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.”
A 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.
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.
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”.
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.
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.
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.
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.
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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