Dad is FIRE

One dad's journey to Financial Independence Retiring Early

What is Satisfice?

Satisfice is such a great word. I had never heard of satisfice until I was studying for the Chartered Financial Analyst (aka CFA). Satisfice is about “good enough” and not needing more. Satisfice is a great word in finance, and even better word for the real life. Are you a maximizer vs satisficer? If you are like most people you are a maximizer. Most people don’t retire early. Let’s look into these personas.

A maximizer looks to maximize what they own, or worse yet what they appear to own. They want the most.

Satisfice means to be satisfied when considering multiple options. So a satisficer isn’t looking to obtain the most, they are simply looking to be happy enough.

This is important. Retiring when you are 40, 45, 50, whatever is just a math problem. It’s an assessment of what are my expenses and how much income do I need to cover those expenses. Sure it’s more complicated than that because of the different phases involved, but essentially it’s just a budgeting problem (as I type these early blog posts you can see the foreshadowing of what I’ll post later).

The difference between satisfice and maximize is expense, both financially and psychologically.

Income is one side of the equation. Expenses are the other. That is why satisfice is critical. It’s a mind-shift change for many. Instead of wanting the most, can you accept merely being satisfied? If so, your expenses will be considerably lower now which allows you to invest more now. Your expenses will be considerably lower later which allows you to not need as large of an income to cover your expenses.

This idea is bigger than money. It’s happiness. Maximizers tend to be less happy. They are always struggling to have more. Satisficers tend to be, well satisfied. Think about that. People tend to be happier with less. But this isnt a conversation around minimalism. Although minimalism is certainly an easy way to retire early because it’s easier to balance the income vs expense equation. This isn’t about being frugal, unless that makes you happy. Satisfice is about living with what makes you happy. It’s about having a Goldilocks standard of living to achieve your goal of Financial Independence Retire Early…while being happy.

I would like an RV. I can afford it. But will it make me 20k happier? No. As much time as I spend on, I know it will not make me 20k happier. I want a Tesla. Will it make me 60-100k happier? No. So I keep driving my 12k several year old car. I enjoy building Tesla’s on their website, but I know I’d rather retire a year earlier than own a Tesla. I have always wanted a Porsche 911. We can afford one. You guessed it, I’m not buying one.

When looking at my options for vehicles, I am satisficed with what I drive. That money I am saving is invested and is buying me several years of my time back with not needing to work when I am in my 50s. I could work an extra year, or I can have my time back. The beauty of this, is I can do both.

At any point if I decide something makes me happier, I just need to do the math and make decisions. The same goes for you. What do you value? Do you really need a bigger house, nicer car, Starbucks coffee, or will a house that you are content with, a car you dont complain about, and coffee made at home make you happier?….what if being content with these trade-offs meant you can retire years earlier?

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