Confronting the Fear of Running Out of Money: My Journey and Lessons
Have you ever dreaded the prospect of depleting your savings? I certainly have, and this apprehension resonates with the "one more year syndrome." This term describes workers who, despite knowing they have ample savings for a comfortable retirement, keep working year after year. They often find themselves looking back with regret, wondering why they didn’t take the plunge sooner.
In 2012, I was fortunate enough to negotiate a severance package, a move that saved me from potentially delaying my exit for another year or even five. My original plan was to retire by 40, yet this package offered me five years’ worth of living expenses, making it an opportune moment to step away. If things went south, I consoled myself with the thought that I could return to work in my mid-to-late 30s.
The First Encounter with Financial Anxiety
The initial year of early retirement was riddled with uncertainty. I constantly questioned my decision to leave a high-paying job at 34. As I look back, perhaps enduring a few more years to save more money might have been wise. Yet, the chronic burnout and physical pain were signals that it was time to move on. My apprehension about returning to work in defeat overshadowed my fear of financial instability.
In 2009, I was among the early proponents of the FIRE (Financial Independence, Retire Early) movement, documenting my financial journey on this very site. Publicly declaring my retirement on my own terms made the thought of returning to work within three years daunting, one that almost seemed like public failure.
Rational Steps to Alleviate Financial Concerns
By 2014, two years post-retirement, I undertook strategic steps to enhance my chances of staying retired. We decided to rent out our house in the Marina district, turning our living space into a semi-passive income source. This decision stemmed from the realization that we had excess space and could benefit from the rental income instead.
In addition, we purchased a fixer-upper in the Golden Gate Heights neighborhood at about 40% less than our Marina home’s cost. This move, a classic example of geoarbitrage, significantly reduced our living expenses.
The plan worked. By saving more, we could sustain our new lifestyle. When my wife turned 35, she too negotiated a severance package. Initially hesitant, she realized the potential of returning as a part-time contractor for more pay, which emboldened her to proceed.
Although we sold our Marina home in 2017 after becoming landlords proved challenging, this decision once again proved rational. With the proceeds, we settled our mortgage debt and reinvested in stocks, bonds, and private real estate, ensuring our financial stability while focusing on raising our son.
Facing a Second Wave of Financial Anxiety
Fast forward to late 2023, the financial anxiety returned. Selling stocks and bonds to buy a house with cash triggered my saver’s mindset. Living paycheck to paycheck for six months, and unexpected capital calls from various investment funds intensified the pressure.
In response, we took drastic measures: cutting all expenses, from subscriptions to groceries, while I took on part-time consulting work. This tight financial phase reaffirmed my belief that we will seldom, if ever, run out of money. Even in dire situations, we naturally strive to adapt and survive.
Assurance for Traditional Retirement Finances
The fear of exhausting funds during retirement is common. People go to great lengths—safe withdrawal rates, expense forecasting—to ensure financial longevity. Yet, based on my journey, it’s clear most of us won’t face destitution in retirement. We will rationally adapt our spending, savings, and earning strategies to meet our needs.
Support systems also bolster this confidence. From children who will gladly reciprocate the care they received, to lifelong friends willing to lend a hand. Moreover, insurance policies offer protection against unforeseen events, and social programs serve as a safety net.
Self-Preservation Through Rational Action
In various facets of life, rational decisions stem from a desire to improve and protect. Whether dealing with online bullies, health advice, career ambitions, or relationship issues, rational actions are our default response to threats. This mindset extends to financial situations, where informed decisions ensure we maintain control over our future.
The Power of Rational Planning
Regular engagement with personal finance topics has a profound impact, driving us to enhance our financial strategies. Difficult times will arise, but our inherent drive for survival ensures we’ll navigate through them successfully. Human nature’s relentless pursuit of stability and care for our families underscores this ability.
Reader Reflections
Do you think you will ever run out of money? Is the fear of financial depletion greater than the actual risk? Do you believe in the rational and self-preserving nature of humans to overcome financial challenges? If you’ve ever faced a money crunch, how did you manage, and what did you learn from it?
To delve deeper into these insights, you can listen to my podcast episode on the Saver’s Mindset on Apple or Spotify. Your reviews and shares are greatly appreciated.
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