Blog

Perhaps the kindest thing that has ever been said about comparisons is that they are odious. They are so much worse than that. They are dangerous. They are compelling and they are confusing. They are so, so tempting too, but at their heart, they are misleading and painful.

I was reading “The Daily Stoic”* by Ryan Holiday the other day and he quotes Marcus Aurelius on comparisons: “The Altar Of No Difference” for November 26th, to be precise (I have been catching up!).

“We are like many pellets of incense falling on the same altar. Some collapse sooner, others later, but it makes no difference.”

What Ryan says about this is insightful too, but rather than quote all of it, I’ll give you a couple of little gems.

First: “measuring ourselves against others makes acceptance difficult.” Totally. There’s always someone taller, richer, faster or “better”. If we we were in a different culture, maybe being shorter, poorer, slower or “worse” would be the desired cultural outcome. Comparisons get in the way of seeing what’s really important.

Second, I think he finishes the note with a clincher: “We have too much to do.” That gets to the heart of it, doesn’t it? Comparing doesn’t achieve anything, and takes up so much time and energy.

Time and energy are how we make money. And what we exchange money for. Time and energy are the particles that make up our life, and we waste them on comparison.

As I was thinking about this, it made me realise that this is, possibly, the single best thing about 25X, the “Freedom Formula”. And also the scariest for people learning about it. There is no comparison.

How much your boss has saved and invested isn’t relevant. How well your brother is doing doesn’t matter. You can’t look at your friends’ houses as a guide: this is all about you.

YOUR ASSETS need to be twenty five times YOUR SPENDING.

No one else is involved here.

If you want a big fancy life, you need twenty five times that much. If you want to scale back a ton, get as close as you can to zero spending, you need twenty five times that little.

You need to calculate your spending. You need to decide what your budget is. You need to include everything important – this is no time to cheat and decide you won’t ever need healthcare (you will) – but you also don’t need to include all the stuff you are still just spending on because you haven’t thought about it.

When you know what your spending is, you need twenty five times that number.

There are no comparisons here. None are relevant. This is the best thing about 25X because it’s empowering. You make your decisions, and what other people do or have shouldn’t come into it. It is also frightening, because we always (ALWAYS) look around us to see what other people are doing, to check if it is the right thing for us to do. That needs to stop. Comparisons here are not just odious, they are damaging.

YOU need 25X YOUR spending. What everyone else is doing doesn’t matter.

“But my buddy takes his holidays every year in the Bahamas…”

So? If that’s something you want to do too, factor it in. If it isn’t, it’s just something your buddy does. Forget about it.

It’s just another pellet falling on the same altar. We have too much to do.

 

(* “The Daily Stoic” is a fantastic book, by the way, one of my favourites, and amazingly, the only book I’ve ever received as a present twice on the same day from different people. Either my family knows me really well, or I am that predictable. Whichever it is, they clearly don’t consult!)

When we think up something on our own, we often doubt whether it’s true or not. So when I started coming up with the idea that became the Freedom Formula…

I know I can get some crazy ideas at times: my business plan of selling green-tinted sunglasses to tourists in Ireland (for them to take home and show people what Ireland looks like), for example, seems still not to have been copied by anyone, surprisingly enough.

So when we do get our own ideas, we often look around for a little support. If we can find someone else saying the same thing, then we might be a little more confident that we’re on the right track.

Four years ago, in 2013, I was running my own spreadsheet on how much money I needed, using a range of withdrawal rates between 3% and 5%, depending on how confident I was of my ability to make good returns, or how desperately that day I wanted to quit work. But I wasn’t sure.

And then support came from two sources that could barely be more different from each other: the Rockefeller Foundation and Mr Money Mustache.

The Rockefeller Foundation, has been managing a charitable endowment for more than 100 years, by withdrawing just 4% per year to give to the causes it supports.

And Mr Money Mustache writes about how he knew he had enough money when his annual spendings was just 4% of his total asset base. He knew then that he would be able to cover his spending for the rest of his life.

I don’t remember which order I found out about these two, it was so close together. I had been in a meeting with New York at the Rockefeller Foundation where they explained this approach, common across the endowment industry. And I was consistently googling the Financial Independence – Early Retirement blogs when I came across mustachioed one.

If two people, or organisations, this hugely, enormously, ludicrously different – one of the world’s oldest, richest charitable foundation and a bloke who wears check shirts and, no surprise, a mustache – were saying the same thing, it must be right.

Right there and then, I stopped messing around forecasting somewhere between 3% and 5% being necessary. It’s 4%, and we need 25 times our spending to make sure we can do that.

So thank you Mr Rockefeller and Mr Money Mustache: 25X is thanks to you.

(Although when I downloaded a picture of John D Rockefeller, I thought, maybe he has more in common with Mr Money Mustache than I realised!)

There is something you hear whenever you start doing something successfully that other people haven’t done or aren’t doing. It doesn’t really seem to matter what it is you’re doing, the people you tell will volunteer why it can’t be done.

Yoga? “That’s not for me, I’m not flexible enough. I find it really uncomfortable.”

Vegetarianism? “I couldn’t do it, I just love eating meat. I guess it’s good for you, but…”

Minimalism? “But I love buying a ton of stuff I don’t need and surrounding myself with it so I can’t see a single flat surface. It’s cosy.”

Saving? “Now you’re just being crazy. I don’t have enough money to get by today and now you’re telling me to save? That’s all very well for you, but I don’t have enough money to cover my basics, let alone save any.”

Sound familiar? These arguments are very common and do a couple of bad things. First,  they reinforce to the person saying them that their current choices are right, even if they know they’re wrong and are damaging their lives. Second, they undermine the confidence of the person making the change, making them feel bad about being different, making it feel easier to give up and re-join typical group behaviour.

If you pursue MISSION25X, you’ll probably hear something similar during your progress:

• “I don’t have time to do a side-gig.”
• “I can’t live in a cheaper apartment, it’s too… (far/small/old-fashioned)”
• “You’re wasting your time saving. Live for today, that’s what I say.”
• “There’s too many scams out there to bother with investing.”
• “25X can’t be the answer for everyone. Some people need more.”
• “Not everybody can save that much. You shouldn’t tell people stuff like this when it’s not possible for everyone.”

And I get it. There really are people who can’t follow MISSION25X. I just think that for every one person who really can’t, there are more than a thousand saying they can’t – and I bet you find that will be true on your MISSION too.  In fact, I’d change that to “for every two people who really can’t”, because I think there are two types of people that really do struggle with this.

We should be prepared to accept the argument from people who spend on nothing but the most basic food, cheap accommodation, and maybe some healthcare.

If they’re skinny non-drinkers with three shirts, a couple of changes of clothes no known vices and a total cheap-freak – and they still tell us they can’t save, we should accept the argument from them. Fair enough. We should probably think about helping them out.

But if they’ve got a social life, a smartphone, a food preference, a beer belly, some spare time, a favourite restaurant, a favourite drink, a wardrobe full of clothes, an unhealthy habit of any kind, holiday plans abroad, things they really want for Christmas, the occasional feeling that they “deserve it”, the pizza delivery number lodged in their head, something that they consider a “must-have” when they know it’s a “want”, an online shopping website in their browsing history, novelty stuff they bought for giggles, a drawer full of old gadgets they never used that will soon be full of the gadgets they are buying today and not using, a Starbucks loyalty card, or in fact, any loyalty card, sneakers that are twice the price they could have paid, but they liked those ones more, or, let’s face it, any of the things that all of us have deliberately tucked away somewhere we can’t see them because we don’t use them and never did, which we bought with money that could have been saved – then we shouldn’t accept that argument from them.

I’m not saying we fight with them. There’s no point. Our truth doesn’t work for them, but equally their truth doesn’t work for us, either. Let’s just know they’re wrong and move on.

The other person we should accept the argument from is someone who cannot point to a single person they know who lives on less than them.

Sometimes it is where we are, where we live and the things we have to do in the places we live that cost so much, and I accept that… but now they think we’re on their side, let’s make them look around harder.

Is there really no one living on less than them? Are there any migrant workers living on the tightest of allowances because they send everything home? Are there no old people around who shuffle down to the shop first thing in the morning, and then do who-knows-what the rest of the day, making their tiny pension stretch as far as it can? The people in the lowest, lowest paid jobs… the people with no jobs… what do they do? How do they get by?

If we have some empathy, if we put ourselves in their shoes, imagine their lives, and then imagine how they would view ours. There are things in our lives, no matter how simple or common-place we think they are that they would view as extra-luxurious. There are things we take for granted other people dream about.

If we are genuinely talking to one of those two groups of people, someone who really has no extras in life and they can point to no one else who lives on less than them – we should accept that they can’t do this. We should offer them our deepest sympathy, or maybe something more meaningful, and see how we can help them.

Direct them to sites like this where they can learn how to budget, save and invest so that one day, when they hopefully have more money than they do today, they don’t waste it, they make it count. There’s plenty of free information here which will get them started…

For everyone else, it isn’t impossible: it’s just hard.

There are things they have and do today that they don’t want to give up, which is fair – but that doesn’t make it impossible. There are things that feel like necessities, but they aren’t really. There are probably things they do for other people (parents, kids, significant others) that they want to keep on doing.

All of these things are choices. All of these things are choices they are used to making.

That they choose to do these things, whether it is give to charity or buy a drink in the pub rather than save, doesn’t make them a bad person. It’s their choice and a valid choice. We wouldn’t be free if we couldn’t make choices.

Recognising it as a choice is essential, though, because choices aren’t forever. Choices aren’t “impossible” to change. We can change our minds about a choice.

We don’t have to continue choosing to drink alcohol forever. One day we may choose to stop drinking, or drink less, saving the difference (and being slimmer too!)

We don’t have to continue choosing to eat out in restaurants once a week, on our date night: we might find an alternative idea. (My wife and I found an evening walk in the park was just as good a way of chatting as drinking a bottle of wine over Italian food).

Whatever you have chosen now, you may choose differently in future. The thing you choose to do today that means you don’t have any money left to save, you may choose to do differently in the future, and free up some money to save.

So when people tell you what you’re doing is not possible, remember it’s our choices that are making it possible for us, and their choices making it impossible for them.

 

 

 

 

 

 

 

I am writing this because I am weak.

This is not one of those humble-brag non-admissions you often see famous people make. Like singers who come off arena stages proclaiming their shyness. They’re not as shy as the people who never got on stage in the first place, and never sang in front of anyone ever. They’re the shy ones, and I’m writing this because I’m that kind of weak.

I shake when I am on cliff-top walks and refuse to walk along them. I let old ladies pass me by while I pretend to enjoy the view. I run, but I slow down when I get a little bit tired, and I don’t run when i don’t feel like it. I take that back. I don’t run. I jog. Slowly. Weakly.

I refuse to go snorkelling, because it scares me almost to death, being out in the sea, listening to my overly exaggerated breathing through a tube that dries out the air in my throat, doubling the feeling of fear. I have made fun of divers for years, that they wear all that equipment just to go “fish-watching”, while the reason I won’t do it is the fear of having a panic attack just a few feet below the surface of the sea, and drown in my self-generated anxiety.

And I have never been able to start a great business, or even a rubbish one, never been able to quit the job I am doing to follow a dream, because I am too scared. Because I am weak.

It is why I am writing now. In my spare time, because my day-job pays too well for me to give it up. And it is why I have done so much research into the Freedom Formula. To know that it is right. To know that it works.

If I am going to step into the sea to look at fish, I am not the type of person to do it with a snorkel – this I now know – I want something closer to a submarine. If I am going to walk along a cliff side path, I want to know there’s an impressive railing between me and the edge. I want to know that it is well made. I want to feel 100% secure.

And if I am going to stop working, take the biggest risk of my life, end my career before I have to, potentially with no way back, I have to know that this is enough. That this is safe.

Some people can do it sooner. Some people can take bigger risks than me. That’s their call. In the “Now” stage of the MISSION, I explain the different ways of applying the Freedom Formula early, quitting before you have 25x, or stopping saving early.

These work in theory but I haven’t tried them out. I have been working for the safe option. I would like to claim that I did that purely as research, as a trial for the purposes of this book, just to test out that the base case was strong enough to build an argument around, but that’s not the reason: I did it because I am weak.

Because of my weakness I can tell you one thing. This will work.

This article from The Guardian spurred me to start this website that I’ve been thinking about for years. It’s called The Big Money Question, the article, not this website, and it asks people if they would give up their jobs for GBP1 million. Is a million pounds enough to live on for the rest of your life?

And no one knows the answer. Not really. Most of them waffle about spending on this and that, make-up or swimming pools. Some of them talk about buying property, or paying off a mortgage, which is a little better… but still not the actual answer. Some said work is good for it’s own sake, which is true, but also not answering the question. The pure, straightforward, mathematical answer is in the domain name of this site.

25x.

If a million pounds is twenty five times your annual spending, then a million pounds is enough to give up work. Twenty five times your annual spending, invested reasonably well, will give you enough money to keep spending at your current rate and keep growing to keep up with inflation. Twenty five times should last you not just twenty five years, but forever.

That’s the Freedom Formula. It’s the idea I’ll be addressing in the rest of this website, encouraging people to learn this for themselves, and how to get to that point too, through new income sources, savings and investing, but thank you to the Guardian for encouraging me to start today. Watch this space.