instead of up. It may crash to the ground. Considering yourself FI because you’ve hit 4 million dollars or whatever is not a guarantee that you’re safe from what life throws at the market.
4. So, too, does real estate.
Uh-oh, it’s sacrilege time, but I’m going to say it: I don’t trust real estate.
We had a condo, and maybe some day we will buy another investment property. Except maybe not. Our experience was terrible, through no fault of our own (well, through a little fault of our own). But even if you do all of your due diligence, and you buy the best possible house for all cash and get amazing tenants, you cannot control for when a neighborhood gets blighted, for when the neighbors stop paying their taxes, for a meth lab being busted across the street. Climate change could suddenly make flood insurance insanely expensive in an area that was previously pretty okay.
Having a tangible asset is probably better than the intangible stock market, but there are no guarantees here, either. It’s possible, very very possible, to invest a ton of money into a property and lose that money. Even if you cash flow it (P.S. I’m in no position to cash flow anything, so that’s a theoretical right there).
5. It seems kind of…selfish.
When we lived in Ukraine 15 years ago, we lived on $225 a month. And we could conceivably do that again. Except when we go back to Ukraine now, we spend many times that. Is this lifestyle inflation? Kind of. But it is also this: we have the ability to make literally 50 times as much money as my husband’s friends and family. When we go out to dinner with them, it would certainly be possible to say “let’s split up this check!” But it would also be ridiculous. And while that is an extreme example, it feels like setting a FI number is also setting yourself up for a fixed income forever, rather than being willing/able to continue earning money for contingencies and overspending.
I know that I am conflating FI with RE – perhaps I should calculate a FI number so I have something to shoot for, keeping in mind that “FI” may simply be a way of feeling secure in what I have. I don’t really intend to retire early regardless. Still, I shy away from the FI numbers because they are predicting the future based on the present (which in no way works for me), because they place a lot of faith in institutions that I hesitate to think of as guarantees, and because given the option, I’d rather keep making money and keep being generous instead of putting myself on a fixed income.