The main argument used against pursuing financial independence (i.e. saving a lot of your income) is because someone likes their job. After all, if you like your job then you’re not trying to get out of it quickly and retire. And since you’re not trying to retire, you don’t need to save much and you can spend more money. A win-win! Sounds great right?
The alternative is to save a lot of money which sounds like deprivation. In previous articles we’ve discussed why saving a lot can be done without a feeling of hardship as long as you spend mindfully so that you don’t waste money on things that don’t make you any happier. I’m not going to rehash this point although it’s critical to understand in order to adopt good savings habits while still being happy with your current lifestyle. Instead I want to focus on the “but I like my job” argument. I’m in the middle of a transition at work that I’ll use as an example.
Personal (and Current) Case Study
In my most recent role at work, I’ve known for a while that my job would be going away due to pending changes in the organization. This is not uncommon for my type of work. What is a bit unnerving about this process is that usually a new role is not defined at the time. In this particular case, a new role was very uncertain until very late in the process. What complicated this was a very large and dynamic merger and associated divestitures at work, creating a lot of stress and uncertainty for many people. There have already been a lot of layoffs and there will be more to come.
Even my new role will likely see some changes and could possibly disappear along the way. So even though I’ve done well in my career and have a strong and supportive network in the company, the possible range of outcomes at work is large. I would not be surprised if I was given a lot more responsibility. I would not be surprised if my job size stayed the same or decreased significantly either. I also wouldn’t be surprised if things shifted along the way and I was out on the street with a severance package along the way. I have limited control over which outcome actually occurs.
In addition to the specific job, other things will be changing. The environment will be negative for a while given the layoffs and high growth expectations around “synergies”. This could be a mildly negative environment or very negative depending on the details. I’m in a cyclical industry so mass layoffs every 5 years or so are common. It’s always negative of course but depending on how it’s handled and the extent of changes, sometimes it’s much worse than others. The demands on those left are also part of the negative environment in these cases.
Finally, there are also a lot of questions around benefits that will be defined later. It’s likely that net compensation is reduced when all the changes are done.
So back to the topic of the post. What if you loved your job and just planned on continuing to do it? In this case it would seem you don’t need to worry about saving much and can just enjoy life more now. After all if you work until you’re 65, you don’t need to save that much each year (although many Americans still struggle to save even that small amount).
As in my example, the reason is that your job is very likely to change significantly over a long enough period of time. In some cases the change is good. In other cases the change is negative. But you often have a lot less control than you realize. In addition, the change is likely to be something you don’t expect to happen. More often than not, people are surprised by changes at work, especially negative ones. It’s the classic “it won’t happen to me” syndrome. It’s human nature. We tend to extrapolate the current state of affairs even though we all know intellectually that change will continue happening.
In addition, you will change. Unfortunately, if you love your job now, your happiness with work will almost certainly go down at some point. Other things like family may arise and be more important to you than your career. Maybe you just get tired of working long hours, or traveling so much. Maybe everything gets too repetitive after many years and it’s not as motivating. Maybe you get to a point where further advancement is unlikely. Maybe you get a really bad boss. Maybe the company culture becomes negative. These are very common examples.
If you’re still required to work to support your lifestyle when you no longer like your job, it won’t be a great situation. The future you will wish the past you (the one that loved their work) would have saved more money when it was relatively easy to do so.
Time passes quickly. Before you know it you’ll be through your 20’s and 30’s. If you save a lot early, compound interest will help you out over those many years. Note that the typical time of career disillusionment is in your 40’s. This is also the time of most work/life balance conflict (coincidence?). If you saved a lot early, you’ll appreciate it in your 40’s. If you wait until you’re motivated to save by dissatisfaction with work, it’s very late in the game and you’re facing a long time working whether you want to or not. Compound interest will feel glacially slow if you start late.
On the plus side, from a purely mathematical perspective, over 10-20 years compound interest makes a big difference. You might be surprised at the big difference in financial assets of a 40 year old who saved a lot early vs one who followed the average path (5% savings rate in America). Their outside life probably won’t seem much different but their portfolio certainly will be. Since we know the math, we have an advantage of adjusting our savings rate accordingly and reaping the rewards in the future.
So there is a big benefit of pursuing financial independence, even if you like your job. In times like my example, you don’t need to stress about the things you can’t control. If you lose your job, you don’t need to worry about groceries next month or keeping your house. You have more freedom to make happiness-inducing choices for yourself and your family.
Even if things work out, you’ll have gone through the uncertain transition with less stress and a more positive attitude, which is also likely to help you end up in a good situation. Unfortunately in this case you’ll have more financial security that you really needed but I never said saving a lot was without downsides!
What does the evidence tell us?
Maybe my case is unique. Maybe I’m just special (spoiler: I’m not). Of course my personal situation has some unique elements but things like this happen to the majority of people at some point.
Here are some tidbits:
Most people are forced to retire before they had planned. The two top reasons for this are 1) health issues and 2) being laid off. Both of these are pretty negative.
I don’t know about you but working right up until I have health issues that prevent me from working also means I don’t get to enjoy a healthy retirement either and that sounds like a bummer. Health problems are very common as we age. Diabetes, heart disease, cancer, chronic arthritis, and other ailments can hit any of us and the chances go up significantly with age, especially past 50. We can easily go from healthy to having a major chronic health issue once we get into that age range. I’ve seen studies indicating 25% of people over 50 have a major health problem (obviously skewed towards the older side but many problems start arising past 50). It’s good to be aware of this and enjoy your good health if you have it (and make sure you have lifestyle habits like exercise and healthy eating to keep it that way).
It’s also known that work is often negative for health. Work can be very good for our minds, but it tends to be bad for our bodies. Many retirees use their extra time to exercise more and eat better, helping prevent major health issues from arising. You should keep this in mind if your job limits a healthy lifestyle (lots of travel, eating too much processed convenience foods, lack of time for exercise, poor sleep, stress, and sedentary days including sitting too much).
Stress is also more and more recognized as an underlying factor to many big health problems. And work and money are leading causes of stress. Being FI is a big benefit because you minimize the money stress. Since much of your stress at work is because you need the job for the money, I would argue that money is behind both of these top two causes of stress. The ability to reduce your stress in life is a strong case for pursuing FI all on it’s own even if you have no plans to ever retire or do something different than you are doing now.
Being fired is a pretty negative thing. And it happens a lot. The stress and trauma of being fired for most people ranks right up there with divorce or losing a loved one in many of the studies I’ve seen. I had a hard time comparing being fired to losing a loved one but studies have shown similar, long-lasting negative psychological effects of similar magnitude, so it’s seems I’m the minority here. Maybe it’s because I don’t tie my self-worth to my job as much.
The scary part is that getting fired is becoming more and more common so it’s a good idea to prepare yourself mentally and financially. It’s often a surprise when it happens. In my career, I’ve seen a lot of good people let go due to deep cost cutting. They were doing a great job, but still were let go due to business conditions out of their control. So don’t think that you’re safe for a long career just because you are a good performer. In addition, as you get older and rise in the ranks to make more money, your job security decreases. Ageism at work is alive and well, as is the desire to make more profit by reducing costs. I see many people forced out in their 50’s in my company. So if you’re in school until you are around 30 to get an advanced degree and may be out of a job around 50 in a challenging field, you better save a lot in those 2 decades. 10% of your income won’t cut it. The lucky part is that in very competitive areas like this where advanced degrees are needed and long-term job tenures are uncommon, the pay tends to be very good. It’s a smart move to take advantage and save a lot instead of assuming you’ll smoothly make the same kind of money until you are 65 or even 55.
In both the cases above, you could be forced to stop working even though you love your job and want to continue. That is the point I want to make with this article. You cannot control these things as much as you think so it’s good to plan as though you might have to stop working well before the “standard” retirement age of 65. That’s why I think it’s a good idea to pursue financial independence by saving more of your income even if you love your job and don’t intend to retire early. You simply don’t get to choose how long you work in many cases.
What if you stop loving your job?
Another key factor is that you might change your mind about work. Saving for a big goal like financial independence takes a long time, even with a high savings rate. If you decide you no longer like your job at some point, and maybe would like to do something different, you’re out of luck if you convinced yourself not to bother with saving for the future back when you loved your job. Since becoming less satisfied with your career as you age is quite common, I think it’s very risky to think you’ll always love your job just because you love it now. I wouldn’t recommend planning around that. If it happens, great. You’ll only have the burden of having more money than you need. Most people can manage to deal with that problem.
In my case, I’m actually excited about my new role, learning new technology and markets, and working with a new team. But part of why I’m excited and not stressed, is because my family and I will be fine no matter what happens. That is the peace of mind that financial independence provides. This is the first major change at work since we actually achieved FI and it feels much nicer than the previous ones (even though we had more job stability through the earlier ones). I would not want to be going through this chaos at work while needing the financial assurance of many long years of gainful employment just to meet my basic spending needs.
I know how fortunate we are to be in this position and while we certainly had lots of help along the way, the main reason we are in this position is because of the choices we’ve made and the effort we’ve applied. We now don’t regret the choice to save so much although there were times we questioned it earlier in our working lives. Times like these are what those savings are for. Even though we couldn’t have exactly anticipated the times we would want those savings, we knew it was highly likely those savings would come in handy. That has certainly been the case in our lives.
Maybe we would have wanted one of us to stay home with the kids. Maybe our parents would have had a big health problem and needed our support. Maybe one of us would have a health problem early. Maybe we’d want to relocate. Maybe we’d want to retire early. Maybe we’d find future activities we really wanted to do that cost more money. Maybe we’d be fired unexpectedly. Maybe inflation would spike. Maybe financial returns would be terrible for a long time. We couldn’t predict which, if any, of these things would arise but the probability of something like this coming up over the first 2 decades or so or work are pretty high. It’s worth preparing for that financially by saving a large % of your income.
Just like we can’t always control how long we are able to work at our jobs, we also can’t predict or control how we will change over time. It’s nice to have a lot of money in your investment account when some inevitable change in your life happens. Whatever your particular situation may be, having a big investment account provides a lot of flexibility and options. I highly recommend the effort of building one.
As always, I wish you the best in your own journey to financial independence!