So, I'm wondering about the FIRE mindset, and wanted to ask: what happens if you reach FI and then RE and have done the numbers right and can sustain your lifestyle. Imagine it's pretty lean, with say an annual budget around $27k.
What happens if you then suddenly find yourself with a 6 figure income from some side gig- is it Mustachian to maintain the low income and build up a massive wealth surplus or should you up the standard of living?
The wife and I have talked about this, and no amount of windfall money would change our plans. More income = more to charity.
It really depends on your happiness and the concept of enough. If you're happy with what you have, and you have enough, why would more change anything?
From what I understand, that's not the case for most people. They'd up their lifestyle. But then again, they're the type to not be happy with what they have, and want more, and they'll not ever have enough. This probably isn't the type of person who will be able to FIRE in the first place, however.
If my experience is any indication, there's a significant difference between "What if...?" and "Whoa." The answer appears to be "massive wealth surplus".
When I ER'd in 2002, my military pension paid for our mortgage and most of our groceries. We had a rental property that we were keeping for family reasons, but it wasn't making any money. We planned to spend about 4% annually from our investment portfolio and FIRECalc gave us a 90% success rate.
Nearly 12 years later, my pension has risen 27%. My parents-in-law finally moved out of our rental property, and after some long-overdue capital improvements we've turned that into a cash-flowing asset that's almost half again of my pension. Due to serial refinancings, our mortgage payment has dropped 40%. The net result is that all of last year's spending was covered by my pension and the rental profits. Not only did we not spend any principal of our investment portfolio-- we didn't even touch the interest or dividends.
As Arebelspy points out, we're already doing everything we want to do. I was a little white-knuckled on the purse strings until about 2005, and I've relaxed considerably, yet our total routine spending has still dropped nearly every year of retirement. Our photovoltaic array and solar water heater paid for themselves over three years ago. We just cut our phone/Internet bill by over 60%. We made a couple other major capital improvements on our home, but the renovations have raised the home's value more than the cost of the work. We replaced our beater vehicles with Priuses, but now we're spending a lot less on gas & maintenance. We've traveled half of the world, but the cost of living in Bangkok is actually lower than the expense of the plane tickets and our local spending. In the future we want to get a visa to stay longer in Thailand, and that means the longer we stay the more profitable our trip will become.
While we were there, we checked our attitudes about spending at both ends of the bell curve. We had drinks with acquaintances at a five-star hotel, where my mango smoothie cost nearly $10. They were newly married and in the middle of a month-long Asian cruise honeymoon on a small ship-- the cruise had to cost at least $10K. They'd just spent thousands of dollars that day on art (local dealer) and silk (Jim Thompson House) to ship back to his 4000 sq ft home which houses his entire art collection (and also now houses her clothing collection). He was dressed in coat & tie, she had on a dress. We were wearing t-shirts, shorts, & rubber slippers. When we split up, they picked up the drinks tab and went on to a 24-course (!) dinner, which I'm sure was at least $100/plate. We went out to Sukhumvit for street food at about $2/baggie.
I can appreciate their lifestyle, but they have to take care of too much stuff. They also have to play dress-up (while they're spending a lot of money), and I don't enjoy that either. I also have more fun finding dinner on the street than I would at a restaurant trying to replicate some European or Hong Kong fantasy.
This "wealth surplus" trend will accelerate in eight years when my spouse's Reserve pension starts. If my projections are correct, our annual income will rise by about 80%. I see our spending staying flat.
Sure, I should've seen this coming. FIRECalc predicted a 90% chance of success, and that's exactly what happened while we were focused on the 10% failure rate. However I still feel the "burden of stewardship". Aren't we supposed to be doing more with that money?
So my spouse and I had the "spend more" conversation, complete with a Quicken printout:
Me: "We're not burning through it fast enough. Where should we spend more?"
Her: (thinking) "I dunno. You?"
Me: (more thinking) "Maybe we should fly business class from now on?"
Her: "Feh. The extra five inches in coach is already more than enough. I don't see the value of being fussed over in business class."
Me: "You wanna upgrade your 10-year-old 29" Panasonic CRT TV to a large-screen LCD with Internet bandwidth and digital cable?"
Her: "But it wouldn't fit our wall unit, and I just got the livingroom looking exactly the way I like it!"
Me: "Well, we should set you up in a home theater."
Her: "But I like the setup we're using now! Do you want a new computer?"
Me: "Eh, I'm happy with the PC and the iPad. I have them working just the way I like it, and I don't need more."
... and so on.
Everyone says "Why, yes, I'd give more to charity!" but... we've volunteered at non-profits and... it's been an uninspiring experience. We've also donated more to charity and had more of the same reaction. We're considering lending a little money to a family member who's going to medical school, but they're the sort of people who will likely insist on paying it back. With interest.
For now our plans are:
1. Stop investing. We'll let the interest/dividends pile up until the markets drop into a recession, and then we'll put that cash back into our asset allocation. Otherwise we're going to just let the money accumulate without trying to chase yield. We might not even rebalance any more.
2. Do one or two more home-improvement projects-- like xeriscaping. (More conservation, less waste.) Maybe we'll spring for a professional tree trimmer instead of juggling our own chainsaws.
3. When I'm flying on my own, I'll upgrade to business class. But I'll be doing it for years with frequent-flyer miles before I have to start using my own money.
4. Keep an eye out for inspiring charities, although we're pessimistic.
At probate we'll probably turn most of our assets over to a charitable gift fund and let our daughter hand out college scholarships. If she's played her own cards right then she'll probably be dealing with her own "massive wealth surplus"-- but that's not my problem.
In the meantime I'll happily write and surf for the rest of my life. Maybe we'll travel more for longer, or maybe we'll eventually have our fill of that too.
#FirstWorldProblems, and very good ones to have.
The lesson learned is that when you plan for success and focus on avoiding failure, then you're probably going to have to end up shifting your attention to dealing with success.