The pyramid and the oxygen mask

Readers of this site will probably be familiar with Maslow’s hierarchy of needs and will therefore have a head-start understanding the philosophy of The Escape Artist.

Maslow's_hierarchy_of_needs_svg

Start at the bottom and work up…

Maslow’s hierarchy is often portrayed as a pyramid with the most urgent fundamental needs at the bottom and higher aspirations such as self-actualization at the top. The most fundamental and basic four layers of the pyramid contain what Maslow called “deficiency needs”: esteem, friendship and love, security, and physical needs.

Maslow’s theory suggests that basic needs must be met before we focus on higher needs.  This makes sense.  When our car has broken down in the snow and we’re cold and hungry, we focus on shelter and warmth – not so much on writing novels or volunteering to help other people.

On this site we are trying to haul our butts off the bottom level and head up to the top of the pyramid. The view is better from up there.

If you have a mortgage, you will have noticed the words “Your home may be at risk if you do not keep up the payments” on the shit they send you.   This is an unfortunate truth and why it’s so important to clear that mortgage.  Whilst you have a mortgage, your basic need for shelter is potentially threatened, implying you can’t move up the pyramid and focus on higher goals.

By the way, if you are comfortably meeting mortgage interest payments when UK base rates are 0.5%, imagine what that is going to look like, budget wise, if interest rates were to normalise at 5%. UK base rates were 17% in 1981.  Just saying.

The flipside of this is that once you have met your reasonable financial needs, you owe it to yourself and to others to raise your sights and stop just focussing on money.  In my time in the City, I used to meet plenty of people that had enough to quit, were good at their jobs but would have been happier being a writer, tree surgeon or a teacher. Why behave as if this one life we get is just a dress rehearsal?  If you are one of those people and you carry on working in your all consuming City or Corporate job, then you are wasting your life.

This is more frequent than you might think. The most common motivation for this behaviour is fear  – fear of change, (irrational) fear of poverty, fear of loss of status, fear of their spouse’s reaction etc.  Its not enough just to make a life-changing amount of money, you still have to change your life.  Don’t just load the gun, pull the trigger.

Apply own mask first…

We owe it to ourselves and our families and friends to start by getting our own shit together.  Think about the airline safety briefing : always apply your own oxygen mask before helping others.

This initially sounds a bit counter-intuitive and even selfish to some people.  But you are no use to your children and fellow passengers if you are choking on the thin air clutching your throat, limbs flailing.

In financial terms this means that you are more likely to be a better friend / parent / partner / spouse / neighbour etc. if you are not stressed about money. If you have no money worries, you will also have way more fun yourself in life.

Real life is not like the Catholic Church: there are no sainthoods handed out for martyrdom.  I know this is true because when I was in the Prison Camp, I started to get Martyr Syndrome.  Here are some clues when you are starting to suffer from Martyr Syndrome:

  • My boss / team / wife / children / cats / goldfish don’t understand how hard I work for them
  • If it wasn’t for me, this entire department / school / house / capitalist system would fall apart
  • I must provide private education / piano lessons / an ipad for my kids at any cost or else they will end up selling crystal meth or turning tricks
  • I work so hard that I just don’t have enough time for exercise / 8hrs sleep / myself

People who martyr themselves tend to let their own health and well-being suffer and this does not work for anyone.  James Altucher reminds us of the importance of following what he calls the Daily Practice every day. This includes getting exercise, eating well, feeling gratitude, maximum honesty, being surrounded by good people (and cutting out the bad) and coming up with new ideas.

When we look after ourselves, we can then help others.  I’ve tried to be a better father, son, friend and husband since I quit work (lets be honest, it wasn’t hard to improve on my previous standard when I was in The Prison Camp).  You can have all the good intentions in the world but if you are focussed on your work as, say, an investment banker or litigation lawyer, you won’t have time to help others – that type of job tends to consume your soul and crap it out the other end.

The Escape Artist figured out how to get to financial independence by 43 but could have done it quicker if I knew then what I know now.  So I now help others with this stuff. I have already shown lots of people how to save huge sums of money on fund / wealth management fees.  The first guy that I helped do this recently told me he now looks at his portfolio online and sees thousands of pounds in dividend income every month that was previously being sucked out via fees of a parasitic wealth manager.

You will find various Warren Buffett quotes sprinkled approvingly around this website and many other personal finance websites.  There is no doubt that the man is a genius. Buffett has understood and mastered his emotional self as well as his rational self.  I greatly admire him pledging his fortune to the Gates Foundation. However, you could also argue its a bit sad that someone of his wealth and talent has spent his entire life focussed on accumulating money.

In my investing, I want to be like Warren Buffett when I grow up. But here is where I differ. I do not want to be like Warren Buffett in some other ways. I don’t want to drink Cherry Coke and eat junk food. I don’t want to avoid exercise and end up overweight.  Most importantly, I don’t want to focus my entire life focussed on pointless accumulation.  I am with John Maynard Keynes (who himself was no slouch as an investor) who believed that investing was a fascinating activity (and made a fortune in the process) but not enough. He emphasised higher goals: love, relationships, art and beauty.

Now, The Escape Artist is no academic pyschologist.  I don’t have a PhD, academic citations nor any brown checked jackets with elbow patches.  But, as they say on Top Gear, how hard can it be?  I therefore present The Escape Artist’s pyramid of financial independence, starting from the bottom and working up:

Level 5 :  Plain broke

Here people lurch from one personal financial crisis to the next, tided over by borrowing.  Think Wonga customers.  These people typically spend over 100% of their income, being helpfully accomodated by finance companies who are always very friendly….until they’re not. They are either actually bankrupt or always teetering on the edge.

Level 4: Consumer sucker

This is where most of the population are.  Someone in this category might be watching QVC, see a fantastic designer toilet seat and get straight on their smartphone app and buy it using a credit card. They only stop spending when they go overdrawn at the end of each month. Typical savings rate: 0 – 5%. Net worth is very low: usually just some cash in a jar and a sliver of home equity.

Level 3: Sensible saver

At this level, people are following basic financial advice. They are still wasting much of their money on consumer shit but at least they are using comparison websites to get a discount on the shit. They’re saving 5 – 25% of post-tax income into a cash ISA or maybe even some popular (aka high cost) equity income funds. They may even use a budget.

Level 2: Financial Independence

People at this level are either on the path to financial independence or have achieved it.  Savings rates vary from 25% -75% for those building to FI. These people understand the power of money and have mastered some of their emotional weaknesses re money.  Paradoxically, they are seeking to get to a point (see level 1 below) where they think much less about money.

Level 1 : Zen warrior

The top of the pyramid.  These people never worry about money because they know it can’t buy happiness and they are smart, resourceful and productive. Their spending needs are tiny; they don’t need money other than to buy some rice and beans. Examples in this category would include : Obi-Wan Kenobi, Bear Grylls, Gandhi, Martin Luther-King, Nelson Mandela, the Dalai Lama, the old bloke out of Kung Fu who trained grasshopper and the androgynous bald kid from Monkey (see clip below).

These people spend most of their life trying to help others.  In doing so, they find happiness and meaning for themselves.

26 comments

  1. The potential changes to interest rates in the coming decade is a worry for me. Not for myself, but for others who have purchased houses recently for significant sums whilst only modelling the affordability on the toxic combination of 2 incomes and low interest rates.

    Our remaining mortgage is fully offset and is these days only about 12% of the value of our house: thankfully fully insulated from any changes to mortgage rates.

    We are moving up the pyramid all the more in the next few years and it feels great.

    1. LCIL – Yes, the housing market in London is crazy but sounds like you’re making great progress – All the best, T.E.A.

  2. Great article. I would say I am Level 2 having followed a similar career to TEA. Now I am “retired” in my 40s and feeling happier and fitter than ever. I would love to see more on Level 1 as that is the thing I find unexpectedly challenging, how to become like Obi Wan or the bald kid from Monkey?

    1. Matt

      Many thanks for your comment. Like you I am at Level 2. I only write about what I know, so I might struggle to write convincingly about Level 1…but if I get any insights, I’ll share them with the rest of the class…

      If you are in your 40s and used to watch Monkey, then you have GOT to check out the Youtube clip at the end of the article. And the kid’s name is Tripitaka if you don’t mind 😉

      T.E.A.

  3. I think I’m just about making the step to Level 2 but feel I have some way to go before becoming a Zen Warrior or Jedi Master – Yoda in my case, as opposed to Obiwan!

    Tripitaka was played by a Japanese model, Masako Natsume who died in 1985 at the age of 27 of leukemia. She confused the hell out of the boys at school who found themselves fancying a ‘boy priest’ played by a female!

    1. Thank you for the Tripitaka gender clarification Weenie. I must admit I used to wonder about that myself.

      Here are the Monkey theme tune lyrics:

      Born from an egg on a mountain top
      The punkiest monkey that ever popped
      He knew every magic trick under the sun
      To tease the Gods
      And everyone and have some fun
      Monkey magic, Monkey magic (repeat)
      What a cocky saucy monkey this one is
      All the Gods were angered
      And they punished him
      Until he was saved by a kindly priest
      And that was the start
      Of their pilgrimage west
      Monkey magic, Monkey magic (repeat)
      With a little bit of monkey magic
      There’ll be fireworks tonight
      With a little bit of monkey magic
      Every thing will be all right

      Hat tip: Lyricfinder.com

  4. @TEA, I’m also at level 2 and am late forties, but I’m struggling to know what I would do after work. Level 1 is something in life we all hope for but happiness is an abstract concept. I think many people on these blogs are now successfully reaching FI, but what comes next is interesting.

    1. Jon

      Thanks for the comment and great to have you following the site. But really? Are you serious? Unless you have already tried everything great that the world has to offer (which I seriously doubt) you are blessed with the highest quality problem IN THE WORLD to have.

      Figuring this out is now your mission. You could start by reading the book “What should I do with my life?” (See Life Changing Books). Start by remembering your passions and interests as a teenager (i.e. before the Prison Camp). What do you love? You will know…although it may take you some time to remember. Talk about it with the people closest to you – use crowd sourcing!

      And remember to enjoy the journey / process!

      T.E.A.

  5. Darren Bull · · Reply

    I love this article. Very inspiring and only as I’m getting older am I realising the true value of time but I do have a question. I’m sure you’ll appreciate that many of us are paying a mortgage and some of us are also over paying our mortgage each month. But I’m interested to know if you consider these mortgage contributions an element of the suggested net saving rates you reference? Or are you suggesting 25 – 50% saving as well as paying the mortgage?

    1. Darren – Thanks! Yes, The capital repayment element of mortgage payments is definitely saving….and a tax efficient form of saving at that. The interest element is like a living expense but the capital element obviously decreases your debt balance and therefore increases your net worth.

  6. @TEA, thanks for the feedback. I have your site bookmarked under favourites. Please keep the inspirational articles coming. We don’t have many FI websites in the uk.

  7. @Darren – Paying down the mortgage should most definitly be part of your ‘savings rate’. I view it as a completely risk free investment that returns a guranteed x% (where x is the interest rate on your mortgage).

    @TEA Nice post. I remember learning about Maslow at Uni…wish they’d taught us this version instead!

    1. UTMT – Thanks! I know you are well placed to give a view on Buy to Let property vs equities asset allocations – do you have any pointers in response to Jon’s question below??

  8. @TEA, I’m also pondering over leaving expensive West London versus going back to the cheaper Midlands and should I add Buy to Let to my portfolio or is it going to be too much hassle, currently its blue chip dividend stocks sprinkled with a few dividend ETFs ……. these are subject matters for a whole new post !

    1. Jon – Thanks its really helpful to receive subject suggestions for future posts from readers. The debate around the mix of BTL vs equities is one that I am still pondering for myself. And geographic mobility is an important aspect of FI – we should make conscious choices on this, as on everything else. Stay tuned…

  9. Hmmm. Definitely level 2, looking towards level 1. I’m finding that money does not have the pull it once did. I no longer feel guilty that I am not optimizing the financial return for my time investments.

    Now, the measure is quality of life. Am I doing what I want to be doing every day? If the answer starts to be “no” too many days in a row, I reevaluate my activities and increase time spent doing what I find most fulfilling.

    1. F2P – Thanks. I know you are very good on reading list suggestions, so please let us know if you found any good books on how to think about going from Level 2 to Level 1?

  10. Very inspiring. I’m at level 2 striving towards level 1. It is absolutely true that our intention is to not think about money at all once we reach FI. It can be all-consuming at times here on level 2, since we’re so very focused on our savings rate and investments, but, I do think that will fade in 3 years when we quit our 9-5’s.

    1. Thanks, Mrs F. I just checked out your blog….its very good – are you still on track to escape by 33?? Respect!

      1. Thanks so much! Yep, on track and excited! It’s all tentative until the day we quit (in my opinion), but, it’s absolutely the plan.

  11. Wow, the article was great but I just can’t believe you’ve managed to link Monkey Magic with personal finance! If there really is a connection then maybe I can get my two hopeless older brothers (who aren’t so good with money) to read your blog! If only there was a way to link in the 1980s version of Flash Gordon…

    1. Its not such a big leap from personal finance to Buddhism to Monkey, IA. Everything is connected.

  12. great analogy. I am happy to see that I moved up from level 3 to level 2 a few months ago.

  13. Just found your site via Frugelwoods (love them) – but love the humour on yours and more relevant being British. At 53 and still with a mortgage and a low income I thought I would be starting from a hopeless base. But the comment that my capital repayments on the mortgage is “savings” is a revelation. I thought I was saving 0 to 2% per month but actually it’s more like 25%!
    I find it easier to think of needing 300x my monthly spending btw as I can envision that far more clearly

  14. Momma S · · Reply

    Just found your site via Frugelwoods (love them) – but love the humour on yours and more relevant being British. At 53 and still with a mortgage and a low income I thought I would be starting from a hopeless base. But the comment that my capital repayments on the mortgage is “savings” is a revelation. I thought I was saving 0 to 2% per month but actually it’s more like 25%!
    I find it easier to think of needing 300x my monthly spending btw as I can envision that far more clearly.

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