Author Topic: The Mad FIentist makes me sad.  (Read 9048 times)

alm0stk00l

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The Mad FIentist makes me sad.
« on: October 14, 2014, 03:39:20 PM »
Not really. I make me sad, but it is always easier to place the blame on someone else. If you haven't checked out his FI Laboratory you should. It makes pretty graphs. From an aesthetic sense. When you are plugging in the numbers I am, it makes very heart breaking graphs. I just wanted to post mine in attempt to shame myself to start doing better. Attached is my "progress" for most of this year.

Bob W

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Re: The Mad FIentist makes me sad.
« Reply #1 on: October 14, 2014, 04:00:51 PM »
You should be ashamed of yourself you piece of crap! lol

Really I don't get the graph?   It shows near zero investment income yet only 16 years till FI.  Shouldn't that be 160 years?

wing117

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Re: The Mad FIentist makes me sad.
« Reply #2 on: October 14, 2014, 04:08:27 PM »
Assuming that blue line is utilizing the 4% rule it will only raise $120 dollars (right?) per $3,000 invested. It looks like a slow climb though. I'm going to have to play with this tool.

Jump on it alm0stk00l! You can do better! Get over to Ask a Mustachian and post your expenses and we'll cut away at you! :)

sirdoug007

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Re: The Mad FIentist makes me sad.
« Reply #3 on: October 14, 2014, 04:14:57 PM »
I think the FI laboratory took your sadness personally.   I went over there to log in and can't load the webpage :(

http://lab.madfientist.com/

Beric01

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Re: The Mad FIentist makes me sad.
« Reply #4 on: October 14, 2014, 04:15:12 PM »
I popped onto the tool to mess around but there's nothing to count for inflation! This makes the tool rather convoluted.

alm0stk00l

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Re: The Mad FIentist makes me sad.
« Reply #5 on: October 14, 2014, 04:15:42 PM »
The blue line uses whatever SWR you choose to follow, but other than that it works just as wing117 explained. It tracks your monthly income from your total investments based on your chosen SWR. When the blue line (monthly investment income) meets the red line (estimated monthly expenses), then you have enough to retire. But that is only the case if the green line (actual monthly expenses) tracks the red line a hell of a lot better than mine does. :)

alm0stk00l

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Re: The Mad FIentist makes me sad.
« Reply #6 on: October 14, 2014, 04:18:23 PM »
I popped onto the tool to mess around but there's nothing to count for inflation! This makes the tool rather convoluted.

I am not sure how adding inflation to the tool would help. It seems that would just make it more difficult to track everything. If 15 years from now I am still using it and still on my way to FIRE and I feel like inflation has created a situation where $4000/month isn't enough, then I would probably just raise it to whatever I felt like was enough at that time.

Beric01

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Re: The Mad FIentist makes me sad.
« Reply #7 on: October 14, 2014, 04:19:00 PM »
The blue line uses whatever SWR you choose to follow, but other than that it works just as wing117 explained. It tracks your monthly income from your total investments based on your chosen SWR. When the blue line (monthly investment income) meets the red line (estimated monthly expenses), then you have enough to retire. But that is only the case if the green line (actual monthly expenses) tracks the red line a hell of a lot better than mine does. :)

The problem with this assumption is it assumes your expenses won't rise due to inflation (and thus you will need to save more). That isn't realistic. You can get around that with assuming a "real return" for your investments under the assumptions, but that doesn't allow for your future expenses to be inflation-adjusted.

I popped onto the tool to mess around but there's nothing to count for inflation! This makes the tool rather convoluted.

I am not sure how adding inflation to the tool would help. It seems that would just make it more difficult to track everything. If 15 years from now I am still using it and still on my way to FIRE and I feel like inflation has created a situation where $4000/month isn't enough, then I would probably just raise it to whatever I felt like was enough at that time.

As a tracking tool, it's fine. The problem is the countdown to FI estimate, which is not going to be accurate due to inflation.
« Last Edit: October 14, 2014, 04:21:09 PM by Beric01 »

Eric

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Re: The Mad FIentist makes me sad.
« Reply #8 on: October 14, 2014, 06:02:55 PM »
I popped onto the tool to mess around but there's nothing to count for inflation! This makes the tool rather convoluted.

I think this is the first time in history that not adding inflation makes something convoluted.  :)

thepokercab

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Re: The Mad FIentist makes me sad.
« Reply #9 on: October 14, 2014, 06:15:08 PM »
I popped onto the tool to mess around but there's nothing to count for inflation! This makes the tool rather convoluted.

I am not sure how adding inflation to the tool would help. It seems that would just make it more difficult to track everything. If 15 years from now I am still using it and still on my way to FIRE and I feel like inflation has created a situation where $4000/month isn't enough, then I would probably just raise it to whatever I felt like was enough at that time.

For what its worth, I think inflation in the laboratory is sort of assumed when you set your growth rate under "assumptions".  For instance, I set mine to 7%- which if I've understood correctly is based on average total return minus inflation. 

OP, i feel your pain.  My graph is similar.  I'm the first to admit it; i'm a wannabe mustachian.  I come here to live vicariously through other mustachians.   

Beric01

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Re: The Mad FIentist makes me sad.
« Reply #10 on: October 14, 2014, 06:30:17 PM »
I popped onto the tool to mess around but there's nothing to count for inflation! This makes the tool rather convoluted.

I think this is the first time in history that not adding inflation makes something convoluted.  :)

As much as I'd like to ignore inflation, I can't in the case of this calculator. If I assume only real returns in this case, then as my costs rise over time with inflation, the number I need to save will change, so I'm chasing a moving target. My FI date will be later than the calculator predicts.

This calculator is flawed. I can work with a calculator like this one, as I'm dealing only in today's dollars. The problem with the Mad Fientist calculator is it attempts to deal with future dollars in returns yet today's dollars in expenses (due to expenses naturally wanting to rise with inflation), which can only result in a flawed prediction. Fine for tracking your monthly progress, but the FI date prediction won't work.

For what its worth, I think inflation in the laboratory is sort of assumed when you set your growth rate under "assumptions".  For instance, I set mine to 7%- which if I've understood correctly is based on average total return minus inflation.

The problem with this is that your expenses (and hopefully savings) will rise over time (with inflation), and yet you are assuming your expenses to be fixed at one point in time. The only way to counter this within the limits of the calculator is to multiply your expenses (and savings) by the reduced value of that dollar compared to your first month's starting point.
« Last Edit: October 14, 2014, 06:49:59 PM by Beric01 »

bo_knows

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Re: The Mad FIentist makes me sad.
« Reply #11 on: October 14, 2014, 06:41:04 PM »
I popped onto the tool to mess around but there's nothing to count for inflation! This makes the tool rather convoluted.

I think this is the first time in history that not adding inflation makes something convoluted.  :)

I seriously relate to that!   

mcneally

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Re: The Mad FIentist makes me sad.
« Reply #12 on: October 14, 2014, 09:16:50 PM »
The only way to counter this within the limits of the calculator is to multiply your expenses (and savings) by the reduced value of that dollar compared to your first month's starting point.

If you use a real rate of return you don't have to separately account for inflation. Do the math on 8% returns and 4% inflation and you'll get the same answer for years to FI as if you use 3.846% real return (1.08/1.04) and don't separately account for inflation. Makes things a lot simpler.

arebelspy

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Re: The Mad FIentist makes me sad.
« Reply #13 on: October 14, 2014, 09:28:08 PM »
This calculator is flawed. I can work with a calculator like this one, as I'm dealing only in today's dollars. The problem with the Mad Fientist calculator is it attempts to deal with future dollars in returns yet today's dollars in expenses (due to expenses naturally wanting to rise with inflation), which can only result in a flawed prediction. Fine for tracking your monthly progress, but the FI date prediction won't work.

Just do everything in real dollars.  Say you're shooting for 40k spending on 1MM stache (4% SWR).  It'll give you your time to FI (time to 1MM) using real returns.. by the time you get there, your actual amount of spending and savings will be higher due to inflation and nominal returns, but who cares?  You'll still need, at that time, 40k in 2014 dollars.
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Dan_at_Home

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Re: The Mad FIentist makes me sad.
« Reply #14 on: October 14, 2014, 10:20:17 PM »
Your monthly expenses seem a bit high, many months you are spending $6500 a month, I suggest lowering your monthly expenses and putting that extra money towards the investments.  This way the green line will move down and the blue will slowly begin to raise up.

You may try consulting the early days MMM articles about how to lower those expenses.

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Re: The Mad FIentist makes me sad.
« Reply #15 on: October 15, 2014, 07:41:27 AM »
At this point in your FI journey you should not even be thinking about an FI date.  It is too early.  Too much can happen between now and then.  For now, minimize your expenses, maximize your savings, invest your savings, keep your head down, your nose to the grindstone, and don't look up for at least 10 years.  You can plot your savings rate on the graph/chart in the link below to get a rough idea when it MIGHT be possible, but it all starts with your savings rate. 

http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/     

alm0stk00l

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Re: The Mad FIentist makes me sad.
« Reply #16 on: October 15, 2014, 08:43:50 AM »
Your monthly expenses seem a bit high, many months you are spending $6500 a month, I suggest lowering your monthly expenses and putting that extra money towards the investments.  This way the green line will move down and the blue will slowly begin to raise up.

You may try consulting the early days MMM articles about how to lower those expenses.

My monthly expenses are definitely too high. I have been following MMM for a while and I feel I have a good understanding of everything he has put forth, but I just have trouble consistently applying it all to my life. I am still able to invest a relatively decent amount each month, but I definitely understand that I need to fix many things. I do have to spend a little more because my wife is in college still and I am paying for that, but I feel like I give myself too much slack for that. With my spending, I do feel like a poser when I am traversing this forum.

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Re: The Mad FIentist makes me sad.
« Reply #17 on: October 16, 2014, 04:09:40 PM »
I love the tool but I treat it as a ballpark number. It has helped me however in being far more motivated to keep my expenses as low as possible just to see how long I can keep my streak of living below my means up.