FIRE:Is It Intelligence or Determination

[Golden sunsets]

So yes luck and intelligence play a part, but I think the most important differentiating factors are desire, determination and discipline.




Yes and to that I would add one more ingredient - Fear. Fear of running out of money in old age.

 

[Which Roger]

It's a combination of all the factors discussed herein: Intelligence, determination, luck, etc.

But I think the main driver is how one is wired. Most of us want to (or wanted to) FIRE. We are different. Most people (even those from whom FIRE is a real possibility) seem to want to continue working at least until a more typical retirement age. If I had wanted to work until age 65, I would likely have had significantly different spending and saving habits, and would not have been very focused on the nuances of planning for retirement.

 

[Taxman59]

My first boss out of college told me it was impossible to escape the rat race since whenever one got a raise they would simply spend the additional money on a higher lifestyle. I thought to myself "That's ridiculous".

That is me in a nutshell! I had a manager over me who said I would never be able to retire since inflation would eat up any raises and to the extent I could get ahead, I would just raise my "needs" and not be able to save enough to retire.

Well Dave, I am 55 and have turned in my notice. At age 56, I will be retired in spite of inflation and increasing needs. It is primarily determination and the upbringing to not live beyond your means.

 

[ChiliPepr]

I agree that life isn't fair but we all have the same chance to be born a crack baby or the child of Bill Gates. Bill Gates was also lucky coming from a well off family and going to a private high school that happened tohave better computer coding equipment than the nearby University of Washington. It's what he made of it that made the difference for him and many others - both up and down the economic ladder.

True, but don't say you hit a homerun when you were born on third base.

 

[ChiliPepr]

That is me in a nutshell! I had a manager over me who said I would never be able to retire since inflation would eat up any raises and to the extent I could get ahead, I would just raise my "needs" and not be able to save enough to retire.

Just the opposite for me. I work in the financial industry which pays a significant portion of its yearly comp in form of a bonus. When my boss told me my first bonus number he said "If you live on the bonus the company will own you, but if you bank the bonus you will not need the company."...Thanks Kevin.

 

[2B]

True, but don't say you hit a homerun when you were born on third base.

Anyone born in the US without a major disability starts out on 3rd base if you look around the rest of the world. Somehow, people from the poorest of countries manage to become billionaires. These tend to be from the elite of these countries but it's still a major accomplishment. In the US there are lots of people from poor families that become mega rich. Rich people become poor. The old saying of shirt sleeves to shirt sleeves in three generations is very true.

Where else but the US are the "poor" typically overweight, have smart phones and have cable access with a HDTV.

 

[hausfrau]

I dunno. It was mostly luck and natural intelligence honestly. I've never really worked that hard. School was always pretty easy and mid-level office work was easy too. I was a directionless liberal arts major, but by being in the right place and the right time, I got into tech in the mid-90's. Most of my training was OTJ, so I didn't have to return to school or get any certs, etc.

Things that were helpful: having a spouse who also had a steady income and didn't spend like crazy, and having a lifestyle that doesn't require a lot of money (small, older house that we paid off early, used cars that we hang on to, etc.) having good health thus far. DH and I are pretty low maintenance.

Neither my DH nor I are big on traveling, nor do we have expensive hobbies. When we were both working we had a lot of extra money that we invested. We were living like we made 30K, but we were making six figures. Now we are parents and we're down to one income, but we still have extra money to invest because we have a pretty small nut every month. We have a calm low key life and it's great.

 

[Cobra9777]

Luck was certainly a part of it for me. I got into a certain career field just because I discovered I was good at it and enjoyed it. Turns out, I joined a technology company that was quite generous with stock and bonus compensation for top performers. My career peaked about the same time as the company's rise, which was a lucrative combo for me. Yes, it was *ME* who did all the hard work. But I could have ended up at Enron, or some small business with no growth prospects, or the local school district... and the comp would have been fundamentally different.

I also think it's about vision, focus, and commitment. Some people are not able to visualize their life on a long-term basis. Or maybe they just don't want to. They live in the present. Nothing wrong with that. But I've always been wired differently. I had a vision of being retired in my 50s. That resulted in concrete plans and actions at a very early age. Then comes focus and commitment. There are so many distractions during the accumulation phase. Kids, career, set-backs, dot-com bubbles, family issues, health issues. The focus required to navigate through all this and stay committed to the vision is, I believe, the key to success.

Intelligence is a minor part. I would say, FIRE success requires a certain kind of analytical mind-set. You almost have to ENJOY solving problems and figuring things out. You have to be willing to read, learn, track, adapt, and pay attention to things that others have no patience for. I don't think any of this requires above-average intelligence, but it does require patience to figure it all out.

 

[hausfrau]

Intelligence is a minor part. I would say, FIRE success requires a certain kind of analytical mind-set. You almost have to ENJOY solving problems and figuring things out. You have to be willing to read, learn, track, adapt, and pay attention to things that others have no patience for. I don't think any of this requires above-average intelligence, but it does require patience to figure it all out.

This is true. All that extra income would have been a lot less effective if I just handed it over to an unscrupulous financial advisor.

That said, we keep our investments pretty simple, but you still have to know how to take that first step. I would argue that it's a lot easier now with the web. I remember when I first started working, I had some company stock I wanted to sell. I had to search the yellow pages for a local broker, then had to make an appointment to go to his office over my lunch hour so he could sell it. I later received a paper check with my proceeds. What a hassle compared to today.

 

[NW-Bound]

Intelligence or determination? Neither!

Nope, it's pure luck. This has been proven time and time again by experts and columnists who said that people can't possibly retire, let alone early, on the bitty typical 401k.

If people manage to ER, if it's not by hook, it must be by crook. Something must be done about that!

 

[unclemick]

I think it may have something to do with a personality that is accustomed to "being on the outside looking in." What this means is that many folks here (myself included) were either never the leader of the pack nor a follower when it came to popular social circles growing up. We had our own set of friends, but for the most part were forced to find our own ways to "survive" our growing up years (and perhaps were also less susceptible to peer pressure to conform). This independent streak provided perspective that being a conformist would have denied as an acceptable reality. Unfortunately for those who "followed," the chains of conformity grow even stronger into adulthood.

Again, some folks here may have been the homecoming king/queen, but I wasn't. FYI, many of the popular kids in my high school "peaked" back then or in college.




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INTJ

heh heh heh - Everyone needs a theory - that's mine. Although I didn't know I was til well along is investing for ER.

 

[2B]

INTJ

heh heh heh - Everyone needs a theory - that's mine. Although I didn't know I was til well along is investing for ER.

That's me. When I first took the test at a corporate HR event, I was maxed out on INTJ. Looking at those traints make it much more likely someone would tend to save and follow their own path.

 

[purplesky]

Anyone born in the US without a major disability starts out on 3rd base if you look around the rest of the world. Somehow, people from the poorest of countries manage to become billionaires. These tend to be from the elite of these countries but it's still a major accomplishment. In the US there are lots of people from poor families that become mega rich. Rich people become poor. The old saying of shirt sleeves to shirt sleeves in three generations is very true.

Where else but the US are the "poor" typically overweight, have smart phones and have cable access with a HDTV.

You could have probably made this "Chase the American dream" point in the 80s.

But in 2014 there is no way the average American starts on 3rd base. Sorry.

Americans as a whole are moving backwards economically.

 

[NYEXPAT]

Luck is also a huge factor. Being healthy and working hard at the right place at the right time. In this global economy many people have been screwed.

Life just hands some people a great card. Others are handed a terrible card.

+1, Fired 27 years ago yesterday!

 

[NW-Bound]

... Life just hands some people a great card. Others are handed a terrible card.

I did not even have a card. Nobody invited me to the card game.

So, I went buy myself a lottery ticket.

Just joking...

 

[Walt34]

I think it is mostly the personality type and being able to defer immediate gratification for long term gain. As brewer correctly notes the math is grade school stuff and because of that I never understood why so many people behave so weirdly with their money and are then surprised at the outcome.

This book, Please Understand Me II, was an eye-opener for me. It's about different personality types, their characteristics, and contains a likely occupation that the different types will likely end up with which in my case was not only correct for what I did, but for occupations I considered.

 

[Katiek]

For me it's a combination of luck and personality. My family always LBYM and emphasized saving for goals over spending, so that helped me gain a useful view of saving. Plus, I'm naturally a worrier and I try to deal with worrying by preparing and doing the things I can control. So I tried to address a fear of being unable to work (whether because I couldn't find a job or health reasons), by saving for a rainy day at an early age.

When i started saving it wasn't for the purpose of retiring early, but more to make sure that I'd be "ok" if something unfortunate happened.

 

[redduck]

I did have the opportunity during graduate school to live on pinto beans and biscuits and a future of that or cat food was no longer appealing.

It doesn't matter what no longer appeals to you: Remember that old saying: 'Badgers can't be choosers."

 

[Klubbie]

If I am being honest there are two things driving my desire to obtain FIRE.

1) Fear:
The thought of being unable to provide for myself in old age definitely drives my desire to obtain FIRE. Similarly, a health scare when I am older, or not being able to work plays into that a lot.

2) A desire for something more:
That is the only way I can describe it, but it boils down to the fact that Time > Money. If I am diligent in my plans to FIRE, then I can get time back. Maybe I am selling my present in the hopes of mortgaging my future, but I guess that's just the way I am wired. To me, that is worth the risk and potential trade off.

 

[RunningBum]

For those of you who say it is luck, what is your advice to a 20 year old who doesn't want to work until they are 65 or older? Do you tell them it doesn't matter what you do, you just need a lucky break or two, or do you tell them to LBYM along with some relevant career and investing advice? Or do you look at their environment, and tell the urban youth to forget it, it'll never happen, and the kid from the upper middle class not to worry, he's got it made?

 

[NW-Bound]

It doesn't matter what no longer appeals to you: Remember that old saying: 'Badgers can't be choosers."

LOL

I think it is mostly the personality type and being able to defer immediate gratification for long term gain. As brewer correctly notes the math is grade school stuff and because of that I never understood why so many people behave so weirdly with their money and are then surprised at the outcome...

Yes. How do people buy high/sell low, and do it again and again? I have seen so many housing bubble cycles, where people that I know keep buying and selling at the wrong time. I think people are afraid to be different. They think strength is in the number.

 

[audreyh1]

I would say it's mostly determination. But you also have to have one other characteristic: IMAGINATION. I think there are many folks who simply don't imagine it's possible.

 

[Walt34]

For those of you who say it is luck, what is your advice to a 20 year old who doesn't want to work until they are 65 or older?

Last month I sent some books to a 24-year-old who had just started a new job and said she didn't know what to do about the 401(k). The books I sent were The Millionaire Next Door, The Millionaire Teacher, Your Money and Your Brain, A Random Walk Down Wall Street, How a Second Grader Beats Wall Street, and Predictably Irrational.

This is the letter that I sent to her with the books:

Dear Sarah:

As we briefly discussed I have sent you several books on saving and investing ordered from Amazon. This stuff is important to learn since what you do or don’t do now will dictate your lifestyle when you do retire. And while I know that right now retirement is so far over the hill that you find it hard to conceive, let alone see, trust me (I was once 24 years old) that day will eventually and inevitably come either voluntarily or involuntarily because of health issues. What the financial services industry wants is your money so that they can take as big a chunk of it for themselves as they can. They are running a business, and the sole purpose for the existence of a business is to make money. They don’t give a damn about how well funded your retirement is. Never forget that.

Fortunately this stuff is not rocket science despite what the financial services industry would have you believe. In fact it is so simple that a second grader can do it as the title of the book How a Second Grader Beats Wall Street implies. I have my own portfolio invested in just this manner and it is performing as advertised. I recommend that you first read either that book or The Millionaire Teacher first. Another point not emphasized strongly enough is that the 401(k) with company match at 5% of pay or so is a starting point and is not nearly enough to fund a retirement. To do that you will need to save 15% to 20% of your pay, right off the top. Take any employer match first – that’s free money and anyone is a fool to not accept the maximum offered. After that further investment goes into a Roth IRA or 401(k) up to the legal limit. After that the savings/investment goes into a taxable account. This is called “Paying yourself first”. If you believe that “Gee, I can’t afford that!” I will say this: You can’t afford not to. The retirement clock is ticking, right now, and that clock does not stop for anyone.

I spend about ten or fifteen minutes a year managing our investments. Once you learn how it really isn’t that hard. And again, what you do now in your 20’s will have a huge effect on how your life will be in your 60’s and beyond. Your future self will either pat you on your back or say “What an idiot I was!” You know what it should be.

The other books are about psychology and exploring why you do the things you do with money. I’ve always wondered why people do the weird things they do, and some of the weirdest are with money. The short answer is that human beings evolved to survive on the plains of Africa, not do long-term financing. The result is that while your gut instincts and emotions will tell you to do exactly the right thing to survive for the short term, in the long term, what your guts and emotions tell you to do is the worst possible thing to do with your money. That is very difficult to do and it does take a while to learn to do it. And that, dear Sarah, is the hardest part of saving and investing: ignoring your instincts and emotions. You have to learn to ignore the sinking feeling and near-panic when the stock market drops half its value (and sure as tomorrow’s sunrise, some day it will) and with it half the value of your retirement fund. That’s when investing and staying the course is the hardest.

During the last Great Recession in 2008 when so many people panicked and sold their investments one investment broker said the only people buying stocks were people in their 80’s. “They had seen this movie before and knew how it ended.” You will read that in one of the books, I forget which one.

A mantra we have learned the hard way is LBYM, or Live Below Your Means. Spend Less Than You Earn. Pay Yourself First. The thing about loans is twofold. One is that in taking one out your future options and opportunities are limited by the amount of the loan and the interest you are then committed to paying on it. The other is that you are then funding someone else’s retirement and not yours. Not all loans are bad of course. You do need a car to get to work in and it does not have to be a new one. You also have to have a roof over your head and depending on circumstances buying on credit may be wise. But do make sure that whatever you buy on credit will still be around when the loan is paid off. You have by now been in the position of “paying for a dead horse”. Not fun, is it? Remember how that felt too.

One other thing, and then this already-too-long letter will end. Why am I doing this? Joan and I do care deeply about what happens to you. No child should have to endure what you and your sister did growing up. What we admire about you is what and who you are in spite of it. So many others turn miserable and take to drugs and alcohol and hate the world because of their circumstances and spend their lives as miserable people.

But not you. You got your act together, went to school (the hard way, paying for it yourself). Not many people have the self-discipline to do that. I also think that you are one of the few people who will actually do two things; read those books and then act on what you learn from them. While investing doesn’t take high intelligence or math skills (not to imply that you don’t have those!) I believe that what you do have that so few others do is the maturity to defer immediate gratification for long term gain. That’s another difficult part about saving and investing.

Please do not feel overwhelmed at the volume of material. It digests easily, but slowly, so take your time going through them, and I realize that you do have a life. There is no expectation that you will read them this month or even in the remainder of this year and there will be no quizzes. But understand clearly that what you do or don’t do with your money now will have a multiplying effect on your standard of living in the last half or third of your life.

If you can find a job that has a pension plan remember that every dollar of pension income is one less that has to be generated by investment income. But it is always better to be in a career that you enjoy. Too many people work at well-paying jobs they hate and get sick or die early because of the stress. But as retired employees of Detroit are learning to their dismay that promised pension may not materialize so it is best not to rely too heavily on promises. No one has a clue where the economy is going to be in 5 years, let alone 30. So while an employer that is financially sound now, as Detroit was in the 1960’s ‘70’s and ‘80’s, may not be when you retire. Plan on that scenario as well.

The best to you always,

Walt 34

 

[NW-Bound]

I would say it's mostly determination. But you also have to have one other characteristic: IMAGINATION. I think there are many folks who simply don't imagine it's possible.

I am reasonably imaginative but in a different way. As a perennial pessimist, I imagined all kinds of bad financial scenarios. So, I was always LBYM. I did not have specific goals of saving so much from my income, but I rationed my consumption because I was afraid to spoil myself.

I did in fact learn that some big spenders were optimistic people. They thought things would always work out for them, and they would live happily forever. Maybe they will. Who knows? Ignorance is surely bliss.

 

[splitwdw]

I feel it's personality and not luck. I just had someone tell me the reason I had money was luck. Luck nothing! I save a good portion of my salary. They spend their money on cigarettes, buying breakfast and lunch instead of brown bagging, vacations. Can you image what other bad financial (& health) decisions this person is making.