508 | 5% SWR, Revealed Preferences, and the 3 Stories | Frank Vasquez

26:15In fact, the only financial thing involved with it is I have a charity that I sponsor out of it. And so if you donate money to the charity, you get to go to the front of my email line. Very cool. And talking about that because it serves homeless people. And then I have a listener said, I was a homeless person. So it's really meaningful what you're doing with that. And so a connection gets formed there. But I think this all comes about in sort of really being intentional about, particularly when you're fine, you're done. It's like, what am I going to do now? Well, what's important to you now? Is it to go and achieve another, climb another mountain?

26:55I mean, maybe you do want to climb another mountain. That's fine. There's nothing wrong with having another hero's journey or doing something like that. But if you've been like me and you've just been working, you know, these 80 hour weeks for years on end and running around all over the world in a high pressure environment, suddenly it's sort of like, well, no, maybe I just want to spend time on relationships and then my activities. How are they going to foster current relationships or build new relationships? And it's interesting because I feel like something you said on a different podcast sort of played into some of this because you were talking at one point, and I don't remember what podcast it was on, but you were talking about how in 2019, you and Jonathan had achieved this sort of level of success.

27:41Yes. in terms of the hero's journey of the Choose F5 podcast. When you got some awards and sort of was a question of like, what do we do now? You know, are we going to turn this into Dave Ramsey, Ramsey Enterprises, or do we have enough of that? And when I heard that, I was like, yeah, that is sort of recalibrating a story that you've had enough of that kind of a hero's journey and you're trying to morph it into some other thing that is sustainable in your mind or your thought and i think another part you always talk about is well wanting to spend more time with your children i think you take that admonition that what 90 of your days your children are before they're 18 that doesn't have to be true that is very true i will tell you that You know, we have three grown children.

28:33One is just graduating and is following the path of Brad Barrett is coming home to start his first job. So he can save some some money and then figure out how he's going to go from there. But the other two we see frequently. We have great relationships with them. We know their girlfriends and their friends and stuff. Our eldest son and his girlfriend both work for a company called MITRE, which is this weird Sputnik thing. that's owned by the federal government and they do secret stuff in there. But their headquarters is like three miles from our house. So whenever they come up for meetings, they both stay here.

29:08And sometimes she'll come up by herself and stay with us. And so in some respects, I think you'll find that dealing with your children as adults is even more rewarding than it was when they were children. And you can see much more of them than you might think from that statistic. Yeah, that's wonderful. Yeah, that is like a worst case scenario type thing. Well, that is how things probably were more like, certainly when I was growing up, it was more, you get pushed out of the nest and you go seek your fame and fortune. Your own hero's journey, right? Don't let the door hit you on the way out. That's actually not the way most of the world works.

29:50Most cultures work. They're more sort of, no, we have this family and you're here together all the time. And you see each other more of the time and there's a relationship that continues or other sometimes relationships that are formed. But I just wanted to reassure you, don't get so wound up that this is it. I got three years. And then it's all over. No, I fully answered. Having that clock, I was going, all right, this has gone too far. So, yeah, to catch the audience up, just in case you haven't heard me mention this a couple of times. I've quoted the article from Wait But Why. So it's the website Wait But Why.

30:30It's called The Tail End. And yeah, in there, he basically, Tim Urban, essentially says every year that your child is from zero to 18 is more or less 5 % of all the time you'll ever spend with them. So by the time they graduate high school, you'll be at about 90 % of all the time you'll ever spend with them. So I think the moral there is really use that time wisely. And that's, frankly, what I'm trying to get across and what I'm thinking in my own head as opposed to like this horrible countdown like because I fully anticipate my kids to be part of my life intimately for many many years after they graduated high school and and college so I'm not worried personally but that said you still need to be cognizant of it right yeah yeah there is the time you're going to do those things I had two adventures to the Philmont Scout Reservation with one of my sons or you know we We went on these 80-mile backpacking trips and things like that.

31:26That was going to happen when they were in their teens, and it wasn't going to happen at other times. I spent the better part of a decade videoing our kids doing their sporting events and things like that and became the commentator for their teens. So I didn't know anything about the sport they were actually participating in, so I make a good cheerleader, though. Yeah, so that was the time to do that. And I needed to carve out work time. I think we're so much more conscious of this these days because growing up, the story was, you know, the song Cats in the Cradle by Cat Stevens. When you come at home, Dad, I don't know when, but we'll get together then.

32:05And then what happens? His kid grows up, leaves, and then kind of runs the same life. It's like, well, I don't even have time to see you now, Dad, because I'm too busy with the kids and the job and all this sort of stuff. that was a model for a long time and is the basis for a lot of those statistics, but it doesn't necessarily have to be the way things are. I always think of that movie Gran Torino, too. Oh, I never saw that. This is with Clint Eastwood, a grumpy old auto worker, Get Off My Lawn. You should see that because the relationship he ends up having with his adult children is his wife dies and they're like, well, you should probably go to a home.

32:45And he's like, he's completely, you know, disaffected from his own children and is sort of living this. He had his hero's journey as the auto worker and provider and and things like that, but is living this kind of listless life. He actually becomes a starfish thrower for the the next door neighbors, the Hamong family. And there's a gang involved in other things. But some of the best scenes is when he's taking this young boy under his wing to help him get a job and not be hanging out with gangs and stuff like that. And so he takes him to a barbershop to try to tell him how to talk with guys. And I won't repeat this because there's a lot of things.

33:31Yeah. But it's a hilarious scene that he gets a job in construction with somebody he knows and takes him to the hardware store and shows him what he needs to buy and things like that. So that really is a starfish thrower story. And why, as an older person, you do want to have that kind of warm role with people where you can help them and they appreciate it. It goes both ways. You're not just helping people who don't appreciate it. You're finding somebody who wants your help and wants to have the relationship and then working in that relationship. I love how intentional you've been about that. And it sounds like you've cultivated that with obviously your podcast and your community.

34:16And I mean, that's very self-selecting both on their part and your part. And also you mentioned in passing, you had relatives come and live with you. I know you've told me about the basement where you've had a couple dozen people live down there at one point, which is absolutely wild. Mostly one at a time. Mostly. We've had a few incidents like, you know, you need to clear out because we got another one coming. The next starfish is coming through. But I mean, like you said, that is what builds relationships, right? Like being intentional about this stuff. As you're talking about this, I'm thinking about like how I and this is not like beat myself up day.

34:54It has nothing to do with me, but like where, especially with my own podcast, with Chooseify, it's been a very different type of thing. This is like a one to many. And I think there are often times where I'll go to like an economy conference, like we were just at, and it's wonderful. And believe me, I never lose sight of how amazing it is that like hundreds of people want to talk to me. But that said, I get one, two, three minutes with each person. And it's just like a little fleeting snippet, right? And there is value there to some degree. And I think some people want to tell me their story. And again, wonderful.

35:29But I'm not diving deep with people. And there is an aspect of missing that, right? But there are always choices in life. And it's interesting to see how you've been so intentional about your choices. Well, you are the nicest guy at five. Yeah, you've coined this now. I walked right into that, Frank. Yeah, one thing about my podcast is I have a peculiar sense of humor, we shall say. And so it's very amusing to me. I either get five-star reviews or one-star reviews. Interesting. It's like, I must be doing something right there because that's what I really want is people that really, really want to listen to it, even if there's five of them, rather than a thousand people who can take it or leave it or really don't like it at all.

36:13Yeah. There's just the difference there. Thanks for listening to Chooseify and for all your support of our mission here. The absolute best way to support Chooseify is when you sign up for your next rewards credit card to use our cards page at chooseify.com slash cards. I keep this page constantly updated, so it should always be the top resource for you. Thanks for being part of our community and for your support. So have you read that new Arthur Brooks book? I just got it on ebook. I'm about like 5 % of the way through. So I'm not far enough through to even speak intelligently on it. Yeah, that was one of the ones I actually haven't read it, but I've heard so many interviews of him and summaries of it.

36:55I know what it says. And I've known what it says from other things too, because he's collected the Eastern philosophy of we need to reduce our desire because desire is what causes suffering. The whole Buddhist kind of philosophy. He's just trying to meld that with the Western idea, which is more directed at what does that mean in terms of what am I trying to do or not do? And this comes more from, I guess it comes from Aristotle and the Greeks, but it's passed through Thomas Aquinas because the medieval people looked all that stuff up and brought it through. Anyway, you get to what are called the four idols, which are money, power, fame, and pleasure seeking.

37:41And so all of those things are stuff you want at least some of. You want to have some money. You want to have some power. You want to have some agency in life. You'd like to be famous enough, at least among your friends and family, that people have some knowledge and desire to be around you. And then with the pleasure seeking, that's just, well, you want to have a couple of drinks, not a couple of bottles every day. But what is real point there is and what the point of that is, is that those things are oftentimes where things go off the rails when you get too sort of addicted or you start measuring your life by those things that, no, I need more money.

38:21No, I need more power. No, I need more and more fame, which often then leads to the addictions. Yeah, for sure. But the point there he was saying, and another thing that I thought was really important was that you lose your sense of purpose when you start sort of pursuing those things for their own. The meaning of your life is having more money or more power. The way he describes it, which I thought was very interesting, that when you do that, purpose and meaning can devolve into raw ambition, which is actually not something you really want to have. That is the wanting things just as a counter.

38:58or attaching that as your value in life. And so that those four idols become the substitutes for actual real purpose and meaning in life, which I thought was just a very interesting way to think about the whole thing. Because then I mesh that with, you've probably never read René Girard, have you? No, I have not. We can talk about the theory for a while. the central idea of that which i think is very interesting is that most of our desires are not actually our own but are copied from other people unconsciously okay is this like memetic desires yes so the real reason i mean that's how marketing works essentially it's yeah cialdini's influences the same ideas but presented from a different direction but i've really taken that to heart and where I've thought about that is like, if I want something, if I see something, I think I want that.

39:57It's like, yeah, but do I really want it? Or am I just channeling some other person's desires? I'm very suspicious of my own wants for anything in particular. It helps put a check on just wanting the next toy or the next thing. Because I was having, it might've been on the choose-up iBoard or somewhere else. I would say it's like, yeah but it's kind of like wearing somebody else's underwear if you think about your desire for a tesla or some other object of the day as that it's sort of like i better really really want this for my own reasons because otherwise it's it's a copied desire which is what sort of leads to conflicts and it's it's not all bad of course you know we're primates so we copy each other to learn things but it's when you're actually trying to become somebody else by wearing the same things they wear and doing the same things they do and talking the same way they talk that's what gerard is talking about mimetic desire oddly enough he's one of peter thiel's favorite people i don't know if that's a good thing or a bad thing but yeah it's interesting to see to just to see fads i have a middle school daughter and to see these things come and go like stanley mugs are all the the rage right now and it's like man where do these trends start i think back to what was it uh malcolm gladwell's tipping point when he talked about uh oh what was it wasn't birkenstocks it was some kind of clothing rock maybe yeah it could have We'll have to fact check it in, whatever.

41:37But where on earth do these things come from? Where did that start? But yet now you have millions of teenage kids who are now craving these crazy Stanley mugs. And it's just, I mean, that is the ultimate example of the mimetic desire. It is the normal state of human beings to copy, not only just copy each other's behaviors, but copy each other's desires, stories, wants, things like that. And it happens unconsciously just by being whatever environment you're in. Well, the kind of practical takeaway for me is even though I'm probably in the first percentile in terms of like consumer behavior or consumerist, but I find almost like you're saying, it's like somebody else's desire.

42:24When I, when I find it almost feels like a fever, like, oh, I've got to research this. I've got to look at that. Like, and I'm thinking about buying something and like almost invariably, I don't actually want that thing. But it, again, it feels like there's no other way to describe it other than like a fever has overtaken me. And granted, this doesn't happen that often, but like, but when it does, it can become all consuming and it's, it's wild to see it happen in your own brain. And now I'm like consciously aware of it so I can take a step back. but I mean, I've definitely bought a couple of things over the last couple of years that I know specifically were because of that fever.

42:59And now I'm more cognizant of it because almost invariably when you get the item, at least in my case, I realized I didn't want the damn thing in the first place. It's just sitting in my closet. Yeah. And it's most obvious with items like that, but then, you know, I'm sure this happened also when you were in the professional environment, And, you know, for me, all the lawyers are kind of buying the same things and consuming the same things and wearing the same thing. I'm sure the same cars. Yeah. The joke is the young lawyers, everybody just buys a BMW. And the guy says, well, no, I'm original.

43:31It's like, what do you mean you have a BMW? It's like, well, mine's gray and the other ones are blue.

43:38That's about as original as he got. Good self-awareness, right? But that is definitely the truth of the way we live. The idea of what will become popular, like you're saying, the Stanley mugs, that is an interesting example of an emergent property. And this is because it's what you would call a complex adaptive system. And most things that we care about are complex adaptive systems like the weather system, financial markets, anything that is complicated with lots of moving parts and lots of things going on. The issue with that is you can look at the behaviors of the individual parts of it, but not really understand what the outcome is going to be.

44:19And that outcome is what you would call an emergent property. And that is sort of how one thing leads to another, how a few people buying Stanley mugs all of a sudden erupts into this. This one becomes the popular one. And there isn't almost any rhyme or reason or any way to predict exactly which one it's going to be. And that's what marketers spend all their time trying to figure out. Well, what do I need to do to make this the most popular thing? And it doesn't always work because it's also what you would call path dependent. Yeah, it doesn't matter on random factors and who went first and whether, you know, oh, this pop star happened to find one of these things in a dressing room and bring it out on stage and somebody saw it.

45:06That sometimes there are random events that lead to these, what you would call an emergent property of something. But a lot of systems in life work that way. That's why things are so unpredictable. Why we can't forecast what are our finance actually going to look like in 20 years or something like that. Because there's too many moving parts. And the best we can do is make an estimate and try to be in that ballpark. There's a whole decision making or assessment idea here. The book you'd want to read is called Risk Savvy. It's by a guy named Gerd Gigerens. He's at the Max Planck Institute in Germany.

45:47And what he talks about is the difference between things that are risky and things that are uncertain. This is also Frank Knight was the economist that talked about this. But the idea is this, that things that involve just plain old risk are things that you can actually predict if you get more data. And the more and more data you get in, you can hone in and predict it. Things that are truly uncertain, you can't really predict them no matter how much data you have. We still live in that kind of world where stuff is going to happen. We're going to have COVID. things like that. And it's interesting that it's actually better to use a rule of thumb in an uncertain arena and be approximately right and not precisely wrong.

46:36That is in a domain where the word we're talking about risk. And then actually you do just need more and more data and then you can make a better and better decision. Right, right, right. Well, I mean, Frank, that ties perfectly into the 4 % rule of thumb, right? Yeah, that's why it actually is a good rule because you're not going to do that much better. And I know people like financial calculators and like to keep shoving more numbers into them and recranking them and rejiggering them and doing more things with them. But it actually isn't helping you predict that future any better than the rule of 72 and a few other broad data points.

47:21because you want to be approximately right. All you're trying to do is get to the ballpark. You're not trying to find your seat in the ballpark. I think people sometimes look at their financial planning as I need to find the seat in the ballpark. So they are, well, I need to plan for long-term care. Well, how much planning can you actually do since you don't know whether you're going to need it or not or how much you're going to need or when you're going to need it or any of those other things? Right, right, right, right. You need to be approximately right on that, not precisely wrong because you don't want to have no resources, but you don't want to be putting the lion's share of your resources to something like that.

47:56And that is one of the tricky things in financial planning. I think most financial planners don't understand this concept that actually having more and more data is not going to get you much better of a decision that just having a few broad pieces of data and applying them well, and then coming up with a nice kind of range of outcomes and not pretending you can get that precise on it. Because the idea is more when you get to the ballpark, okay, then you'll look around and say, okay, well, I need to go that way. And it's the same thing with financial planning that when I get five years closer, then I'll have a better idea of where my child is going to go to school and how much that's going to cost or some other thing that's unpredictable now, but will be more predictable later.

48:46And then I'll reorient and go that way. But trying to predict it before I have the information or actually close to it is not a useful thing. And in fact, I'll probably be making worse decisions. The harder I try, the worse it gets. No, that's that is absolutely fascinating. I of lead. I've kind of come to this conclusion that it seems like people in our community are building like every layer of redundancy and conservatism into their planning. And it seems like it's exactly what you're counseling against, right? It's like they're trying to get so specific and granular. And I think what it's costing them is years of their lives.

49:30And I'd love to hear your thoughts on it. Yeah, it is. One of the things I rail about on my podcast is people not spending enough money. I think it should be a 5 % rule if you reorganize your portfolio a little bit and commit to variable withdrawal strategies. Okay. That there's no reason this can't be a 5 % rule. And it's interesting the filters people put on because people don't want to believe this. People that have decided that, no, I want to be really conservative. There's a confirmation bias thing going on here. That people stop looking for any information. They look for information showing that things are going to be worse in the future.

50:08They stop looking for information to show that, oh, no, we could actually do better. One of the interesting things I see in that regard is how people look at what Bill Bengen has to say and when he said it. Everybody seems to know that Bill Bengen did this work in the 1990s, came up with this thing called the 4 % rule that was a historical analysis, and he did all these things. If you ask people, what does Bill Bengen think today? How many people know the answer to that? Approximately zero. Except it's not unknown. He's been on podcasts like Money with Katie. Interesting. And what he says is this.

50:45He says, you know, if I would have used a better portfolio, you can have a lot better safe withdrawal rate, probably like 4.8, 4.9%. Okay. Most people ignore that information. They say, well, Bill Bengen says this. It's like, well, that's what Bill Bengen said in 1994. What does Bill Bengen say in 2021? that's not what he says anymore and so why is that over bill bangen so attractive to you where the the modern new one you don't like that that causes you cognitive dissonance because you you've been saying well i think it's a four percent rule but i'm going to be three percent just to be conservative and right and not count social security and pad my expenses and find other reasons to not spend money yeah and look for any threat of of something that will help you justify that.

51:33And this actually has become, this is a mimetic thing in the FI community. When I talk about that mimetic desire of people copying things, it's like, you see somebody, well, I have 35 times, I have 40 times. It's like, oh, well, I need to be there too. If you are around people like that who are over savers and think these things and talk this way, you become that way subconsciously it's going away from that but it it was almost like this stanley thermos fad for a while of people talking about how little they could spend and how low their safe withdrawal rate needed yeah there was a big competition it's the bubbles kind of burst after a while it was like yeah but wait a second is that what i want to live well i mean frank i've tried you know i've tried really hard to change the narrative on that in the last couple years on spending and living your life.

52:29And it can't just be about the money. But yeah, to your point, I think people are looking for, A, it's this interesting intersection of that pessimism and, like you said, confirmation bias. So, oh, I heard Karsten Big Earn say a 3.25 % safe withdrawal is 100 % guaranteed or as close as possible. So people just latch onto that. But like I said, most of them, almost everybody is counting social security as zero. They're now saying a 3.25 % safe withdrawal rate. They are taking their annual expenses and then grossing that up 10 or 20%. So like their safe withdrawal rate is probably approximating 2.5 % or something, maybe even lower, right?

53:10Like where you're saying there's a real chance if you do this right, Hey, maybe 4.8%, maybe 5 % might be more plausible. Yeah. What I would say is no, most of it, we can easily get up to 5 % just by thinking this through and really trying. Because to me, do you want to spend money? Right. Do you want to be a miser forever? Because for some people, it's like, no, I really don't. It feels bad to me. Now, let me find out reasons to do this. Because I'll tell you that if you have a withdrawal rate that's 3 % or less, you really don't need much of a withdrawal strategies to to say something like that.

53:48You could have 100 % stocks, you could have 30 % in stocks, you could have all kinds of things and really not have to think about it at all. And it's funny to me when people have something like that, and then they go, okay, and now I need three or four buckets, and I need a CD ladder, and six years of cash, cash in this bond thing. And it is an example of trying to, if I have more things and more complexity, it makes me feel more secure because it creates an illusion of control. It's like, actually, no, that isn't helping you. It's making your life any better. But you've already solved the problem by determining you're not going to spend much money.

54:35That's how you solve the problem. The rest of this is, it might make you feel good. It might do something psychologically for you. But the way you chose to solve the problem was just by not spending much money. Right, right. That resolved all the other problems. That solved all of this problem and you don't need to worry about anything else. Now, if you do want to spend more money, then you do have to be more mindful of what you're doing here and how this is going to proceed. Because there was a very nice paper, at least the half of it, that was about this by Morningstar that was put out in 2023.

55:09You know, they do that annual state of retirement now paper. One year they said 3.3 and the next year they said 3.8. There's a problem with their model and that's why that's jumping around. But the better analysis, the more interesting analysis was they said, all right, well, let's look at all of these variable kind of withdrawal strategies. Let's look at like a guardrail strategy. Guyton-Clinger is one of them. Michael Kitsis has one. And then they look at some very simple things like, well, what if we just don't increase our spending by the CPI rate of inflation? What if we do it by CPI minus one, which in fact is what is usual for an average retiree?

55:52If you just do that, if you just don't increase your spending, you get between 0.5 and one plus on your safe withdrawal rate. So if you just committed to that, you get another half percent, at least another half percent. Because remember, the original safe withdrawal rate was predicated on this idea that you're going to start spending this much money on a certain year. And then you are, without fail, going to increase that by the rate of CPI inflation every single year for the rest of your life. Right. To the dollar. Yes. To the dollar. No matter what you actually need to spend, you're going to spend more.

56:30And the truth is people in retirement do not experience CPI inflation. They're typically not building another family. They're not doing a lot of the things that cause people to experience more inflation because that's an average. And so if it's an average, there's some people that are below the average and some people are above the average. It's actually not too hard to stay below the average if you're doing things like, well, I'm not going to replace my car every three or four years. I'm going to replace it every 10 years. I'm not going to consume at the rate that most other people are consuming.

57:06And you're probably not doing it anyway if you're a five person. So the chances are your consumption rate is actually going to be much lower in terms of how it progresses. I can tell you ours has actually gone down nominally, even with 9 % inflation. We're spending less money than we did when I stopped working full time. Oh, wow. Okay. Mostly because I'm sitting in the house all day long and not driving anywhere and not eating anything anywhere else. I just tell you, I'm housebound. I sit here with an old dog and we record podcasts, record podcasts and watch YouTube videos. How much could that possibly cost?

57:49And that's even, you know, we took a huge expensive trip to Peru this year for our 30th wedding anniversary. It's not like we're not doing the things we want to do. It's just, I'm not going downtown every day and buying lunch every day. Just things like that, that typically basically go away. It's funny. I never did any budgeting when I was working because it was sort of like, well, we're going to save first and spend what's left over. So we just saved massive amounts of money. And then I would get a big chunk of it as a bonus, like at the end of the year, and we can just save that or put it away somewhere in one big shot.

58:25And then we would usually have money left over at the end anyway. And then we saved more of that. And so we never really looked at what we were spending. These days, my wife and I do because it's sort of like, well, what are we spending? Because it's sort of like, well, where is the money going to come from? And a lot of it is, well, how much money do we actually need to bring out of some account for next month? So we sit down at the beginning of the month and say, we have taxes due this month because they're lumpy. We have insurance due this month. We have some other thing that we need to bring more money out for.

58:55But as we've gone through and monitor it, yeah, it's our spending is flat to go down nominally. I mean, that's not even. So if it continued on that rate, you know, I could add another one to one and a half percent on the save withdrawal rate. And that's the other thing. Once you actually get to retirement, your spending is so variable and flexible. It does not conform to any of these sort of boxes where it's like you're going to actually spend this percentage, this of this thing, it's going to be a lot more, a lot less, and there'll be other factors that go into that. I mean, one of the reasons that I started my podcast was simply assuming you want to spend as much money as you can out of your invested assets.

59:40How much is that realistically and how can we make it more by holding different things and by managing it in a different way than would be typical. So yeah, I just had a podcast where I said, yeah, everybody should be able to spend 5 % without really working too hard at it. We use what I call a 3-1-1 plan in terms of spending. And what that is, is 3 % is for what I call keep the lights on expenses, that stuff we have to spend money on. Our taxes, our food, our utilities, our healthcare, all of those things that aren't going to go away. You kind of know what they are and you just put the money away.

1:00:20So 3 % on that. 1 % is on what I would call comfort expenses. That is hiring people to clean your house or your lawn, your gym membership, going out to eat, all the things that are just kind of fun to do that you do all the time or that if I had to cut this back, I would, but I really don't want to. and it's part of my habitual life. And then another 1%, I would say, goes on what I call extravagances, which are, okay, let's go to Peru and spend a lot of money there. The next ones we're going to spend on some renovations in the house and we're just kind of plotting those things out. But those are sort of like, they're usually like one-off big trips or big expenses, but they're not the same like every year.

1:01:03And they're the kind of thing where you could say, no, I'm just, I'm not going to take a big trip this year. I'm not going to do a renovation this year. I'm not going to, there's nothing there that has to be done for those. And to me, that is a conservative spending plan that gets us to that 5%. Because I think we can actually spend more if we have to, if we want to. And maybe we will as time goes on, because if our assets do grow, we will spend more money and we will give it away. Charity is important to us as well. I'm on the board of a charity and they want my money generally how it works that's part of what gets you on the board of a charity I'm also the treasurer so I get to count them I'm the treasurer of my girls swim team so yeah I know how that works believe me so that is a basic discussion of that but it is designed around flexibility And for me, 3 % is a bare minimum spending.

1:02:08Got it. That in no way, shape or form, should that be your goal? Because you're going to die at your highest net worth. That is what economists would call your revealed preference. Okay. And I like to think about this idea too. What economists have always said is that, well, you can't trust what people actually say because they say they're going to do something. then they do something that's completely opposite to that or does not coordinate with that. So what they've come up with is this idea of a revealed preference. It's like, we don't care what you say you think you're going to do. We just look at what you actually did or are doing and look at the most probable outcome of that and say, that is what you actually are trying to do.

1:02:52That is your revealed preference. We're looking for an objective way to do this without actually going into somebody's brain and asking them. We look at the behavior, look at the most probable outcome and say, well, if that's your most probable outcome and that's what you're doing and we're assuming you're a very rational person, then you are intending to get that outcome. And that's called your revealed preference. So in this context, if your behavior is spending 3 % or less of your portfolio, your revealed preference is to die at your highest net worth because that is your most likely outcome you tell people things like there's like well i don't want to be no that's not what i meant that's that is amazing that is absolutely fascinating but i always think about that that when people are talking about well i'm going to do this this and this is like well all right you're going to do this let's just think about what's the most likely outcome of that if you drank a liter of vodka every day um your real preference is dying of alcoholism or liver disease yeah but you could do that with any sort of thing and i think what that gives you is an objective standard for judging what people are doing because otherwise this devolves down into well personal finance is personal i can do whatever i want with my favorite thing my retort is personal finance is finance Finance is the noun.

1:04:16Personal is the adjective. The noun controls the adjective. Yeah. So I think that that is a better starting point for a discussion with people about their finances than asking them what they're trying to do. Yeah. Because oftentimes what they're trying to do or what they say they are trying to do is inconsistent with what they're actually doing. And what they're actually doing is, you know, maybe governed by fears or beliefs or some other thing that's not even attached to preferences could be habits or things like that. So, you know, you can reverse that and go the other way. A lot of people in our society spend too much money on their children and their adult children and they support them long after they should be supporting them to their own detriment.

1:04:59And that is one of the other than like health issues or addictions or things like that. That is one of the key reasons that people end up broke when they're older. And so you would say that somebody who is overfunding their children to their own detriment actually has a revealed preference to be bankrupt in their old age because that is the most likely. Now, you know, that's not what they want. Right. Not consciously. Ask them what they want, but objectively, an economist would say, well, that's a revealed preference. And it's because they value giving this money to their kids so much that going bankrupt in their old age is fine with them.

1:05:40That's the weirdness you always get into with economists is that they assume everybody's a rational actor, even when we know they're not. But this analysis is an interesting place always, I think, to start. And it's sort of like, well, if you don't want that to be your revealed preference, then maybe you should change your behaviors in some way yeah that's so interesting frank so right reveal preferences so this it's funny because you said that's a good place to start i feel like that's a good place for us to close this episode yeah and i suspect very strongly so a we didn't get to any of the mailbag questions which i apologize for i know i did prepare answers to all of the ones you gave me but we can do this has been absolutely amazing.

1:06:22I mean, I could not have anticipated that the conversation would go this way. And that's what's so beautiful about podcasting, right? I think that is the perfect kind of launching point for people to really, really think about their own personal finances. How many layers of this conservatism are they layering upon, again, layer upon layer upon layer upon layer. And you're saying, hey, there's a reasonable chance 5 % might be too conservative in many cases. And yeah, I think we are definitely going to have to do at least one follow-up, Frank. So we'll do the mailbag. And I strongly suspect people are going to really want to dive into the granular look at that 5%.

1:07:00So let's put a pin in that right there because this has been amazing. And I just want to thank you again for everything you do for the community, for everything you've done for us over the years. And we've mentioned your podcast multiple times, Risk Parity radio anywhere else people can find you other than the facebook group and the podcast that's it and by the facebook group it is the choose fi facebook group there's a couple other ones i you're active in a lot of groups catching up to fi is bill and becky and now jackie's podcast and in their facebook group they have a ask uncle frank a finance question on thursdays and so if you do want to ask a question directly to me about something in a forum, that's probably the easiest way to do it.

1:07:46Other than that, most of my podcasts these days is responding to people's emails in addition to talk about portfolio construction issues. We are up to podcast number 334. So I've been doing this since, I guess, July of 2020. A lot of the early ones go through sort of the background and the nuts and bolts and everything is built on those early ones. It's one, three, five, seven, and nine are the first five episodes that you want to listen to that. And we do talk about that because my podcast, I liken it to going to a dive bar. And if you go into a dive bar, there's a whole bunch of regulars sitting around and they're talking about stuff and you're in the middle of a conversation.

1:08:30You have no idea of what they're talking about. And so it's a little bit of a weird place. Hard to jump in. So 1-3-5-7-9. 1-3-5-7-9 would be sort of a background for the podcast. Awesome. But it's a very enjoyable experience for me. And I really appreciate my listeners and being able to get on here with the nicest guy of Fi.

1:08:58Brad Barrett, the nicest guy of Fi. That's going to stick, Greg. all right my friend thank you so much for the time i really appreciate it you're quite welcome and uh hopefully i'll see you in the flesh at some point in the future if you're not on a roller coaster so yeah lots of coasters lots of coasters all right frank until next time thank you for listening to today's show and for being part of the choose if i community if you haven't already the best ways to get involved are first subscribe to the podcast So you're listening to this on a podcast player and just hit subscribe and then subscribe to my weekly newsletter.

1:09:32I actually sit down every Monday and write this by hand and I send it out Tuesday morning. So just head over to choosefi.com slash subscribe. And it's really, really easy to get on the newsletter list right there. And I would greatly appreciate it. It's the best way to get in touch with me. You can actually just hit reply to any of those emails and it comes directly to my inbox. So that's the way that I keep a pulse of the community. and how we keep this the ultimate crowdsourced personal finance show. And finally, if you're looking to join an in-real-life community, we have Chooseify local groups in 300-plus cities all around the world.

1:10:08So head to chooseify.com slash local, and you'll find a list of all of those cities in 20-plus countries all across the world. And if you're just getting started with FI, or you have a family member or a friend who you think would be interested, two easy ways. Choose a Vi episode 100 is kind of our welcome to the Fi community. And even though it's a couple years old at this point, it still stands up. And it's a really great just starting point to get an understanding of what is financial independence? What are we doing here? Why are we looking to live a more intentional life where we save money and use it as a springboard to live a better life?

1:10:45And then Choose a Vi created a financial independence 101 course that's entirely free. just head to choosefi.com slash fi101. And again, thanks for listening.