22 Aug Triple Bottom Line Financial Independence
Laura Oldanie, a member of the Your Money or Your Life community, wants to marry FI and the 3Ps (people planet profit as the bottom line for a sustainability business) into a 3PFI lifestyle. In this article written especially for us, Laura describes the choices FIers would make if they kept the planet in mind.
One of my earliest overtly environmentalist acts was to persuade my sister to make low-flow shower heads for both bathrooms in our house our Christmas gift to our parents. Thirty years later, one of those shower heads still works just fine. Now, as an adult I’m trying to find ways to marry that concern for the environment (and social justice) with my efforts to achieve financial independence (FI).
There are numerous blogs and podcasts covering a variety of topics related to FI. Rarely though, is FI pondered through the lens of sustainability. And when it is, the focus is often on living a more sustainable life to reduce costs with the environmental benefits being important, but secondary.
FI in its most recent iteration relies heavily on investing in the stock market via low-cost broad-based index funds as well as rental properties. What is one to do however if she (or he) isn’t comfortable with the idea of earning money from the stocks of companies which follow business practices or sell products that aren’t in line with her values and she doesn’t want to be a landlord? What if you want to encourage a regenerative vs. extractive economy, which means you want your money to “serve humanity while simultaneously stewarding the integrity of earth’s ecosystems” in the words of the Capital Institute? What if you add 3 P’s – people, planet and profit – to pure FI.
Is it possible to achieve financial freedom while pursuing a triple bottom line, that values people, planet, and profit? I sure think so, but it’s not as straightforward. I certainly understand the appeal of the simpler approaches and am delighted that these options have made FI attainable for so many people.
Pursuing the 3PFI lifestyle as I’ve come to call it allows people to traverse a much more sustainable and holistically-oriented path to FI. It likely won’t launch people on the fast-track to earning millions of dollars, yet it doesn’t preclude it either. So how does one strive for financial freedom without relying on index funds and rental properties? I don’t presume to have a comprehensive answer to that question, but I’ve given it a great deal of thought and have some ideas to share to get this conversation going.
Probably the most obvious and accessible alternative to mainstream broad-based index funds is investing in socially responsible (SRI) index funds. A number of the more sustainably-minded people on the path to FI may already be invested in this type of fund. In a recent blog post, Kristine at Frugasaurus described an ethical index fund that had been launched in Norway where she lives. This Norwegian version of what we refer to in the U.S. as socially responsible investing (SRI) offers an index fund that, like the many SRI funds available in the U.S. excludes companies that deal in fossil fuels, firearms, and tobacco. It also screens for environmental practices, workers rights, and some other things.
A significant portion of my own personal retirement account money was stashed in TIAA’s Social Choice Equity Fund for many years (and a small portion of it still is). However, as I outlined in a recent blog post, much like the Vanguard FTSE Social Index Fund Investor Shares (VFTSX) and many other SRI funds the TIAA option includes companies such as Microsoft, Johnson & Johnson, and Coca-Cola. I find this list of companies extremely disappointing. These companies push consumerism, unhealthy products, and extractive practices or offer services that I don’t want to encourage. While there is debate about whether or not the returns on SRI investments can match those of more mainstream index fund offerings, they do at least offer a viable alternative as we explore, refine, create, and popularize more holistically and sustainably-oriented options.
One of the best mechanisms people living in the U.S. have available on the path to 3PFI may well be the self-directed IRA (SDIRA), a little known option that allows one to make a wide range of alternative investments. I first learned about SDIRAs while attending a Slow Money Northern California meeting. Members of this group use SDIRA’s as a vehicle to invest in small local food businesses, including Love & Hummus, Hip Chick Farms, and Saint Benoit Creamery and agree to a (s)lower rate of return on their investment knowing instead that they are strengthening their local food system.
SDIRAs generally require much more active participation on the part of the account holder than their traditional cousins. There is a good bit to learn to successfully navigate these SDIRA waters amidst the IRS guidelines pertaining to them. That shouldn’t deter those of us who want to be making much more meaningful investments from considering them. Carl at 1500 Days to Freedom established his SDIRA to invest in real estate, which is probably the primary investment people make through these accounts. In one blog post Carl cites SDIRAs as The Ultimate Investment Account for Entrepreneurs.
There are so many options beyond purchasing rental property though, that exist for SDIRA account holders. Given how much discussion there is on the various FI forums, Facebook pages, blogs, and podcasts about the importance of building community I would have to imagine that there are others out there on the FI path who would be interested in investing in sustainably-focused local businesses, taking the long-term view and accepting a (s)lower (financial) return on their investment. Don’t we all want to live in thriving communities?
In the recently revised edition of Your Money or your Life Vicki Robin mentions her involvement with Local Investing Opportunities Network (LION) in Washington state, which adheres’ to the mission of building prosperous local businesses, keeping investment dollars in the community, and helping build a more resilient and sustainable local economy. Investing locally surely isn’t as easy as logging into your computer, opening a Vanguard account, and setting up automatic transfers, but it has the potential to be so much more rewarding. There are a few good resources online we can look to for inspiration and guidance. They include:
2) Slow Money
And what about investing in companies that promote a closed loop system, even if they aren’t local? Wouldn’t it be nice if an index fund or other mechanism existed to enable us to more easily invest in businesses prioritizing a regenerative mission? Or how about biomimicry, an approach to innovation that seeks sustainable solutions to human challenges by emulating nature’s time-tested patterns and strategies? Have you, like me, watched Jane Benyus’ 2009 Ted Talk and wondered how do I invest in some of those companies?
The SEC may well have had the best interests of what they now classify as non-accredited investors (basically those of us with a net worth of less than $1 million dollars or annual income of less than $200,000) in mind back in the 1930’s when they created the accredited and non-accredited investor designations. Unfortunately, the myriad of restrictions enacted by the SEC to keep us “regular” folks from directly investing in businesses precludes us from easily learning about and participating in these and other investment opportunities.
Certainly, another barrier to individual investors contributing capital to these businesses is the way in which our smaller individual investments make for a much more labor intensive capital raising process for the company seeking investments. In recent years, online crowdfunding platforms have started popping up such as Seed Invest and Wefunder making it easier for non-accredited investors and businesses seeking investments to connect. Maybe someday there’ll be such a platform dedicated entirely to biomimicry companies. (Please note: I recognize these investments can be risky. I’m by no means suggesting that someone invest all of their money via these platforms, but I do think such investments can make up part of a diverse portfolio.)
Beyond traditional financial investments and increasing our savings rates we can also consider the income generation side of this 3PFI equation, especially as it relates to side hustles, which are so often a part of the FI journey and much more under our control at the individual level. If you have one, does your side hustle contribute to the new regenerative economy? Or is it part of the old extractive model? Are you selling products made of plastic or other materials that people don’t really need? Will the products you are involved with end up in a landfill in the near future and then remain there for many years?
I will be writing a great deal more on my own blog about my side hustles, which all stem from my waste stream diversion activities. We are barraged with messages of scarcity from so many directions, yet so much of what ends up in the trash may not be needed by the person throwing it away, but could easily be put to use by somebody else. Unfortunately, capitalism often makes it more economically viable for businesses and people to throw things away than to redirect them to people and business that could use them. I have used the food I retrieved from grocery store dumpsters to feed my compost pile, which provides the soil for the plants I sell from my backyard plant nursery.
Some of those plants are potted up in containers I rescued from curbs and other places. In episode 274 of the Side Hustle Nation podcast Nick Loper profiles a man who built a business buying industrial byproducts, things used for shipping like pallets, cardboard boxes, crates, and so on, and selling them for a profit. A good bit of the scarcity we experience (along with a lot of our waste) could be easily erased by simply opening our eyes and seeing things in a new way.
Another form of capital to consider is our social capital, an all too undervalued form of capital. Vicki has spoken most eloquently on a number of podcasts about our financial interdependence. This interdependence provides the obvious benefits of friendship and connection and it can also save us a great deal of money over the years as well as improving our health and longevity according to research conducted by the Harvard Medical School.
In his Get Rich With: Your Own Urban Tribe post well-known FI blogger Mr. Money Mustache outlines how he and his family spend most of their time within a 2 mile radius of their home, getting to know their neighbors and exchanging skills, food, friendship and much more. Local Buy Nothing groups can be a great way to facilitate this in your own community.
On the popular podcast ChooseFI, co-host Jonathan Mendonsa often underscores how people’s limiting beliefs keep them from realizing their full potential and achieving FI. I wonder if today’s FI community has created a set of limiting beliefs around the most commonly accepted methods of reaching FI, that have come to blind us to other possibilities.
I realize that because this 3PFI path is still in the process of being fleshed out and doesn’t offer the more immediate, easy, safe and obvious financial returns that index fund and rental property investing do that many people may be hesitant to explore this arena. I hope though, that you’ll want to continue to follow this discussion because it is much bigger than anything I or Vicki can conceptualize on our own.
Those of us working towards FI, who are concerned about stewarding our money in ways that value more sustainable and ethical practices, need to connect with each other online and in person to crowdsource our knowledge and ideas here on the Your Money or Your Life website, my new blog Triple Bottom Line FI, and other places where these conversations are percolating. I look forward to connecting with you.
Laura Oldanie started her blog at Triplebottomlinefi.com in order to crowdsource a life that values people, planet, and profit. She is an aspiring waste stream diversion expert, who when she isn’t playing with plants in her backyard nursery spends her time retrieving discarded items and reselling them on eBay and Etsy.