I’ve spent plenty of time on this blog discussing the emotional effort required to retire early—the mental gymnastics of deciding on  “enough”. But I’ve been holding back one huge part of the equation: the money itself.

It’s time for a confession.

I have not been a good investor.

The financial independence (FIRE) movement is packed with successful investors who are all in on index funds or are savvy stock pickers. I hate to admit this, and I am embarrassed by it,  but I am neither of those things. If I had followed even some of my own proposed investment plans, early retirement would have happened five years ago.

I am what I call a “Rabbit Investor”: skittish, paranoid, and always listening for danger. Did you hear something? Pull out of the market. Slowly crawl back in. Hear something else? Pull out again. Repeat. Yeah I am that guy.  Yes I know it is wrong.

I am the ultra-conservative, sleep-well-at-night type, which means I consistently miss out on large stock market returns. So, how are Padme (age 48) and I (age 52) getting close to being FIREd? 

We are close to FIRE mainly for 2 reasons. The first being Padme and myself have been blessed with good careers that come with high salaries. Combine the good fortune of high salaries with a lower cost lifestyle and a large savings rate just happens.  It’s not due to any planning or through any budgeting exercise.  We typically don’t want for much, pay for everything with cash, and just naturally are not big spenders. 

This means we basically save a significant amount of money per year that will fund our retirement.

The second reason we are FIRE is  due to Padme working for one of the last companies that have a defined benefit pension.  Throw her pension on top of our savings rate and we realistically could both retire when she hits age 50. 

For background lets explore how our lower lifestyle budget is a big reason we are almost retired. We have been fortunate on the big spendy items in life which in parts comes down to when we were born. If we were born 30 years later we likely would not have been as fortunate. 

We bought our house when prices were decent 20 years ago.  We bought a small house, 1300 sq ft for where it was located, because it came with a big yard, and it has lots of mature trees.  It is country living in the middle of the city.  It was priced at 1.5 times our gross pay. The same house today would be 4 to 5 times our pay.

A small house typically means small bills. We burned our mortgage after aggressive payments for 5 years as we are both debt adverse.

The cottage (2^nd small house) was bought during the tech bubble  and was the best thing I did during those years for an investment.  Where I live recreational homes had just come through a crash in the mid 90s right before the tech bubble took off.   Incomes and stock market advances flew higher and faster than house prices recovered.   

Combine a growing salary, lower house prices, and my little dream to have a getaway place and I bought the cottage on a whim.  I wasn’t looking for one but thought I would check out one a friend recommended in case my parents were interested. I bought it the same day.   I just wanted it.   With skyrocketing stock prices and a small inheritance I bought it for cash.  I bought the cottage before meeting Padme while I was still renting a real house.  Not the wisest investment decision at the time but it worked out. 

Cars are the next typical big expense item in life. I will say we have never been car people.  We have always had reasonable cars that we  typically drive for 10+ years.  They owe us nothing in the end.  I got to say though I miss the Minvan days.  You can haul anything in those

Be careful of that soccer mom

In the end we seem to follow some of the advice that Ramit Sethi is known for.  His approach centers around focussing on the $30K decisions vs the $3 decisions. Control the big expenses and you will get rich.  This is likely the backbone of our style in a way. 

We typically delay any big bills as long as possible because they give me heartburn.  New kitchen? Please god no.  But it is coming.  Someday.  Expensive vacations?  Let’s go to the cottage with friends.  We enjoy this more in many ways than a fly away vacation.  

Expensive kid activities are another one that we somehow escaped.   Our kids extra curricular activities have not been expensive like other families that we know.  Our kids are happy doing recreational league sports like Basketball or Ultimate Frisabee which have no little overhead.  A pair of shoes and a ball and away you go.

We are blessed to not be travel hockey or dance parents.  Lots of expensive equipment combined with lots of expensive out of town tournaments add up. 

If our kids had shown an interest in anything serious we would have gone there. They just never wanted to and we never pushed them into anything.    

Some friends talk about how they can’t wait until their kids go to University – it will be cheaper than competitive hockey or dance.  Granted school is cheaper in Canada than the US but this still boggles my mind.  Some parents pay multiple thousands of dollars per year per kid because of what recreation they choose to put them in.  Again we lucked out.     

So let me restate that we are at the soon to be retirement point first and foremost because of savings.  Nothing about investments has got us here. Our choices have. 

Another way to look at is based upon the ESI Money blog (ESI Money – Three Simple Steps to Wealth). E is for Earn, is for Save, and I is for Invest. Two out of three are likely all it takes which we have done (E&S). 

The second reason we are where we are is Padme’s pension.  Her pension is handled by professional money managers which cost us nothing.  Her pension is guaranteed. It will cover half if not more of our expenses if Padme retires in 18 months.  The longer she works the more it will cover.  The running joke when we met 20 years ago was I dating her for her pension.  

It is definitely a nice bonus later in life

Let me say it again.  We are Blessed

So what is our investment style with our nest egg?  With her pension we should be aggressively in the market.  Like all of it.  With half of our lives or more covered by her pension we are in a good spot to be aggressive. 

At this point we basically have been mainly invested in a 20:80 portfolio for the last 3 years.  Twenty percent in safe equities like utilities, and eighty percent in Fixed income like 3 month T bills.  Small returns after tax.  No risk.  No drama.  Sleep well at night. 

The kicker is I am barely  in the stock market and it still causes me stress. Still a rabbit. Knowing I want to retire in less than year I am even more risk adverse. 

And this is the crux of my problem.  Investment Decisions for me are proving to be driven mainly by emotion which is strange to admit as an engineer.  I know the math, I know the logic, I consume all the FIRE content,  but in my mind someday the market will not act like it always has.  That this time it’s different, in a negative way, can and will happen. 

It’s weird to admit that I am emotionally driven around investing.  It is likely based upon starting to invest during the dot com bubble and watching many people lose everything. 

I want to retire with what I call Break Away money.  That between the pension and investment returns the nest egg will never go down and likely grow.   To do that, at this point, I just need typical S&P yearly returns of 8 to 10% on a healthy portion of the nest egg. We would be full breakaway if I wasn’t a Rabbit.

At the current rabbit conservative investment style we would likely be close to yearly break even in a year or two.   But the nest egg wouldn’t grow with inflation. It would likely fall as interest rates do.   

So I am torn.  Riding the fence.  Security, safety the way I am now or index and ride the market.

I want to ride.  Before I retire I would like to push at least 60% or more of the nest egg into the index.  And I would like to see that typical 10% up  year once I invest to have a cushion.  A year of anxiety to get that 10% average up year.

So I am sitting here waiting for a large down draft in the market. To get in.  Which I know is wrong. But will I have the backbone  to do it?  Can the rabbit do it? Do rabbits pounce? I honestly don’t know. 

Ready to conquer in the next downturn