How to Feel Financially Independent — Without Being a Millionaire
Hint: Independence isn’t a number, it’s about enjoying life now
2020 was a strange year. While it devastated some people’s livelihoods and health, others ended the year quite flush. Working from home has led people to save money on transport, takeaway coffees and eating lunch out. Others have finally had the time to launch their side hustles, and some key jobs within society have had people working crazy amounts of overtime.
And as shopping and work moved online, so did finances. Those who were saving money started searching for ways to reinvest their money, looking beyond the traditional savings account with near 0% interests. It’s my personal opinion that the rise of the price of Bitcoin, other cryptocurrencies, Tesla, stocks, and even the GameStop debacle are all linked to this leftover cash that households and individuals are no longer spending and instead are investing. And as people Googled online for ways to invest, they will have stumbled across the FIRE community.
FIRE: Financial Independence, Retire Early
The Financial Independence, Retire Early concept is simple, but hard to achieve in practice. If you are able to save and invest 25x your yearly expenditure, then you should be able to retire on the investment returns every year and you’d be free to quit your job forever.
FIRE is said to originate from the 1992 book Your Money or Your Life, and popularised online by Mr Money Mustache’s blog. Today the FIRE movement has developed into a bit of a cult, with books, articles, podcasts and even a yearly conference (Fincon) about the idea of retiring on your investments. It is a wonderful rabbit hole to get lost down, and after a few weeks of reading about FIRE strategies, you will feel ready to save up a 6–7 figure number and start your journey to financial independence.
The long road to financial independence
One of the things not often mentioned in the financial independence realm is that saving hard is a long slog, and saving enough to ‘retire’ on is not as easy as it sounds. After taxes, living expenses and bills, a lot of your salary will be gone, and staying frugal for 10–15 years can be hard and tiring. I previously wrote an article not recommending it for people in their 20s, because the extreme focus on saving and frugality is not the best way to spend your freedom years. However, setting up good money habits and learning to invest is crucial to your 20s, but this topic is for another article.
After discovering FIRE most people double down at work, hustle, save and build complex spreadsheets. Then they watch their numbers slowly tick upwards (and sometimes downwards too). Then they wait, check again and wait. If you give FIRE too much attention, it can be exhausting because, short of a lottery win, building wealth can be slow. Many times, people move jobs for better salaries, but because they’re focusing on their job as a way to earn money for independence, they end up disliking the job and mentally framing it as a chore, or something to eventually escape from. If the focus is on some future situation, the present will always be frustrating.
How to feel financially independent today, not when you finally FIRE
What is often missing in the discussions is what to do while you wait for financial independence. The average FIRE blog estimates it takes between 10–15 years of solid saving and investing to get to a level of Lean FIRE (where you can retire if you live frugally afterwards). If you have a high paid job, you might get there quicker, with a low salary, it might take longer. You might experience monetary setbacks, or you might get lucky with a portfolio of bullish stocks. Regardless of how much you earn, save, invest, the most important thing is how to make today count and this is what we need to prioritise.
The thing to consider is what you would actually do if you hit your FIRE number, if you didn’t have to work any more: would you travel more, spend more time with your kids, read, study, learn a language, take up a sport? Whatever you identify, these are the things you need to start incorporating into your life today, because these are important to you. You are willing to sacrifice 10 years of hard work to do them, so find a way to fit them in today. 20 minutes of reading in the morning before work, Quitting Netflix to spend more time with your kids, spending an hour every evening learning the guitar, what ever you want to do when you ‘retire’ early, start doing them today.
The saying goes, work will expand into the amount of time you give it, so if you work 9–5, then make sure at 5:01 pm you are unplugged and no longer thinking about it. In any 24 hour day, you have 8 hours to work, 8 hours to sleep, and 8 hours to do whatever you like. By focusing on filling your free time with enjoyable hobbies you will feel more fulfilled with life now, instead of waiting for some future point when you have ‘enough money’.
The feeling of financial independence is in enjoying life now and having a plan in place to have enough in the future.
Ultimately, enough money is enough to walk away from any job you hate, or not have to struggle if an unpredictable event (like covid) occurs. This could be as little as 6–9 months of monthly expenditure saved, not 25x your yearly expenditure. Your FIRE plan should tick away nicely in the background, but it shouldn’t be the focus of your days, and it shouldn’t even be checked weekly. Trust it and let go, leaving time to focus on activities you really want to do.
Considering FIRE is important for setting up a good investment strategy and spending habits, but arguably the best gift it can give you is to contemplate what you would like to do during the Retiring Early part of FIRE. If you can start to bring those things into your everyday life, then you will start to feel more financially free than ever before.
