What Is Financial Independence And Why Do I Want It?
FIRE stands for Financial Independence Retire Early. FIRE is a popular acronym, but I prefer simply ‘financial independence’ (FI). That’s because the ‘retire early’ part often creates confusion. Most people who reach financial independence don’t actually retire. In simple terms, it’s about building up enough investments so that you can live off these assets forever.
Now that’s pretty simple right? Assets create income. Buy enough assets, earn enough income and hey presto. Work becomes optional.
Once the passive income that you generate from investments exceeds your living expenses, you no longer need to work. You are financially independent! This allows you to retire early if you desire. Retirement might sound like an odd concept for someone in their teens, 20s, 30s, or even 40s. But FIRE is more about freedom and choices than sipping cocktails on a tropical beach. And getting started early makes everything so much better. So even if you’re a teenager, keep reading.
Imagine for a moment that work is completely optional. How would you live if you had complete control over your time? Would you still work the same hours in the same job? If you’re like me, or most people, you’d probably say: “hell no.”
I love my job (most of the time). But I don’t want to work forever and I would certainly prefer to spend a larger part of my life doing other things. While there’s numbers and finance involved in working all of this out, this process is more about life than it is about money.
Our Modern Lives
In most developed countries, life runs at a frantic pace. High stress levels, anxiety, and time scarcity are accepted as a fact of life. Being ‘busy’ is a badge of honour. It makes us feel and sound important. But should we be proud of this? Throughout society, most of us feel like we never have enough time.
We cram as much as we can manage into each day (and quite often we cram in way more than we can manage). We neglect our health. Our relationships don’t always receive the time that they deserve, and our hobbies wither away because we’re burned out by our ‘always on’ culture.
Sure, we have fancier stuff than our parents did. But we’re working hard to pay for it all, as each promotion or pay-rise is quickly spent on a few extra niceties…which rapidly lose their luster as we swiftly become accustomed to them. For rare, joyful moments, we’re happy. But most of the time, we’re wanting to fast-forward through the present, so that we can reach the next weekend, or the next holiday.
And then as soon as we reach it, we start dreading the end, when we have to return to the drudgery of work.
This never ending focus on reaching the next Friday afternoon or the next holiday seems to make time pass quickly as we get older. At least it does for me. We are not so much sucking in the moment but fast forwarding to each weekend. Remember when we were kids and a week seemed like forever? Each Christmas seemed like an age apart. Now my years pass by like months.
We constantly feel like something is missing. Life seems unfulfilling. We’re frustrated by our lack of freedom, and our jobs aren’t meaningful. We’re trapped by our expenses and our full-time schedule. Hopefully, your life is a bit better than this dreary scenario. And to be fair mine isn’t nearly this bad. But for the majority, it really is.
But what choice do we have? Sure, work has its highlights. But much of the time we can feel like a cog in a machine, and sometimes we’re even treated as such. At the very least, we’d love to have more free time and we’d love to stop worrying about money.
Why FI Is the Solution to Many of Life’s Problems
Financial independence won’t save the world. But it does give you the power to live a more enjoyable and meaningful life. The physical, mental, and practical freedom you gain by doing things differently from the masses is astounding. Financial independence gives you back your control. It puts you in the driver’s seat with a firm grip on the steering wheel, rather than making you feel like you’re being bounced around inside a pinball machine.
When you’re in a strong financial position, life is different. Take a moment to just imagine a time and a place when things are different to the way that they are now. You may think of it as a dream. But for more and more people, this is real.
- Work is optional. Any work you do is purely because you find it enjoyable for its own sake. You can stop anytime, and the pay doesn’t matter. This means we can take time to find work we truly want to do, without pressure to make a certain amount to pay the bills.
- You’re no longer stressed about money. In fact, you feel good about what it can do for you, the people you love, and the world at large.
- Unlimited free time. This one is hard to imagine after so many years of work. No alarm clock necessary! Set your own schedule, or have no schedule and treat life like one big adventure. Every day feels like Saturday.
- More time with family. If you have kids (or plan to), what could be better than being fully present in their lives? You can also spend more time with pets, older family members, and friends thanks to this freedom.
- Dedicate more time to health. We no longer have to sideline this due to other demands. This is amazing (and very necessary), because without our health, what do we really have?
- We can finally spend more time on other pursuits. Those hobbies we used to have (or wish we had), the side project you yearn to explore, or the part-time business you want to start. And the other interests we neglect because we’re too tired or don’t have time.
- Create the right balance in our lives. We can craft our ideal lifestyle, dedicating as much time as we want to the things that matter most. This results in a higher quality of life because we have the freedom to adjust things as our priorities change.
Why We Need Financial Independence
As you can see, financial independence has countless benefits and gives us the time and mental space to improve every area of life. Being in a strong financial position is like playing life on easy-mode. In fact, I’d go so far as to say we ‘need’ Financial Independence. We need it to live healthy, balanced lives, where everything important gets the attention it deserves.
There’s nothing natural about working 50 hours a week for 50 years. Instead of having no time for anything, you’ll have time for everything.
Would you do your current job for free? Probably not. So it’s fair to say that you’d rather do other things with your time. I know it can be hard to imagine what else to do, given we’re so accustomed to our current way of life. But that’s exactly why you need FI, so you can figure out who you are and what really matters to you.
That might sound a bit strange, so let me explain.
Finding Yourself
The rat race dulls our imagination, our spirit, and our sense of who we are. But once you escape from its tentacles, you reclaim your soul. I’m not saying you won’t work anymore. You probably will. Except this time it will probably feel more like ‘play’ than ‘work.’ Almost everybody who reaches FI still works in some form. But their energy and focus shifts to what’s meaningful to them.
Sometimes it’s being the best damn parent they can be. Other times it’s starting a business that can make a difference and help a lot of people. Or they might decide to explore multiple things each week: fitness, hobbies, volunteering for important causes, and more. In many cases, people are just happy to experience a cruisier lifestyle. For example, working 2 or 3 days per week gives them time and space to focus on other stuff, achieving a healthy sense of balance. Instead of making life fit around work, work can fit around life.
Of course, there’s no one-size-fits-all recipe. That’s the beauty of it. Financial independence lets you create the ideal life for you.
Take a moment to imagine what you might like to do if you didn’t have to work. Think about your life 5, 10, 15 years from now. What kind of future do you want for yourself? What would your ideal day look like? Write it down, and then once you’re feeling excited about it, realise that this doesn’t have to be some pointless daydream: it can become a reality. People have done it. So why can’t you?
So How Do You Get There?
If you’re now fully convinced that this FI thing is worth pursuing and that working until you’re 65 suddenly sounds ridiculous, then stay tuned. This post was all about what FI can mean for our lives. My next post will outline how people have actually done it. Spoiler alert …. It’s nothing crazy. It’s actually quite simple, even boring. Ok, it’s not easy or fast. But it works.
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