Cross-Over Points: Milestones Towards FIRE
Happy Fall, ya’ all.
It starts today a little after 5 p.m. here in the PNW.
It’s also Bilbo Baggins’ birthday.
And since Tolkien says that The Lord of the Rings is really about death, that is a masterful choice for the day.
Fall is the start of the decline into winter.
I didn’t realize what an existentialist Tolkien was.
But the ideas of authenticity and existentialism in general are heirs to earlier romantic philosophy, so yes, it does make sense.
The LOTR is very much a Romantic Tale of decline from the ideal, or “the” fall.
Anyway, there are numerous events that have been going on since this past weekend to celebrate what is becoming known as Hobbit Day.
There’s one going on today at a bookstore in a town about 2½ hours away from where I live. I will not be going.
Perhaps next year I will plan better.
But onto the main point of today’s article …
Yesterday, we wrapped up a quick overview of the 7 FIRE Metrics That Matter. The last one we covered was knowing your cross-over point.
However, that is a misnomer.
There isn’t just one cross-over point, as I figured out on my own journey to FIRE.
You may recall in a much earlier article that I first had the amount of $500,000 in mind, way before I knew about cross-over points or FIRE.
It was the number that my father put into my head when he thought he might get laid off and could collect a lump-sum pension.
He was convinced he could live on that the rest of his days. That was either the late ’80s or early ’90s, so he was probably right.
When I got accepted to my 2nd graduate school program, the one I thought I would be getting a PhD from, a small part of me was hesitant to leave my then employer.
Why?
Because 401(k) vesting would not happen until I hit the 7-year mark.
It was a cliff-vesting program. What a crap 401(k) plan, btw.
Nevertheless, my thought was, “Gosh, if I stay, I’ll have $75,000 in 4 more years.”
Ha!
In just 4 more years I made that per year as a result of taking the foolish path.
Later, while I was in graduate school, I started calculating what I would have saved and invested in a 401(k) if I worked for five years and then came back for the PhD.
It was about $250,000.
Unfortunately, that probably contributed to my decision to postpone and never go back to that program.
Nevertheless, it seemed like a lot of money I would be leaving on the table, and it would have been.
You may also recall that when I got a job after graduate school, I started putting 15% per year into my 401(k).
My estimate was I would be at $1,000,000 when I was 48 years old and could leave work then if I wanted.
Fast forward about 10 years to late 2008.
I essentially had to start all over.
By then, my cross-over point was set at $745,000.
I figured I could live off a 6–8% withdrawal rate if I was careful and moved to a lower-cost-of-living area.
However, by the end of that year …
My asset accumulation strategies had all pretty much gone to hell.
I went through a divorce (always expensive for both parties).
my company folded and I lost over $600,000 in stock options.
and I came within two weeks of potentially losing my job due to the economy.
It was a nightmare.
Luckily, by the end of September 2008, I had landed on my feet.
From there, I was able to ride out the Great Recession in a good place (a great place, actually; I had no idea how fortunate I was).
By the end of 2008, I had a Net Worth of about $100,000.
then housing prices sunk to 10-year lows, and that net worth was fully erased by 2010.
My mortgage was way, way, way underwater.
As my savings built, My Net Worth started to come back into the black.
In 2011, I had about a $61,000 net worth.
Ouch.
Also, by the middle of 2011, I was beginning to question if I had a large enough capital target for my cross-over point.
I bumped it to $1 million or more.
And, I bumped it up at least 2 more times before finally leaving at the end of 2019.
You see, I was getting caught in the One More Year trap.
Your cross-over point is based on three things, really:
What you need to survive (bare necessities)
What you “want” to have and experience
How “secure” you feel about your financial situation
Change any one of those variables, particularly the first two, and you could probably be free today.
Reduce or modify what you consider bare necessities.
Reduce or modify your wants.
It’s simple.
Buy a bicycle, a backpack, and a tent. Couch surf sometimes.
Voila! You are ready to go.
There is a guy in the book How to Retire Happy, Wild, and Free who retired in the late ’90s.
After 3 years of early retirement, his spending budget was about £6,000 per year.
That would be a little less than $13,000 in U.S. dollars today.
He basically travels the world by bicycle. He camps a lot of the time. He has many friends whom he visits, and whether they like him showing up or not, he is housed sometimes.
I would call this a “Forest Gump” escape plan.
Got $250,000?
You can easily have that lifestyle or perhaps something even more luxurious.
Van life and/or car living is an option.
Some people with way more money than $250,000 do this because it is a “dream” lifestyle they want to experience.
A couple of years ago, I drove past their annual gathering in Quartzsite, AZ. It was a huge party-like atmosphere.
Geo-arbitrage is another.
Evidently, there are some amazing places in the world where you can easily live a middle-class lifestyle on $13,000 per year.
Living on a sailboat might be another, but I hear it is extremely expensive … and you need the boat.
Are you closer to being able to collect Social Security?
Do you qualify for a pension?
If so …
Wade Moss says you can retire very happily and satisfied on $500,000.
So does the Shark Tank guy, Kevin O’Leary. He recently was reported on making essentially the same claim (2025 versus I believe 2015 when Moss’s Book was released).
Both agree you will need Social Security and the $500,000,
and you will need to Live in or move to a low-cost-of-living location.
But you can do it.
I probably hit that level in 2014.
And I was looking forward to living in a van, down by the river. Sign me up!
But I was too scared and unsure to pull the lever then.
Luckily, from that point on, my restricted stock options started going through the roof.
The company I worked for was kicking butt.
Therefore, by March 2015, I was close to Lean FIRE (defined as spending up to but less than $40,000 per year).
All I had to do was get rid of all my crap, sell my overpriced home, and move. I was thinking the Boise area.
At the time, I could buy a brand-new cookie-cutter house there for $150,000 or less.
Done.
And I would Likely have never needed to work for a paycheck again.
But I was too scared and unsure to pull the lever then.
Then, in 2017–2018, I tested “could I live on a 3% withdrawal budget.”
I found out that, yes, yes Indeed, I could, very easily.
Therefore, when the opportunity came up a year later to exit gracefully, I took it.
It was a no-brainer.
But, honestly, if not for that “nudge from the universe,” I probably would have stuck around for 2, 3, or even more years.
Hell, I might still be there, for all I know.
I was still too timid and unsure to pull the lever, even then (early 2018).
And I started getting “greedy” about what I could do with all the extra cash.
That would have been fine, but let me tell you what I learned.
It’s a trap.
It might hook you, too.
The question, therefore, is not “Do I have enough money?” to reach a cross-over point.
The real question is: What is the best lifestyle design I can and want to put in place today that I can afford?
You can start doing that now.
That’s basically what I did.
Not perfectly, but I knew what my “escape plan” was at any given moment.
And I generally knew what I wanted to do instead of my corporate career.
What I learned Most though was this.
When you bring the most integrity you can muster into your current life, “luck” will be on your side.
That is essentially a core message in Your Money Or Your Life.
I believe this and it was what I experienced.