Let's think about how wealth behaves, when one has got the basics under control.
Basics? Well, basics for financial independence would be something like:
1) investing continually in a portfolio
2) ... with a strategy to survive rough markets (such as the permanent portfolio),
3) .... and expense control with a
4) .... big savings rate (above 50%, at least).
Level 1 Low Earth Orbit: ~ 370,000€
Assuming the popular 4% rule (which is probably overly safe), and deducting for fees and taxes it becomes, let's say the 3.25%-rule. Very conservative. We know that we can bring our expenses down to 800€ a month per person - let's assume 1000€. And voilà, 12 000 yearly expenses / 0.0325 ~ 370 000 €.
Level 3 The Outer Planets ~ 820,000€.
We do realize that a life can be lived with few worldly pleasures, sure, on the other side we have no hard time to imagine ourselves living in different parts of the world during different times of the year (near equator wintertime, then skiing in the Rockies or Chamonix, spending the summer in Italy).
Level 4 Beyond the Solar System > 1,200,000€
4) .... big savings rate (above 50%, at least).
The orbital mechanics of wealth
Then money will stash up.
But could one speak of orbital mechanics of a stash?
Let's compare the growth of our stash with rocket orbits around earth. A completely sane comparison, we know. And we agree that there is some burlesque amusement in seeing the 9-5 life as a hard-to-escape gravity-well keeping the inhabitants of earth locked down in wage slavery.
Anyhow. Let's not go there.
Back to the rocket comparison.
If our wealth was a space rocket, the fuel (money) could bring us to different orbits. And these orbits behave differently. It's not the same thing, as any sober NASA engineer would attest, to go to low earth orbit as leaving the solar system. That's a whole new breed of space flight.
And a whole new breed of financiobatics.
An an important part of all that is the size of the rocket. So what does size mean for our Financial Independence Rocket?
Domitian's son aspiring on Low Earth Orbit, ca 90 AD.
His daddy is somehow looking less than pleased.
(CC, wikipedia).
His daddy is somehow looking less than pleased.
(CC, wikipedia).
Level 1 Low Earth Orbit: ~ 370,000€
Assuming the popular 4% rule (which is probably overly safe), and deducting for fees and taxes it becomes, let's say the 3.25%-rule. Very conservative. We know that we can bring our expenses down to 800€ a month per person - let's assume 1000€. And voilà, 12 000 yearly expenses / 0.0325 ~ 370 000 €.
Which means that the defining thing with Low Earth Orbit is that it's subsistence financial independence.
No thrills.
This would, however, be a very frugal life without much room for any extravagances. Low Earth Orbit is also not likely to bring us away from the pull of Earth's Gravity, and we would just barely orbit outside the atmosphere of a day job.
This would, however, be a very frugal life without much room for any extravagances. Low Earth Orbit is also not likely to bring us away from the pull of Earth's Gravity, and we would just barely orbit outside the atmosphere of a day job.
Any miscalculation, sudden expense or misfortune would make us crash down through the atmosphere.
When would the Low Earth Orbit be enough? Well, if one is acutely allergic to other people, regular working hours. And if one rather eat arsenic than find another job to improve the situation, or if one has a fantastic hobby that could turn into a money making machine, then it might be an idea to launch the financial independence rocket with the aim on low earth orbit.
We prefer to think twice, get our stuff in order, grind on a little longer, enjoy the ride and aspire higher.
Level 2 Escaping Earth's Gravity ~ 620,000€
Let's raise the bar a little and assume a more normal level of expenses. Our take on this is that, still being very frugal, but with room for some 'luxury' expenses a year.
Let's raise the bar a little and assume a more normal level of expenses. Our take on this is that, still being very frugal, but with room for some 'luxury' expenses a year.
We think having that room, like a wedge between necessary living expenses and possible spending, we will feel a lot more free, sleep better at night, and be able to increase the level of adventure in our life quite significantly, because even with a frugal attitude, some adventure requires some spending.
What would that mean? Fur us, it's probably things like the occasional long-haul flight and staying a broad for 4-6 weeks every odd year, or rent a car for some more extended time. That, for us, would amount to monthly expenses around 1800€ per person.
We could also take a financial blow if it happens - to us or to someone close to us - without just trying desperately to escape it.
This is an orbit where we would probably feel independent.
And, as the choice of the word Escape for this orbit indicates, this is also a level where there is a decent chance that we will not only orbit 100 km above the conventional working life. Because of the wedge between necessary living costs and possible spending, the orbit is likely to expand.
And allow us to explore worlds that we have not even dared dreaming of.
Level 3 The Outer Planets ~ 820,000€.
We do realize that a life can be lived with few worldly pleasures, sure, on the other side we have no hard time to imagine ourselves living in different parts of the world during different times of the year (near equator wintertime, then skiing in the Rockies or Chamonix, spending the summer in Italy).
If we put the costs for our dreams of a more lush life together and we started to feel that it got seriously ridiculous. Then we ended roughly on 2400€/month, which gives us the third orbit.
An orbit where we are pretty sure that it might be just as well to spend any extra on a good therapeut/shrink (with a frugal attitude) rather than additional consumption if we wanted to go further.
However. There's always a however. So far in our lives we have shunned all kinds of capital goods. We have felt that capital expenditure (car, house, forest, a pond where Antinous could feed the ducks, etc) would burn off too much fuel in our Financial Independence Rocket.
This is, as long as we do not consider the fourth orbit.
All above assumes that we avoid buying any capital goods for a long time, because that would burn off to much fuel on the rocket, risking it to crash down to earth. But at Level 3, it's reasonable to assume that the stash will actually grow, and we will be able to do things that we couldn't imagine now - buying a house when we get older? Giving substantial parts of our money away? Who knows?
Level 4 Beyond the Solar System > 1,200,000€
Leaving the solar system. Who knows how decadent we become with age? That castle in the alps might be much more tempting than what we think now. Or we might want to give our money away. Or devote our time to capitalism in general.
We don't think so, right now. But for the sake of being exhaustive, let's mention the fourth orbit - leaving the solar system.
This is the point where we think our financial rocket would reach such speeds that the momentum itself would bring us on a far and unknown journey.
It is also the point where another paycheck has such an marginal impact on the size of the ever-growing rocket that there is just no monetary reason to work more.
So questions on this orbit becomes truly much more existential.
Fueling up the rocket
Our plan right now is to aim for Level 2. The benefits of increased margin just seem so appetizing. And also quitting 9-5 knowing that any extra income from this point now is just pure bonus and nothing we really need.
When we reach level 2, we probably evaluate on a 6 month basis. Is it still fun to work? Well, we might keep on another 6-months period. But at some point around level 3 and level 4, we will need to face that for what-ever reason we are working, those reasons (or fears?) are about something else than money.
Where are your financial independency rocket bringing you?
antinous&lucilius
