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How FI Is Different From Personal Finance

Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. Disclosures.

While Financial Independence (FI) is personal finance, personal finance is not always FI. Many people come to the FI community and way of thinking because of an interest in money, or perhaps because they’ve worked through Dave Ramsey’s “Baby Steps” and now want to level up their money savvy. But FI is not just about finance. It’s more!

FI Is Personal Finance 2.0

FI is different from personal finance, and even though many FI’ers love the nuts and bolts of finance–the spreadsheets, the draw-down strategies, the magic that is compound interest–there’s so much more to it than that. FI is different because it spills into your “how” and your “what” to envelop the “why.”

Often, people start into personal finance via Dave Ramsey or through finance bloggers in order begin to understand the basic concepts of loan repayment or staying out of debt, but many wonder what’s next–beyond the basic concepts. Often, people discover FI because they want to “level up” after their credit cards are paid off and want to figure out how to build passive income streams or shave years off their retirement, but this approach is often at odds with the “average” personal finance advice designed for the “average” person.

Once the debt is paid off or a financial milestone has been reached, for many people looking into personal finance, their work has ended–but for aspiring FI’ers, they often wonder what’s next and if there’s more to discover.

Related: Life After Dave Ramsey–Baby Steps 8-10

Retire To Live Versus Live To Retire

The biggest difference, at least on its face, is that personal finance is based on the premise of retirement at age 65, with a good 30-40 years of working history.

FI of course, seeks to shave 5, 10, 20 or even 30 years off of your working timeline. So while traditional personal finance advocates that you should seek an average savings rate of about 15%, FI’ers work towards a 40-50% savings rate. Doing so shaves the retirement timeline down significantly.  While most FI’ers value security, they also value freedom and believe they can have both by living mindfully and buying back years of their lives.

Credit Is Not The Devil, But An Incredible Tool For Travel Rewards

Two of the biggest proponents of a traditional personal finance approach are Dave Ramsey and Suze Orman. Their entire model is based for the “average American,” who lives an average life of consumerism, with an average age of retirement at 65. Dave is especially known for his disdain of credit cards, mainly because so many people come to traditional personal finance due to credit abuse and debt. Suze Orman is a big proponent of “can you afford it?” and bases her models on a long game to retirement. FI’ers differ from both of these approaches because they see credit cards as a tool to be able to creatively afford travel, even on a limited budget.

FI’ers acknowledge that avoiding credit card debt is a solid approach to life, but wonder if this limited use of credit (simply in the fear it could be misused) is shortsighted. That’s where travel rewards and using credit cards to get free stuff comes in–FI’ers do not shy away from credit cards, especially after they’ve managed a healthy relationship with credit. They use credit to their advantage and play the game accordingly to travel the world. With creativity, they can afford just about anything, whether or not Suze Orman says their income matches up!

Your 401k Isn’t Your Only Tool For Retirement

Most of what traditional personal finance teaches us is that we should work to max out our 401ks every year and funnel every penny we can into our retirement accounts. While this can be solid advice, it doesn’t work as well for early retirees who require more flexibility on a condensed timeline.

FI’ers are known for their diversification and not seeing their retirement accounts as the end-all, be-all for retirement, but simply as one strategy of many. Purchasing rental homes, starting a side business for ongoing income, and even employing tactics like mega backdoor roths and tax optimization are also tools in the FI retirement toolbelt. Since the FI timeline is shorter, the tactics get more complex and are both proactive and passive to help create a unique mix of investment strategies to diversify and optimize–versus “throw your money in a retirement account and wait.”

Side Hustles Don’t Quit

Traditional personal finance advocates frame up that retirement will finally be a welcomed respite for workers after years and years in the workforce. Traditional retirement requires that you save up as much money as possible, because you likely will not be able to produce much, if any income, in your late 60’s.

FI is different because it insists that the lines between work and play don’t have to be so stark, and retirement doesn’t have to be a time when a person is “put out to pasture.” By the very nature of the condensed timeline, it’s unlikely that anyone would be completely happy playing golf and hanging out with the grandkids for the next 40 years with nothing else going on! Heck, many FI/RE walkers “retire” well before they even have grandkids!

For FI folks, retirement is simply another evolution of work. A side hustle that was developed to get to that FI date even faster, now becomes a full-time profession, and a lifelong passion project. While many traditional finance folks see a divide between work and retirement, FI/RE folks often intentionally blur this line as part of their strategy.

Check out ChooseFI Side Hustle articles here.

FI Isn’t Just Concepts–It’s A Lifestyle

In the personal finance realm, most people in the “normal” world will research what they need to know from time to time to hit their financial goals and be done. For people who discover the FI community, they start to see that the journey to FI makes life more exciting and it starts to spill into all areas of their lives–like minimalism or stoicism, seeing the world using travel rewards, taking on side hustles to learn new skills and being healthy as a tactic to not just feel good but save money too!

In sum, while it should be obvious–what sets FI apart from personal finance is not about accumulating wealth for wealth’s sake. It takes money a step further–not just to have it, but the freedom money can purchase. Money is not the end goal, freedom is the goal and money is simply a tool to get there.

Personal finance is about tactics and numbers, the FI mindset requires you to try and understand what tactics make you happy, and the “why” behind your financial goals. While it could be impressive to the personal finance crowd to say you have 10 million in net worth, many in the FI community would ask if that money afforded you the life you wanted and of course, if all of it is necessary. It’s less about numbers and more about purpose.

It’s not just assets that create meaning in life, but what number would be enough for you to be satisfied? While personal finance can show you how to do something–it doesn’t help you understand why you’re doing it, while FI strives to.

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How FI Is Different From Personal Finance


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Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. Disclosures.
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