The onset of Christmas brings with it for many a sense of refuge. The promise of a few days when our everyday worries are neutralised by a haze of twinkly lights, booze, food, and family bonding. As long as we can just get there…
I felt I recognised a touch of that pre-Chrimbo fatigue in a comment from Monevator reader, Sarah, requesting a motivational piece on Financial Independence (FI) in the face of evaporating savings rates and warnings of muted equity returns ahead.
Actually, reading that comment from Sarah gave me some cheer. Not because I’m a git that revels in the misery of others, but because it helps to remember that I’m not the only one who finds the FI going hard sometimes.
It can be a tough old plod, and I think this is partly because even the followers of FI generally think of saving the way the rest of society does – as a sacrifice.
Yes, we’re deferring consumption today to enjoy consumption tomorrow, but we don’t have to swallow the notion that every pound socked away until Independence Day is somehow happiness denied.
Because that’s thinking like a good little consumer. Falling back into the trap that we can buy off our lows and woes with a new iPad, hair extensions, or a posh meal out. Essentially acting like a caffeine addict who staves off the headache with another Venti latte.
We’d do better to cheer ourselves up with the thought that whatever comes our way, the FI good times start long before you smash off the final shackle.
I want to break free
I believe the journey to financial freedom can itself create a profound sense of personal change for the good:
- You realise you’re thinking for yourself and that’s something to be proud of given societal pressures to conform. You’re no longer accepting the world as it’s presented by family, friends, and the advertising industry.
- You stop looking for answers in the wrong place. A desire for power, status and trinkets is replaced by the values of freedom, fellowship, and a sense of true worth.
- Perhaps most of all, you gain a sense of purpose. When you have a bad day, week or year, you know that it wasn’t for nothing… your efforts are still moving you towards your goal.
Like any other worthwhile pursuit, FI sharpens your skills. You get better at it. You stop seeing yourself as a number on a pay check. You’re able to value things because they make a difference to your life rather than because they’re fashionable or because they offer an off-the-peg sense of identity.
“I must be successful because I drive a BMW.” That sort of mind-rot drops away long before you reach FI.
Just knowing there’s a finishing post fills your lungs with oxygen, but something amazing happens as the financial furlongs slip past. You gallop faster and faster until you feel like you’re running downhill.
“Hey, you know what? This is easy. I feel great! I feel less vulnerable. Even if my wages are stagnating and growth rates are tunnelling out the bottom of the graph, I’m still better off than if I’d never started this thing. I’m living on 90%, 70%, 50% of my income – I didn’t even realise that it was possible before and I don’t feel any worse off.”
That’s how it can feel when you look at it through the spectacles of optimism rather than the soap opera glasses of pessimism.
The choice is not freedom or consumption. We need both.
The choice we’re making on the way to financial independence is being free to consume only what we need and to spend the rest of our time gorging on the most amazing good of all: freedom.
Take it steady,
The Accumulator
Great post!
Your “I must be successful because I drive a BMW.” comment struck a chord, because this could be the main ‘potential’ threat to my quest for FI. I’ve always wanted a BMW!
However, my mantra to date has been “I’ll drive a BMW when I’m successful”; meaning my BMW will only come when the mortgage is paid off, and I’m ahead of the game with my other financial plans. Heck, by that time I’m might even decide to push it back to when I’m truly FI*
* at which point I’ll probably realise that I really don’t need a BMW!
Great thoughts.
Also check out how to get a million pound pension fund just by giving up smoking in Investors Chronicle.
But you can have the BMW too. Just buy an old one, during the winter and negotiate a good deal. Then when you’ve had your fun – sell it on at a profit. It IS possible, i used to do this many years ago with MGBs and TR6s.
Keen to learn more about the areas you cut back on.
And on ideas for cranking up your income so that cutting back is only part of the answer.
I’ve been driving BMWs (5 series of various flavours including a 540i) and Audi A8s for many moons, and wouldn’t go back to the BMWs.
I buy the A8s used as the 2nd hand market seems to hate them and you can get a fully-equipped A8 for less than a lesser A6.
Just for the sake of debate, allow me to mention the paradox: we want to spend less and less, and yet we want to have proper jobs manufacturing goods (sometimes luxury goods) we want other people to buy.
Ah yes the paradox of thrift. But this is a one off adjustment as we all get back to our senses to spend at more sensible proportions of income (less than 100%)
And to the extent that we cut back on unnecessary stuff then you could say it simply hastens the demise of pointless industries.
There is a problem when we all do this at once but this is only likely when we’ve all been binging on debt at the same time.. . . . . oh dear.
> we want to spend less and less
We might, but fortunately the vast majority disagree.
>Keen to learn more about the areas you cut back on.
And on ideas for cranking up your income so that cutting back is only part of the answer.
Choosing a place to live which is unexpensive (Spain)
Good thing for me that I’ve continued living like a student far beyond my student years. I guess I just became so used to the lifestyle that it wasn’t even a hardship anymore.
Spot on – forget advertising.
Stop watching TV so they can’t get to you. The more they put prices up the more I cut back. I’m not giving up my financial independence. They can shove it!
May I be so bold to highlight this post from a guy who has achieved financial freedom at age 35 due to his savings and passive income streams?
http://www.financialsamurai.com/2012/11/11/how-does-it-feel-to-be-financially-independent/
Well said. I think a lot of people have trouble living differently than their friends and family and what the ad agencies say we should do . Great motivational post!
My quest for FI started over five years ago.
I’ve now saved over £80,000 from my job as a London bus driver.
I’d have been able to save more if it wasn’t for the meagre interest rates being paid by the banks and Inflated food prices.
I put £20 away for 25 weeks for new apple retina 10 inch wi-fi cellular iPad.
Best thing I ever bought/fast/stunningly clear images
Ditched my main computer
No need for anti-virus as apple safari uses cloud
I use it anywhere
When it’s down to 1% charge I see no diff in functions
easy to charge an lasts for hours
But I still hav Nokia phone—that just calls/text
What I’ve learnt is saving up for a better quality product is worth the wait
Yes, people should only spend money on things they need, but everyone needs an iPad.
The fact that my company gets a modest royalty payment from every one sold has *nothing* to do with my opinion on this matter. 🙂
Paradoxically, as I’ve been able to afford to buy/consume more over the years, my appetite for it has dropped dramatically. The more money I have, the less I want to spend it. Perhaps I am a miser.
Instead of salivating over the latest iFad, I end up salivating over investments and savings accounts… despite having enough cash on stand-by to order a full truckload of iWhatNots without even really denting my bank balance…. oh dear. Perhaps it’s people like me holding up the economy?
The things I enjoy are mainly either free or inexpensive (certainly compared to gadgets/clutter). Walks, swimming, an evening with friends. Life is great.
I saw some TV briefly the other day (having been a declining/zero viewer for the past 7-8 years now) and found it surprisingly really stressful – loud, flashing, noise, wham – I couldn’t even follow it and the adverts didn’t make much sense to me. Why not read a good book instead?
Inspiring stuff. I have just embarked on my own journey towards financial freedom, and I feel absolutely excited about it – both the process and the ongoing/end result.
@An Admirer – iFad 🙂
Great post.
As someone who thinks he has achieved FI I recognize a lot of the emotions. There are three elements: income, expenditure and timescale: it is only when you sit down with a spreadsheet and work out a plan for life that the reality sinks in.
And cutting expenditure is a learning experience – for example, it is only late in life that I have learned how to buy my food for roughly quarter price or less (but still eat top-line stuff). I have discovered ‘reconditioned’ electrical/electronic goods and second-hand books/DVDs. Surprisingly it is actually fun to look for bargains and to marvel at the masses who buy full-price.
There are some positive tricks that you can use: monthly direct debits both help to spread costs over the year but also help you to remain realistic about what cash you have to spend. Having a focus on reducing debt as fast as possible is helpful.
But the ‘income’ side is the most important and building up the ‘passive’ income stream is the most satisfying activity – difficult at first but with patience and experience it can be very rewarding (my portfolio is up one-third this year).
im 50 and SLOWLY changing my financial position.(when you hit 50 alarm bells start ringing)
the internet has been a godsend for info.(car insurance £200 less this year)
ive always been in debt to banks(small loans hurt)
i havent had a loan in 3 years an now have no debt
no debt means i can over/pay mortgage
trying to get into a position where i invest/save a decent amount monthly and the rest is mine to spend as i like.
Thanks for this piece, it reminded me to focus on all the positives of striving for FI.
This year we bought our first home (overpaying the mortgage from day one), have started investing again (low cost trackers), have saved over £1000 towards our emergency fund and my wife has started a pension after a gap of 1-2 years.
By themselves, all painfully dull, but as a whole a sign that every small triumph takes us in the right direction.
All that and we’re having fun on the way 🙂
Thanks for your thoughts all. It’s good to have a rally round because I actually don’t know anyone in real life who’s going for FI. With the exception of The Investor, although I think that’s more a side-effect of his obsession with the stock market.
I forgot to mention that a really good book for anyone in the early phases of FI is Your Money Or Your Life. Coincidentally Mr Money Mustache has just written a post about it.
@ Luke – you’re right, you can have fun along the way. Mentally I feel more at peace with myself than I ever have. I know I’m on the right path.
@ Moneyman – yup, I’ve had exactly the same loss of appetite for stuff and loss of interest in TV. The drive to spend less and value more becomes self-reinforcing.
@ Juan – you raise an interesting point but I don’t think we should be duped into believing that our quality of life is reliant on ever increasing consumption. Early twentieth century commentators used to wonder what we’d do with all the leisure time once productivity gains released us from the need to work full time. It never happened. Greater productivity just equalled greater desire for stuff. Maybe it’s the human condition. Maybe we suffer from a paucity of imagination. I’m inclined to believe that our culture is at fault and we’re too focused on oneupmanship. The sooner we shift that culture and reduce the status anxiety the better.
I thought I’d share a conversation I overheard at a family meal yesterday.
Relative x was bemoaning the fact that she and her partner didn’t drive a luxury car and that she’s jealous of those who do. Relative x has an admin job, doesn’t save or invest and has a few hundred £ in a Post Office account as her ‘pension’ (no actual pension).
Partner would love to achieve FI one day (the only person I know other than myself who is on the road less travelled). He politely ignored the jibes about the fact that *he* hasn’t bought said luxury car. He overpays huge sums on their mortgage, has £20k+ in investment trusts that he invested from his student loan and still manages to take part in about 10 different hobbies.
I know which example I’d rather follow 😉
Good article and comments, nice to have this blog and others online to keep me sane. Its hard keeping the faith when your nearest view it as depriving them of nice things, my situations like the one Luke mentioned right down to the pressure to buy a newer car, she has a new one herself, gah!
Thank you for responding to my plea. You are right of course about not succumbing to the blandishments of consumerism but it can be hard sometimes. I have fallen off the wagon and bought myself an iPhone but is a 3GS and was used from ebay and cost a quarter of a new one and I will operate it on PAYG and £5 a month data. So I won’t feel TOO guilty.
I have over £100K squirreled away already and live on 50% of my income but FI still seems a long way off i.e the ability to shove my job. But I do take reassurance in the fact that in the few years I can probably go to working part -time without it having any effect on my life – other than giving me that wonderful thing of more time.
My favourite thing to do is read which can usually be done inexpensively or for free via the public library – so I am a cheap date 😉
It’s also interesting the comments about feeling alone in everyday life. Most conversations about money in RL start with everyone bemoaning how little they have – even if they are actually much better off than 70% of the population – followed by a discussion on the meals, clothes and shoes they bought over the weekend (bizarre). It seems to be a culture thing and I would never discuss with my work colleagues how much I have saved. Though most of them know I have no intention of working past 60 and that I don’t spend much in general.
But thank you for the encouragement and reminder that it is not all about the goal but the journey to independence too 🙂
@ Luke and Larry – I hear you. I’m very lucky in that Mrs Accumulator shares the goal and is frugal too. It would be much tougher if we were pulling in opposite directions.
@ Sarah – glad to help. My biggest relapse this year was the iPad. And I still feel guilty about it – another interesting side-effect of gunning for FI. In years gone by I wouldn’t have given an iffy purchase a second thought.
But now I’ve empowered the little voice in my head that says, “Yes, it’s shiny and you may love it, but you didn’t need it. That’s set you back X hours, you eejit”.
The voice didn’t save me that time, but does on plenty of other occasions. And the odd relapse strengthens my resolve to do better next time.
Part-time is an interesting one. Like you I’m saving around 50% of income. I expect going part-time would be marvellous. Two things stop me. The obsessive side of me wants to keep thrashing through the accumulation phase and hit true FI as soon as poss. And the cynical side of me suspects that working part-time in my industry means working full-time on part-time wages.
Those money conversations are the oddest thing. A friend of mine who knows what I’m up to but is a workaholic can’t understand what I”ll do with all that ‘freedom’. Another carries their mortgage on their back like a cross, yet just spunked £80 on a Christmas candle. Sometimes it’s like being Neo the moment he wakes up in the Matrix…
…Neo – that made me chuckle. £80 for a candle! I didn’t spend much more than that on the iPhone!!! Hope it was from a company I have shares in 😉
Merry Christmas and here’s to a 2013 where all the surprises are nice ones and FI is a step closer.
My own journey down this path took an unexpected twist.
After completing my engineering degree, I hired into a job that I disliked intensely, so the prospect of an early exit was the motivating force to put my house in order from the start. This and round after round of layoffs that hit early in my career, which I was fortunate to have consistently averted. Even as business gradually improved I was constantly reminded how an engineering career resembles one in sports– don’t count on being able to stay in the game once you reach middle age.
Fast forward to today and the paycheck has become almost irrelevant, and my reaction has been a much more favorable disposition to the job that I’ve held all these years. In my line of work we have interesting projects and grunt work, and my independence has allowed me to pick which assignments I will accept. This freedom to choose has made a huge difference, as I’m able to take on high risk projects that others who carry much steeper financial commitments (common among my age cohort) with less cushion would not dare take on.
So far this combination has worked out well for me, so even as I am financially able to pull out whenever I wish, I’ve lost the urgent desire to retire that I started with a quarter century ago. Instead I’ve found a satisfaction with my job that I believe would have not been possible if I needed it.
As a saving fiend there are mindsets that one must develop in order to be successful. Every beginning saver, whether they are just out of school or overcoming a daunting financial history must first develop this exact mindset. Saving is not a sacrifice.
The way that works best for me is having several things to save for – from something small, like that tech gadget or new toy I’ve been eyeing, to something a little more meaningful like a vacation or down payment. As in all things, there needs to be a balance of what you want and what you need. By only fulfilling what you need, you tend to develop a dull however responsible view of life – but what you want makes you happy. If we do these things in moderation, not only can you achieve goals but you can also achieve happiness.