Back in 2018 I wrote a post called Financial Independence is for Everyone. I thought the article was pretty clear but I see from the internet that some misinterpreted it.
Perhaps they just read the title and not the actual article. Perhaps they read what they wanted it to say. Perhaps I didn’t write it clearly enough.
Whatever the reason, some took that as meaning the following:
Anyone and everyone can (and should) get to Financial Independence by 40, they just need to try harder
No, that’s not what I said. And its not what I meant. Not even close. What I said was everyone can use the tools, techniques and mindset of financial independence to get better with money.
It seems like I’m gonna have to spell this out again.
People sometimes accuse FI blogs of being repetitive. But this is a feature not a bug. Some of this FI stuff takes a while to sink in. People often misunderstand some bits and so we keep plugging away, correcting the misconceptions. I’m not just giving out one-off information, I’m trying to help people on a journey (one where it’s not easy to stick to The Path).
So can anyone and everyone get to financial independence? Sadly no, I don’t think so. Let’s start with an extreme case to illustrate the point and then we’ll broaden it out.
Imagine someone born with an incurable disease that prevents them from working. FI is off the table for them. That’s not to say there isn’t hope for them: medical breakthroughs happen. But without that cure, that person is just not going to be able to get to financial independence.
Now let’s widen it out. There’s a young guy who works in my local gym. He cleans the floors and equipment and does the jobs the trainers don’t want to do. He has Downs Syndrome. I have a huge amount of admiration for this guy because, despite having been dealt a shitty genetic hand, he’s making the best of it. He’s diligent and hard-working: he shows up and holds down a real job. Its pretty humbling.
No doubt he can learn and grow just like we all can. But with the best will in the world, he’s probably not going to to climb the ranks into management or run his own business. Stuck on minimum wage, its not gonna be possible to get to financial independence without state support. That’s not anyone’s fault: it is what it is. But I see this guy as a success rather than a “failure” because I’m more interested in his attitude, actions and example than his money situation.
It’s obviously easier to get to financial independence if you have a higher income. Some tout that as the dirty little secret of financial independence. In terms of stating the bleedin’ obvious, that’s right up there with the “secret” that being an Olympic pole vaulter is easier when you weigh less than 30 stone.
The point is that most people currently earning lower incomes can use a FI mindset that prizes determination and resilience to hopefully climb the ladder and earn more over time. I started off on £12,500 per year and ended up as a top rate taxpayer. Income is not set in stone and earning more is not cheating.
I’ve devoted the last 5 years to explaining financial independence to as wide an audience as possible. I do that because everyone can benefit from ditching consumerism and being smarter with their money choices. But values, actions and happiness are what ultimately matter…its not just about whether someone has the financial ability to retire early or not.
To illustrate, there is a lady who we’ll call Betty who works in my local Tesco Express. Betty is over 80 years old if she’s a day. When I was buying some groceries a few months ago, I stopped to chat to her. She told me she’s been working there for ~20 years: she worked there when it was an independent local shop before Tesco bought the site. She likes working there so (to her great credit) she carries on working a real job and contributing to society.
A clown who read my blog and thought it was all just about early retirement might conclude that I disapproved of someone working into their 80s. No!…I have way more respect for Betty (who chooses to work) than someone who retired at 25 thanks to a lottery win, inheritance or other random windfall. Betty is a wonderful example to young people, many of whom could do with reading The Inestimable Advantages of Hardening The Fuck Up.
One of the curses of media coverage of financial independence is the way FI gets presented as binary. Journalists love to ask: is “it” possible or not for this or that group of people. By “it” they mean retiring at 40 (or whatever random number they’ve plucked from the air).
The retiring-early-never-to-work-again thing is the most eye-catching but perhaps least interesting part of FIRE to me. Don’t get me wrong, I write a blog with a Prison Camp theme because I found out the hard way earlier in my career that being trapped in a job can be awful. But there’s so much more to it than early retirement.
Financial Independence is truly life changing because the process of getting there changes you for the better. And then it gives you options to do pretty much anything you want with your time. It allows you to take time off, travel, change career, work for yourself, work part time, start a business or do a fun job that doesn’t pay much.
But you don’t have to wait until you have more than 25x your annual spending to reap these rewards. It’s not binary (where you’re either broke or financially independent). How about being able to take a gap year for grown ups? How about being debt-free, having your pension set up properly and a years expenses tucked away as an emergency fund? That would be a massive improvement for most of the population.
The reason that the FIRE will keep spreading is because most conventional financial advice is pants: its biased, expensive and ineffective because it doesn’t get your savings rate up. And the tougher your situation, the more you need to go hardcore and adopt the “full on” FI mentality.
People sometimes say : “Financial independence is irrelevant because house prices are too high“. I agree that it’s harder for millennials to get on the housing ladder than it was for me back in the day when house prices were lower. But I see it as 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 save for a deposit.
And, if you want to get political, I will agree that it was totally wrong that bank bondholders and shareholders were bailed out in 2009, bank CEOs mostly kept their high paid jobs and that we’re still paying the price (low interest rates and high house prices) 10 years later. That was a (partial) failure on the part of the Democratic (US) and Labour (UK) administrations that presided over it. To be fair they kept the system afloat and avoided an apocalyptic collapse of western civilisation, so I guess the scorecard is mixed on that point.
But the real question is what can those young people do to best play the hand they’ve been dealt? The answer is to focus on what you can control. We are where we are and these days you are gonna have to go ALL IN just to get a place of your own in a high cost of living area (like London for example).
But is it even possible to save in a high cost area on an average income? Well, The Escape Artist was recently featured in an article on Vice.com (not as racy as it sounds, sadly). The interesting thing about this article is that the journalist actually LIVED IT for a month – saving 50% of their salary even though they earned a normal average wage (£30k), renting in London.
This shows that saving half your income is possible for a wider range of people than you might think. And here’s the thing: even if the journalist ditched the FI experiment at the end of the month, they’ll have learnt something valuable from the experience. Everyone would gain some insights from tracking their spending and being mindful about their choices.
I’ll be honest, I’m just not that interested in writing a blog that’s only read by a tiny handful of high earning and low spending
geeks introverts (even if I fit that description). I don’t just want to preach to the choir. And I’m not interested in being a FI fundamentalist where you’re either in the cult or you’re out*.
Financial independence (and this website in particular) is not just for people like me. Its not just for middle class people, its not just for high earners, its not just for one race or gender. Its for anyone and everyone that wants to get better with money.
Fuck, its really for anyone that wants to get better with ANYTHING.
*That is NOT a criticism of MMM who has done more than anyone to spread the word as widely as possible
Ken from The Humble Penny and I are having another meet-up for anyone interested in financial independence. Come along and have a drink and chat with other financial freedom seekers.
The venue is The Marylebone Pub, 93 Marylebone High St, London, W1U 4RE. You can find directions here. Drop in for drinks from 6 – 11pm on Friday 29 March to celebrate the impending start of British Summer Time.
Hope to see you there 🙂