If you want to retire early, why? Is financial independence your goal or a means to an end?
Longtime readers might know I enjoy and recommend a blog on retirement and financial independence called Mr. Money Mustache.
The author there wrote a post on people who evaluate him by their standards and claim he isn’t really retired. He created a definition, quoted below, and said he was. As I said, I recommend his blog, but I think his choice of how to define “retirement” missed the point of what we want in life.
Personally, I consider financial independence a means to an end, not an end itself. Its point is the emotional reward it creates. If you think financial independence is your goal, you’ll miss you’ll try to achieve something slightly different than what you want. You may rest when you only got money but didn’t get the life you want or you may keep working without satisfaction if you don’t realize you have everything you need for an emotionally rewarding life.
I copied here my response to that post:
â€œThe only rule is that you theoretically must have sufficient savings (or other assets) that you could live indefinitely off the passive income they provide, and these savings must give you the freedom to realize that any work you do is totally optional. You donâ€™t actually have to live off the income, it just has to be there.â€
People can define words however they want, but all a definition does is let you put different labels on things. I suggest that whatâ€™s more important is how you live your life â€” your values and if you live by them â€” independent of what definition your life fits or not.
I think the key value in that definition is freedom. I would add a feeling of security too, though the definition doesnâ€™t mention it.
You can get freedom and security through other means than passive income. Personally, Iâ€™ve chosen to have enough savings to last me way more than enough time to get a job if I have to and then to live my life how I want in that time.
You could say I donâ€™t have the security of someone who could live off their assets, but many people who could live off their assets in 1929 found they no longer could in 1930. Or who worked in Enron months before its collapse, at the time considered a paragon of success, compared with after its collapse. Or before a war began compared to after.
In other words, whatever your assets and passive income, you still have risk. Anyone who thinks they have none is only fooling themselves. The question is how much.
I bet I could produce statistics everyone here would agree with that I have as much security, based on my skills and experience, as they do with their assets and passive income. So Iâ€™m not â€œretired,â€ but I bet my life espouses everyoneâ€™s values as much as anyone.
I know people who have virtually no assets, yet travel the world. Whole cultures donâ€™t even have concepts of assets and income, yet people in them live lifestyles we might envy.
Consider an immigrant who works night and day to give their grandchildren opportunities they never had. They may never be â€œretired,â€ but they may feel more pride and happiness in their achievements than many readers of this blog.
Again, Iâ€™m not arguing with the definition. I donâ€™t care what word someone else describes my life with and I suggest you donâ€™t either. I just suggest you focus most on your values and the emotions you live by, which that definition puts second.
If you love your life and wouldnâ€™t change a thing about it or a decision that led to it, who cares about passive income? If you donâ€™t, I suggest no amount of passive income or savings will fill that gap.
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