Drew Ed 17/04/2020
People love a label, an identity, a group or a gang. We are pack animals, evolved from tribes but messed up by modern urbanisation and lifestyles. But take a look at identity politics and see how much we still want/use/focus on it. FI:RE has rapidly become one of those things.
FI:RE breaks in to two parts – the FI and the RE.
What is financial independence? As always with lots of things in finance and economics, the answer to that question is “it depends”.
In its simplest terms, FI is about having enough income to pay your living expenses without having to rely on a traditional job or being reliant on someone else. Pretty simple? If that’s enough, skip the rest. But once you unpick that, there are variables in there to play with.
Firstly, what are your living expenses? Everyone’s are different. And if you read up a bit on FI, you will see that people can get quite judgemental of those whose expenses are higher than theirs or what they say as appropriate. Turns out some people can be dicks about anything. Who would have thunk it?
Some people focus on living frugally, lowering their cost of living so that the income they need to generate is very low and saving rate is high. Others focus on generating more income to create more wealth to be able to finance higher spending. And everyone else is somewhere in between.
Secondly, when you FI, where do you get that income from? Its not a job. Property? Sure. Income from investments in stocks, shares and funds? Yes. Match betting? fx? crypto? If you like a punt, maybe (I don’t understand any of them). There is a whole host of discussions around this. Active. Passive. EFTs. OEICs. Platforms. Income. Accumulation. I will try to explain some of these in future posts, and people will be mad at me whatever I say.
Thirdly, I can’t have a job? What happens if I have the money invested, can cover all my expenses and I am 50? What the hell do I do all day? Of course I can have a job! I just don’t need to RELY on one. Which leads to the next part….
RE. Retire Early. No sitting in the traffic, on site, in the miserable grey cube farm (do they still exist?) until your late 60s. You get to quit and do whatever you want, because the FI is in place to cover your costs. So you don’t need a job.
Now, if your cost of living is very low, you live frugally and save hard, then you can do this VERY early. Check of the “Things we love” section of the blog and there are a few links to other blogs where people do this in their late 20s and early 30s. Oddly enough, they are mostly high income and no kids. So yeah, try that with 2.4 children, a dog, a mortgage and just over minimum wage.
But just as much, do you want to work until late 60s? Some do, most don’t. They get tired, worn out, disillusioned it careers that rarely offer what was sold to them. See “Career” section of the site for a few insights into how to addres that. Very few people want to be the richest person in the care home, so anything that brings the retirement date sooner is great.
How do I put all this together for me? My take on FI is to create “Fuck you” money. I don’t necessarily want enough money to stop working entirely forever when I hit 50 (which is scarily close). I want enough money to be able to say fuck you and walk away from a job if i want to and be able to do something else. It may pay less, have less responsibility, less status. But that doesn’t matter, because I got it covered. If I want to do something else, I can.
So that’s me. I will talk about FI much more than RE, because I currently don’t see a total early retirement, I will always want to do a bit of something.