I’m going to let you into another secret to making it easier to get to financial freedom.
And that’s to relax the rather unrealistic assumption that you never do any paid work ever again.
Just about everyone I’ve met that achieved early financial independence is still doing some form of paid work.
This is why I don’t
waste spend time reading endless blogposts, studies and books on the safe withdrawal rate (SWR).
Don’t get me wrong, the SWR is an important concept : the idea that you can spend say 4% (plus inflation) of your starting portfolio value each year and that this can last forever. This implies you have enough when you have 25x your spending. Or to put another way: every £1 that you cut from your annual spending reduces the amount that you need for enough by £25.
But a lot of time gets wasted debating whether the safe withdrawal rate (SWR) is 4%, 3.25% or whatever. It’s a bit like the meaning of life – a hell of a concept and an interesting debate for students and amateur philosophers…but essentially unknowable with any precision.
The future is always uncertain. Yes, I totally get that people wanna be cautious and make sure the parachute works before The Jump out of the aeroplane of corporate employment. And yes, I get that right now you may be fed up with work and feeling like you’d be happy to never work again. That’s normal but it reminds me of when I have a hangover and I swear I’ll never drink alcohol again…but then get back on it when I’m feeling good a week later.
Life is like riding a bike. When you are peddling and moving forward its all good…but when you stop suddenly, things can get wobbly. I think we need some forward momentum in life. This is why its good to have something to “retire” to, not just a job to retire away from. Working after financial independence can provide you with this sense of continuing progress.
And then there’s the fact that it makes the numbers a LOT easier. If you earn £15,000 a year in a part time / flexible gig (easy), that boosts your income by the same amount as having an extra £1.5 million in the bank earning 1% a year (not easy).
Plus, if you hate your job right now, you need a new strategy that works in months rather than decades. There are many immediate benefits to pursuing financial independence…things that can improve your life right now. But to actually get to 25x spending takes ~18 years at a 50% savings rate. So you may need to change job (or career) before you achieve full-on financial independence.
That may require re-training and retraining is really hard if you are in debt. Debt is a trap…its the barbed wire fence around The Prison Camp. Given that we live in a world where most jobs for life have long since disappeared, it makes no sense that people borrow more than ever. The machines are coming and most people are going to have to change not just jobs but careers (perhaps several times) over a lifetime. Dig a well before you are thirsty.
This is another reason why financial independence is for everyone. Cutting your spending, getting out of debt and having a freedom fund allows you to navigate a (hopefully temporary) drop in salary and successfully change career.
There are many paths to greater financial freedom. I went the route of “just” doing a well paid job, saving hard and investing the difference until I had got over the magic 25x…and only quitting my corporate job after that point (in 2013).
But my life almost went down a different path back in 2007/08. At that time, my career in finance seemed to have stalled. It was hard for me to see at the time what my next move would be. I was doing OK at my job and I was saving money hard but it certainly wasn’t feeding my soul nor was I ever going to set the world alight in that job. I felt like I was stuck.
At that point, financial independence felt a long way away. We had 3 young children and the associated bills that seem to go with that. I watched all the Escape to The Sun porn shows where young-ish couples with cute kids moved to Tuscany to renovate old villas and grow olives. I wanted to believe the dream but I knew that the reality of farming is hard work and most soft office workers (me included) probably wouldn’t hack it.
But I did think a lot about career change. And one idea that I kept coming back to was retraining as a teacher. So I did some research. I got the prospectuses for the PGCE courses. I volunteered as a classroom assistant at my kids primary school. I spent a day observing lessons in a state secondary school.
I agonised about whether we’d be able to live on the reduced salary. The £25,000 starting salary would have been a big pay cut to swallow but it would have been possible because we were mortgage free and we’d already slashed our spending. And I like to think that with time I could have re-climbed the salary ladder, got payrises and maybe done some private tutoring on the side.
I was under no illusion that it would have been tough to re-train as a teacher. Teaching is like performance art – there is a lot more to it than first meets the eye. Being interesting to adolescents is a tough gig…and that’s before the crowd control, marking, form-filling and Ofsted inspections. But maybe teaching would have given me that sense of vocation, and that sense of meaning and purpose? [The long holidays would have been fine with me as well.]
I was prepared to take the status downgrade from starting a new profession at the bottom of the ladder. The 2 things that I worried about was 1) Teaching kids that didn’t want to be there and 2) going into the bureaucratic machine that is the state education system. I suspect that my issues with authority might have proved problematic in that environment 😉
As things turned out, a new job came along that offered new opportunities and I ended up not going down the retraining as teacher path. But in some ways, it feels like I’ve ended up as a teacher via another route. I think of my blogging and financial coaching as teaching people about money, investing and personal finance.
For example, I spent all of Monday this week at a company doing 1:1 financial coaching for employees…free to them and all paid for by their remarkably enlightened employer. It felt a bit naughty for The Escape Artist to be back in
The Prison Camp a corporate environment, letting other people in on the secret of the amazing power of not spending all their money. But, if you think about it, it makes perfect sense: who wants employees that are anxious / stressed about money and unproductive as a result?
And, in other retraining news, I’ve enrolled at a local college to do a part time “Introduction to Counselling” course. If I were to train as a counsellor / therapist, this would be the entry level. This gives you the option either to just do Level 1 or keep going all the way and become a qualified counsellor over a period of years.
It struck me that by having a greater understanding of what counsellors and therapists do, I could learn something useful for my financial coaching. Whilst they are 2 different things, there is definitely synergy between counselling and coaching. It will hopefully make me a better listener and give me more insights into The Behaviour Gap (the difference between what we should do and what we actually do).
I’ve always thought that retiring in your 30s / 40s / 50s to do nothing seems like a bit of a waste. But I’m not telling everyone else how to live their life, I’m just telling you what I did to get to financial independence…and what I do now. What people do with that information is up to them.
I prefer to have the best of both worlds. I want the flexibility of being financially independent: in charge of my own diary, being my own boss, being able to walk away from BS. But I also want to continue to learn, help people via my financial coaching and yes continue to earn money which still feels good to me.
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