Alright sir, you’re a Lebowski, I’m a Lebowski…
We could all learn a few things from the Dude. You remember him of course as the super laid back, pot smoking, unemployed dude who bowls and seems to live a very zen life. Sure he may be broke but he seems to have a few things figured out. After all he is financially independent. Don’t agree with me? Does life not start and stop at my convenience? Let’s explore this a bit. FI, or financial independence is being able to sustain your current lifestyle without doing any manual work; all expenses are somehow paid by some means without an individual’s manual labor.
Today FI seems to be all the rage. Everyone wants to say that one has retired early or working towards financial independence as if it is some brand new and miraculous thing. Blogs pop up everyday and lure people into their stories. But it isn’t anything new other than how pop culture has brought it to the attention of young professionals via the blogosphere.
Let’s go back to that glorious decade of the ’90’s. I didn’t really understand what was happening with the Dude for the first few years after seeing that movie. I just thought he was unemployed and poor and it seemed like the kind of situation that we all have been taught to avoid. There was a scene where he said he needed to check with his accountant and I remember thinking “hah, this unemployed guy doesn’t have an accountant.” But after studying finance for a few years, it dawned on me that this was no accident. He had his living expenses low enough that he didn’t have to work. And he probably indeed did have an accountant. Now some might argue that he may have been collecting unemployment. I checked into this. Unemployment could only last for so long: 26 weeks in the state of California at the time of this writing (I have yet to figure out what it was back in the 90’s).
We know that the Cohen brothers wrote that the Dude is an heir to the Rubik’s cube fortune but they do not tell you this in the movie. It’s spoken of on IFC. I am unaware of whether it is true but let’s assume it is for now. We don’t know how much he got from this windfall but it’s not likely much given his lifestyle. Either that or he blew a large chunk of it on Kahlua or cream and then he realized how to sustain himself on whatever remained. Nevertheless he seems to have it worked out so he does not have to work and can still pay his rent. Ok, so he pays on the 10th, but he still pays it.
Until I moved to Los Angeles, I didn’t think much of his modest little bungalow, but now that I live in LA, I have come to realize how ridiculously high the rents are and that this was a sweet little pad that was not dirt cheap. His place, 606 Venezia is located in Venice. Check it out here.
Abide me a moment and let’s work some numbers here. The cost of living in Los Angeles has been for some time relatively high compared to the rest of the United States. Let’s just say for a moment that he had a nest egg of $250,000. That would give him an annual income of $10,000 if using a safe withdrawal rate of 4%. If you need a lesson on safe withdrawal rate, check out my favorite blog on money. It’s basically the amount that you can reasonably withdraw each year without running out of money under most situations assuming you have a diverse portfolio of index funds.
The 90’s was a solid decade of growth. If his investments paid him even a low ROI, he could have monthly expenses of 833$. At the time the film was shot, 1997, the poverty line in the contiguous United States was just a hair below 8000$ per annum. According to census information, the median gross rent was around 700$ which seems very high but of course we are talking about LA. Based on these numbers, it might be reasonable to assume that the Dude could be living off this windfall rather than unemployment.
How you might ask? Because the Dude knew how to be FI (Financially Independent)! It was not at all about how much money he made but rather whether or not he could keep his spending low enough to match whatever his investments earned. If he was able to keep his spending just below or at his safe withdrawal rate, then he would almost never run out of money. Thus it was important for him to drive an old beat up car, be worried about landing in a higher tax bracket, and not have to pay to replace his tape deck and Creedence!
What do you think? Do you agree with me about the Dude’s ability to be a Financially Independent bowler who just wants his rug back? Drop me a line, man and let me know what you think.