“The first $100,000 is a bitch, but you gotta do it. I don’t care what you have to do – if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.”
-Charlie Munger
$100k is a nice round number. It is a milestone that can take almost a decade for many. There isn’t anything magical about it, but by this point your money starts doing some of the lifting in your portfolio. 10%/year multiplied by $100k means that your portfolio is earning about $10k on its own. You can blow that $10k, and the $10k you personally add each year, on a big vacation, upgrading a vehicle, or a down payment on a house and end up in around the same place if you paid the rest of your way.
So like Charlie says, you have to get money to start working for you, and the earlier the better.
If you continue compounding your invested money and adding more money to it, then soon after $100k you will double it to $200k, then get to $300k faster, and beyond. Before long you are in the early stages of financial independence.
For us, frugality and a decent job got us through the early steps. However, at a certain point I think it is natural to spend a little more on yourself and your family.
When I hear the main detractors of FIRE, they strawman you into a life of poverty and then claim they don’t want that. That strawman hasn’t been my experience. I was pretty frugal and literally had simple tastes in the beginning steps. The early years were mostly an extension of college life. I had a healthy relationship with money in that I spent mostly on things I enjoyed, which were convenience and food. I didn’t enjoy my job, so spending on purchasing my financial independence was the most important thing to me, but admittedly I was not a very good cook, ate out often, and had a newly remodeled house that was beautiful but affordable.
As my net worth has increased, we spend more on convenience than I ever did before. Eating nice dinners, cleaners, gardeners, and doctors who do house visits are some of the things we enjoy now. All of these things are cheaper in Ecuador, but I no longer pride myself on pure frugality. Instead, I value frugality in relation to our net worth and how much that net worth passively makes.
One of the most extreme frugal personas is the Mad Fientist. If I remember correctly, he spent his last months working living in a tent to achieve FIRE only slightly faster. This is an extreme case, but FIRE should be a long-term goal and less of a finish line to reach as fast as possible. Recently, the Mad Fientist, or Brandon, has been writing more about exercising his spending muscle. Specifically, he bought an entire coffee bean infrastructure to roast beans for his own consumption, which also provides a little bit of income selling the extra.
As personal finance people, you will continue to monitor your net worth and investments even past the point you need to. Everyone is worried about a huge drop as soon as you retire. However, it is more probable that you will end up with much more money than you will need, and it’s important to prepare for how you want to exercise your own spending muscle.
What are some things you plan to spend more on in the next few years?
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