There are many benefits to becoming financially independent (FI).
Duh, you say?
Well, yes, it’s pretty obvious that the freedom of not being dependent on a job to pay for your lifestyle is pretty great for a lot of reasons. You can find top 10 and other such lists of these reasons on the internet with a quick search.
But these lists tend to be matter-of-fact and obvious.
If you’re FI, you can quit your job if you don’t like it! Really? Maybe I have higher standards for my readers but I’m guessing 100% of you have figured that one out already!
What is underlying all these lists is that FI gives you options. And why does this matter? It’s not just because options are inherently good. In fact, there is compelling research that shows choice can sometimes be bad. We covered some of this in a previous article.
So if it’s not just that choice is good, why does having options matter so much?
Change is the reason having options matters so much. This is worth thinking about carefully and really internalizing. You may find it really helps your motivation if you’re struggling in your FI journey.
Change also seems obvious, just like choice is generally good. Everyone knows that things change right? But we need to go a bit deeper and really understand how our lives might change with time.
Even though it seems obvious, we don’t seem able to grasp or predict future change well at all, especially if it’s in the distant future. We may be better at planning for the future compared to every other animal on the planet, but most of us still aren’t very good at it.
And predicting the future? No one gets that right. That’s worth remembering.
So becoming FI gives you options. That’s a big worthwhile reason to pursue it.
So are you motivated now?
Can I stop writing? Are you fired up to pursue FI yet? You’ll have more options in the future if you do.
Is this not cheerleading enough? Does this not make you want to change your financial habits right now?
Hmmmm…….maybe I need to work a little harder then.
Knowing is not Feeling
Some financial firms are experimenting with digital aging of client photos. What they found is that when you can actually see yourself as old, it becomes more real in your mind (and heart) and you save more for retirement! Amazing!
Knowing intellectually you’ll get old is not the same as truly internalizing a future you that is dependent on the choices you make today. Truly internalizing drives an emotional response that drives motivation. This is lacking from a purely intellectual realization.
Let’s walk through some of the reasons the “future you” may value financial independence more than you predict right now. Since we are bad at predicting, it’s useful to use evidence to see what actually happens as people age and change.
Maybe you’ll decide to bump up your savings instead of spending more money now (which would be mission accomplished from my view!).
Do you like your job?
If you’re in the first 10 years of working a “real” job, chances are you like it. It’s of course not perfect. You can relate and laugh at a Dilbert strip just like the older employees in the office. You still have to deal with office politics, longer hours than you’d like to work, less time for fun and other things than you would like. Not enough money. Not enough recognition. Not enough development opportunities. And so on.
But overall, I bet you like your work. And more importantly, I bet you think you’ll always like your work about the same amount as you do now, especially if you are only saving 15% of your income. Because you’d be saving more if you didn’t!
You probably use the tired arguments against saving more like “you’re only young once”, or “what if I’m hit by a bus tomorrow?”, or “what’s the point of living like a student my whole life?”. There is a bit of truth to this. You are only young once and you should find a balance that allows you to enjoy life. But the future you will also want to “live life” just as much if not more. I don’t think we fully realize this when we are young.
There is a very good chance that your feelings toward your job/industry/career will change over time. Unfortunately, those feelings usually go just one direction…….down.
People in jobs for a long time will often talk about how the industry has changed for the worse since they have been working. In some cases that is true, but I suspect that more of the change has been a change in themselves. Work is just not as much fun, for them, as it used to be. The new employees coming in probably feel more like you did when you started and are more positive.
So if you always thought you’d be working (and enjoying it) until a traditional retirement age and so only saved 5-15% of your income, but then find in your 40’s that you are liking your job less and less. Too bad. You don’t have many options. You’re many years away from good options.
You could change jobs in the same industry but you’ll likely just end up with a similar job that doesn’t excite you anymore.
You could try to make a career change to something very different that you’d enjoy more. Maybe you can take the risk but you’re likely facing a significant pay cut (after all, what expertise can you offer?) and you don’t have enough saved to make the numbers work if you’ve been living off most of your current salary. If you had more saved, you’d have the option (even if you’re not fully FI yet).
You certainly don’t have the option of stopping work altogether.
This is worth really thinking about. It is very common. Don’t just take my word for it. Talk to some people. I think you’ll find most of the younger people like working. But many of the older workers don’t like it as much and dream of retirement (but realize they are far away financially still).
To be fair, some people love their jobs for a very long time. Especially where the job is less money-oriented and there are other fulfilling aspects to the work. But the data is not encouraging. 70% of employees are disengaged at work. I have not seen age/experience studied in detail but I would guess that engagement declines over time for most workers.
Since it’s very difficult to accurately predict whether you will still love your job in 10-20 years, and since it’s very common for people to lose satisfaction with their work over time, I think it’s worth saving more of your money for yourself (i.e. the future you) to have some options. It’s very likely you’ll have a very good use for the money.
On top of that, it will have grown nicely due to compound interest (if you invest in things like stocks) so it will be worth a lot more (even inflation adjusted)!
I spent a bit more on this example because work is such a big part of our lives and the source of our savings and it’s one of the areas we seem to do a terrible job predicting the future.
Having options for work in the future while you are still relatively young is a huge motivator for me. I still like my job (although less than I did when I was younger) and am still working but I can tell you that being FI has made a huge difference. I would not be as happy with my job if I felt financially trapped.
I do not have any regrets for saving aggressively, or feel like I made big lifestyle sacrifices. At the time, I sometimes did feel the pain of saving a lot of my income. But I have to work hard to remember that. The current me is super-happy that the prior me made the choice to save instead of spend. If anything, despite the fact that we are FI, I would have saved even more when I was younger, and reached FI sooner. It would have made the years with really little kids much less financially stressful for one.
Now that you see where I’m going here, let me briefly cover a few other major changes that are highly likely to happen to you. Again, you will realize these intellectually. But give these some deep thought as well. Truly visualize yourself and your priorities after some of these changes happen in your life. Having more financial flexibility can help your happiness through any of these changes as well.
Do you have kids?
If you don’t, you might. Despite the fact that more and more people are choosing not to have children (a perfectly valid choice BTW is that’s what you want), statistically you are still likely to end up with kids, even if you don’t think so now.
Kids will change your lifestyle and your desires a lot. These changes will have a financial component to them. It’s a full article to cover this in detail so I’ll just mention the big one, because it ties to the first section on your feelings towards work.
Kids will make your career feel less fulfilling.
You will want to spend more time with your family and less time at work.
Unfortunately kids are expensive. They don’t have to be as expensive as many people , but they will still cost money. If you aren’t in a good financial situation, this will be very stressful. This is too bad since it should be a happy time.
My wife and I were in a really good financial situation when we had kids. This was largely because we consciously waited to have kids to save more and get more established in our careers. But I still remember the financial and job-stress because we chose the extra long-term financial obligations of becoming parents. I’m really glad we weren’t in worse financial shape and it would have been nice to be in a better financial position.
This is the point where your aggressive savings can give you very fulfilling options.
One spouse can quit and stay home. If you’ve been saving a lot of your income, then you can figure out how to live on one income (plus you should have a nice amount of savings built up if you’ve been saving at least one of your incomes).
Even having enough to go part-time is a huge luxury that many can’t afford because they have been spending too much of their income.
As the kids get older, you’ll want the ability to say no at work for important family events, kids activities, taking care of a sick child, etc if you need to.
But if you spent too much money “living life” when you were young, you might feel obligated (even if you don’t truly need to) to be the one saying yes to the extra projects at work and working long hours because you can’t afford to be fired.
If you are FI, you don’t have this stress and can make balanced choices. Ironically, this usually doesn’t cause you any career harm but when you need the money badly, it’s too nerve-wracking to bluff.
So being financially able to work less (or not at all) and spend more time with your family, especially with younger kids, is a great use of your money. Those that aren’t there yet don’t realize this. Buying a new car, going to Starbucks everyday, and enjoying expensive dinners are much less fulfilling uses of money when you look back on your memories. The future you will regret that you did this if they are short on money.
Do you like to travel?
A job will restrict your allowable time for travel, even if you travel cheaply. Believe me, you’ll still want to travel when you’re older. Surveys show the desire to travel really only drops off when you’re in your 70’s. Take some cheap trips now, with your limited vacation, if you love travel. Cut back on other things to save aggressively and you’ll have a lot more time and money to travel in the not-too-distance future. You’ll still be at an age you really enjoy it and if you’re FI, you’ll be able to with a great deal of freedom.
Will your interests change?
When I was young, I loved cars, expensive sports equipment (I spent a lot on skis and ski trips), and fancy houses. Luckily I was financially prudent and didn’t stretch to build a dream house, or get a super-fancy car, among other things. Now I like different things and the “sacrifice” I felt by not getting these things has long-faded (and it wasn’t a particularly long-lasting pain either).
Luckily at the time, I wanted savings even more than I wanted those huge material purchases. I knew I would want that money later even if I wasn’t sure what I would want it for. It’s extremely likely that you will be the same. The future you, even if you can’t quite fully envision him/her in your mind, will still be you. But you will be different. You will have some similar desires and some new ones. Some of what you want badly right now, will be unimportant to you later. But you will still have strong desires when you are older.
So spend a bit on yourself now. Enjoy the journey and this phase of your life. But make sure you are setting aside a lot for the future you. I’m quite certain you’ll have very good uses for it. You will want the money and the options it provides as your life changes. As a huge bonus, since you invested it, you’ll have a lot more money than you saved too!
Hopefully this helps you find a dose of motivation in your own FI journey. If so, then this was definitely worth writing.
I’d love to hear any examples from the readers. For those with some more life experience, did you find something to spend money that you didn’t predict when you were in your 20’s? Anyone regret saving money when they were younger? I’d love to hear from your experience!