I’m glad you don’t want to retire early. I guess you made great career decisions.
But have you thought to consider your worst-case scenario? The situation you dread, although it may never become reality?
It’s awful to consider, but if a loved one had a significant health crisis would you want to move closer?
What if the health crisis was your own? Would having a year’s worth of living expenses make a difference?
Also consider if you were exactly the same person 10 years ago as today? How will you (and your aspirations) change in another 15 years? It’s hard to know!
Love My Job & Don’t Want to Retire Early
Doctors and other high-income professionals have spent years fighting for selection into highly competitive training programmes. They spend years training and then perfecting their art.
An individual does not achieve these successes without extreme dedication, single minded determination and grit.
As a result, when stumbling across the FIRE community, many of these professionals don’t see the appeal.
Quitting has never been an option for these high achievers. They are driven to succeed, and gain a lot of personal satisfaction by achieving expert status in their chosen profession.
Sometimes, however, a dream job becomes a nightmare. Some savings and investments and a gap between income and expenditure provide more flexibility to pivot to a new dream job.
FIRE Doesn’t Seem that Appealing to High Achievers
When first reading about financial independence, most are shocked that young investors are saving 50%+ of their income. These individuals are often looking to escape a job they don’t enjoy. Some document stories of extreme sacrifice and cheapskatery along their journey.
Their aim is to reach the point where investment income can fund their living costs as soon as possible. Then, they assume, they will retire to the beach and watch Netflix. This looks pretty boring and uninspiring at first glance.
FIREYs are High Achievers Too
What many do not realise is that they have lot in common with “FIREys”. Those that manage to achieve FIRE display the same dogged determination and single mindedness, in achieving their big hairy audacious goal.
They are driven, intelligent, high achievers. Very few (if any) simply “Retire” once financial independence has been achieved.
For those that don’t enjoy their day job, quitting is a strong motivator. However, these job haters will usually move on to other income producing activities, guided by what they actually enjoy.
They often think they want to retire early, but in fact end up discovering that productive work is important for happiness. Movement towards financial independence can provide the confidence they need to quit a miserable day job and give it a go making income from a passion.
But many others are already lucky enough to find fulfilment, enjoyment and identity at work. Financial independence simply provides more options, choice and flexibility for a future that is still unknown.
These people are in less of a rush. There is no situation they are trying to escape from. They have an intentional life design.
Their life is probably fairly close to their ideal life. Optimising spending allows small changes to make life even better. Savings and investments also provide lots of flexibility in case of a change in situation or new interests. This flexibility is not dependent on financial independence, but gradually increases as savings, and wealth grow.
Health Crises Can Happen to Anyone, at Any time.
It is natural to consider yourself invincible. Yet we all know people whose lives have been turned upside down by illness or injury. Insurance is important in providing financial support in case of such events.
Income protection will cover up to 75% of your take income in case of incapacitation. A 25% savings rate, therefore, is a practical way to prepare for the worst.
Total permanent disability and life insurance will pay out if you are permanently unable to work, or die.
What if you were able to work but your child was severely unwell? Would you want to take some time out to support them?
Trauma insurance covers a list of illnesses and will pay out based on diagnosis, despite your ability to work. Unfortunately, if your diagnosis is not on the list you will recieve no payment.
A Pilot with a Side Hustle
Captain FI is a young pilot. A fabulous and esteemed career, for which he has no doubt trained for many years. I have no doubt the entry hurdles were extremely high, and of course the stakes, with hundreds of healthy travellers on board, even higher than medicine.
Despite a well-paid and glamorous seeming career, this young pilot decided he would start a side hustle. He started the successful finance blog at Captain FI. It is obvious from the site he has worked his butt off around shifts at work to produce copious great quality content, build a strong audience, and monetize his site.
COVID struck, and the unthinkable happened. Pilots were out of work. Rather than get thrown into panic, the good captain took a deep breath and threw himself into taking his blog to the next level.
Planes are taking off again, although the industry will take a long while to recover, work for pilots is yet again increasing. Yet Captain FI has just quit his job. He has had a series of unfortunate family health crises at an unfairly young age, and clearly feels he should be close to home to help out.
Captain FI has been saving and investing hard, whilst keeping expenses low.
He probably didn’t anticipate both his parents becoming seriously unwell and wanting to interrup his career to support them at such a young age.
If he had a huge mortgage for his “Pilots house,” and a leased luxury car it is unlikely he would be able to.
Captain FI’s foresight, saving and investing have allowed flexibility and options in a difficult situation. Should the worst happen, will you be as prepared?
Change of Direction
It happens to many professionals. They are singularly focussed on achieving a career outcome. Like many great goals, the destination can be underwhelming.
Even if you enjoy your chosen profession as much as you had anticipated, perhaps you will have different aspirations in 10 or 15 years time. It’s hard to imagine in what way we will change as time goes on. But it’s pretty much guaranteed you will have new passions and interests.
Being financially independent gives you complete freedom to change careers, take a sabbatical, do that dream overseas fellowship or anything else the future you desires.
Along the journey to financial independence, each level of savings and investments provides a buffer, and a little more confidence in taking risks and following dreams.
But Financial Independence Seems Impossible.
All big, hairy, audacious goals seem out of reach. Just like achieving entry to the career of your dreams, big goals need breaking down into manageable steps.
Saving 50%+ of your income seems impossible, but is not.
A lot of income is wasted without any real lifestyle benefit, particularly for high income households.
Most households can cut spending by significant amounts with tiny cuts, that don’t seem worthwhile but really add up.
Once you’ve embraced joining this community, your mind gradually opens up to opportunities to increase savings rate.
Keeping your cars and home relatively modest will allow a significantly higher savings rate.
Contributing most of your future pay rises to savings and investments will increase your savings rate without any impact on your current standard of living.
Financial Independence Seems Like a Lot of Sacrifice
For lower income households, saving 50% of income involves serious sacrifice, and smart manouvering. For high income households, it is much easier. Any income household will become financially independence in 17 years.
For those of us in no rush, the benefits of the journey towards financial independence start long before the 17 year mark. This assumes no current savings or super balance. A 65% savings rate will reach financial independence in 10.5 years. Increases in savings rate above this make increasingly small reducations in the time to financial independence.
Some in the community are extreme, and all about cutting out every non-essential spend to retire as soon as possible.
I, and the majority of FI enthusiasts are a lot less extreme and believe in achieving balance. The financial independence mindset is to maximise value and eliminate waste.
Adopting this mindset, and picking up practical tips on how to achieve this by following FI literature and podcasts will gradually increase your savings rate.
Financial Independence is Great for Those Who Don’t Want to Retire Early
Most people will dismiss the idea of financial independence as impossible, too much sacrifice. They will continue wasting money that could provide better value used more efficiently.
The benefits of financial independence are not binary. Having a financial plan documenting the steps you need to take to ensure you can retire at 60 is a lot further than many households.
Having a year worth of living expenses saved gives you a huge amount of flexibility for future health crises, or new aspirations.
Aussie Doc Freedom is not a financial adviser and does need offer any advice. Information on this website is purely a description of my experiences and learning. Please check with your independent financial adviser or accountant before making any changes.