SPECIAL: The Little Known World of FatFIRE

**Sam Parr** (0:00)
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All right, what's happening, you heathens? A lot of you are watching this YouTube channel and listening to this podcast because you want to do one thing. You want to get wealthy. Of course, you want to live a good life. You want to start great businesses. But at the end of the day, a lot of people, they just want to get wealthy. And that's what I'm going to talk about today. I'm going to talk about one resource that I've used that has changed my outlook on how to get wealthy, on what it feels like to be wealthy, and has helped me get there. And a lot of people don't know about this, about this resource. I'm going to tell you all about it. I'm going to tell you a few things that I've learned from it. First, I'm going to tell you what it is, but then I'm going to tell you what I've learned from it. Then I'm going to tell you what it feels like at the different levels of courting to people who use this resource. So, and that resource is called FatFIRE. So it's a subreddit on Reddit. So if you go to reddit.com/r/fatfire, you'll find it, or if you just Google FatFIRE, FatFIRE Reddit, you'll find it. So F-A-T-F-I-R-E, you'll be able to find it. Now, what is FatFIRE and why should you care about this? Well, there's this great book called How to Get Rich. It's horribly titled, but it's a really, really amazing book. It changed my life. It's about this guy or it's written by this guy named Felix Dennis. So Felix Dennis was an entrepreneur in the 60s, 70s, 80s and 90s. And eventually he died in the early 2000s, I believe. And he did a bunch of stuff, but he was most known as a newspaper and magazine publisher. So in the 60s, 70s, 80s, publishing was a great business. It wasn't like today where it was a lot harder. And it was kind of like the software of the time. So you can create a magazine and you can make a fair bit of money. And that's what he did. And you probably don't know who he is if you're in America, but you might know Max in magazine. That's one of the magazines that he founded. But he had maybe 10, 20, 30 different titles in England. And when he died, he was probably worth close to a billion dollars, maybe 700 million pounds, I believe. And so he was a wealthy, successful, rich guy who ended up writing about it. It wasn't the other way around, a guy who got wealthy writing about it, which is important. And he is very to the point. He's almost like a Richard Branson meets a Mick Jagger. So he's kind of eccentric, but he's a little bit raw and he's very to the point. And he talks about his past doing drugs and drinking alcohol and partying. And so he's like kind of an interesting character. And there's one sentence in there. So the book talks about getting wealthy and like steps that he took. And how his view on life is and how he manages people and really tactical stuff on running a business, collecting money, things like that. But he gives an intro and he tells all the reasons why this book is interesting. And then there's one sentence in there that caught my attention. And he goes, he basically says, this whole book, I'm going to teach you how I got wealthy. I'm going to teach you what I've learned about wealth. But I want to preface this by saying one thing. If I had my time again, knowing what I know today, I would dedicate myself to making just enough to live comfortably as quickly as I could by the time I was 35 I would then cash out and retire to write poetry and plant trees. Then he goes on and says, but I was like a punch drunk boxer and I couldn't give up business. Although looking back, I wish I did. And Felix Dennis, I think he was in his late 60s, he died unmarried without kids. He seemed generally happy, but he said that he wished he could have done it all over again. And of course, he does say that when he would have wanted to live comfortably, he needed 60 to 80 million dollars, which is definitely wealthy, and that's a ton of money. But his point was that he just wished that he wouldn't have kept going. And that got me interested. That changed my mindset because I think when you start businesses or when you try to get wealthy, this is something you should do forever and you shouldn't necessarily retire. But it was kind of funny hearing this guy say that. And so I got really interested in this idea about 8 years ago. And I built my life around it. And eventually I found this subreddit called FatFIRE. So, FIRE means Financially Independent Retired Early. And historically, it meant people, whether you're a teacher, a nurse, just you work at a big company, you can make $50,000, $100,000, $150,000, $250,000. So a pretty good but maybe not outrageous salary. And you live very, very, very frugally. And you work your hardest to save around $500,000 to $1,000,000 to $1,000,000 and a half. Which you could definitely do if you make $150,000 a year and you have a spouse that earns something like that. And in doing that, you save about $1,000,000. And you generally live off of 3% to 4% of that money, which would be about $40,000 that you live off of. But you don't have to work. And so you can retire early. But FatFIRE is a little bit different. See, typically people refer to FIRE as this mentality of like saving a ton and then living frugally. FatFIRE is different. FatFIRE is people who want to retire early and be financially independent, but they don't want to live frugally. They want to be fat. So they want to be willing to spend $10,000, $20,000, $30,000, $50,000 a month in the retirement, which means they need to save a whole lot of money, or they need to sell a business, or they need to work somewhere that earns a whole lot of money, and they can retire with a bunch. Jen, this number, it varies. You know, on this subreddit, most people would agree that that number is around $5 million in liquid assets. So you have a business that you sell, or you and your spouse work really hard, and you save up this money, and you get around $5 million. Some people think it's a little bit lower at about $3 million. Some people think it's much higher at $10 million. I would say it really depends on where you live. If you live in New York City, that number's about $10. If you live in a lower cost of living, I would agree that number is about $3. And so it's people who want to save that amount of money, and then they want to live off a percentage of it. Typically around 3%, 4%, 5% of that money. And this subreddit is really interesting because there's about 150,000 people subscribed to it. And people talk about stuff that you can't really talk about in public, on Twitter, with your friends, because it's kind of douchey. It's kind of lame to talk about, you know, I've saved to a million, how do I get the 3 million now? Or what investment strategy should I do? Which wealth manager should I use? Do you guys, what are some extravagant expenses that you guys spend on that make your life better? Like a chef, a nanny, whatever. And it's really fun. You get really interesting insights. And so if you're already wealthy or on your way to becoming wealthy, it's a really fun way to share ideas and get intel and see how other people are doing things. And it makes your life a little bit better. I've gotten a lot of amazing tips. And if you're not wealthy, it's a really great way to see how wealthy people think. And it's a great way to ask certain questions and just to read the comments. It's just a ton of amazing information that you can't find anywhere else. And so I want to tell you a little bit about the eight or nine most interesting things that I've learned from FatFIRE. And then also I want to talk to you about what, there's this amazing comment where someone talks about the difference in wealth levels from 10 million to 30 million to 100 to a billion. And what this person has seen is the difference. It's someone who has experienced that. So first, let me tell you a few things that I've learned about FatFIRE. The first, your safety withdrawal rate. That's one of the biggest things that I learned. And so basically what this means is your safety withdrawal rate is the amount of money that you can pull out of your nut. So basically if you save 5 million or 10 million or $1 million, how much money can you withdraw from that to live while continuing to grow your principal? So if you look at the trailing in 100 years, the stock market has grown around 7.5% a year. Of course, you don't want to just have your money grow and take that same 7% every single year, otherwise your principal is not going to grow. And then if the stock market goes down one year and then down another year, it's like, oh shoot, you start getting a little nervous. And so your safety withdrawal rate is the amount that you can withdraw while your principal still grows. And based off of the trailing 100, 150 years, however long we've had this data, which is based off of a famous study, so it's quite a long time, it's how much money you can withdraw and basically never run out of money and your principal still grows. That number is around 3-4%. Some people think it's as high as 5%. And so what that means is if you save $10 million, you could spend around $300,000 to $500,000 a year risk-free. Of course, a pandemic can happen or something crazy can happen, and maybe your risk, you get a little scared. But just looking at 100 years of stock market data, that number is very, very, very safe. That's really interesting. The second thing that I've learned is this thing called an asset-backed loan. There's a bunch of different names for it. It's basically a line of credit. And so what this means is once you have saved $1, $2, $3 million, you can go to a big bank like Morgan Stanley, I imagine Chase. A lot of these big banks, they have wealth divisions. And if you have a little bit of money saved with them, you know, a couple of million bucks, this is something that's absolutely crazy that I learned about in the subreddit years ago when I was early in my journey. You can get a loan very easily up to 70% typically, the ranges vary up to 70% of your assets. And you could use that money for a variety of things. You can use that money just to live. You can use that money to invest in other stocks. You can use that money to buy a house. Now, get this. Oftentimes, this loan is based off this thing called the, I believe it's called the London Bond Exchange, LIBOR. And so it's this bond exchange in London that sets the rates for certain bonds. Right now, it's low. It's like 1%. And you can withdraw, again, the ranges depend on how much you withdraw and how much money you have with the company. But you can withdraw a fair amount of money, up to 70% of your money, with an interest rate that's incredibly low, like 1%, 2%, super low.