FI means a lot to us! And it means something different to all of us. Does it has to be a yes/no thing? Do you need to wait for the benefits until the moment is there? Let us explore.
Quite soon in the journey towards FI, I realised that FI is not an absolute given: you are FI or are not FI seems so strict to me. Rather than looking at it binary, I look at it as a spectrum, a continuum.
Let’s take one step back and look at the what FI means to others and how we can use that to define our own version.
FI seen from a money point of view
One of the definitions that I like about FI is made by Ms. ONL
This is actually a great definition for multiple reasons:
- The definition is a high level definition that removes any reference to 4pct rule, savings rate,… It means the discussion can be focused on the core. You start to get the idea.
- The definition focuses on what is really important in life. When retired (or in FI) you do things based on passion and fun. You focus on what thrives you and gives purpose. As such, pre-retirement, you work because you have to find a way to pay the bills.
- The definition does not “forbid” you to work in retirement.
The limitation to me is that it is an absolute given: you are either FI or not.
FI seen in stages
There are definitions that have a a gradual build up towards FI and that even go beyond. There are 2 great articles on this one.
The stages of Financial independence (Radical Personal Finance) and the six stages of Finacial Freedom (Money Boss). The 2 articles share some same stages and there are some differences. Let me try to make a summary.
- Financial Solvency: you have to work to pay the bills – you still have debt or increase your debt.
- Stability: You have a good control on your income and spending, you manage to save money and an emergency fund starts to build up
- Agency/debt freedom: You are now debt free (maybe still a mortgage for tax purposes)
- Security: your stash can cover basic expenses. Nothing more, nothing less
- Independence: The stash covers the life style
- Freedom/Abundance: Your stash supports more than you need in your regular lifestyle.
The advantage of this approach/definition is that you have somehow a roadmap to guide you. However, it is very money centric and needs you to understand the link between savings you have and your spending.
This approach lacks some higher goal, a reason to be FI. The moneyboss makes one illusion to FU money in the stage Agency: “you have enough banked that you could quit your job at a moment’s notice without hesitation.” Radical personal finance puts it like this for financial independence “The key at this stage is simply to know that it’s up to you!”
The evolution in our thinking
Over time I came to realise that FI is not a destination, it is a journey. Image you reach FI, then what? Sit on a the beach and drink cocktails all day long? Would that not bore you? I am pretty sure people start to look for a purpose. And I read this in a lot of stories from people that reach FI or are about to FI. (and like always, tere are exceptions). I do think that I would need some purpose, goal, challenge in life.
So the question is: why wait?!? Do I need to be FI before I can do that? Can’t the journey be fun as well?
What if we define FI by the percentage of time that you can spend on your passions? I admit, this makes things harder. How would you measure that? As it is not based on an exact number and mathematical science, how can we compare to the other FIRE Jonses?
Maybe I am just a lucky bastard that used the amberindex to jump to a new job. This new job/company avoids a lot of unhappiness – the best way to be happy. And I get to do things that I want to do in a post FIRE life. My wife is currently envisioning a similar approach.
Despite the fact that we are not FI (I work because we need the money), despite the fact that we are only in the agency/debt freedom faze (we have the cash to pay off the mortgage, just decide not to), I do feel 50-60 pct FI already.
does that make sense to you?