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Financial Independence - What's the Big Deal?

 

So we've been exploring personal finance for a few months now, but I think it's time to address one of the underlying unspoken questions that I've come across when talking to people about money: why should I put so much effort into reaching financial independence? What's the big deal? Some people look at me like I'm insane when I tell them that I have a savings rate above 35% (it used to be above 50%, but some life events forced me to divert some money), and often it appears that the impression I leave is analogous to a hoarder. Why would I go to so much trouble to save as much of my income as possible? What does it do for me in the end? Why don't I live like the majority, spending money as it comes in and not worrying about the details of how I'll manage to retire? After all, things have a way of just falling into place when you're an intelligent, hard worker... don't they? Unfortunately, we don't live in a universe that consistently rewards inaction, and that's one of the central reasons behind my fanatical saving.

Let's start with the overarching question: what's the point of saving such a large portion of your earnings? Well, on its own there is no point. Just having a stockpile of cash for its own sake doesn't do anything for you, except maybe look pretty. Here's the important distinction; if you take nothing else away from this article, remember that financial independence is a beginning - not an end. It's the first step to the rest of your life, if you'll pardon the clich├ęd language. The average working person spends more than 40 waking hours a week performing work-related activities. Assuming an 8-hour sleep schedule per night, you're left with ~80 waking hours per work week (Mon-Fri). Slice 40 hours off of that, and you've decimated your free time by half already. This is your time to pursue your interests; stimulate your mind, play with your kids - whatever it is that you enjoy doing. Add on a modest commute time of 20 minutes per direction (the common commute time in my area is often closer to double this), and you're out another 3:20 per week, bringing your free time down to 36:40 per week. Already the work/life balance is slanted toward work. For many of my friends and colleagues, the slant is much more dramatic toward work. Even with the "ideal" 50/50 split, you're giving up half of your life during the week to your job, and it's amazing how dominant work often becomes even outside of the normal work day. By the time you get home, figure out what to eat and settle in, it's nearly time to get back to sleep so you can wake up and do it all again.

Think of work as one half of your life happiness equation (this is an extreme simplification for the purposes of this example). In the best case, it contributes to your overall happiness (you love your job and you may even do it if there were no paycheck involved), and in the worst, it's a purely negative modifier (you can't stand your job, and you only stick with it because you need the money to survive). If you're in the middle class of the U.S., you probably fall somewhere close to the middle of this spectrum. Most people I've talked to seem to like their work overall, but there are times when it wears on them and they wish it would just go away. Even if you love your job, it's important to have an exit plan that takes your financial needs into account, because even the best things eventually come to an end. More on that in a moment.

Now for the other half: what would you like to do with your life? If you didn't have to work for someone else for the majority of your waking hours, would you be better able to do those things? I'll give you an example: I'd love to be able to contribute to solving some of the bigger problems our country and our planet are facing. Energy generation, homelessness, what I call "social apathy" (which is an umbrella for a whole host of societal trends that trouble me that I won't get into now) are just a few. The obvious problem is that the majority of my energy is funneled into work - by the time I'm done with my average work day, there's very little time to devote to anything but "prepare for tomorrow". Don't get me wrong - I enjoy the work I do, but it does prevent me from doing some of the (more important) things I'd like to be doing. I'd wager that a similar situation exists for you if you're a working person.

One final point that should be made is that work has a tendancy to ask more of you over time. In some cases, this is a good thing; seeking to improve oneself is never a bad idea. On the other hand, some jobs will start demanding things of you that you don't want to give. This puts you in an awkward position: if you're not financially independent, you feel extra pressure to comply with any demand your job has of you - you need the paycheck, after all. You'll often end up with the unenviable choice between capitulating to something you really don't want, or refusing and putting your livelihood at risk. Being in this position is one of the worst feelings I've experienced, and I count myself lucky that it's only happened once to me so far, but there's an important point to be made here: when you're financially independent, you are nobody's bitch. This may sound like hyperbole, but it's really the way I see things. Whether you like it or not, employers are often in a much better position than workers - you need the money your job provides you, but your employer can almost always replace you if need be. Conversely, if you don't need to work for the money, you have the freedom to leave a situation that troubles you, with little ultimate consequence. Imagine never having to give in to excessive work demands, and hopefully the case will make itself for you.

So, back to the original question: why should we expend so much energy to reach financial independence? In response, I turn the question back around to you: what would you be able to do if you didn't spend so much of your time working? This is going to be different for every person, but that's the point: if you're free to explore the things you're really passionate about without the constant need to earn more and more to sustain yourself, you'll accomplish things you can scarcely imagine.

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Title image: http://mrg.bz/x8tlVN

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