The Hook

Financial freedom

The idea of quitting work and never working again is “The Hook” of financial independence. 

It’s the thing that first captures people’s attention.

How do we know this? Well, it’s always the thing that the mainstream media focus on when they feature financial independence. 

The Media know they have to lead with something that catches people’s attention above all the noise and the competing narratives.

When will you be able to quit work? On this website there is a free calculator (the FI-o-meter) that allows you to plug in your current age, net worth and your assumptions about % savings rate and % investment returns. It then tells you when you will reach financial independence.

I think it’s incredibly valuable to have a play with this. You may or may not like the results. But the results will always tell you something valuable about where your attention should be focussed.  If the results are a wake up call, that’s a win. If the results are reassuring and telling you that you’re on track, well that’s also a win.

Most people instinctively shy away from cold hard truths. The first step to financial independence is embracing reality. The results are what they are. You can’t negotiate with the maths and you can’t negotiate with reality. The FI-o-meter helps reveal your options.

Your % savings rate is the most important number. It’s more important than the % investment returns that you make.  So the question is what can you do to increase your % savings rate?

Your options fall somewhere on a spectrum. At the low risk end of the spectrum is extreme frugality. This allows even people with “normal” incomes to be able to save 30,40, 50+% of post tax income. This is not easy but it is do-able.

We all want to enjoy the journey. The benefit of Monk Mode is that it works as a hedonic reset that reminds us how little we really need to be happy.

At the other end of the risk spectrum, we have entrepreneurs who bear risk and, if they are lucky and doing it right, get rewarded for that risk. Entrepreneurs don’t have to invent new technology but they do have to take risk, find customers and solve their problems. Entrepreneurs and the self-employed find new ways to deliver products and services…even if they are running a traditional plumbing or gardening business.

In the middle of the spectrum we have the route that I focused on…the promotion route. I treated work as a series of sprints. I moved between jobs, negotiated pay rises and climbed the ladder. This involves going all-in on your career, making yourself indispensable and sacrificing the idea of work-life balance (for now…that comes later).

The one problem here for hardworking people from a modest background is that when they see they’re doing better than they were 2 or 3 years ago they avoid taking any risks that would put that progress “at risk”. That might be a mistake. Are you aiming too low? 

Most people generally need to THINK BIGGER.  It’s important to be pushing and taking enough career risk (as well as investment risk).



One book that I often recommend to people in their 20s and 30s who want to get on in their career is the book “So Good They Can’t Ignore You” by Cal Newport.

Just the title alone is worth the cost of the book.  You can not afford to wait for anyone else to push your career forward. You have to be so good they can’t ignore you. If you are lucky you will have a mentor at work, but you can not sit around waiting for them to appear.

One of the things I like about So Good They Can’t Ignore You is that it is made up of real world case studies: it tracks the careers of a number of successful people in different industries.

Over time, these people make themselves more valuable, they build a reputation in their industry (not just within their current company) and they build career capital.  Career capital can be traded for more money, more interesting work, more flexible working conditions. Career capital allows you to work on your own terms.

If you have enough career capital, having net worth >25x your annual spending (a mathematical measure of financial freedom) becomes unnecessary.

I think the whole idea of never working again is over-rated. It’s like dreaming of winning the lottery…we’ve all done it but it’s a mistake if it distracts you from taking action to improve your situation. Better to take baby steps via The Aggregation of Marginal Gains.

It is however worth keeping track of your runway. I define “runway” as the number of years that you could go without working. It is HUGE to go from no runway to having the ability to take a year off. After that, you want to get to the point where you could take 3-5 years off (e.g. extended childcare break). And then on to the next milestone.

Once you have net worth >20x your annual spending, it is damn near impossible to run out of money if you invest sensibly and spend flexibly.

And you can experience most of the benefits of financial freedom much earlier than that.

Why? If you’ve been reading this blog for a while you’re probably an unusually focussed / hard-working person blessed (or cursed) with a need to “do something”. I bet that many (most?) of you will always earn enough money to cover your living expenses.

Once you have runway and are happy working on your own terms, you have won the game. You do not need the magic 25x to win. That is just The Hook.


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7 comments

  1. Is it wrong that I thought of the Robin Williams movie, Hook, when I first read your title? Glad I did, it’s an interesting post.

  2. I’m circa 30% on the road to FIRE aka I have approx 8 years of funding and I’m already starting to notice the difference. The job is more enjoyable and I’m starting to revise my plan to quit working completely. Since I’m just under 40 life should still be long and sitting on my ass from 45 until death seems a little bit.. ehm unproductive. So I’m already starting to realize that waiting for 25x annual spending is a bit overkill. I will have some form of retirement benefits and there are a significant heritage if I outlive my peers. So instead of procrastinating life until I reach my FI number I have started to live life now. Which means 40-50% in savings rate instead of 65% but oh the joy of spending time and money on the things you really appreciate in life!

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