One of the funny things about financial independence is hearing the objections made against it. Most are pitifully thin.
For example, one of the more bizarre criticisms is that financial independence is only relevant for high earners.
Errr…hello???…if you’re not a high earner, its even more important not to piss your money away on ridiculous spending.
Living paycheck to paycheck leaves people at the bottom of society prone to disaster. They, more than anyone, need the techniques of financial independence to build a safety net and gain options to improve their life.
So let’s discuss why the mindset and techniques of financial independence are for everyone. Even those on low incomes. Even those who like their job. Everyone.
What I’m not saying
I’m not saying that achieving financial independence is possible for everyone. Sadly, some people get dealt a hand in life (e.g. incurable illness) that will make it impossible.
I’m not saying financial independence is easy. It isn’t. It’s obviously easier for people with high incomes. But even they will find it tough to resist lifestyle inflation.
I’m not saying you can get to financial independence on minimum wage. Whilst you do hear stories of janitors leaving millions in their will, that makes the news because its so unusual. No, the way that people on low incomes can get to financial independence is by increasing their income (as well as holding down spending). Again, this is not easy but its possible with time. Even if your income has hit a glass ceiling, things made of glass can be broken.
Those of us living in rich countries can usually control our own spending quickly, its under our control. The truth is that people on low incomes are wasting money…people with high incomes even more so. But the lower your income, the more you need to be frugal.
I’m not saying everyone should be obsessed by financial independence. Some people won’t ever be interested in financial independence. And that’s OK…The Escape Artist is used to being ignored by the majority of the population. It happens…a lot.
Financial independence as a journey
But let’s distinguish between 2 very different things. The destination and the type of transport. If you are flying to New York, the destination is….errr…New York and the transport is a jumbo jet.
Here’s my point. Don’t just think about financial independence as a destination, think of it as a means of transport as well.
In money terms, the techniques of financial independence are the fastest and most efficient form of transport. They are how you get to your destination the quickest, wherever that might be.
There is often a silly idea that the destination of financial independence has to be early retirement. Nope, they are 2 different things. The opposite of financial independence is not working, it’s consumerism. Consumerism is buying shit you don’t need. Its self-imprisonment via mortgages and other debt, advertising jingles and keeping up with the Joneses.
So, to repeat, think of the tools of financial independence as how you get where you want to go. Early retirement is a destination where you could go. But its not the only destination. If your destination is freedom, happiness and doing work that you love…then 1) good for you and 2) the tools of financial independence are the best way to get there.
But even if your destination choice is more dubious, then the tools of financial independence are still the best way to get there. So let’s say your goal is to spend as much money as possible on buying donuts. In other words, you set your objective:
I will buy and eat as many donuts in 2018 as possible
and then make conscious choices to track your spending, stop buying shit, switch energy supplier, move house to pay less rent, cycle to work, get promoted, maybe get a side-hustle etc etc and then you’d have a ton of money to spend on donuts!
The same things work for saving a deposit on a house, buying a car, saving for a holiday…or anything. You get to choose.
People sometimes say : “FI is irrelevant because house prices are too high“. I see it the other way round. In other words, its because house prices are so high that young people need to use the techniques of financial independence to buy a house.
The techniques of financial independence
The techniques of financial independence are about making smarter life choices. Over time, these add up and make you rich, thanks to the aggregation of marginal gains.
For example I’ve written about the magical effect that keeping track of your spending can have. The reason I bang on about finding out where it all goes is not that, in and of itself, its a thrilling way to spend your time (it isn’t). Its to switch off your spending auto-pilot and to bring conscious awareness to how you spend your money (and therefore your life energy). What gets measured gets managed. Once you’ve scrubbed off the gunk of consumerism, there’s no need to track your spending anymore.
Then you put your money to work in productive assets like index trackers which, over time, make you wealthy. This is easy…even if you know nothing about investing.
What if you like your job?
After The Escape Artist was on telly earlier this year, his contribution to Western Civilisation was critiqued in The Times by
some clown a journalist who seemed to have trouble understanding that anyone might want to quit their job.
Two points here. First, if you like your job as a fancypants journalist on a national newspaper, then Yay…go you. But how narrow minded would you have to be to conclude that everyone else must also love their jobs?
And second, how short-sighted would you have to be to not see that things change? Even that nice Mr Murdoch has been known to fire people.
So dig a well before you are thirsty. Even if you are currently paid to review new mountain bikes (I actually know someone who is) or test condoms (good work if you can get it).
How can we help low income people?
One of the great things about this blog’s readership has been the near absence of complainypants comments…even as the page views have crossed 2 million (according to WordPress stats anyway).
Elsewhere on the internet, it often seems people just read the title of an article, the vein in their temple starts to pulse alarmingly and they skip straight to the comments section to puke up a complaint about how financial independence is impossible for people called Dave, people with ginger hair etc etc. Not that Ginger Dave is bitter, of course.
Other commenters seem more interested in virtue signalling than they are in actually doing something useful to help poorer people. If they were actually interested in helping poor people they might…I don’t know…perhaps write a blog about how to get better with money and put it free on the internet where everyone can find it?
The question is not whether there is some magic wand that we can wave to immediately make all poor people rich…there isn’t. The question is whether everyone can get better with money? I think we all can…but we have to start with an inconvenient truth which is that…
Most people are not even trying
No matter how many mistakes you make or how slow you progress, you are still way ahead of everyone who isn’t trying. Tony Robbins
Most people spend time and energy complaining and waiting for their elders and betters to come and rescue them. Sadly, it doesn’t work like that. The cavalry are not coming to save us.
For example, there is a lot of moaning about energy prices. But why is it that about 60% of people have never switched supplier and are therefore on a standard (i.e. expensive) rate? Is it because its difficult to switch? No!
Is it due to those evil companies trying to make profits by keeping people warm? Errr…no. The problem is not lack of information, nor lack of intelligence, nor lack of competition. Its because, when it comes to getting richer, most people are not even trying.
We’re told the UK has a housing crisis (young people have nowhere to live) and a pensions crisis (old people don’t have enough income). But there are 19 million spare rooms in England alone not being rented out. Can anyone else see a solution here?
Everyone becomes FI at some point
I used to think that financial independence was a very rare thing. And in some ways it is. But I’ve come to realise that large sections of the population have a lifestyle which looks quite a lot like being financially independent (in that they don’t have to work full time in an office).
For example, people that are employed but work flexibly from home. Self-employed people. People with a small business. All retired people. Housewives and house husbands. People living on benefits.
And I could take the argument to an extreme and say that everyone becomes financially independent in the later stages of life. Even someone with no money will at some point have only a few days left to live and won’t need to earn in that period.
Let’s agree that just a few days of “financial independence” before snuffing it is setting the bar a bit low. A more suitable target duration for not having to work would be 40+ years. My point is that financial independence is not binary. Everyone can get better with money and that will move them in the right direction along a spectrum.
This blog is trying to help people move away from the 2 day scenario and towards the 40+ years scenario.
Financial independence is not just a destination, its a journey as well. And “using the tools of financial independence” is just a fancy phrase that means not being shite with money.
Financial independence is a mindset and a set of practical tools to help you achieve your goals. You could apply these tools to achieve almost anything.
Like I said, financial independence is for everyone.