I recently went to FINCON (see this post) , a gathering for financial content creators, and let me tell you: a LOT of content is being created on the topic of Financial Independence, aka FI, FI/RE (RE = retire early), or Financial Freedom.
But what is FI?
Financial independence is about being independent from needing to work. FI’s focus is on this end goal: work being OPTIONAL instead of compulsory, because you’ve taken care of your economic needs with other income — without you needing to go earn a paycheck. Also baked in is a focus on needing less money and consuming less — because the less you spend, the less you need to get in passive income to stop working.
Tactically, FI is based on basic math and understanding of investments.
Essentially, acquire assets (eg own stocks or property) that provide you passive income. Specifically, the two main ways folks operationalize this is:
1) save up a big investment nest egg, ideally 25x your annual spending (which is why reducing your spend matters a lot), such that investment growth will allow you to withdraw a small amount (4% is the usual suggested) and be able to live off earnings…permanently. Yes, that does mean saving $600k-$1.2 Million or more depending on your spending needs.
2) Buy real estate as investment, and rent it so that rental income covers costs and makes you enough such that you have income coming in in perpetuity.
Conceptually, FI is often spoken about as a sense of the “freedom,” “choices,” and “options” when you don’t HAVE TO work to survive.
This is fascinating to me because it begs the question: were you unfree beforehand? Were your choices or options limited? — and in our current economic system OF COURSE.
That’s … like the entire underlying engine of capitalism for most people: forced labor. The colonialist backbone of capitalism came up on forced slave labor, the enclosing of the commons in Europe forced agricultural labor, and nowadays the reality still is that most of us gotta earn money to survive.
However, these days we are not without freedom of choice or options. That’s the slippery situationalism of consent under market capitalism.
Labor isn’t a choice, even if the specific labor we pick is.
I’ve been writing about the situational consent at work and choice/constraint models for years here at Ride Free, so these concepts land with me. Plus, as my traveling punk years and friends attest to — there’s plenty of ways to notwork.
Given the heat around it, I wonder: what makes financial independence different from other ways counterculture folks have found to escape the gnarly aspects of society?
Not all of the ways folks escape include having what you need, however which is why FI is both interesting and still unsettling. Who doesn’t need to acquire money? Easy: people who already have money by virtue of their lineage. If that sounds aristocratic — IT IS. Will FI create a secondary layer of unachievable aristocracy, or highlight the possibilities that not needing money allows and blow up the silence surrounding wealth?
For the many of us who are excellent at living on a super small amount of money, the idea of saving up a nest egg which would create that money is a wildly divergent idea.
Yeah — How do you save up all that money to early retire?
It’s taken me a long time to start to sync with with FI thinking — mostly because of the answers to this question…
Waaaiittt – is FI only for ye privileged white folks who work as software engineers?
Look: if you dive into FI-landia online you will observe a LOT of engineers talking about optimizing their income and retiring by 35 or whatever.
However it’s a disservice to everyone else in the movement to say that only highly-paid engineers can do this.
You either need to have:
1) a well-paid job of some sort, or
2) gotten a boost up from family somewhere along the way, or
3) be unusually and especially gritty and determined, or
4) realistically a combination of all three — because saving up $600k+ isn’t a light task and that’s kind of the minimum you need, again unless you have some other form of income.
There’s a wave of participants which is growing in diversity but because the key point of FI is stack money, there’s a gender and racial wealth gap, most voices are either men or white couples. But not all!!! Add that to the fact that the collective environmentalism has been drowned out by a bootstrapping Thoureau like #minimalism and there’s a Rambo like individualism that a lil weird at times.
What to like about FI
- I really love that FI makes it obvious that most people would rather contribute to the world in a multitude of other ways than “work” — It’s like an open secret.
- I also love that as a niche it celebrates an anti-consumerist approach to life: bike, fix things, reject faddy gadgets.
- And I definitely like that it’s a total hack on capitalism: build yourself a perpetual money machine and go about your life.
- Finally, it makes wealth a tool you can build rather than an uncomfortable thing about your family.
Origin story: Your Money or Your Life
- I also like that FI was not born from engineers, but rather from environmental activists in the 1980’s who figured out that they could hack bonds, which used to pay out 7%, to live off and consume way less / fuck up the planet less at the same time.
The original Financial Independence book is Your Money or Your Life, by Joe Dominguez and Vicki Robin, and it’s absolutely worth a read (get the 2018 updated version).
(I had a chance to meet Vicki last summer, and she’s totally a brilliant creative sister spirit btw.)
In it, there’s an exercise where you calculate how much an hour of your work REALLY pays you — after commuting and food prep and recovering from work and your work hours, and then you are asked to decide if the thing you want to buy is worth the equivalent portion of your one short sweet life.
If your number is $22/hour, then perhaps you won’t feel that one cocktail in Manhattan is worth an extra hour of work you have to do; or maybe you will — that’s the magic. It gives you another way to look at money in and out in terms of your life energy.
What is kinda weird about FI?
1)One thing that freaks me out about FI is what seems to me to be an unspoken and underlying fear of being poor … by a lot of people (not everyone!) who have never been poor and who have dedicated a decade+ of focus to ensure they never will be poor.
Look – *I’m* worried about being poor because I’ve had to choose between rent, food, and heat more than once and I KNOW it sucks (but I’m not afraid because I know that I can survive).
Most of the FI folks have been bubble wrapped against such experiences and have used that bubble wrapping of privilege to ensure they never will experience the realities that 40% of the US contends with.
On one hand: I really don’t want anyone to experience poverty. That’s kind of the point of economic justice tbh: enough for everyone. But … also, there’s something weird about the intensely individualistic way some folks approach their storytelling and path to Financial Independence. Again to be fair! There are also folks who approach their FI storytelling with nuance and economic inclusion.
2) What I also don’t love about FI is that it’s an individual solution to a collective problem — what we need is universal basic income, but what we have is this super difficult bootstrapping solutionizing that replicates the demographics of privilege and inequality.
Now — that’s not the fault of FI folks. None of us pick the privileges we’re given, just like none of us pick the oppressions we’re dealt. It is always important for those of us with privilege to at minimum pass some along and help out.
Ideally, all of us with privilege use the free time we might get from RE to get some economic policy in place that centers enoughness for more people such that no one has to take decades of their life grinding in an unwanted job just to not have to grind at a job.
TELL ME MORE I WANT TO RETIRE EARLY AND ESCAPE THE GRIND!!
Y’all there are hundreds maybe thousands of blogs, vlogs, and instas documenting stories by people who have “hit their number” and retired as well as by lots of folks documenting their process to get there.
A few you might like reading:
- Mr Money Moustache is the classic blogger folks know, and his blog is funny verging on aggro but his math is A++
- Millennial Money — Grant Sabatier is a killer content creator; check out his FI/RE book list
- Our Next Life, by Work Optional author Tanja Hester – also Tanja is super friendly and won community builder awards at FinCon so, GO GIRL! This post about the early slow start to saving her $tack was inspo to me
- Rich and Regular – Black couple who won an award this year for chronicling their journey to get debt free on the road to FI
- Debt Free Guys queer money podcast —by the lovely David and John — one of the very few LGBTQ FI/RE pieces of content out there. Weird! Perhaps I need to work on one… 🙂
Remember — FI/RE is only one way to “get there” so don’t be discouraged if it’s not for you, or if you’re so hella deep in debt or stuck in underpaying work that the whole idea is laughable. It is, as many participants point out, not possible for everyone.
However, it might be more possible for you than you think.
Five years ago I was earning $30k a year, feeling stuck as hell and sad, and wondering how I’d fix my teeth at 40. Today I save 50% of my income and paid for a crown like no problem brah HERE’S MY POINTS CARD I pay that shit off every month.
I honestly don’t know if FI/RE is for me because I love to contribute and work, so I don’t feel like I need to build an escape plan. A safety net? YES LORD. Options? PLEASE QUEENS. A feminist fuck off fund? TRULY CRUCIAL. But, I already escaped the non consent grind of capitalism and I already took a “mini retirement” by Living a Fabulous Gay Lady Life On The Road.
I want to keep earning money so I can save up AND enjoy myself finally in life, help my mom and my communities, and create joyful queer and radical autonomous spaces. I want to invest a lot of money buying a motel that all my fabulous friends will decorate and we can have a zine library, entrepreneurial things like that.
However I’m inspired by the hacks and determination of the FI/RE folks, I appreciate the folks keeping it intersectional and real, and we really all should be buying less consumer crap either way 🙂