I used to think that the benefits from financial independence only accrued to you when you had reached the cash stash needed to exit the workforce and you were enjoying time on the beach, sipping pina colada’s. In fact, that couldn’t be further from the truth, because the slow steady progression toward financial dependence has led us to certain mindset changes which have been made possible because of the nest egg that’s already been built up.
The freedom for a flexible lifestyle!
I’m relatively happy with the work situation that I currently enjoy. It’s a good balance of stimulating, interesting work, stability and predictability and good work life balance.
You occasionally get offers for higher paying positions that are more stressful and demand more from you in terms of time and application. If you are a slave to the dollar, that sometimes distorts priorities. It can be hard to objectively see what the trade offs are for new opportunities. When you are focussed on the money, you don’t see the late nights in the office, the politics, the additional stress and strain that comes with the new role.
The beauty of having your own financial cushion is that it allows you to push all those distractions away and focus on what’s important, which, from a career perspective can often just be staring you right in the face all along.
My FI safety net gives me the freedom to only pursue what I want to pursue, and ignore the other noise and distractions that come along from time to time.
My wife also shares in the value of our FI safety net as well. Unlike me, she’s actively pursuing a job search at the moment. I’ve said to her that money shouldn’t be a consideration for her in the search (after all we have the equivalent of a part time median family income on the books!). Finding happiness in relation to the work life balance, flexibility of working schedules and commute and job satisfaction should trump everything else.
Even if we’re at a point we’re we’ve attained enough to fully satisfy our needs, I’d like to keep chugging away with doing what I’m doing. I couldn’t imagine just sitting around idle for days on end.
The freedom to not be in fear
Fear can be crippling. It can kill your enjoyment of life. Financial fear is a big one for many people. Fear of an axe hanging over your head at work or a fear of not being able to have a suitable retirement.
I’ve found that my attitude at work is a lot more relaxed in recent times. I’m enjoying myself more. I haven’t been bothered by any concerns or fears about what future changes, layoffs or other dangers that could be lurking around the corner.
It’s empowering to be emboldened to speak your mind, without fear of the repurcussions in the workplace. It makes for a far more satisfying work day!
My FI safety net has also better helped me find my optimal work life balance at work. It comes from having the security of knowing that we have a reliable, dependable backup that is working for us day in day out.
Fortunately, I love what I do so I am passionate about putting in solid hours at my day job. But I love the flexibility to switch off and work on my own schedule when I want to, without fear of my job being at risk. I’m better optimized all round.
Retirement fears are a big one for a lot of people. The threat of not being able to attain a comfortable retirement is one that hangs over many peoples heads.
I was shocked when i came across an article which claimed that more than 57% of Boomer and generation X workers have saved less than $25,000 toward retirement. Even if those numbers are overstated, this speaks to a really big problem.
The more steadily your FI safety net is built up, the more it helps to gradually reduce this fear. Our concerns and fears of not being set for a workable retirement gradually diminish with the more we are able to build up our various cash cushion, via taxable dividends, retirement accounts and others sources of income.
The freedom to max out!
Sheltering you current taxable expense is one of the most powerful things that you can do to really snow ball your retirement (in my opinion). If you are lucky enough to have access to a 401k, that’s $17,500 tax shelter annually.
Your annual tax free contributions also compound tax effectively, with no annual tax leakage. This can make a huge difference over the years, close to a $500k net investment in our case vs investing in our taxable account.
And pulling out the funds? Close to an effective tax rate of 0% on the first $20k annually that you pull out (thanks to standard and personal deductions for a married couple). Combined with concessions on qualified dividends and long term capital gains, that’s close to 70k that we can pull out annually, tax free, in todays money.
Assuming that gets indexed over time, as a couple you’ll be living tax free on $70k. More than enough for us.
It’s not easy to find a spare $35k that you can put into maxxing out retirement accounts to allow you to reap the longer term rewards of tax free investing. Our FI safety net is allowing us the freedom of tax sacrifice today to reap the rewards tomorrow of tax sheltered sacrifice.
The freedom to experiment
I love the idea and discipline of investing. How businesses make money, and what drives the returns on certain asset classes. My FI safety net has been built on the backbone of a set of solid large cap companies… Coca Cola, McDonalds to name a few.
But evaluating alternative investments such as small cap companies, property investment, heck even my Venture Fund and it’s investment in BitCoin are all possible because of the FI Safety Net that we have.
If there was no current stream of passive income in play, there would be little way that I’d be able to have a small pocket of money that could be set aside to indulge my investing hobby and experiment a little.
Part of the freedom to experiment comes from having a strong core that makes up my financial safety net. If I had my whole portfolio invested in assets that moved up and down like a yo yo, I don’t know how comfortable or secure I’d feel about where my money or was parked and whether it would be valued anywhere near current levels in 5-10 years time.
Attaining financial independence will surely be a great thing. But just as importantly, the benefits start accruing to you while you are actually on your FI journey as well. Taking time to recognize these benefits and enjoy them for what they are will allow you to enjoy an FI lifestyle well before you are actually at your destination.