Lazy Man and Money

Calculate Your Financial Inflection Point

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There are tons of math rules of thumb when it comes to personal finance. There’s the rule of 69/70/72 which helps you calculate when investments will double. There’s the rule of 4% that is used to estimate financial independence.

Few people write about one of the most important numbers*: Your Financial Inflection Point

If you aren’t familiar with the term inflection point, I was able to find two definitions from Google’s Dictionary search:

  1. Math – A point of a curve at which a change in the direction of curvature occurs.
  2. Business – A time of significant change in a situation; a turning point.

When you point both of these definitions together and apply them to your own finances you get something amazing:

Your money works more for you than you do.

As my tagline has said for years, “Making my money work, so I don’t have to.” That’s where the “Lazy” brand comes from.

Some people might not understand the concept of making their money work. It’s letting your investments make money passively. Even if you aren’t personally familiar with investing, you’ve probably heard the saying, “The Rich Get Richer.”

Let’s pretend you won a medium-size lottery and after taxes and getting the money at once, you had $10 million. If you invest it and earn 7% a year on it, they’ll make $700,000 a year. It takes a lot of McDonalds workers a lot of years to make as much money. Those investment dollars are working hard.

It’s fun to pretend winning $10 million dollars, but what if we looked at something more realistic?

Let’s take off a zero. If you amass a portfolio of a million dollars, your money can make you $70,000 a year (assuming 7% investment gains). That’s a very good second paycheck, perhaps even better than what you make working for yourself. While a portfolio of a million dollars may sound out of reach, the magic of compound interest can make easier than you think. (This may require you to earn a lot of money and/or avoid significant debt hurdles like tons of student loans or health problems. Here’s how you can get to a million dollars in 20 years.)

Calculate Your Own Financial Inflection Point

Over the last couple of years, I’ve noticed that our investments are doing very well. It’s not my imagination, investments have been well for almost a decade now. It got me thinking, have we reached our own financial inflection point?

The calcuation turned out to be surprising easy. It’s:

Income / Expected Return = Inflection Point

So let’s say that your income is $50,000 a year. You expect the markets to return 7.5%. The math of 50,000/.075 = $666,666.66. While that number looks evil, it’s actually not so bad. Maybe you want to call it $700,000 if the markets don’t peform as well as you think they might. It seema a lot more achievable than the million dollar example above, right?

When I initially did the math, I was extremely surprised to learn that we are far off of our financial inflection point. It felt like we were there.
What went wrong?

There were three problems:

  1. Our income has jumped a bit lately as I’ve taken on some substantial freelance work. The income number has recently grown. This raises the bar for the inflection point.
  2. I plugged in an expected return of 7.5%. While that’s a reasonable expectation, I was comparing it to the returns of the last few years… which were NOT reasonable. Someone should slap me with a mutual fund prospectus because “past performance is no guarantee of future results.”
  3. I was looking at the growth of our net worth, not just our investment gains. I have no excuses other than just being a bonehead.

When I first realized how far away we were, I was disappointed. Then I realized that two out of three of these “problems” were very good “problems” to have. Who doesn’t more income? Who doesn’t mind a period of double-digit investment gains skewing their expectations? Who doesn’t mind being a bonehead? (Ummm, ignore that last one.)

Fortunately there’s an easy fix. My wife has to retire next March when she’s elibible for her military pension (at age 43) and I have to remove all advertising here and quit any freelance work. That will solve that pesky income problem. I’ll also assume the markets will return 12% annual, because there was a time where that was normal. I won’t even get into any pesky asset allocation problems that could lead to less than my optimal expectations.

What’s the Value in your Financial Inflection Point?

If you didn’t catch my sarcasm in the last paragraph, shame on me for not being a little more obvious. I wanted to illustrate that on some level reaching your financial inflection point may not mean much. It’s definitely a great milestone, but it might not be realistic.

If you are a doctor making $300,000 a year, your financial inflection point would be $4 million (at 7.5% investment gains). If you “only” have half that amount in investments leading to $150,000 in gains each year, you’ll probably do okay.

Your financial inflection point is most helpful when it is combined with your expected expenses.

Last May, I projected our expected expenses over the next 45 years. (Yes, it was insane and you should read it, right away).

The quick and dirty answer is that we’ll likely have around $35,000 in expenses per year. We don’t need to replace our income completely like the financial inflection point suggestions. Our money only has to work hard enough for what we need it to do. This was one of the considerations in buying solar panels. While we might not be investing towards our inflection point today, we are investing in reducing our expenses in the future.

* At the time of publishing, I decided to do a search and found that The Green Swan covered this topic very well, but in a different way.

The Serenity of My FIRE Journey

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Last week, I read Why FIRE Is Such a Compelling Story on RetireBy40. The article compares Joe’s journey to FIRE (Financial Independence / Retire Early) with the classical hero’s journey blueprint that underscores many successful stories.

To explain it, he goes step by step through Christopher Vogler’s book The Writers Journey. He contrasts his FIRE journey with a movie about a motley crew of space travelers who overthrow an all-powerful oppressive regime. It’s an old movie, so I doubt you heard of it. I think it was called Space Battles something.

Joe invited other bloggers to join in on the idea. I’m throwing my hat into the ring.

I need to start by saying that I don’t think FIRE is “heroic.” It can’t be compared to saving a city full of people.

I’m going to take his old 20th century movie about a motley crew of space travelers who overthrow an all-powerful oppressive regime and give it a 21st century update. I know there are a lot of Space Battles fans out there, but this is for the Firefly/Serenity fans out there.

This is going to be challenge. As io9/Gizmodo writes in Eight Reasons Why The Hero’s Journey Sucks:

“But over time, lazy writers like George Lucas have used [the hero’s journey] as a checklist… It discourages originality… Instead of championing stories that are different, like say, Firefly/Serenity… What about a group of people who decide to work together to change the crappy status quo?”

Fortunately, I found some help with this hero’s journey of Serenity. I’m curious how this is all going to work out. If I don’t know where this going, you can’t have a clue either right? Good!

Let’s dig in.

Serenity and My FIRE Hero’s Journey

1. The Ordinary world:

Normal life before the adventure begins.

Serenity: It’s the year 2517, and humans have moved to a new solar system after Earth was overpopulated. Our hero, Captain Malcolm Reynolds (Mal), and his crew can best be described as space pirates. They go from planet to planet on smuggling jobs living paycheck to paycheck.

FIRE Journey: Lazy Man graduates college with a computer science degree. He quickly moves up to management at an top internet company.

2. Call to adventure:

Something happens to disrupt ordinary life.

Serenity: Mal decides to bring 16-year old River on a job because she has the rare gift of being able to read minds which might be helpful. River’s brother, Simon, has broken her out of a secret assassin/brainwashing training lab run by the evil Alliance. The job doesn’t go as planned and River was put in danger, and Simon announces they are off the ship at the next planet.

At the next planet, a television plays River’s secret assassin trigger word and she destroys a bar until Simon says her sleep word.

FIRE Journey: The internet goes bust and everyone lays off software engineers. Lazy Man goes from contract to contract. After a few years, joins a new start-up. Lazy Man starts to develop the idea that software engineering may be outsourced to India and other places where the cost of living is cheap.

3. Refusal:

The hero fears the unknown and is reluctant to change.

Serenity: The crew (sans River who is in her bunk listening) meet in Serenity (the spaceship). Mal has no explanation for why he didn’t leave them on the planet like the plan. In this case, it is the top mercenary, Jayne, who fears the unknown and Mal agrees with him.

FIRE Journey: Lazy Man continues to work. Despite being paid in the bottom 5% of his Salary.com peers, he is happy to have a job and doesn’t want to rock the boat.

4. Meeting a mentor:

Serenity: Mal contacts Mr. Universe to try to find out what happened. Mr. Universe watches all the media in this universe, “Can’t stop the signal, Mal. Everything goes somewhere, and I go everywhere.” He learns that the Alliance triggered River with the television commercial so that they could find her. The Alliance needs to get River back because they made the mistake of having someone with all of their secrets in the same room with her… and her ability to read his mind.

FIRE Journey: Lazy Man reads an article about bloggers who are sharing their income and spending, but not their names. He comes across Rich Dad, Poor Dad. Lazy Man starts to think that working smarter might be better than working harder. (It would be some time before he realizes that Rich Dad, Poor Dad is only good for motivation and Kiyosaki gives terrible personal finance information.)

One of my prized possessions. Signed by everyone in the cast except for Gina Torres.

5. Crossing the threshold:

The hero leaves the ordinary world and journey into the special world.

Serenity:

FIRE Journey: Lazy Man is getting serious with his girlfriend. Her active duty status means she’s eligible to retire with a pension at age 43. Lazy Man starts this blog in 2006, with the hope of finding some path to retire with her in 2019. The idea of retiring in 2041 at age 65 is not appealing. He explores investing in condohotels, P2P lending, and ways to save money.

After a few months, he learns that what he’s been calling a “money blog” is actually something called “personal finance.” Years later he would learn about the FIRE acronym.

6. Tests, Allies, Enemies:

Hero encounters difficulties, helpers, and challenges.

Serenity: Mal meets up with Shephard Book and gets some practical advice. Book says the Alliance is sending an assassin, an Operative, because they want to keep this a secret. Mal also receives some spiritual advice and starts to realize that he has a strong moral compass (despite all the thieving, smuggling, and the other stuff they do to get by.)

Mal gets a call from Inara (former passenger and Mal’s unspoken love interest) who claims to need help with local unrest on her planet. Mal, knowing that it is a trap, goes anyway. He gets in an epic fight with the Operative, but is clearly outmatched. On the verge of getting killed, Inara saves him with a perfectly timed distraction.

FIRE Journey: Lazy Man creates friends with dozens of bloggers. He joins one formal network where everyone promotes each other’s work. Lazy Man spends a lot of time in personal finance forums building relationships with other bloggers. He reads and comments on a dozen blogs each day.

7. The Approach:

Long journey and preparation for the major challenge in the special world.

Serenity: River has a vision of the secret that the Alliance wanted to hide, a planet called Miranda. They return to Shephard Book’s planet to find out more about this hidden planet and found that the Alliance was there first. In a touching moment, Book tells Mal that he doesn’t care what Mal believes in, just that he believes.

The Alliance is taking out anyone and everyone in the universe who has ever sheltered our heroes, leaving them no safe haven to run to.

Mal orders his crew on a “suicide mission” through “Reaver space” to get to Miranda and learn the secrets there. Reavers are humans who have become almost like a pack of wolves hunting other humans like bunnies. It’s a big stretch to call them human and I’ll spare you the too graphic description of how they treat humans.

The crew doesn’t agree with this plan, but this journey is the one place they can live where the Alliance won’t follow. As the pilot, Wash says, “There’s nothing about this plan that isn’t horrific!”

FIRE Journey: Lazy Man’s fiancé, against all odds, gets a job opportunity across the country in San Francisco. The two go out and build new friends and alliances.

They have to turn their condos into rental properties because they can’t be profitably sold. Lazy Man get more and more interested in blogging and less and less interested in software engineering. Silicon Valley is no place for a 32-year old geezer engineer anyway.

Six years later after the birth of their first son, the heroes move back to the East Coast. Just days before they do, they finalize a HARP refinance on those rental properties. The new 15-year at 3.5% rate cuts years of payments off of the old 30-year at 6%.

Lazy Man and wife continue (as they have done all along) to do their best to max out retirement accounts and take advantage of the power of compound interest.

8. The Ordeal:

Greatest personal challenge, everything is on the line.

Serenity: After successfully getting to Miranda, the crew learns the Alliance’s secret. With that secret they forge a plan to tell the world.

FIRE Journey: Over time, Lazy Man learned the secrets of how MLM/Pyramid Schemes scam people into false “business” opportunities. He broadcasts logical explanations of what they are and how they work including information that they are designed so that more than 99.9% of people lose money. When the people lose money, they are told they aren’t working hard enough or that they need to buy more training so that they can continue to feed money to the 0.1% at the top of the pyramid.

Lazy Man is attacked by unscrupulous lawyers hired by the MLM/Pyramid Scheme industry. They threaten to bankrupt his entire family to suppress people from learning the truth about the scams. (This was before John Oliver exposed them on HBO and the FTC publicly lambasted them.)

Lazy Man gains new respect for the movie Serenity as he struggles against legal loopholes that are used to silence free speech.

9. The Reward:

The hero takes possession of the prize and becomes stronger.

Serenity: Mal and the crew gets the proof to share the truth about Miranda. If they can get the proof to Mr. Universe, they can broadcast it to all the planets in the universe and the corruption of the evil Alliance will be revealed.

FIRE Journey: The power of compound interest and the great on-going bull market propels Lazy Man and his family towards financial independence.

10. The Road back:

One minor test to drive the story to completion.

Serenity: Mal and crew head to Mr. Universe, but they have to get back though Reaver Space and the Operative/Alliance. One small ship against hundreds? Our hero creates a plan. If the plan to get to Miranda was “There’s nothing about this plan that isn’t horrific!”, the plan to get back is a hundred times more horrific.

One could make a case that this fits in the next section.

FIRE Journey: Lazy Man and his wife have two awesome boys. Lazy Man’s wife has a work situation of golden handcuffs. In addition, her active duty status grants the boys a tremendous discount at a tremendous school. If she retires, the education costs go up while our income goes down.

The search for a solution to this is ongoing. We don’t know how the story will end, yet.

11. The Resurrection:

The hero has a final encounter with the danger. This is the climax of the story.

Serenity: Mal gets in a final fight with the Operative. The Operative runs a sword through him, but an old war injury saves him. Mal has the opportunity to kill the Operative, but instead traps him and forces him to watch as he spreads the truth about Miranda which changes the ‘verse.

FIRE Journey: Lazy Man and wife don’t know what twists and turns life will throw at them, but there will certainly be some encounters with danger.

12. The Return:

The hero returns home or continues the journey, bearing some type of treasure or power to change the world.

Serenity: Mal has a final talk with the defeated Operative about the changed world. His love interest, Inara, is on the fence about whether to join the crew or go back to her planet. Mal settles in with his new co-pilot, River.

FIRE Journey: At some point in the future, Lazy Man and family, pack up their stuff, rent out their house, and spend summers in Europe. The boys have a difficult decision of choosing the best financial aid packages from Princeton, Harvard, and Stanford. Lazy Man’s wife manages the boy band they all co-founded.

As for Lazy Man, he grows up and figures out what he wants to do.

What’s Your Journey?

As you can, our FIRE journey is still a work in progress. If we wanted to retire next year when my wife is pension eligible we could. We could put the kids in public school. We could sell off the rental properties and use the money to pay off the mortgage on house we live in. We’d have very few expenses with paid off cars, solar panels, house, and relatively cheap health care from the military.

However, these aren’t necessarily the best choices to make. It may be cutting things close. We would be sacrificing things that are important to us.

More FIRE Journeys

Anchor – Retire By 40: Why FIRE Is Such a Compelling Story.

Story 1 – Dividends Diversify: FIRE hero’s journey.

Story 2 – Route to Retire: Why Spiderman’s Path is Like the Journey to FIRE.

Story 3 – Mr. Tako’s Escape: Darth Vader and The Path to FIRE

Story 4 – Willing Personal Finance: Lion King and Financial Freedom

If any bloggers are looking to join this chain, the instructions are at the end of the Anchor article by Retire by 40 above.

I really need your comments on this article, readers. I’m not sure I did Serenity justice or if I put it in the right mold. I did my best to minimize spoilers, but it’s been 13 years, so you had your chance.

I also want to hear what you think about your FIRE journey. Does it fit the hero’s journey?

Downsizing: The FIRE Movie That Wasn’t

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I don’t typically get the time to watch too many movies. Well, with a 4 and 5 year old, I’m on top of most of the “G” rated ones. Last week, I made it a point to hit my local Redbox and catch a movie I had wanted to see since Christmas, Downsizing. After a discount code they texted me, I had to shell out a little more than 50 cents.

I won’t blame you if missed the movie. We’re all busy around the holidays. In any case, here’s the trailer:



In this fictional world, scientists create a way to shrink people to around 5″ through a process called cellular reduction. As the trailer explains, “$52,000 translates to $12.5 million” when you are small. A city of people can fit in a normal backyard. The same city can share a couple of apples. At the end of the trailer, you see them filling up a pitcher from a bottle of Absolut vodka. (This scene wasn’t actually in the movie.)

Downsizing

I’m going to interrupt the financial explanation of Downsizing. In the spirit of Earth Day, this movie does take a strong stance that Downsizing is the best way (perhaps the only one) to save human life on Earth. And now back to the financial aspects of the movie…

The main characters, Matt Damon and Kristen Wiig, decide they are going escape the rat race and get downsized. With the equivalent of $12.5 million, they can retire in the lap of (small) luxury.

It’s a great premise. Unfortunately, this alone doesn’t necessary make for a workable movie. There needs to be conflict, a plot, and things like that.

The trailer covers about the first 25% of the movie that sets up the premise. After that, the movie could go in almost any direction… and that’s exactly what it did. The last 75% of the movie didn’t rely on the Downsizing premise at all. It could have happened in normal-size world with very few edits.

Here’s part of the review:

“I’m here to tell you that everything you think about this movie is wrong. Cowriter and director Alexander Payne (Nebraska, The Descendants, Election) takes that intriguing concept and inexplicably flushes it down the toilet… The second-half execution is an epic fail, nonsensical in its plotting and disturbing in its venom for other human beings.

Characters are tossed aside. Sturdy plots are tossed aside. Even the visual gimmicks go away. We clean up the mess. The chaotic zig-zagging story (written by Payne and Jim Taylor) goes to new places with wild, irresponsible abandon. This is a would-be hero’s journey in which everybody is the villain. Damon is pathetic, not sympathetic. Waltz is even more despicable. You will not care about any of them.

This is exactly how I felt watching the movie.

Since Downsizing was no longer the Financial Independence/Retire Early (FIRE) movie that I was expecting, my mind wandered off on many tangents. Here are a couple of the thoughts I had:

  • There were a lot of All-Star cameos. Or maybe they are all-stars to me: Jason Sudeikis, James Van Der Beek, Patrick Gallagher (Glee), Neil Patrick Harris, Laura Dern, Donna Lynne Champlin (Crazy Ex-Girlfriend), Kerri Kenney (The State)
  • In contrast to most movies, there was a good deal of male full-frontal nudity and zero female nudity. The nudity was in a medical setting, which is something to note if male full-frontal is your thing.

The biggest thing my mind kept going back towards were the inconsistencies. They make a point that the Downsizing process requires removing teeth and hair. After being Downsized, dental implants are put in and hair grows back (eventually). I’m not sure why hair cells wouldn’t shrink. I’m also not sure teeth would behave differently from bones that do shrink. (Note: The movie review above says it was just teeth with metal filings, which makes more sense.)

Downsizing vodka
The vodka scene that didn’t appear in the movie.

The shrunken world amazingly has cellphones and HD televisions. The cell reduction technology can’t work on these, so it seems that 2-inch screens with 2 million dots is cheap.

That may sound nit-picky, but it plays into bigger questions in the movie. Sometimes making quality small things is expensive. I suppose that small people could be making small ovens and refrigerators. However, the downsizing pitch is retirement on a relatively small amount of normal US dollars. Maybe people in extreme poverty can get downsized and perform labor for what we might consider a middle-class lifestyle? I wish the movie explored these types of questions.

The real shame of Downsizing is that it would be a better fit for a television show. The core concept can lead to numerous story lines. These story lines could actually be related to the act of “downsizing” unlike the movie itself.

For those looking for a mainstream movie about FIRE, the search continues.

[The above article may contain affiliate links]

Remember: Use Whatever Motivates You Financially

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I’m at Disney World this week. As a result, today’s thought is going to be shorter than usual. I want to save the deeper articles for a time when I can go into them in detail. It turns out that when you pay a lot of money to go to Disney, the desire to spend that time blogging greatly wanes. I probably wouldn’t be publishing this if I had a normal amount of sleep or active brain cells.

Before I get to the personal finance thought though, I feel like I need to get some stuff out there… perhaps to clear those few working brain cells to carry the day.

I looked at the news a few times and it seems like this vacation is “part two” of the one my wife I and took to Australia in 2009. You might remember that month of September as the one when the financial markets collapsed. Perhaps more personally devastating to me, Tom Brady was injured for the season just a few months into it.

I won’t get too political here, but I do have to say a few things just like I did back then when the financial markets were collapsing. It looks like the game of musical chairs continues with the top positions in our government. It feels like it should accompany circus music or that music from Benny Hill. I’m pretty sure my 5-year old is next in line for a cabinet position. My 4-year old seems to understand school systems better than the Secretary of Education.

That 4-year had an active shooter drill in his preschool class last week. I don’t know how to process that. I’m surely not capable of explaining it it to him. I completed college without a drill or even a thought about gun violence. I understand that times change… hey I just made a Benny Hill reference. It’s just that I don’t know how we can normalize teaching “sorting beads by color” at the same time as what to do when an active shooter is around. It seems like dozens of advanced countries have solved this problem, so I don’t see how it is complex here in America.

In other news, Stephen Hawking died on Pi Day. Ugh. I’m sure that there will conspiracy theories that Bill Belichick killed him because the Patriots gave Stephen Hawking a jersery with the number Pi on it. And to round out the Patriots stuff, they’ve lost some of their best and my favorite players in free agency: Malcolm Butler, Nate Solder, Danny Amendola, and Dion Lewis. That’s a lot of talent leaving the team. So far it doesn’t look like they are replacing that talent with any proven talent. (Update: Yay, Jason McCourty signing! All is good again.)

Phew, imagine how I’d feel about all the above if I wasn’t in such good mood while at Disney World? Yikes!

That’s a lot a of words that don’t have a core focus on personal finance. (However, there’s a lot of hidden non-personal financial motivation in all the above.)

Let’s get to that personal finance thought.

While I was in some line for some ride, I read an article from Our Next Life suggesting that we shouldn’t get discouraged by slow initial progress when looking towards financial freedom.

I couldn’t agree more.

There are some personal finance bloggers out there who have net worths of more than $2 million dollars which mean they have sizable investments. Their monthly reports can show gains of $25,000 very easily if the stock market is moving in the right direction. If you are just starting out, $25,000 a month seems impossible. It’s worth noting that for most of these people, this money is just stuff on paper. They are typically in retirement accounts that are difficult (but not impossible) to access until they are nearly 60 without penalty.

It might also seem impossible to get to $2 million dollars. I think that depends on your own circumstances such as education, income, and financial obligations. Everyone is going to be different when it comes to that.

Rather than focus on those big, difficult-to-relate-to numbers, I suggest you do something different. Focus on growing your net worth in terms of percentage rather than actual dollars.

One of the (few) great things about having a low net worth is that it’s easier to high percentage gains. If your net worth is $20,000 and you save $7000 in a year, that’s more than 33% net worth growth. That’s amazing! Embrace that as a big win!

Those people who have $2,000,000 in net worth usually can’t hold a candle to those kind of percentage gains. They’d have to grow their net worth more than $650,000 to match your 33% growth in net worth.

Sometimes a little change in perspective can be the motivation that you need.

Why FI in RI?

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The question of where to retire once you reach financial independence has come up several times in the last month. It started about a month ago when my big sister in spirit sent me an email. I’ll call her Buffy in keeping with a longstanding tradition of naming anonymous people after Buffy the Vampire Slayer characters. Her family’s location in Silicon Valley is high cost of living… perhaps the highest in the country. If you aren’t working for Big Tech, it probably doesn’t make sense to live there. We saw the writing on the wall around 2011 and realized that I can blog from anywhere and my wife’s military pay won’t adjust for geography when she’s retired.

Trying to find the best place to retire is an interesting exercise. It’s so interesting that Money and Kiplinger’s magazines seem to put together new “Best Places to Retire” every 4 months. Maybe it just seems that way to me. Anyway, Buffy is an A+ planner and she had already sent a list of things they’d be looking for in a new place. I like that it started with a list they wouldn’t be looking for:

Things NOT to look for retirement

  • Jobs – No need for a job if you are financial independent
  • Perfect weather – They reasoned that they could travel during bad seasons. In New England we call the winter relocation to Florida second homes, snowbirding.
  • Schools – Their kids will be out of school, so this isn’t a consideration. I pointed out that there might value in a nearby university for things to do.
  • Profitable housing prices – Buffy has experience in real estate investment. I think she wanted to point out that this was not really a concern. This makes sense if you are just looking for a primary residence to spend your days

Things REQUIRED for early retirement

  • Nice, low maintenance house – Not everyone can put this on their list, but moving from Silicon Valley opens up a lot of options. When the average house there is probably going for $2 million, you start to think what $400-500K buys you some place like Texas… or Rhode Island.
  • Decent medical facilities – Seems like a reasonable request as one hits retirement age
  • Nature, but no wildfires – Clearly the wildfires last month in Northern California is a factor here.
  • Low disaster risk – The hope is to avoid earthquakes, hurricanes, tornadoes, floods, etc. I think Buffy is concerned that climate change will only get worse.

Obviously everyone will have different lists of what they want in retirement. I would say that the first list is about avoiding paying a premium for things you don’t intend to use. The second list puts a premium for safety and security. There’s also a touch of scaling back and enjoying simple things like a nice evening stroll or maybe a day of hiking.

So Buffy’s husband was thinking about New Hampshire or Vermont, while Buffy was thinking about Oregon or Colorado. Then Buffy’s husband brought up Rhode Island… where we live.

Before I got to the last part of the email, I was already thinking about Rhode Island. It’s natural to think of your state and see whether it is a fit, right?

Here’s Why to FI in RI

Beach Dog
This is Jake. You’ll be seeing more beach pictures of him on the blog.

It’s very easy to check off most of the first list.

Rhode Island is the 50th best state for business. The schools need $2.2 billion in urgently needed repairs. That kind of shortfall could be negative, because property taxes might need to be raised. That’s one of the things Buffy wants to avoid. However, overall jobs and schools are not great here.

Rhode Island doesn’t have perfect weather with a few months of snow, but it’s not bad. My area, Newport, RI gets less snowfall as it’s closer to the coast. The rest of the year the weather is pretty good, including the recent fall foliage. I never know where housing prices are going to go, but usually jobs and schools are an indicator. However, since this isn’t a big consideration we can just move on.

Moving onto the list of positives for Rhode Island, it looks like a good fit for Buffy. Housing prices are higher than much of the country, but still a fraction of what they are Silicon Valley. It’s a relatively short drive to Boston’s medical facilities which has some of the top hospitals in the world. Rhode Island is aptly named The Ocean State for a reason. Our nature is miles and miles of coastline and beaches, but that qualifies as nature, right?

The disaster risks in New England are largely related to snow storms. Disasters like earthquakes and tornadoes are black swan events and generally very tiny even then. We do get hurricanes, but they are usually fairly weak by the time they’ve traveled up the Atlantic coastline. I don’t want to minimize the snow, but we still have plenty of homes built in the 1600, 1700, and 1800’s, so that’s an indicator that they may be around for another hundred years.

That’s not to say that New Hampshire, Vermont, Colorado, Oregon are bad options either. I can certainly see why some people would consider them. There’s no right answer and it’s highly dependent on the individual. For example, the popular financial independence blog Frugalwoods wrote about Vermont. Similarly, Tanja from Our Next Life wrote about why California is right for them.

I’m not really convinced that Rhode Island is our final destination either. With two kids 5 and under, we’ve got another 12 years to gather more information. Twelve years ago I would have told you that the Boston suburbs would be my forever home. We’ve been to California for 5-6 and to Rhode Island for almost that long. Rhode Island certainly checks off a few boxes for us or we wouldn’t be here now.

What’s your best state for early retirement? Let me know in the comments.

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