SPECIAL: The Little Known World of FatFIRE

This episode is sponsored by the HubSpot Podcast Network. The HubSpot Podcast Network is the audio destination for business professionals who seek the best education and inspiration on how to grow a business. Whether you're looking for marketing, sales, service, or operational guidance, the HubSpot Podcast Network hosts have your back. Listen, learn, and grow with the HubSpot Podcast Network. Go to hubspot.com/podcastnetwork. 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 gonna tell you all about it. I'm gonna tell you a few things that I've learned from it. First, I'm gonna tell you what it is, but then I'm gonna tell you what I've learned from it. Then I'm going to tell you, um, what it feels like at the different levels according 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, FatFIRE, you'll find it. Or if you just Google FatFIRE, uh, FatFIRE Reddit, you'll find it. So F-A-T-F-I-R-E, you'll, 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, uh, 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 Maxim Magazine. That's one of the magazines that he founded, but he had maybe, uh, 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, uh, 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, um, 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 gonna teach you how I got wealthy. I'm gonna 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, a punch-drunk boxer, and I couldn't give up business. Although looking back, I wish I did. And, and Felix Dennis, I think he was, uh, in his late 60s. He died unmarried without kids. He seemed generally genuinely happy, 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, um, he would've wanted to, to live comfortably, he needed $60 to $80 million, 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, you know, when you start businesses or when you try to get wealthy, this is something you should do forever and you, and you, 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, it, it meant people, whether you're a teacher, a nurse, just you work at a, a big company. You can make, you know, $50,000, $100,000, $150,000, $250,000. Um, 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 million to $1.5 million, 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 a million bucks and you generally, uh, 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 Fat FIRE is a little bit different. See, typically people refer to FIRE as this mentality of like saving a ton and then living frugally. Fat FIRE is different. Fat FIRE 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 their 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. Gen— uh, 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 million. If you live in a lower cost of living, I would agree that number is about $3 million. 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 $1 million. How do I get the $3 million now? Or what investment strategy should I do? Which wealth manager should I use? Um, 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 like 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, um, 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, it's, 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, uh, 8 or 9 most interesting things that I've learned from Fat Fire. And then also I want to talk to you about what, uh, there's this amazing comment where someone talks about the difference in wealth levels from $10 million to $30 million to $100 million to $1 billion. And what this person has seen is the difference. It's someone who's, who has experienced that. So first, let me tell you a few things that I've learned about Fat Fire. 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 100 years, uh, the stock market has grown around 7.5% a year. Of course, you don't want to just have your money, uh, grow and take that same 7% every single year. Otherwise your principal's not going to grow. And then if the stock market goes down one 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 the, this data, which is based off a famous study. So it's quite a long, um, 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 to 4%. Um, 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, you know, a pandemic can happen or something crazy can happen and maybe your risk, you, you get a little scared, but just looking at like 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 there's this thing called an asset-backed loan. There's a bunch of different names for it. Uh, it's basically a line of credit. And so what this means is once you have saved like $1, $2, $3 million, you can go to a big bank like, uh, Morgan Stanley. Um, 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 million bucks, this is something that's absolutely crazy that I learned about in the subreddit years ago. Uh, 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, uh, I believe it's called the London Bond Exchange, LIBOR. And so it's the, it's this, this, 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 the— 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. And this is one of the ways— there's many ways, but this is one of the ways that the rich get richer. So basically, often— and this is what I've learned about in this subreddit— Often people will use this loan and they'll live off the interest. So they'll have their big liquid net worth stashed away into equities and bonds, and they'll withdraw this money. And sometimes they'll invest that money back in the stock market, which makes 7.5%. And then that 1% is what they owe back to the bank. And they live off that 6% difference, or they use that money to buy a house, or they use that money to spend just on their life or they pay taxes and they don't pay that loan back until they die. And before their kids are inherited any money, they pay that loan back. It's incredibly interesting. It's, it's something that blew my mind when I first learned about it. The third thing, most people who hit fat FIRE, they keep working. So we have this idea of you just sold your company. You just made all this money. Now you're going to go retire to the beach. Some people do that. What I've learned in fat FIRE and amongst my friends is people who do that, they typically only do it for a very short amount of time. Sometimes that could mean 5 or 10 years, which isn't that short. Oftentimes it's about a year, then they get bored and they go back to work. And that is not the goal that I've learned about, about being wealthy. It's not so you don't have to work. It's so you can choose to live your life how you want to live. So that means you can go and work at a nonprofit. It means you can start a business. It means you can go get a job. But the whole point is that you have this thing that you can rely on, this, this place of solitude, this place of, of what a lot of people describe as F.U., this, this fuck you position where you don't like your boss, tell him to fuck himself. You don't like this situation, quit, tell them to fuck themselves. You have what you need. You don't need anyone. That's the point of this is to be in the position where you don't need anyone, not necessarily to stop working. Because what I've seen is most people, virtually everyone I've seen goes back to work. And so you think you wanna retire, you'd be shocked after a few months, a few years, most people all go back to work. The fourth thing that I've learned, it's amazingly easy to spend a lot of money. Now, a lot of you who, um, are frugal, of which, which I consider myself to be frugal as well, I track my expenses. It's a lot of people don't even, I mean, if you're wealthy, a lot of people don't track their expenses that much, or they just don't care. And it's very easy for them to spend a lot of money. There's some amazing threads on this subreddit and they'll say, what's your expenses? And people will say, I've spent around $65,000 a month. Uh, for the last 12 months. And frankly, I have no idea how it got that high. I, I didn't track it and I just tracked it for the sake of the subreddit. And those are also some of the questions that people ask on the subreddit. How much are you spending each month? What are you spending on? What are you spending on that makes you happier? What are you spending on that is overrated? And a lot of people will post their monthly burns. It's astonishingly high for a lot of people. And they'll tell you often, I have no idea how we got here and I'm not happier. But sometimes they are, you know, there's a few things that people like, they like spending a lot on vacations. They like spending a lot on health, which tends to be common. Um, but it's amazing how you guys, uh, may think, oh, I spend 5, 10 grand a month. I feel great. I can't imagine spending more. It's shocking. Some of these commenters, how they just up their spend and they don't even realize it and they kind of get addicted to it, but you don't have to spend a lot. And that's another interesting thing. There's a lot of posters on this subreddit who say, I spend $15,000 a month. I'm incredibly happy. I feel like I live rich. I feel like I have everything I need and I don't really— my happiness, I used to spend a lot, doesn't really change with that spending. I myself am in this category. I don't spend too much money a month and I feel like I live quite wealthy and quite happy of around $15,000 a month. But when you have family, which I don't, I don't have kids, and when you have when you live in a really fancy area like a New York or San Francisco, it adds up fast. If you have 3 kids and you want to live, live a high life, and you'd be shocked. And that's an interesting thing that I've learned in this subreddit. Now, the 6th thing that I've learned is that there are definitely, there's definitely a number that matters. And the whole idea of Fat FIRE is that you want to know what your number is. You want to guess what your number is and you, and you want to get there as fast as possible. You want to put in a lot of work while you're young, get to that number, then decide what you want to do. And that's kind of like the premise of this, of this community. And from scrolling through this subreddit and reading it every day, which I do for years and years, that number for a lot of people is like $1 to $2 million where it's like, all right, I feel like I have security. I may not, I'm not going to retire yet. I don't feel comfortable retiring yet, but I feel pretty good with like $2 million. Typically, people who earn $10 million on that subreddit say, "I can live anywhere. I'm not flying private, but I will never run out of money, and I feel very secure, and I feel very, very happy." And I think that there's this thing with wealthy people, and they'll say, "Yeah, it doesn't make you happy." In some regards, that's true, but I would say it's mostly true after you get over a threshold of around $1 or $2 million. From my reading this subreddit, That's what I, what I think is true. That's the number. 7, a lot of people in this subreddit don't like wealth advisors. So I have a lot of friends who are, uh, not very wealthy and they're giving a wealth advisor 1% of their money. And I think personally, I agree with the subreddit, the general subreddit sentiment. I think that wealth advisors, if you are worth less than $10 million, for most people, I think it's crazy. Why? I think that you could put most of your money, depending on what your age is, if you're pretty young, I think you could be pretty aggressive and put 85 to 90% into a Vanguard total market fund and the rest in some general bonds and cash mix and not really work that hard at managing your money and not have a wealth advisor. And I think you'll be totally fine. I think if you have a fee advisor and you're not doing really a lot of complicated stuff, which most people don't need, you don't really need a wealth advisor. And that's what I learned about, uh, in this subreddit. Of course, don't take anything that I'm saying as advice. So do your own research. Number 8, for years I used to make a joke that I thought the only way that you can get really, really wealthy is to start a business or become a salesperson because salespersons have, uh, salespeople have unlimited upside. Starting a business also, you have a lot of upside. I am so wrong. There are so many people in this subreddit who have made an astounding amount of money, $10, $20, $30, $40 million working at large tech companies. Particularly, it seems working at tech companies that they started when it was around 1,000 to 2,000 people. So it was a relatively stable, they can earn a relatively large amount of money, $200,000, $300,000, $400,000, $500,000. And they were also given some stock, RSUs, that either was illiquid and they just held onto it and then they wait until the company went public, or it was already liquid. It was a company that was already public, but it was incredibly fast growing. My company was acquired by HubSpot. One of the reasons why I wanted to sell to them was because I thought their stock was going to do really well. I saw it from the outside and I thought, this looks like an interesting company, enterprise SaaS, undervalued in my opinion at the time. And that's why, uh, one of the reasons why I did the deal. My, uh, wife works at Airbnb, has worked there for 5 years, got in there before it went public. I saw that. And there's so many people that work at Facebook, Netflix, you know, the FAANGs. So that's, uh, Facebook, Amazon, Netflix, Google, Microsoft. And there's other people who work at different companies like Uber, DoorDash, things like that. The companies that are really stable. They got in when the company wasn't small. So it's not like a totally lotter— it's not a lottery ticket. It wasn't like they were in the first 10 employees, but they could have been in the first handful of hundreds or the first thousand-ish. And they picked a good company that paid them a lot of money and they also got stock options. And that works. I actually think joining an early stage startup is incredibly risky. And I would say that these companies that I'm, uh, that I'm talking about, they're not that risky. Um, compared to other things, I don't think they're that risky. And in this subreddit, I learned there are just the, the vast majority of these people don't seem to be entrepreneurs. They seem to be people who worked at companies and they worked for 10, 20 years saving, saving, saving, saving, getting equity that went up in value and they, uh, hit fat fire status. And finally, number 9, what I've learned in this subreddit is there are so many rich people who complain. They do not live life. There, there's just a lot of threads and these are always fun and interesting to read of rich people saying they have $8, $9, $10, $15 million, but they're afraid to quit because they want to earn a little bit more. They're afraid of, of running out. They're afraid of a lot of different things. They are not living life. And I just learned that this money thing, it can totally control you and you got to let go sometimes and live life. Um, it's an incredibly fascinating subreddit. I think everyone should read it. Uh, don't comment if you don't want to, but just read it. So it's called Reddit FatFire. It's amazing. It will change your game and your mindset towards money, towards life. The name of the game is to save and earn as much as possible. So you have a position of FU and you can keep working. You cannot keep working. I think Most people will keep working in some capacity, but it just means you can get there as fast as possible and live a good life, or at least live life on your terms. All right, everyone, this episode is brought to you by HubSpot CRM platform. It's very simple. This is really easy stuff, but it sounds complicated. I'm going to break it down. It helps you make landing pages so you can align with key sales plays and even personalized content for a complete strategy. So basically, you want to sell something? You spin up this landing page, people come, they see it, it's customized to the person seeing it. Boom, you get the sale. Number 2, documents. You can use documents to manage a library of approved sales-enabled assets so your content will always be on brand. And 3, quotes. Create a beautiful looking quote or proposal in seconds. HubSpot's quoting capabilities also, also give you the option to collect e-signatures or receive payment via Stripe. Ooh, music to my ears, HubSpot. Learn more about how you could scale your company without scaling complexity using HubSpot.com. Now I wanna get to the interesting part. So there's an amazing comment that has been shared a ton and it's where, uh, there's a, a poster who says, I'm, you know, I'm relatively wealthy, but for some reason I've been around a lot of wealthy people my whole life because of the work that I do and the group that I run in. I've been surrounded with, uh, a bunch of people who are worth tens of millions, hundreds of millions, and I've actually uh, dated the daughter of a billionaire several, several years ago. So I've gotten an interesting peek into people's lives on, on what it means to be wealthy. And they broke it down and I'm gonna read to you some of the highlights. All right. So there's levels to different wealth. So this poster says he thinks the levels are $10 million to $30 million, $30 million to $100 million, $100 million to a billion, over a billion. And then he has a totally separate category that I didn't mention too much, which is Tens of billions. The $10 to $1 million liquid crowd. At this level, you can live how you want. Your needs are met. You can live comfortably at 4 to 5 star level. You can book a $2,000 suite for a special occasion. You can fly internationally first class. Sometimes you have a very nice house. You can afford any health care you need. No emergency financial situation can destroy your life, but you are not rich in the way that money doesn't matter. You still have to be prudent. And careful with most decisions unless you're at the upper end of the scale where you truly become insulated from personal financial stress because business stress exists at all levels. The banking world still doesn't classify you though as ultra high net worth. The next level, $30 to $100 million. At this point, you start playing with the big boys. You can fly private, although you normally charter a jet or you have a fractionally owned jet through NetJets or something like that. You stay at 5-star hotels. So you have multiple residences. You vacation in the prime time. So you can ski in and ski out at a villa in Aspen for Christmas or go to Monaco for the Grand Prix, things like that. You're willing to spend $5K to $20K per night. You run or have a controlling interest in a big company and you socialize with congressmen, senators, community leaders, things like that. In Beverly Hills though, you are still just a minor player at $80 million unless you really throw your weight around and pay out the nose. You might not even get a table at the city's hottest restaurants. You can buy any car you want. You have personal assistants and you're starting to have people who handle things for you. You can travel anywhere in style. You can buy pretty much anything that normal people would think of as rich people stuff. That's pretty interesting. All right. $100 million to a billion. It's a wide range, but life doesn't change much when you're worth $200 million to $900 million. At this point, you have a private jet, multiple homes with staff, elite cars in each home, ownership or significant control over a business that most people have heard of. You're able to socialize with movie stars, politicians, rock stars, corporate elite, aristocrats, everything. You may not get an invite to every party, but you certainly can go anywhere you want. You have people and you have staff, and the world is full of yes-men. Your ability to buy things becomes an art. You have a fancy Ferrari though that you love, but your billionaire friend thinks it doesn't really handle well and has a one-of-only-five-exist-in-the-world type of car, and you become envious. You have a bunch of beautiful women who want to be with you. You probably won't be emotionally connected to them. And damn, it's incredibly hard to build relationships at this level. Now, finally, here's what this guy says about a billion. I'm going to exclude the $10 billion crowd because they live a head-of-state life. But at $1 billion, life changes. You can buy anything, anything. In broad terms, this is what you can buy: access. You now can just have your staff contact anyone and they will call you back. I've seen this firsthand and it's mind-blowing, the level of access. And respect that $1 billion gets you. In this case, I want to speak with a very well-known billionaire businessman and billionaire one called billionaire two and mentioned that we should chat and boom, got it. Yes, you can buy influence as a billionaire. You have many ways to shape public policy and public debate and you use them. This is not in an evil way. The ones that I know are passionate about ideas and trying to do what they feel is best, just like you would. But they just had an hour with the governor, governor privately or the secretary of health. And they buy ads or lobbyists. The amount of influence you can get can be heady. Time. You can buy time. Yes. Literally never wait for anything. Travel. You fly private, show up at the airport, sit down in the plane, the door closes and take off in 2 minutes. You fly directly to where you're going. The plane waits for you. If you decide you wanna leave at any time, you dry or you, or you take a helicopter and the pilots and stewardesses are your employees who are there waiting to take care and handle you. How about dinner? Your driver drops you off at the front door, waits a few blocks away for however long you need. The best table's waiting for you. The celebrity chef has prepared a meal for you because you gave him so much catering business. He wants you to be very happy and he ensures service is impeccable. Golf? Your club is so exclusive there is always a tee and no wait time. Going to the Super Bowl, Grammys? You are whisked behind velvet ropes and escorted past any and all lines. Experiences. Dream of it and you can have it. Want to play tennis with Pete Sampras? Not him in particular, but you get the idea. Call his people. For a donation of $100,000 to his charity, you could probably play a match with him. Like Blink-182, there's a price, and they would simply come and play at your private party. Love art? Your people could arrange for the curator of the Louvre to show you around and even show you masterpieces that you have not even known existed. Love NASCAR? How about racing the top driver on a closed track? Love science? Have dinner with Bill Nye and Neil deGrasse Tyson. Love politics? Have Hillary Clinton come speak at the dinner for you and your friends. Just pay her speaking fee. Your mind is the only limit to what is available because donations and fees can get you anyone. The same is true with stuff. You like pianos? How about only one Mozart used to compose music? This type of stuff you can do to impact. Your money literally changes the world and changes lives. It is almost too much of a burden to think about. Clean water for a whole village? Chump change. A dying child needs a transplant? Hell, you could just build and fund a hospital and get it done. Respect. The respect you have at this level is over the top. You are the man in almost every circle. Governors look up to you. Fortune 500 CEOs look up to you. Presidents and kings looked up to you as a peer. Perspective. The wealthiest person I've spent time with makes $400 million a year. I couldn't get my mind around this. Okay, let's compare with someone who makes $40,000 a year. $400 million is 10,000 times more. Now let's look at the prices. He might look at a new Lambo, $235,000 became $23.50. First class ticket international, $10,000 becomes $1. A full-time executive helper, $8,000 a month becomes $0.80 a month. A $10 million piece of art, $1,000. Expensive, so you have to plan a bit. But the best suite in New York City, $10,000 a night, that's like $1 a night. A $50 million home in the Hamptons, $5,000. There's literally nothing you can't buy except love. Sorry to sound so trite, but it's nearly impossible to have emotional relationship at this level. It is hard to sacrifice for another person when you are never asked to sacrifice for anything. Money can solve all problems, so you offer it. Your time is so valuable and it makes you lose connections with people. It's hard to find love. It's hard to find relationships. So that's this guy's answer. He was in the subreddit. There's a lot of amazing stuff about this subreddit. I love it. So there it is. It's called FatFire. I also think you should read the book "How to Get Rich" by Felix Dennis. But for sure, check out this subreddit. It's amazing. Talk to you soon. Let me know if you like this episode. @TheSamParr on Twitter. We can do more of them. Talk soon.