What is FI and why would anyone be motivated to pursue it?
The first part of the question is easy to answer. A financial status of having enough money and assets to pay for one’s living expenses without being dependent upon employment is the generally accepted definition of financial independence, or FI.
The second part of the question, however, doesn’t have a right or wrong answer. Reasons for pursuing FI are as varied and unique as the people working to achieve it.
Financial independence sounds a lot like traditional retirement. It can be, but not always.
Retirement is commonly a goal people spend decade after decade working to reach. Prime adult years are devoted to exchanging time for money with the hope that one day, enough will have been saved to make working for a paycheck no longer necessary.
But what if it didn’t need to be that way? What if you could design your life to live it exactly how you want? In a way that aligns with your values? And with time to pursue your passions? That’s FI! And if it’s the kind of lifestyle that appeals to you, you’re in the right place.
Reaching financial independence often marks a new season in life when participating in the rat race is left behind and life begins to slow down. Being financially independent means you can finally afford to retire. But for most people, that milestone takes a very long time to reach. In fact, in the United States, the average age at retirement is trending up, rising to 64 for men and 62 for women.
But recently there’s been a groundswell of people who are rejecting the standard path. They are members of a community of likeminded people, making different choices with their time and money, and taking control of their lives in the pursuit of FI.
For those on the path to FI, retirement from paid employment might be ONE of the goals. Whether retirement comes in their 20s, 30s, 40s, or even later, the greater ambition is to have the freedom to design and live a life consistent with their values.
And the rewards are felt long before reaching FI. Simply being on the path to FI transforms money into a powerful and versatile tool that provides options. When used intentionally, FI becomes freedom.
Related: The Why of FI
No doubt you are familiar with the standard path. Most people are on it. It’s what society teaches you to pursue. Good school, good job, family, nice home, fancy cars, designer clothing, two weeks of vacation per year, retire at 65.
Is that really your dream? It might sound great until it’s time to pay for it all. Student loans hanging over your head for decades, astronomical mortgage payments, two car loans, and credit card debt results in living this “American Dream” on the edge. There’s no joy in literally trying to survive paycheck-to-paycheck. The stresses of being stuck in a job you don’t enjoy and not having a financial safety net negatively affect you, your spouse, and your entire family.
But even those in more secure financial positions are not immune to the standard path’s shortcomings. We’re taught that investing is complicated. Entire professions revolve around mastering these mystical markets, so how is the average investor, already busy with work and life, expected to invest on their own and do well? The answer is, they aren’t.
So you seek out professionals for “help” and in turn, your investment returns are needlessly gutted from commissions and fees. And you end up being stuck on a hamster wheel, continuing to work long hours in a desperate attempt to get ahead, while others get fat off our efforts. It does not have to be this way.
The problem is that most people have never been taught about personal finance at all. They are thrown into a world where taking on debt is easy and the reality of why saving is so important isn’t discussed. Once armed with the ideas and concepts presented here, you will be able to step off the standard path and begin making more optimized choices with your money.
You can get out of debt and begin saving. You can earn more and make a highly optimized plan for your money. And most importantly, you can start living the life you really want.
The path to FI is egalitarian. You don’t have to be debt-free, invest in a 401(k), or own real estate. There is no single prescribed method. Everyone’s path will be somewhat different, but it does require the commitment to begin building wealth using just three main principles:
There’s a common misconception about FI. It is not about living a life of deprivation. On the contrary, it’s about living a life abundant in what truly brings value and joy in your life. Being on the path to FI is learning how to make slightly more optimized decisions with your money. When made consistently over time, those small more optimized decisions build upon each other and begin to grow at a fast rate.
When following these principles, FI not only becomes possible, it becomes a mathematical certainty. Though the math itself is quite simple, continuing to make the right choices isn’t always easy. It can be difficult to diverge from the standard path and embark upon a way of life that doesn’t look like the same one everyone else is living.
Earning more and having a plan for your money sounds great. Spending less, maybe not so much. But FI is hopeful. Choosing to pursue FI puts you on a path where your spending is consistent with what you truly value.
Success is substantially more difficult to achieve when you don’t understand why you are working toward a goal. It’s only when you stop to consider your values that you can make intentional choices with your time and money that are in alignment with those values. And that’s why it’s critical to understand what kind of life you want to live.
Whether your FI goals are financial security, time with family, world-travel, freedom to take a risk on a new career, or retirement from paid employment, knowing your personal “Why of FI” is the first step.
It’s okay if you are currently on the standard path. You may feel trapped, but rest assured, you are not. There is an exit for you that leads down a path that is ideal for YOU.
The goal is to see that there is an alternate path. The information and tools the FI community has tried, tested, and proven to be the most useful, allow you to choose which levers to pull as you embark upon your own journey.
Listen: The Why of FI
Society and media project images of success and wealth that influence what people value. To emulate these lifestyles, attention to the things you value or make you happy can fall by the wayside. It’s easy to get caught up and lose your way.
Take some time to consider what truly brings you joy in life and write it all down.
Then ask yourself, “Do my current spending habits align with my list?”
Related: Finding My “Why of FI”
Be open to the new ideas presented. Challenge conventional wisdom. Be prepared to look at problems just a little bit differently. Take a chance on living a life that is different from those on the standard path and experience the freedom being on the path to FI can provide.