Fear is the mind-killer

[jacksonM]

You continue to intrigue me, PS.

Finish the quote...

I will face my fear. I will permit it to pass over me and through me. And when it has gone past I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain.

Sounded like a Buddhist quote until I got to the last sentence.

[WiseOne]

Yeah, and living through the Depression and WW2 just completely colored an entire generation's thinking about money in a major way; and that was a worldwide phenomenon, not just in the USA.

I remember my dad's stories about growing up in the Depression era. He was all about frugality, DIY'ing, and good citizenship, more so than my mother who came to the US in 1947 and didn't have that experience. I was thinking that the Great Recession might have a similar effect, but apparently not so much. It did bring a new emphasis on frugality, and perhaps was also a major factor in the FIRE movement.

Some big differences between our parents' situation and ours: back then, when you got a job with a large company, the company took good care of you. As long as you were a good corporate citizen you could look forward to a 30 year career, steady salary increases, and a pension for retirement. Investing wasn't something that most people did. If you had savings, you put it into a passbook account that paid 5% interest. I don't think the market was on people's minds as much as it is today.

[Ad Orientem]

Yeah, and living through the Depression and WW2 just completely colored an entire generation's thinking about money in a major way; and that was a worldwide phenomenon, not just in the USA.

I remember my dad's stories about growing up in the Depression era. He was all about frugality, DIY'ing, and good citizenship, more so than my mother who came to the US in 1947 and didn't have that experience. I was thinking that the Great Recession might have a similar effect, but apparently not so much. It did bring a new emphasis on frugality, and perhaps was also a major factor in the FIRE movement.

Some big differences between our parents' situation and ours: back then, when you got a job with a large company, the company took good care of you. As long as you were a good corporate citizen you could look forward to a 30 year career, steady salary increases, and a pension for retirement. Investing wasn't something that most people did. If you had savings, you put it into a passbook account that paid 5% interest. I don't think the market was on people's minds as much as it is today.

People who came through the Depression often wound up with a lifelong suspicion of stocks and banks. My late aunt Mary's mother and father in law mostly lived on cash and kept no more money in the bank than what was needed to cover the very few checks they wrote. Shortly before he died in the 1970's from cancer (he was a 3-4 packs a day man) he told his kids including my uncle Dean where the money stash was. Behind some loose bricks in the basement wall they found two boxes with wads of cash. Some dated all the way back to the 1940's along with wartime ration books.The cash was almost $30,000 which was lot of money in the 70's.

[jacksonM]

Yeah, and living through the Depression and WW2 just completely colored an entire generation's thinking about money in a major way; and that was a worldwide phenomenon, not just in the USA.

I remember my dad's stories about growing up in the Depression era. He was all about frugality, DIY'ing, and good citizenship, more so than my mother who came to the US in 1947 and didn't have that experience. I was thinking that the Great Recession might have a similar effect, but apparently not so much. It did bring a new emphasis on frugality, and perhaps was also a major factor in the FIRE movement.

Some big differences between our parents' situation and ours: back then, when you got a job with a large company, the company took good care of you. As long as you were a good corporate citizen you could look forward to a 30 year career, steady salary increases, and a pension for retirement. Investing wasn't something that most people did. If you had savings, you put it into a passbook account that paid 5% interest. I don't think the market was on people's minds as much as it is today.

I think a lot of people might have learned the wrong lesson from the Great Recession because stocks recovered fairly quickly and we are now well into the second longest recovery ever. History often repeats itself but it has no obligation to do so. A better learning experience, at least for me, was the crash of the dot com bubble.

My parents sound exactly like yours but when they retired and put their money into a passbook account it was paying more like 18%. I think that was the same kind of lesson wrongly learned and ZIRP would eventually become the ultimate teacher. Another lesson was that fixed pensions with no cost of living increase will eventually become nearly worthless if you live for 30 years after retirement. I think my Dad was getting around $80 a month when he died. For them SS was a much better deal.

[Pointedstick]

You continue to intrigue me, PS.

Finish the quote...

I will face my fear. I will permit it to pass over me and through me. And when it has gone past I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain.

Precisely. I no longer fight my fear to try to remove it. I accept it. I lean into it. And then it ceases to be frightening and I find that my mind is clear.

I'll be a bit more specific: I have resolved to completely forget about the money in my retirement accounts because I'm not going to use it for another 35 years at least. I have faith that 35 years is enough time to level out the fluctuations and produce that average 7% annual real return. If it's not, that probably means that the whole USA is in the shitter, which means that having a lot of money that will probably make you a target of the have-nots will be of secondary importance compared to owning useful assets and being socially respected and important.

The real action was always in my taxable portfolio, which I had earmarked for ERE before actually achieving it and getting bored silly. I liquidated the portfolio last year and now it's all cash waiting on the sidelines, which I'm periodically dipping into for home improvement projects that raise my quality of life. Mentally leaving my previous fear-based mindset allowed me to follow my instincts that the stock market was toppy. I have zero fear right now. If the market continues its downward slide, I'll get back in at a nice discount, and if I miss the absolute bottom, who cares. If let's say the market recovers on Monday and resumes its previous rise, the worst case scenario is that I can buy back in at the point where I sold, so I won't have lost anything.

But the taxable portfolio is funny money. I don't care about it. I could lose 100% of it with zero consequences. My family's cost of living is still ridiculously low and I have shed my previous fear that I won't be able to get a job or earn income. Since the last time I posted here, I'm now making $600 a month from my KDE hobby.

Life feels so much more vibrant now than it did when my focus was on guarding my gains. It's glorious out there.

[Mark Leavy]

Life feels so much more vibrant now than it did when my focus was on guarding my gains. It's glorious out there.

Outstanding. Great to hear.
Mark

[Kbg]

You continue to intrigue me, PS.

Finish the quote...

I will face my fear. I will permit it to pass over me and through me. And when it has gone past I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain.

Precisely. I no longer fight my fear to try to remove it. I accept it. I lean into it. And then it ceases to be frightening and I find that my mind is clear.

I'll be a bit more specific: I have resolved to completely forget about the money in my retirement accounts because I'm not going to use it for another 35 years at least. I have faith that 35 years is enough time to level out the fluctuations and produce that average 7% annual real return. If it's not, that probably means that the whole USA is in the shitter, which means that having a lot of money that will probably make you a target of the have-nots will be of secondary importance compared to owning useful assets and being socially respected and important.

The real action was always in my taxable portfolio, which I had earmarked for ERE before actually achieving it and getting bored silly. I liquidated the portfolio last year and now it's all cash waiting on the sidelines, which I'm periodically dipping into for home improvement projects that raise my quality of life. Mentally leaving my previous fear-based mindset allowed me to follow my instincts that the stock market was toppy. I have zero fear right now. If the market continues its downward slide, I'll get back in at a nice discount, and if I miss the absolute bottom, who cares. If let's say the market recovers on Monday and resumes its previous rise, the worst case scenario is that I can guy back in at the point where I sold, so I won't have lost anything.

But the taxable portfolio is funny money. I don't care about it. I could lose 100% of it with zero consequences. My family's cost of living is still ridiculously low and I have shed my previous fear that I won't be able to get a job or earn income. Since the last time I posted here, I'm now making $600 a month from my KDE hobby.

Life feels so much more vibrant now than it did when my focus was on guarding my gains. It's glorious out there.

You should care a lot, an awful lot when you are 55 if your savings are going to be a significant part of your retirement income. You should start caring a little bit when you hit 50. Until then, enjoy your new found freedom.

[flyingpylon]

But the taxable portfolio is funny money. I don't care about it. I could lose 100% of it with zero consequences.

So why not head to Vegas?

[WiseOne]

Since the last time I posted here, I'm now making $600 a month from my KDE hobby.

Life feels so much more vibrant now than it did when my focus was on guarding my gains. It's glorious out there.

So what are you doing these days apart from the KDE hobby and some home renovation projects, that's making life vibrant? And that you couldn't do while in "early retirement"?

I am convinced that many early retirees drastically underestimate their long-term spending, because it's based on a tightly constrained, unsustainable lifestyle that works best at age ~30. But, I suspect that the moment of job-quitting and "RE" is simply the start of a new path, and that many (or most) find new and perhaps unplanned ways to earn money to cover those extra living costs, while their savings continue to grow and they enjoy a life free from living in a Dilbert cartoon.

Personally, my intention is to become a "SWAMI" rather than an early retiree. I'm not quite there yet, but getting close and it's already paying big dividends in quality of life. As Mr. MM puts it, "Work is better when you don't need the money." And yes, at some point I can foresee wanting to call it quits, and I'll have the option to do that. That's something you may not imagine right now as a 30+ year old, but that isn't unimaginable at all when you're over 55.

[buddtholomew]

I have had the opportunity to work from home for the last decade and this has significantly improved work/life balance.

I can’t imagine retiring completely as the boredom would be too much to bear. Even working out 3-4 hours daily, taking care of the kids and the home isn’t enough to feel whole as I need to challenge myself mentally as well (albeit on my terms).

PS is fooling himself as he has a 50/50 AA and hasn’t found the holy grail that he purports to have found (assuming retirement $ = taxable account $). Investors do this all the time - I am 100% equities only to find out they have a well-funded emergency account with a substantial cash balance. Look at your accounts holistically. If you’re so enlightened why have the cash savings at all.

[Tyler]

I did the full work-free FIRE thing for a few years and eventually settled back into working three days a week on my own terms. Permanent 4-day weekends are great, and the other perk is that I tend to get the low-stress projects as the high-maintenance ones require full-time attention that I no longer offer. The extra money is also allowing me to afford to live in a cool part of town to maximize the enjoyment of those days off. So while quitting is awesome (and I highly recommend a sabbatical for those able to do it), the more important concept is to embrace the idea of building your own happy, sustainable system. A little work is part of the recipe for me right now but that may change in the future. Financial independence is cool like that.

The best way to fight boredom is to do something productive. Granted, trying to suddenly self-motivate is pretty tough after years of atrophy brought on by a lifetime of depending on a parent or boss to give you direction. But with a bit of exercise and a few growing pains it gets a lot easier. I'm a much stronger and more independent person now than I was even a few years ago.

[dualstow]

Personally, my intention is to become a "SWAMI" rather than an early retiree.

Self Worth Amounts to MIllions?

[WiseOne]

The best way to fight boredom is to do something productive. Granted, trying to suddenly self-motivate is pretty tough after years of atrophy brought on by a lifetime of depending on a parent or boss to give you direction. But with a bit of exercise and a few growing pains it gets a lot easier. I'm a much stronger and more independent person now than I was even a few years ago.

Ah ha, I think you nailed it! Self-motivating is refreshing if you can do it, but it can also be hard to do. And, it can be depressing when you suddenly don't have immediate goals in front of you. My job requires me to set my own goals so I'm familiar with that let-down feeling when you get stuck in the goals department. Sounds like PS may have been stuck for a while, but glad he's worked his way out of that now.

Dualstow, there's a Mr. Money Mustache post about SWAMI's. I forget what it stands for, but it's a financially independent person who continues to work because they want to.

[dualstow]

I just googled it. Thought it might be Still Working and Making Income.
It’s Satisfied Working Advanced Mustachian Individual (Swami).

[Jack Jones]

This has been my favorite thread of the year. PS returns from silent retreat to proclaim the gospel of 100% equities.

For me, what little wealth I have is hard earned and I don’t know if I can do it again. I like having 25% of my wealth outside the system, where the have nots and do naughts can’t touch it.

For better or worse, I internalized the Your Money or Your Life lesson that my wealth represents the product of my life’s energy. Perhaps that will change on the other side of financial independence, but for now, I’m not prepared to witness 50% of that life’s energy evaporate in a drawdown.

P.S. it seems telling that your second paragraph expresses regret in not fully taking advantage of the recent bull market. Hopefully this was just a conversation starter, tapping into the Fear of Missing Out that us conservative investors experience from time to time.

[moda0306]

If investing in a deeply diversified portfolio is "fear-based," and losing everything doesn't matter, why not just spend most-if-not-all of your income in any year? By that logic, any hoarding is "fear-based," is it not?

I really don't think the PP is necessarily fear-based, nor is a more equity-heavy portfolio necessarily greed-based. But I definitely could make the latter argument easier than the former. If losing everything doesn't matter, neither does getting a 6% RoR instead of 10%... right? What DOES matter when it comes to wealth, returns, and financial security? I actually mean this as a real question... what are the most important one or few aspects of finances that are important? I'd say that things are most important insofar as they are in a place so-as-to not toxify other aspects of your life. So all the other non-financial aspects of life are best protected (financially) how exactly? Certainly investing in all equities isn't "important" in that model? It's just one way to move the deck chairs around for a hopefully higher return at the expense of higher volatility and potential for sub-par long-term returns, or perhaps a complete crash when you need the assets most.

Always glad to see PS back, but I feel like maybe he's weaving an inconsistent narrative... and you know how this group likes consistency.

All that said, I definitely think people put WAY too much stress onto things like market downturns, crappy traffic, social slights, workplace hiccups, etc. Stoicism is a good tool to avoid all that... but to PS's other point about marriage, it can leave you a bit insensitive and overly "sociopathic" in how you view things if you let it. I try to set my "stoicism filter" so to filter out all the bad stuff and amplify the good stuff. Cuz if I'm overly-carefuly-planny about risks, then I've done what I can do and should be able to fully take in the joys of life without carrying any other burdens on my back. I think it works well, but maybe PS has a better-tuned model.

[Pointedstick]

What I realized was that for myself, the desire to protect my financial gains arose from a worry that I would be unable to replace my income. For me, the PP was a fear-based portfolio. YMMV.

I went through the process of losing that income just like I feared. But then with little effort, regained it--and even created new income streams. This cured me of my fear of not being able to make ends meet, provide for my family, and be an income earner during my working years. I know that someday I'll want to retire, or semi-retire, or become financially independent again and pursue non-compensatory hobbies or charity or whatever. But I also know myself well enough to understand that I will always want to stay both busy and productive, and that in all likelihood I will be able to monetize those activities if I so choose.

The happiest retired people I know are very busy, and many of them are earning quite a bit of money from their post-retirement activities, such as selling art, teaching classes, giving panels at conferences, earning royalties from the sale of books and music, selling wax and honey from beekeeping--things like that. Not like $50k+ a year, but enough to provide a nice supplement and backup to their Social Security/pension/investment portfolio income. Like MT's carpet cleaning business. I just know that's what my model of retirement is going to eventually look like, rather than the "watch TV and play poker with my friends every night" model.

Current thoughts:

When I near the time when I feel like leaving the workforce, if I don't have a $3m portfolio (inflation adjusted, of course), I may consider moving $1-1.5m of it back into a fairly conservative PP-style portfolio (likely a 30/30/30/10 or therebouts), but if I do have more than $3m, I don't see the advantage right now. A $3m portfolio sustains $120k/yr, which is vastly, outrageously more than my family has ever spent per year, and similarly vastly more than my wife and I would ever spend when we're in our 60s when we don't have kid expenses anymore. If I ever have a $3m portfolio, it will be generating so much money than even in retirement, more than 60% of the yearly dividends and principal increases will be simply reinvested, causing the principal to increase rapidly.

Such a situation would allow me to lose more than half of it and still comfortably live off 4% of what remained, keeping the principal intact. So why bother putting it in something really conservative to try to preserve the principal when you have so much that the worst loss* is something that doesn't bother you? Yes, end-of-life expenses can be high, but if you stay active and your kids don't hate you, there's much less of a chance that you'll have to move into one of those miserable $70k/yr death houses. Even if you do, average stays there are not long before you finally, mercifully kick the bucket. My experience with people living in these places is that pretty quickly death seems like sweet release.



* Note: I'm not considering the possibility of losses like the stock market going to zero or the total implosion of the USA's economy, political system, and society, because if those kinds of events happen, we have left the realm of personal finance and entered a very different realm with different constraints, risks, and opportunities and our investment portfolios will have very little impact on our survival and condition once the situation stabilizes.

[Pointedstick]

Another thing: from an emotional perspective, I've realized that I'm personally more comfortable with the risk of exposure to stock market under-performance than I am the risk of missing out on stock market gains because of the desire to preserve and defend my gains. I'm old enough that I can start to notice life trends; one that has become apparent to me is that the more I plan and analyze and micro-optimize and try to protect my gains and avoid loss, the worse the outcome usually is. By contrast, the best choices I have ever made in my entire life were high-risk, spur-of-the-moment decisions, and I regret none of them.

It's like in war: you need to accept risk and venture forth and attack to have any chance of winning. Defense never wins, and by not winning, you lose. Now, sometimes the loss is subtle, like our losses from the past 17 years' Middle Eastern wars: We didn't lose territory, but our strategic losses include national wealth, social cohesion, regional stability in the Middle East and north Africa, and our military's readiness and ability to fight a peer war with a country that can actually fight back, like Russia or China.

I'm sure some of the risks I'll take won't pay off. That's the nature of risk. But I have faith that the ones that matter will, and that I'll be able to recover from anything really bad that happens.

[barrett]

Of course the other side of the coin, PS, is why bother taking risk when you have already won the game? (borrowing from Bill Bernstein here) It sounds like your annual expenses are so low and your human capital is so valuable that, essentially, money just isn't all that important to you at this point.

[Xan]

Right, barrett, it seems that PS could just as easily put everything into T-bills.

[Mountaineer]

Another thing: from an emotional perspective, I've realized that I'm personally more comfortable with the risk of exposure to stock market under-performance than I am the risk of missing out on stock market gains because of the desire to preserve and defend my gains. I'm old enough that I can start to notice life trends; one that has become apparent to me is that the more I plan and analyze and micro-optimize and try to protect my gains and avoid loss, the worse the outcome usually is. By contrast, the best choices I have ever made in my entire life were high-risk, spur-of-the-moment decisions, and I regret none of them.

It's like in war: you need to accept risk and venture forth and attack to have any chance of winning. Defense never wins, and by not winning, you lose. Now, sometimes the loss is subtle, like our losses from the past 17 years' Middle Eastern wars: We didn't lose territory, but our strategic losses include national wealth, social cohesion, regional stability in the Middle East and north Africa, and our military's readiness and ability to fight a peer war with a country that can actually fight back, like Russia or China.

I'm sure some of the risks I'll take won't pay off. That's the nature of risk. But I have faith that the ones that matter will, and that I'll be able to recover from anything really bad that happens.

PS, your post reminds me of a segment from a book I'm current reading. In my opinion, the context of the segment deals with human nature from a combination of psychological, philosophical, emotional, and religious perspectives, much like your post above.

The Genius of Luther’s Theology by Robert Kolb and Charles P. Arand, pages 119, 120:

People continually make a grave error when they, as creatures who lack faith seek to “usurp the power and authority of God the Creator” shaping the future. Lacking faith, human beings want to plan and control events and things in order to obtain the results that they want. They want to define success and how to obtain it. They need to find meaning in the world and make sense out of life. In his preface to Ecclesiastes, Luther recognized that the human need to manage, to be in control of our plans and actions, is so deeply ingrained within every person that it will also at times characterize the Christians. Luther pointed out that things often turn out differently from the way we thought they would which makes our planning and working seem futile and pointless. Retirement savings may be lost to corporate mismanagement (as in the Enron affair at the turn-of-the-century) or diminished through economic recession and other factors, such as illness, accidents, storms, and war. According to Luther, Ecclesiastes teaches that “human calculations and plans dealing with creatures all fall fail and are worthless when one is not satisfied with what is presently at hand but instead wants to master and rule the future. So things always go backwards as a person has nothing more than lost effort and worry”. When things do not turn out according to the best-laid plans of human creatures, they become impatient, disgusted, angry, disenchanted, and apathetic. Before long they want to give up and do nothing more convinced that creation is meaningless when the fault lies with them and their scheming.

As Christians carry out their responsibilities in the world, faith frees them from the bondage of caring for themselves and presiding over their own destinies. Christians no longer need to be masters of their fate. Their new relationship to God as the Creator and to the world as his creation no longer requires them to control everything that happens in their lives or in world history. It no longer requires them to predict the outcome of their planning and labors. Instead, faith lets God be God. It recognizes that he is the one who has a divine perspective and in his wisdom graciously guides creation according to his purposes. Faith then lets us be us, those who are fully human and accept our finitude and dependence on God.

[Cortopassi]

Mountaineer and PS,

I have to call a little BS here in these comments and clips.

"human beings want to plan and control events and things in order to obtain the results that they want....Yes

faith frees them from the bondage of caring for themselves and presiding over their own destinies....What is that trying to say?

It no longer requires them to predict the outcome of their planning and labors....Good luck with that"

You guys have families, you guys have jobs, you guys have bills, houses, cars, tuition, etc, etc. What am I supposed to read into this? Hey, I don't feel like going into work today, I may just blow it off. I don't want to take that Chem final today, so I won't. Seriously?

Of course you have to plan and control events to some extent to prevent from being destitute or homeless, or not graduating, etc, etc. That's why we are all on an investing forum! Am I supposed to read that God will take care of everything and I don't have to care about myself or my family's well-being? Of course things don't always go as expected...

That's how I read it but I am not religious and sorry if I am offending people. The faith I have is in myself, my family and my friends.

[Mountaineer]

Mountaineer and PS,

I have to call a little BS here in these comments and clips.

"human beings want to plan and control events and things in order to obtain the results that they want....Yes

faith frees them from the bondage of caring for themselves and presiding over their own destinies....What is that trying to say?

It no longer requires them to predict the outcome of their planning and labors....Good luck with that"

You guys have families, you guys have jobs, you guys have bills, houses, cars, tuition, etc, etc. What am I supposed to read into this? Hey, I don't feel like going into work today, I may just blow it off. I don't want to take that Chem final today, so I won't. Seriously?

Of course you have to plan and control events to some extent to prevent from being destitute or homeless, or not graduating, etc, etc. That's why we are all on an investing forum! Am I supposed to read that God will take care of everything and I don't have to care about myself or my family's well-being? Of course things don't always go as expected...

That's how I read it but I am not religious and sorry if I am offending people. The faith I have is in myself, my family and my friends.

Hey, no offense at all. I considered whether to post the material from the book as it can easily be taken out of the greater context of the whole book. For me, the the point of the quoted material is: use your God given gifts today to the best of your ability - reason, skills, social contacts, work contacts, etc. but always remember that it is God that is in charge of both this world and the eternal world to come. Thus, don't worry about tomorrow, tomorrow will take care of itself. Don't be anxious and uptight, it just eats away at ones self and is toxic to your family, friends, and neighbors. But, to really understand the quote, I'd suggest reading the book if you wish to understand thoroughly. Sometimes snippets fail to communicate, just like it is very difficult to communicate (vs. sharing data) on the internet. Can't see body language etc. Sorry for the confusion.

[Cortopassi]

use your God given gifts today to the best of your ability - reason, skills, social contacts, work contacts, etc. but always remember that it is God that is in charge of both this world and the eternal world to come. Thus, don't worry about tomorrow, tomorrow will take care of itself. Don't be anxious and uptight, it just eats away at ones self and is toxic to your family, friends, and neighbors.

That is much more succinct, thank you!

[Mountaineer]

use your God given gifts today to the best of your ability - reason, skills, social contacts, work contacts, etc. but always remember that it is God that is in charge of both this world and the eternal world to come. Thus, don't worry about tomorrow, tomorrow will take care of itself. Don't be anxious and uptight, it just eats away at ones self and is toxic to your family, friends, and neighbors.

That is much more succinct, thank you!

You are welcome. And, I really do suggest the book for anyone, Christian or not. It gives a good understanding of Luther's thought processes and how one of the major events in Western Civilization (the Lutheran Reformation which initiated the Protestant Reformation) came to be 500 years ago. One may or may not agree with the Luther's theology but it is a well written and interesting read. The impact of the Reformation is much broader than many realize: hospitals, capitalism, end of serfdom, universities, perhaps even was a big contributor to the settling of America, etc.