Fail Upward

Ed Viesturs is widely regarded as the greatest American alpine climber ever.  He has a famous saying:  “Getting to the top is optional.  Getting down is mandatory.”

Storm From Nes Perce 5A mountaineer as accomplished as Viesturs has been turned back many times on many mountains.  Sometimes weather or avalanche conditions don’t cooperate.  Other times a team member gets injured or ill.  The best option at times is to turn back, knowing you can always start again another time or try a different route.

However, there are times when you need to turn back, but you’ve already gone too far.  Often when climbing you will ascend one route and descend another much easier route.  Even though ideally you would turn back, it may make more sense to continue to the summit to be able to reach the easier descent.  Other times you may be traversing multiple peaks with no places along the ridge to bail out.  Once you’ve gotten too far into the route, it would be harder and longer to turn back.

In these cases turning back is a worse option than just finishing.  You must “fail upward”.

Time to Bail Out?

Over the past 3 years, I’ve dove into all aspects of the how and why of retirement planning.  I originally looked at this as black and white.  You work and make money, then you retire and don’t.  As I have learned and developed more nuanced ideas, I must admit this traditional path has become less and less appealing to me.

I first became interested in the concept of creative lifestyle design by accident when I read Todd Tressider’s, “How Much Money Do I Need to Retire?” looking for the literal answer to the question.  Instead, I had my eyes opened to a different way of looking at the problem.

I later stumbled on the ideas of “F-You Money” as written by our friend Jim Collins and the concept of “mini-retirements” as described by Tim Ferris in the book “The 4-Hour Workweek”.

We have shared the stories of other such alternative paths in two of the three guest posts we’ve ever published, the story of our friend “The Prophet” and that of real estate investor/entrepreneur Chad Carson.

So then why don’t we just quit our jobs now and do something else.  If starting from scratch, we probably would.  However, when we developed our plan, we had to start where we were.

Our Route to FI

Before we got serious about learning about personal finance, we spent a dozen years saving about 50% of our after tax income every year.  We had no plan.  I got this idea that we could be “Dirtbag Millionaires” and retire early, but had no idea if or how we could actually do it.

In doing this, we built a pretty substantial nest egg despite making some massive mistakes with our investing. We also became established in our careers during this time.

We didn’t get serious about planning until fall of 2012 after a few life changing events gave us great urgency.  We then took a few months figuring out the best investment strategy for our lifestyle and another couple actually implementing the strategy.  It wasn’t until about two years ago that we ever figured out exactly how much money we spent and where it was going.

While we knew we wanted to do something different, we never really thought about what we actually wanted this early retirement to look like.

By the time we started figuring things out, we realized that we were not too far off from the traditional definition of financial independence of having investments 25X annual expenses.  However, we definitely weren’t there yet.

Fail Upward

We had several options.  We could quit and start over down a completely different path.  This was appealing in that it would offer a different set of challenges.  However, at the end of the day we would still have to work to make money.  It would take even more time and effort when we most wanted to spend that time with our young child while trying to stay active and seek out adventure.

We could stay on our path for a couple more years.  Depending on the market, we would achieve (or be very close to) financial independence.  We could then spend the rest of our lives pursuing what we wanted without the burden of needing to make money to live.

We had options, but one was clearly the best for us.  We would keep going.  We would “fail upward”.

Lifestyle Jobs

By the time we set our financial independence day, Mrs. EE was in her current position that allowed her to work part-time (30 hours/week), from home with a flexible schedule, paid vacation and holidays.  She made enough money to fully support us with her salary, even after maxing out contributions to her retirement plan.

I had been at my job for over 10 years.  I had negotiated my way up to 4 weeks vacation.  Because I earned a lot of comp time by working a ton early in my career, I also had been able to accumulate 4 weeks of banked vacation time.  Therefore, when we decided to work 3 additional years, we figured that I could use 5 weeks vacation/year for 2 years and then 6 weeks the last year.  Combined with paid holidays, I could essentially work part-time with full-time salary and benefits.

Speed

We have already advanced in our careers and have fairly high salaries.  We also have already eliminated our mortgage and built a very high savings rate.  Therefore, we could conservatively save my entire salary while maxing out Mrs. EE’s retirement plan.  Any work bonuses or side hustles would allow us to build wealth even faster.  With no help from the market, we could boost our investments substantially in just 3 years giving us far more financial security for the rest of our lives.

An alternative would be to build savings in a more passive/sustainable ways such as diving into real estate investing, trying to grow and monetize this blog, or start another lifestyle business.  Any of these routes would involve upfront time and effort to learn, forcing us to sacrifice even more time now when it is our most precious resource.

We could also just slow down, work less now and reach financial independence more slowly.  This would cost us in the form of benefits as outlined above as well as the other big benefit of working full-time.

Health Insurance

Working full-time allows us a few more years of having employer provided health insurance.  My employer covers our entire family with excellent coverage at minimal cost.  Obtaining coverage in this way as an employee means that it is a non-taxable benefit.

This has saved us considerably over the past 2 years.  I’ve suffered a chin laceration requiring stitches due to a climbing fall and fractured my thumb in a skiing fall.  Mrs. EE has dealt with a ruptured tendon pulley in her finger climbing and a variety of autoimmune symptoms requiring extensive and expensive tests.  Little EE has had a variety of typical baby/toddler ailments including flu with high fever, ear infections and skin rashes.  While these have slowed us physically, none of this has slowed us down much financially.

As we have been researching how to pay for health insurance under the Affordable Care Act (aka “Obamacare”), we have learned that it is simply another tax planning decision, no different than whether to use tax deferred retirement accounts.  The law is very favorable to those that have a low earned income.  However, for those that earn substantial income, premiums are quite expensive without subsidies.

As premiums continue to rise it is very punishing to those that have to pay full retail cost.  Therefore, having our coverage provided is huge until we are able to substantially decrease our income to a level where we can live off of investments or at least earn only a small enough amount that we no longer have to save.  At that point, we could qualify for subsidized insurance premiums based on much lower incomes, barring any fundamental changes to the law.

Family Life/Adventure

We both love to climb, hike and ski and are each other’s primary partners in these pursuits.  We could easily let one of us be the primary breadwinner and the other pursue these things now.  However, we view our marriage as our most valuable asset and both agree that we wouldn’t want to be out doing those things while the other was stuck with all the responsibilities of day to day life.  We like being equal partners.

We also both want more time with our child.  Again, we feel that our path lets us both share these joys and responsibilities as equal partners.

By staying our path, we can still get out on occasion with the support system we have from family.  As we gain our financial independence, little EE will also be reaching the age where she can be a more active participant in our lifestyle and options like getting her out on adventures with us and pursuing slow travel will be more realistic and enjoyable.

Conclusion

To sum things up, we each need to step back and figure out what is the best option when considering all that we want.  When we started this blog, we thought it was all about reaching early retirement.  We were focused on learning and spreading the message of being as efficient as possible in reaching this destination.

As we’ve learned and grown, we’ve come to realize that there are many right paths to financial independence.  We each have to find the one that makes the most sense for our individual needs.

There are a lucky (and I would guess exceedingly rare) few who have figured out the right path from the beginning.  For others, you may realize that you’re doing things all wrong and you would be better off to bail out and start over on a completely different route.

We’re somewhere in between.  So we plan to keep “failing upward”.

Are you sure you’re on the right path to FI?  Are you thinking about bailing on your route, or have you already bailed out and started out on a different route?  Are you “failing upward” also?  We’d love to hear how you are growing and learning.  Please share below.

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23 comments on Fail Upward

  1. When we started to it was more of a “work, work, work then completely retire”. But, then as we started thinking more and more about ‘retired life’ in our 40s we realized that we don’t necessarily want to not work. We just want more freedom to spend time with our kids and each other, and live in a town we want to live in. That’s when we started thinking of FIRE as more of a fully financed lifestyle change.

    And, I don’t think the path is always clear for us either. I was all set to quit early next year to spend time with the kids and work part time, but now with our industry struggling (oil), both of us are threatened by layoffs – so we think we will stay the jobs for awhile until we feel secure again and keep savings. And if we do get laid off – well maybe we will make our lifestyle change sooner than later!

    1. The key conclusion that we’ve both reached is that life is not black and white and we have the power to make decisions to design the life that we want. We don’t have to work 40 hours/week b/c society says we have to and we don’t have to retire b/c we have reached any particular financial milestone. It is amazing how simple that concept is and yet how hard it can be to figure it out. Even though it may have taken us both some time, at least we’ve managed to get there!

  2. Thanks for another inspirational post and for sharing your journey and the twists and turns that come up. I have always thought I wanted to retire early but never really had a plan or made much progress toward an early retirement. As a result I have a lot of catching up to do. I’m also finding that it’s not “early retirement” I seek, but early FI so that I can choose what I want to do and when without being tied to a full time 9-5 job. I have a job with very good benefits. And while I can live comfortably on my salary I will have to substantially boost my income to reach an early FI. So I’m at a point where I don’t think I want to turn around and start at the beginning again by changing career paths. Instead, for me, I need to keep going forward. The paths I see before me are to either add some side hustles to boost my income giving me more to invest while continuing at my current job, or finding a side hustle that is scalable and would allow me to gradually transition from my current career to something more lucrative. I’m sure there are other fail forward paths that would work for me, and I will continue to look for other options.

    1. Glad you enjoyed it Travis. I may write a follow up post of what I would do differently. There aren’t many things, but the ones that I think would have the biggest benefits with the smallest lifestyle impact would be to use my housing as an income producing asset rather than our largest expense (even after having a paid off mortgage) and developing a small business as a side hustle. Both are things I’d like to do in early retirement. Each will provide sustainable long-term income (versus killing self with another “job”) and provide tax benefits. We have talked about doing these things now, but as outlined in the post value our time more than the benefits they would bring at this stage in our life. Hopefully that helps!

      1. Sounds like you have a good plan. I’m also not interested in “killing” myself with another job. I wouldn’t have a problem working a lot of hours for a short period of time to set up something that could mostly sustain itself eventually (maybe real estate investment or a 4-hour workweek type muse). But I kinda enjoy having time off to go have fun. Seems to be a common theme of people not wanting to retire and never work again, but instead wanting the freedom to do something different and at their own pace. I like the idea of turning housing around from the biggest expense to an income generator. That would be huge. My wife isn’t going to go for having roommates though. Maybe I could come up with another way (maybe get rid of a bunch of stuff I don’t need and rent my garage out to people to store the stuff they don’t need, ha ha!). By the way, this post reminded me of a Freakonomics podcast episode I heard a while back that’s kind of related to failing upward. It’s called “The Upside of Quitting”. If you haven’t heard it you should check it out. It’s a cool spin on something most of us are thought we should never do. Sorry about being so long winded with my comments, but I am enjoying your blog a lot and get pretty excited when you make a new post! And the follow up post sounds great!

        1. I enjoy reading your thoughts and knowing that I’m inspiring people to think about things a bit is what keeps me going so no need to apologize. Don’t plan to add a roommate to the mix at this point either. We are thinking about downsizing and allocating the extra capital to a rental unit or two. Also thinking about doing a traveling gig for 3-6 months a year, especially if we don’t hit our FI number by the time of our FI date and renting out the house while traveling and checking out different parts of the country, living in free housing as part of traveling contract.

  3. This was one of your better posts, EE. Your closeness to the goal is palpable. I’m already FIRE and just sort of squeaking by. I’m hoping to establish some side hustle soon. Just 4-5k extra a year would make a HUGE difference. I think that’s one of the benefits of retiring to a lower tax bracket. If you need a little more, just a few thousand is a significant percentage increase and feels luxurious.

    1. FV,

      This is something we talk about frequently. We are not really worried about the 4% rule in the sense that most people look at it: “OMG, I may run out of money!” What we talk about is that we have never really had a budget. We spend what we want to spend b/c we are genuinely happy and don’t need to have the fanciest car, clothes, etc. However, we don’t skimp on good food, travel, and experiences we value like travel, skiing, and doing things with our daughter. We don’t want our retirement life to revolve around a budget. Money has never been a stress in our lives and we want to keep it that way in our retirement.

      Thanks for the insights!
      EE

  4. The original plan was to work and save very diligently and then completely call it quits. But as time has gone on the plan has changed a bit. For one I don’t expect either my wife or I to never work again. I personally plan to pursue other employment options although at a much more scaled back pace. My wife will probably continue to work as well because she absolutely loves teaching. Reaching a partial/semi FI state is probably what we’ll end up doing before I end up leaving my job. My job requires me to work out of town for long periods of time so mine will likely be the first to go.

    1. JC,

      Thanks for stopping by. Your plans sound similar to ours. It is amazing the number of options that are available to design your lifestyle.

      The idea of retirement being any one particular thing makes no sense when you stop to actually think about it. However, most people don’t stop and think. Just like there are many ways to pay for school or cars or homes other than to finance, most people just take the same path like sheep b/c we are trained not to think. I try not to be too critical of those trapped in those ways of (not) thinking b/c our original ideas of retirement and investing were very similar. We were doing the best we could with the knowledge that we had and following the crowd.

      Good luck as you continue to grow, learn and develop your plans.

  5. We are definitely familiar with failing upward on the mountain! One memorable experience getting cliffed out on a 14er comes to mind…

    I love how you use different climbing analogies for FI principles, and this is a great one. Though we’ve also concluded that we could do some part-time work, we also feel like we’re so far along at this point that we don’t want to turn back. And, like you, we’ve concluded that we want to lowest possible income in retirement for Obamacare purposes, and that means trying to have about as little earned income as possible. So we continue to climb, whether or not we see storms up ahead! 🙂

    1. I think we’re pretty much taking the same route. We’re just trying to ease ourselves out and make the last few years as leisurely as possible. Not sure how you maintain the schedule and travel you do. Glad to see you’re taking the last 2 weeks of the year off. Have fun!

  6. Love this post, EE! I agree with another comment that it’s one of your best. Thanks for the shout-out in the article.

    The “fail upward” climbing analogy is perfect. It reflects the nature of this climb to financial independence. The summit (FIRE) is exciting, but it’s really just a stopping off point for celebratory pictures. Then you head down to to bigger and better things with a descent and then other climbs.

    I like that you shared the back-and-forth struggle to figure out what you want to do in the future. I think we all deal with that if we’re honest. I am always a little leery (or call BS) when someone is TOO certain and has it all figured out.

    I feel fortunate that my path up the mountain with real estate has been satisfying thus far. But beyond the next couple of years, it’s all wide open and I’m not sure exactly what my life will look like. That’s scary and exciting!

    Keep up the good work.

    1. Thanks for the feedback Chad. I’m with you on calling BS on those who have it all figured out. I used to aspire to be one of those people and had anxiety b/c I just don’t know. Accepting that fact and embracing the adventure of figuring it out w/o fear of failure is very empowering.

  7. The in initial plan was to work and save till the retirement age and make sure we have enough money to keep our lifestyle.
    Then I stumbled along FIRE blogs. The goal changed, stop working was now the goal.
    After some reflection and discussions with my wife, the truth is not black or white, but rather a shade of grey. We now aim to live the life we design with our kids, and at the same time build up the assets needed to reduce time spent on working in 15 years from now.

  8. I’m in the middle of Breaking Trail: A Climbing Life by Arlene Blum. This is one of my favorite lines: “You cannot predict the eventual outcome of your choice. All you can do is listen to that little voice deep inside you that knows what you want to do.” I think it applies here, too. We try to make the most well-informed decisions possible, but there is a scary unpredictability about reaching for financial independence. I’m still in the debt-destruction phase, which is more of a preface to FI than anything else, but I’m still trying to make smart moves with earning, spending, and saving to get there.

    Thanks for the inspiring words!

    1. Thanks for the comment.

      Becoming debt free is a huge step in becoming FI and all the principles are exactly the same. We’re just piling all the money into investments that you are throwing at the debt. Once you’re net worth hits zero, you will have your processes in place and just need to reallocate.

      Keep going!

  9. It’s a great point to bring up and consider. I know many of us, myself included put the numbers in the spreadsheet and see we can retire early or stop working, because this seems like a great idea we write about it and keep putting those numbers in the spreadsheet. Along the way I think we find out more about ourselves and what makes us happy, we see options that may not have been so clear before.

    We are adjusting as we hit major milestones, a new zip code or investment, volunteer or donate, it’s great to see a few forks in the road. Best of luck figuring out yours:)

  10. We too don’t think we want to retire in the virtual sense but instead want to grow our wealth to the point were it allows us options. My wife and I have worked our way out of debt and when doing so we again adjusted our FI plan. We constantly review our plan and make adjustments as we see fit. We have not climbed down but we continue upwards on the mountain although we tend to change the route as often as we feel is needed to get us to the top. Our personal finance plans are always changing and we must go with the flow.

    1. Agree that we always need to make adjustments along the way. I think the idea of financial independence is a goal we should all ultimately shoot for. However, there are many paths to get there.

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