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You are rational and will never run out of money

by xyonent
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Have you ever been afraid of running out of money? I have. This fear gives rise to a phenomenon called “one more year syndrome.” This refers to workers who, after doing the math, know they have more than enough money to live comfortably in retirement, but continue to work to save more. But 10 years later, they’re still working with great regret.

If I hadn’t figured out how to negotiate my severance in 2012, I would have delayed my retirement by at least another year, maybe five. My original goal was to work until I turned 40 in 2017 and then be free forever.

I was lucky enough to have my retirement savings cover my living expenses for at least five years, so I figured it was now or never, and when I ran out of money I could just go back to work in my mid to late 30s. It made perfect sense.

The initial fear of running out of money

I’ll be honest, the first year after early retirement was a scary one. I kept asking myself if I’d made a mistake by leaving a high paying job at 34.

In retrospect, I should have tried harder for a few more years to save up money so I might not have had to face my recent financial difficulties, but I was too burned out and in too much chronic pain to continue.

The fear of going back to work with my tail between my legs was actually greater than the fear of running out of money — after all, I helped spark the modern FIRE movement back in 2009 when I started documenting my journey to financial independence on this site.

I also publicly announced that I was leaving of my own volition. I would have been embarrassed if I had to write an update explaining that I was returning to work in three years’ time. As a result, I decided to make a big decision to avoid the mistake of retiring early.

Take rational action to resolve your money worries

In 2014, two years after I left my job, I made some big changes to improve my chances of staying in retirement. We rented out our home in the Marina District from 2014 to 2017 for between $7,600 and $8,500. We lived there since we first purchased it in 2005. Our intention was to grow it into a 3 bedroom home one day when we had kids. However, no children were born while we lived there.

We had a lot of extra space and weren’t planning on paying a lot in rent, so we thought rationally and decided to rent out our home and earn semi-passive income.

And in 2014 we Approximately 40% decrease It was less than the cost of our Marina District home when our big CD expired, and geographic arbitrage three miles west to the Golden Gate Heights neighborhood of San Francisco allowed us to significantly reduce our housing costs.

By taking action, we were able to save more money and continue to live a life of freedom. My wife also negotiated her severance package when she turned 35 in 2015. She was nervous at first, but when she realized she had the option to be rehired as a part-time contract employee at a higher salary, she went ahead and negotiated.

Being a landlord for the old house in the Marina was a trying experience. As a result, we sold the property at a profit after our son was born in 2017. I wanted to spend my time raising my son rather than dealing with problem tenants. Again, this was a rational decision.

With this seven-figure windfall, we reinvested the proceeds from our home sale into stocks, municipal bonds, and private real estate funds, which helped us replenish our lost rental income while eliminating $811,000 in mortgage debt.

My second fear is running out of money.

Until recently, I had never felt as financially anxious as I did from 2012 to 2014. My savings mindset was put into high gear in October 2023 when I sold stocks and bonds and bought a house with cash.

We were living paycheck to paycheck for six months until April 1, 2024. During this time, we received unexpected capital calls from several closed-end venture capital funds and venture debt funds. It was as if all the general partners suddenly decided it was time to invest.

Faced with this liquidity crisis, my wife and I cut back on all our expenses — from subscriptions to food, nothing was safe. I also found temporary part-time consulting work, which I’ll write about in a future post.

In other words, we did all we could to weather difficult economic times. Now that the worst is behind us, these two experiences have helped most of us realize that money will probably never be a problem again.

If you were faced with a similarly tough economic situation, you would do whatever you could to survive. Have you ever met someone who spent their last money on their last meal and died penniless?

Traditional retirement doesn’t mean you’ll run out of money

Many of us obsess about having enough money for retirement, from calculating the right safe withdrawal rate to forecasting our expenses with free wealth management tools. No one wants to run out of money before they die, so careful planning is essential.

My own experience with financial stress leads me to strongly believe that most people will never run out of money in traditional retirement, and just as my dynamic safe withdrawal rate will change as the economic environment changes, we will also rationally adapt to different circumstances.

When we need to make ends meet, we always find a way to save, earn, or borrow money. Do you think your kids won’t lend you or give you money when you’re in trouble? Of course they will! You’ve been raising your kids for at least 18 years. What about lifelong friends? There’s no greater honor for a true friend than to help them in their time of need.

We also have insurance to protect us from disasters. My wife and I have Policy Geniuswe both felt a huge relief. Ultimately, I was able to secure affordable 20-year term life insurance that would cover my children until they turned 22 and 24, respectively.

As a last resort, if you are truly in financial difficulty, the government’s social security system will provide assistance. Even if you are not in financial difficulty, there is a social security system.

Other reasonable things to do to protect yourself

If you are being bullied online, you will rationally fight back or spend less time online. You are not going to just let someone hurl racist insults and degrade you.

If your doctor told you that you were at risk for heart disease and that it could result in your death five years earlier, you would rationally choose to eat better and exercise more. You wouldn’t choose to do nothing just because you wanted to see your children grow up.

If you’re looking for love, you’ll reasonably work on improving your personality, revamping your wardrobe, attending more social events, creating a profile on a dating app, etc. You’re not going to accept sitting alone in your apartment every Friday evening for the rest of your life.

If you’re aiming for the corner office, you’re obviously going to work long hours and develop great relationships with your boss and coworkers. You’re not going to put in the bare minimum and watch your coworkers overtake you.

If your marriage is going through a difficult time, you will likely be rational and spend a lot of time listening to your partner’s concerns and taking action to address those concerns. If you want to stay together, you probably won’t ignore the problems.

If you can’t stand a boss who doesn’t respect your time and is a stickler for detail, you’re not going to just quit quietly. You’re also not going to give your boss the satisfaction of firing you. Instead, you’re going to read this: How to Plan for Layoffs Learn how to walk away with your severance package in hand. It’s a great feeling to be in control of your own destiny.

How to Plan a Successful Termination - Learn How to Negotiate Severance and Become Free
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Your Rational Self Will Save You

Interestingly, what inspired me to write this article was listening to my latest podcast episode, “When You Need Money, a Savings Mindset Comes Naturally.” That’s the power of regularly addressing personal finance topics. These topics inevitably motivate you to think about and improve your finances.

It is likely that we will face difficult economic times in the future. However, even if we run out of money, we will surely find a solution. We are hardwired to survive and provide for our families. Otherwise, the human race would have gone extinct a long time ago.

Questions from readers

Do you think you’ll ever run out of money? Is the fear of running out of money greater than reality? Do you think we’re all rational, selfish people who will do whatever we can to survive? Have you ever run out of money? If so, what happened and how did you get out of it?

My podcast episode on the Saver’s Mindset is apple or SpotifyAs always, podcasting is a labor of love, so any reviews and shares would be greatly appreciated.

Join 60,000+ others to accelerate your journey to financial freedom. Free Financial Samurai Newsletter And sign up to get my new posts delivered to your inbox hereFounded in 2009, Financial Samurai is one of the largest independent personal finance websites.

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