Have you heard about this thought experiment? Which superpower would you choose if you can pick one – flight or invisibility? John Hodgman has been asking this question for a long time. This American Life did an episode on it back in 2001. It was a fun episode and I enjoyed it. Psychologists read quite a bit into the choice you make, but I think it’s just for fun. There is no need to treat everything like an academic paper. Don’t think about it too much, just pick one.
- Flight – You can fly up to 1,000 mph and up to 100,000 feet.
- Invisibility – You can turn invisible, but anything you pick up is still visible.
For me, I picked flight right away. I used to snowboard and we had a BMW Z3 convertible at one point. It is awesome to go fast and feel the wind in your face. I think it’d be a blast to fly around. That’s the primary reason why I chose flight. I didn’t dwell on it much because it’s a fantasy. Those superpowers are not real. Mrs. RB40 would love to be invisible. She doesn’t really like to be seen.
However, there are some superpowers that are real and very applicable to FIRE (financial independence, retire early.) I’m talking about these two rare superpowers.
- Making more. The Census Bureau considers those making over $150,000 to be high income. Let’s go with that. If your household made more than $150,000 last year, congratulations. You are part of the top 15% and have this very real superpower. We’ll include passive income here to give retirees a boost.
- Being frugal. This one is tougher to define. It’s really subjective depending on many factors. For this post, we’ll go with an arbitrary $40,000 (not including taxes.) That’s about double the poverty level for a family of three. Also, it’s below the average household expenditure, $60,000. If you’re single, use $30,000.
Interestingly, these two real powers correspond to the fantastic superpowers above. Making more is kind of like flight. You have to be aggressive and push yourself to make more money. You have to be noticed and surpass your coworkers to get more raises. On the other hand, spending less is stealthier. You can become invisible by dressing down, driving a regular car, and living in a smaller home. That’s stealth wealth.
Unfortunately, most people don’t have either of these real world powers. That’s why many households have debt and no savings. Even being good at one of these isn’t really enough. Some households make $150,000 per year and they spend it all. Conversely, you aren’t going to be able to save much if you make $40,000 per year. You need to be moderately good on both of these things to build wealth.
Focusing on your weak point
If you want to FIRE in a reasonable time frame, you need to save 50% of your income. This is very difficult for anyone. To achieve a 50% saving rate, you need to focus on your weak point. If you don’t have a good income, then you need to figure out how to make more. If you already make six figures and don’t have much savings, it means you’re spending too much. You need to find a way to spend less and save more.
One of our readers has been saving 50% of his income and he’s having a really hard time doing so with his $50,000/year income. I think it’s amazing he could save 50% with that income. It means his family is living almost at the poverty line level. That seems really tough unless you live in a low cost of living area. They need to work on their weak point and earn more. Living on $25,000 per year for a family of three will probably create a lot of conflicts over the long haul. I think it’s better to spend a bit more now and live an acceptable lifestyle. FIRE shouldn’t feel like a sacrifice.
Anyway, you need to be good at both making more and being frugal to save 50%. Also, 50% is just a target. You’ll be way ahead of everyone else even if you save 30%. You have to do what’s right for your family.
Some real-life examples
The RB40 household – Last year, we had an extraordinary income year and made over $200,000. That includes Mrs. RB40 full-time income, my blog income, and our passive income. Wow, it feels good to have a high income again. On the spending side, I thought we were frugal, but we spent around $60,000 last year. The big problem was housing. We spent almost $30,000 on that alone. It’ll be better this year because we moved to our duplex. We might even meet the $40,000 per year threshold. You’ll have to wait and see how it goes.
The Root of Good household – Justin’s family spent under $30,000 in 2018 and they lived an amazing lifestyle. I’m jealous every time I read his monthly report. How the heck can their expense be so low? Well, they live in a low cost of living area and their house is paid off. That’s how. I hope to get to that point someday.
Jason Fieber of Mr. Free at 33 – Jason lives in Chiang Mai Thailand and normally spends about $1,500 per month. He is single so it’s easy to prioritize spending. Chiang Mai is much cheaper than most urban locations in the US. He gets to live the lifestyle he wants while spending very little.
See, it’s not impossible to have these real-life superpowers.
What’s your superpower?
The great thing about the real world is that you can make more and be frugal at the same time. Both of these are quite difficult, but you should be competent at both to achieve financial independence and retire early.
What about you? Do you have these real-life superpowers? Do you excel at making more, being frugal, or both?
Image by Colton Jones