How Long Are You In For?
On my last day of work in Corporate America earlier this year I was having a conversation with a member of my team as we walked down the hall. It was just a generic discussion about what I would be doing after leaving, and since I was not particularly close with this person it was not very deep in detail. Like everyone else she was stunned by the idea that someone 20 years her junior would be leaving the corporate straight-jacket so early, and not wanting to go to deep into the particulars of our financial situation, I was mostly bobbing and weaving with bland descriptions of how we had saved over the years and now wanted to move on to try something else. So I was somewhat surprised by her response when I started to ask her a question—“so how long before …”—but she interrupted with an answer before I finished the question. “Four years, three months, and 16 days.” She anticipated my small-talk question—“how long before you retire”—and she knew to the day how long it would be before she could retire and claim her full pension (and it was four-plus years away). It was as if I had asked a fellow prisoner “so how long are you in for?”
It seems to me an unavoidable conclusion that if you are counting the days until you can leave your job—and that timeline is longer than a year away—something is not right. To be in a position of spending 40 years of your life marking the calendar with red X’s until you can finally live free—that is, if you don’t physically die during that 40-year period—is unacceptable. If you are in the situation of counting your days at work, it is imperative that you devise a plan to get out—as Chet would say—ASAFP. You have two options: (1) move quickly to a “productive passion”-type job, or (2) race like hell to get to financial independence as quickly as possible.
Option 1 entails moving to a job where you are doing something you are passionate about, that has meaning for you, and that pays you enough to live some and to save some. I think of this as a “productive passion” career or endeavor. Note that I did not say that it pays you as much as your current soul-crushing chalk-marks-counting-days-on-the-wall job. Your productive passion endeavor probably won’t pay you as much. Funny thing how being an accountant pays more than working for a non-profit that is helping people; I’m pretty sure there are rational market forces that explain why that is—oh yeah, that’s right, being an accountant every day sucks total ass and nobody would choose to do it if it paid the same amount as working for a non-profit, so employers have to pay more to get people to do it (and of course there is a smaller supply of people willing to give up their lives combing through 20,000-line spreadsheets). So if you take Option 1 and pursue a productive passion you may have to adjust your lifestyle to be within your newly reduced means. That is a small price to pay for not retching every morning when you wake up and realize that you have to go to work again.
Option 2 is the path I ultimately chose—to pursue financial independence with great vigor and commitment. Here the focus is on earning as much as possible, saving as much of your earnings as possible, and investing the savings to earn the highest possible net return (i.e., after expenses). Option 2 requires more patience and discipline than Option 1 because financial independence cannot be achieved overnight, and involves a number of years of staying in a job that you do not like while living a lifestyle significantly below the standard that said job would otherwise support. Option 1, on the other hand, can be implemented immediately—as long as you don’t have high fixed structural lifestyle costs (e.g., a huge mortgage) that can’t be changed in the short-run to jive with a reduced income level.
I ultimately chose to try and fast-track to financial independence because as an extrinsically motivated person, I had (erroneously) sought out the high-income profession of law. By the time I started practicing and realized that it totally sucked, I had invested three years in law school and was making a really good six-figure salary. So my logic at the time was “OK, this sucks, so save as much as possible so you can stop asap.” At the time I did not specifically define the goal as financial independence/early retirement—I just wanted some financial breathing room that would allow me to decide what to do next. After 16 years of pursuing this objective, in June of this year we reached a point where we had the option to either (a) retire at age 41 (at one spending level), or (b) take a nice long break while we pursued productive passions to generate income and retire in the future (at a higher spending level). We opted for something of a hybrid: I’m trying to keep our family of five in a spending/consumption range that is consistent with the 4% rule and presumes retirement now, and Mrs. JF is pursuing a productive passion (with me as her in-house counsel/administrative assistant) with the goal of not being bound by a spending/consumption range constrained by the 4% rule.
If I had it to do over again, knowing what I know now, I think I would be tempted to choose the Option 1/productive passion route instead. That path is more stable and sustainable for a long period because you are doing something you enjoy and that you value. And even though the financial independence/retire early path put us in a position to call it a day at age 41, I’m not sure that it was worth the cost of 16 years of hard labor. I think finding a career/family/life groove that you enjoy and that is sustainable for a long period (a lifetime) is probably the ideal situation; hell, I could die tomorrow and only have enjoyed three months of early retirement in exchange for my 16 years of servitude. But at least I made a decision and devised a plan of action—a step that most people don’t take. Instead they take the career opportunities that happen to come their way and then put their work lives on auto-pilot. The default mindset is then to make as much money as possible to support the desired lifestyle, without ever critically analyzing how they want to spend their lives. The next mistake is to not save and invest because hey, I’m working hard so I might as well enjoy myself. By the time they realize they are destined to be miserable for another 30-plus years it is too late—they are trapped in work by lifestyle and consumption.
In one sense I may have been blessed by choosing a profession that was truly wretched: the level of discomfort it created served as a hard motivator to find an alternative. If I had only modestly disliked my path—or even worse, been indifferent—I probably would not have acted as decisively (even though frugality is in my DNA). A few years ago I had lunch with a college friend that had gone into corporate banking. At the time I was contemplating a move from the law firm to an in-house position (in search of some relief), and I asked him if he liked his job. The question seemed to confuse him—it appeared almost as if this issue had never crossed his mind. I don’t know whether I was lucky or unlucky that this issue was always on my mind, but either way that fact set me on a determined path toward financial independence. (Note: my corporate banking friend subsequently joined the $100k-up-front country club and built a seven-figure house on the golf course, so whether he likes his day job or not has at this point become moot).
Like any other endeavor, in the arena of work and money, if you don’t have a plan you never know where you’re going or where you’ll end up. The wisest course is to decide what you want to do and how long you want to do it, and then tailor your financial plan accordingly. If you choose a productive passion that suits you just fine for a 40-year trek, good for you. You were wise. But if you happen to choose unwisely and only want to work for 10 years, set your savings and consumption levels to allow you to accumulate 25 times your annual spending in that period. The math is not that hard (you might even call it “shockingly simple”). Who knows, with a bit of luck the market returns on your savings could serve as tail-winds that get you to the objective in less than 10 years (but of course they could also serve as head-winds that extend the journey, so be flexible). Decide how long you want to be in for, and then execute the plan with ruthless dedication and consistency. The knowledge that you have a plan and a timeline to achieve the goal should help to get you through the low points along the way. And it sure beats counting down the days for 40-plus years until you hit 65.