There Are No Guarantees

mydoorYou know what I have come to realize is almost always ridiculous? Contracts.

Contracts, paperwork, and bureaucracy. Guarantees, warranties, and excessive caution in an attempt to ensure a trouble-free future. Not all of it is bullshit, but the older I get, the more I realize that a surprising portion of it is.

I mean sure, if I’m Tesla and you are Panasonic, and we’re partnering to build the world’s largest structure and produce the majority of the world’s energy storage products, and we each have thousands of employees involved in the process, we can write up a contract and sign it.

But if I invite you over to my house for one of our customary Sunset Beers in the Park events tonight, how appropriate would it be for me to send along a little PDF contract with five places for you to sign?

I, Jane Mustachian, agree to arrive at the Mustache residence between 5 and 6PM, and consume between 1 and 5 servings of beer and/or wine, over a period not to exceed six (6) hours, to convey myself to and from the event using only muscle-powered transportation…

….blah blah any food served may or may not contain nuts or gluten…

…agree to not to hold Mustache family liable for any injuries..  and so on.

You’d think I was crazy, and find another place to have your beer tonight.

We understand this at the social level, and even at the small business level, if we feel a high level of trust. But as soon as we lose our trust and get overly fearful, we start breaking out the lawyers and the contracts and the stifling formality.

It is at this point, I argue, that life starts to suck.

It’s also the point at which a company starts to suck – that moment when it loses its soul and its freewheeling joy, and starts pushing for profits above ethics, and the lower level employees are not empowered to do what they know is right because their boss would have to ask the next level boss and the request would die before it reached someone with enough authority.

This is also the point at which I try to avoid doing business with a company if at all practical, and find a smaller one who could use a new customer.

And therefore I think we can make our lives better if we raise that threshold of fear a little bit, and start running our businesses and our lives as if we were big boys and girls.

Here’s another story which illustrates this point:

On the “contact” section of this website, I have a little note that says people should not email me with requests for marketing partnerships, TV shows, book publishing, etc. Through experience I learned that those activities not nearly as fun as they sound.

But one guy snuck through the gates – “Hey man, I work for Sony Entertainment which is a big company but don’t worry, I’m cool – I just have some ideas for a TV show about Mustachian lifestyles and wondered if you want to talk about them.”

So we talked on the phone, and he was indeed cool. It was a nice concept and a respectable company and they had done other successful stuff. So I said I might help out with the project occasionally, as time permitted.

Suddenly, a completely unrelated person from their legal department started emailing me contracts and agreements and such – pages and pages of them! The contracts contained obligations, promises, and bullshit galore.

And here I was just naively thinking I’d have a beer with this creative writer and laugh about some ideas for a TV show. We had already agreed on the phone, that if the project ever ceased to be completely fun – for either of us – then we’d just drop it. Retirement is is too short to engage in non-fun projects, because there is already an enormous queue of extremely fun projects that I haven’t even had time to start yet!

So I told the lawyers thanks, but I wasn’t interested in contracts. But I’d still be happy to help out just as I had originally offered.

And I never heard from anyone at the company, or the creative guy, ever again.

I felt like I had been stood up – the whole thing had been a small waste of time. But I was grateful that I hadn’t actually dug in on a big project with an organization that works this way – for that would have been a much bigger waste of time.

Let’s contrast this with a a few other business arrangements.

Figure 1 - Camp Mustache

Figure 1 – Camp Mustache

I have fixed up plenty of houses with local friends, with many thousands of dollars at stake. Sometimes even lives or limbs, as we scrambled around like monkeys to cut down tall dead trees.  No contracts, just plenty of dirt, scrapes, laughs and good times – and profits, too.

I’ve done several interviews and trips with Jesse Mecham, founder of You Need a Budget. Significant value accrued to both of our businesses from these collaborations as thousands of YNAB customers became Mustachians and vice versa, and yet somehow it never occurred to us to make up a contract.

Next month I’m traveling to Portland – first to visit Treehouse founder Ryan Carson and do some social stuff that might also have promotional value for his business. Maybe record a video and a podcast, and even host a gathering of Mustachians right in the courtyard of their central Portland building. With beer!

No contracts, of course.

Then on to Seattle to attend Camp Mustache – something that is now a popular recurring event. Although there are tens of thousands of dollars involved in putting it on, it’s an informal not-for-profit arrangement and the organizers and I have never signed a contract.

But What if the Other Person Breaks their Promise and I Get Screwed?

You may think I’m painting an unrealistically rosy picture here. Not everything always turns out for the better, right? Business partners sometimes turn evil, tenants stop paying rent, girlfriends or boyfriends dump you, products break,  stock markets crash, bones break, and fatal diseases strike your loved ones.

I agree – life has been known to serve up the odd Platter of Shit from time to time. Every one of those things above has happened to me. And yet in zero of the cases could I have protected myself with a contract or warranty and come out ahead.

I’ve been to court a few times. In some cases, I was the landlord and the tenant wasn’t paying rent even though we had a contract. The judge ordered the tenant to pay. The tenant, who had long since left town, didn’t even know there had been a court case. And yet life went on, and the inconvenience was soon forgotten.

I retired early, invested too much in a house building business, then lost a bunch of money in the ensuing great financial and housing crisis. No contract could have protected me from these market realities, and yet somehow I survived again and life continued to get even better.

I’ve had products malfunction while under warranty, and in most cases the warranty department was so clumsy and incompetent (ahem, Samsung, Nissan) that I just gave up and fixed the product myself.

The point is that in almost all life decisions, the stakes are actually very low. Here in the rich world, the majority of our catastrophes have the following consequences:

  • You might feel “inconvenienced” and experience a frowning face for a short period of time.
  • Some numbers stored in a computer, which represent your wealth, might temporarily decrease.
  • You might have to move your body around – and possibly even experience mild heat, cold, or muscular exertion.
  • You might have to speak some words into a telephone or press some buttons on a computer keyboard to resolve a problem.
  • In more extreme situations, you might even have to speak to one or more humans in person.

Are these consequences really worth worrying about – or potentially even missing out on the chance to do something great?

What does This Have to do with Early Retirement?

Every week, I get at least a few emails from people who have more than put in their time. People in their late 30s and beyond who have worked multi-decade careers, paid off the house, given their kids a good start in life, stashed seven figures into retirement accounts, and long since grown bored of the big-company life.

But they are still working one more year, to add that last bit of safety margin padding, fill up that last college fund for the last kid, max out that health savings account just in case. Some of them have more savings than my family has even now, even though we’ve been retired (and continuing to accumulate wealth) for more than ten years.

And they’re still afraid to retire.

You Become Free Only when you Acknowledge That You Cannot Control Life

You can’t control the random bits of misfortune which may strike you. You can only control your responses.

If you are following the Principles of Mustachianism, you’ve already taken all the preventative work that you need to take: optimizing your habits to maintain a healthy body, mind, and bank account.

These are not a formal insurance policy, because formal insurance is nonsense.

They are a statistical prevention policy, a way of tilting the odds in our favor. And even more important, a response policy – a recipe that ensures that even when shit does hit the fan, you can clean it up, resume your prosperous life, and learn something in the process.

The lesson? Instead of working endlessly to build a glass shield around yourself, start enjoying life right now and just keep a mop handy.

Further Reading: In his joyful short book “Anything you Want” on founding a really successful business, Derek Sivers argues the same thing about contracts – just skip them if you can possibly do so, because people will either keep their word, or they won’t. If you bring it to court, everybody loses, and all a contract does is give you something to show in court.

  • Henry April 26, 2017, 11:28 am

    Where can we find more information about Camp Mustache? Who can attend?

  • Alexander April 26, 2017, 12:07 pm

    Jeez that is crazy that they sent you all that stuff and thinking you were actually going to sign it.

    What is this camp mustache? Sounds awesome!

  • Joe Freedom April 26, 2017, 12:30 pm

    The reality is that contracts by their very nature force both parties to the arrangement to stop and imagine ALL THE BAD THINGS THAT COULD HAPPEN in the future, regardless of how remote the possibility may be. We lawyers are trained to think this way—to imagine things going south and to document protection against those eventualities. I suspect that is in part why law is one of the few professions where skepticism and cynicism actually make you better at what you do (and often miserable at the same time). And lawyers aren’t the only ones to blame: if they miss a potential bad outcome that does actually arise, they often get sued. But formalizing a list of potential bad scenarios has a way of pitting people against each other. It is much more efficient and healthy to simply do business with people that you can trust, shake hands, deal with each other fairly and honestly, and go on with life. (But Tanstaaflite’s and Vigilante’s posts above do a good job of detailing the realities that make this difficult if not impossible.)

    • The Vigilante April 26, 2017, 1:34 pm

      Also great points! Rarely do you see so many lawyers in total agreement :)

      Imagining bad scenarios and solving the problems that realistically may arise is actually one of my main justifications for so strongly supporting prenuptial agreements – I think it’s better to prepare for possible difficult issues while the couple still love each other, rather than waiting until the shit hits the fan, one or both parties are bitter and angry, and both parties suddenly realize (as they do in MOST divorces) that their future livelihood – such as a retirement plan – is at stake and they need to protect themselves.

  • Christian April 26, 2017, 12:31 pm

    Agree, and disagree – as a small business owner I don’t usually deal with real contracts, but I do like to have everything in writing so that all expectations are clarified in advance. Sometimes a signature so that I know the person has read it, but I keep things in plain English and short because, who’s got the time for more?

    • jubilant jill April 26, 2017, 1:20 pm

      This sounds reasonable. I like things written down for clarity’s sake. Do you also go over everything verbally?

  • David Kaminski April 26, 2017, 12:42 pm

    Maybe I’m playing the role of devil’s advocate, but I do disagree with your reluctance about contracts.
    In your piece about this, you include many situations where someone has simply done you wrong (“Business partners sometimes turn evil, tenants stop paying rent…”). Contracts offer you little protection for those type of bad things in life.

    The reason I am endorsing the use of contracts is because preserve the good things. Contracts (should) require a discussion about expectations up front. They can preserve friendships and business relationships. It’s about the positives, not preventing evil or being able to sue if you are wronged. Contracts can save you from a misunderstanding and a disagreement later. A well done contract, which should be short, is way of communicating expectations upfront. Too often, when we are working with friends or small businesses, we don’t have a full discussion and open communication about what is expected (“who needs that, they’re my friend and they won’t do me wrong”). Well, they didn’t “do you wrong”, they just had different expectations. I’ve seen many friendships ruined because there wasn’t clear communication from the beginning of an arrangement.

    A contract can be verbal, but that creates a fuzzy memory about what you talked about. Write it down and keep it short. I like to write my own leases with the tenant (hate boilerplate “protect the landlord at all costs” leases, even though I’m the landlord). The lawyers have expanded contracts to cover every contingency and complexity.

  • Brian April 26, 2017, 1:06 pm

    I wonder how much productivity and creativity is forgone or idle in the pursuit of “legal protection.”

  • Willard April 26, 2017, 1:21 pm

    Know when enough is enough. I still think I need to work 2 more years as a veterinarian before I feel secure. To see two people who have a totally different view go to tworetiredtravelers.com. Richard owned a car repair shop in my hometown. Diane is the mother of my children and was my wife for 20 years. I was always waiting for “someday.” These two now just travel the world and blog about it. I think they are in Hamburg, Germany now. I wish I had the guts to do the same. Someday.

  • Jeff April 26, 2017, 1:23 pm

    I agree with your points about not being able to control the future.

    But your criticisms of contracts are a bit off IMO.

    Contracts allow the parties to define responsibilities and roles before the relationship begins. They ideally provide clarity for the future.

    In your landlord example, should the tenant be responsible for your attorney fees if he doesn’t fulfill the agreement? Can he pay the rent on whatever day he wants with no penalty? Can he have loud parties at 1 am on a Monday night? Can you evict him 3 months into his tenancy? Can he run a business from the apartment? Under what circumstances can the security deposit be taken by the landlord?

    While some contracts may be overly long, contracts are important tools of a civil and peaceful society.

  • WaldportDan April 26, 2017, 1:45 pm

    This is a pet subject of mine that I wrote an essay on called “The Immorality of Contracts.” The gist is that while conventional wisdom holds that contracts exist to protect rights, often it is the opposite. Unless two people agree to something as equals, the consequence is rarely fair. Accordingly, most contracts are gentlemanly tools of oppression. No overt violence is necessary to take an advantage. Simply a handshake. If you are not feeling bad about the contracts you have made, odds are, it is usually because you are on the advantageous side.

    Contracts take many forms: Legal. Diplomatic. Real estate. Social. All monetary transactions imply a contract. Anything done quid pro quo. But all contracts have one thing in common: They create a body of rules that are difficult or impossible to change. And here’s the rub: The terms of a contract are enforceable with indifference as to whether they were created fairly or circumstances change.

    Say you lose your job. Your contract says you still have to pay your rend or your mortgage payment. Or you are a farmer and your crop fails. The bank says you still are responsible for your farm loan. Or have an accident…

    A fair contract would have both parties share in the benefit and the risk. This is rarely the case…

  • S.G. April 26, 2017, 1:46 pm

    I agree in theory, but I disagree with the purpose of the contract. The landlord contract isn’t as much about getting your money out of them as much as covering your butt when you evict them. In the case of the TV show, if they’re counting on you to deliver X and they promise their distributing stations based on that and you fail to deliver then they’re potentially out a lot of money. If you sign away that you will give them your firstborn if you don’t deliver then you are more likely to deliver.

    With that being said, I totally agree with your decision to leave the opportunity on the table. Even if they have good reasons for dogpiling you with their legal team, paperwork and fine print quickly makes any project not fun.

  • Alan B April 26, 2017, 1:47 pm

    I agree with this sentiment and do my own work in this manner, but also am aware that there is a certain amount of privilege involved in being financially able to walk away. For those who cannot have it, the contract often is a necessity. Even then though, there are acceptable contracts that really are the simplest of agreements or unacceptable ones that are needlessly cmoplex and filled with legalese.

    • Tanstaafllite April 27, 2017, 9:12 am

      As noted above by Joe Freedom and The Vigilante, a complicated contract may be required in order to address the reasonably anticipated contingencies and potential negative outcomes of a business deal. I agree that a needlessly complicated contract is always a nuisance and often a misuse of resources. Of course, the simplicity of an appropriate contract required for a $1,000 deal (which may require no written contract at all) is different from the thoroughness and complexity of a contact used for a deal with 2 or 3 additional zeros.

  • jRock April 26, 2017, 2:00 pm

    Nicely written and totally agree. I’m curious to know if technology has played a factor in diluting the human aspect of deal making – it just seems there was more trust in business relationships in the past.

    The other thing to consider is inheritance. For example, it’s a good thing a contract is in place between the US government and the american people – the constitution. This may not always be needed; however, you never know who will inherit via the role of President.

  • Michael R April 26, 2017, 2:22 pm

    When deciding to retire this year – despite the uncertainty of the ACA continuing to exist – we decided we can’t live based on worst case scenarios. Planning for the likely case radically simplifies matters.

  • Jonah April 26, 2017, 2:33 pm

    As a writer/creator myself, I have to say, from much experience, that contracts are 100% absolutely necessary. In fact, they often make the collaborative process much much easier and freer. If you and I agree in advance to the terms of our partnership in a creative endeavor (which are tricky enough to define as it is, to say nothing of doing so after the thing has already been created), then we’re both on the same page from the outset, no one has to worry about credit or compensation, and you’re free to just do the work. If, however, you wait until the work is done and THEN try to go sell what you’ve created without a contract between partners in place, you leave yourself open to mayhem and getting screwed over– now that there’s an actual concrete opportunity before you, everyone wants to make sure he/she is getting a fair share (or, depending on the person, more than fair). But we never defined what “fair” is… so one partner might have assumed we were gonna split 50/50 no matter what, and the other might say “yeah, well I think you only really did 35% of the work, plus really it was my idea, plus we used my credit card to pay for the lunches so I should get compensated for that, plus alphabetically my credit should come first even though I verbally said I didn’t care six months ago.” And now the relationship is in jeopardy, the project is in jeopardy… it’s all very messy. Which all could’ve been easily avoided by agreeing to simple terms at the outset.

    It’s about managing expectations and being upfront so that you’re free to create without having to worry about fairness or “the business side” of things after the fact. I can’t speak to having the dude ghost on you and reappear with a lawyer with no warning — that’s just a shitty way to handle a collaboration, no matter what business you’re in. But I have been absolutely screwed over by partners before because we didn’t have an agreement — and these aren’t evil people. They’re just people who, like most people, are looking out for their own best interest, and if that means jumping at a chance to sell an idea you worked on together, without you attached to it– because the buyer doesn’t want to pay that many people, and you have no formal documentation linking you to it– they’re gonna sell it.

  • KS April 26, 2017, 2:35 pm

    As my brother said, you know you’re ruining a good start up company as soon as you introduce an HR department. I know lots of folks who did not participate in the 4/22 science marches because ‘the might possibly even experience mild heat, cold, or muscular exertion.’ Sheesh! Didn’t MMM discuss how clothing is your climate control a few years ago?

  • Underdog April 26, 2017, 3:39 pm

    I’m having a tough time going to electric. I now drive a 23 year old Ford Escort station wagon. I walk to work, (my own business which I love), the car sits most days in my driveway. I drive to church on Sunday, about 16 miles round-trip, and to get groceries. It takes 10 gallons to fill it. I spend somewhere around $300 or $400 every couple of years to keep it running. If I tried to sell it, I doubt I could get $500 for it. I doubt if I would be able to justify going to an electric car until this gem finally dies. In the meantime, I’m able to put aside enough monthly to afford me a fine used vehicle in the $4000-5000 range in a couple of years when/if the time comes.

  • Matt April 26, 2017, 4:04 pm

    Excellent post MMM. I agree with all of it, mainly because you’re describing me… I know you’re right, but I’ll finish the year out and be done – it’s only 8 months more at this point. It isn’t for the safety net though in my case, and I’ll bet there are plenty of others out there just like me. I have spent so many years being frugal that I don’t want to be just ‘ok’ when I retire. I want more than ‘enough’ so I can splash out on treats, travel and not have to worry about money for the first time in my life. I know that isn’t very Mustachian, but it’s perfectly natural and I’m doing it at 41 with a whole lot of life still to live. Maybe I’ll get it out of my system in the first 2 years and be done with it, who knows. Each and every one of us will have a different definition of ‘enough’, and that’s ok. The important message I’m trying to put out there is that there isn’t a 1 size fits all answer to how much is ‘enough’. 1 more year is ok, I think the point is not to let it become 3 more and not to let the decision stress you out! When you have worked hard and made the right moves to get to a place where you are in great financial shape, whether you are on the journey to FI or have made it, enjoy it in whatever way works for you. I suspect that there are a number of different reasons preventing people who want to retire and could retire from retiring – chasing the illusion of safety, wanting some fun money, relationship complications etc. Maybe some people have been on the treadmill for so long they are addicted to seeing their net worth increase month after month (I think that’s probably all of us!). What I do know is that I have a date and I’ll pull the trigger the moment I get there. Big thanks to MMM – you change people’s lives.

  • Northerly April 26, 2017, 4:27 pm

    MMM, curious what your net worth was at lowest ebb after retirement? I”ve been a massive fan for about 3 1/2 years now, but I don’t think I’ve ever come across this info. If I understand the timeline right, you’d have lost equity in the building project at about the same time of the stock market crash, causing a pretty big (temporary) hit to the ‘stash.

  • David April 26, 2017, 6:33 pm

    When I was a full time painting and remodeling contractor I used contract on about half of my jobs. When I was subbing under a general contractor or developer the contract was simply a formality and both sides knew we weren’t likely to look at again. When I was working directly for a homeowner the contract was more important. The reason was the general contractor and I knew what to expect from each other. Many homeowners don’t know what is included in the bid and what is extra. My contracts listed what was included for a certain price and any additional work would be charged for time and materials.

  • Mr. Atypical April 26, 2017, 8:20 pm

    I totally agree that contracts are bullshit. My favorite example of this was our experience with trying to get housing over here in China. We moved to China 2 years ago on an expat assignment for a US Chemical company. During the process of finding a house to live in, they gave us a budget of 18,000 RMB per month and then gave us a real estate agent from a world-wide house hunting company to find housing. They took us around to multiple places to check out, of course in the most expensive apartment complexes around, and we found several places that would work for our needs.

    We fell in love with one way up on the 25th floor of a building overlooking the sea and went through the process of signing the contract. Usually a rental contract is written by the landlord, but my company insisted on using their contract for the lease.

    The company contract is 40+ pages!

    No wonder the landlord blanched at the idea of ever reading that bullshit. They doddled around for a few days dragging their feet, asking what we needed added to the apartment before in the end telling us no. This happened no fewer than 3 times to us while looking for apartments.

    My boss just went through the same thing when his landlord broke their contract and sold his apartment out from under him. He then went through 10+ apartments trying to find one to live in.

    All of this experience really hammered home your point on contracts are bullshit. The best one I lived under was with a landlord with no contract, one built on trust.

    Thanks for the great post!

  • Mrs.Wow April 26, 2017, 9:28 pm

    Literally just finished reading a contract for work and couldn’t believe some of the bullet points on it. I shake my head thinking they were put in there for a reason, when it seems so common-sense to me. Always good to keep a mop on hand.

    • LennStar April 27, 2017, 2:53 am

      Participants agree to not make a camp fire in the dorms.

  • Frugal Bazooka April 26, 2017, 10:08 pm

    3M rarely fails to deliver great advice and once again I find myself lining up to agree with your general premise. No piece of paper will provide true peace of mind, figuratively and literally a contract is just a piece of paper and nothing more. The person that stands behind the contract is the key and either you can trust him/her or not.

    I’m also fascinated that so many people who apparently could successfully retire relatively early, choose NOT to retire and stay at their job. I just can’t wrap my head around that idea. I hated waking up early, I hated having to wear certain kinds of clothes, I hated being in one place for 7 hours a day, I hated being subject to the whims of a supervisor of any kind, I hated arbitrary work place politics…I didn’t hate the people i worked with and I certainly didn’t hate the pay, but I would not stay one day longer than I had to…

  • Mike Hindman April 26, 2017, 10:41 pm

    Great blog. A contract gives 2 or more attorneys a way to make a living off of words like reasonable, good faith, default, remedy, and intent. This should be the true definition of the word contract.

  • LennStar April 27, 2017, 2:52 am


    I think you are ignoring the (for me) most important part of contracts.

    I am not talking about Big Company BS Contracts or “I buy one bottle for 1$” *oral contracts* ;)

    But the average things where money plays a role but, as you called it, comfort is more important. Comfort as in “it is working”.

    If you put down “deliver X and Y at 3pm on the xyz to house Z” on a piece of paper and both parties get it, they knwo what to do.

    Ever seen a family bickering about an inheritance when one says “But father said X” and the other says “I don’t remember this!”?

    That is also the reason I prefer emails to phone. We can speak about everything, but in the end, here is an Email (and an OK response) about what when and where.
    That way I don’t have to put power into remembering it 2 days or weeks later and there is no misunderstanding because someone misheard or mis-remembers (the brain is often very faulty) things.

    • Brendan April 27, 2017, 4:13 am

      In contrast to this, I rang my local electrical light shop and asked them who they would recommend fixing a light. The electrician came to my house and replaced a transformer up a 12-foot ladder. I helped him out holding the light and passing him tools and he reduced the charge because I made his job easier. No contract.

      When my mother passed away we asked each other “who wants this?” coin collections, antiques, money etc. If we’d got nothing it wouldn’t have mattered. The idea of relying on someone else dying to secure my future seems a little un-Mustashcian.

      That’s not to say an email clarifying what has been agreed is helpful but the idea of that somehow morphing into a contract is something a lawyer must have invented.

  • Kenneth April 27, 2017, 3:28 am

    I’ve owned and managed 2 service businesses since 1990 (Landscape and web design). I’ve never used contracts to speak of. I’ve been tempted but never followed through. I’ve had maybe 3 negative experiences in all that time (largely inconsequencial) that may have been lessened with a clear contract. These could also have been prevented by my being more clear. Contracts strike me as a way to not have to worry about being honorable, or worse yet, defining what “honorable behavior” looks like for the other party. In line with what MMM says, there are times when having at least the basics of what you’re doing, for how much, and what the consequences are if someone screws up is beneficial, but it doesn’t have to take an afternoon to get through it.

  • Stefan April 27, 2017, 5:20 am

    MMM – what is your advice on prenuptial agreements (prenups, i.e. pre-marrital contracts)?

    Assuming you have enough assets to retire early in two years, but the person you are planning to marry has not. Should a mustachian protect their assets through a contract to avoid having to work for them man again in case of a bad divorce?

    • Buried April 27, 2017, 4:54 pm

      Also, can you send me the answer to that 14 years ago?

  • Shaunae April 27, 2017, 6:08 am

    It was fun and useful to read it! May I say that sometimes there is more like an mutual agreement, a gentlemen agreement that is the base of any contract!

  • Joe April 27, 2017, 6:18 am

    You should check out the story behind the audio company Schiit. The founders have posted the details over on the Head-Fi forums.


  • Angie unduplicated April 27, 2017, 7:27 am

    A contract is only as good as your judge. I recently went into a courtroom with a stack of solid paper evidence on a broken lease, against a man who was evicted by his off-lease business partner but claimed the deeper-pocket building owner unlawfully evicted him. The judge sat on the case for a month, his pick of court reporter never typed a transcript and the evidence was included with the transcript. Judge found the building owner (my boss) guilty.

    It is notable that another county judge is about to go to prison for five years for malfeasance. FBI needs to give the county a BOGO.

  • Phil B April 27, 2017, 9:16 am

    Good stuff. The comment about trust at the social and small business level reminds me of a theory from evolutionary psychology called Dunbar’s Number. It proposes that we can only really know about 150 people well enough to understand how they relate to one another. This turns out to be about the size of primitive villages. It may explain why organizations larger than this tend to become bureaucracies and rely more on formal arrangements. If you’re interested in the subject I recommend “How Many Friends Does One Person Need?: Dunbar’s Number and Other Evolutionary Quirks”.

  • Mark April 27, 2017, 2:27 pm

    One More Year syndrome reminds me of the book The Power of Now by Ekchart Tolle. Being preoccupied with the future makes us not appreciate the present. It’s great to prepare for future uncertainties, but not when it interferes with living in the present moment and getting all we can out of life.

    We also underestimate our ability to deal with uncertainty (job loss, illness, economic conditions) by sometimes over-preparing and playing it too safe – working jobs we dislike, staying in relationships that are toxic, etc.

    Sometimes you just have to jump in the ocean and trust you can swim.

  • Doug April 27, 2017, 7:51 pm

    Yes, there are no guarantees, with the exceptions of death and taxes.

    As for contracts, the problem is they’re often written with in a manner like: pertains heretofore unto the aforementioned parties of the said agreement herewith, or rubbish like that. Wouldn’t it be a lot easier if they were actually written in English?

  • PedalGeoff April 27, 2017, 8:37 pm


    If you haven’t seen the musical, Jersey Boys, the part I really liked about their story (the Four Seasons) was that Frankie Valli and Bob Gaudio have never had a contract; they have always worked from a handshake agreement they made decades ago.


  • Sharon April 28, 2017, 2:13 am

    We are also at the FI point you describe and the main barrier is health insurance. With the level of uncertainty in the health insurance market and two adults with preexisting conditions we really need our big corporation provided insurance and don’t see an easy way out of this situation. In a few years I’ll qualify as a retiree for my company’s retiree medical program but there is nice guarantee they will continue to provide this benefit or that it will be affordable.

    Any ideas on how to resolve?

    • Rory May 2, 2017, 4:15 pm

      I’ve asked the same question. I have no idea, other than working part time for an employer who is willing to provide health insurance. It’s not FI, but if it was part time and mobile, it’s sorta retirement. Maybe as close as we can get in the USA if the ACA gets repealed.

  • SKB April 28, 2017, 9:24 am

    Thank you for the reminder! My spouse and I are currently in the “just one more year” (or two? or three?) phase. It’s hard not to clutch that security blanket and cower, especially when family and friends whisper “just 5 more years and you’re super safe!” (or 10?, what if? what if? what if?)

  • German April 28, 2017, 11:56 am

    Just wanted to comment that with this post I’m proudly up to date with the Blog, which I started reading a while ago and have been reading from the bottom up since then.

    Greeting from Buenos Aires, Argentina!

  • Michael April 28, 2017, 1:04 pm

    what are you, some kind of mind-reading wizard/finance/happiness guru? Timely post, as I am just starting to look into Disability insurance this very week!
    Interestingly, income replacement wasn’t really something I had considered giving much thought to, as I’m young, healthy, etc. After reading this post it has beckoned me to back off some of the scary talk and ‘what ifs’, so thank you for that. Nonetheless I do see the role it could play since I’m still in my wealth accumulation years (age 26).
    I apparently have a group disability policy from work, but after doing some research I’ve discovered it’s not very good (like most group disability policies). Ultimately I do see this as something worth having, atleast until I no longer need my income and am truly FI. Would that be a reasonable approach you think?
    The problem is placing a value on it (price), and the insurance companies have much better estimates on me than I have on myself.

  • Melissa Yi Yuan-Innes April 28, 2017, 10:51 pm

    I’m a doctor-writer, and I’ve realized that successful authors take risks. They don’t have everything nailed down. They try things out. They fail and get up again. They have mops ready.

    Being a doctor is the safe option. The golden handcuffs.

    I just launched a new novel on Tuesday (DNA Day, thank you very much), and I’m experimenting with new things. For example, I did a book launch in Montreal yesterday, even though I hadn’t lived there in two decades, and most of my friends had either moved away or couldn’t come because they’re now doctors with toddlers. I was freaked out. “There’ll be more wine than people!” I said. (“That’s not a bad thing,” some people replied.)

    But I also knew I wanted to experiment with failure. So I did. And a bunch of people showed up, some of them bought books, and I forced them to submit to photos like pretending to be dead bodies because my book is called Human Remains. It was fun. Writing is usually just slogging by myself in a room when I’m already tired out. I’m allowed to have fun.

    I definitely have one more year syndrome when it comes to early retirement, too. So much of life is a mind game. I have a folder marked Psychology in my Scrivener retirement file, because my natural tendency is to play it safe forever, even if I don’t have to or want to.

    Thanks for the injection of courage. I agree that safety is an illusion. I just have to slowly relinquish my grip on it.

  • Robert Hunt April 29, 2017, 7:54 am

    As an RIA, the state requires a lot of paperwork. Sadly, I am not sure how effective it is in protecting investors. If they simply required folks to not be able to make commissions off clients it would save a lot of trouble. Good post.

  • Master Duke April 29, 2017, 3:02 pm

    This was one of the first blog posts to really talk through the ANNOYANCE of contracts. A society that could trust each other without them would be awesome, think of how much GDP is used fighting cases like Google’s Waymo fighting Uber for stealing its technology.

    Awesome post thank you for it!!

  • Fuzz April 29, 2017, 6:32 pm

    I represent small businesses and individuals in litigation. MMM is on point with this. You are far, far better off dealing with great people and no contract, than having a great contract and dealing with folks you don’t trust. Life is too short for that.

    I’ll also add that “do nothing” is some of my favorite advice to give when folks want to fight over a contract.

    Many contracts, even those drawn up by fancy lawyers, are ambiguous as to key terms once those terms are applied to what actually happened. A contract doesn’t mean what you think it means; it means what a judge says it means.

  • James April 30, 2017, 4:17 pm

    I’m curious what people think about oaths, vows, and the like, and where they fit on the contract-trust spectrum.

    Some recent research shows people are more “truth revealing” in surveys and experiments when they sign an oath to do so, even though the oath is utterly unenforceable (and participants know that). It would be nice to think of simple contracts serving similarly as “priming” people to actually act in good faith, but it does seem that they tend to work in the opposite direction.

    My (now) wife and I didn’t get married until we knew we could trust that we would always be on the same team, and so I always considered our wedding vows a mere formality. At the same time, that formality was really important to us — and it offers a convenient mechanism for explaining the nature and depth of that trust to the outside world. Perhaps (good) contracts do the same, in that they’re mostly for third parties who might care or even have skin in the game.

  • RJ Bruer April 30, 2017, 6:49 pm

    I completely understand where you are coming from. Unfortunately, our society has become way too litigious. I hate bureaucracy and bullshit as much as the next guy, but you do need to protect yourself. Unfortunately, I feel contracts have been necessary in some of the business transactions I have completed. I do some consulting from time to time. This requires a contract to protect me from liability. I’ve also required the signing of a contract when home sharing as a side hustle: http://www.realsimplefi.com/simple-side-hustles-fund-financial-independence-home-sharing/

    I’d love to live in a place where your word and a hand shake is all that is needed. However, I need to be realistic and, unfortunately, contracts are required at times.

  • Chris May 1, 2017, 11:41 am

    Odd/Sad example of this from my life…

    Several years ago a producer and director wanted to option one of my screenplays. They were the most legit people who had or have ever been interested in one of my scripts. They were a British duo who had previously teamed up to do several commercials and music videos, and were now looking to do their first feature film. In lieu of a cash payment option, they offered to pay for a trip to London so I could better revise all of my locations from US ones to English ones. After consulting with a friend of mine who had optioned several scripts and had one produced, I asked for a contract. They were actually okay with it, but they spent months getting a legal group to draft it. At some point the director and producer had falling out, and nothing ever happened. They are now both talent agents and I am still an amateur screenwriter.

    I wonder what would have happened if I had just said “YES. Sounds Cool – Which one of you limey bastards is buying me a pint?”

    Dammit – I just bummed myself out. Thanks for that.

  • Mrs. Waiting May 1, 2017, 1:05 pm

    Wow. It’s like you read my mind. My husband and I are counting down to retire in 5 years at the age of 52, old by your standards I’m sure. We are right around 1 million now but I just feel like it is not enough to handle the what ifs? I am a financial planner by trade so learning to let go and realize how little control I have is quite tough. Our daughter has 3 more years of college. We figure 2 more years to give us a cushion. But I just keep hearing a voice saying, “go now, don’t wait”. How do you get through all of the psychology of leaving the money behind? My friends think I am crazy to give up my business. My brain hurts! Fear and the building of the glass shield have taken over.

    Most of our wealth is tied up in the equity of my business and our home, which could fall at any time. How do you make the jump and feel ok with it? Or do you never feel ok?

    • Kathy Abell May 1, 2017, 11:49 pm

      You make plans and then life happens. You just need to have the flexibility to keep adapting your plan to changing life circumstances.

      My company had early retirement at age 55. But I was diagnosed with triple negative breast cancer at age 50 (something that was never in ANY of my “what ifs” btw). I honestly did not think I was going to live the five more years I needed to make it to retirement. There are no guarantees in life for any of us. I’ve seen too many people put off “living the dream” until it was too late for them.

      Find the joy in your life TODAY. If you don’t have it now, figure out why not then work to resolve that.

      Remember that just because you retire from your current career it doesn’t mean you will never, ever do any kind of paid work again. If you must, consider yourself as just taking a “time out” to figure out what your next “career” will be. If it takes 20 years of relaxing on the beach or cross country road trips to figure it out, well so be it. ;)

      • Mrs. Waiting May 9, 2017, 2:42 pm

        That is great advice Kathy. I do try to live that way. I lost my mom when she was 53 so that weighs on me for sure. I guess our generation just has the work ethic so ingrained in us it makes it hard to think that is ok to leave and move on. Our identities are also so tied up with our careers.

        I hope you are well and have many, many years to enjoy your retirement.

    • RJ Bruer May 2, 2017, 4:23 pm

      I hear on on the psychology thing. Sounds like you are in a similar situation as us. We are 46/44. Hit the six figure mark this past year and currently at 1.25mil. About 200k is wrapped up in our paid for townhouse. The rest is investments and savings. We have both been working like crazy the past 4-5 years to get here, yet we tell ourselves we need 2mil or hit age 50, whichever comes first.

      Math tells us we can do it now as our expenses are fairly low. However, we just don’t feel like we are there yet psychologcally. I guess we are the types that just feel like we need more of a cushion. I’m also a bit infatuated with watching our money grow at an accellerated rate. Why not keep this train rolling a bit longer? Just a bit longer. I hope I’m not feeling the same way four years from now.

      • Henry May 3, 2017, 4:27 pm

        Have you ever thought about semi-retirement? It sounds like you are financially independent, so what about cutting back from “working like crazy,” to something less stressful?
        Just a thought.

  • Laurie May 2, 2017, 4:37 am

    I’ve always been someone who tends to trust others–maybe to a fault. But in some ways I think that makes you more willing to work with/do work with people who are trustworthy–you get this “funny feeling” about people who aren’t acting on the up and up, and prefer to work with people who are transparent like you.

    I don’t know how others feel, but I (paradoxically?) cannot stand to be taken advantage of. I get so annoyed if I feel like I’ve been ripped off or charged too much. Maybe that’s really an indication I’m not as trustworthy as I think I am. In the long run, though, I don’t think the money lost is worth the feelings of aggravation.

  • Lutorm May 2, 2017, 6:03 pm

    I sort of agree with the “no contract” thing, but also not. Just being in the process of writing up a minor contract between a few people, I think the major point of hashing out the contract is for us to just make sure we’re all on the same page. The point is not to have a written contract so that someone can take to someone to court, but to avoid the scenario that down the line someone goes “Wait, you’re saying we should X? I thought we were going to Y.” because we didn’t realize people had different things in mind.

  • Erwin May 6, 2017, 12:43 pm

    Reminds me of marriage. Once you add this legal contract into this social relationship, the dynamics inherently change. Now instead of falling back on the good faith of two partners when problems arise, you fall back on the legal and contractual obligations to each other. While this doesn’t negatively affect every relationship, I can see why people say “everything changes after marriage.”

  • FIRECracker May 6, 2017, 1:10 pm

    “but they are still working one more year, to add that last bit of safety margin padding”.

    Yup, I had this “1 more year” syndrome when we retired as well. We ended up working an extra 6 month because a) we wanted a cash cushion outside the portfolio and b) my husband’s boss asked him to stay on longer to train his replacement.

    In hindsight, it really wasn’t that necessary because our costs dropped so much in retirement (as we found out, travelling the world is actually CHEAPER than staying home) ,we ended up easily living off dividends and side gigs while letting our portfolio grow.

    I would agree that fear of uncertainty is what holds most people back and causes them to keep trading off their time for extra money they likely won’t need. BUT, one area that I do empathize with them is healthcare. Particularly if they are American. Canucks, Europeans, and Australian don’t have to worry about it because we have free healthcare, but in the States, one major health issue could wipe out your portfolio. That risk was mitigated with ACA, but now with the Republicans in power, who knows what’s going to happen.

    For the retirees who want to travel or move abroad to a lower cost country, they can mitigate this by paying out of pocket (I’ve also learned through travelling that quality healthcare is very affordable in Mexico, Southeast Asia, etc), but for the people who choose to continue living in the States, they’ll insurance will go up by $10K/year at least and mostly likely continue to go up.

    Do you have any thoughts on costs of health insurance for American early retirees? I know that you like to keep fit as a preventative measure, but peoples’ fears of healthcare costs in retirement are not unfounded.

  • Jacob May 7, 2017, 8:08 pm

    As a lawyer and a carpenter hobbyist, I recommend that anyone with a small business selling goods (not services) check out their state’s UCC provisions. Sales of goods are always covered by the UCC – it’s the default contract, even if nothing was ever written down.

    I’m all for going without a contract as long as I have a relationship with the counterparty, but for those of you who are engaging in arms-length transactions with strangers for the sale of goods, the UCC is your friend.


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