Why the simple path to Financial Independence is so hard!
What is Financial Independence ( F.I. )
F.I. is the ability to live off of your investments with the benefit of those investments growing over time and not having to work a normal job. This description has a few variants in the F.I. Community, but everyone is attempting to live off of their investments ( Stocks, Bonds, Real-estate, Royalties, etc ) so as not to work as an employee to someone else.
As humans we love to be rewarded with instant gratifications.
The iced chocolate doughnut that screams to our psyche to devour it for the easy calories. ( That sounds yummmy! Brb getting a doughnut and coffee. )
Our ancestors were rewarded for simple choices in the present that added to the chance that they would survive the next day.
Although our brains are still in the caveman stage, our current modern life does not reward only living for the moment. Planning for the future provides us with a path to a possible Financial Independence.
Here is the simple math to purchase your freedom:
Yearly Expenses x 25 = nest egg – 4% yearly expenses in a well balanced portfolio.
Check out the 3 fund portfolio for more research.
If you can become frugal you can lower the equations into something attainable with a savings rate of 30-50%.
You tell yourself you will forego the expensive food, the nice restaurants, the new cars. Over time your mind, ever wanting to live in the present, complains into your inner ear….
“You deserve more! Don’t worry about the future. You can always make more money!”
A bad year in market growth hits and your voice sneaks the words, “Cash out..be safe. Time the market!”
You get peer pressure from your group of friends. Join us on the nice vacation. Join us for drinks.
All of these things eat into your savings rate. Forcing you to choose between the powerful “Now” and the distant “Future”
Here are some ways we have experienced failure in our journey:
We once fell into the trap of thinking the ‘Joneses‘ had it all together. We told ourselves ‘Let’s try it! They look happy! Stable’ Maybe we are suppose to do that. So we followed the path of mortgage, new cars, fancy stuff. Debt…Debt….Moreeeeeeeee Debt… Did I mention it takes debt to be a Jones?
O’h yeah…Did I mention how stress and depression can lead to addictive behavior that can ruin your financial plans? Yeah we tried that too. Best to not seek fulfilling experiences that cost too much money.
Or…family and friends seeing all of your “STUFF” and being so proud of you. While secretly you think..but I am sooo stressed in debt!! Why do they become proud of me now and not when I didn’t have so many things?
In hindsight. “WE SHOULD OF HAD A BUDGET!!!!!! Instead of fighting it!”
- “The Millionaire Teacher” by Andrew Hallam
- “The Richest Man in Babylon ” by George S. Clason
- “Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence” by Vicki Robin
- “A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing” by Burton G. Malkiel
What are some ways that you have been tempted and or failed to not save as much for your freedom? If you would like to share, we would love to hear.