Growing up, I never really wanted money that much. Part of this is sheer luck – I had parents who were financially stable and quite excellent providers for me, so I didn’t need to equate money with survival, which surely would have made me want it quite a lot. From my advantaged position though with my basic necessities (and then some) taken care of, I saw money as designed for the accumulation of more. Better clothes, bigger cars, fancier toys and games. I suppose I enjoyed turning up my nose as the mainstream notion that I just had to have all that stuff. If the cost was to consume my days with burn-out levels of work, I just thought… I’ll pass.
The tragedy in this is how I thought I would get away with passing. Part of my philosophy involved enjoying what I had and not working more than I needed to be happy. Yet by my own actions I was condemning myself to a lifetime of presumed middle-income labor. Sure, I dreamed about having a million dollars, investing it in the 1-year bank CDs that paid 5%+ from my youth (alas, those days are long gone), and living quite merrily on the $50,000 in interest. But I didn’t really think that was going to happen, short of winning the lottery.
Because I couldn’t see the long-term benefits of having money, I worked for reasons like beer money, rent payments, a basic sense of responsibility and a desire for independence. In that way I thought I was avoiding the long-term harm of wasting time and energy working for toys I didn’t need, and I never accumulated much for retirement or otherwise because I couldn’t see the ultimate motivation – a realistic shot at earning my freedom.
Back on my first post, I admitted how, while there are things I’d like to do, I’ve kind of wanted to not “work” for a long time. But it’s only in the relatively recent past that I’ve come to understand it’s truly, genuinely possible to buy my freedom with a reasonable sum of money, just by doing the things I already do. My teenage-self already knew I wanted to turn my money into little green workers who could free me from toiling, and that same self already knew I didn’t want to overspend or waste money. I just never put two and two together.
There are several strategies for hitting financial independence to retire early (ie: FIRE) that I like, but my current model is that championed by Mr. Money Mustache, who I recommend you read if you’re interested in the topic. It involves optimizing investments in surprisingly reliable (over the long term) and low-cost index funds, which will probably yield an average of 7%-10% annual growth over time. At the same time, optimize your expenses by reducing a surprising amount of unnecessary costs, ideally living on a fraction of your income and investing the rest. A much longer, dedicated post can explain the nuts and bolts of all this, and I’ll get into that another time to do it justice.
The main idea is that, according to a widely cited Trinity Study, you can expect to safely live on about 4% of your portfolio over a 30 year time horizon. That means you need to own investments equal to 25 times your expenses. For many people, that means something closer to $500,000 than millions. The other key cog is the insanely powerful magic of compound interest. Head over to any compound interest calculator and find out what happens if you can save $500 a month for 30 years at a conservative 7% growth rate. Odds are that sum will cover most if not all your needs if you get your expenses in order, and if you can start saving when you’re in your twenties, you’ll already be retiring before many of your peers. If you can increase your contribution, so much the faster. The MMM people generally estimate that if you can live on 50% of your paycheck and invest the rest, you’ll be in the clear in around 10 years.
None of this is set in stone or without other complications, because it’s investing, and I’m no financial advisor – but the idea I wanted to get across is that thinking about this has fundamentally changed my perception of money. Every dollar I earn is a dollar that can be put to work, investing in the hard work of others, and lessening the burden of forced labor on myself. I’m not about to go out chasing dollars at all costs because that’s not me, but I’m not about to miss out on the glories of compounding what dollars I do earn either. Getting laid off won’t do any wonders for my FIRE timeline, but this approach will stay with me through unemployment and into my next job.
Essentially, it’s just me being more of who I already was, paired with the knowledge that doing so can get me what I really want – the freedom from labor that I have not chosen for myself. It’s a revolutionary thought, and if you’re anything like me, one that just might turn around your relationship with your money as well.