On the pod today from Austin, Texas is Corwin, a fellow aerospace engineer and FIRE blogger from ‘Engineering your FI’. Corwin and his partner reached financial independence in their early thirties and it was awesome to hear his journey and chat about personal finance and engineering!
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Corwin – Engineering your FI
On the pod today from Austin, Texas is Corwin, a fellow aerospace engineer and FIRE blogger from ‘Engineering your FI’ with a Bachelor’s, Masters and PhD in aerospace engineering, as well as over a decade of engineering industry experience. He definitely fits the engineering bill, which we often see here in the FIRE community.
Corwin and his partner reached financial independence at ages 35 and 33 respectively, which he puts down to a lot of hard work and some good fortune. Corwin has worked for NASA, and also gained a position at the University of Texas as a researcher, where he still works to this day. He calls personal finance a hobby, he’s clearly a very intelligent bloke and with his engineering background, we had a lot in common!
He worked bloody hard to command a high income and has sensibly invested a large portion of it over time, allowing him to reach financial independence at such a young age, and it was awesome to hear about his experience and his journey! Listen on..
Episode 55 – Corwin – Engineering your FI
Show Notes
- You can visit Corwin’s blog Engineering your FI
- You can find Karsten’s blog Early Retirement Now HERE
- You can read the article by Nick Maggiulli ‘Why Investing Like Your Neighbors Isn’t As Dumb As it Seems’
- You can find Corwin on Facebook HERE, Instagram HERE and on Twitter HERE
- Corwin’s favourite podcasts: Mad Fientist, Choose FI Podcast and Mile High FI Podcast
- You can read Captain Fi’s Book Review of The Seven Habits of Highly Effective People HERE
- Corwin’s recommended reading:
-
How to Talk so Kids Will Listen and Listen so Kids Will Talk- Adele Faber (Author)
- English (Publication Language)
- 07/14/2022 (Publication Date)
-
Sale
Back Sense: A Revolutionary Approach to Halting the Cycle of Chronic Back Pain- Siegel, Dr. Ronald D. (Author)
- English (Publication Language)
- 256 Pages - 04/09/2002 (Publication Date) - Harmony/Rodale (Publisher)
“I’m an engineer to the core. With a BS, MS, and PhD in Aerospace Engineering, and about a decade of engineering industry experience, I definitely fit the engineering bill. Folks who have been in the FI community a while are probably not surprised by this admission though, as engineers seem to be disproportionately well represented in the FI universe. BUT, I like to think I’m not a stereotypical engineer that can code but can’t communicate (we’ll see!). I’m planning to build some fantastic tools and visualization capabilities that communicate really clearly the best choices for big financial decisions. And I plan to bring some hard-nosed engineering logic to a lot of lifestyle decisions that can get you to FI a lot faster.”
Corwin – Engineering your FI
Transcript
Engineering your FI (Corwin)
Captain Fi: [00:00:00] Ladies and gentlemen, this is your Captain speaking. Welcome aboard the Financial Independence Podcast.
Gday and welcome to another episode of Captain Fire, the Financial Independence Podcast, where I open the cockpit to some of the best and brightest in personal finance, as well as those who have reached or are on their way to financial independence. Before we get started, remember nothing said here is financial advice, and you should always do your own independent research before making any financial choices.
With that being said, I hope you enjoy the episode and learn something new.[00:01:00]
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On board today is Corwin, a fellow aerospace engineer and fire blogger from EngineeringYourFI.com, with a bachelor’s, master’s, and PhD in aerospace engineering, as well as over a decade of engineering industry experience. I think he definitely fits the engineering bill, which we often see here in the fire community.
Corwin and his partner live in Texas and they actually reached financial independence recently at age 35 and 33 respectively, which he puts down to a combination of a lot of hard work and some good fortune. But it’s also very clear that Corwin is a pretty intelligent bloke and he’s worked pretty bloody hard to command a high income and has sensibly invested a large portion of it over time.
So Corwin, thanks for your time mate. Welcome on the pod. How you doing?
Corwin: Good. Thanks very much for having me. [00:03:00] This is a treat talking to someone on the other side of the world. It’s pretty amazing to me that we can do that now.
Captain Fi: Hey, my pleasure mate. And so you are coming to us from Dallas, Texas, is that right?
Corwin: No, Austin, Texas.
Captain Fi: Austin, Texas. Yeah. Sorry. I always get those two mixed up because I’ve actually got a mate who lives in Dallas and I always mix it up cause I always think that’s the capital cuz it’s one of the biggest cities in Texas, right?
Corwin: Yeah. It’s a bigger city than Austin. But Austin is the capital. Austin’s about 200 miles south, so it’s not too close. It takes you a few hours to drive between, but it’s not too far either.
Captain Fi: Yeah, in Australia we’ve got our capital is Canberra, but Sydney is obviously way bigger than Canberra and it’s pretty close. So it’s a similar sort of setup. But mate, before we get stuck in, can you tell us a little bit about yourself?
Corwin: Sure. So I was born in Dallas but then when I hit 18, I headed down to Austin, went to UT, University of Texas at Austin for my bachelor’s and master’s.[00:04:00] And then I lived and worked in Washington, DC actually for a few years, which is quite different than living in Texas.
And then I returned to Austin to get my PhD. And then when I finished that up, I got my position at UT as a researcher and I’ve been doing that since. So it’s been going really well. And yeah in terms of personal life, very traditional family situation, wife and two kids. So yeah pretty straightforward.
I don’t have many other hobbies besides personal finance, which is probably a sad state of affairs for most people. But that’s pretty much all I’ve got time for.
Captain Fi: Well, mate, it’s definitely an interesting hobby and it’s certainly paid off for you guys, that’s for sure. Now look, everyone has a slightly different understanding about, I guess financial independence and FIRE. Even the RE can mean so many different things to so many different people. Yeah. So for you what does FIRE mean for you?
Corwin: Well, so it’s funny, I tend not to have the RE at the end. I tend to just go by financial independence. [00:05:00] That’s why I named my Engineering Your FI instead of Engineering your FIRE.
Just because I tend to like the financial independence aspect of it more. And I don’t know how many people I’ve talked to about this over time, but the vast majority of people say something like, oh, I don’t wanna give up my job. I really enjoy it.
And every time I have to say it’s not about giving up your job. It’s not about giving up what you like to do. It’s really about gaining power over your life, not being at the whim of the economy or someone else. It’s just so much more satisfying to have that power over your life. That’s really what it’s all about in my mind. So it’s not about no longer working.
And I think that’s in line with every single fire blogger and podcaster out there as well. So, yeah. But still what I get most of the time when I talk to someone outside this community is “I don’t wanna give up all work”. That doesn’t make any sense. So, yeah.
Captain Fi: Yeah. I totally agree with you, man.
I’ve heard, RE being like, Retire Early or Redirect Employment or Recreation Enjoyment. There’s all sorts of funny little acronyms for it. [00:06:00] But yeah I definitely feel like freeing yourself up, giving yourself the choice, taking that power back. That’s where I’m sitting at the moment.
And semi-retirement is awesome because you can keep working part-time. You could switch to a passion project. You can start a business. It really does free you up to pretty much do anything you want. So that being said, would you be able to give us a bit of a rundown on your journey to financial independence and how you got started and what your journey was like?
Corwin: Yeah, sure. So back when I was living in Washington, DC I was actually taken with the minimalist movement. I thought that was my thing. I decided eventually I wanted to return for my PhD, but after that I thought I wanted to start some kind of business or startup along the lines of the minimalism movement.
But I was on the bus to school one day and I was reading this Becoming Minimalist newsletter and he had this link to a Mr. Money Mustache post about what would happen if everyone became super frugal. [00:07:00] And I thought, that is an excellent question. I’ve often wondered that myself.
So I read that post, and of course, like nearly everyone, I loved it and proceeded to read the rest of his entire site. But I feel like most people encounter him via one of the really popular posts, like the Shockingly Simple Math post or something like that. But yeah, I basically realized that FIRE or FI is really my cup of tea. That’s really what I want most, more than starting a successful business or anything like that.
And we had just given birth to my son and so, my wife and I were like maybe we should just take this reasonably good paying job that you can get with this PhD that you just spent all these years getting and really go after FI instead. So, that’s what we ended up deciding to do. And, I still am enjoying the job and the people I worked with. It’s a great place. So, I think it was a very good decision.
And then basically with a very high savings rate and low cost index fund investing, along with a really strong bull market from 2016 to 2020, we were at FI. Well, somewhere between Lean FI and Standard FI by 2020. And then of course, we know what happened spring of 2020 but the market’s also returned really rapidly.
So we hit standard FI not too long after that. And now we’re on track to get to our Fat FI goals, which are always changing on us. Of course. So that’s probably it in a nutshell.
Captain Fi: Oh, we gotta be careful with shifting goalposts there, mate.
Corwin: I know, man. I know. It’s dangerous. It’s dangerous. Yeah. I also like having a goal though, so I dunno.
Captain Fi: Yeah, dude, it’s pretty awesome. But you’re able to achieve your goal though I mean, obviously staging, through lean FIRE to FIRE. So what exactly are your fat fire goals?
Corwin: Yeah, that’s a good question. So, I tend not to talk about absolute numbers, but, we have a series of things like, okay, what if we want this withdrawal rate percentage, right? We wanna get down to 3% withdrawal rate. And what if we go after this crazy high spending threshold, which would let us live somewhere else outside of the extremely hot Texas [00:09:00] summer? Maybe every year let’s go to live down in Australia every summer, right? Which would be y’all’s winter.
And we say, okay, how much does that cost? Then, we tend to pick our withdrawal rates based on the CAPE ratio. Given market status right now. So we tend to extrapolate, along those lines. And we come up with these goals and then we’re like, okay, once we get to those goals, now let’s go to the next one.
Captain Fi: So, yeah. Yeah. I get it, mate. So look I’m not like your super smart investor guy. Like basically I’m good at saving money and investing it to index funds. Yep. So same here. When you talk about like CAPE, like what is the CAPE ratio?
Corwin: Yeah, that’s a good question. So CAPE is the 10 year average of the price to earnings ratio of the total US stock market.
Actually, I think it’s typically associated with the S&P 500. This is a very US focused metric, but I think it can be applied to other markets. And that basically tells you what a reasonable withdrawal rate is, based on the current valuation of the [00:10:00] market,
Captain Fi: Right. So it can actually change.
Corwin: Right. So the nice thing about that though is that if the markets drop heavily, that means the safe withdrawal rate also changes accordingly, right? So you’re not just screwed if the markets drop. And if the markets rise, that safe withdrawal rate changes accordingly as well.
So, there’s a great website called Earlier Retirement Now that’s run by a guy named Karsten, who has done a ton of analysis. He has what’s called a safe withdrawal series. It’s very long and very technical, and I love it, as do a lot of other people in the community. I highly recommend checking that out.
I have a PhD in aerospace engineering, but he has a PhD in economics, so he definitely has a big leg forward on me on that front.
Captain Fi: Yeah, Karsten is bloody brilliant. Actually, he came on the show a couple of weeks ago. I discovered his site and I was like, whoa, this is going way over my head.
And I don’t have a PhD. But I do have a master’s degree in aerospace engineering. And, I thought that I was pretty good at math. I thought I was pretty good at personal finance but that stuff falls straight outta my head. [00:11:00] And the thing that really confused me was, I guess when we talk about this CAPE ratio, I always thought that if the market drops, then you should tighten your belt a bit.
Whereas like some of the stuff that Karsten is talking about and what you just mentioned now is that you could actually increase your withdrawal rate when a market drops. And that concept just blew my mind.
Corwin: Yeah it, but see, the thing is your assets are probably gonna drop too, right? If you’re invested. So your withdrawal rate can increase, but your assets also probably dropped. So it’s a mixed bag, right? So yeah I think in one of Karsten’s recent posts, he talked about how the markets have dropped quite a bit, to the point that a 4% withdrawal rate, the “4% rule” was good again, right?
But odds are your assets had also dropped if you were using standard index funds, right? So, it’s funny how that ratio changes. [00:12:00] The markets change, so you have to look at it all as a whole. But yeah, I think still in general, it is a good idea to tighten your belt a bit when the markets are down.
So yeah that’s my overall take.
Captain Fi: Just for me, if I’m trying to plan it out logically without resorting to, like modeling or formulas or anything. If the market drops and you’re in the accumulation phase, everyone knows it makes sense to buy more, right?
Yeah. And then definitely if the market’s like really high, then you sell, well, like you’ve made a profit, right? So that’s the whole “buy low, sell high” thing.
Corwin: I mean hopefully you wanna accomplish that via an annual rebalancing, right? So if you’ve got some stocks and bonds, then you’re selling high and buying low when you rebalance, automatically.
Captain Fi: See now that’s something that I’ve yet to do, branch out and buy bonds. Cuz at the moment I’m only recently retired and I’ve pretty much been camp growth. And so I’ve had almost a hundred percent growth assets.
Yeah, probably 95% growth assets and about 5% cash equivalence of an offset couple of years worth of cash on my mortgage. [00:13:00] I think I’ve read about the Efficient Frontier and how, JL Collins explained it to me, how he keeps I think 20% bonds through a bond index fund.
Corwin: Yeah. And some people will say that’s pretty aggressive for someone his age, they would say, whoa, he should be down to 30 or 40% bonds and corresponding amount of equities. So yeah. To each his own too.
Captain Fi: Yeah. And so I get the principle of having the bonds and stocks and the rebalancing to, buy low, sell high.
But what I don’t understand is if the market does drop, wouldn’t it be better to, if you can, to tighten your belt a little bit? So there’s this new concept (I mean, it’s always been there I guess, but it’s being talked about a little bit more) called flex rate.
Flex rate is essentially if the market drops and your assets come down [00:14:00] and you’re maintaining a fixed withdrawal rate, then your income’s gonna drop, but you can tighten your belt. So maybe instead of getting the scotch fillet maybe you just get the chuck or…
Corwin: I have no idea what those things are.
Captain Fi: Oh, sorry. So in Australia… Hey, come on, you’re Texan. You should be all over the barbecue stuff.
Corwin: Different names, I guess for it.
Captain Fi: Oh, okay. So yeah, just like a really expensive steak. It might be like 50 bucks a kilo for scotch, or it might be like $10 kilo for chocolate or something.
I know I don’t eat a lot of meat personally, but It just means tightening your belt. Maybe you stop spending as much, maybe you don’t go out as much. Maybe you actually pick up a part-time job. Yeah.
Corwin: So there’s actually a lot of discussion in the FI community about that.
A lot of people believe, especially if you retire young or you hit FI young that you have more flexibility, so you can tighten your belt, you can reduce spending easily. But then there are others that argue back and say, Hey, what if the markets are down for a lot longer than you think? You could be looking at a lot of belt tightening for many years.
So, that’s a point of quite a lot of discussion still in the community [00:15:00] . What is an acceptable amount of belt tightening and for how long are you willing to do it right?
Captain Fi: Yeah, it’s true. And I think it’s probably something you want to plan out ahead, right? Because just like with investing, you always want to have a plan so that if stuff does go to poo, or for example, if you’re in the accumulation phase and you wanna buy and the market, all of a sudden, tanks, we all know now it’s a great opportunity to buy, but it could be quite a different feeling when it actually does happen, yeah. Everyone’s saying, oh, the sky’s falling in. No, this is not the same crash as last time. This is definitely the end. So it can be very spooky and I know that it’s stuffed me in the past and that’s where I found auto investing became really helpful because it took me, the human out of the loop.
And it just rain or shine every fortnight or month, that auto invest is gonna ping off. So, as someone from previously being in engineering and then working in aviation as a pilot, automation is really the key, I think. [00:16:00]
Corwin: Oh yeah. I mean, the automation level in modern aircraft is incredible and that’s how we achieve these incredible safety standards as well.
Captain Fi: So, yeah. I’m just thinking how long do you tighten your belt for? It’s a good question. And I guess ultimately you just go back to work, wouldn’t you, I mean, maybe it would be hard if you had been out of the workforce for a while, but maybe that’s an argument against the quote unquote early retirement, maybe that’s an argument for semi-retirement.
Corwin: So, I just put out a recent post about exactly that. How there are so many valuable aspects of dropping down to part-time instead of leaving the workforce completely, whether entrepreneurial or with a standard job.
If you do see a huge drop in the markets, right, and you’ve been working part-time for a job somewhere, then you’re gonna be so much better prepared to ramp up back up to full-time if you need to. Or even just that smaller amount of income will be incredibly valuable going forward. [00:17:00]
And it’s just a better balance too. I think a lot of people, especially if they retire early, go from tons of work and no time to spend any of the money that they earn, to lots of time but they’re worried about their spend rate and whether that’s gonna put them above a healthy withdrawal rate.
So in my mind it’s a really nice balance going down to a part-time role. And like you said, if shit hits the fan, then you can really ramp up far more easily as a result.
Captain Fi: So I wanna ask a little bit more about the withdrawal rates and saving rates. But what I wanna do first is I guess, maybe finish up a little bit more about your career, if that’s okay. So I mean, we jokingly get referred to as aerosexuals in the industry.
And most young kids get pretty excited when they see a big jet, like a big airliner military fighter jet. They’re pretty sexy things, right? So for a lot of us, it’s a pretty obvious career choice to move into aviation. [00:18:00] And of course aviation is built on engineering and a lot of hardworking smart professionals learning from mistakes that we’ve made in the past.
And you’ve really taken it to the next level, like with insane levels of post-grad education. Would you be able to tell us a little bit about your choice to move into the industry, what it was like to study, do your post-graduate work, and now life as an aeronautical engineer?
Corwin: Sure. So I have never heard the word aerosexual before. That’s quite a new one for me.
Captain Fi: Well, there you go, man. Education’s important.
Corwin: It sounds like someone who enjoys the Mile High Club on a regular basis to me.
Captain Fi: Hahaha
Corwin: Actually I didn’t start as an aerospace engineer. I got admitted to college as a computer science student. But I was reading this paper course catalog (back in the old days when they still had those) and just ran into the aerospace engineering major description. I was like, oh, this is what I want.
[00:19:00] I was a big Star Trek fan and I thought I might wanna do some engineering, but none of the other kinds of engineering really jumped out at me. So yeah, and I had to knock on some doors to get into that aerospace department because, since I actually got admitted to the computer science department.
But it’s funny, you’ve got this aviation background and aeronautical engineering background, and I’m on the other side of the fence within the aerospace community. So I am what I would call an astronomical engineer. So it’s really more focused on spacecraft and spacecraft navigation, versus aircraft and aviation.
So I was actually very lucky, I got a NASA fellowship for my PhD and I was able to, with that NASA fellowship, study spacecraft navigation around small bodies like asteroids and comments using something called optical navigation. So it was a really, very good experience.
And yeah I’ve done a variety of things since then. I would say though, I tend to tell people I got my PhD in aerospace engineering, but really what I got my PhD in was statistical estimation, which I know is probably gonna instantly put most people to sleep when they hear those words, but it’s such a valuable skill that you can apply to a wide range of industries. [00:20:00]
So yeah, in general, that’s my experience as an aerospace engineer.
Captain Fi: That’s awesome, man. So you’ve worked for NASA.
Corwin: So when I was in DC I worked for a NASA contractor, but I worked so much with NASA people that I was basically part of the NASA community.
And I got this NASA fellowship, so I guess maybe you could say I was working for NASA, but really my boss was ultimately my PhD advisor at the university. So that was an interesting funding situation, but really nice for me as a student as well, because I could really focus on the research.
And I strongly encourage anyone going after an engineering graduate degree in the US or elsewhere, to try to go after some of these really awesome fellowships that can help you get your degree a lot faster and more effectively.
Captain Fi: Mate, I think we’re gonna have to chat offline about this because I actually did my masters in space engineering [00:21:00] and I definitely wasn’t at the level that you did, but I worked on optical flow as a navigational tool as well.
So using small sensors and mostly on like drones. But yeah, with the idea of being able to use it on spacecraft. So yeah, that’s actually super exciting. And it’s not something I’ve really talked too much about on the pod or my blog. Cause it’s, I dunno it’s I guess pretty niche.
But yeah, one thing that I have always thought about doing is, yeah, coming back and studying a PhD.
Corwin: Yeah, definitely! You won’t have to worry about funding as much, I guess since you’re a financial independent, which would be nice. So you’ll probably be able to get there a little bit more easily if you can self-fund yourself.
Captain Fi: Yeah. But I mean, we’ve got a small space industry here in Australia. It really focuses more on commercial management of contracts I guess, well you say airspace management, maybe that would be orbital management and frequency allocation. There’s not as much of an indigenous space industry, like in the [00:22:00] US, where you obviously have the space race and now they’re like sending manned missions to the moon soon.
Oh my God. That’s incredible, right?
Corwin: Yeah. Well, maybe you’ll have to come to the States for a few years and get your PhD. How about that?
Captain Fi: Oh that’d be the dream, but gosh, the cynic inside of me just Always says oh, this research is really just about designing weapons at the end of the day. But oh, I’m sure there’s some pretty awesome innovations that have come out of the space race. Didn’t we get like Teflon and Tupperware and stuff out of the space race? So, yeah.
Corwin: A lot of people would argue modern computing came from the space race, the miniaturizing computers. And even things that no one’s ever heard of that are vital to so many things we do today. Things like the Kalman filter. I’m not sure if you’ve ever heard of that, but it’s a computational technique that allows you to take noisy measurements from sensors and estimate your state, your position and velocity and things like that.
So yeah it’s pretty amazing what the Apollo program alone gave us.
Captain Fi: Sorry, I’m just getting [00:23:00] like PTSD flashbacks when you bring up Kalman filters. It was a huge part of the space engineering and a lot of the professors and stuff were just like, oh yeah you guys know this from your bachelor’s, and we’ll just get you to build them and use them to process these signals and stuff.
I’m like, actually no, this is the first time I’m hearing about it. So yeah, definitely had a few head scratching moments trying to do assignments and stuff and lab work. So, yeah. Man, it’s such an interesting industry, isn’t it? And I wonder what are your thoughts on computing? We’ve got web 3.0 and people talking about quantum computing. It’d be exciting to see what comes next.
Corwin: Yeah, that’s all over my head. I don’t know how quantum computers work at all. I feel like very few people do. When you start reading about them, you’re like, what? This doesn’t make any sense. Things can mean the same state at the same time, two different states at the same time. What? So, yeah.
Captain Fi: For computational engineering the [00:24:00] limit of my knowledge is that apparently it uses a lot of liquid helium. And that’s really cold, so. Yep. Right. So look, I guess getting back on topic, why do you think there’s so many engineers in the fire community?
Corwin: Yeah, that’s a good question.
There’s actually a 2013 post by Mr. Money Mustache where he did this survey, and I think it’s still live too. And apparently one in six of his readers were engineers versus one in 200 of the US population. So very highly concentrated.
There’s a lot of theories about that. My favorite theory is that a lot of engineers are trained to step back from a problem and say, okay, what is the ultimate goal here?
What is the ultimate, what we would call performance index, we’re trying to optimize? And so, when you think about that and you think about your spending in life, you’re like, oh, wait a minute. My ultimate goal is not to become the richest person in the world or to buy all the things, right?
Ultimately, I wanna be happy and have a fulfilling life. And when you read a lot of the writings and the [00:25:00] podcasts of the fire community, it’s like these people really seem to have a better read on and the best performance index for life. So I think engineers, they’re wired that way to see that by training or by intuition.
And then I think another big thing is engineers are not afraid to do the math. Most of the time. They’re not afraid to whip out their spreadsheets and look at mathematical tools to see, okay, if I save at this rate, I can see how I can be financially independent in X years. Right? That makes sense. It’s logical.
So I think for those reasons, engineers are a really good fit for FI. But I think also over time, I’ve seen the community broaden quite a bit. I think it was a lot of engineers and finance gurus in the beginning, but I feel like it’s broadening some.
I also feel it’s slowed down a little bit in the last few years, which is disappointing. But I think it’s just getting into the part of the community and the part of the population that it’s gonna take a bit more time tp get these principles [00:26:00] through.
Talking about doing the math, that’s actually a thing that I talk about a lot on my site. And then I try to emphasize there’s a lot of tools out there and a lot of people get overwhelmed by the tools and they don’t understand the tools or they think, well, this tool doesn’t really quite do what I want it to do. And they spend hours and days and weeks fiddling around with these tools trying to get it to do what they want.
But I feel like it’s actually really good to try to do it on your own as much as you can, break out the spreadsheets and try to do the math yourself. At least try. Right? Because there are so many valuable skills you can gain from that.
And you’re gonna trust the answer more. At least I do. And you can always check your answers against other people’s tools.
But I think that’s something that is not emphasized a lot in the fire community, which I like to emphasize, which is try to do the math yourself. Really get in there and see if you can figure out the answer. And you can check it against other tools and your intuition, make sure it’s logical. But don’t just rely on other tools you find online.
Captain Fi: Yeah. A big one is fees as well. Like a 1% fee doesn’t sound like much, but that’s actually 10% of your investment returns.
And when you look at the way that compounds over time, you end up with two thirds of what you could have had. I think if you look at the Passive Investing Australia awesome blog, he’s gone through over a 30 year period and looked at the impact of a 1% fee on a predominantly index based portfolio.
And yeah, it’s a third of your nest egg. And then the crazy thing is once you switch from accumulation to retirement, you start looking at cash flows in retirement. Well, if you’re paying a 1% fee, your 4% rule becomes a 3% rule. Not because you are having a more conservative drawdown, literally because you’re paying 1% in fees.
And so between losing a third of nest egg and 25% of your cashflow, you end up with half of the income in retirement you could have. [00:28:00] And that’s pretty scary, to be honest. This is out there that our 1% fee is acceptable, but it can result in half the retirement income. That is just madness. That is madness.
Corwin: Yeah. Humans still really have a hard time understanding compounding. Most people have a really hard time understanding. It’s just not intuitive to us. We’re used to linear motion, linear things. 1%, oh, it’s not too bad, but compounding over time, it’s brutal. It’s absolutely brutal.
Yeah I think also a lot of people don’t understand the difference between things that are random or stochastic versus deterministic, which is certain. So the markets can go up and down, right? Over time, long term, they’re gonna pull ahead. Most people will agree that’s likely gonna happen, but a fee is guaranteed, it’s a guaranteed loss, right?
And so that’s something that you can minimize. It’s like taxes in that sense, right? Taxes are deterministic. They are something that if you can [00:29:00] lower, you can lower them. Whereas returns, they’re variable, right? You don’t know from year to year what it’s gonna do. So I strongly encourage people to go after fees and to find ways to reduce their tax burden via retirement accounts, cuz that’s really what you can control.
Captain Fi: Spoken like a true statistician there, mate. Hey, maybe one day you can actually explain to me the difference between mode, median and middle and I’ll actually remember it.
Corwin: Sounds good.
Captain Fi: Hey, so I’m mindful you’ve only got a short amount of time before you feel you’ve gotta put your kids to sleep. Now this is something you talk about online, on your blog Engineering Your FI. One of the reasons you were interested in FIRE in the first place is you wanted to have time to raise your kids and you wanted to raise financially savvy kids. What do you think this means practically from a parenting standpoint and how are you planning to teach your kids about money?
Corwin: Yeah, that’s a good question. So I am of the opinion that actions speak a lot louder than words when it comes to kids. [00:30:00] So I think just doing it yourself, being FI or getting to FI, being on that path, kids are smart, they can pick up on that a lot more easily than you’d expect.
I think most people recognize the benefits, of course, of being FI for parenting. You’re typically gonna be a lot less stressed about money. You’re gonna have fewer fights about money, with your spouse or partner. You’re gonna have a lot more time with your kids.
They’re gonna see that, they’re gonna see how much less stressed and how much more time you have with them so I feel like that’s the most important thing.
Now, in terms of directly educating them about it, I tend to think there’s a bimodal distribution here. So for younger kids, you don’t really wanna go beyond the standard money basics, the importance of saving. You really don’t even want to get into compound interest and all that kind of stuff real rigorously.
Once they reach like middle school, high school, 11, 12 years of age and older, maybe earlier than that, then you can start explaining the [00:31:00] more advanced concepts. So that tends to be my approach.
I’ve read a few books about money for kids. But they’re almost invariably written for the standard audience that’s not on their way to financial independence.
So our goal is essentially to demonstrate via action instead of trying to just shove it all down their throats, as early as we can. And so for example, this summer I’m halftime, my wife is halftime, and as a result, we can trade off and spend time with our son who’s out of school this summer, and we can go out and see sites around the city and, enjoy having this time off from school, enjoy time with him.
If we were both working full time, that absolutely would not be happening, right? We would barely be getting the stuff we need to get done on the weekends and stressed out, and it would be much less enjoyable.
However, I’m gonna caveat all of that: teaching kids about FI is definitely not my focus. I don’t tend to [00:32:00] focus on that as much on my site. But maybe when my kids are a little older, I’m gonna start learning more and writing more about that.
Captain Fi: Yeah, well look, I mean, it’s pretty much like how JL Collins said in the Simple Path to Wealth, that’s how it came to be. He was explaining to me how basically it started as writing letters to his daughter to, improve her finances
And then, Mr. Money mustache. Wow. He talks about all of the opportunities that he has to be a kick ass parent because their whole project is basically raising their son.
And, I think those two sites had a big influence on me and my goals. I actually just finished reading the Barefoot Investor for Kids. So, if you don’t know who the Barefoot Investor is, he’s basically the Australian version of Dave Ramsey. A bit of a guru. Maybe just take away the evangelism.
He’s a really good dude. His book’s probably one of the biggest ones in Australia. I mean, jeez, it’s really helped me to read that. 2016, [00:33:00] God, it was a while ago and it certainly helped me get on the right track.
So yeah, owe him a lot. It’s full of just no nonsense good stuff really.
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I guess speaking of money and [00:35:00] teaching kids about FIRE, obviously we all know that behavior is the most important thing when it comes to financial independence and personal finance.
But there obviously is a little bit that you do need to know about investments. So, engineers, we do tend to maybe overdo things. I certainly did at the start. So I’m really interested to hear how do you invest mate? What do you invest in and why?
Corwin: Yeah, so we’ve talked about J Collins a lot on this episode, and I am almost 100% aligned with his investment philosophy of simplicity index funds.
I am a big fan of those. I really dislike speculative investments like gold and crypto. I always refer people to the Mr. Money mustache post back in 2018. It’s why Bitcoin is stupid. I like that title too.
But yeah, something else that JL Collins has said many times, he’s happy investing just in total US stock and bond markets [00:36:00] versus total world funds.
And when I first read that I was pretty intrigued. I was like, why was he saying that? So I dug into it a bit and in the end, I tend to agree with him actually. So one of the things we were talking about before was fees, right? So, the Vanguard total market index fund here in the US has a 0.04% expense ratio.
But if you wanna get their total world index, it’s over double that. It’s 0.1% I think. It’s still not too bad, it’s a 10th of a percent. But it’s not nothing. And the thing is, like we were talking about before, there’s no guarantee one market’s gonna do better than the other.
So I tend to say, well, higher expenses are guaranteed.
Now here in the US it’s a little bit different though. The market capitalization of the US is almost 60% of the world market capitalization. And a lot of large US companies are international as well. So you get plenty of international exposure.
So it’s easier for me and other people in the US to do domestic only, versus someone like yourself in Australia. We’re gonna have a lot more exposure that way. [00:37:00] However, there was a really good post that I read about a guy named Nick Maggiulli. I think I got his last name right. Maybe not. It was called Why Investing Like Your Neighbors Isn’t As Dumb As it Seems.
And he made some really good points about the value of investing primarily in domestic markets. And it gets down to the fact that that’s the community you live in, right? So, if you invest heavily internationally and it goes really down and everyone around you is doing quite well because the domestic market is up, right, that is gonna feel a lot worse than the opposite in general, right?
So he actually has a plot that’s really interesting, maybe we can put that in show notes or something. It showed Australia as well, and apparently, Australia has I think 2.4% of the capitalization, but 66% of Australians put their money into domestic equity. So I think there is something to that.
So yeah I think in terms of investments, I’m just index funds. Simple total stock market funds. That’s good enough for me.
Captain Fi: Yeah. [00:38:00] Nice mate. It’s good to see someone clever who, experienced mathematician and engineer, keeping it simple. Yeah, look, that home bias thing, yeah, it’s massive here in Australia.
I think there’s some tax advantages too. Like the franking credit scheme. The franking credit refund scheme can be quite a good source of income for retirees here in Australia. So, you know how corporations pay tax, I think it’s 30% tax rate for large businesses in Australia.
Okay. So when you get a dividend from a company, in Australia companies typically pay much higher dividends than in the US. So they typically pay around like 4%. Maybe even 3% to 5% in dividends depending on the company, cuz it’s dominated by industrials, like miners banks. And even telecommunications.
So they’re quite mature businesses and they’re not really innovating. They’re more at the stage where they’re like, cool, well we’ve got a solid business practice, we know what we’re doing. We’ve got this cashflow, so we’re gonna start [00:39:00] returning the wealth or distributing the wealth to the shareholders.
Corwin: It’s not gonna see as much growth, but that’s a really solid dividend too.
Captain Fi: Yeah, absolutely, man. And I know in terms of total return, dividend versus capital growth doesn’t actually matter. And ironically, I find myself siding towards the side of capital growth because then you can decide when you are going to sell a parcel and crystallize the sale.
And it just makes it a bit easier from a tax planning perspective as well. Whereas with a dividend, we are selling this portion, we’re giving it back to you and then you’ve gotta pay tax on it. Yeah. Which can be a bit rough.
I’m not sure what the rules are in the US with dividend taxation.
So essentially before the company can distribute a profit, it has to pay corporate taxes. They get distributed with what’s called a franking credit and god knows why it’s called that. It’s probably named after an economist named Frank.
So old Frank gives you a tax credit for the corporate tax that was paid, which is 30%. And [00:40:00] to be on a 30% taxation level, you need actually quite a healthy bit of income here in Australia. It’s like a tiered system. So you know, you don’t pay tax on like the first 20 grand or slightly under 18 grand. And then you pay progressively more tax as you earn more.
And so most people won’t be on the 30% tax bracket. And so they’ll typically get a refund. So some of their tax will get paid by this. And actually if you are on a fairly lower income, cuz you might be retired, like if you’re only on a $40,000 income cuz that’s all that you need in FIRE cuz your house is paid off and you’re not having an extravagant lifestyle you can actually get a refund.
And it was a very political topic recently. I think it was the Labor party who tried to do away with the franking credit refunds scheme and that pretty much lost them the election. So I think, yeah, it just goes to show how deeply ingrained people, particularly retirees and the older generations really want their franking credits.
Corwin: That’s interesting when you say [00:41:00] Franken, so have you heard of Frankenstein? So typically, at least in, in the US when someone says Franken something, they mean something that’s been, dead and been brought back to life. But it’s not good.
Captain Fi: Oh, sorry, I’m trying to say franking like Frank, i n g. Which just my expresses my accident.
Corwin: Gotcha, gotcha.
Captain Fi: Yeah. But it seems that like in Australia we definitely have a big home bias. And I definitely started with that. I started out buying predominantly Australian index funds and I bought the fund with the lower management expense ratio which wasn’t a Vanguard fund.
I should get Beta shares fund. And 200 index versus the 300 index. So pretty much the same thing. And yeah, it was good. It helped me build like a baseline level of dividend income. And after that I really started to properly look at my splits and actually I had the majority of my investments in the US.
Yeah, I’ve got over 50%. 50% of my index funds are US based. I mean, having said that, I do have an [00:42:00] investment property in Australia, so that probably skews it back to a domestic bias as well.
And so, with your investments, you have your VTSAX, which you know, as you’ve mentioned, is pretty much even though it’s a domestic fund, it does have global diversification.
And we talked about bonds earlier. So do you do a bond fund like JL?
Corwin: Yep. Total bond market index fund VBTLX.
Captain Fi: VBTLX to smooth the ride…. I can just hear the Godfather in my head now. Yep.
Corwin: Yeah. Awesome. It’s pretty straightforward.
Captain Fi: Yeah. Love it mate. Good. Hey, keep it simple.
And so we touched on this earlier in the interview mate. So you hit your lean FIRE number in, it was 2020. You recently hit your FIRE number and you mentioned you’re working towards fat FIRE. I know it can be a bit of a changing goal goalpost, but can you tell us a little bit about did you have numbers?
How did you plan your investments going forward?
Corwin: Yeah, so we had numbers. Of course, inflation’s been pretty rough lately, [00:43:00] right? So, those numbers can change quite a bit as a result. And we have numbers, but we try to base them on our current expenditures and then also future desired expenditures.
So, like I mentioned before, we live in a very hot place. It’s getting hotter. Right. And it’d be real nice to take advantage of the fact that our kids are outta school in the summertime to go elsewhere, maybe eventually one day. Right. Or maybe at least for part of the summer or something like that.
So, if we were to do something like that, that’d cost a bit more money than otherwise. So we try to tie our numbers to expense levels, conservative expense levels. And that’s why I also tell other people, if they’re interested in Lean FI versus standard FI versus fat FI, don’t just come up with random numbers.
A lot of people will say, well, I want 2.5 million because I wanna be able to spend $100K a year with a 4% rule. Right? Well, is that tied to anything in the reality of your life? So they just have this $100K a year [00:44:00] number in their mind, right?
So I’m a big proponent of tying it to actual expenses, even if you have to throw at some guesstimates. I have no idea how much it would cost to go spend a good chunk of the summer somewhere else. It would depend on where we go, right? So we just came up with a real rough conservative number and then we’d work from there.
I will say I like having a goal too. If you didn’t have anything you’re shooting for… There’s a phrase in the FIRE community, I don’t remember who it was originally attributed to, cuz I’ve heard it a number of times, but, the phrase is something like, “the reward for financial independence is an existential crisis”.
So, I think that, if you hit this number and you’re like, I definitely don’t need more, it can be discombobulating. And so for now we have these higher goals and, it’s nice to work towards something, but at some point it really is gonna be like, okay, we really don’t need to shoot for anything additional and what are we gonna do from there?
Captain Fi: Mate, I am literally recovering from my existential crisis as we speak. I was talking about this with a friend of mine. He works as [00:45:00] an analyst in a large company. A really switched on guy. And he’s a bit of a sleeper when it comes to FIRE. He hit FIRE recently, but I don’t think he’s actually said it to anyone. He just quietly mentioned it to me one day because he knew I blogged about it. Wow. Which was pretty awesome. And he goes, “yeah, it’s a bit unsettling, isn’t it?” Now that we’re not motivated by money, but our whole society is built on money.
It’s “what do I do?” And he jokingly said, oh, he likes Europe, and particularly the Nordic countries. He said he’s gonna run away and set a bookshop up in in Norway or Sweden or something, which is pretty Okay. Pretty exciting.
And yeah, I was like, I don’t know. I had a lot of stuff going on in my life as well, dealt with a lot of loss recently. So definitely I guess getting over the grief. And also part of that as well, I guess grieving my job in addition to family members.
Corwin: Yeah. Its a part of your identity. Yeah. A huge part of your identity, man.
Captain Fi: And even with this whole FIRE thing, like I’ve really enjoyed blogging and podcasting about fire.[00:46:00]
And when you reach financial independence and money is no longer a thing and you are no longer on the journey. It’s oh, it’s the end of the Lord of the Rings trilogy. What do I do now? And yeah. Sail off to the West.
I guess he recommended this book, Nausea by Sarra, and it was the hardest book I’ve ever read. Like it’s just not fun to read. But I’m glad that I did. And yeah, I don’t wanna like spoil it for anyone, but all I’d say is it’s actually super relevant to the FIRE community.
And I also did some psychedelics which has definitely helped with my existential crisis. Not that I’m recommending anyone go out, do some trips, but yeah, it, it’s certainly interesting and, not being restricted by aviation medicals allows you to properly do that.
Corwin: Yeah. Well, I think that psychedelics are potentially gonna make a comeback in the US because they’re helping so many veterans here based on the studies they’ve done. I think that’s gonna bring a lot more people on board that were not on board before.
Captain Fi: Yeah, it’s like a [00:47:00] renaissance in the research.
Corwin: Yeah. The PTSD research with psychedelics is incredible. If you have not heard about that it’s pretty amazing what they’re discovering.
Captain Fi: Oh yeah. If anyone is interested, I’ll put some show notes to some interesting books. Like How to Change Your Mind by Michael Pollan.
That one yeah there’s even the Netflix series, which is pretty good. I mean, that book’s been turned into a Netflix series. There’s heaps. In fact, my bookshelf is like four of them. So I got really interested and I did wanna do a lot of reading before.
We can go down a rabbit hole here, but look I’ll try and pull it back on track. Alright, so back to your journey to FIRE. Target savings rate. Did you guys have a planned or a goal savings rate that you worked towards?
Corwin: Yeah, so initially it was 50% because you read that number so many places, right?
And we got that, pretty easily. Once I started full-time work, and my wife was working full-time. And we worked full-time for about five years and I would say on average we hit around 70% during that time. So we were pretty proud of that. What’s really [00:48:00] amazing though, is we have both dropped down to halftime at this point, but we’re still at about a 60% savings rate. Which is really crazy to me.
So if you do the math and you just drop your income by half, you should drop to a 40% savings rate from a 70%, right?
But there’s two reasons that we’re way up at 60%. One is taxes. So here in the US we have a very similar tax policy structure to what you were describing earlier, progressive taxes.
And it’s amazing how much more tax efficient we are at halftime income than we were at full-time income. Because those higher tax brackets get quite high. But we can still take advantage of retirement account contributions and things like that, which is really nice.
And then of course, also with the larger portfolio, we have more dividends coming in and things like that, which helps boost our savings rate. But yeah, so I’m still amazed we can do that here now that we’re working halftime as well. But that’s I think the savings rate in general we’ve had.
And in general, I think anything above [00:49:00] 50% is still a really amazing thing that people can shoot for, and get to FI in 10 to 20 years, probably closer to 10 years.
Captain Fi: Yeah. That’s incredible. I know JL says you should be aiming to save like at least half of your income.
And that’s pretty powerful. Lacey Phillippi as well, she mentioned that had been her goal. And what’s that? 17 years about?
Corwin: Yeah. It depends on the interest rate you assume, the ROI. It heavily depends on that. So I did a post about that and I used 7% real rate of return. You have to use real, so after inflation numbers. But I think it’s closer to 10 years. I’d have to go back and look at my numbers. Maybe it’s 15, but it’s definitely a lot less than 40 to 60.
Captain Fi: You’re Absolutely, yeah. And then when you are up around like a 70% savings rate, like that’s under 10 years. That’s incredible.
Corwin: Yeah, like eight. Well, what’s interesting is, it’s a logarithmic curve, right? So you don’t save that many years going from 60 to 70%. Actually, you [00:50:00] save way more years going from 30 to 40%, or 40 to 50%. Because of that compounding, right?
Captain Fi: Yeah. And that is incredible.
And that’s really great news for people that are thinking like, oh geez, how can I start investing? How can I start saving? Well, yeah, as we’ve just said, because it’s a logarithmic relationship, those initial gains have massive results. And if you can go from a five to a 10% savings rate or a 10 to 20% savings rate, you are literally shaving years, decades off your required working career. Yeah. Awesome, man.
I guess the next thing that comes with planning retirement and FIRE is the withdrawal rate. And the most widely known one is the 4% rule coming out of some early statistical analysis called the Trinity study. But there is debate about this in the industry.
There’s new updated models that have come out, Monte Carlo Sims I know. You know this concept of flex rate tends to increase it. But [00:51:00] other people that are quite conservative who want to decrease it. And I think you mentioned earlier you had planned on a 3% safe withdrawal rate. Would you be able to explain I guess your take on safe withdrawal rates and why you’re going with that figure?
Corwin: So, I wouldn’t say 3%. That’s the worst case scenario. My safe withdrawal rate changes literally every day. So I base it on that CAPE ratio we talked about earlier. So it depends on the ratio of the price of the markets to earnings. So, there’s been a lot of articles out there that talk about well just take one over that ratio, and then you get your rate, you get your safe withdrawal rate.
So you know, the Shiller PE ratio is 30, then one divided by 30, multiply that by 100 to get a percentage. So for yesterday, that was about 3.3%. And then there’s been a lot of analysis by people like Karsten at Early Retirement Now [00:52:00], who say that’s not quite the relationship you wanna look at based on the data that we see and the historical returns.
So, he recommended something like 0.5 divided by CAPE plus 1.75. So you can imagine instead of just this inverted straight line from the origin of your plot, you’ve got a y axis offset and then you’ve got a lower slope, right? So, with that formulation, it’s 3.4%.
And then he’s also done a lot of work regarding what the relevant rule there is because valuations are so much higher than they’ve historically been. A part of that is that companies are more and more plowing their earnings back into their own investments, back into their own stock, right? Versus paying out dividends. So that can change valuations, right? Even though mathematically it’s equivalent. So he’s done a lot of work along those lines and he’s come up with his own ratio that is even higher. So as of yesterday, that is 3.79%. So you can see there’s this wide range of withdrawal rates. [00:53:00] And I calculate these in a spreadsheet every day because I’m me. But there ranges from 3.3 to 3.8. So what do you want to go with? Do you wanna go with something more conservative or less conservative?
So I tend to compare to the more conservative numbers. But it makes me feel better knowing that with his ratio, I’m actually probably even more safe than I would normally be. So I think it’s really nice to go with that data-based approach. It makes sense if the markets are way down and you’ve got a particular withdrawal rate, you know you’re gonna be a lot safer than if they’re way up.
So, yeah, I’m a big proponent of using that. The challenge, of course, is communicating all of what I just said to someone not interested in this in 10 seconds or less.
Captain Fi: Yeah, no, it is interesting, mate. And I think I gotta do some more reading about this.
I’m gonna have to go back onto Early Retirement Now. And have you written any articles about the safe withdrawal rate?
Corwin: Yes, but far more limited, far more crude. That’s not really been the focus of my [00:54:00] analysis. My analysis has been more on the lines of how to minimize taxes.
Cause again, that gets back to the whole “that’s what you can guarantee”. And a big concern I had when we were approaching FI was, “Hey, wait a minute, I’ve set my withdrawal rate based on this, but what about taxes? Aren’t we gonna be paying a good amount of taxes? Isn’t that gonna change our withdrawal rate?”
And I was really nervous about that. So I built this big model in Python and in the end I was very relieved to find that, with low expenses, FIRE retirees who really earn no other money actually are quite safe. They can do a lot of things that can quite minimize their earnings.
And here in the US we have something called FICA taxes, which is Medicare and Social Security program taxes. But basically that’s only on earned income. So you don’t have to worry about those anymore, right? If all your income is just from your investments.
So I was very relieved to find that, and that’s been the big focus of mine. So as a result, I have not focused on withdrawal rates as much. Plus, Karsten has this [00:55:00] incredible series that I think probably answers most questions.
Captain Fi: Definitely man. Well, I’ll obviously link to that in the show notes so people can go out and have a read.
But I would say it is complicated. And if it’s overwhelming you, don’t stress. As a first pass, like rough back of the envelope maths, 4% is a pretty good number. If you wanna be conservative, three and a half, 3%.
There’s so many different factors. I think it just comes down to your personal preference. And like we talked about earlier, if you have an ability to work part-time or you have a job that you can go back to, it’s not worth super stressing about, but it can become quite an interesting academic exercise.
Now look, I’m mindful of the clock here, so I’m gonna try and squeeze as much juice outta you while I still have you mate. So maybe we’ll just go rapid fire here. Housing. So are you team pay off the mortgage team, keep the mortgage or team rent investor?
Corwin: We are team Keep The Mortgage.
I’ve read a lot of [00:56:00] arguments about this, and how actually mathematically it makes more sense to pay off your mortgage than put any of your money into bonds, cuz those have not given anywhere close to the return you’d get paying off even like a 3% mortgage, which is what we have. But I still like the liquidity of bonds. I like how it helps with rebalancing.
I also like that it’s like another safety margin, right? In 27 years our mortgage will disappear. I don’t count for that really, although I could. And I like the fact that with inflation, those mortgage payments will drop over time in real dollar amounts, but I don’t think that’s a big factor.
But yeah. We’re keeping the mortgage over here.
Captain Fi: Nice. With interest rates going up, it’s certainly something that people are thinking about. And I think a big thing that comes up here in Australia is we’ve got 6% interest rates. When you consider tax, and you gross that return up… You mentioned deterministic versus stochastic. Could you invest in stocks with a theoretical long-term rate of return of 10% or do you get a guaranteed, 6% pre-tax return or when you gross it up, maybe that’s seven or 8% depending on your income, by paying off your mortgage.
Something for people to consider, but [00:57:00] awesome to hear your thoughts on this. Now, you just mentioned bonds. I forgot to ask, I should have said what’s your asset allocation with bonds compared to equities?
Corwin: Yeah, we’re still pretty aggressive because we’re still working right now.
So, we tend to hover around 80 to 90%-ish in terms of equities. So bonds are the other percentage of that, and I don’t include any of our house equity in there as well. Cuz we don’t plan to leave this house anytime soon. I guess we could extract that equity in and invest it essentially, but that’s taking on more risk as well.
But yeah we tend to go around 80, 90% now. If we both agreed, okay, we’re really gonna stop earning all money, then we’d probably reduce that maybe down to 70%.
Captain Fi: Ah, nice. I guess that leads well into the next one, which was when you do choose to quote unquote early retire, and I know, early retirement, that’s the dirty word, but we’re just basically using that for dropdown from full-time income.
I mean, what would that look like for you at all?
Corwin: Well, we’ve done that basically. [00:58:00] Neither of us work full-time now. And it’s funny, in the future I might go back to full-time if I decide that’s something I want to do if I’m really enjoying my job and I do enjoy my job now.
But it’s nice to have that time with family and all that. But yeah it’s funny, I have a hard time answering this question. I would not be happy not working on something. I know that about myself. So I don’t think I could do a traditional early retirement in the sense of not doing anything productive.
Maybe I could do something like a nonprofit, where I’m still working on something, building something, doing something good for the world, and I really am earning no money from it. But it would still be something. I don’t think I could do the traditional early retirement physically.
Captain Fi: Yeah it’s a human thing, right? Like we need to be doing something productive, working towards something. I took some time off and played video games like Fortnight. I played that for I don’t know, a couple of months full on and yeah, didn’t really do much else, did some reading and it was [00:59:00] boring.
You’re gonna get sick of it. Whereas I love writing, podcasting, building these websites, gardening, volunteering, getting out with the dog, training. We need something to do.
And I think hard work is a reward in itself. Just by virtue of the fact that it’s difficult. It’s a challenge. We need to be challenged. And it sounds like you are a very intelligent person and you really do need that stimulation. You wouldn’t really get if you were just playing golf or something.
Corwin: Yeah. Especially after all the pain I went through to get my PhD. The idea of not using it is just, ugh. It’s just a waste. I spent so many hours and years of my life on it. I was in college for 10 years. Or university as y’all probably call it.
Captain Fi: Yeah, no I feel the same with my aviation career mate.
Definitely don’t want to hang up the log book and the wings just yet. Definitely still want to get some value out of it and it is a lot of fun.
So 10 years at university mate. So obviously you’re a very well learned bloke. And one of the things I [01:00:00] love to ask on these interviews is I wanna find out what are people reading? What are they listening to? Where are they getting their information from?
Cuz that can be a great way for people on the path of FIRE to start emulating them and start learning. What are they learning? What circles are they moving in? So with that being said mate do you have any favorite books?
They don’t necessarily have to be on personal finance, but basically anything that’s had a profound impact on your life.
Corwin: Yeah. I have a hard time narrowing that down. Very hard time narrowing that down. So we’ve already talked about the Simple Path to Wealth by JL Collins. That is, I think, one of the best investment books ever written because it is so approachable.
But outside of that, we’ve got two young kids at home and one of the books that really changed our life completely was How to Talk So Kids Will Listen and Listen So Kids Will Talk. It’s a classic book. It is amazing the tools that you can pull from that book and use when you’re raising kids that are incredibly effective.
And then speaking of being effective, there’s a book that [01:01:00] Mr. Money Mustache has referenced several times, a classic called The Seven Habits of Highly Effective People by Stephen Covey. And if you can internalize lessons in that book, they’re incredibly powerful as well.
There’s also one kind of random book that I tell people sometimes about. It’s called Back Sense by an author named Siegel. I was having these back pains when we lived in Washington DC and just couldn’t seem to get rid of ’em. And then my wife randomly finds this book in a box of giveaways at the local library.
She brings it home and she’s like “I know your back has been having issues, so I thought I might give this to you.” And I was like, oh, okay. This is random. And I read it and it changed my life, man. It was unbelievable how much value I got outta that book in terms of alleviating back pain and regaining my life to some extent.
Captain Fi: So, okay. I am going to find that book and buy it straight away, cuz that’s something that I’ve struggled with, mate, is back pain. Yeah. I think a lot of people in the industry have that and maybe just a lot of people in general. We tend to be sitting in front of a [01:02:00] screen for so long these days.
So what about podcasts mate? Do you listen to podcasts or are you an audiobook guy or do you prefer just to read?
Corwin: So yeah, with two young kids, I don’t have a lot of time to sit down and read a book in comfort without children climbing on me.
So, audio books and podcasts are definitely how I get probably the majority of my reading done now. I’d say maybe 80% of it. I used to be a lot more focused on podcasts. I listened to a lot of the FI focused podcasts. Mad scientist, of course, he was one of the early pioneers.
And then Choose FI as well. There’s some good other ones as well, like the FI show. And then, my favorite recent one is Mile High FI. And I met those guys at a recent conference and they’re real good guys.
But overall though, I feel like over time I’ve gravitated more towards audiobooks and less towards podcasts. Just because, audiobooks tend to have a lot of polish to ’em. People spend a lot of time and effort on them. So I like that.
But I also still listen to podcasts too. That’s the way you get the vibe for [01:03:00] what’s going on in the community and what’s going on currently.
Captain Fi: Definitely. And the Mile High FI show – that’s different than the Mile High Club that you mentioned earlier.
Corwin: Yes. I’m sure they aren’t sad about the similarity.
Captain Fi: Cool man. Hey, look it’s been a blast interviewing you, mate, and I like to ask this as the last question which some people, you know it can be a bit of a tricky one, but mate, if you could distill all of your knowledge and information about personal finance down into your top three pieces of advice, what would they be?
Corwin: There’s a couple that everyone gives, the first of which is to track your expenses.
So for that one, I think you’ll like this, I like to use an aerospace analogy. So if you’re trying to navigate a plane or a spacecraft, you have to know where you are first in order to get to where you want to go, right?
So, if you don’t know how much you’re spending, then you are lost. You have no idea how much you’re gonna need to achieve financial dependence. You’re not gonna know how to start reducing that number. It’s the foundation for everything.
But, everyone [01:04:00] in the FI community spouts that advice endlessly. So I’m not saying anything new there, most likely.
But it’s funny, so few people outside the PHI community really do that still. So hopefully it’s something we can change.
And then the second big thing is just remembering the journey to FI is a marathon versus a sprint. And remember to keep enjoying your life and don’t go a hundred percent, don’t go after a 99% savings rate or something ridiculous like that. You gotta keep enjoying it because it’s gonna take you a few years unless you have an insanely high income.
It’s also really about mindset, right? It’s all about keeping a good mindset about why you’re doing this and the value of going after financial independence and why that’s more important than buying some thing that you know is not gonna really make you all that happy.
But tracking your expenses and remembering that it’s a journey, those are the more standard fair for advice.
Something that I think is a bit more unique to my site is my philosophy that you should try to build your own systems for tracking all of this if you [01:05:00] possibly can.
DIY is a big thing in the FI community, especially with Mr. Money Mustache. But I feel like it’s not as emphasized when it comes to financial tools and tracking your financial status. And I think that’s an equally valid and strong area to DIY.
Because the skills you get from doing that are incredible. They will pay incredible dividends. If you learn how to build a spreadsheet to track your expenses, well guess what? You’re gonna know how to build a spreadsheet to look at grocery expenses for several different stores and realize, okay, I know how to optimize this now. And then you can use that tool for other things. It’s a great snowball of skill that you can build into your life.
You can use Python if you wanna do some really deep analysis, if you know how to code, which is what I primarily use.
But I do recommend checking your results against some of the tools that are out there. There’s a lot of free tools you can check and you can plug in some dummy numbers if you want to just confirm everything’s lining up [01:06:00].
So yeah, that’s the three I would get with.
Captain Fi: Awesome. I love that. I guess it’s just being a bit more actively involved in your finances rather than just passively.
Which is ironic, because for our investments we ideally want to be as passive as possible. I guess from a behavioral point of view, taking an active role in working out where you are and working out how to get to where you want to go, I think that’s awesome, man. Look it’s been an awesome interview, man. Thanks so much for your time. Before we finish up is there anything else you’d like to mention today that we might have missed?
Corwin: There’s lots of things we could talk about I can tell, but I’m not gonna keep going. Also, the kids have to get ready for bed, but we should definitely talk more. I think we’ve got a lot in common that we’d be able to talk about.
Captain Fi: Yeah, mate. Well, awesome episode. Love to have you back any time, mate. Yeah, so look, if anyone wants to find out a little bit more about your blog and yourself where can people find out more or contact you?
Corwin: Mainly through my site EngineeringYourFI.com. So you can go there.
And I’ve also got the social media accounts. I’m not [01:07:00] as active / skilled at those as many other people in the FI community, but I do have accounts so you can find me on Facebook, Instagram, and Twitter. Someday I might do a podcast. And Someday I might do YouTube.
Captain Fi: Yeah, man I feel that it can take a lot of time and, you got your priorities at the moment. That’s your family mate. Hey, thanks so much for your time, Corwin. It’s been an absolutely pleasure mate. Love having you on. Look forward to catching up in the future.
Corwin: Sounds good. Thanks man.
Captain Fi: See you mate.
Thanks for listening to another episode of the Captain Fire Financial Independence Podcast. To read the transcripts or check out the show notes, head over to www.captainfire.com for all the details. If you have a question for the captain, make sure to get in touch. You might even make it on the airwaves.
You can reach me online through the Captain Fire contact form. Or [01:08:00] get in touch through the socials I’m Mac given on Facebook and Instagram, as well as a number of online finance and investing forums. And finally, remember the information presented on the show and the links provided are for general information purposes only.
They should not be taken as constituting professional financial advice. You should always do your own research when making any financial decisions and make sure it’s appropriate for your personal circumstance.
Captain FI is a Retired Pilot who lives in Adelaide, South Australia. He is passionate about Financial Independence and writes about Personal Finance and his journey to reach FI at 29, allowing him to retire at 30.
