The Financial Independence Ladder to Freedom

30 Nov The Financial Independence Ladder to Freedom

A prominent spokesperson for F.I.R.E. “confessed” a strange phenomenon in his journey to having a million dollars in his investment account. He hit his “number” and now visits it in his online account and feels … nothing. He feels no free-er. No happier. He is certainly glad to have the  money. He is clear that it represents the potential to stop working. He is vaguely aware that sometime in the future he will, like all people, age and possibly sicken and die… and that this number in his account is somehow associated with doing that with relative ease (though none of this is easy). Yet right now he has a fabulous job with lots of interesting, challenging work in the pipeline.

His greatest sense of freedom, though, came with a very different number.

He’d had his first epiphanies through Jakob Lund Fisker’s Early Retirement Extreme and J.D. Roth’s Get Rich Slowly – my “generation’s” fellow torch carriers for a life that can be outwardly simple and inwardly rich, a life of “enough”, of empowerment, of greater meaning. He also found Your Money or Your Life along the way.  He harvested the early fruits of awakening to the relationship between spending, saving and freedom. One example: he broke up with his partner but didn’t move out – even after a new lover moved in. It was too good a deal to let the normal reactions to a breakup prevail. Other people, in this early phase, will get rid of their second car, or clean out their garage and sell off the excess, or downsize from a large home to a condo and sometimes even a room in a shared household. The next phase is a review of memberships, insurance policies, online streaming media, cell phone monthly fees. etc. Then comes fashion, buying used, maybe giving up the first car for a bicycle or public transportation plus a once a year rental for a vacation.

All the while, in this part of the journey, people feel empowered, like they have walked out of a dark room into the daylight.

My early experiences included learning how to grow food, raise animals and butcher them for my winter’s meat, build, work on cars and basically re-do college, the first one Brown University, the second one the School of Life. I loved learning my way through problems rather than buying my way out of them. I also learned to live on the cast-offs of hyper-consumers. City dwellers know the day that people put large items – furniture, appliances – out on the curb for pick up – and furnish their homes for free. The join a Facebook Buy Nothing group or Freecycle. In a consumer society which promotes waste, it’s so easy to just harvest the fruits of other people’s excess. This is not for everyone, especially this generation’s FIRE adherents who largely ratchet up their income as their primary strategy.

My friend’s insight about not getting the expected high out of hitting his “number” – and if the nearly half a million FIRE practitioners are honest many might admit to the peak sense of freedom coming long before FIREing – may come from a confusion of freedom and independence.

The sense of freedom comes when we break through a constraint that felt impossible to surmount.

It’s an exhilaration as the walls crumble and you expand into a space of freedom, a sense of boundless possibility after a sense of being stuck, torn or confused. The circumstances are varied, and not always positive:

• Getting the job/grade/mate you’ve considered beyond your reach.
• Achieving a score in a sport or winning a game, from swimming a mile in a lap pool after a disability took your mobility to winning the World Series.
• Getting away with murder – doing something you know is wrong but not getting caught.
• Getting out of a bad relationship, be it a business partner or a life mate.

After the initial “Whee I’m free”, though, comes the challenges of building your next life, moving towards your next edge. If you don’t take on this creative task, this moving forward, often that sense of freedom will degrade into a humdrum existence. Again. Feeling free is a lifelong courageous process.

So freedom in our personal lives is a feeling of expansiveness after a time of constraint, but it has nothing to do with financial independence.

Independence is when we can distance ourselves from the constraints of financial need. It is the ability to get away from a material constraint imposed by a material circumstance. Some people are financially independent from birth because of the material circumstances of their family or society. In the FIRE community your “number” is predicted to be when you feel free, but sometimes it doesn’t feel like anything.

Back to my friend who felt freest when he’s saved what before seemed an impossibly massive amount of money – enough to cover a whole year of life. It wasn’t just a number. It was the transformation of the despair of always being behind the eight ball financially – and an identity of a loser. His million was just a number, a sort of basic promise of lifelong security but not a doorway into anything different.

Understanding this difference between independence and freedom can be very helpful on your FI path.

If you celebrate your breakthroughs all along the way you can feel free during the whole journey. If you are so busy on money making and saving and investing that you dare not stop to “smell the roses”, you may be disappointed at feeling nothing when you reach your goal.

In Your Money or Your Life we suggest a ladder of financial independence.

1. The first rung: freeing your mind from the grip of the consumer culture. Realizing you are being manipulated by culture, personal history, marketing, fashion to spend money on so much that never brings out anything but clutter. The capacity to say no to false desires and feel smarter and freer rather than deprived, you’ve liberated your mind. At least for a moment.
2. The next rung is flattening your debt. Part of that process is saying no to behaviors that sent you into debt in the first place and quitting the debt habit. The other process is systematically getting rid of it. The fire in the belly of debt reduction gets you there. Teachers like Dave Ramsey are masters at getting people across that line.
3. The next rung is putting together an emergency fund equal to at least 2 months of expenses in liquid assets, and ideally 6 months. Wow, what a sense of freedom that is!
4. The next run is recognizing and energizing the many layers of non-monetary capacities to meet your needs we call the ABCs of wealth in the new 2018 edition of Your Money or Your Life. It’s your networks and skills and relationships.
5. The final rung is, of course, building a nest egg, the income from which will meet your needs now and in the future. This number is generated by doing the process suggested in Your Money or Your Life so you find your “enough point.”

Final Take-aways

• Celebrate the breakthroughs along the way, they may contain your greatest sense of freedom!
• Don’t expect financial independence to give you financial freedom. This one I suggest you suck on like a hard candy for a long time to get the flavor out of it.