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  • Bogleheads® Live with Mr. Money Mustache: Episode 44

Bogleheads® Live with Mr. Money Mustache: Episode 44

Post on: May 15, 2023 by Jon Luskin

The John C. Bogle Center for Financial Literacy is pleased to sponsor the 44th episode of Bogleheads Live with Mr. Money Mustache.

In this podcast, Mr. Money Mustache answers questions about early retirement, investing, and more. The online blogging pseudonym of Peter Adeney, Adeney is an early icon in the early retirement community, championing frugality and a do-it-yourself approach to much of life – not just investing.

Mr. Money Mustache

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Jon Luskin: Bogleheads® Live is our ongoing Twitter Space series where the do-it-yourself investor community asks their questions to financial experts live on Twitter. You can ask your questions by joining us for the next Twitter Space. Get the dates and times of the next Bogleheads® Live by following the John C. Bogle Center for Financial Literacy on Twitter. That’s @bogleheads.

For those that can’t make the live events, episodes are recorded and turned into a podcast. This is that podcast.

Thank you for joining us for the 44th Bogleheads® Live, where the do-it-yourself investor community asks questions to our guests live on Twitter. My name is Jon Luskin, and I’m your host. Today’s guest is Pete Adeney, better known as Mr. Money Mustache. Pete will be answering your questions.

Let’s start by talking about the Bogleheads®, a community of investors who believe in keeping it simple, following a small number of tried-and-true investing principles. This episode of Bogleheads® Live, as with all episodes, is brought to you by the John C. Bogle Center for Financial Literacy, a 501(c)(3) nonprofit organization that is building a world of well-informed, capable, and empowered investors. Visit boglecenter.net to find valuable information and to make a tax-deductible donation. Or you can jump straight to boglecenter.net/donate.

Before we get started on today’s show, some announcements: registration is now open for the 2023 Bogleheads® Conference. Our 2023 conference will be held on Friday, October 13th through Sunday the 15th in Rockville, Maryland. We have a slate of fantastic speakers, both personal finance and investing experts, including Charles Ellis, Mary Beth Franklin, Clark Howard, Paul Merriman, Wade Pfau, and Brad Barrett. We’ll also have Bogleheads® favorites such as Christine Benz, Dr. Bill Bernstein, Rick Ferri, Mike Piper, Alan Roth, and much more. Go to boglecenter.net/2023conference.

Another announcement: this will be the last Bogleheads® Live show until we start up again in fall of 2023. In the meantime, you can find me guest hosting the Bogleheads® on Investing podcast normally hosted by Rick Ferri, who’ll be taking a summer sabbatical to travel. I already have several fantastic guests lined up, including Nobel Prize winning economist William Sharp, Jonathan Clements, and Bogleheads® favorite Mike Piper. Find that podcast on Apple, Spotify, Google, or wherever you get your podcasts.

Before we get started onto this show a disclaimer. This is for informational and entertainment purposes only and should not be relied upon as a basis for investment, tax, or other financial planning decisions.

Let’s get started on today’s show with Pete. Pete, thanks for joining us today on Bogleheads® Live. Let’s start with our first live audience question. This one is from Tyler.

Tyler (audience): You put up a post about self-educating children and your own son, I know you’ve done interesting things with teaching and schooling. Now that your son is almost done with traditional age of schooling – 16 teenager or so – what’s your parenting take on looking back?

And I have two daughters, eight and five. If he was 10 years younger, what do you think you would’ve wished you had done back then?

Pete Adeney: For me, early retirement, the main reason I did it along with my co-parent wife at the time is that we wanted to have the most free time to devote to parenting. So that is the biggest thing that I look back on with incredible fondness and gratitude is absolutely no regrets that I gave up on the fancy career side of things and just made everything second in my life except parenting. And even today, my son is with me this week and it’s just so nice to have that free time, and we can just go for a walk whenever we want and we can dive into some projects together or whatever.

That part has been amazing and, in a way, it helps with the kids’ schooling too, because you’re devoting so much time and energy, and if you’ve got a good education yourself and some curiosity, I think that rubs off on the kid.

And then separately, the whole homeschooling thing, that’s really a personal decision and it depends on the lifestyle of the family and the kids’ needs. My child happened to do mostly public school education, but then he switched to homeschooling a little bit in middle school, and now he’s fully homeschooled through high school. He’s on his own curriculum. He’s pretty much done with the regular stuff a couple years ago.

So really, I think it’s been fantastic and it’s been perfect for the needs of my son. The only thing I would do is, if I could magically go back and inject some more adventure into our lives, maybe push a little bit harder for more international travel with him when he was more flexible to do that stuff.

Overall, I would highly recommend the basic path to anybody, which is just having your own life as a parent fairly open so that you have space for your children.

Jon Luskin: We got a few questions about FI theory and how your beliefs may have changed over time. Let’s start with one from username, “AerialWombat” from the forums who writes: “If he were 30 again and was considering FIRE today in 2023, what different criteria might he apply in the decision to FIRE or not?”

Pete Adeney: What I would do differently – surprisingly deep question in some ways because you can always look back and question yourself – but from a financial standpoint, probably nothing.

The funny part is I didn’t really know about the 4% rule when we did retire in 2005. I’d read a bunch of investing books, and I knew about cash flow and expected investing returns, but I just hadn’t thought about the 4% rule. But it was roughly what we did just by accident.

Now what I would tell my past self to do differently is just to worry less because right after retiring, I went and started this somewhat risky startup company of building houses, which ended up being a money loser. And I got really stressed out about seeing my paper net worth decline because the housing market and the great financial crisis happened to hit at that time. So suddenly I wasn’t able to sell these houses that we were building at a profit anymore. And I was worrying as I saw the net worth decline.

And now I realize that’s so silly. You should not be looking at your net worth. Which as a financially independent person, that’s really the difference between do I have enough money to last 100 years or 30 years or maybe 15 in the worst case. Those are all very, very nice situations, better than most people ever experienced in their whole lifetimes. But yet, somehow I was allowing myself to worry because of these things. And really in the long run, you’re just like a boat on a big wavey ocean. Your fortunes go up and down and up and down. But as long as you’re still in the boat and moving forwards, that’s really what you should be shooting for is enjoying your life as it goes on. And it’s a great thing to be early retired and not have to work and then have work as an option.

Jon Luskin: And then a related question, do you think the future of the FIRE movement is bright? Do you think it’s still a viable option? If so, why? And related questions from usernames “HomeStretch” from the forums and “CookieDough” and username “DoTheMath.”

Pete Adeney: Does the future of the FIRE movement look bright? I think, yes. 12 years on from when I started this blogging, I’m absolutely thrilled there’s something called the FIRE movement. I didn’t invent this movement or the name. And that’s actually a great sign that I didn’t invent it because I think it means there’s many other people involved and it has momentum of its own.

It’ll always be a viable option because all we’re talking about is being slightly ridiculous with our spending decisions. It’s not really about early retirement, just about more conscious spending and reducing waste, and that leads you to the option of early retirement.

But even if you never retire or you never quite reach the level of wealth to retire early, it’s pretty obvious. Just getting better at making the most of the money or income you do have is going to give you a better and less stressed-out life.

So a battle I fight all the time because there’s always new people coming into the FIRE movement. They’re like, “Well, retire early. I don’t want to retire for this reason, or I can’t, or what if this or that happens?” Relax. Until you get to the moment of financial independence and possibly several years after that, you’re not even quitting thinking about literally quitting all forms of paid work. All I’m really trying to get people to do is look at their spending, and maybe start to optimize things and strip out things that cost you a lot and aren’t giving you much life value.

And that’s been the whole point of my blog since the beginning. And then of course, early retirement, that’s really more like a marketing jingle. Everyone loves the idea of freedom and that’s the path that I chose to take, but it’s really sort of a secondary thing, and you can get benefits from this stuff whether you retire ever or not.

Jon Luskin: You hit on a couple other topics that came up from the Bogleheads® Forums. You mentioned the 4% rule, so I’m going to bring up a question that we got beforehand about just that. This question is from username “TinyHouse” from the forums who asks: “Do you still advocate for the 4% withdrawal rate? If so, why?”

And then related is a question from Harry Sit from Bogleheads® Reddit, who asks: “It’s been almost 20 years since you retired at age 30. How do you handle withdrawals from your portfolio for living expenses over these years?”

Pete Adeney: I certainly do still think the 4% rule is a really useful thing. But, how literally you take it really should depend on how close you are to retirement and whether you’re going to literally retire and never work again.

So, for example, if you’re early on in your career, I would think of the 4% rule as like a goal post on the other side of the state that you live in, and you’re running along through a bunch of fields, kicking the soccer ball, you know, working your way down the highways and through the fields and, you’re not going to take a shot on goal at that point and wonder, “is this going to be exactly straight?”

It’s not until you get to the end and then you’re like, okay, now I’m let’s say 40 years old and I have $1 million and my expenses are $35,000 per year. Just to make some easy numbers. At this point, I would be trying to retire with what is a 3.5% withdrawal rate. Is that okay or not?

And then you’d ask other questions like, “Well, 3.5% is a lot safer than 4%, so the chances are yes, but let’s say you’re in some life situation, hypothetically, where you know you’ll never make another dollar in the rest of your life, and maybe you have some medical conditions, or you have people in your family that might need massive support from you. So, your expenses might go up way in the future. In that situation, you might say, all right, well 3.5% on my million-dollar retirement fund is maybe a little risky, so I might want to have some backup plans.

On the other hand, a lot of people do the opposite. They get to a certain point where the numbers look good, and they’ve completely neglected the fact that they’re probably going to get some Social Security income at some point in their lives. A lot of people in the United States have parents that are non-zero wealth and they’re eventually going to get some kind of inheritance. You should think of that as increasing your options. It allows you to have more of a safety margin later in life, even if it’s 20 years from now.

And then, okay, so that’s the basic idea of the 4% rule. And if you really want to get into the weeds, which I know a lot of Bogleheads® do, I’m a big fan – if you’re trying to fine tune it – of thinking about the CAPE-adjusted (cyclically adjusted price-to-earnings ratio) version of the 4% rule, which really just means the more expensive the stock market is right now, the less you can expect in future returns on average of course, because you’re paying more for something as it gets more expensive.

Like right now I had just looked it up, the CAPE ratio is something like 28, and that implies that the safe withdrawal rate is technically a little bit lower than 4% right now. It might be 3.5% if you were looking at today’s prices of your investments, and you would just use that to fine tune and say, do I have enough or not?

And you might need to work an extra year, but maybe not. So much stuff in your life changes beyond just your investment values that it’s really one of the smaller factors I would say. Whether it’s a 4% rule or the 3.5% or whatever.

For those folks who want to learn more about sustainable spending in retirement, answering the question, “how much can I spend?” check out Episode #35 of Bogleheads® Live where we interviewed Bill Bengen, creator of the 4% rule of thumb. In Episode #37, we interviewed Christine Benz who also looked at this question, “how much can I spend in retirement,” using a Monte Carlo simulation. And then in Episode #41 we interviewed Derek Tharpe, who talks about the pros and cons of those two different approaches. I’ll link to those episodes in the show notes for our podcast listeners.

Jon Luskin: I’m going to add Cody Garrett as a speaker.

ody Garrett is going to be a speaker at the 2023 Bogleheads® Conference. You can go to boglecenter.net/2023conference to register.

Cody Garrett (audience): How do you think about emergency funds differently before financial independence versus after you’ve reached financial independence?

Pete Adeney: The word emergency fund, it’s really a good concept for people who are really struggling with debt and cash flow problems. The type of situation where you have no savings and you have debt that you’re trying to pay down. And you have an income that just barely covers your life expenses, plus maybe some debt paydown.

In that situation, if you have a sudden unexpected expense, like a $1,000 car repair or house repair, then you’re not making your debt payments anymore, which can drive you back into debt. So that’s the real reason emergency funds are good for people in that life situation.

Then the reason I’ve spoken out against it is as an early retirement saver, you’re probably way past that point in life, and I talk about people who, they can’t even remember credit card debt if they ever had it, and hopefully no car loan, and then they’ve got income that greatly exceeds their spending. And then hopefully they also have a bunch of savings built up in your retirement account. And on top of that, in taxable accounts that are also targeted towards future financial independence.

So in that situation, everything is an emergency fund, right? If you have a high income, then of course your next paycheck is your emergency fund, because let’s say your paycheck’s going to be $3,000 and your expenses are $1,500 for that period. Well, guess what? There’s $1,500 to cover that unexpected $1,000 repair. You just cash flow it. And then presumably you also have a Vanguard account that might have like $10,000 up to multiple hundreds of thousands in it. So, if an expense happens bigger than your next paycheck or whatever, then you can just draw out of that.

In the case of not having the income, well, I’m assuming if you’re financially established, then you also have some savings. Of course, you just withdraw some stuff if you need to. I’m also a big fan of having a line of credit or, nowadays I use a margin loan on my brokerage account. I don’t really have emergencies in my life, but I use it for emergency fund stuff. Like, oh no, I have to help a friend buy a house, so I need $200,000 to issue a temporary loan. And that’s really great because you can pull out money, which just starts accruing interest that you owe. And then when your friend pays you back, or whenever you earn more money, you just pay that loan back. And you can always choose to sell more shares at that point.

And then if all that sounds like crazy rich people talk and you’re like, “well, I don’t have savings,” an emergency fund is good in that situation because if it’s going to prevent you from having to go into high interest credit card debt, then yes, you should keep some cash for the day-to-day fluctuations.

Cody Garrett (audience): Just a quick follow up question. A lot of people lose their jobs at the same time that the market is having volatile moments. Would you still pull out of savings regardless of what the market is doing in that moment or is that where you’d switch to more of a line of credit?

Pete Adeney: The basic idea is if you hold a bunch of cash, instead of keeping it invested in the market and you’re doing that with a thought that, well, maybe I’ll lose my income and maybe I’ll need this and maybe the stock market will be down at that moment. So, this cash will protect me from having to sell my shares at a discount. Really a bet against the long-term actions of the stock market, which is on average a losing bet.

It’s true that if you do take the all-in in stocks approach and exactly what you described happened, oh no, you lose your job and it’s the Covid era. And the stock market goes down a bunch and then you have to replace the shingles on your house all in that same month. In theory you would have to sell some shares at a lower valuation. And that’s a risk, and it really depends on how comfortable you are with risk.

I’m pretty comfortable, because I always just think about the long-term statistics of everything and I don’t mind short-term losses. Because I think in the long run, as long as I’m making reasonable decisions and betting on the same side as the house odds, then I’ll be all right. But that is a big benefit of having some line of credit type stuff set up. Line of credit or a margin loan on your brokerage account because it really does give you more flexibility in those moments.

Jon Luskin: Pete, I’m curious. Have you ever looked at the fine print in that agreement with that brokerage? Are they able to pull that line of credit whenever they want? Or is that yours forever? Are you always going to be able to access it in any situation?

I just can’t help but think about how some HELOCs got pulled during the Great Financial Crisis. And do folks have a similar level ?

Pete Adeney: So, I did read as much as I could. I read the whole brokerage account from my brokerage, which happens to be Interactive Brokers. There’s a bunch of muddy stuff in there where they try to cover their asses just in case they want to change their policies. They’re like, policies can change.

But the real answer is, you have to keep in mind that the stock market could drop down 50% on short notice. So, I would advise you to think about what’s the margin requirement even in that situation.

And that’s even worse if you have individual stocks. They could go down a lot. And then I’ve noticed Interactive Brokers for stocks that are really beaten down, they’ll say, well, by the way, we’re changing our margin requirement on this stock. Whereas before you were allowed to borrow 50% of your balance, now it’s only 25% because we’ve noticed it’s volatile. So, if you were operating close to the limit in that situation then what was a safe limit may suddenly be over the limit. And they could force you to liquidate some of your shares at a loss.

I’m a big fan of just taking it really conservatively. I hold a bunch of really stable index funds in my brokerage account, which means that they don’t fluctuate a lot, which means they have a lower margin percentage requirement. And I believe it would just stay active forever.

And now the only big problem is the interest rates can go up. Like the first time I used my margin loan account a couple years ago, it was like 2% or 3%. And now we’re borrowing from the same account at like 6.x% percent. So as long as you’re ready for that type of fluctuation, a margin loan and brokerage is a great thing. Home equity line of credit is a close second. And I would say it’s pretty rare those are going to get pulled in any normal financial situation.

Jon Luskin: Just want to touch on something Pete mentioned. Index funds, certainly they can be less risky than owning individual stocks. But we still have some risk when investing in index funds.

As an example, we’ve had some companies quite recently disappear entirely. They were wiped off the map. The recent bank failures, Bed Bath and Beyond, those stocks have pretty much gone to zero. There’s a lot of risk there.

Now, alternatively, we can compare that in the worst case to a low-cost index fund. Now for an all-stock fund such as the S&P500, we can see while this certainly has never gone to zero, in the past it has lost a lot of value during some risky times.

We can take a look at the Great Financial Crisis. We can see that the S&P500 lost a little bit more than 50%, half of its value from the tail end of 2007 through March of 2009. So, index funds can be less risky than individual stocks, but we still have a lot of short-term risk when investing. That’s why it’s important to have a long-term approach.

Pete, you touched on work optional, so let’s pivot to that topic. This question comes from username “unwitting_gulag” in the forums who writes, “Are there any circumstances in which a frugal investment-oriented person might nevertheless rationally choose to not retire and instead pursue a traditional nine to five through a conventional, lifelong career?”

Rick Ferri, for example, he likes to put his own spin on the FIRE acronym. Usually, Financial Independence Retire Early. He likes to think of it as Financial Independence Remain Employed. What are your thoughts on that?

Pete Adeney: Sounds awfully simple. If you enjoy the job, then of course why not keep it? My take on FIRE is not even really about necessarily early retirement. I still work. It’s just very sporadic and random, not every day. And sometimes it’s construction and sometimes it’s blogging. I certainly don’t have interest in a nine to five job or anything with a schedule or requirements or deadline.

But other people are different. And especially if you have a career that’s meaningful to you, like whether it’s a teacher or doctor, or any of these other things that happen to feel like a useful investment of your time, then I’m really happy for those people. Because it does make the financial thing even simpler to have this income constantly coming in.

And, if you’ve got a relatively frugal lifestyle relative to that income, you’re going to keep on building up assets and investments even while you don’t even notice it because you’re doing what you want to do anyway. And, that’s a really great situation to be in.

My only advice to a person like that is if you do keep accumulating money, just remind yourself how much it is and just keep asking yourself, “am I doing the right thing given all these options open to me?” Like, would I rather have a different job or should I be more generous with this money? Am I going to be the richest person in the graveyard?”

Money does give you a lot of options. My newest blog article is about this situation where I found I wasn’t taking into account my own level of wealth, and I was maybe missing out on certain things based on being stuck in too frugal of a mindset.

Jon Luskin: Let’s jump to an audience question.

Jonio (audience): My question is related to what you were just saying, I’ve started to realize it seems like there’s a gap in workplace options between full-time and zero retired.

Pete Adeney: Yeah. Well, actually, maybe a question for you first is does this apply to your own life? And if so, what career are you?

Jonio (audience): Software engineer.

Pete Adeney: Yeah. Okay. It really depends on if you’re in a certain branch of software engineering that makes it tricky to be part-time. I definitely know because I was in that field as well. So, a lot of my friends who are around now, they do have part-time jobs. One guy just joined, for example, a satellite software company here in the Boulder area of Colorado, and he works about half-time, and most of that’s from home. So, for him it works because he’s also got a couple of daughters at home and he likes to be around with the family.

I think it really just a matter of reaching out. A lot of people don’t really reach out as much as I think they should when it comes to either changing their current job or looking for new ones. And you’d be surprised how high the hit rate is if you go on LinkedIn for example, and find your old friends and colleagues and be like, “I’m looking for exactly this.”

And then sometimes it really will come to you or if you read about a company in the news, and then you just find their contact page and say, “Hi, I’m a software engineer and I would like to do exactly this thing for you.” It works out better than many people think. If you’re unsatisfied with your job right now and you’re not reaching out at least once a week to a new person or employer, then that would probably be the first thing that I would try.

Yuji (audience): My question is at what age did he start investing and how much did he save for investing monthly?

Pete Adeney: What age did I start investing? I would say more playing around at roughly age 19 or 20. And that was ill-advised stuff because I didn’t really know about index funds at the time. So, I was a college student. I had some of my money that I had saved. It was basically my tuition money from working at the gas station and all these other crappy jobs.

And then I got a part-time job working in an engineering company. At the time it was called Newbridge. It was Canadian Techstar at the time. Oh, Newbridge is going to go through the roof. I’m going to put like half my tuition money into that. And then, it went up a bunch and then it went down a bunch. And then it was super stressful, and I probably lost a bit of money and then learned my lesson by selling out. I wouldn’t say that’s investing, but it’s a lesson in what stocks are and how they behave.

And then my real first experience in investing was just after graduation, so maybe 21 or 22 years old. And then the company had an employee retirement plan – a 401(K) equivalent – and just your basic auto paycheck deduction. And that was pretty low. Maybe 10% of my pay was going in there. It taught me some more lessons. At the time, I chose an actively managed fund, which performed really poorly. And then after moving to the US and having more jobs and having higher income, then that’s when my investing really began. So, let’s say age 24, that’s when I discovered Vanguard and index funds and I put everything, both my employer type plan and all my after-tax savings into that stuff. And that was what really worked and still works to this day.

I would say that the age doesn’t matter too much. What really matters is when you reach a financial situation in life, the combo of earning versus spending, that you have some surplus, that’s the right time to start investing.

Jon Luskin: Let’s talk about some investing. We’ve got a few questions from the forums about investing and from Bogleheads® Reddit as well. “BuonaDomenica” writes: “What is his current portfolio asset allocation? Is he still VTSAX and chill or does he now add international stocks and bonds as he is getting older?”

For those who aren’t investing nerds, VTSAX is Vanguard’s low-cost US total market index fund. This fund invests in pretty much every publicly traded stock in the United States.

While a low-cost US total market stock fund like VTSAX can be a great way to invest because it’s low-cost and it’s diversified, there still is quite a bit of risk with that approach. Adding international stocks and bonds to a portfolio can help manage risk when US stocks next underperform.

Pete Adeney: VTSAX is the majority of what I hold and what I would continue to buy. Around 2014, because of the advent of robo-advisors, I started a thing called the Betterment Experiment on the blog where I started putting money into a Betterment account. It’s sort of the second option you described, which is mostly American Funds equivalent to VTSAX. It’s mostly Vanguard ETFs in there. But then it also has an international allocation. Still Vanguard funds. But basically, the VXUS like Vanguard excluding US portion of that, maybe even like 30 plus percent. And then there’s a small percentage of bonds, too. I have mine set to, I believe, 10% or 5%. So that’s automatically managed and rebalanced by Betterment. And it does tax loss harvesting in the event of volatile markets, which has ended up working a lot better than I expected it to.

So that’s my allocation to international stocks is basically through my Betterment account. And I have a public one that I make visible on the blog; it’s performance over these last nine years. And then I’ve also put an additional amount into my private personal account also at Betterment, just because I thought it was still a good value, price-to-earnings wise. So, that’s most of it.

And then, confession time. I also have a couple of stocks, like a little bit of Tesla just because I am a fanboy of electric transition, especially solar and energy and storage. That’s a bad idea. It’s a very volatile stock. So, it’s just mainly to keep me tuned in and because of a bunch of friends have it really, really tiny, like 1% of my net worth or whatever.

For similar reasons, I also have some Berkshire Hathaway shares because many, many years ago I read a bunch of books on Warren Buffet and I really liked his philosophy, and I liked the idea how they had in the past outperformed the market. So, I bought some Berkshire Hathaway at the time and I’ve enjoyed following along. Again, maybe not the best advice. So long story, pretty much Bogleheads® is my real allocation.

Jon Luskin: We’ve got a related question on investing. This one is from username “anoop” from the forums who writes: “Is it possible to build a retirement portfolio without stock investments? If so, how would you approach it?”

Pete Adeney: First thing that comes to mind would be rental houses. Rental houses or apartments are in theory a way to get similar returns in the stock market or better. If you are good at managing, which involves some analytics and some people skills when you have rental houses, it’s a business rather than a passive investment. A lot of my friends who are early retired, they do rental houses. And they do really, really well in exchange for the work that you put into it.

But aside from that, I don’t really see anything nearly competitive with stocks. Like you can of course think about bonds or fixed investments. Up until this most recent year, that was almost a zero-return situation. Like you’d get less than inflation type returns. Now that the rates are a little higher, I guess you could just ladder up on a whole bunch of bonds and Treasuries and then in theory, you could set up income for life. You just might need a larger portfolio to get your income covered versus stocks, which I think still have a longer, a higher long-term expected return.

Jon Luskin: So, you’ll notice that Pete answered the question “how do I invest outside of stocks?” by talking about bonds and real estate. Why those other types of investments? Well, those other types of investments have “intrinsic value.” That’s a nerdy way of saying those things are in the business of generating cash.

Pete didn’t suggest crypto or gold or Beanie Babies or NFTs. And that’s because you only make an investment return on those types of things if you can get someone to buy them back from you at a higher price. And what if that doesn’t happen? That’s why sticking with those investments that are in the business of creating money is a less risky approach when it comes to managing your wealth.

I’m going to add Margaret as a speaker.

Margaret (audience): Why do you think there are so many engineers in the FIRE community?

Pete Adeney: First of all, among my own blog readers, there’s a weird phenomenon that Paula Pant and I observe, is that the audience often reflects the demographics of the creator or the blogger.

So for me, there’s a lot of white dude tech bros, for better or for worse. So that’s like software engineers and people work in Silicon Valley and men and women. But when you look at my co-working space, it does fit that demographic.

And then meanwhile Paula says, oh yeah, I end up with a lot of minority and non-white women, who come from lower income backgrounds who are fans of my podcast, which is exactly what her background was before becoming the Afford Anything creator and host.

So that part is kind of funny. I imagine there’s other people in other disciplines and other creators that have different audiences. Now, if these people are coming from Bogleheads® and Reddit, that is also a relatively tech-oriented and engineering-oriented audience.

That’s just a guess at the reason. And the final one is maybe just that it’s a little bit of a logic-oriented and numbers-based pursuit. This idea of investing and getting enough to invest so that you can quit working not wanting to conform to social rules. That’s kind of an engineering thing in general. So that’s my guess.

I do hope it keeps spreading to more and I’m trying to find ways and promote other writers and creators who are not like me so that the message can spread to people who are different because it benefits everybody even if it currently interests engineers a bit more often.

But I think everybody could benefit from having less stress around money.

Jon Luskin: Let’s move on to another question that we got beforehand from the Bogleheads® Forums. This one is from username “StoaX”, who writes, “Ask him how inflation has affected his spending. When you’re already living a frugal life, there’s less ways to cut in an effort to offset inflation.”

Pete Adeney: I was watching my spending as inflation happened over the last year or two. The biggest thing I notice is certain food prices go up. I often marvel at how my son’s favorite brand of take and bake pizza used to be $11 for a three pack of these pizzas, and now it’s $16. I’m like, wow, that sounds expensive every time I toss it in the cart. So, in theory, that’s adding up to bigger numbers on my spending.

But to be honest, I’m a little bit of a hippie and I don’t track this stuff very much. I buy what I want to, and then the credit cards get auto-paid from the bank account, and I’ve always felt like there’s a bit of a surplus anyway.

As long as you’ve designed your early retirement with enough surplus, then these fluctuations and prices probably shouldn’t affect you too much. Because remember, in the long run, inflation is a neutral thing to a person who’s living off investments because in theory, the companies that you own, their earnings are going to go up in absolute dollars. I probably own shares in the company that made that pizza. So now their sales are higher. And then their profits are a higher number, even if it’s not a higher percentage profit margin, because they’re paying more for ingredients. And then that eventually feeds back into the nominal stock prices. So, if you have a million dollars of shares and then there’s 20% inflation across the entire country over the course of several years, your new shares should be worth about $1.2 million just because what inflation really is, is the devaluation of your currency by a small percentage. So, it should be neutral.

If you’re holding a fixed asset like some cash under your mattress, that’s when you really get concerned about inflation. And thankfully, since all of my money is in assets that keep up with inflation, whether it’s my house that I own or the stock investments, and then also my little commercial building downtown where we ran a coworking space, those all just kind of float along top of the waves of inflation and prices.

So I’m not really too concerned about it. If I did ever start running low on money, then I would consider cutting back on things and trying to become more frugal if I needed to.

Jon Luskin: I’m going to add Itzhak. You should now be able to ask your question.

Itzhak (audience): My question is, do you think that the world index is too correlated with growth tech stocks and other assets like value stocks or some kind of asset can hedge this risk? What do you think about that?

Pete Adeney: The US index definitely became more tech heavy because the most valuable companies in the US happened to be tech stocks, like Google and Apple. So, you mentioned value stocks. I’m not really qualified enough to truly predict the future about whether it’s better to also diversify and add pure value stocks. I know that in the history of investing, there has been a bit of a premium return assigned to value stocks, but I can’t guess if that’s going to into the future.

One thing that I like to do though as a reassurance is I diversify in other ways. Like I choose to have my house paid off rather than having a mortgage on it. So having a paid off house is a little bit like having a bond that pays you the amount of the rent or the interest you would’ve paid on a mortgage. So that’s nice. It lowers the pressure that your portfolio has to do.

If things get really crazy, then it’s possible that I would change and broaden out even more. Like for example, if Google and Apple started suddenly being worth $5 trillion each market cap, I might do a bit more investment reading and deciding, oh yeah this is a little bit irrational. Even though I believe in an efficient market, there might be some things that happen that might convince me that maybe it’s not as efficient as I believed.

Right now, though, I’m still pretty happy with how it is. And remember that technology really is an increasing part of the world’s commerce. So, it makes sense that technology companies would be a bigger part of the index as well. Because the economy is digital, there’s just a lot more money that goes into things like, for example, there used to be television cable companies that would make money from advertising, right? And now only a fool would spend a lot on TV advertising because the wealthier consumers are using Google and other online services.

Overall, nothing to be concerned about, but it is fun to educate yourself and try to make sure you are able to question the markets and understand why they’re probably still functioning as it should be.

Jon Luskin: Let’s talk about divorce. We got quite a few questions from the Bogleheads® Forums on that topic. Username “ER999,” username “AnnetteLouisan,” and “H-Town” all ask about how divorce impacts early retirement? What are your thoughts on that, Pete?

Pete Adeney: It really depends on your situation. So, on a purely numbers basis, it should really not affect people too much because if you think about it, there’s two people. If you are early retired and you’re living off of a certain amount of income, and then you decide to part ways and separate your household, and if you choose to each take half of your nest egg, then each got half as much to live on, right? So, less people, you’re only supporting a household of one instead of a household of two. In theory, that should be roughly equivalent. Unless of course you choose to live alone for the rest of your life and still own a house of equal size or whatever. In that case, you’ve increased your rent costs, but your food cost is still going to be lower and you’ll just have one car instead of two or whatever.

And then of course if you’re, hopefully you’re still a friendly and outgoing person, and you’re probably going to meet somebody else. And if you choose to couple up again, then you’ll be back in that shared housing situation anyway. So, I really don’t think divorce is really that giant as an expense as people label it.

On the other hand, if you have a bad divorce, where you’re actually paying lawyers to fight with each other and destroying assets, and

We didn’t have any of that kind of fighting or lawyers in our split up. It was just an amicable separation of two households and now

But I really encourage people to think about that before you get married. I do think most people get married a bit too quickly and a bit too impulsively, and maybe they start families and have a lot of kids without really thinking about, hmm, am I ready for the 20-year commitment per child that this involves? And am I ready for the fact that we might split up with this person? Because there’s nothing really magical about a marriage, like it’s a human relationship and putting a government stamp of approval on it doesn’t make it all that much more likely it’ll last forever.

So I would suggest, always have a plan and don’t make yourself financially dependent on another person if you can avoid it, think ahead and make sure you’re both equals in the relationship. And that really cuts down on the pain of a possible divorce. And it makes you a lot less likely to fight in the event of a divorce because you no longer feel fear and scarcity about the future if you’re deciding to separate your household.

And I wish everybody best of luck whether it happens or not to them.

Jon Luskin: Pete, this one comes from username “watchnerd” from the forums who writes, “How has he handled medical issues and insurance as he has gotten older?”

Pete Adeney: I will start with a disclaimer that this is a serious topic. And sometimes I’ve been accused of making too light of it myself because I’ve never had any medical issues myself, never had any expenses or needed care or medications or anything.

The quick answer for myself is I use a subscription to a direct primary care. Basically, a concierge doctor, which sounds fancy, but it really only costs $107 per month. And what that gets me is full-on access, including text messages, phone calls, and in-person visits to a local doctor. So, that takes care of anything, like if I need stitches for an injury or prescriptions or diagnosis for a lot of stuff.

And then in the event of catastrophic stuff, like a big accident, or if I had a chronic disease, then I carry a second thing with one of these health share providers.

Jon Luskin: The challenge with health sharing organizations is that they are not insurance. That means these organizations don’t have to reimburse you for a medical expense if they don’t feel like it. Although health insurance can be more expensive, it might be the better option to protect you in that worst case.

Jon Luskin: In the show notes for our podcast listeners, I’ll include a couple of resources. One is a very crass, but very entertaining breakdown by John Oliver of Last Week Tonight. Talking about some anecdotal observations about why health sharing organizations may not protect you in that worst case. And then I’ll also link to a Bogleheads® Chapter Series video on YouTube that discusses healthcare options in early retirement.

Pete Adeney: But I’m also just really, really focusing on stuff I can control. So, ever since I was 16 years old, I’ve always done all the stuff you’re supposed to do, like sleep well and minimize stress and do weight training and walking every day and eat well and minimize alcohol.

And I think of health and fitness as kind of my number one job in life is to be as healthy as possible. And even though that’s not going to guarantee that you have no medical problems, it really, really tilts the deck in your favor. Anyone who’s not a total health nut, try to find a way to convince yourself to be a total health nut. Because that’s really your biggest job as a human is to keep your body in tiptop shape and then everything else falls into place a lot better if you’re doing that first.

Jon Luskin: Pete, this one comes from username “belowaverage” from the forums who writes, “I would like to know how he was able to successfully create a car-free city in Longmont, Colorado.”

Pete Adeney: Oh man. I wish this was an accurate question because I have not created any such thing. But the good part is I still manage to barely ever use a car within city limits. There’s always a way to bike, even if you supposedly live in a car-based city. And I encourage other people, if you’re still able-bodied and able to ride a bike, to try to adopt this mentality a little bit.

But perhaps the confusion of this person is, I did recently visit possibly the United States’ first car-free community in the last 150 years. And that’s this thing called cul-de-sac in Tempe, Arizona. So, I became sort of internet friends with the founders, and now that they’ve built out the first big phase of it, it’s kind of a really neat place. It’s really just an apartment complex, for now, but it’s 1,000+ people living in this area where everybody’s pretty much car-free and they have ride-shares and e-bikes instead. And it’s right on the light rail system.

And I’m considering going to live there during this next winter as my snowboard thing. So, I’ll have a lot more to report on car-free communities after that.

Jon Luskin: Pete, here is a question from a San Diego FIRE meetup and the question asks about the FI dating app. The user writes, “all the girls want the juicy details.”

Pete Adeney: For anyone who hasn’t heard of this, there’s a website called FIREdating.me. And a couple months ago I went on Paula Pant’s podcast to try to sort of lament and suggest that, hey, we need more people on this thing. Because I happened to find myself single earlier this year. And then I was like, “Hey, I can finally try FIRE dating like I’ve been wanting to do,” because I’ve known of its existence for a couple years.

I went on there and I found it’s a great site and the people on there look great. It’s just not enough of them. Like everybody, there’s approximately 10,000 users, but they’re scattered across the world, mostly in the US and Europe. So, it just needs more people to sign up. So, I’ve been kind of promoting it a little bit.

But suffice it to say I really encourage anybody who is single and looking for a smart, with-it person to sign up for FIRE dating and help make the platform better. And hopefully you’ll have some wonderful luck on there.

Jon Luskin: Pete, that is going to be it, it looks like we’re out of time today. Are there any final thoughts before I let you go?

Pete Adeney: Not really on the questions in particular. I really enjoyed all the questions that the people sent in. We only covered a small fraction them on here, but it really warmed my heart to see so many thoughtful people sending in questions. I didn’t know there were that many people still out there watching and listening. So, I’m glad to see you all out there “Mustachians.” So, thank you very much.

Jon Luskin: Well, folks, okay, that is going to be all the time we have for today. Thanks to Pete for joining us today, and thank you for everyone who joined us for today’s Bogleheads® Live.

Some announcements. Registration is now open for that 2023 Bogleheads® Conference, so check that out. boglecenter.net/2023conference.

Check out resources of the Bogle Center before our next episode when we resume in fall of 2023. A wealth of information for do-it-yourself investors at the John C. Bogle Center for Financial Literacy at boglecenter.netBogleheads.orgBogleheads® WikiBogleheads® Twitter, the Bogleheads® YouTube channel, the Bogleheads® on Investing podcast, which I will be the guest host for this summer, normally Rick Ferri is that host, Bogleheads®, Facebook, Bogleheads® Reddit, The John C. Bogle Center for Financial Literacy on LinkedIn, and local and virtual chapters.

For our podcast listeners, if you could please take a moment to subscribe and rate the podcast on Apple, Spotify, or wherever you get your podcast. And please write a review. Thanks to everyone who rated it. Writing a review would also be amazing. We’re now up to 36 ratings, but only six reviews. So please take a moment to do both. That’ll help more people find this resource for do-it-yourself investors.

Our latest is a five-star review from Chrisentaie who writes: “This podcast is essential for the individual investor, great guests that always provide useful advice for typical Boglehead investors trying to do it themselves and not get taken advantage of by Wall Street.”

Thank you for that kind review, and also thank you to Barry Barnitz for helping out with the show, and Nathan Garza and Kevin for editing the podcast. And a final ‘thank you’ to Jeremy Zuke for transcribing podcast episodes. I could not do it without all their help.

Finally, we’d love your feedback. If you have a comment or guest suggestion, tag your host @JonLuskin on Twitter.

Thank you again, everyone. Look forward to seeing you all again in the fall of 2023 for the next Bogleheads® Live. Before then, I will see you on the Bogleheads® on Investing podcast through summer. Until then, have a great one.

About the author 

Jon Luskin

Board member of the John C. Bogle Center for Financial Literacy


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