Financial Independence/Early Retirement Comes In Many Flavors
A few months ago I was having lunch with a good friend (let’s call him Jake). During our conversation he described his current state of mind regarding his job at a corporate organization: he had largely grown bored with the work and no longer found any enjoyment or satisfaction in it, but he was continuing to plug along because it pays him well. Because I know that Jake is financially independent, I noted that this state of affairs sounded very, well, un-Jake-like. He is the sort of person that only does things that interest him; that’s one of the reasons he is so interesting to be around. In response to my comment he asked what I meant, and I explained that the Jake that I knew wouldn’t stay in that position for very long, so I was surprised. (Note here: I was expressing genuine surprise; not trying to steer him in any direction.) He nodded in apparent appreciation of the thought, then we moved on. We didn’t discuss this issue long—in fact, it was only the two or three sentences I’ve described here.
The next time I talked to him, maybe two to three weeks later, he informed me that he had submitted his resignation notice.
Jake’s story here is just one of many examples of what financial independence looks like in practice. The moment you decide that you are not satisfied with how you are spending your perpetually diminishing number of days on this earth, you’re moving on. Maybe you move to another job in your field that’s potentially more engaging or fulfilling. Or maybe you go back to school to learn a new skill, or take a post as an apprentice to learn a new trade. In the last couple of weeks I’ve thought about walking onto a residential construction site in my neighborhood with my tool-belt and asking how I could help. I have another friend that left a lucrative corporate marketing job, took a couple of years off, went back to school to learn to be an HVAC technician, and now loves his job making house calls to fix A/C units. Others may work for a charity, or spend large chunks of the year on the road traveling with their family (and giving their children an incredibly valuable form of alternative home-schooling). Any number of these paths may be combined in sequence as you grow tired of the current endeavor.
I got to thinking further about this topic after I came across a blog post this week that was provocatively titled “Early Retirement Is a LIE.” Initially I presumed it would be another irrational and emotive rant about how it’s impossible to save enough money to accumulate wealth along the lines of those that I have written about before. But it wasn’t. It was a thoughtful piece by a blogger explaining her perspective as to why it’s ridiculous to spend a big chunk of your life working a soul-crushing day job that pays well, just so you can quit cold-turkey and become a worthless tub of goo sitting on the beach drinking way too much craft beer (OK, that’s my imagery, not hers). Instead, she argued, we should seek to find meaningful work sooner—work where we have more balance between income and job enjoyment/fulfillment—and not waste a significant portion of our lives working a sucky job and counting the blood money. In a comment to her post I noted that I largely agreed with this view, pointing to my earlier post where I concluded that I probably should have done this myself earlier in my lawyering career. The larger point here that is worthy of further discussion I think is that the journey to financial independence can look different for all of us (some more pleasant than others, and certainly of differing time durations), and that true financial independence, once achieved, buys you the freedom to pursue any number of paths that were not options when money was the primary objective and motivation.
In his book Drive: The Surprising Truth About What Motivates Us, author Daniel Pink describes the differences between people that are extrinsically motivated versus intrinsically motivated. Extrinsically motivated people are driven to work by the financial and other external rewards that their work produces, while intrinsically motivated people are driven by the value and satisfaction that they derive internally from the work activity. Based on his research Pink concludes that while extrinsically motivated people may shoot ahead in the short-run, in the long-run they will ultimately burn out before those that are intrinsically motivated. Pink had some particularly interesting and relevant insights regarding lawyers. His research indicates that they tend to be extrinsically motivated types and this accounts in large part for why they are so relatively unhappy with their career choice as a group. So in other words, if you choose a profession (like law) just because you are attracted to the money, your longevity in that profession may be limited from the get-go. And that was indeed my experience. I chose law early in life because I liked the idea of getting paid a lot of money to argue and analyze (admission: I like to argue). No one ever challenged me in this conclusion. I wish they had. If pressed to provide more than two reasons in defense of my career choice (money and a general predisposition to belligerence), I likely would have been unable to do so. (Another note: if you tell anyone at age 10 that you’re going to be a garbage man, they will likely challenge you, at least a bit. But say you’re going to be a lawyer and you don’t get a lot of pushback). This logic and motivation led to early burnout.
In hindsight the preferred course for me would have been to find a productive passion—an endeavor that I wanted to pursue strictly for its own merits, but that just so happened to also be productive and therefore generate an income. Easier said than done. It’s unfortunate that the relationship between the intrinsic value/personal satisfaction variable and the money variable for 98% of jobs/careers looks something like this:
That’s just economics at work. Fewer people to do the job that needs to be done equals higher compensation for said job. But if you are an individual that is particularly wise beyond your years, or lucky, or maybe just self-aware and well-adjusted, you might set out at an early stage to design a career path with the goal of finding something like the outliers highlighted below. (I can’t say for sure whether a pediatric neurosurgeon actually fits this bill, but it makes sense to me. And I do know first-hand a fair number of entrepreneurs that truly seem to have maximized both of the x/y variables.)
Or if you’re not that smart, good, or lucky, then you play it safe and target something in the green area of the distribution, and simply set your lifestyle from the start at a point that is commensurate with the related income level. Good enough. And sustainable. If you wake up one day and find yourself in the bottom right quadrant of the distribution (the red zone), it can be awfully tempting to just keep your head down and sprint like hell to the FI/RE finish line because it seems to be your best (or at least shortest time-duration) option. But this is where you need to be careful; too much time in the red zone can cause lasting damage. My less-than-scientific theory is that you shouldn’t spend more than a year here. After that, you run the risk of adapting to the income level (lifestyle inflation = trapped in work), and/or rationalizing away your feelings of animosity towards your work. I would suggest instead taking an “early retirement” and finding one of those productive passion endeavors in the green zone.
The incredibly wise and well-written personal finance author Jonathan Clements recently advocated taking this latter approach by express design. His logic is that by pursuing money first instead of a passion, you will buy yourself some financial freedom down the road after that whole compound-interest thing works its magic. No argument from me with that logic—as long as you don’t spend too long in the red zone. (Footnote plug: Jonathan Clements has forgotten more about personal finance and investing than most of us will ever know. As the personal finance columnist for the Wall Street Journal during my formative working years, I read his stuff religiously and his writings and perspective had an over-size impact on my saving and investing philosophy. In fact, next to Jack Bogle and his books like The Little Book of Common Sense Investing, Clements may have had the single greatest positive impact in introducing me to many of the personal finance concepts that we here in the FI community take for granted as the laws delivered on the tablets by Moses.)
So back to my pal Jake. Because he is a principled dude he gave his employer a number of months to find a replacement for his high-value, high-responsibility position. I think they are still looking. But in the meantime they decided to create a new position just for Jake. They valued him to such a high degree that they essentially made up a new job—just for him. In his own words, here is how Jake described it in an e-mail to me:
“[They] created a new job for me … this is a new endeavor where I’ll work with new people doing new things. I get to leave the old job behind since they are replacing me. And if it doesn’t work or isn’t fun, I’ll just quit again.”
Mmmmm. That smells a lot like Freedom. (Capitalized. For emphasis.) So because Jake set himself up to be financially free by not spending all of his hard-earned money on shiny crap over the last 15 years or so, he gets new jobs created just for him when he wants to do something different (of course it’s also because he’s really smart and his employer values him for a host of reasons, but the proximate cause of the new gig was his decision to quit in the first place, which was enabled by his financial independence). And as a further benefit, since Jake’s employer now knows that he isn’t working for the paycheck like 99% of the other trapped Working Joes that they employ, my guess is that he gets treated even better for that reason. They know if he’s not happy, he’s gone. This state of affairs likely leads to a great work experience for Jake and probably for his employer too, since a happy and intrinsically motivated employee is almost always more productive than the alternative.
OK Joe, so you’ve been talking now for like 10 minutes—what’s the point? I don’t know. I guess I like the sound of my own voice, and in a former professional life I was paid by the word. Old habits die hard. But I suppose my conclusions are as follows: (1) I agree with the blog referenced above to the extent that it asserts that the best option is to seek out a career in the green zone and stay out of or at least minimize any time spent in the red zone. Even better: find something of an outlier in the upper right quadrant of the green zone. (2) The freedom that we discuss here in the FI/RE blogosphere as being the ultimate objective takes many forms, and once you achieve some level of financial independence (the “FI” in the acronym), the next two letters of the acronym can be whatever you want them to be. The community here settled on the “Retire Early” language probably just because it completed a catchy acronym (“FIRE” just looks so cool!) more so than because it was technically accurate and descriptive. (You know, kind of like the stupid names that Congress slaps on legislation just so it creates a legible acronym like the “PATRIOT” Act that they can talk about in their next re-election campaign). Maybe it should have been dubbed “FIPP” (Financial Independence/Productive Passion), or “FIHO” (Financial Independence/ Helping Others), or “FIRK” (Financial Independence/Raising Kids). Technically I’m in the “RE” phase because I left my job and turned off all earned income, but I’m continuing to engage in various productive activities, including serving as legal counsel for Mrs. JF’s business endeavors (that will hopefully yield supplemental income one day). Jake entered the red zone and took decisive action to move back into the green. But to the extent that the FIRE acronym and some of the discussion that takes place around it on the Internets implies that it’s a wise and strategic move to spend a significant portion of your life going full-on drug kingpin during the day and counting your dollar bills at night—all while undertaking the monomaniacal task of calculating the number of days and years left until you can tell the boss to take this job and shove it—I’ll disagree. (I’m not sure that there is much in the FIRE space that actually does advocate this position, but let’s stipulate here, you know, just for the sake of argument.) That’s a waste of time and a misguided effort, and probably the result of laziness and/or a lack of creativity. The better approach would be to leave the red zone ASAFP and move to a spot further up the y axis on the chart (and certainly above the self-loathing line). If that also moves you to the left on the x axis, so be it. You can either accept a longer period of time to reach FI, or reduce your spending to stay on track. Even if it takes you longer to get there, you’ll be happy you didn’t waste years of your life being miserable in exchange for a few bucks. And as a result, once you do reach FI—even if it took you longer to get there—you’ll be in a better psychological position to decide how to productively spend your time in “early retirement.”