
A Miserable Debt-Free Life - zdw
http://www.rowetel.com/blog/?p=4316
======
mkozlows
It's cool that this guy is doing things that make him happy. But I'm extremely
confident that he didn't do this by following the financial plan he blithely
gives.

Because a) good luck finding an investment that'll give you 10% consistently
for decades, and b) even with that magic risk-free return, his plan takes 20
years (or 22 if you somehow don't have $10K stashed up as a youngster) and
then c) leaves you on the edge of your expenses (as he defines them) and
reliant on that consistent 10% return continuing forever.

"Hey, if you find a magic investment, you can retire at 47 and then live in
constant fear of penury!"

~~~
Artistry121
I don't think you need a magic investment. Find a way to live on half of your
after-tax income, save for ten to fifteen years the additional amount and put
it in large, relatively safe dividend stocks (DJIA is a good place to look).
Then you have retirement at the same level as pre-retirement with about a 4-5%
withdrawal rate even if your investment returns only average about 5% per year
through the accumulation and disbursement phase.

~~~
IshKebab
> Find a way to live on half of your after-tax income

This is like "How to have an easy life":

1\. Find a way to have plenty of money. 2\. ...

~~~
Artistry121
How much money do you need to live? $15k a year? How much can you generate:
30k a year? You're set.

This isn't talking about being wealthy - it's about considering alternatives
and making good choices - if you can make more than $20k a year.

~~~
Retric
So step 1, don't have kids, step 2 don't get sick.

That's like saying win the lottery. Sure, it could work, but it's a lot of
risk and does not scale.

~~~
carlob
So step 1 don't live in the US.

fixed that for you :)

~~~
anotherangrydev
Step 2: Do not get paid like in the US.

~~~
toomuchtodo
Step 3. Live in a country with a proper healthcare system (not the U.S.).

------
JamesBarney
He unfortunately kept one of the biggest contributors to the success of his
lifestyle a secret.

How can you get consistent 10% return on your investment?

Assuming a more realistic 6% nominal return - 2% inflation gives us a more
realistic 4% real return.

Running the numbers that way ends up with a measly $10,000 in interest after
20 years not a whopping $47,000.

~~~
zrail
10% was an example to simplify the model. Achieving the same goal at a reduced
return involves either putting more money in or waiting longer. It doesn't
invalidate the model.

~~~
reitzensteinm
Assuming 10% risk free return is more like designing a tank and assuming the
armor is an order of magnitude stronger than it is.

First, let's cover the tank in 10mm of it, which will give us all the
protection we need. Freeing up that much room gives us more space to put a
bigger gun on it. After vastly reducing the weight, even more so because we
don't need to carry as much fuel, we don't need tracks, because an 8 wheel
variant gives sufficient traction.

Oh, and since our new highly mobile and effective vehicle now costs a tenth as
much, all the other expensive and slow vehicles taking on other roles in the
army can be deprecated.

In fact, let's design a variant that carries fuel. In this way, instead of
having 50 tanks advancing 100km per day, we can have 500 of our new vehicles
advancing 500km per day, with the same firepower and effective armor,
completely overwhelming any opposition. Why has nobody figured this out
before?

OK, so, after we've taken the base assumption and followed the chain to its
logical conclusion without error... we have nonsense. After realizing our
mistake, and factoring in the real value for armor, our design and plans for
reworking the army are absurd.

"Waiting longer" at 6% means 82 years to achieve the same returns as 50 years
at 10%. But if we include 2% inflation as well, 6% takes 97 years to match 50
years at 10%. One of those is planning for your retirement if you're young...
the other is planning for that of your grandchildren.

------
sandworm101
Oh look. Another wealthy person lecturing on the wisdom he has learned through
wealth, that wealth is secondary to happiness and should be avoided. For the
rest of us, lack of money is the root of most stress. Those with dependants
cannot simply remove them from our lives (where is this guys wife now?). Our
lives are not diminished by opportunities lost because we spent too much time
at the office. They are diminished because we don't have enough money to pay
the bills --> because we are not able to spend time at the office -->
underemployment.

I actually believe the 10% reference. But I also believe that he isn't being
honest about where it is from. I smell a spendthrift trust or investment
property that his is milking (ie taking rents but not paying the mortgage.)

If this sounds like a rant, it is. I'm spending all day doing RSA submissions.
I do this to chase business/clients/pad my resume. It's yet more time spent
chasing work rather than actually doing the work. Welcome to the gig economy.

~~~
zrail
> In Australia the government gives much of the population “middle class
> welfare”, a few $100/week which covers much of my food and bills. We also
> have free public health care.

You don't need much when you have a social safety net, freely given to anyone
who needs it.

~~~
wycx
He gets that middle class welfare due to his child. As a single male
professional in Australia, I see none of that middle class welfare, unless I
start speculating in real estate or taking advantage of superannuation
concessions.

------
s3nnyy
It is all about the savings-rate. If you save 50% of your net-income, you can
take one month off for every month you work. If you have a ~80% savings-rate,
you can take 8-9 months off for every month you work.

Most people can not quadruple their income, but it is technically possible to
live on way, way less than most people think. The guy in the post claims his
expenses are 40k/year for a 2.5 person household. That is 16k/year per person,
which is low. But it can be lower than this. Check out Jacob from
[http://earlyretirementextreme.com/how-i-live-on-7000-per-
yea...](http://earlyretirementextreme.com/how-i-live-on-7000-per-year.html),
he lives off 7k per year in California and retired in his early 30s.

~~~
tw04
How to live on $7k/year - don't have a pre-existing medical condition.

------
tswartz
It seems that most people are immediately pointing to why the author is wrong
or that his numbers are incorrect. I think we are missing the broader point
that spending less than you make and saving consistently for 10+ years is
going to help you have the financial freedom to work less. Save 15% of your
income into retirement and you will be set.

Another key point is to stop thinking that there is good debt (i.e car loan at
2%) and to stop the 'keeping up with the Joneses' mentality. If you need a
loan to buy something besides a house, you probably can't afford it. Being
debt free can give you a mental and emotional peace that is hard to find
elsewhere.

~~~
aetherson
I don't know that there is much in the way of good debt practically available
to most people, but your example is bad. If your choices are:

1\. Buy a car with cash up front.

2\. Buy the same car with financing at 2% APR.

Then you should exercise option #2, and take the money you don't immediately
spend and invest it aiming to get 4% return on investment (which should be
achievable), then pay off your loan and realize a net 2% return.

~~~
tswartz
The problem with option 2 is that it doesn't take into account risk. You need
a much higher and more secure place for a return to alleviate risk. Similar to
what others said most people are taking out loans for things that they don't
have the cash for. They aren't taking out the loan at a low interest rate so
they can invest their cash somewhere else. But they are told, take the cheap
money and invest elsewhere. They just forget to do that last part.

~~~
aetherson
This may well be true, but the takeaway there is not "2% APR is bad debt,"
it's leading into the confluence of issues about how to get people to invest.

------
rayiner
> I am not convinced there is any significant advantage from private schools

I don't know what the schools are like in Adelaide, but in much of the U.S.
the impetus for sending kids to private schools is not the quality of
education per se, but the quality of the students. In Baltimore, where I live,
you can either send your kids to private school, or send your kids to a school
where some significant fraction of everyone is in a gang. Or you can move into
one of the exorbitantly priced suburbs, increasing your carbon footprint and
contributing to the exodus of middle class people that makes schools in the
city such a disaster to begin with.

~~~
habitue
By sending your kids to a private school, aren't you contributing to the
exodus from public schools that make schools in the city such a disaster to
begin with?

~~~
rayiner
It's a collective action problem. I'd love for all the parents of my
generation to move back into the city and send their kids to public school, so
we could have schools where middle class values and culture dominate. But I
won't if everyone else doesn't. The cost of that is potentially quite a bit
more than the cost of private school:
[http://www.telegraph.co.uk/news/uknews/1549711/Children-
lear...](http://www.telegraph.co.uk/news/uknews/1549711/Children-learn-most-
from-peers-not-parents.html).

~~~
habitue
I get that, I just meant to point out it's a collective action problem in both
cases. There are different trade-offs for you personally though which might
make you pick one over the other.

------
Mz
He's 48. I am 50. I know most folks here are in their 30's and 20's. Let me
suggest the better takeaway is that if you want a particular lifestyle or
personal outcome and you are persistent over time, you can do all kinds of
things that look undoable to most people.

His real secret is he made a decision to walk away from keeping up with The
Jones' and stuck with it for many years. If you do the same, you can have
similar outcomes by his age, assuming you want that. Some people do. Some
people don't.

------
ksmithbaylor
> Until age 38 I was very focused on material accumulation. I had a Porsche
> 911 (called Helmut), several investment properties, a wife, and several
> pairs of trousers.

Is anybody else disturbed by the inclusion of his wife in his list of material
posessions?

~~~
bshimmin
The tone of the article is one of humorous self-deprecation, which is quite a
common trait amongst Brits and Australians; to me, the inclusion of "a wife"
in that sentence seems no more strange than his mention of "long pub lunches"
as a highlight of his previous career in industry.

~~~
sliverstorm
That he lists "several pairs of trousers" in the same list of accomplishments
as a Porsche and investment properties should be a clue.

------
breischl
Jeez, a whole room full of smart (or at least educated) people and half of
them see "10% returns" and get completely wrapped around the axle. Use your
brains a bit - the same concept applies at whatever return you happen to think
is reasonable. Adjust the numbers appropriately, and you're all set.

For example, a 4% withdrawal rate would have let retire into the teeth of the
Great Depression and gone another 30 years without working a day. Adjust for
your circumstances a bit, and you can make it last forever. Or get a little
bit clever with variable withdrawal rates and you can increase the rate _and_
make it last forever.

[https://en.wikipedia.org/wiki/Trinity_study](https://en.wikipedia.org/wiki/Trinity_study)

------
parkaboy
If you don't know who David Rowe is - his work is amazing. He's the main force
behind Codec2, one of the few opensource ultra-low bitrate speech codecs out
there. The project hit ~700 bps recently!
([https://github.com/freedv/codec2/blob/master/src/codec2.h](https://github.com/freedv/codec2/blob/master/src/codec2.h)
\- I think it was actually at 400 bps @ one point, but I guess it got scaled
back)

------
stvswn
Hmm.. it seems like most of his strategy depends on "middle class welfare,"
public healthcare, and public schools. I don't know much about Australian
taxes, but I assume that with his low income and high savings he's paying less
in taxes than he's taking from the public. And he's doing it because he likes
the lifestyle, not because he fell on hard times. If I were an Australian
taxpayer, I'd want to know why I should fund the early retirement of a tech
exec.

------
econner
It's very possible to retire within 10 years if you're frugal.

Essentially if you save 65% of your after tax income you can retire in ~11
years assuming you do not increase spending in retirement.

This model assumes a safe portfolio withdrawal rate of 4%.

[http://www.mrmoneymustache.com/2012/01/13/the-shockingly-
sim...](http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-
behind-early-retirement/)

------
inerte
Some people call it FIRE (Financial Independence Retire Early). There are many
people doing it and several resources online about this. I would start
visiting some of the sites on this sidebar
[https://www.reddit.com/r/financialindependence](https://www.reddit.com/r/financialindependence)

------
smpetrey
> In Australia the government gives much of the population “middle class
> welfare”, a few $100/week which covers much of my food and bills. We also
> have free public health care. So the country you live in helps.

What a wonderful country.

~~~
MSM
I imagine that has to play a HUGE part in how he's able to stay out of work.
If it's exactly "a few hundred a week" that still adds up to ~15,600 a year. I
know the cost of living is pretty high over there but that's a really healthy
chunk of change to be able to count on.

------
jayess
10%/year investment return is virtually impossible these days.

~~~
Artistry121
S&P 500 average return since the early 1900s has been 12%<. But... that
includes volatility. Still it doesn't seem like an impossible number - the
past 6 years have all met that growth target.

~~~
sz4kerto
S&P return since 2000 was 2.2% on average, 0.05% (!!) inflation-adjusted. Last
decade was 5.3%, or 3.2% inflation adjusted.

~~~
jcdavis
Total return is ~4.3% nominal ~2% real annualized since Jan 2000, ~7.5%
nominal ~5.4% real annualized since Jul 2005. Total return isn't a perfect
measurement (particularly due to taxation of dividends), but its a much more
useful number. Over a long term, dividend reinvestment makes a huge
difference.

------
song
I agree with the comments, his 10% are way overestimated. Best I've ever did
in a year was a bit below 7% across all my assets (but then maybe I'm just not
very good at managing my money). That said, saving enough money to have such a
life by 48 is easy for most people here.

The easiest way to save is to keep spending like a student even when you start
earning real money. That means avoiding the trap of wanting a bigger house,
getting used to expensive food and restaurants, spending money in big brands
and all the luxuries people start getting addicted as their salary go up. This
goes with the second rule of thumb, never take on debt on depreciating assets.
A mortgage for a house is fine, a loan for a TV is not.

It's much easier not changing your lifestyle as income increase than suddenly
trying to cut expenses. Of course this advice doesn't really work for people
who are paid a low salary but for software developers who earn a multiple of
the median income, saving like this is easy.

~~~
pinewood74
In 2009, the S&P 500 returned 23%, where were you then?

It did similarly well in 2013. Are you picking stocks or something? Because
you should settle down and just get some Index Funds from Vanguard.

The Median 15 year annualized return on the S&P 500 since inception is 12%,
back out 2% inflation and you're right at 10% returns.

10% returns are not unreasonable. Sure it's not going to be a flat 10% every
year like the article, but annualized returns of 10% over 15-20 years is
doable for everyone.

~~~
maxxxxx
If it's that doable why are there no funds that guarantee 8% every year? I
would even buy a fund that gives me "only" 5% guaranteed. They can keep the
other 5%.

~~~
prewett
Why would I guarantee something if I could avoid it? Investment returns are
lumpy; some years you get +23%, other years you get -20% (probably 2008, for
example), why would a fund manager offer a guarantee?

An average of 10% over a long period is doable; Berkshire Hathaway has
averaged +15% for 40 years. Just because fund don't guarantee something
doesn't mean it isn't doable.

~~~
maxxxxx
Winning the lottery is doable too. So is making $20 million per year as golf
pro.

When people give investment advice based on the 10% average return (which they
do) then it should be a pretty safe thing and easy to achieve for everybody.
Otherwise it will be bad advice for a lot of people.

------
VLM
Cool, this is the FreeDV / Codec2 guy, did not know this side. Might find his
commentary on Codec2 patent issues as interesting as his financial planning
commentary.

------
xntrk
"invest at 10% (you get to work out where)" if you could really do this you
wouldn't have to work (at the current rates environment). You could start
selling bonds for say 7% return and collect 3% for free!

------
mkiol
A guy I know retired in about 1970, and raised his family on his savings
alone, which were about 200k. He says today his savings are mostly untouched
(he lived off the interest, and his in recent years he reached the legal
retirement age and receives a pension).

To do so he:

\- Home schooled his kids

\- Had the benefit of free public healthcare

\- His kids (who most have now got university degrees) used government
interest-free loans to pay for uni

\- He did take his family on a year long overseas trip back to his native
country which cost about 40k

\- He didn't live in a house, but in a sailing boat!

------
stretchwithme
Perhaps it would be a lot easier to live as one pleases without having to pay
the taxes required to subsidize $100/week and free health care for others.

Perhaps it would be easier to earn a decent return on investments if your
government doesn't subsidize borrowing so much that you earn less than a
dollar a year in interest on your bank deposits. Maybe Australia doesn't do
that and its banks pay a decent interest rate as a result?

~~~
harryh
Isn't is weird how some people in this thread say that the guy can only do it
because of Australia's generous social programs. Meanwhile you think it would
be easier if these didn't exist and taxes were lower.

In reality I bet it's about as easy no matter what country you live in and
what tax rates or social programs you have access to. Simply live a somewhat
frugal life, save lots of money, and let the magic of compounding work over a
decade or two.

Rather than looking for excuses it's probably better to just get started.

~~~
stretchwithme
I'm not searching for excuses. I'm a great saver and took several years off to
work on apps and startups and a couple of book ideas.

I'm very frugal. My last car lasted 15 years.

Perhaps you'd be better off responding to what someone says instead of
inventing imaginary motives.

------
RodericDay
It's kinda cool that he mentions the kids throughout.

So many greedy people feel attacked by this kind of thing, and react to the
implicit allegation that they're being wasteful with condescension, muttering
about the selfishness or oddness of not having kids, or then again about how
much of a difference having to support a family makes and how unrealistic
idealists are.

As I heard it said once, Lawful evil: "I did it for my family".

~~~
jessedhillon
> _So many greedy people feel attacked..._

I think I found out why.

------
habitue
A lot of people seem to be attacking his numbers and his advice etc. But even
if his explanations and suggestions are complete bunk, the fact that he's
_doing it_ serves as an existence proof that this kind of life is achievable.
So if you're attracted to this kind of life, take it as evidence that not
everyone works forever, and you can figure out how to do it too.

~~~
anon1385
> the fact that he's doing it serves as an existence proof that this kind of
> life is achievable

Real life lottery winners prove that winning the lottery is achievable. That
doesn't make playing the lottery good financial advice.

~~~
Artistry121
But... he provides somewhat actionable advice that helps get there.

The lottery example you provide is one in which even the winners can't give
good advice on how to win.

------
sz4kerto
At the moment, relatively safe investments with 10% yields do not exist.

~~~
aetherson
At basically every moment, relatively safe investments with 10% real yields do
not exist. For an investment to be relatively safe and give 10% real yield,
that means that the economy as a whole has to grow at roughly 10% per year.

That'd be awesome! We all would like that! But it's not something that ever
really happens. Maybe if we discover strong AI or something.

------
Artistry121
There's a really cool tool: www.firecalc.com that will let you calculate your
likelihood of being able to retire based on all previous permutations of stock
market returns.

------
rokhayakebe
I think the plan is patience and discipline. For some it may be to invest
money over 10 years. For the average HN user it may mean to have the
discipline to create a paid micro saas which requires little time to manage
and keep working on it for several years. Invest $100 per week, or invest 2
hours per week, and grow your paid service x% yearly.

------
AdrianRossouw
This is what I'd love to do one day. Have enough money so I can just build
interesting things all the time.

~~~
harryh
Save half your money for 15 years and you can do this. Depending on your
financial situation you can probably do it faster. It's simple (though not
easy). Don't just imagine this as some impossible dream. Make it a real goal
and go for it!

Go read [http://mrmoneymustache.com](http://mrmoneymustache.com)

------
meapix
summary, country you live in helps. This guy is on welfare.

~~~
astrange
I'm sure that let him quit his job a whole one year earlier.

