Something I love about financial blogging is there is always someone out there who will poke holes in any idea I put forward here. Though we try to think things through before we incorporate ideas into our plans or write about them here, we can’t possibly think of every angle — and so, helpfully, someone else usually does that for us in the comments.
Sometimes it’s just mean (Boo, trolls! But yay for there not being too many!), but most of the time the input we receive is constructive and helpful, and there have been plenty of times when we’ve revised our thinking based on great points y’all have made in response to something we put out there.
Of course, we’re especially lucky because we have this blog where we can throw things out for feedback, but not everyone has a platform like this. That doesn’t mean, however, that you can’t pressure test your own plans and ideas.
Toyota and the Five Whys
Toyota has long been known for its obsession with quality, and for kaizen, or continuous improvement. In the 1950s, Toyota developed a problem-solving technique they called the “five whys” aimed at not just finding symptoms or artifacts of problems, but actually getting to the root cause. The basic idea is that you see a problem, ask why it happened, and then ask why that thing happened and that underlying thing happened and so on, until you have your root cause identified, which you can then address fully, instead of with an incomplete bandaid solution.
Here’s an example of how it works from their website:
“Why did the robot stop?” (1) The circuit has overloaded, causing a fuse to blow.
“Why is the circuit overloaded?” (2) There was insufficient lubrication on the bearings, so they locked up.
“Why was there insufficient lubrication on the bearings?” (3) The oil pump on the robot is not circulating sufficient oil.
“Why is the pump not circulating sufficient oil?” (4) The pump intake is clogged with metal shavings.
“Why is the intake clogged with metal shavings?” (5) Because there is no filter on the pump.
They tested out different numbers of whys, and found that five was the most effective for learning what they needed to know, and so they formalized the practice around that number. Given Toyota’s long history of excellence and strong reputation, it’s clearly something that works for them.
Going Deeper With Your Questions
The five whys process isn’t perfect, and it relies heavily on the knowledge of those asking and answering the questions. It’s also possible for different people to come up with very different answers to the same questions under it. But as an exercise to pressure test processes, it’s still a strong tool.
What’s most important about the five whys is going deeper than the surface level answer. It doesn’t let you off the hook with “Eh, that won’t be a problem for me.” Or “That was just a one-time fluke.” And going deeper with your exploration can only make your thinking better and stronger — an especially good thing when that thinking is around a plan meant to withstand all that could come at it over the course of many, many decades.
Of course, when pressure testing a financial plan, the five whys might not be the right questions, because we’re not starting with a problem that needs a solution. We’re starting with a plan or a set of assumptions that feels sound, but which might benefit from some poking and prodding to be sure they hold up. In this case, the more helpful line of questioning could be the Five What Ifs.
The Five What Ifs
The idea of the five what ifs is to pressure test our plans to be sure they’re built to stand the test of time. A good place to start might be with your contingency plans. Here’s an example we might think through:
What if the markets take such a big dive that we don’t want to sell shares? We’d consider selling our house and buying a smaller one to free up cash.
What if the house won’t sell? We’d try to rent it out and live out of our (future) RV for a while.
What if there are no renters interested? We’d go to our worst case scenario spending plan and buckle down everywhere we possibly could, cutting our spending by 60+ percent.
What if that wasn’t enough? We’d try hard to hustle any way possible to make extra money.
What if the economy was in such bad shape that there was no work available? We’d suck it up and sell some shares, though we’d sell as few as possible, keeping our spending at rock bottom levels until things picked back up.
Those what if questions are not meant to be softballs. They should be real devil’s advocate/near-doomsday scenario follow-ups. Without that level of pressure testing, it’s hard to know what you’d really do, or whether your plan stands up. Forcing us to think through these questions, for example, makes us confront the ultimate underlying question here: If things really get that bad, would we rather take out a new mortgage on our paid-off house or sell off shares at too-low prices?
Here’s another example we’ve thought through:
What if health insurance becomes unaffordable in the U.S., or the out-of-pocket maximum goes away, forcing us to budget — essentially — for infinity? We’d first try getting a catastrophic coverage policy to make sure we’re covered in accidents or serious illness, and then pay cash for preventive care and be extra diligent about eating well and getting enough exercise to stay healthy. Or we’d consider continuing to work enough to get employer-provided health coverage.
What if we needed a whole bunch of tests that weren’t covered under the catastrophic policy, but would completely bust the budget? We’d see if we could do the tests more cheaply in Mexico, or maybe India or Thailand.
What if the tests uncovered chronic illness that wasn’t covered by the catastrophic policy but required ongoing costly treatment? We’d consider moving abroad to where health care was more affordable, at least for as long as it took to treat the illness.
What if doing all of that meant having a gap in coverage that would mean we lose eligibility for pre-existing condition coverage in the U.S.? Then I guess we’d become permanent expats. (Stupid health care system! :::shaking fist:::)
What if it wasn’t feasible to go abroad for any of this stuff for any number of reasons, and we were forced to pay the costs in the U.S.? We’d try hard to negotiate rates down and to negotiate payment plans, and we’d make sure we understood the likely effectiveness of any treatment before agreeing to it (evidence-based medicine, y’all), but ultimately we’d pay whatever it took, and deal with the consequences, even if that meant spoiling our early retirement dreams. (Though in that case we’d be extra glad we used this 401(k) rollover strategy so that our traditional retirement funds would be protected from any bankruptcy judgments.)
In this case, going deeper with the what ifs forces us to confront what we’d trade for good health, and the answer is “essentially everything.”
Testing Your Own Plans
There are lots of places we can all start with this set of exercises, and it’s beneficial to go deep on the what ifs with all aspects of your plan. Some starting points to consider, depending on your unique circumstances:
What if your portfolio tanks?
What if your pension disappears?
What if you grow tired of the lifestyle you plan to lead in retirement?
What if you withdraw too much of your portfolio early on and risk running out of money when you’re in your 60s or older?
What if your health gets worse and you can’t do the things you’d planned to do?
What if Social Security goes away?
What if health care or health insurance costs skyrocket?
What if Medicare goes away?
What if you can’t find renters for your rental property?
What if someone you care about needs extensive support, financial or otherwise?
What if a spouse or partner dies?
What if we have a period of extended “stagflation” (price inflation with stagnant markets), so your spending has to go up but without market increases?
What if you can’t sell the home you need the proceeds from?
Some of these scenarios might be far-fetched, but they also might not be. Since none of us can see the future (or if you can, please call me!), we don’t know which “what if” scenarios might ultimately play out. But our plans can only get stronger if we think these questions through and really do the work of answering them honestly.
Just as blowing off potential concerns with the “I can always just go back to work” response leaves your long-term plan vulnerable, so does only going one level deep with your “what if” questioning.
You’re banking the whole rest of your life on your financial plan. The least you can do for yourself is make sure it’s truly solid.
How Do You Test Your Plans?
Have any of you guys gone through similar exercises to pressure test your financial plans? Or have any other tools beyond the five questions that have been helpful to you? Any thoughts this has stirred up for you, or doubts it has raised about the solvency of your plan? Or still prefer the approach of just staying flexible without pressure testing your plan components? As always, we love hearing from folks with a range of viewpoints. Let us know your thoughts in the comments!
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Categories: the process
If your health care doomsday story does eventuate, Australia has free health care for all and we’d gladly welcome you ;)
Some great questions in here. We try and test our plans with worse case numbers. Eg. what if we only make 2% on our index funds? What if mortgage interest rates rise to 6/7/8%? We will start working through some of these questions though.
We may take you up on that! :-) (Today’s post only adds fuel to that doom’s day thinking on American health care!) It’s great you guys are thinking ahead this way and not planning to get historical average returns every year like plenty of folks plan for!
I know this is really late but if you’ve got a serious medical condition, you likely won’t be able to emigrate to most western developed countries because they simply won’t accept you. (When you think about it, why would they? An old sick person is just a net drain).
For Australia, you need to get a certain number of points, you’d get some for speaking English, being educated and having money. You’d lose even more for being sick.
Sorry for being negative but I feel that if that’s your plan, it needs a bit more research!
Fortunately, that’s not our plan. ;-)
Nice kaizen connection! Inspired by your Japan trip? I’ve always thought that the continuous improvement mindset relates well to FIRE, especially on the spending optimization side of things.
I like the idea of pressure testing my plan components *and* staying flexible. These are really important questions to ask, and it would be a bit reckless to dive into such a major life decision as early retirement without ever considering one’s response to a major negative event.
Just like the five whys exercise relies on the knowledge and biases of the person answering the questions, though, so too does my pressure testing rely on my current perspectives, life circumstances, and level of risk tolerance. Those may change over time. Similarly, these what-ifs are interrelated: my response to a market crash 20 years from now will certainly be informed by the performance of the market over those two decades prior, any changes to my projected Social Security and Medicare coverage, and all kinds of other economic and lifestyle changes. So, I think it’s good to use these types of questions to make sure your plan is robust, but I personally anticipate that my answers to the what-if scenarios may not stay the same. I’d treat them as a planning exercise, not necessarily a rock-solid plan.
That said, you’ve laid out some really good questions for consideration here! This definitely deserves a chapter in your forthcoming book. 😁
I think you put it perfectly: the what if answers are more of a planning exercise than a rock-solid plan. Especially because so many of these things are hard to quantify, and the available solutions will be very time-dependent, as you said. Sure, we can say that if markets dip 10% we’ll cut our spending 10% or whatever, but the rest of the things we might think about don’t have such easily quantifiable numbers to attach to them, and the current perspectives you mention are huge factors, too. Plus things like age that (should) make us less risk tolerant over time. But as a kaizen fan, I know you also appreciate the value of a thought or planning exercise. ;-)
I really need to work on going a couple of levels deeper. I’m way too ready to just figure one answer and say “okay, got it,” and move on.
Agreed. This is something I’m working on this year. It is really easy in a busy life to get a solution and move on rather than taking the extra time to dig deeper. But often digging deeper avoids future problems in addition to getting better results.
Well said, Matt! Avoiding future problems is a HUGE benefit of thinking some of this stuff through in detail.
I think that’s totally normal! Especially when the follow-up questions aren’t obvious and the solutions are hard to predict. But it’s absolutely worthwhile to put in that extra thinking to be sure your plan can stand up to a few things going not to plan. :-)
My biggest concern is healthcare, as it likely is for most people. Although I don’t plan to “retire” for 9 more years, I’m very closely watching what the administration is doing and all the proposed ACA replacements.
Heathcare would be my deal breaker and likely keep me working just for health insurance. Sad that we live in a country that doesn’t place value in the health of their citizens, but that’s the reality we live in.
Being in MN, maybe I’ll just move up to Canada :)
Same here. Healthcare is our top concern, so we have talked about a few scenarios like medical tourism or moving.
You’ll love today’s post, then! :-)
Oh, amen sister. Today’s post is ALL about this. On this one thing only, I’m almost envious of people who have a little longer until FIRE, because it all seriously freaks me out! And if you’re not completely joking about moving to Canada, do it soon! They have age limits! ;-)
I’ve personally dealt with Toyota (including meetings in their Japanese HQ!) in my career, but never thought to apply the “5 Why’s” to Retirement Contingency Planning.
Brilliant application, and I’m going to build it into our retirement plan. A great way to really make you think. Love it!
Wow, that’s cool you have first-hand experience with the analysis method! I’ll be curious to know after you do the What If analysis if my application of it is anything like Toyota’s real deal. :-)
Since you have way more than 5 “what if’s”, I wonder what Toyota-like analysis would suggest the optimum number of “what if’s” should be. Really appreciate that “monetize the blog” isn’t one of your contingencies!
I’m probably more of a “1000 What Ifs” person in reality. ;-) But that’s just me, and I don’t expect everyone else to follow my occasionally cuckoo bird thinking. Hahaha. And yeah, no plans to put ads or sponsored posts up here… I hate that stuff and don’t want to make readers suffer through it!
I have a deep seated hatred for “what if” questions, but even I can see how they will be useful. After all, that’s the only anybody asks of me after they learn of my plans.
My favorite what if is “what if you have kids?” or, “what if you get married?” Ugh.
Haha. Well you gotta ask some of these loathsome Qs to make sure your plan is super solid. ;-) You can skip the married and kids Qs for now and just focus on the basics like what if you get sick, what if your house burns down, etc. ;-)
I work on providing storage solutions to very large companies. As part of my day job I have to ensure that their access to data is never disrupted. This means always having backups and planning for contingencies. I think about this all the time at work and it has become second nature to me. I find that I approach FIRE planning in much the same way.
I always cringe a little when I see people in the comments section of blogs and on reddit so casually say “Well, I’ll move to a different country” as a response to the healthcare what-if. As an immigrant I can tell you that this is much harder than it looks and I hope that these folks have done a lot more planning than their casual tone would suggest. And you can’t just ‘move’ somewhere. They have to want you. You have to get a permit to live there that is not a visitors visa. Those permits are typically based on you having a job there or on you having a ton of money. I also say, “I’ll move to a different country”. I have a spreadsheet though, that details the top 3 countries under consideration, how we would get a job in each, what the visa process is, how taxes work in that country etc. Bottom line: if your answer to a what-if is something as big as moving countries, you probably shouldn’t stop at that answer. Dig deeper and plan for exactly how you would execute such a move.
I hope everyone reads your comment, because this is all so true! Those knee-jerk response answers are seldom as feasible as people imagine (like “I’ll just go back to work”… really? After a five year gap? In a recession with high unemployment, which is when you’re likely to need more money?). I could see us one day making a long-term plan to move abroad, but that’s not something anyone should ever expect to be able to do quickly or easily!
Have to say it’s a bit ironic that you mentioned the why why analysis. Had to do that for work for some failures encountered in Japan… Let’s just day it’s not the most fun exercise to do, especially when there are Japanese quality guys involved.
Eek! Didn’t know this would hit so close to home! ;-) But hey, better to be thorough, right?
Hi ONL’s!
Your excellent summary of 5 tier contingencies reminded me of the emergency procedures checklists that pilots to use. I think of them as a super time-sensitive combo of troubleshooting, emergency management and safety (all on steroids).
With that in mind, it might be important for people to identify a “trigger point” for each level of contingency in advance of actually experiencing it. Tons of accident investigation history has shown that a major factor in air incidents is that pilots don’t recognize the emergency soon enough, or can’t believe that it’s really happening to them! Our brains take some time to “catch up” with the reality of an unexpected event.
In this context, I’d suggest that your readers consider a specific market downturn amount to trigger the next contingency (i.e. a 10% correction in our portfolio = business as usual, @ 20% we tighten our belts, @30% etc etc). Setting up these trigger points in the cold, calm light of day will help us to actually execute the plan when it seems like “things are just about to get better”.
I’ll never forget what my flight instructor asked my class of student pilots: “At what point do you think Sully decided that he was going land in the Hudson River?”
Guesses started ringing out: “20 seconds after engines out” “No, 1 minute”, “90 seconds!”
With a knowing smile came the answer: “How about 20 years earlier, when he was first preparing for safe places to put down a jetliner over Manhattan?”
Do you know I’m a massive aviation nerd? I think you used this example just for me. :-) So thanks! I love your idea of the trigger point and the correction levels connecting to specific actions. Plenty of emergencies are hard to quantify, but for things we know are a certainty like market dips, it’s better to be overprepared to cope than underprepared. That Sully anecdote is pretty amazing, and makes total sense. And that’s essentially what we all should be doing, not trying to make huge decisions in the midst of panic.
Dear ONL – Replied to your 3/6 posting with my story yesterday sharing that I’d started my career as a laboratory technician. What I hadn’t shared was… I quickly moved into Quality Engineering and have been there ever since… 18+ years. So… absolutely loved today’s post on the 5 Whys, root cause, etc. As a suggestion, another tool would be to conduct a PPA (Potential Problem Analysis) where you define the potential problems, the likelihood of their occurrence, the severity should they happen and then define the corrective/preventative actions you’ll take should they occur. The approach simplified is… plan A looks great… but plan B… plan C… etc. will also work. I love planning… but in the end, all these “what ifs” are the unknowns of life. If all were to happen to you… no amount of planning is gonna keep you afloat… you may as well keep working :). That said though… thinking about them… listing them… and weighing them against your plan isn’t meant to scare you into never retiring… it’s simply to make sure you’ve really thought about your plan. While it’s not realistic that ALL these unknowns will happen to you… it’s IS realistic that one or a few could. I’ve seen plenty of plans out there on the internet from folks who have retired early that are so crazy tight that they have no room for contingencies. My comfort level is to add quite a bit of cushioning to our magic number just in case. If we overshoot and at the end of our lives we have money to give to our children and/or charities, I’m good with that. And honestly, we’re still weighing a stepped transition into retirement instead of and all or none approach. I don’t mind working… I just don’t want to work 40+hrs per week, 12 months per year any longer than I have to. So the action item of “I could always go back to work” doesn’t feel so much like as a catch-all as it does a reasonable alternative should life throw more curveballs our way than we anticipated. Thinking positively like this… glass half-full thinking… should keep me finding the Joy in every day instead of being disappointed should it still not go to plan. As Steinbeck so eloquently put it… even “the best laid schemes (plans)….”
I love how you put it: thinking through the problems isn’t meant to scare you into never retiring, it’s to make sure your plan is solid. And I’m with you — I’ve seen those plans with no or few contingencies, and they make me want to throw up a little. Obviously my comfort level with risk is a lot lower than plenty of other folks’, and that’s fine, but having NO wiggle room? I don’t know how I’d even sleep at night! I’d rather do as you mention and have money leftover at the end that we can donate to worthy orgs than aim too low and wing it.
Our healthcare system (sick care would be more accurate) is a big hot mess. What has me hopeful, though, is that it can’t become much more dysfunctional before it implodes.
There’s a federal law called EMTALA that requires emergency departments to evaluate and stabilize all patients regardless of ability to pay. It also prohibits transfer of patients (patient-dumping) based only on the ability to pay, so sick patients who can’t pay and who are admitted to the hospital essentially receive free care from both the ED and the hospital itself.
Health insurance used to pay most medical costs, but not everyone had insurance. Now, most people have insurance but deductibles are so high that patients are still paying most medical costs (up to about 14k for some plans) before any insurance benefits kick in.
But most patients can’t afford this and many aren’t paying, leaving doctors and hospitals struggling to keep the lights on and the doors open. If deductibles continue to increase, the situation will get worse and many hospitals will close.
From 1990-2009, almost 30% of non-rural EDs in the US closed (prior to the ACA) and while I don’t have stats for the rural EDs, they’re traditionally even more at risk.
At some point, if things don’t improve, we won’t have anywhere left to seek care even if we have gold-star insurance.
Some might say the problem is with PCPs and not EDs/hospitals, but if people can’t afford to see their PCPs, they get sicker and end up in the ED, so it all comes full circle.
I think that people are waking up to this and I’m holding out hope that our legislators will find a feasible solution.
I would love to have that same level of hope, but I don’t think we’re there yet! You raise so many important points about the problems with the current system, and I quoted you in today’s post on how health care costs are likely to increase for early retirees with the ACA going away.
Um, i was under a blanket curled up in a ball after reading some of those “potential” issues. Yes, the 5 why’s of Toyota! we get trained up on that in my industry for all of our risk management training. What comes to mind is your future RV, could be a huge mitigation for finding employment. Most people are stuck with a specific geographical area. You would be totally mobile and could go lots of places IF you had to go back to work. I do recognize that you work remotely now.
the truth is, you and your spouse are your best risk mitigation for all of that uncertainty. Stick together and you will find a way.
I don’t mean to be all doom and gloom! ;-) I find it comforting to know that we’re prepared (I consider myself a conditional optimist), so tend to work out a lot of that stuff here. And you’re right that a future RV could indeed be good for future employment. I hadn’t thought about it that way before!
Great take on using the 5 Why’s and turn it into What If’s for our financial independence planning!
I think the most uncertain part of my and most other’s portfolio right now are the healthcare costs in the future as the ObamaCare replacement hasn’t really shaded light on the expected costs of health insurance premiums, which is most likely to be higher than existing prices.
Speaking my language! Today’s post is all about the future of health care costs for early retirees, or at least the money we’ve all been saving from Obamacare that we may not have realized we’re saving. ;-)
We have unknowingly used the 5 why’s in our plans, we just didn’t know that it had a name or a number where you reach diminishing returns. 5 it is! All of our planning has been with contingency after contingency built in. With Prof SSC teaching and loving it, it looks like she won’t be retiring in 3 years or maybe even 10 depending on what kind of a gig she creates for herself. That’s changed a lot of our outlook already.
Like the recent J$ article about “are you retirement free?” yep, we’re there, and close to being FI. If she keeps working after I do, then my stress level over what ifs just keeps dropping. :)
Our main ones are healthcare and market crashes, followed by withdrawing too much early on and market crashing. All of these scenarios played out with geographic arbitrage – I get a job somewhere, she gets a job somewhere, we get jobs somewhere. Even if it’s 1/4 of the pay i was used to, a BLM salary (~$30-$40k/yr) for instance would cover COL, and healthcare and bam, we’d be back on track. If we couldn’t find those types of jobs, I could always get a geotechnical testing job over the summer or egt a testing job with one of my college buddies asphalt company out in CO. Yep, it would be higher COL, but I could probably parlay it into full-time if we needed to go that route.
Lots of scenarios, and lots of what ifs. I just keep my network on point, in touch, and ever expanding because you enver know what may happen in the future.
I am SO HAPPY for you guys that Prof SSC is loving her teaching gig, both for her own sanity and happiness, and for the bolster it provides to your whole plan. So awesome to have that huge buffer added in… plus I assume she would have a way to get health insurance through teaching, too? That’s definitely on our minds big time lately… and the subject of today’s post!
That’s a good list of “what ifs” that you have. I think it’s not only important to answer these questions, but to actually write the answers down. As a writer, you probalby understand how much clearer your thoughts become when putting them on (virtual) paper. I’d view it in a similar manner to writing out an Investment Policy Statement concerning your investments and asset allocation.
I’m going to do this soon. Thanks for the inspiration!
I agree completely! Writing things down makes all the difference in clarity of thought… and frankly, it’s just easy to forget or mis-remember conversations! (Or maybe that’s just me.) ;-) So great that you’re doing to sit down and do this — let me know how it goes!
We had a plan B and C before I retired. Things have gone really well so we didn’t need to rely on them. Now they are probably outdated and I need to update the plans.
What ifs are nice as long as you don’t let them stop you from doing what you need to do. Sometime, you just have to pull the chord and react to whatever comes.
That’s great that you haven’t needed to fall back on any of your backup plans! It’s a good thought, though, to spend some time updating them. And so true that you don’t want to let the what ifs hold you back… so long as you’ve done your due diligence first! :-)
I do something similar to your what ifs as a stress test of my plans. I also run a pilot program of a new plan before making it the defacto. For example when my wife stopped working, we lived without her salary for two to three months before hand to see how it worked out.
That’s great! I love that your default is to test things rather than just assume everything will work out. And I love the test drive approach, too. We were planning to do that this last year of work until we realized that we’re already spending below what we can spend next year (but certain costs will go up, especially groceries because I’ll be home more, so it’s hard to get an apples-to-apples comparison).
I really like this idea. Risk is always under-appreciated until something happens. My personal approach (I’m not retired) which I just spelled out on my blog is to have a worst-case scenario plan for my family (insurance / estate plan) and assume very low returns over the next 15 years (2% annually) for my retirement nest egg. Once retirement begins, projections need to be even more conservative if relying on investments for income.
Great post! –R
Thanks, Rich! So true — risk definitely IS underappreciated, and it practically goes against the American way of thinking to consider that bad things could happen. It’s great you guys are making sure your plan can withstand some catastrophes and super low returns!
This concept is the entire basis for the name of my blog 😁
And the theme of my life, thanks to some fairly bad experiences with emergencies and other ship-sinking types of situations. So every time I get anxious about our money, or heck, once a week to stay in shape, I ask: what if? Then what’s the plan? And then what happens if that doesn’t work? What’s the next fallback?
I plan my money like I’m under siege. It’s been instructive and keeps me from getting complacent. And it makes almost anything seem possible because “all” I have to do is figure out what’s preventing me from having something we want in our lives and then identify how to resolve that issue. Resolution isn’t always easy but difficult is a far cry from impossible.
I think you’re already well wired to think in “what if” terms! ;-) And can I borrow that quote sometime? “Difficult is a far cry from impossible.” Love that! I’ve come to conclude that there are essentially two types of us: those who trust that things will generally work out, and those who assume that nothing will work out and therefore we need a million contingencies. (Guess which camp you and I are both in? Haha.) So folks like you don’t need this nudge, but others do.
You may indeed quote that :D
Okay, good! Because I already did. :-)
So many questions to answer. Doing all that takes the fun out of the journey to FI. :-)
And thank you very much for doing that!
I like the framework and the questions you give us to help us understand more risks than we currently might see.
The going back to work is a too simple answer to most questions. There needs to be additional what it’s to understand what we would really be willing to do.
Question: do you keep record off all these what it’s scenario’s? It could be great to have that lying around so that you at least have a starting point when the bad Hong happens.
(Could be a good chapter for a FI for dummies book: what if your future)
Hahaha, that’s an accusation I’ve never heard before: “You take the fun out of FI!” ;-) And to answer your Q: No, we don’t currently have a written record of the what if scenarios, but you’re right that we should! I’ll add that to the to do list (and maybe the future book chapter list). ;-)
Would be great to have the book on sale roughly one year before we move into FI territory. Or most likely, half FI. Not that i want to put time pressure… ;-l
When is your current half FI date, so I can plan accordingly? ;-)
Is next week to soon? I am guessing in a few years. I first want to see how startup life treats me…
Nah, I’ll just crank out a book this weekend! ;-)
My pressure tests will last years since my first stage of FIRE will be “retiring” to doing my own business and no longer working for others on top of it. Once I burn out, I’ll gradually wind it down to a reasonable number of hours. By then, we’ll have some thing figured out for health care I hope. My girlfriend has no interest in ER and will probably always work for a place with great insurance; yet another reason she should marry me.
I’m pretty sure people willing to work forever who have employer-provided health insurance are worth their weight in gold these days. :-)
Maybe even platinum
Haha. #truth
This is brilliant. I love the list of example questions as well.
After the election (say no more), my husband and I decided that no matter what, we can’t lose the house. That led to a number of pressure-testing questions (though we didn’t know to call them that at the time) about how best to make sure that happens. It was comforting to realize how many doomsday-scenario options we do have, and what we’re willing to do.
It’s admirable you guys have done that! I know it can be tough to face down worst-case scenarios, but it’s important to ensure that our plans (especially if they involve walking away from paid work!) aren’t overly optimistic. High five for facing the (possible) truth! :-)
If you don’t mind some constructive criticism – when i’m reading this article on an ipad, there is a huge banner at the top with your logo and “start here”, “about us” etc, which covers literally 25% of the reading space. It’s intensely annoying! Please make it go away!
Great blog otherwise :)
Thanks for that feedback. Unfortunately, I have limited options for the tablet and phone versions, given that I am using a free template. The only alternative, to be able to use a custom template, would be to fill up the screen with ads. And I’d rather not do that to you. ;-)
I think l’d rather have adverts than the banner to be honest, as long as they didnt cover the text. Adblock does wonders :)
Still, you have to make decisions based on all your readers unfortunately.
Just FYI, I looked at the site on several tablets since you sent your note, and so far you’re an outlier in terms of what it looks like. Haven’t found a single other one where it shows what you’re describing. So it’s a mystery!
Interesting post! When I read the title I expected there to be 5 specific “What if” questions presented that will help you suss out cracks in your plan or formulate contingencies. So now I’m trying to come up with the five top “what if” questions that would be general and comprehensive enough to apply to many situations and plans. Big ones that strike me are:
What if I become disabled or seriously ill?
What if my lifestyle preferences (i.e. standard of living desires) change over time?
What if my family structure changes (divorce, pregnancy, death)?
What if my financial assumptions are more than 25% off (tax rates, inflation, returns)?
What if there is a black swan event (political takeover, major world war, global depression or contagion)?
I think that’s a solid list of questions. And it’s in the answering of each one that the “5 what if’s” really come into play. Like if you became seriously ill, what would you do? What if that plan doesn’t work? What if your contingency falls through for some reason? Etc. Those five questions will be much more specific to the big question you’re asking!
We can all benefit from asking the ‘what-if’ questions. I think there needs to be balance as well though. For myself, I can analyze something for too long until I do nothing. Inaction can also be bad. However, I think for most people a healthy level of asking the what if’s is important. Especially if their wealth is tied up in one area and they are not well diversified. That is what we are currently working to avoid in our finances.
You’re so right! As in most things, it’s that middle ground that we should be aiming for. Not winging it, not overthinking ourselves into inaction.
I am a huge fan of lean management tools, so it made my heart pitter-patter to see the 5 whys mentioned here! We are currently using the “Peace of Mind” test to decide how to divide any extra funds between saving and paying down debt. It’s not as streamlined of a snowball as D.R. would recommend, but it has motivated us dramatically and proved to have good results! An a side-note, even the biggest of big wigs use the 5 whys. This is not one of my posts at all, I just enjoyed reading it and thought you might too: https://www.linkedin.com/pulse/use-5-whys-find-root-causes-peter-abilla
Oh, dude, I am a HUGE believer in the peace of mind test! That’s why we paid off our house early even though the conventional wisdom said to keep that low rate mortgage as long as we could. And it’s why we’ve made a bunch of our decisions. So more power to you for going based on that and not just some strict expert advice! And thanks for sharing that link! :-)