Can You Beat the Market?

I lurk in a lot of online groups related to the Financial Independence (FI) movement. Although many members in that movement advocate investing in low-fee index funds and letting time do the work for reaching FI, I see constant discussion about picking individual stocks.

Is it wrong to pick stocks? Absolutely not. I oppose anyone who tries to dogmatically force a specific path to FI down someone else’s throat. That said, I think there are a lot of strong arguments to be made in favor of the low-fee index fund, fire-and-forget strategy. Let’s look at some of this.

Can the Pros Beat the Market?

My main reason for suggesting that we avoid picking stocks is that the vast majority of the pros fail to beat the performance of individual index funds.

You’re skeptical? I believe it…I was too at first.

I first read this assertion in JL Collins’ fantastic book, The Simple Path to Wealth. (Amazon affiliate link.) You don’t have to buy the book to read his assertion though. He’s published the same content for free in Part III of his excellent Stock Series. He asserts that 80% of actively managed investment funds fail to beat the market average. Over the past few years, the disparity has gotten even worse.

You can clearly see this in colored charts on sites like this one at Index Fund Advisors. A CNBC article from 2019 noted that about 92% of actively managed funds fail to beat their respective index.

Perhaps the most notable recent illustration of this fundamental comes from this headline: How Warren Buffet Won His $1 Million Bet. Mr. Buffett is one of the wealthiest people alive, and perhaps the greatest investor of our time. Even with all of his knowledge, he recommends that the average investor just by low fee index funds and let them sit. When he dies, his instructions for taking care of his family are that 90% of his wealth to be placed into index funds.

We got this recent headline because Mr. Buffett made a bet many years ago. He’d put $1M into index funds, and the other party would put $1M into any combination of actively managed funds. The winner would be the person with a higher account balance at the end of a decade, and would get both pots of money. Mr. Buffett, frequently called The Oracle of Omaha due to his stock-picking prowess won the bet by investing in low fee index funds.

The point you should take from this article is not that Warren Buffett is smart or that we won a $1M bet. The point is that the article about his bet goes on to mention that 93% of actively managed investment funds fail to beat the market. That number skyrockets to 98% for government bond funds! Why in the world would you invest in something that has a 93-98% chance of failing to beat the market when you could just invest in the market itself by purchasing shares of a fund like VTSAX, VTI, FSKAX, etc.?

Fees! Fees!

Having just used The Oracle himself to make my point, I’ll say that there are some valid caveats here. We’ll get into some others, but first we need to look at fees.

Even a somewhat passively-managed index fund like VTSAX needs to pay human beings to manage it. VTSAX is a “total stock market” index fund. The over-simplified idea is that every time Vanguard gets some money, they use it to by shares of stock. Specifically, they buy one share of stock from each company on the market. Once they have one share of each, they go back through the rotation and buy another share of each. This continues for as long as people give them money. It’s a pretty simple process, but it still requires some human action to complete.

Thankfully, the process is simple enough that Vanguard can do this cheaply. Vanguard charges most investors an impressively small 0.04% fee for their services. (This is also referred to as the fund’s “expense ratio.”) This means that for every $100 you invest, Vanguard takes four pennies. That’s downright reasonable for a fund that’s rewarded me with a 35% Return on Investment (ROI) over the past year, and returned 7.92% since inception!

Let’s compare this to actively managed funds where you pay a financial advisor a fee to pick stocks for you. The idea is that he or she sits around all day studying stocks and businesses and can choose winners while leaving out losers. I’ll be upfront and say that there are plenty of people who do this some of the time. Warren Buffet is the leading example, but there are plenty of others. However, most of them fail to consistently out-perform the market. As we’ve noted, the number of failures has risen to 93%.

Part of the reason that these individuals give you lower returns that the market is that they charge you much higher fees. While you can find a variety of fee structures at different investing firms, you’re likely to pay a minimum of 1% Assets Under Management (AUM.) This means that for every $100 you invest with this actively managed fun, they take $1.

A dollar doesn’t seem too bad, until you compare it to the index fund’s expense ratio. That 1% AUM fee is 25 times more than VTSAX’s 0.04% expense ratio! When you compare these two options, the actively managed fund charges you 25 times as much money for a 7% chance of out-performing the alternative. You almost always lose that bet.

Sadly, this isn’t the worst type of actively managed fund either. There’s a company that I consider to be downright predatory, especially toward members of the US military, that charges exorbitant fees upfront to manage their investments.

Another very common fee structure for big hedge funds is “Two and Twenty.” This means 2% AUM (twice what you’ll be charged at many smaller firms) and 20% of your profits when you take money out. If those hedge funds consistently beat the market, it’d be one thing. However, knowing that 93% of these funds fail to perform as well as VTSAX, these fees are belong in Crazytown.

Frustratingly, it’s those fees themselves that account for much of the failure to beat the market average. A 1% AUM advisor has to beat the ROI from VSTAX by a full percent to justify their existence. By picking and choosing, they’re lucky to get above the average at all. But beating the market by a full percentage point (or more!) is even tougher.

The odds are never in your favor.

(If you want some entertaining television, Showtime has a fun series called Billions. It’s part high-stakes finance drama, part director getting to show off a lifestyle of mansions, fancy cars, and crazy hijinks, and part an illustration of what those hedge funds do with your “2 & 20.” If you think they’re giving you a great service and taking care of your best interests, consider the fact that Billions is based in part on decades of real-life examples.)

Unfair Advantages

Hopefully I’ve convinced you that simple past performance show how professional investors are terrible at beating the market, and part of the fact is they charge you outrageous fees. I could leave things there, but it wouldn’t be fair of me. As it turns out, there are lots of individual investors who beat the market. Why? We have what one investor calls “unfair advantages.”

If you haven’t already, go listen to Episode 75 of the ChooseFI Podcast. The guest on this episode, Brian Feroldi, does a great job explaining a variety of factors that make things far more difficult for a big, actively-managed fund than the individual investor. Here are just a few:

  1. Overhead – Big investment firms need to have an office. They need to pay a staff. They need accountants, and payroll, and HR, and more. Of that 1% AUM fee (or worse) much of it is going toward these expenses. If you can choose stocks as well as the people at a big firm, you’ll have a large advantage because you won’t have the same overhead.
  2. Perspective – If you’re investing for yourself, you’re focused on long-term wealth building. Investment firms don’t have that luxury. Three letter agencies like the SEC and the IRS require them to report their performance to investors every quarter. The entire investing industry pays attention to these reports and rewards or punishes these firms based on their quarterly performance. Personally, I believe this is a terrible way to run any business or investment. I believe it’s causing long-term damage to our country and our world. If you want a good read on this subject, I highly recommend The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America. (This is another Amazon affiliate link.)
  3. Rational Self Interest (or Greed) – Like it or not, fund managers are in this business for themselves. Sure, they make money if you make money. However, they can also make a lot of money in ways that hurt you. One common practice is for these funds to do lots of buying and selling over time. Some charge you on a per-trade basis. Others charge you every time you make a profit (up to that 20% number.) This means it’s in their best interest to do as many trades as possible, as often as possible. That is rarely good for you.

I’ll leave it to Mr. Feroldi to give you more details here, but I agree with his assertion that the individual investor has a lot of advantages over most active fund managers. This means that you, as an individual reader, do have some hope of beating the market despite the fact that 93% of the pros can’t. But that’s not the end of the story either.


Before you take the points from that last section and run off to start picking stocks, let’s take a moment to consider the concept of expertise.

Is expertise valuable or important to you? Maybe it depends on the context, but overall I value expertise.

The COVID-19 pandemic has made this concept a hot topic. On one hand, you had doctors and scientists saying, “The best ways we know for you to protect yourself are…” (wear masks, stay at home, social distancing, etc.) On the other hand we had randos from politicians to Instagram influencers spouting all manner of nonsense. (One of my favorite examples of this jackassery was when a church not far from me started telling people that drinking bleach could cure the virus, and started selling it!)

My wife is a dentist and sees similar ridiculousity. Science has exhaustively shown that fluoride treatments are both safe for human beings and necessary for healthy teeth. She gets patients all the time who have watched some random conspiracy theory video on YouTube asserting otherwise. She has patients who sit in her chair and refuse fluoride or other scientifically-proven treatments while complaining that their teeth are ugly and painful. She explains that they’re welcome to believe what they want to, but eventually their teeth will get so bad that they’ll need emergency treatment. One way or another, they end up paying a lot of money for their obstinance.

So, what about investing? Do you need to be an expert to make money?

Recent history has proven that no, you truly don’t. However, for every example of the random individual who’s made great returns on the market there’s an example of a naive investor who lost thousands or millions because they didn’t know what they were doing.

One of the things I love about JL Collins book, The Simple Path to Wealth, is the reason he wrote it. He happens to be a finance guy. He made his fortune playing the market and has retired comfortably. When his daughter got old enough to start investing he tried to broach the subject with her. Her response was something to the effect of:

“Dad, I’ve watched you do this for your entire life. You spend countless hours on it. I know you love it and that’s fine, but I don’t want to spend that much of my life thinking about all this. I have other things to do. I just want a simple way to invest my money that will give me a good chance of success without taking up all my time.”

And that is why he wrote about The Simple Path.

The big actively-managed investment funds cost a lot because they hire really smart, talented people to do what JL Collins used to do for a living…they sit around all day and study companies. They look at balance sheets and performance, they read news, they watch for new contracts and trends and deals. Frequently, they travel to those companies to look at the operations themselves and judge whether they think they’re done well or not. These funds have an incredible amount of data, knowledge, and insight about hundreds of companies.

Despite that incredible amount of living insight, 93% of them fail to pick winners while avoiding losers.

So, how does your level of expertise compare to this? How many hours per day do you spend researching companies? How closely do you follow every scrap of news about government regulations, mergers, partnerships, contracts, and other business deals?

If you’re in school, or you have a job, or a hobby, or you have a family (and I hope you have some combination of them all) I bet you don’t have as much time to devote to investing research as an analyst who earns a 6- or 7-figure salary to spend all day every day diving deep into research. If they do worse than average 93% of the time, how can you possibly hope to do better, even with your unfair advantages?

Emet’s Answer

That last point is the main reason I put most of my investments into low fee index funds. Even if I thought I had the expertise to do professional-level analysis, I just don’t have the time. Frankly, I have better things to do with my life. I suspect you do as well.

I believe that the vast majority of us are better off living full, meaningful lives and leaving our investments on autopilot in low-fee index funds. I don’t think it’s worth the time and energy it would take to do the research necessary to beat the market. Your family, your friends, your hobbies, and yes even your job(s) deserve better.


Talking about jobs highlights another critical point. Can you make more money using your time in other ways?

Some jobs pay by the hour. If you make a high wage, I assert you can get a better ROI for your time by spending an extra hour at work as opposed to researching investments. As an airline pilot, this is almost certainly true.

If you aren’t a wage employee, do you get a performance bonus? I bet the commission from making an extra sale is better in many cases than spending an equivalent amount of time researching stocks.

Taking this further, have you considered a side-hustle? Sometimes these aren’t the most lucrative ventures as first, but I know of many side hustles that bring in a lot of money. I do some flight instructing that pays far better than I could possibly do picking stocks. I’ve heard of people who sell digital products on Etsy that make amazing money for very little effort.

As a fan of BiggerPockets, I strongly believe that investing in real estate is a great way to make money. I believe that a hardworking investor who sets up good systems and processes can vastly out-perform the stock market though real estate investing. If you’re out to make a lot of money, I assert that you’re far better off reading books, blog articles, and listening to podcast episodes on BiggerPockets (and then taking action!) than you are researching stock picks.

How I Pick Stocks

Having said all this, I’ll admit that I do some stock picking. Why? Because it’s fun.

There’s something thrilling about the fact that my investment in Virgin Galactic (NYSE:SPCE) is still up 257.12% today even though the rest of the market is way down. Unfortunately, that great pick is being dragged down by my shares in LYFT that have done nothing but sink since I bought them. Because…

…93% of the pros do worse than the market average. I lack their expertise and my picks stand a decent chance of being even worse than theirs, despite my unfair advantages.

And yet, I have shares of few companies that I think will go up over time. Instead of wasting all my time and energy on picking stocks, and risking all of my family’s savings on my inexpert abilities, I’ve chosen to give myself a sandbox to play in. I have a section of my Roth 401K set aside for stock picking. I allow myself to buy and sell whatever I want in there, knowing that I could potentially lose it all.

To mitigate that risk, I only gave myself a small portion of our overall savings to play with. I recommend the average investor like me allows a maximum of 5-10% of your total nest egg for stock picking. This way, if you make a dumb choice and lost it all, the loss isn’t catastrophic. If you pick a home run, it’ll be a nice boost overall.

I’ve found that this little sandbox satisfies my (probably irrational) desire to pick stocks and see if I can outsmart all the big hedge funds and the market at large. Overall, I’m doing about as well as my holdings in FXAIX, plus or minus a few percentage points on any given day.

I’m doing all this trading at Fidelity where they no longer charge a fee for individual trades. I’m doing it specifically in my Roth 401K so that any profits I make don’t increase my tax burden. If your company doesn’t offer a Roth 401K, you could do the same thing with a Roth IRA account.

Do You Have Unique Expertise?

A few moments ago, I blithely assumed that none of us has enough expertise to out-perform a pro at a big investment firm, but I don’t think that’s universally true.

I think most of us probably have quite a bit of expertise in our chosen profession. I’m a pilot, and specifically an airline pilot. I guarantee that I have some very unique insight into my particular company that no bean-counting analyst could ever obtain. I believe that between my network of airline pilot buddies and my first-hand understanding of our industry, I can make some pretty good calls about other companies in our industry too.

Want an example? When two 737 MAXes crashed, killing hundreds of passengers, Southwest Airlines stock tanked. I don’t work for Southwest, but I think they’re a great company and I understand how and why they’re profitable. (I still think my company is better.) I bought some Southwest stock believing that Boeing would get the MAX back into the air (they have) and that Southwest would go back to being the profitable powerhouse it always has been. (That hasn’t happened yet, but when it does, I expect a pretty decent ROI for that little corner of my little sandbox.)

I’m also a tech guy. I have a degree in Computer Engineering and I’ve made real money selling apps on Google and Apple app stores. I’ve been known to buy shares in a few select tech-related companies based on my knowledge. Again, that’s only a small part of what amounts to 5-10% of my overall nest egg. Am I likely to get rich off those picks? No. However, picking those stocks scratches an itch, and keeps me from making bad decisions with the rest of my money. In the meantime, most of my money is making my rich by sitting quietly in low fee index funds.

Final Strategy

If you’re going to pick stocks, limit it to a small part of your portfolio. Invest where you’re strong – where your education and experience give you unique insight. Take advantage of your unfair advantages, and try to invest in places where making a profit from short-term trades won’t cause you tax issues.

However, I recommend you spend the overwhelming majority of your time on something other than researching and picking stocks. At worst, work more at your primary job or scale your side-hustle. Better yet, spend more time doing things that you love – things that bring lasting happiness into your life. Spend time with your friends and family.

I promise that on your death bed you will not say, “I wish I’d bought more shares of TSLA at $240!” Personally, I’d rather be able to look back with contentment and pride knowing that I had love and been loved by people that matter…and that I’d spent my life enjoying time with those people.

Put most of your money into low fee index funds and forget about it until you need it. The Shockingly Simple Math says that this strategy will help you reach FI. Let that be enough and spend the rest of your time and energy on things that really matter.

PMTB on White Coat Investor

I just had the privilege of appearing on Episode 186 of the White Coat Investors podcast. Check out yours truly spreading the message of Pilot Math with someone who’s been helping high income professionals fill their own Treasure Baths for years!

Jim Dahle, the WCI, has a truly impressive ecosystem of content aimed at helping hard-working high-income individuals get a fair shake on Wall Street for a long time. It was great talking to him, and he had a couple questions that I couldn’t answer entirely to my satisfaction. I’m looking forward to following up on those topics to see if I can come up with some improved ideas for aviators, physicians, and others.

Do you have another favorite podcast that would be a great place to talk about Pilot Math? Leave a comment and let me know!

The Unspoken Hypocrisy of FIRE

I’ve tried writing this post more than once, giving up each time. It’s tough to do this subject justice while remaining tactful. I’m not surprised that everyone else seems to have avoided it as well. I’ve been dying to write it though, because I think this is an important discussion for the FIRE community. If my attempt at starting this discussion is imperfect, please look past my meager writing and try to consider the topic at hand.

We’re going to question a lot of beliefs today. Many of our questions don’t have clean, easy answers. I think some of them are beyond our ability to answer. Personally, I’m okay with this. The world isn’t black and white, and it’s okay to do the best we can with what we have. However, we must accept the fact that thinking through all of this is going to make us uncomfortable.

As humans, our natural instinct will be to defend ourselves when we start to hear these questions and feel this discomfort. Your next inclination will be to attack the person asking the questions that cause those feelings. I know because I’ve been the uncomfortable person doing the attacking many, many times.

Please resist that urge though! If you get lost defending yourself or attacking me, you’ll miss out on an important opportunity. I think that every single person pursuing FIRE should at least consider what we’re discussing here today. I believe your life will be better if you do that. I believe you’ll find better, more fulfilling, and more efficient ways to pursue FIRE if you give these ideas due consideration.

And with that, let’s move on.

The idea of FIRE, reaching Financial Independence and choosing to Retire Early, is a great aspiration. (I prefer to focus on the FI part because there’s a lot of unnecessary drama over RE.) I believe our world would be a far better place if more people pursued this idea.

I think the very label of Financial Independence highlights the guiding principle of this movement: the idea that each human being can and should support itself.

The FIRE movement seeks to attain that state by reducing our spending, investing our savings wisely, and finding ways to increase our income for savings…all while trying to maintain a happy, balanced life.

I get a little frustrated when I see people over-focusing on the “reducing our spending” part of that. Many of us go way beyond frugality and dive into deprivation. I think this is the wrong way to do it. FIRE is not a short process – there are no get rich quick schemes. I believe it’s too difficult for most people to intentionally live in deprivation for the amount of time it takes to reach FIRE. I think someone trying too hard on this front will either end up quitting, or cause significant damage in their relationships or other parts of their lives. Mr. Money Mustache wrote a great post about this distinction.

If you’re capable of living a life of deprivation while pursuing FIRE, good on you! I wish you all the best and I hope some of what I write will help you. However, I hope the most extreme frugalists will be careful not to push their ideas on others too energetically. People in our world are increasingly vulnerable to social pressure. While this can make any one person a force for good, I’m afraid most individuals’ progress toward FI is tenuous enough that you’re more likely to scare them off than convince them to be like you.

Speaking of being preachy, if you spend any time around the FIRE movement you’ll hear a lot of rebelling against the rampant consumerism in our world. I think this is great! I believe that many of our world’s financial and social woes come from mindless consumerism. I think the pursuit of FIRE is more than a lot of people are willing to bite off; however, I think we can do a lot of good even if all we do is get them to step back and look at the damage consumerism causes in their lives.

As great as it is for us to preach against consumerism, but we’d better be careful.

It seems to me that most people who discover FI can’t help wanting to spread the message to others. That’s awesome! However, do we need to think about our message and tone?

FIRE only works because our economy allows us to invest our money and earn interest on it. We use The 4% Rule as a rule of thumb. Throughout the history of the stock market, a person who only spends 4% of his or her investment account balance has an extremely high chance of being able to continue spending at that amount for at least 30 years without running out of money. In most cases, that money lasts even longer than 30 years. This does account for inflation, but doesn’t account for an individual choosing to spend less than 4% in tough years or continuing have some type of income after giving up mandatory full-time work.

We’re lucky that 4% is a very conservative number. It leads us to some Shockingly Simple Math that shows how it can be relatively easy for any person to reach FIRE.

However, we need to ask a question: Why can we feel so confident in this 4% number?

Although there are endless ways for us to invest, the most common is buying low-cost index funds. This is definitely the simplest way to invest. It’s so simple, in fact, that JL Collins wrote a book on this subject called The Simple Path to Wealth.

Historically, the stock market has averaged more than 11% Return on Investment (ROI.) This is fantastic! When I wrote Pilot Math Treasure Bath, I dropped that number 3% to account for inflation, and then took another 3% to be conservative. Even at the resulting 5% ROI, I calculated that it’s possible to reach FIRE in a shockingly short amount of time.

But, why does the stock market offer such impressive returns?

Stocks don’t gain value because a company maintains the status quo. Stocks gain value because companies sell more goods or services and make more money as time goes on. In fact, what really drives stock price lately is a number called Earnings per Share, or EPS. Publicly traded companies have to report this number quarterly. If a company’s actual EPS equals or exceeds an EPS estimate selected by analysts, their stock price is likely to rise. If actual EPS fails to meet estimates, that stock price is all but guaranteed to drop.

(If you want a fascinating read on this topic, check out a book called The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America, by Alex Berenson.)

Now, my FIRE friends: What is the only way for a company to make more money quarter after quarter, and year after year?

Sadly, the answer is consumerism. Companies only make more money by convincing the public that they need to buy more stuff. Much of this stuff is nice, but not necessary.

Apple makes good products, right? (I’m typing on a 9-year old MacBook Pro right now.) Nobody needs a new iPhone, iWatch, iPad, and Mac every single year, but Apple does their damndest to convince people to buy them anyway. And with each year’s new release, there are lines of people outside Apple stores and millions of online preorders for Apple’s devices.

Apple is wealthy because of our world’s rampant consumerism. You’re welcome Mr. Cook!

Many of us deride people for their Apple addiction. We buy Android, Windows, or Linux products that do as much as Apple’s, if not more, from a variety of manufacturers at drastically lower prices. However, we still benefit from the ridiculous consumerism that surrounds Apple, don’t we?

How many of us hold shares of AAPL and love the fact that it’s trading at $361 today? Even those of us who prefer the simplicity of index funds benefit from this ridiculous cultural phenomenon. Our very own sacred cow, VTSAX, is a whole-market index fund.

Owning VTSAX is owning Apple.

Owning VTSAX is also owning Amazon, Johnson & Johnson, Coca Cola, Verizon, and all the other companies in our country that only exist and thrive thanks to rampant consumerism.

Do we realize that every time we rail against consumerism, we’re railing against the very goose laying our golden eggs?

Do you see any hypocrisy in that?

How is the FIRE movement’s relationship with the goose laying all it’s golden eggs?

Like I said, I’m not trying to reach a resolution around these questions. This thought should make us uncomfortable, but I don’t think we should feel obligated to completely alleviate that discomfort. I think the discomfort is a good thing. I think we need to realize and acknowledge the fact that our good fortune exists because of others’ consumerism. I wonder if, perhaps, we should consider being a little more thankful for all those consumers. Ideally, I think this discomfort could drive us to set some long-term goals for the FIRE movement.

This brings up a question that I see about once a month in groups like ChooseFI and BiggerPockets Money: What would our world be like if everyone lived by the principles of FIRE?

If every single person on the planet embraced frugality and tried to save 50% or more of their income, our current economy would collapse. There might still be demand for expensive goods, from people who had achieved FI and wanted to spend excess money on nice things. However, without hundreds of millions of people trying to keep up with the Joneses, many companies would just plain go bankrupt.

This would mean lots of job losses and a big stock market crash. Even going forward, without businesses constantly expanding, overall market returns would not be nearly as large as they have been. The 4% Rule might quit working altogether.

Honestly, I don’t think this scenario is realistic. Even if the FIRE community flooded social media with envy-inspiring images of how great life is in FIRE, consumer culture seems so entrenched that I doubt we could convert more than a couple percentage points of humanity, let along the whole world.

Even if it did happen, I think we’d eventually figure out an equilibrium where our economy could function. Mr. Money Mustache wrote a great post about his ideal design for a city. His idea is basically a society where each person spends 10-15 years working hard, then retires to a life of meaningful living. I think this ideal could work. With such a small portion of the population working full-time, I think we could keep them busy and their companies profitable providing for our basic needs (food, clothing, housing, etc.)

Spending needs would be lower in this society, so maybe a Treasure Bath deep enough to work with the 4% Rule in our world of consumerism would work with a 2-3% rule in a Mustachian utopia.

However, we have to admit that the transition from here to there would be brutal. It would result in many years of chaos, and would require a complete redesign of our economy and our society. It could only work if we convinced the vast majority of humanity to live by the FI movement’s principles.

So, although we get to live great lives once we’re freed from financial insecurity and the drudgery of mandatory full-time work, we have to realize that our success is fueled by people who suffer from that same insecurity and drudgery every day. And if we actually wanted to bring all of them into our fold, it would cause worldwide chaos.

For me, this is just the first major hypocrisy of the FIRE movement. Let’s look at another.

One of the Pillars of FI is frugality. From efficient meal planning and shopping, to sniffing out free entertainment, to just redefining what holds meaning in our lives, the people of the FIRE movement have become masters at finding ways to enjoy life without having to spend a lot of money.

Another Pillar of FI is reducing our tax burden. We debate endlessly how to fund our tax-advantaged retirement accounts, and then how to get the money back out of them in time to be useful.

The Mad Fientist wrote one of the most efficient explanations of how to access money in retirement accounts I’ve ever read. He also wrote about how an HSA can be a treasure trove of money, upon which a person never has to pay any taxes. Justin, who writes on Root of Good, has a famous article explaining how he only had to pay $150 of taxes on $150,000 of income. Jeremy, of Go Gurry Cracker, has a famous post about how to never pay taxes again.

On one hand, I think these posts and those like them are brilliant! As long as your laws allow you to pursue strategies like this you absolutely should!

However, this leads to some more uncomfortable truths for us to consdier.

Frequently, when you see a post or comment about how someone effectively (and correctly) reduces his or her tax burden, there’s usually a post or comment nearby about all of the free government services people use.

People in the FIRE movement love the library…for good reason. The average library can potentially provide hundreds of thousands of hours of entertainment and learning for “free.” (In this case, “free” means “the money you pay in taxes.”)

For the average citizen who doesn’t try to optimize anything and pays a lot in taxes, this is a pretty good deal overall. But, isn’t it a much better deal for members of the FIRE movement who pay little or nothing in tax?

The FIRE movement loves parks as “free” entertainment. Those parks are frequently kept up by the government, and funded with tax dollars.

Mr. Money Mustache has identified riding bicycles as a foundational principal in his philosophy. He rides them on city streets, and on city- or state-funded bike paths. Even his ideal Mustachian community would have sidewalks and paths large enough for bicycles. I can only assume that his vision has members of the community contributing to the creation and upkeep of those thoroughfares…with taxes.

This is a pretty nice bike path. I wonder how many tax dollars it takes to build and maintain something like this.

Many of us use real estate investing to help diversify our risks and potentially increase our returns. How many of us consider crime rates and police presence in the area when deciding whether to buy a property? How many of us rest a little easier knowing that we’re protected from the worst possible tenants by police who will enforce an eviction?

How many of our investment properties are insured against catastrophes like fire, in part because the insurance companies know a nearby government-funded fire department will keep fires from spreading out of control?

How many of us sleep easier at night in our own homes knowing that we can call on police or firefighters to protect us?

We generally scoff at the idea of private school. “Why would you pay more than the Root of Good family spends in a year just for elementary school tuition when your kid can attend public school for ‘free’?” If we live beyond walking or biking distance, do we put our kids on publicly-funded school busses in the morning?

College is expensive. Many people within the FIRE movement put great effort into “Hacking the FAFSA” to get government grants and/or cheap loans to help pay for college. The “hacking” aspect of this comes from the fact that most of us make a lot more money than we get taxed on. We’re trying to use every loophole possible to make it look like we’re poor…even though we may be well on the path to FI.

We’re a long way from solving the problem of health care in our country. Many of us benefit from provisions in the ACA that get us coverage despite pre-existing conditions, or reduce our costs. Many members of the FI movement rely on government subsidies to get any health care at all. Personally, I’m okay with this on some level. I believe that we’re better off funding as much preventative care as possible. It costs us far more to have uninsured people show up at the emergency room for conditions that should never have led there. And yet, do any of us honestly think that the ACA subsidies were intended for people in the double comma club?

I could keep this up all day, but maybe I’ve made my point?

It is good that we benefit from all of these “free” services. However, we must admit to ourselves that they aren’t actually free. They’re all funded by tax dollars. For those of us who do everything in our power to legally avoid paying taxes, are we getting more than our “fair share?”

What do you get for “Free”?

What if these services were all privately owned? Do you know any teachers? They work very hard, doing an incredibly important job, for relatively little pay. I wonder how many members of the FIRE movement have advocated to increase teacher compensation while also doing everything we can to pay less in taxes.

Would you walk into a bookstore and take a bunch of books home without paying for them?

If you wanted to borrow some money from your parents or a friend, would you intentionally make it look like you had less money than you do to convince them to help you?

There are schools of thought, to which you maybe belong, that would label most of these actions dishonest. In some cases, they’d look a lot like stealing.

This makes me very uncomfortable, and I hope it has a similar effect on your. Remember, we’re not defending ourselves right now. Just step back and consider your position on this.

Do you know someone less wealthy than you? Maybe they spend their money stupidly, but maybe they also work hard and live honestly as they try to do their best in this world. How would that person feel if you boasted what a good deal you get on things like libraries, schools, emergency services, roads, etc. without having to pay for any of it in taxes, despite having a higher income and net worth?

I still think it’s okay to pay as little as possible in taxes. As an Air Force officer, I can tell you that the government wastes so many of your tax dollars that it makes me sick. Maybe if we all paid less, they’d have to waste less.

However, I also realize that I get a lot of benefit from the taxes I pay. I’m even unique here. I used to fly the B-1B in the Air Force. We burned roughly 2,600 gallons of fuel per hour at high-altitude cruise. We didn’t spend a lot of time in full afterburner at low altitude. Part of the reason is that we would have broken every speed limit in the book. Another part is that our fuel flow was closer to 44,775 gallons per hour in that configuration!

My old ride. Yes, she’s every bit as fast as she looks.

I also got to teach Air Force pilot training in the T-6A. It is one of the most fun aircraft I have ever flown. I enjoyed every minute of flying I got to do in the Air Force. I realize that my lifetime tax bill probably won’t be enough to cover my use of roads, emergency services, and public education resources…let alone a portion of the flying I enjoyed in the military.

Is it morally good for us to take advantage of so much that we don’t pay for?

Yours truly cruising in a T-6A. I don’t know if I’ve ever had a better office.

Another key principle of the FIRE movement is finding ways to increase our income. Many of us start side-hustles to bring in extra money. Frequently those businesses include writing blogs or books, writing software, creating videos and podcasts, and other intellectual property.

We rely on the income from our creations to help us support our families in the short-term, and hopefully reach FI in the long-term. In general, I feel like we’re proud of those around us for the things they create.

And yet, any time you get a thread of commenters discussing frugality, people start coming out of the woodwork discussing the ways they save a buck on entertainment. We borrow books from the library or get them used. Libraries pay authors for their books, but I can tell you from experience that it’s not very lucrative. Used book sales don’t benefit authors at all.

I’m also a computer programmer. I have never finished a customer-facing project with fewer than a copule hundred hours of work. More involved projects might take thousands of hours of work.

Do we value the time of other human beings so little that we aren’t willing to provide them at least some compensation for putting in all of that work?

If it were your book or your computer program, how would you feel about someone who said, “Thanks for creating that…it was great! I made sure to take full advantage of it in a way that didn’t earn you a dime!”?

To be fair, I feel like most of us who write about FIRE will reach our goals without selling you our book. I feel like most of us are more interested in you benefitting from the ideas than making a buck off you. I haven’t hesitated to give out free copies of my book to aspiring pilots who do no more than ask. I’ve never heard JL Collins complain about people checking out The Simple Path to Wealth from the library.

Still, I think this is something worth thinking about.

During these discussions, I almost always see a few people who comment that they’ve taken all this a step further. They discuss ways that they get access to books, music, movies, or other materials in ways that outright violate terms of use or border on illegal.

They share passwords to streaming video accounts. They find pirated copies of books, songs, movies, and software. If you can find these things legally, then by all means go for it! However, I was taught that taking things that belong to others without paying is called “theft.”

For me, the worst part about these comments is that the things most people brag about “getting for free” are just entertainment. Many parts of the FIRE community deride people who mindlessly consume entertainment. “If they just spent a portion of that time getting control of their finances or starting a side hustle, they’d be out of debt and financially free in no time!”

We have lots of stories justifying theft to provide food that will mean the difference between survival and starvation. Of all things, is entertainment worth sacrificing our principles over?

Is it morally right to use outright theft to reach FI?

Please understand that I’m not perfect here either. I spent years digging for ways to get free stuff. I remember my first time at an open-air market in Russia seeing tables full of CDs for $1 each and thinking I’d hit the jackpot.

I’ve mostly reached FI, and I think it’s a lot easier to take some sort of moral high ground when it’s easier to afford the things you want. Still, I think we owe it to the members of our community who work hard to produce things we value to consider how we obtain copies of their work.

I hope reading this has made you at least a little uncomfortable. I didn’t try to induce that discomfort to just make you feel bad. Instead, my hope is that it will convince you to think through some of your mindsets. This blog doesn’t have many readers yet, but I’ll admit that I hope this post will prompt some open conversations wtihin the FIRE community.

Let’s have this discussion. Over and over again. We don’t have to reach any conclusions as a group. There’s value in just mulling things over.

You may notice that I didn’t provide many answers in this post. That’s because I don’t have them. I’m not sure any of us does. I think it’s very important for us to agree that it’s okay for these issues to continue being unresolved.

I’m a big believer in individual rights and individual decision-making. I don’t think any unified, overarching set of answers to all of this could be effectively enforced on all of us anyway. Like the Oracle always says, each of us just has to “make up your own damn mind.”

And yet, I believe there’s value in having this discussion publicly. I don’t presume to be the smartest person around. I hope to hear opinions of others that both support and oppose my ideas. I believe that each of us can reach a better conclusion by listening to both sides.

So please let me know what you think.

  • Is it okay to deride consumerism when that is exactly the force that makes FIRE work for us?
    • Is there a way to adjust our attitudes toward consumerism to acknowledge our inherent hypocrisy while still pursuing FIRE?
  • Is it okay to maximize our use of taxpayer-funded services while doing everything we can to avoid paying taxes?
  • Is our quest for frugality driving us to obtain others’ work through morally questionable sources?

Thank you, sincerely, for reading this today. Thanks in advance for sharing your thoughts.

Image Credits:

I got this post’s feature image from Mahmudul Hasan Shaon on Unsplash. Thanks and fantastic work!

The image of FinCon speakers is from a Teachable course offering videos from past conferences. I haven’t taken the course, and I’m not affiliated with it at all. You can find it here:

The golden eggs are from a photo by Sharon McCutcheon on Unsplash.

The FREE concert is a photo by William White on Unsplash.

The image of Tim Cook is from this USA Today article:

The French bike path is a photo by Grillot edouard on Unsplash.

The B-1B photo in the post is from: You can see it and a bunch of other “free” (taxpayer-funded) military photos on that site.

The fireside discussion is a photo by Tegan Mierle on Unsplash.

Escape Plan FIRE

For all intents and purposes, my family has achieved FIRE. This is why I finally have the time and resources to work four jobs.

Yes, you heard that right…I guess. My wife either jokes, complains, or humble-brags about me having four jobs as it suits her needs.

I know the Internet Retirement Police are probably already on their way. According to them, a person isn’t allowed to be “retired” if he or she still does even a single moment of work. You may have noticed that I’m a pilot, which means that I could care less what the IRP (or anyone else) thinks.

I think the Financial Independence community gets too wrapped up in phraseology, and seeks out dogma in a movement that is as individual as it gets. If having investments equal to [25 x Annual Spending] constitutes FIRE, then what constitutes Lean FIRE or Fat FIRE? I say, who cares?

I also think it’s unfortunate that “Retire Early” makes such an accessible acronym when coupled with “Financial Independence.” If there’s one thing we can learn from the early leaders of the FIRE movement, it’s that society’s idea of retirement is overrated. Nobody can sit around the house all day binging Netflix, or even sipping margaritas on the beach. People need more fulfillment from life.

We’ve seen how the Mad Fientist and his wife abandoned their original plan that involved at least 6 months of travel each year. They realized that they value community and productivity that they can only get at home. The Financial Samurai recently announced that he “failed” at retirement, and planned to return to a regular-ish job. Even the great Mr. Money Mustache has continued pursuing commercial activities that include running a highly-profitable blog and a co-working space so cool I’ve tried to convince my wife she’d love living in Longmont, CO.

None of these people leads a life that society at large would define as retirement. And yet, none of that takes away from the only fact that matters: whether they work or not, their investments will cover their families’ needs forever. (Well, I’m not sure about the FS. He makes it seem like he needs more money. I say he could move almost anywhere else on Earth and be just fine.)

This is all that really matters in the FIRE movement. Does the passive income from your investments cover your family’s needs forever? If so, you’re FIRE. Done.

My wife and I both continue to work because we find fulfillment in our jobs. If I were to describe my ideal retirement (by mainstream standards) it would include owning or having access to a variety of aircraft. I’d wake up in the morning and go fly one for a while. I’d probably land long enough to eat lunch, and then go back up again. I love flying like some people love golf, or knitting, or watching TV. Flying for me is both fulfilling and fun.

I could certainly make sure that my nest egg is large enough to cover the cost of operating an aircraft or two. I guess we’re probably there anyway. However, given the choice of paying tens (or hundreds) of dollars an hour to fly my own airplanes, or letting other people pay me hundreds of dollars an hour to fly their airplanes, why not spend a few hours “working” here and there?

I don’t plan to share the specifics of my family’s finances here, but I’ll admit that we spend far more than the Root of Good family or most of my other favorite FIRE bloggers. We feel comfortable spending at our level because our jobs pay well. However, COVID-19 has recently reminded us that even our fantastic jobs aren’t guaranteed.

I’m an airline pilot, and our industry is getting pounded right now. I’ll almost certainly get “displaced” from my cushy Captain seat and forced to fly as a First Officer again in the next few months. This will entail about a 40% pay cut. I’ll be lucky if that’s as bad as things get. I’m also potentially vulnerable to a furlough that would reduce my pay to zero.

My wife is a pediatric dentist. Her office has been shut down for a couple months. They finally have approval to open back up, but they can’t get their hands on any N95 masks. (Thanks to all the hoarding heroes who have been wearing medical-grade masks to the grocery store and to collect takeout from restaurants.) We hope she’ll be able to work for pay again someday….

What if it didn’t happen though? What if my wife and I lost both of our jobs, and our ability to find equivalent work forever?

It’s extremely unlikely that all four of those things would happen, but I think the thought experiment is worth going through.

First off, we have enough in our investments that we could cover our spending needs through passive income. This probably includes spending more than we strictly need to right now, and owning a fancier home than any self-respecting personal finance writer should. I think we’re both conservative enough that we’d look at ways to cut costs if we both lost our jobs.

We also happen to own a house in Rapid City, SD. It’s an accidental rental property. My wife bought it when she arrived for her first operational Air Force assignment and we couldn’t afford to sell it when we she left two years later. (Note to Active Duty military members: don’t ever buy a house when you PCS, unless it will make sense as a profitable rental property. Ideally, it should work as a house hack while you’re at that assignment.)

It’s a great house. It has 4 bedrooms, 2 1/2 bathrooms, a 2-car garage, and a nice yard on a big corner lot. It’s walking distance to the nicest elementary school in town, biking distance to a grocery store, and 5-15 minutes closer to Ellsworth AFB than most of the houses in town.

A simple, but wonderful home.

Since this house has been a rental for the last 12 years, we have quite a bit of equity in it. In our absolute worst-case scenario we could pay that house off, pack up our whole lives, and move to Rapid City.

This would take a necessarily dire situation. We Florida, sunshine, and warmth. I’d have to convince my family that it’s fun to have our house occasionally look like this:

Note the visible grass. These drifts happened because of wind blowing the snow around, not because it was that deep everywhere.

We’d definitely try to sell our current house in Florida. We have some decent equity in it, and we’ve used our high incomes to increase its value. We’d definitely get enough cash from this sale to pay off our Rapid City house. Optimistically, we’d have enough after that to cover living expenses for a while.

If we got scared and only broke even on selling our Florida house, we could still pay off Rapid City. We started a house payoff fund last year, and it has almost enough to pay off the Rapid City house right now. Worst case, we could sell some of our other investments to come up with the rest of the cash we need.

It’d suck to uproot ourselves and move away from here. Thankfully though, we still have friends in Rapid City and we could fit in there as well as we do in Tampa.

Once we got there, our cost of living would plummet without even trying hard. First and foremost, we would have shed a larger-than-necessary mortgage by selling our Tampa house. By paying off our Rapid City house, we’d eliminate any mortgage payments there. With nothing to worry about but taxes, insurance, maintenance, and utilities, we’d save a lot of money right away.

With neither of us working, there’d be fewer meals out. (I do a lot of restaurant dining as an airline pilot.) Neither of us works more than about 10 days per month, but we’d still save costs on commuting. In fact, we’d have no need for a second car and could slash expenses by selling one.

We’d go further though. I’m close to convincing my wife to cut cable out. Google FI is already cheap, but spending less time at work would mean using more wifi and less cellular data. If we were making a change as drastic as moving across the country, we’d get more diligent about meal planning. I’d also feel compelled to go full Mustachian for transportation and only ride my bicycle to places like the grocery store.

After the initial shock, I think we’d end up pretty happy with the situation. I feel like we have a lot of fluff in our lives that doesn’t need to be there. Moving in this context would naturally get rid of a lot of it. We’d have lots of time to spend together, and lots of time to pursue other interests. It’d be a lot like our daily lives right now, stuck at home not working because of Coronavirus.

With our investments strong enough to support most or all of our spending level in Tampa, we’d be very fat FIRE at our reduced spending levels in Rapid City. If we wanted to we could just enjoy our unemployment: hiking and rock climbing in the Black Hills, running and biking around town, skiing in the winter. It’d be glorious.

The Needles, as seen from the fire observation tower atop Harney Peak, the highest point between the Rockies and the Pyrenees. I could do a lot worse than spend the rest of my life wandering around the Black Hills.

However, I’ve mentioned that I don’t think it’s realistic for anyone to live a life of total leisure forever. My wife and I are both driven enough that I don’t think either of us could last without pursuing some type of meaningful, paying work.

This isn’t a bad thing. My first instinct would be to pursue flight instructing. Losing my job as an airline pilot could be the result of factors that would also prevent me from doing other commercial flying, but let’s ignore that for a moment. I taught and towed gliders at the Black Hills Soaring Club last time I lived there. I’d definitely offer my services. I was also a mission and instructor pilot for the Rushmore Composite Squadron of the Civil Air Patrol. That’s a volunteer gig, but it’s fun and very rewarding. It also involves cheap or free flying and would be a good way to enjoy doing what I love.

Flying BHSC’s LET-13 with my all-time favorite and most attractive passenger.

Beyond those opportunities, I’d look for flight instructor jobs at schools in the area. As a former B-1 pilot, I could potentially get a job as a simulator instructor at Ellsworth AFB. (I could also pursue Air Force Reserve jobs as a B-1B or MQ-9 pilot at Ellsworth. I think they’d be a lot of work, but it’s nice to have options.) I also flew a lot with an FAA Designated Pilot Examiner when I lived there. I have the qualifications to do that job now, and I’d seek his advice on how to do that job. The FAA has a DPE shortage right now, and I figure I could easily make $600-1000 per day in that job.

Those are all nice, local flying opportunities. Assuming we only had to move there because of our current employers going under, I’d eventually be able to search for a fancier flying job with an airline, charter operator, etc.

That’s a lot of flying job opportunities, but I could also pursue paying opportunities outside of flying. I’ve been doing paid writing for a while, and I would definitely look for opportunities to do more. My first book is selling well, and I have no shortage of ideas for more books. In theory, not having a day job would free up time for me to get those projects done.

My wife and I also have several ideas for businesses we could start from anywhere. With the security that comes from having our basic needs met, we’d feel confident trying to make one or more of those ideas work.

I could go into more detail, but I think this gets the point across.

In case of dire catastrophe and total job loss, we’d be okay. We could:

  • Sell our fancier-than-necessary house in Tampa and move to a home we already own in Rapid City.
  • We have several different ways to pay off our Rapid City house.
  • Our Treasure Bath is deep enough to support our current spending. However, between no mortgage, no job-related spending, less commuting, and other cost savings, we’d slash our spending requirements.
  • We’d have plenty of time to enjoy a simple life together. However, there is no shortage of job prospects if we chose to pursue fun and meaningful employment.

Don’t get caught up in someone else’s definition of Financial Independence, or worry about whether or not you meet some arbitrary criteria associated with an acronym like FIRE. The labels and checklists don’t matter. All you need to care about is whether your streams of passive income can cover your family’s spending needs.

If they can’t, follow the well-established steps to reduce your spending, increase your income, and save everything in between. Your choice to do this is entirely in your power. Once you start, it is only a matter of time before you reach FI. As far as I’m concerned, it’s a shockingly simple mathematical certainty.

When you reach the milestone of FI, you can celebrate. However, that doesn’t mean you need to make any changes in your life. If your investments covered your spending yesterday, then as long as you don’t increase your spending tomorrow you’re still good. At that point, every dollar you earn is just gravy on top of everything…extra Treasure spilling over the edge of your Bathtub. If you enjoy that work, keep doing it until you don’t! If not, you have the freedom to make a change.

If you choose to keep working, you’ll have the option of increasing your spending. We have, but we still aren’t going crazy. We certainly aren’t committing ourselves to any long-term spending burdens. We’ve thought through our options in case this income goes away…and ended up with this FIRE Escape Plan.

Now it’s your turn. Is your Treasure Bath full, or close to it? If so, what’s next for you? If you choose to keep working and/or increase spending, whats your Escape Plan?

Full Text – Chapter 8, Dead Zoners

What follows here is the full text of Chapter 8 from Pilot Math Treasure Bath. Having just read back through it, I feel more disappointed than vindicated that I was correct to include this chapter in my book. I’m giving it to the world for free here because I’m afraid COVID-19 is going to turn far too many of us into the equivalent of Dead Zoners before the end of the year.

I want you and your friends learn from the mistakes of the past. I want your family to make it through this time with less stress in the near-term, and certainty of a bright future. I firmly believe that if you pay attention to and follow my advice, your family will make it through these tough times better off than most.

If you find any of this useful, I think you’d benefit from reading the rest of my book. It’s available as a paperback or Kindle eBook on Amazon, and on Kobo. Now, without further ado…

This book exists because the state of our industry fills me with optimism. US airlines are expanding, retirements are looming, pilot supply is insufficient to meet demand, and our world is addicted to air travel. All of that is good news for someone starting out a career as an airline pilot.

Sadly, history shows that I need to spend at least a few moments trying to temper my unrelenting enthusiasm. All it takes is one bad day to go from what we have now to a really terrible decade in this industry. Whether we are talking about health scares, a financial crisis, or a major terrorist attack, there are numerous threats to the good life that we enjoy.

Should something cause the music to stop, we could all find ourselves in a very different environment. If (or perhaps more likely when) this happens, it will affect the way we employ Pilot Math. I’m going to start illustrating this by using the current generation of “deadzoners” as an example. Here’s today’s history lesson:

At the end of the 20th century, the US economy was booming. The dot com bubble was still inflating, deregulation meant that airlines were free to figure out how to actually make money, and airline pilots were still treated with deference. Times were fantastic!

Pay rates for a senior widebody captain were sky-high. In today’s dollars, they were in the ballpark of $600,000 per year, or more. In addition, every major airline had a pension fund that promised to pay 60% of a pilot’s Final Average Earnings (FAE) for the rest of his or her life. During their working years, pilots spent money like it was going out of style, knowing that they’d still be pulling in more than six figures every year in retirement. Nobody saved for the future because there was no need…60% FAE is a lot of money!

Tragically, a lot of bad things happened in relatively rapid succession.

The first problem was Uncle Sam’s fault. Congress wrote tax law to allow pension plans like those the airlines used to offer. The IRS allows companies to contribute pre-tax money into these funds. That tax treatment is supposed to incentivize companies to do the right thing for their people. Make no mistake though, neither IRS nor Congress wants to give up a single dollar of tax income if they don’t have to. They can’t afford it. (Someone needs to explain Pilot Math to the US Government.)

In theory, a company like an airline should contribute more money into a pension fund than is required to meet their payout obligations. This would protect against a market crash. It would be the morally correct thing to do.

Companies don’t want to tie up a bunch of money in a pension fund, but I think many of them would have chosen to fund their plans a little better if they could have. The problem is that he IRS won’t let this happen. They only allow a company to put enough capital into the fund to meet payout requirements, after accounting for accrued interest. It’s a very count-your-chickens-before-they-hatch situation. There are specialists called actuaries who do the chicken counting. They gaze into mathematical models equivalent to crystal balls, decide what kinds of investment gains a pension plan can expect, and tell a company how much cash it’s allowed to put into the pension fund each year.

The IRS watches this process very closely and only allows a pension to be “over-funded” to a certain level. If the company were to over-fund to an even higher level, perhaps expecting bad times ahead, the IRS would accuse the company of tax evasion and start arresting people.

As we just mentioned, the stock market was on a tear through mid-2000. It was called the “Dotcom boom” until it became the “Dotcom bubble” then the “Dotcom bust.” Over several months, the stock market experienced one of the largest drops in history. Companies went bankrupt, investors lost billions.

Suddenly, all the pension plans that had been anywhere from healthy to legally over-funded were in trouble. The value of the assets in which they were invested wasn’t even enough to pay out their obligations. The retirees drawing on the pension fund continued to decrease the principle available, exacerbating the situation.

As companies looked toward the future, it was mathematically impossible to fulfill all their pension obligations without huge cash infusions into those funds. The problem was that in the crashed economy, spending on air travel had dropped and the airlines weren’t making enough money to do that. It didn’t help that they were still trying to figure out how to make money in the first place, with deregulation not that far in the past.

Then things got worse.

Some evil men corrupted the minds of some religious zealots and used them to crash airplanes into the Twin Towers and the Pentagon…and the world panicked.

Commercial airlines resumed operations fairly quickly after 9/11, but it took a long time for the American public to feel comfortable flying again. The problems that the Dotcom Bust was causing for the airlines only got worse.

Many deadzoners will tell you that airline executives jumped with joy when this happened. There was simply no way they could continue to meet their pension fund obligations in this environment. The cynics say that the airlines used this situation as an excuse for getting rid of the pension plans altogether. I have no way to know if this was the case, but it doesn’t matter. It doesn’t take a math genius to realize that the economics of this situation left companies with no choice.

A series of bankruptcies preceded a series of mergers that left us with three major airlines (Delta, American, and United) and Southwest as the fourth major domestic player. As part of those bankruptcies, the US Government allowed these companies to simply give up on trying to fund their pension plans.

Some companies got to “freeze” the plans. The funds would remain invested and each pilot would get a payout when he or she retired; however, the company didn’t have to contribute any more money to the plan.

Other companies had to fall back on the Pension Benefit Guarantee Corporation. The PBGC is a government-run insurance agency just for pensions. Airlines (and other companies) had been paying premiums to the PBGC, and it had in effect insured their pension plan. The problem here is that, as with most insurance policies, the benefits the insurance company paid out weren’t anywhere near what had been promised. Most pilots who will receive PBGC money in place of their expected pension will receive pennies on the dollar for what they were promised. Many will receive even less.

This was a rough time for the entire industry. The mergers and bankruptcies continued for the better part of a decade. It didn’t help that SARS, bird flu, swine flu, and the 2008 financial crisis continued to…uh…challenge…the airlines throughout this time.

Another part of the bankruptcy process involves cost-cutting measures mandated by bankruptcy court. At my company, management told the pilots that they had to take a large pay cut if the company was to survive. The pledge was that they were only going to cut pay once. It’d be a huge amount, but it do the trick. The pilot group accepted reality and voted to approve the cuts.

Shortly thereafter, management came back and said that the pilots would have to take another pay cut if they wanted the pension plan to remain solvent. In the end, the pilots accepted nearly a 50% pay cut…and lost the pension anyway.

Naturally, with times this tough, everything scaled back and many pilots were furloughed. The ones that survived furloughs were stuck with almost zero progression for years. Every pilot at Delta Air Lines knows the name of the guy who was at the bottom of the seniority list during these years because he was stuck there for a decade!

Before the pension finally died, the company offered early retirement to many pilots. Take a lump-sum or a reduced payment now and you still get your pension, or you can stick around for a few more years and roll the dice. Many pilots took the early out, for better or for worse.

However, most pilots weren’t eligible for that golden parachute, and had no choice but to stick things out. These are the deadzoners – the pilots who were employed at a major airline the day it went bankrupt. They lost their pension, but unlike us, they have less time to use new 401K plans to build up retirement savings. They were immediately behind the retirement savings power curve because they’d lived the last decade (or two or three) thinking that they didn’t need to save. They’d always had a pension to look forward to.

Today’s deadzoners will tell you that their companies could have preserved their pension funds. Some of them accuse their companies of intentionally pushing things toward bankruptcy. We’ll never know if those accusations are true or not, but we do know that the current generation of deadzoners will never be “made whole.”

I feel bad for them. I wish there was more we could do for them. I would even support policies that paid them a little extra at my expense because I realize that I would not have the great job I do today if not for their sacrifice. We’ll see if our companies and our pilot groups have the creativity and moral backbone to make that happen.

When I look at our industry today, I can’t help but perceive a shadow of doom looming over my sea of optimism. Pay and benefits are high. The economy is booming. People are happy. All it will take is one bad day and we could find ourselves hurting, much like the deadzoners.

Thankfully, few airlines still have a pension, so none of us has been deceived into thinking that someone else will take care of retirement for us. Anyone starting at a major airline these days has plenty of time to take advantage of 401K plans and other savings to put away enough to enjoy a comfortable retirement. However, if things were to go bad and we saw another round of 50% pay cuts, the Pilot Math equations would get out of balance very quickly.

I hope that this doesn’t happen. I hope things will stay good for a very long time. However, we need to be realistic about the fact that things could go wrong. If they did, we’d each have to take some significant action.

One of the reasons the term “deadzoners” even exists is that they can’t help telling everyone they meet about how badly they got screwed. In their defense, they did get screwed. Unfortunately, as many of them approach retirement, they’re starting to worry that they’ll run out of money before they die.

I feel terrible for that generation of deadzoners. I hope they’re taking advantage of these good times to make up as much of their shortfall as they can, within reason. Unfortunately, some of them spent too long clinging to hope of a restored pension and failed to take the action necessary to protect their families financially.

Poor Old Joe falls into this group. When his company went bankrupt and he took his massive pay cut, he had just closed on a gorgeous “captain’s house.” This house had it all…4,500 square feet, 5 bedrooms, a home theater, a pool, new furniture to fill it all up, with tennis courts and a golf course just down the street (and a $500/month Homeowners Association fee to cover their upkeep.) He’d treated himself to a brand-new Corvette to park in the driveway. He’d raised some smart kids and they all got into top private schools. His daughters had been taught that they deserved to dream big for their weddings and had spent accordingly.

Having taken a 50% pay cut, Joe couldn’t afford any of this, but he refused to give it up. He told himself: “My family is accustomed to a certain standard of living. I refuse to deny them that. It’s not their fault we’re in this situation. It’s the damned airline’s fault!”

Sadly, Old Joe never realized that it doesn’t matter who was at fault. The money was gone and it’s still not coming back.

Joe attempted to fund all this with two bad choices. First, he took on debt. Second, he chose not to maximize his contributions to his new 401K plan because he needed the cash elsewhere.

You’ve seen the spreadsheets. You know that Pilot Math doesn’t work if you are spending like crazy and/or not saving. Poor Joe was immediately doomed.

Eventually, he realized the dire straits he was in. He pared back his expenses slightly, and started increasing his savings. However, he still didn’t want to give up his house or his toys. He felt at least a little bit entitled and had a tough time facing reality. (Funny, I thought those were exclusively the traits of young whippersnappers who don’t know how hard we old graybeards used to have it….) Although the government, or the market, or the company, or…someone…screwed him, Poor Old Joe also played a role in his current financial emergency.

I’m not telling you about Joe’s generation to pick on him. He was a victim on many fronts: severe macroeconomic turbulence, a lifetime of consumerist brainwashing, and a company that had to declare bankruptcy because it had no mathematical way to honor the promises it had made. I hope my generation of airline pilots can figure out a way to help Joe as he enters retirement. However, we need to understand the severity of his situation so we don’t make the same mistakes.

If (or when) our industry again hits hard times, we cannot afford to ignore reality like Poor Old Joe. In the event of a bankruptcy or other catastrophe that cuts our pay or benefits, we need to adjust our Pilot Math to protect our families’ future.

What follows here is essentially an emergency procedures checklist. None of this is fun, or desirable. I imagine I’d be very angry and feel wronged at finding myself in this situation.

Unfortunately, like some emergencies in aviation, my feelings about the situation don’t matter. If my aircraft catches on fire, my choice is to try to put the fire out and land ASAP…or burn up. If I lose all my engines, my options are to find a suitable runway…or crash.

If I suddenly become a deadzoner, my options are to follow this checklist…or crash financially. So, here goes. In case of economic tragedy, do this:

Cut housing costs

Houses are expensive. There’s mortgage, interest, taxes, utilities, maintenance, furnishings, and more. If I’m living in a house that I can barely afford on my current salary, it would be simply illogical to continue living in that house after taking a massive pay cut. Even a house that may have been “sensible” in the past might end up being too much to handle in a severe downturn.

As a new deadzoner, I would consider moving to a new part of town, or even a completely different part of the country. If I was previously commuting to my airline job, I’d consider moving to my airline base to make myself available for the extra pay opportunities that will eventually arise when things recover. If I lived in a state I loved with high taxes, I’d consider moving to one I don’t love as much to pay less tax. This move doesn’t have to be forever. If times improve, I could move back to a place I like more. However, the fire marshal has to agree that the emergency is over before I get to taxi back to parking, right?

I’ve mentioned repeatedly throughout this book. Their community is truly a wealth of ideas for minimizing housing costs. Before I moved, I would start spending a lot of time there reading about ways to help make ends meet.

One of the reasons I love including real estate as part of my Treasure Bath is that it opens up some great opportunities if things go bad. If I’d been studying real estate for years on the day of a market crash, I’d already have an education that would equip me to move quickly and find a better housing situation. If I already own some smart rental properties, I’ll have a recession-proof stream of income to help support my family while my wages are low. One of those properties could even be a fallback plan. This is exactly how I view one home that my family owns.

My wife bought a house when she got assigned to Ellsworth AFB, SD, in 2006. We were only there a few years and didn’t have enough equity to justify selling it when we moved away. It’s a nice 4/2 with a big yard, located within walking distance of one of the best elementary schools in Rapid City. It’s an ideal rental, and we’ve had tenants in it ever since.

We don’t owe that much money on the house. Though we’re waiting to pay that mortgage off for the tax benefits, we have a pot of money earmarked for just that purpose if it became necessary. If everything went to hell, we could have that house paid off in a matter of days and move our family there. We love the area and the cost of living there is very low, as long as you’re not a tourist. I’d have to commute for work, but our family could survive there very happily, even if I took a giant pay cut.

This is the power of having a Treasure Bath. It gives you options to stand in the worst possible storms and brush the water off your jacket like it’s just a trickle.

Cut car costs

We don’t realize it because many of the costs are easy to overlook, but owning a car is extremely expensive. If you don’t believe me, there’s a free calculator on Edmund’s that you can use to prove me right.

If economic disaster strikes, there is no excuse to be making payments on and driving expensive cars. If I suddenly got hit with a 50% pay cut, I’d sell at least one of my cars. If we were making payments on two new cars, I might consider selling both and buying a used Toyota Corolla or Nissan Leaf. My wife and I can share a car. When our kids get old enough, they can become the family taxi service.

If you’ve already figured out Pilot Math, you’ll be way ahead of the game here too. Worst case, you’re only making payments on one car at a time. You realize that tying your ego to your car will only drown you in a flood of economic disaster. You have affordable, efficient cars that minimize (optimize) the costs of car ownership as much as possible. These cars have high resale value and become increasingly desirable in bad economies. You’ll have no trouble getting your money’s worth if you decide to sell one. If you have more than one car, and they’re all efficient and paid off, you may be able to keep them anyway.

Get rid of toys

I own an airplane – a 1950 C-170A. It’s a lot of fun, but it’s a frivolous expense. You could describe a boat, jet skis, RVs, pickup trucks, and many other toys the same way. In the face of an economic disaster, my toy would go immediately. Worst case, it’d get parked in a hangar and I’d stop insuring it for flying operations until I could afford to fly it again.

There is simply no excuse for drowning in the depths of financial disaster with your hands holding white-knuckled to your toys.

Have “The Talk” with your family

History and literature are replete with stories of families reaching financial ruin because the a spouse or parents were ashamed to explain their hard times to their families. They tried to ignore the truth and let their families live (and spend) as if nothing had changed. Willfully avoiding this truth will never help you.

In this situation, you absolutely must sit down with your entire family and explain your new financial reality. This could have some severe lasting impacts. Elective shopping trips will be cancelled. Kids may have to give up spots on expensive traveling sports teams. Our society seems stuck on the idea that a child is entitled to attend any college that will admit him or her. This won’t be the case for your kids, and they must understand that. (If you’re having trouble coming to terms with this, you need to read Malcolm Gladwell’s fantastic book, David and Goliath. He argues very convincingly that going to a big name school isn’t all it’s cracked up to be.)

Your kids will need to pursue scholarships. They may need to start at a local community college. They may need to work to fund some part of their education. There is no unlimited free ride. You’ll have to adopt a similar mindset for school trips, home remodeling, and weddings. (You just read the chapter on Baby Pilot Math, so you’ve hopefully started brainwashing your kids to favor these strategies anyway.)

As a guy and a cheap-ass pilot, I’m scandalized by all the wedding-themed TV shows around today. One show features girls who walk into stores planning to spend thousands of dollars on wedding dresses…and they almost all end up going over budget. Others highlight a stream of increasingly over-the-top weddings that cost more that most American families spend on college. The hosts of these shows gush over how wonderful everything is and always assure the bride that she has “earned” her special day.

If a child’s parents are paying for the wedding, or if the wedding is being funded with debt, then almost by definition, the child hasn’t earned anything. If your family is in financial chaos, you cannot afford to spend an unlimited amount of money on a single party.

That said, the existence of these TV shows, and the rest of the wedding “industry,” show that our society still values the institution of marriage. Weddings are important ways for us to celebrate a milestone in our kids’ lives, and gather families together. In discussing this section, my wife informed me that simply refusing to pay anything here probably isn’t an option. The cheap and unsentimental pilot in me resists this notion, but I’ll defer to her superior judgement in this case, like I do in most cases.

If you’re going to help pay for a child’s wedding, and I won’t fault you if you do, the important thing is to have a plan. When you decide it’s time to have kids, you and your spouse will need to start having a series of conversations. When can you kid get a smartphone and will he or she have to pay for it? Will you provide a car for him or her to drive? Will you pay for college, and if so, then how much? Do you plan to provide money toward your kid’s eventual wedding.

As long as you’re thinking about these things early, you can use Pilot Math to designate a mini-Treasure Bath set aside for each of these purposes. If you want to pay toward an eventual wedding, then start putting a few dollars each month into a specifically designated investment account early in that kid’s life, just like you should have done with a 529 plan for his or her education. This wedding investment account will be subject to taxes, but at least it’ll be earning interest for a couple decades first.

We’re talking about this situation based on the assumption that we’ve fallen on hard times and money is suddenly tight. One of the most beautiful, enduring principles of Pilot Math is that if you save as much as you can while times are good, your family will be okay when times aren’t. If you suddenly have to come up with a bunch of money on short notice, it’s an emergency. If the money has been sitting in an investment account for a decade or more, a furlough or other catastrophe doesn’t change anything. The money is still in that account. If the economy tanks, the balance in this account might decrease, but it would take a very bad recession to wipe out a decade or more of investment gains.

When the time comes, don’t simply ask your kid, “What do you want for your wedding?” This open-ended question runs the danger of suggesting that there are no cost limits. Instead, I’m hoping to go with something along the lines of, “We love you, we’re proud of you, and we’re happy that you’ve found someone to marry. We want to help you celebrate. Here’s the amount of money we’ve saved up to contribute. How can we help you make this enough?”

Hopefully, you’ve been teaching your kid about Pilot Math for his or her entire life. He or she should at least understand how to look at this little Bath full of Treasure and budget it out. With my kids, I’m hoping that if his or her desires exceed the amount we’ve offered, he or she will work to fund things in other (debt-free) ways. If they’re going to ask me for money, they’d better be willing to ask the in-laws. I hope I’ll also be able to inspire enough of a work ethic in my kids that they’d take pride in going out and earning some of the money they need themselves. (I have, thus far, failed miserably at my goal. Thankfully, I still have some time.)

I also plan to suggest that my kids get creative about how they do things. The blogosphere has a seemingly infinite number of writers who talk about how to do a wedding on a budget. I won’t insist that a child uses all of the ideas out there, but there’s nothing wrong with considering some of them. My wife and her friends made centerpieces for the tables at our wedding. We hired the spouse of a friend from my squadron to take pictures. She did a fantastic job for a very reasonable price. These are just a couple ways we saved a little money while still enjoying a fantastic experience with our friends and family.

I feel that between planning and saving ahead, encouraging your kids to find at least some of their own funding, and encouraging them to be creative, it’s possible to help your son or daughter have a wonderful wedding experience, without having to simply say “No!” to everything or bankrupt yourself.

For better or for worse, things like weekend entertainment and family vacations will need to get a lot cheaper in this situation too. It turns out that human beings knew how to have fun long before the advent of theme parks and international airline travel. You’ll need to work with your family to find ways to have fun without spending a lot of money. I’d expect to spend a lot of time enjoying the mountains or beaches near my house.

Side Hustle

I made side hustles part of Pilot Math (next chapter) more because they enrich our lives, than because we airline pilots need the cash. In the face of economic disaster, that changes. A pay cut or furlough at a major airline is the perfect excuse to start or expand on a lucrative side hustle.

If you’ve been enjoying something as just a hobby or doing low-volume business, you should look for ways to start monetizing your efforts more effectively. If you’ve already adopted this Pilot Math principle, you might have something profitable already in place. In a best-case scenario, you might be able to increase your profitability enough to make up for your lost airline pay.

Although I’m pretty hard on deadzoners like Poor Old Joe, not every pilot in his position made such bad decisions. I’ve flown with more than one senior captain who started or already had a side-hustle when our company went bankrupt. Many of them now have an overflowing Treasure Bath thanks to these businesses, and in spite of the same economic challenges that still give Joe fits. There was no functional difference between these deadzoners other than the fact that the ones who are currently solvent went out and did something to improve their situation instead of avoiding the truth and complaining.

For some deadzoners, the military was this side hustle. Whether they went back onto active duty to fight the war in 2001, or they were just able to pick up full-time orders in the Guard or Reserves, the military saved their families. I’ve heard that Southwest even worked with the Air Force to help make sure that some of their pilots got activated, precluding the need to furlough them. Having military service as a fallback in case of economic crisis is one of the many reasons I believe the ultimate career path for a military pilot includes joining the airlines ASAP while keeping a foot in the Guard or Reserves.

Continue Saving!

A market crash is the worst possible time to panic and stop saving. (It’s also the worst possible time to sell!) When the market is down, it means that stocks are on sale. Over the very long-term, the stock market always goes up. No matter how hard it falls, it will beat all previous record highs in the future. One of the reasons to cut so many costs in hard times is to protect your ability to continue investing while assets are cheap.

If you take a 50% pay cut, you must realize that it will take a very long time for your pay to get back to where it was. (Adjusting for inflation, today’s wonderful pay rates are still only starting to approach the levels they were at before 9/11 and the waves of bankruptcies.) You will spend many years not making as much money and you won’t be able to pump as much into your retirement accounts as you’d like. This means that the power of compounding interest is even more important. You need to do everything you can to get money into your accounts ASAP to give it the maximum amount of time to grow before you need to start drawing on it.

You also need that money to be in the market when the recovery starts to happen. You’ll spend the rest of your life kicking yourself if you miss out on that opportunity. Ask anyone who panicked in 2009, sold everything, then waited until 2012 to start investing again.

[End of Checklist]

This certainly isn’t an exhaustive list. There are many other useful things your family may be able to adjust if (or when) our industry has another bad day. I feel that it’s important to have frank and open discussions about finances with your spouse. He or she needs to understand Pilot Math, and you two need to know exactly what your financial plans are. I believe that you should also discuss your emergency plan for a worst-case scenario. This list should be taken as a starting place from which you build a plan specific to your family’s situation.

While another black swan event would really put a damper on the fun of our career, this discussion only continues to prove the power of Pilot Math. If you’ve worked hard to fill up your Treasure Bath as quickly as possible, you can potentially make yourself invulnerable to a bad day.

If your Treasure Bath is so full that a 4% withdrawal rate can cover all of your family’s needs, then who cares if you take a pay cut? We’ve already discussed the idea that you could declare FIRE and quit mandatory full-time work once the volume of your treasure bath equals 25x your annual spending.

Take a moment to think about how powerful you’d feel in that situation.

(Yes, if the market just tanked, 4% of your current account balance probably won’t cover your spending like it would have the day before. If you’re already drawing from your Treasure Bath you’ll need to adjust your spending for a while. If you have a side hustle, or even reduced pay at a full-time airline pilot job, you should still be able to make ends meet. Times will get better, and your portfolio will end up worth more than it has on the day the market crashed. You’ll be able to raise your spending again at that point.

It’s also important to note that it would take terrible timing on a really, really bad day to affect your Treasure Bath catastrophically. People a lot better with money than you or me have examined the entire history of the stock market. There are only a few 30-year periods where a Treasure Bath containing 25x annual spending would not survive even the worst collapses in US history…even when those periods included the Great Depression. In most of those cases, the balance of those savings doubled by the end of the 30-year period. Michael Kitces has studied this extensively and you can read his research if you want a second opinion.)

Imagine that Joe is your neighbor. On the day that disaster strikes he’ll be shell-shocked, walking around on the verge of tears. He and his family will be overwhelmed with fear and uncertainty. Everyone will be angry, but there will be nowhere to turn for help. From that day forward, Joe will be at work all the time. He’ll have to be because of all the expenses he has to cover. He’ll miss out on important family events, his health will suffer, and his job will become an obligation instead of a passion. Poor Old Joe.

In contrast, you have a Treasure Bath full enough to support all of your family’s needs, you won’t have to worry about anything. You may have to forego some luxuries, but you won’t be facing deprivation or the embarrassment of having any of your property repossessed. Whether you get to keep your major airline job, you end up furloughed at a regional airline, or you end up elsewhere, you won’t have to be frustrated about your pay cut. You won’t have to work extra hours…all because you won’t need the money. Sure, you won’t turn down the drastically reduced paychecks, but they’ll only add to the comfortable depths of your Treasure Bath. You’ll even have the option to work less than full-time, allowing Joe to pick up all your extra flying, and continue enjoying time with your family.

We’ll discuss later how to present the ideas behind Pilot Math to your non-pilot spouse. If you’re finding it difficult to get him or her onboard, illustrating this type of financial security in the face of an economic crisis should help. Your spouse might not understand the potential benefits of turning your full-time airline job into a side hustle, but he or she will absolutely support a plan that means your kids don’t go hungry if you lose your job.

You may have no intention of abandoning mandatory full-time work now while times are good. However, if things suddenly change, having that Treasure Bath ready to go gives you all the options. It’s like having an extra hour of fuel in the tanks when you get to your destination to find that a thunderstorm has popped up, or having an extra 5000’ of altitude between you and the mountains when an engine failure forces you to drift down. I cannot overstate the sense of power and security that comes from maximizing your application of Pilot Math as early as possible in your career. Having a Bath full of Treasure makes you invulnerable to many threats that keep most pilots up at night.

I hope we get to ride these high times for decades, but if something happens, Pilot Math can make sure you weather the storm in comfort.

Like I said, if you found this chapter helpful, I think you’d appreciate the rest of Pilot Math Treasure Bath too. Please consider ordering your copy on Amazon or Kobo today!

Aviation For Mustachians

Dear MMM (or is Pete okay?),

Forgive me formatting this as a blog post. I originally thought about writing you fan mail on this topic a long time ago. When I became a serious student of Mustachianism, I shamelessly appropriated many of your ideas and repackaged them in a way that I hope a bunch of my pilot friends would listen to. That became a book, Pilot Math Treasure Bath, and a website by the same name. I think other people can benefit from what I’m writing about today, so I’m posting this on my website too.

I only found your blog a few years ago, and I quickly became hooked. Your philosophies on life, stoicism, savings rate, and face punching resonated with me. My wife and I have achieved financial independence at a relatively young age. We both still work, because we still like it. In fact, now that I’ve reached FI I can afford to enjoy four jobs.

Beyond shockingly simple math, our shared background in computer engineering, and your affinity for the mountains of Colorado, I decided you and I were kindred spirits because one of your posts mentioned that earning a pilot’s license was one of your life’s goals.

Then, in a later post, you mentioned that you’d abandoned the idea of flying as an unnecessarily expensive hobby.

You’re right, of course. Unless you’re a military or airline pilot like me, it’s tough to make money in aviation. Most hobby flying is downright expensive. Still, my heart hurt when I read that you’d essentially given up on aviation.

I’m writing this to assert that aviation is a pursuit worthy of even your time. I also hope to show several ways to make aviation affordable…as a hobby and/or side-hustle. First, some context:

I love being out in nature. I grew up in Loveland, CO, just up the road from Longmont. I hiked, biked, canoed, climbed, skied, and ran cross country all over the Rockies and can’t get enough of them. My Eagle Scout project was illegal campsite destruction and erosion control on the trails of Long’s Peak. For me, the mountains are as sacred as any cathedral. I believe it’s important for human beings to go experience the beauty of our world, to explore it, and to take time to appreciate it.

For me, flying is an extension of that philosophy. If the sum of your aviation experience is limited to sitting in the back of an aluminum tube with a hundred other people staring out a window barely big enough to rank as a day/night indicator (thanks for your business) you haven’t seen anything.

Not only can you surpass the amazing views of places like Mt. Elbert from the windows of a flight deck, you have a freedom and capacity for maneuvering through our world that is unmatched anywhere else in human experience. John Gillespie Magee Jr. did more justice to describing it than I can in his famous poem, High Flight.

Afghanistan from 47,000 feet.

I think the ironic psuedo-religion of Mustachian is an awesome, positive force in our world. However, I don’t want you to miss out on the opportunity to explore your world through aviation because of any arbitrary economic or philosophical limitations.

So, how might a Mustachian pursue aviation without violating his or her principles?

First off, I’m the staff writer for a group of more than 25,000 pilots called The Pilot Network. I wrote a series on this general topic, targeting people who want to pursue a career in aviation. You should check them out…you’ll see shortly how they tie in to two types of aviation I’ll recommend for you.

  • Part 1 – become a glider instructor in as few as 15 flight hours. (I’d be ready to do more than 15 hours to be gain the necessary experience, but it’s still cheaper than being an instructor in powered aircraft.)
  • Part 2 – become a Sport Pilot Instructor in as few as 150 flight hours.
  • Part 3 – How to use home study to prepare for flight training, how to get flying scholarships, how to choose the right aircraft/school for flight training, and how to fit in work around your pursuit.
  • Part 4 – teach drone pilot ground school as a side-hustle. MMM World HQ is a perfect venue for these classes. (I think the great Alan Donegan would love this post.)
  • Part 5 – serve your community and country, while flying cheaply and/or for free, as a pilot for the Civil Air Patrol.
  • Part 6 – Look for part-time flying jobs, or become a powered aircraft flight instructor.

You’ll notice that my first suggestion in that series involved flying gliders. I believe that this is probably the closest thing to a Mustachian form of aviation there is.

Flying powered aircraft is great…I love it. However, pilots tend to treat airplanes like cars…expensive gas-guzzling wheel chairs. We drone along “smashing bugs” or “boring holes in the sky” just to land an another airport and buy the proverbial “$100 hamburger.”

Soaring, or flying gliders, is nothing like that.

A glider needs a tow plane to pull it into the air. You usually release around 2000 ft Above Ground Level (AGL.) From that altitude, an unskilled pilot has enough altitude for a few maneuvers before it’s time to enter the traffic pattern and land. Total flight time tends to be around 18 minutes.

That’s fine for a training flight, but it’s not cheap. The average glider tow costs $30-40. If your flight only last for 0.3 hours, you’re flying at an equivalent cost of more than $100/hr. Ouch. The cool thing about soaring is that your costs are inversely proportional to your abilities.

Wheeling, soaring, and swinging in a Schweizer SGS 2-33, in relative proximity to another aircraft that happened to have a camera onboard.

A skilled glider pilot can find places with rising air currents, put his or her aircraft in them, and enjoy much longer flights. I learned to fly gliders just down the road from you at the USAF Academy, and can tell you that Colorado has some of the best soaring condition in the US, if not the world.

You can catch thermals, roughly cylindrical updrafts that form when the sun heats up the ground. You can catch ridge lift that forms on the windward side of a ridge line. Or, you can catch wave lift that forms leeward of a mountain range with stronger winds.

Learning to fly each of these is its own unique challenge. When you get good enough, that $30 glider tow could result in a multi-hour long flight. The last time I checked, the Colorado state record for the highest altitude reached in a glider was over 49,000 feet. The Perlan Project hit a world record of 76,000 feet last year in a very special glider! When I used to instruct at the Black Forest Soaring Society (just down the road from you in Elbert) the people who owned gliders used to launch every Saturday around noon. They would be out playing around the Rockies all afternoon, and only just beat sunset to land back at the field.

When you get that many flight hours from a single tow, the hourly rate for your flying drops to effectively nothing. Is it still frivolous? Yes, a little. However, it’s a way of exploring and experiencing the beauty of our world that at least equates to hiking in my mind. I feel like it’s particularly Mustachian that your flights get both cheaper and provide more overall enjoyment based on your skill.

You’ve mentioned that the dastardly master plan behind your website is one of environmentalism. Gliders aren’t totally clean because they rely on some type of motor to get them airborne. However, long-duration soaring is certainly the lowest-impact type of aviation around.

The Soaring Society of America has an interactive map that shows places with active glider operations. It shows two at the Boulder airport. It’s not close, per se, but it’s probably within biking distance if you really wanted it to be. Also, if you wanted to put a concerted effort into flying lessons, and you did all your ground school ahead of time, you could get most of your flying done over a few weekends. This would minimize the trips required for training.

Longmont has a great airport and would be a nice site for a glider operation. You’d need to find someone with a plane interested in doing some towing. It’s not a trivial undertaking, but it’s definitely doable. I know lots of TPN members who are looking for work as tow pilots. (Another option would be a motorglider. More on that shortly.)

Another Mustachian thing about glider flying is that most operations are organized as clubs, rather than commercial operations. The spirit of community that exists in these groups is fantastic. Young people show up in the morning for flying lessons and help launch gliders all day long. People with their own gliders pay the club for parking and for tows. At the end of a flying day, the club works together to clean up the operation before gathering at a clubhouse for stories, dinner, and beverages.

Most clubhouses could use a little carpentry work, and I suspect that it’d be easy for you to trade your skills in those respects to cover some of your flying costs.

I could stop at that. Any Mustachian afflicted by the flying bug could enjoy a lifetime of aviation in the soaring community. However, there’s one other option I think you’d find particularly interesting: you can build your own airplane.

Back in the day, this process involved drawing your own plans, glueing wood together, and sewing fabric for your aircraft’s skin. Although that sounds as awesome as it does difficult, it’s a little easier today.

Dozens of companies make high-quality aircraft kits. They design using cutting-edge CAD software, and cut all the kit’s pieces on multi-million-dollar CNC machines. They also do any metal bending you need. Their CAD engineers and fabrication processes are so good, that the holes from one piece align with the holes in the next one when the kit arrives at your door. You just line them up and start popping rivets. (Not, it’s not quite that simplistic, but it’s a lot easier than it used to be.)

You don’t need any crazy skills to build most aircraft. If you want some instruction before you get started, the Experimental Aircraft Association offers SportAir Workshops in every possible discipline of aircraft kit building. Most kit companies also hold workshops at their factory. My father-in-law is building a Zenith CH-750 Cruzer. He and I had a great time building his rudder under the Zenith pros’ supervision at their factory.

With my father-in-law at the Zenith Aircraft factory

With coronavirus limiting travel right now, Zenith is doing their next workshop virtually. They ship you a rudder kit and all the tools you need. You build the rudder with supervision via Zoom, and then ship the tools back to them. There are worse kinds of social distancing!

Since these aircraft aren’t produced in a factory, the FAA classifies them as “experimental.” Some people worry about this, but I don’t. I feel like I could be more confident flying an aircraft where I’d seen all the guts and knew exactly how well each rivet was driven. Experimental aircraft also get to use technology and instrumentation years before it’s available to the certified market. Since the process of certifying anything with the FAA is lengthy and expensive, all that technology is cheaper for kit aircraft too.

I have long maintained that you can get far more aircraft for your money in experimental aviation. If you don’t believe me, check out this video. The SR22 here probably cost $800K to $1M, depending on the options. The RV-10 cost a maximum of $150K, plus sweat equity.

AOPA’s Cirrus SR22 vs Van’s RV-10 fly-off.

You don’t have to spend $150K on a kit though. There are plenty of cheaper options. Sonex advertises that you can have a 2-seat airplane flying for $37,314. That’s still more than a year of the MMM family’s spending, but it’s downright cheap for an airplane.

Going back to glider flying, Sonex Aircraft also has a kit for a motorglider, the Xenos-B. You could build your own glider, base it at the Longmont airport, launch yourself any day of the week, then shut down the motor and soar to your heart’s content (assuming your skills and the weather are in your favor.)

The Xenos-B motorglider.

Sonex advertises the Xenos as costing about $40K to build. If that’s too rich for your blood, you can take advantage of another great thing about aircraft ownership – you can get partners. Four people could easily share ownership of something like a Xenos. They might have fun building it together, and since it has two seats you could plan to fly it in pairs. Or, each individual could have it for one weekend each month. Any Mustachians in the FIRE camp probably have free time to go flying every day.

You don’t have to build a kit though. There are plenty of used gliders in the world available at great prices. You could buy one yourself, or do a partnership for it as well.

A partnership cuts all the costs of ownership, and creates an automatic community around a shared passion. I bet you could find three other people at MMM HQ right now who’d love to join you in pursuing aviation.

I realize that starting something like this probably isn’t in your plans right now, and that doing so would be a stretch in a lot of ways. My intent in writing this isn’t to compel, but I do hope it opens your eyes to some possibilities.

Somewhere above NV or AZ in an Icon A5

Your writing and your ideas have made a big difference in my life. I wrote this as a way of saying “Thank you!” If you ever decide to pursue flight training, I’d love to to offer my services as a flight instructor as further thanks. I live near Tampa now, but my work schedule is extremely flexible, and I fly for free on my airline. I could travel to meet you somewhere conducive to training. (The flight instructor equivalent of carpentourism.)

Most glider clubs only operate on weekends, but some make exceptions for special circumstances. If we did ground school online ahead of time with an in-person capstone, and found a club that would let us fly every day for a week, we could get you a Private Pilot’s license, no problem. This is a standing offer.

Thanks again for creating MMM. You are a force for good in this world.


Jason Depew

If you’re reading this, your name isn’t Mr. Money Mustache, and you don’t know who that is, you need to go read his entire blog, right now. Not only is it highly entertaining, it will change your life!

TPNQ Issue 13 is Live! (and Free)

Issue 13 of The Pilot Network Quarterly is now live! This magazine features some of the best content published on TPN every quarter, and includes original content you can’t find anywhere else.

This issue of TPNQ is packed with great career insights. (I should know…I wrote a lot of it.) It even includes a chapter from Pilot Math Treasure Bath, in case you want to try before you buy.

TPNQ is free to read, and best viewed on an iPad or larger screen. I hope you’ll check it out. If you do, I’m sure you’ll enjoy it!

How is Your Free Trial of FIRE Going?

When I write for pilots, I always say that it’s not a question of “if” the next downturn will happen, but “when.” No thanks to COVID-19 for proving me right. It’s causing a lot of problems for a lot of people, but I hope that you and I can put this mess to good use.

I recently wrote a few pilot-centric posts about how to make the most of this situation, how to get the most out of socially-distanced layovers, and what things will look like for pilots if our economy gets worse. However, I want to look at this situation from a non-pilot perspective today.

As an airline pilot, I’m somehow considered an essential employee. This means I’ve gotten to keep working…for better or for worse. A lot of our flights are empty right now and we’ve cancelled more than we’ve flown for weeks. If this keeps up, I may get volun-told to take a break from being an airline pilot.

The departures board at LaGuardia’s Terminal D on a recent day at work. 4 departures for the rest of the day. Normally, these screens would have to scroll through multiple pages to show all of our traffic. And this is just one company’s operation at a very busy airport.

However, my wife is a pediatric dentist. Working in a room characterized by spit flying through the air is the last place I’d want to be during a coronavirus breakout. Her office’s owners finally came to terms with that reality and shut things down. My kids’ school is also closed. They have a lot of online schooling to take care of, but still have plenty of time on their hands.

This situation wouldn’t be so bad if we were able to get out of the house. Unfortunately, trying to avoid illness means we stay at home almost all the time. Even if we could leave the house for entertainment, everything else is as closed down as my wife’s clinic.

I’ve loved this! We’ve worked on some projects that we just couldn’t seem to find time for. We’d wanted to plant a garden for a long time, and this was the perfect opportunity.

Ignore the barren weeds around the planters. The plan is to put pavers or something here. Thanks to coronavirus, we have some time to make up our minds.

We’ve been able to work on some other projects around the house, and I’ve had lots of time to write. We’ve enjoyed some TV and movies as a family (our kids finally decided they like Harry Potter!) It’s also been nice to just spend an afternoon reading a book. (Bobby Draper in Tiamat’s Wrath. Wow! But don’t go anywhere near it unless you’ve read the rest of the series. Book 1 is Leviathan Wakes.)

Unfortunately, I’m not sure my wife has enjoyed shelter in place as much as I have. She definitely likes having more time with me, the pups, and our kids. She also likes finishing projects we started or planned long ago. She even likes helping the kids get through their online learning lessons (I dislike it…even more than they do.) However, her identity is tied very tightly to her status as a Board Certified Pediatric Dentist.

I’m proud of my wife’s accomplishments. She spent seven years in school after college, and worked as a dentist for several years in the Air Force. She’s great at her job, and actually saves lives on a regular basis.

I also feel bad for her though. Beyond continuing to work as a dentist, she hasn’t been able to figure out what she wants to accomplish in life. (She can come up with options, but none of them have called to her strongly enough yet.) For her, having to spend all these weeks not working has robbed her of one of her main purposes in life.

I understand how she feels, but that makes me feel worse for not being in the same boat. Sure, I’m a pilot for a major US airline. However, I have a bunch of side hustles. I enjoy the work I do in those other arenas (for the most part) and have welcomed the time to focus some more energy on some of them.

I also have a lot of ideas that I’ve yet to find the time for. I want to write more books. (I’ve started several.) I have ideas for businesses. I want to build an airplane…or two, or three. For me, COVID-19 has allowed me to experience something I’ve heard from many members of the FI movement. After leaving mandatory full-time work, these writers or podcasters frequently comment, “I have so many great things to do right now, I don’t know how I ever had time to work 40 hours a week at a real job!”

So, I’m wondering, how is coronavirus affecting your work schedule, and what are you doing in the meantime? I know that many businesses are figuring out ways for employees to work from home, but others are just stuck at home waiting for things to get better. In a (very unfortunate) way, this is forcing us to all try out a post-FIRE life. I think each of us can learn a lot about ourselves by paying attention to how things are working out.

I loved watching the Mad Fientist’s progression toward, and after, FIRE. He wrote a wonderful post about his first year in FIRE, and it had some great insights. He realized that it’s not enough to just stop working and sit around all day. He was very glad to have projects to move on to.

I can identify with this. If I had no side hustles, a few days of quarantine would drive me crazy. Instead, I’ve been able to write and even fly. It’s been awesome. I’ve felt so bad for my wife. She doesn’t have a good side-hustle right now and it’s prevented her from enjoying this opportunity like she could.

I’m not the biggest fan of the Financial Samurai, but it’s been interesting to follow his progress along the path to FI as well. He went all the way…full FIRE while living in San Francisco. Since then, he’s abandoned retirement and started working again. Some of his posts have been a bit critical of the FIRE movement overall. I don’t agree with them, but his insights are important. You should definitely read about Why [He] Failed at Early Retirement.

I think my wife and I are learning some of the same lessons as these two writers. We’re increasingly aware of how social interaction affects our well-being. (We’re both introverts, so it isn’t all bad. However, even we can recognize that we’d be better off with a little more socializing.)

How has your relative isolation affected you?

We also realize that we both value being able to help others and make a difference in the world. That’s always been the main reason why I write. When she starts getting antsy, my wife’s go-to has been trying to figure out ways to help other people. (For the record, animals count as people in our family.) It’s nice to know that’s an important part of our identity and something we’ll want to prioritize in our future.

Have you tried helping others during your isolation? Maybe you sewed masks, built face-shields, or delivered groceries for the elderly in your area? Do you feel differently doing those things, as opposed to when you’re just at home catching up on Netflix?

We’ve already reached any definition of Financial Independence. Even with the market downturn, we’re probably at what some people call Fat FIRE or better. It’s been interesting to watch our reactions to the market decline and feel the gut check of wondering how we will actually start drawing down on our investments if I get furloughed and my wife’s clinic has to stay closed. My wife won’t feel safe until we have more money ‘stached than Suze Orman. I’ve felt immense peace though, knowing that our investments can cover our needs forever.

Have you been temped to sell while the market is down? (Don’t do it!) Do you have enough of a Treasure Bath to cover your needs for a while? If so, has that knowledge given you peace as well? If not, I hope it’s put your past spending in perspective and inspired you to save more from now on!

Most importantly: have you been able to identify something big and important to start putting more time into? Have you enjoyed it as much as you thought you would?

Back when the Mad Fientist and his wife were still just dreaming about early retirement, part of the carrot they set in front of themselves was a 3-6-3 Plan. They planned to spend 6 months of every year living in Scotland with her family, 3 months living in the US with his family, and 3 months traveling the world. It didn’t take long after reaching FIRE for them to realize that this plan wasn’t all they thought it would be.

Most people aren’t financially independent, so they still have to work full-time. If you were to achieve FIRE, you could plan to spend lots of time with your family. However, you’d spend most of each day sitting around while they were at work. Brandon and his wife also realized that while they enjoy traveling, they find more fulfillment and pleasure in being productive. I loved the maturity and insight they showed by coming to and sharing that realization.

If you’re stuck at home because of coronavirus, this time is a gift! Under other circumstances, you have to be like the Mad Fientist, the Financial Samurai, or Mr. Money Mustache. You have to work, and save, and invest and get all the way to FIRE before you can actually try it out to see if you like it. That sounds like a terrible plan to me. I think it’s backfired for more than one member of this movement.

Take advantage of this increased free time to identify and put lots of effort into whatever it is you think you’ll be doing after you eventually retire. If you enjoy it, great! However, you may find that it’s not enough to sustain you. In that case, you’ll be able to spend some time figuring out some other post-retirement options.

You may also find that you’re just not set up to really start pursuing those big projects. Maybe it’s a lack of education and training. Maybe there’s just a lot of groundwork to be laid before you can get to the good stuff. That’s okay! It means you can start using your time now, and after things get better and you return to regular work, to start getting things set up for your future. Maybe you’ll be able to steer your spending and saving habits toward your goal. Maybe you’ll decide you want to work on some self-education. Maybe you’ll realize what kind of networking you need to focus on.

I got paid to fly an Icon A5 from Florida to upstate New York last week. It was a fantastic trip, and far better than any other version of social-distancing I’ve tried over the last month.

This opportunity did not show up out of the blue. I’ve been teaching in and flying the A5 for almost two years now. I’ve done some A5 ferry flying for other pilots, and I’ve done some productive networking. This trip happened as a result of all those factors. I would never have gotten that trip if I hadn’t set up this side-hustle before COVID-19 hit.

Social Distancing, Pilot Math style.

Don’t feel bad if these realizations mean you’ve squandered opportunities in the past. Use this as a wakeup call to do better from here on out. Let this test-run of FIRE show you the ways in which you’re ready for the real thing, and the ways in which you still need to do some preparation. You don’t even need to (or want to) retire early. However, there will be a point in your life where you have to stop full-time work. Whether that’s sooner or later, you’ll face the exact same challenges. I hope you can figure out answers for them now!

Junior Captain Update #1

I just published an update on what it’s like to be a very junior Captain at my airline on The Pilot Network. Here’s an excerpt. Please click the link at the bottom if you’d like to read the full post!

I wrote last year that I’d just been awarded a seat as the 4th most junior A220 Captain at Delta. Every time I interact with people online, they ask “So, how’s it going?” with a sort of morbid, hesitant, even cringing curiosity. (Don’t feel bad, I’d be asking the same thing in exactly the same way if our roles were reversed!)

Spoiler alert: it’s been fantastic. I enjoy running my own show, I’ve maintained full control over my schedule, and the money…well….you can read the pay charts yourselves.

I finished OE in October and have been flying the line without training wheels for a couple months now. Although I’m planning on doing a 4th Year in Review post after profit sharing drops in February (16.6% baby!), I felt like it’s worth giving a bit of an update now.

For the sake of my own sanity, I’m going to start by addressing some of the points from that original post in roughly the same order. Here were some of the key considerations/expectations:

  • Amazing pay increase
  • Maintain the ability to make family schedule work
  • Probably mediocre schedule and layovers
  • Enjoy running my own show
  • Challenge myself
  • Fly with younger pilots
  • Not chasing more “respect”

Click here to read the full post!

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