This is part 2 of a 5-part introduction to financial independence and understanding. Make sure to read the whole series to really grasp what Money Tofu is all about!
Before reading this post, make sure you have read the previous post in this series: What is Financial Independence?
Hopefully by now, you have a good sense of what Financial Independence (FI) means. However, the explanation is incomplete without looking at what FI allows you to do.
Here is a list of 3 major things that FI enables, which are also solid reasons that may have brought you to think about FI at all. After all is said and done, it is likely that 1 or more of these reasons is the driving force for you to want to achieve FI.
FI means that you no longer have to work for money since you have enough to live on. As human life expectancy continues to rise (in the US, life expectancy increased by 30 years in the 20th century), we have seen the average retirement age rise as well (now defined as 67 years old by the Social Security Administration).
For some, that results in working a job that they hate (or at least are not enjoying much) for that many more years. If you fall into this camp, FI is extremely appealing. If you can achieve FI before the “normal” retirement age (and you can!), you are able to effectively retire early so that you can stop working at a job that brings you no joy.
Think about all of the things you would rather be doing than working a job. Then think about how much time you would have to do those things if you didn’t have work obligations. We generally call working 40 hours a week a “full-time job.” What could you do instead in those 40 hours a week (not to mention having the flexibility to do it at any time, and saving time from not having to commute, and so forth)? If you have or want to start a family, would you rather be spending time with your kids or grandkids, or missing out on their most formative years growing up?
For many, being able to retire early is the most appealing part of being financially independent. While early retirement because you simply dislike working is a fine goal by itself, we can dig deeper and uncover some additional reasons why someone might want to retire early. The answer usually aligns with one of the next 2 reasons.
Not all jobs are bad. You may be working at a job you really enjoy and wouldn’t mind doing for the next however many years. Therefore, there is no point to FI, right?
Well, take a minute to imagine your life if you won a $500 million jackpot at the lottery. Does your fantasy include the job you are currently working? If so, that’s awesome and you should absolutely continue doing it. You can still keep working even after you are FI, and that is really the point.
For those of you whose fantasies did not include continuing to work at your current job, a portion of you may want to retire early and do “nothing” instead. That is perfectly fine. However, another portion of you may be thinking that you would be bored out of your mind with nothing to do, so it’s better to keep “working.” That is also perfectly fine.
If you are FI, you can keep working without all the stress that needing that paycheck to survive brings you. You can work at a slower pace that allows you to manage your health, without worrying about how to pay the bills if you get fired. That isn’t to say you want to be lazy and do a bad job; rather, you are able to say no and speak your mind more freely in order to do your job to the best of your abilities, all while maintaining reasonable hours and work-life balance.
FI will help bring you less stress to your life and work.
Finding Your Purpose
If you believe that you need to be doing something and that something is not your current job, you are thinking about how to find your purpose in life. This is not a religious discussion, but one of professional and social purpose.
When I say purpose, I refer to something that is meaningful to you. It need not be something that benefits society or furthers the human race. It only needs to be something that brings joy and meaning to you personally.
I assert that if you are working for the purpose of earning money necessary for your survival, it is difficult to claim you are doing something with personal purpose. There is nothing wrong with doing a job for money; in fact, it is probably the most common reason people work and is an essential way that society operates. However, doing a job for money inherently means that money is at least one of the reasons why you are doing the job.
Most of us are beholden to our jobs’ wages such that we cannot quit. If you are working a full-time job, you know how tiring it can be. When you get home at night, you hardly want to do more work after all the chores are accomplished. You just want to sit back and relax for a while, and the weekends even more so as a break from the daily grind.
Frankly put, you don’t have the time or energy to work toward whatever meaningful accomplishments you desire because you are already putting all that time or energy into a job working for someone else.
In a world where you are FI, you don’t need to work for money. Only then can you ask yourself and evaluate honestly: would I still be doing the same work if money was not a concern? If the answer is yes, then the money is irrelevant (to the purpose; it can still be relevant to increasing your happiness) and you have found a purposeful occupation.
If the answer is no, then would you not be better off working toward something that is actually purposeful to you? Only by being FI can most people have the opportunity to truly seek out their purpose.
Above are 3 of the major reasons why you may want to achieve FI. For each and every one of us, we have our own reasons that resonate best with our goals in life. Perhaps you identify with the reasons listed here, or perhaps you already have some others in mind.
Next, we’ll take a look at how one goes about achieving financial independence.