My FIRE Journey & Inequality

A few weeks ago I was on my way to Culver's for the first time, because even a single dollar donated to the 2018 version of the GOP is one too many. So I decided to donate my burger dollars to a different joint, and Culver's seemed like it would be worth a shot.

And friends, I do not miss In and Out at all. Because, cheese curds.

But before I got to the drive-through, I heard Kai Risdall interviewing the American Enterprise Institute's outgoing president, Arthur Brooks. And, it was so good, I just had to pull over into an empty parking space. Tasty burgers could wait. [A transcript and audio of the interview can be found here.]

I pulled over because Brooks noted something I rarely ever think about when it comes to the dynamics of inequality:

"The knock-on effect of a financial crisis is really uneven economic growth. So, we can always talk about the economic growth rate is 2.9 or 3.2 or 4.1 percent or whatever we're measuring right now. But the problem in the decade after financial crises is that almost all that economic growth is concentrated in the top fifth of the income distribution."

The top quintile? Welp. That's us.

Here was the eye opening bit, for me: if recessions lead to uneven recoveries, then existing income and wealth inequality are made worse, not better, in the recovery itself. Rather than being a great leveler, bringing both the insanely rich, middle class, and poor to their collective knees, the Great Recession just exacerbated the existing inequality, even as we recover from it.

This is a little troubling to me, because we're totally in the group Brooks described as seeing nearly all of the gains: the top quintile of the income distribution.

U.S. share of household income by quintile, 1970-2016. Source [Click image for bigness.]

U.S. wealth distribution by quintile in 2017.
Yes, those are negative numbers for the bottom quintile. 
And a zero for the 2nd quintile. Source [Click image for bigness.]

Deep inside, there's a part of me that cares a lot about how people perceive me. That part of me wants to frame my FIRE journey as one of class mobility. I would like to think that I came from a middle class background, or maybe even a lower middle class background if I want some street cred. And, now, look where I am. Through my own hard work and good planning and, hey, aren't I impressive?

But that's a disingenuous framing. A more truthful way to think about it is that my journey to financial independence started in earnest in 2012, as the recovery was in full swing. I'd left my dreams of teaching and my years in the public sector behind, joined the corporate world, and sold way the hell out.

By 2012, we were already doing way better than average. Social Security says I made a whopping $84k that year, and that was just the income from my job. Throw in the stipend Mrs. Done by Forty earned from her graduate program, and we were comfortably in the top quintile of all earners in 2012.

And things just got better for us from there. I moved to a new company the next year, earning an even more ridiculous, six figure salary. Sure, Mrs. Done by Forty's income dipped a bit when the stipend ran out and she moved to T.A. and R.A. positions. But at no point did our household income ever leave the top quintile.

Ever since we discovered the FIRE movement, our efforts have been focused on turning the benefits of our income inequality into longer lasting, more impressive wealth inequality.

Sure, for a long while I have earned more than the average American. But when a financial crisis hits, and stocks and houses are on sale, why not try to leverage that opportunity to own a lot more wealth than the average American, too?

I can only speak for myself, but on some level FIRE is just another flavor of inequality in action. While other people were losing their jobs, liquidating their 401ks, losing their houses, and debating visiting a food bank for the first time, I was doing the opposite: learning about FIRE, stuffing my 401k and IRAs full to the point of overflowing, and buying preposterously cheap real estate that some unlucky soul had to sell.

In our corner of the world, we were living examples of how income inequality can be turned into a neat form of wealth inequality -- one in which we get to use the wealth to buy the most precious resource of all: time.

I'll freely admit that I feel a lot of guilt these days. I feel a little disconnected, being so utterly divorced from the middle class. Why should we be part of the top fifth who somehow owns 87% of all the wealth? In the case of our first home, and the woman the bank foreclosed on, why should we get to live in the house, instead of her?

Yeah. I've got some feels. But luckily for us, Arthur Brooks has a lot more actionable advice for his audience than just feeling guilty. Let's let him take us out today.

"Now the political result of having stagnation in the bottom 80 percent is political populism, is despair across parts of the economy that people who are just looking at net aggregates they don't see. The policy solution to this, to the extent that there is one, is for all of us to work for more even economic growth. Pushing opportunity out to the periphery of society. This is an opportunity for economic conservatives and people who talk more about social justice, for people at the margins of society to work together because we have to have a common goal here."

A little common ground, a little hope, to start our week. Thanks, Arthur.


*Photo is from ChairWomanMay at Flickr Creative Commons.