The Chicago Financial Planner — aka Roger Wohlner — ran a guest editorial written by me on his blog this weekend. If it looks familiar, it’s because the Hub ran it earlier in the weekend under a slightly different headline. Why Financial Independence is a Better Goal than Retirement. That blog was picked up a year ago by the Retirement and Good Living Blog.
I had also run a guest post on Roger’s blog a year ago after the U.S. edition of Findependence Daywas published in 2013. After all, both the U.S. and Canadian editions of the book are set in part in Chicago!
After an exchange this weekend on Twitter about the above post, Roger offered to run the blog as a followup to the first one but indicated he preferred to run his own headline. He chose the one used in this post, which is a bit more neutral. So if you missed the earlier one, please do check out Roger’s version. Apart from the headline, it’s also different because of an extensive preamble Roger wrote to introduce it, with comments about the “Findependence” movement to which this site, The Financial Independence Hub, is dedicated.
Posting on Twitter as @rwohlner Roger is one of the most followed Certified Financial Planners (CFPs) in the United States. You can also find him listed under our “Getting Help” tab.
What do you think?
As I posted this Monday morning, there were three comments about the article on Roger’s site. After you read them, it would be great to get some reader feedback about these two terms (Retirement vs. Findependence) here at the Hub. Also note another post from this morning: 5 fears you shouldn’t have about retirement. Read them over and ask yourself how many of those fears would still apply if you substituted the phrase “financial independence” for retirement.
While we’re still tweaking our discussion forums, registered users should be able to use the Comment feature below. If anyone attempts to do so and is having difficulty posting a comment, please email me at jonathan@findependenceday.com.
In many ways, financial independence is intimately linked with the related themes of voluntary simplicity, inconspicuous consumption and what we call (in the books and e-books) guerrilla frugality.
But the author of today’s linked blog also has a nice definition:
“Becoming financially independent means having enough money, so that it doesn’t become the main concern or worry in your life. It means having enough money to freely live your life on your own terms. It means that the paycheck doesn’t have control over you anymore and that you can experience life freely and openly.”
Hard to argue with that definition.
So how to you achieve it? The secret is simplicity itself:
“… You achieve financial independence when your income is significantly higher than your needs.
Here’s a piece I wrote a year ago that got picked up by another blog. It pretty well sums up the point of the Financial Independence Hub. You can go to the posting in the Retirement and Good Living blog but since I wrote it (the author credit they provide is J. Chevreau), I’m republishing it here below. Go to the link and you’ll see four comments below, including one reader who says they “love the contraction of financial and independence to give you findependence! Good stuff.”
By Jonathan Chevreau
One of the problems with selling the concept of Retirement to young people is that old age just seems so impossibly far away in the distant future. The financial services industry and the mass media love to talk about retirement but let’s face it, if you’re a recent college graduate just entering the workforce, retirement is perceived as something far far in the future, just one step before the equally remote prospect of death.
Findependence far more accessible for young than Retirement
The pity is there’s a much better term that could be substituted for Retirement. It’s called Financial Independence or what I’ve dubbed “Findependence.” (simply a contraction of the two words.)
Financial independence is a goal that can be achieved not 30 or 40 years from now but in 10 or 15 years. It’s not unreasonable for a 25 year old just taking their first step on the career ladder and embarking on marriage, family formation and home ownership to set a goal of financial independence (or “Findependence”) by the time they’re age 40.
Findependence is not synonymous with Retirement
Does that mean “early retirement” at such a tender age? No, because Findependence is not synonymous with Retirement. Most of us know what Retirement is but for a refresher course on Financial Independence, go to Wikipedia and search the term Financial Independence. You’ll find an entry which is simple enough to grasp: financial independence is the state of being able to have enough financial wealth to live “without having to work actively for basic necessities.”
If you’re findependent, your assets generate income greater than your expenses. Note that Findependence is not correlated with age. If you have modest means and have been frugal enough to build up a nest egg in 10 or 15 years, you may well be “findependent” by age 40 or so. Conversely, if you’re a high-earning high-spending professional who requires hundreds of thousands of dollars of income a year, findependence may not be in your grasp even by the traditional age of retirement.
You can see why people often confuse the terms since two ways of generating passive income is often employer pensions and Social Security or other pensions paid by governments. These particular income sources do not begin until one’s late 50s or 60s. But again, if your needs are modest, you might well be able to establish early findependence solely with a portfolio of dividend-paying stocks, perhaps supplemented by part-time jobs or freelance work.
Boomertirement
For baby boomers, the so-called “New Retirement” will often prove to be a variant of Findependence and traditional Retirement. Very few boomers, even if they have the financial means, will embrace the traditional “full-stop” retirement of their parents who enjoyed Defined Benefit pension plans. The older generation may have experienced the gold watch and a quarter century of golf, bridge, reading but boomers are much more likely to embrace a semi-retirement that consists partly of employer pensions, supplemented by government pensions, taxable investment income and part-time employment income, and perhaps the fruits of certain creative endeavors: royalties from literary or musical creations, licensing fees from various entrepreneurial ventures, fees from serving as corporate directors and other sources of income.
They say one example is an aberration, but two is a trend. If so, this week’s posts here at the Hub and sister site Findependence Day indicate a growing pattern: the millennial generation is picking up on the “Findependence” meme and taking steps to establish early Financial Independence.
They don’t talk about classical “Retirement” decades hence but instead have set their sights on financial independence in their 30s. For both of them, real estate is an early ingredient. And both give credit to the book, Findependence Day, for being inspired to do this. (One of the central tenets of the book and new e-books is that the foundation of Financial Independence is a paid-for home.)
And today, Friday, another millennial — Saxon Funk, pictured above — describes how he too plans to parlay frugal living and real estate into early Financial Independence. Saxon even noted that at 28, he is the same age as when Findependence Day protagonist Jamie began his 22-year journey to Financial Independence.
There must be many more millennials out there who have similar aspirations. We’d love to hear from you and join our community. Please come over to the Hub, register, and email us at jonathan@findependenceday.com to tell us your story. Hopefully, you can help to inspire your less financially literate peers.
Yesterday we ran a guest posting from financial planner Jenya Rose, who argued there’s no need to seek early Financial Independence (Findependence) as long as you eventually find a line of work that allows you to generate “Happy Money.”
This started as an exchange on Twitter, and I said initially only that I didn’t think the two concepts are far apart. After letting Jenya speak for herself, I also said I’d respond more fully today. This is my response.
I’ve always said Findependence is all about working because you want to, not because you have to. (financially speaking). And I’m fully supportive of career changes where you find a more fulfilling line of work, even if you have to take a pay cut. I did precisely that in 1993, when I took a $25,000 pay cut to leave public relations and return to journalism at age 40.
To me, Findependence facilitates Happy Income
I don’t know if I’d go so far as to call P.R. “unhappy income” but I didn’t feel it was my true calling. Certainly my first job (in computer sales) in my early 20s DID qualify as “Unhappy Money” but fortunately I took the advice of my yoga teacher then and quit after six months. Making cold calls and asking for the order just wasn’t my thing.
By contrast, writing, journalism, creative writing (which is what the book Findependence Daywas an attempt to engage in), blogging, web videos and even public speaking could in my view all be categorized as “Happy Income.”
I don’t see Findependence as Retirement. That’s the whole point of the Financial Independence Hub. Personally, financially speaking, I could “retire” tomorrow in the classical sense of the word. But I’m nowhere near ready to settle down to playing golf and watching daytime television.
For me, doing what I’m doing now — including freelance writing for MoneySense and various other media outlets, running a web site or three, writing and publishing e-books, and doing a little public speaking — IS happy money! I totally agree with Jenya. Before this year, I had to do many of those “Happy Income” projects on the side while my day job generated what Jenya terms “Unhappy Money.”
Once I left salaried employment in May of this year (aka Findependence Day), I felt able to spend not just nights and weekends on “Happy Money” endeavours but the precious Monday-to-Friday nine-to-five time. That was always a goal but to do all these projects required, at least for me, some degree of Financial Independence.
Retirement Redux
Findependence doesn’t necessarily have to occur decades or years before traditional retirement. If classical full-stop retirement occurs at age 65 or 67, I fully anticipate “working” long past that age. To me, Findependence is exactly equivalent to Happy Money: I’ll be happy to write full-length books (perhaps one every two or three years), to do the odd speaking engagement and probably keep websites like this running and I’ll likely keep doing all these things between 65 and 75, health and the good Lord permitting. (I’m 61 right now)
My friend Sheryl Smolkin views the world in similar terms. She’s been working on various writing projects and web entrepreneurship for almost a decade since she first “retired.” You can read about her adventures at her Retirement Redux site. Sheryl hopes to write a guest blog for us here at the Hub in the next few weeks.
Extreme Early Retirement is really Early Findependence
A millennial inspired by Findependence
As for millennials achieving “Findependence” in their early 30s, I say wonderful. Read Sean Cooper’s article on how he plans to do just that by age 31, right here at the Hub. Sean (pictured on the right) doesn’t call it retirement, nor should he. I can’t believe all those Early Retirement Extreme authors and bloggers actually “retire” at age 30. If nothing else, they’re still “working” by writing books and blogging about how they “retired” so young. It’s not retirement at all — they’ve achieved financial independence, as defined here. One of my columns in MoneySense this fall was on this exact topic.
Thanks for starting this dialogue, Jenya and for reminding me that on Twitter references to Findependence should be preceded with a hashtag, like this: #Findependence. Who knows, if one day this trends on social media, we might actually effect some positive change.
Plan for Longevity, not Retirement
This site has a section on Longevity and Aging because I believe we’re all going to live a lot longer than we may have thought when we were in our 20s and 30s. (I’m addressing fellow Baby Boomers here). I wrote elsewhere that 35 years is a long time to go without a paycheque, if you “retired” at 60 and lived to 95. That goes double for those who think they’re going to retire at 30. 65 years is a helluva long time to go without a paycheque.
One of the bloggers in that section to which we’ve devoted space is Mark Venning of ChangeRangers.com. He’s about my age and believes we should be planning NOT for retirement, but for longevity. This is also the subject of my current column in MoneySense.
He’s right. So is Jenya.
Call it Happy Money if you want, call it Freedom 55, Second Age or whatever you like. I think Jenya and I almost totally are on the same page: we’re just using different terms for the same concept. For me, however, it’s probably too late to call this the Happy Income Hub. So I’m sticking with the term Findependence!
In any case, I welcome the exchange and hopefully we can have more back-and-forth once our forums are up and running. That’s the plan anyway.
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