Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need, to impress people we don’t like.
— Tyler Durden (Fight Club)
A couple of weeks ago I ran a workshop on retirement investing for some other co-op folks. I’ve run this workshop before, but lately I’ve been thinking about it differently. Turns out calling it “retirement” investing can be a turn-off when you’re talking to a bunch of mission driven people who are working on things they love, and think they’ll never want to “retire.” The word can have a connotation of hedonism or idleness. The permanent worthless vacation. Or just sitting around waiting to die. “Early retirement” serves no purpose when the work you do is done primarily because you believe in it. There’s also a sense with “retirement investing” that you can’t touch the money until you’re old. Which is a long-ass time if you’re in your early twenties.
So I’ve started thinking about it as “autonomy investing” instead — becoming financially autonomous quickly, so that you can do the work you’re compelled to do. Without having to worry about whether your political activism will put your job at risk. Without caring if your mission is compatible with the Nonprofit Industrial Complex and their funding metrics. Without having to work a soul-sucking day job that leaves you too fried to spend your evenings and weekends on civic engagement and organizing. Or alternatively… without having to beg investors to pay your living expenses while you work on the early stages of your startup idea.
This is, essentially, the project of buying yourself out of corporate servitude.
First, you have to figure out what the price on your head is — and you are almost entirely in control of your price, because it’s almost entirely a function of how much money you spend.
I love working with people in the co-op system on investing because many of us have already figured out this most difficult part: living well below our means. There’s a strong anti-consumerist bent in the community, and it leads to less overall spending — at least, relative to what’s considered “normal” in the US. Thrift store clothes. Bulk buying and dumpster foods that are then cooked from scratch at home. Lots of bikes and bus passes, and not that many cars. Adults content to live within a hundred square feet of private space — or even to share a room (hooray for grownup bunk beds!).
The expense side of the ledger seems constitutional — some people are compelled to save, almost regardless of their income. There are co-opers making $15k a year doing child care who can still max out a Roth IRA ($5,500). And there are co-opers making $70k in the tech industry who repeatedly bounce rent checks. How much money you save seems surprisingly uncorrelated with how much money you earn — at least at the lower end of the earning and saving spectrum. Because of this, I’ve come to think about income not as an absolute number of dollars, but as a ratio.
It’s not the number of dollars that matters, it’s the fraction of those dollars that you need to live happily.
The math behind this general idea has already been well covered by Mr. Money Mustache, but I’m especially fond of thinking about income this way because it erases a lot of class divides when you’re talking about money to a room full of people whose incomes range over a factor of 5 or even 10. Plenty of people who could be saving $50k a year are just barely putting the match into their 401(k) and crossing their fingers. Obviously increasing your income means you can save more money (so long as you don’t also allow your spending to expand). But decreasing your expenses means both that you can save more of your existing income, and that the price on your head is lower. The amount of money you need to live off of forever is about 25 years worth of living expenses, since you can safely withdraw about 4% of your savings every year for decades without spending down the principal. So for example the price on my head is $375,000, because I live happily on about $15,000 a year.
In addition, cultivating a lifestyle of constrained or even declining spending means that if and when your income does increase, you’re much better able to resist the temptation to let your spending expand with it.
Once you know how much it’s going to cost to buy yourself out, you need to raise the money. If you just accumulate excess income and don’t put it to work, you end up with a mountain of cash in your bank account, slowly eroding away due to inflation even as you shovel more cash onto the pile. This is more work than you need to do alone. The obvious thing to do is to invest the money, and make it work for you too. Except it’s not that obvious to everyone — a lot of progressive folks are either bewildered by or actively opposed to the idea of investing the money they save.
The bewilderment is forgivable — there’s a vast disinformation industry dedicated to making investing seem complicated, and telling us stories about how, like the children in Lake Wobegone, they are Above Average when it comes to managing our money. In fact they are lining their pockets at our expense, as well described nearly 75 years ago in Fred Schwed’s book Where Are The Customers’ Yachts?. Which you’ll note, tellingly, keeps getting re-printed. Thankfully, it’s easy to avoid getting screwed! First, convince yourself that nobody can tell the future (which should be easy). Then, you put your money in low expense index funds from the gargantuan investing co-op known as Vanguard, and make sure that as much money as possible is put into tax sheltered accounts. And you basically never touch or even look at it, if it’s in a Target Retirement Fund that’s essentially on autopilot (yes, it’s slightly more complicated than this, but not by much…)
The outright opposition to investing that many progressives express is more difficult for me to understand, but I think part of it flows from a belief that by investing in a company — buying its stock or bonds — you are somehow supporting that company financially. To me this sounds like a sign error. When you buy a company’s stock or bond, you’re buying the right to be supported by them — you’re getting a slice of their profits or debt payments. Unless you’re in the very unusual position of participating in an initial public offering (IPO) or some other stock or bond sale where brand new securities are being sold by the company, then the company never sees your money — you’re trading with another investor who almost certainly bought the stock or bond from another investor… back along a chain of thousands of transactions. Most of the time companies don’t particularly care what their stock price is — especially if they’re profitable and accumulating cash, like the oil companies we love to hate. The way we support these companies is with our spending — so if you’re not blowing money on gasoline and fancy new things you don’t need, then you’re probably doing a great job of not supporting the companies you don’t like.
For some reason, among progressive environmentalists, people seem more reluctant to buy Exxon stock than Exxon gasoline. So much so that I sometimes almost wonder if the liberal aversion to investing is some kind of conservative conspiracy, meant to keep us trapped working for wages instead of working for change.
There are potentially three kinds of relationships between you and the corporate world here: your employment, your spending, and your investing. The story we’re told is that we’re supposed to trade the corporations 40+ years of our labor for money, and then we’re supposed to spend that money on the mostly useless disposable crap made by those very same corporations. The investing relationship is an afterthought at best, often involving an unscrupulous intermediary.
There are other possible stories. At the other end of the spectrum, you can work for 10-15 years, leading a simple, hopeful, awesome existence, and invest 75% of your income along the way. Then you spend the rest of your life fighting the xenoforming of your homeworld with the unwitting sponsorship of the very companies doing the xenoforming. Much more of your life’s labor goes to your own ends, not theirs. Instead of contributing your wages to their profits by buying things you don’t need, you buy your own autonomy from them.
And in the meantime, you might just end up learning how to live comfortably within reasonable consumption limits from the biosphere’s point of view, too.