What are you investing for?
Why are you working so hard to save money and put it into special accounts like 401(k)s and IRAs? Why should you divide that money between stocks, bonds and other “investments” you’ve never actually touched or even seen with your own eyes?
What are you really trying to do here? What’s your end game?
The party line in our society is that you’re saving for retirement. You know, that thing you get to do in your 60s, after you’ve kept a stable job for 40+ years, and you finally have enough money to abruptly quit and enjoy your golden years.
But that’s an old school way of thinking.
There are more exciting possibilities available to people who are willing to think a little bit differently. And in this case, a small change in mindset can make a big difference in your investment success.
Introducing “financial independence”
The big problem with the idea of “retirement” is the assumption that everybody lives their lives along the same linear path and that you have to wait 30 or 40 years before having the freedom to make your own choices about how to live.
I don’t know about you, but I don’t want to wait. I’d like to be able to retire at some point, but I also want to enjoy myself along the way and give my family the freedom to live how we want to live now.
So when it comes to my personal financial plan, I no longer have a “retirement” goal. And when I work with clients, I take the focus off retirement as well.
Instead, I like to talk about financial independence.
Here’s what financial independence means to me: the point at which you’re free to make decisions based on what makes you happy instead of what makes you money.
In other words, it’s the point at which you’ve saved enough money that you’re no longer beholden to the next paycheck. You’re free to spend your days in the pursuit of happiness and fulfillment, whatever that means to you.
Let’s dive into some of the implications of this definition.
The beauty of financial independence
From a purely financial standpoint, the idea of financial independence is somewhat similar to the idea of retirement. They both require you to have enough saved up so that you no longer have to work for money.
But from a psychological standpoint, there are some key differences that open up a world of possibility.
There Are Degrees of Financial Independence
Retirement is absolute. It’s an end point. You’re either still working or you’re not. Simple as that.
Financial independence has degrees, and those degrees give you the freedom to make some exciting life choices a whole lot sooner.
The end goal of financial independence is to eventually have enough money that you never need to work again. Not that you will definitely stop working (see below), but you have the option to stop if you so choose.
But financial independence can also simply mean having enough money to temporarily give up income in pursuit of something you care about.
Speaking from personal experience, it was that second type of financial independence that allowed me to start this business. The savings we had in place allowed me to take time to grow my business into something profitable and sustainable while still handling my family’s needs.
We weren’t fully financially independent. But we were independent enough to allow me to build my business from scratch.
When you’re willing to think in degrees of financial independence, you open up a world of opportunities over the course of your lifetime.
Finding Your Life’s Work
While financial independence frees you from a dependence on income, it doesn’t assume that you stop working. After all, work done in support of a mission you believe in is one of the most fulfilling ways you can spend your time.
What’s more appealing: the idea of gritting your teeth through a terrible job just so you can quit decades down the line, or the idea of spending your days doing work you love because your financial position allows you to do so?
Financial independence supports your quest to find fulfilling work you believe in, rather than forcing you to wait for the day you get to quit a job you hate.
You get to make the rules
When you stop working towards retirement and start working towards financial independence, you give yourself so much more opportunity to create a life you enjoy, both now and in the future.
It’s no longer about reaching the same end point that everyone else reaches 30-40 years down the road; it’s suddenly about dreaming up whatever kind of life you want and starting to work towards it.
I would encourage you to Google “financial independence retire early” and just start clicking. You’ll find all kinds of stories about people who have reached financial independence at all different ages and are doing all kinds of interesting things with their lives.
There’s Jim Collins, who has continually used his “F-you money” to chase varied interests, ensuring that his days are always spent doing something he enjoys.
There’s Brandon Sutherland, who figured out how to take advantage of pretty much every loophole in our tax code to quit his job and travel the world with his wife.
And then there’s the infamous Mr. Money Mustache, who reached financial independence at 30 and now spends his days writing, building houses, and teaching advanced math at his son’s school.
And there are much simpler examples from the lives of my clients. I’ve worked with people who decided to start a yoga studio, stay home with their kids, and go back to school. All of those choices required giving up income and having the savings in place to make up the difference. They required a degree of financial independence far before traditional retirement age.
The point is this: you have OPTIONS. There are no rules. You get to decide what you want out of life.
The rest is simply a matter of using the financial opportunities available to you to make that life a reality.
How would you start living your life if you no longer depended on your next paycheck?
Take a minute to think about that question right above. Or take a few minutes, or an hour or more if you would like.
Your answer to that question is the key to your financial success.
You don’t have to wait until you’re old and gray to start living a life you enjoy. You can use your money to buy your freedom a whole lot sooner than that if you want.
All it takes is a little change in mindset.