Are We Dumb and Dumber To?

Dumb and Dumber

“Just when I think you couldn’t possibly be any dumber, you go and do something like this . . . and totally redeem yourself.”

Back in 1994, my closest friends and I frequently hit the dollar movie theatre near our college campus. And what more could any immature group of freshmen ask for than Jim Carrey and Jeff Daniel’s “masterpiece” of Dumb and Dumber. After repeated viewings, one-liners from that movie became part of our everyday banter as we roomed together throughout college. The funny quotes even continued in emails and texts for the next 20 years.

Dumb and Dumber To World Premier Party Ticket

Dumb and Dumber was our movie, so my six college roommates and I jumped at the opportunity to attend the Los Angeles premiere of Dumber and Dumber To, twenty years after the original’s debut. One member of our group was able to get tickets to the red carpet event and after-party, so off to Hollywood we went. (“Why you going to the airport? Flying somewhere?”) Despite our changed taste in humor and a terribly crass sequel, it was an event to remember.

How much money do you need to retire?

Oddly enough, one brief and surprising conversation with my friends was something that still stands out to me. During a visit to Washington, D.C. by one of my friends a few weeks before, I had told him that I was interested in “retiring” at the age of 45. Apparently this intrigued him enough to mention it to my other friends before my late arriving plane touched down in L.A. So, shortly after I jumped in the rental van, I was asked . . .

“I heard you want to retire by the time you’re 45?”

Perhaps “retire” was the word that set off the few mocking comments that followed. In hindsight, it wasn’t the best word but it certainly got their attention. But yes, I had a goal to be financially independent so that when I worked, it wouldn’t be for the money. I told my friends that achieving financial independence in 5 to 6 years was a stretch goal, if I could get my wife on board. But 10 years was certainly doable. This, of course, led to a few more snide comments.

“So, how much money do you guys need to retire?” I responded.

Silence.  

Well, silence until someone belted out another line from the original movie. “What is this? What is this? Where’s all the money?”

“That’s as good as money, sir.  Those are I.O.U.s,” another exclaimed. “See this? That’s a car. 275 thou. Might want to hang on to that one.”  Jim Carrey couldn’t have said it better himself.

And from there we were off to the festivities.

The Dumb and Dumber To World Premier

As expected, the Dumb and Dumber To movie premiere wasn’t my scene, but it was interesting nonetheless. Bright lights, photographers, and reporters from E! and Access Hollywood lined the red carpet. A mix of fans, paparazzi, and professional autograph seekers crowded the sidewalk, pushing, shouting, and screaming when an A-list (or even B-list) celebrity walked by. Jim Carrey and Jeff Daniels pulled up in the Mutt Cutts dog grooming van and hysteria ensued. The movie itself was, well, pretty terrible, but it was great watching it with my friends – and Larry David.

The event continued at the after-party, where we watched for celebrities but our main goal (accomplished!) was to find the now-grown Blind Billy from apartment 4C, to whom Carrey and Daniels characters sold a dead bird in the original. For me, the celebrity highlight was likely seeing Kristen Bell, who had recently voiced and sang the part for Anna in Frozen – a movie I was very familiar with because of my at-the-time 7-year old daughter, Flora. It was interesting to see that Kristen wasn’t dressed up, didn’t walk the red carpet, and went practically unnoticed by the paparazzi throughout the entire evening.

Dumb and Dumber To World Premier Red Carpet
On the red carpet at the Dumb and Dumber To premier (fairly creepy anonymity courtesy of my daughter Fiona)
Dumb and Dumber To World Premier After Party Mutt Cutts
Franklin and friends outside the after-party in front of the Mutt Cutts mobile.

The 25x Rule

With the movie premiere and after-party over, I started thinking back to the earlier conversation with my friends about early retirement. Here I was with two lawyers, a doctor, an engineer, a medical equipment salesman, and a corporate executive who all had a higher earning potential than me. We were all about halfway through our careers but why was it that none of my friends had considered specifically how much money they needed to “retire”?

Perhaps it’s because they had some common (mis)perceptions about work and money, such as:

  • As long as more money can be earned, we should try to earn it
  • We should all work until we’re 65 and then retire – that’s what everyone does
  • We need to provide for our families, and there’s never an end to that responsibility

But here’s the reality for all of us . . . we live in an amazingly opportunistic time when we can accumulate enough wealth in 10 to 20 years to live off the earnings of that invested wealth for the remainder of our lives. Sure, we’ll continue to earn money in some capacity because being productive and expressing our creativity is a key part of what makes us tick. But that sort of “work” will not be required within the same framework in which we’re currently engaged.

So, back to that question of how much money is needed to be financially independent. Well, one technical answer one of my friends could have given that night is 25 times your yearly expenses (not income). So if you spend $40,000 a year, you’ll need $1,000,000 in investments working for you. 50K equates to $1,250,000. And 75K? $1,875,000. I know that those seven-figure goals look huge to many of us. And I’m sure some of you big city folks are thinking “I spend $40K just on my mortgage payments each year!” We’ll address those concerns in more detail in another post, but we first need to understand where this rule of “25 times your yearly expenses” comes from.

The 25x Rule comes from some assumptions and simple math. The first assumption is that your money is invested in a way that it earns a return of, on average, 7% a year. The second assumption is that the things we buy will increase in cost over time, so we need to accommodate for an average inflation rate of 3% each year. So, if our investments are generating 7% a year and our expenses are increasing by 3% a year, that leaves 4% of our investment returns available for our yearly spending without reducing our initial investment amount (adjusted for inflation). Since 25 x 4% equals 100%, the 25x Rule helps us target a specific amount of money that we need to have invested to become financially independent.  

A lot more can be said of the 25x Rule, and its companion 4% Rule. But let’s save those discussions for another time. The important point I want to make is that the 25x Rule helps give us a target, something my friends may or may not have ever considered before.

So what are your chances of becoming financially independent if you don’t even ask yourself how much money you need to retire?

“What are my chances?”

“Not good.”

“You mean, not good, like one out of a hundred?”

“I’d say more like one out of a million.”

“So you’re telling me there’s a chance!”

 

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