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  • Mike Kern, CPA

Financial Independence: Getting Out of the Rat Race

Updated: Sep 2, 2019

Your alarm goes off. You “snooze.” It goes off again- but you can probably afford to snooze once more… or twice. The alarm goes off again. Uh oh! You need to leave for work in 15 minutes. You spring out of bed, throw some clothes on, grab a breakfast bar, and run out the door. Fingers crossed you’ll still beat traffic.

You made it to work just in time! Success! Upon your arrival, you’re bombarded with emails and immediately feel the weight of what needs to get done. You spend your whole day hustling, trying to meet- no, exceed- the expectations of those around you. You’re glad to see 5:00 roll around but don’t feel like you accomplished quite enough. Oh well. You head home, scrounge up something for dinner, watch a few episodes, and somehow it’s already bedtime. Where did the time go? Time to go to bed and do it all over again tomorrow.

And the next day. And the next day. And the next day.

This is the life society has built for us, and most of us will go along with the “9 to 5 life” for 40 years until retirement. Throw in a couple kids and a few career changes to shake things up, but the overall experience tends to be the same. We hopelessly drift through life without feeling like we’re actually living life.

I felt this way until I started questioning the status quo. Is this how life should be? In my searching for alternatives, I stumbled upon a little concept known as “F.I.” or Financial Independence.

Financial Independence

F.I. represents a movement of people fighting against the deep-rooted societal belief that retirement is only possible in your 60’s. They boost their income and cut expenses to such a high degree that they save 60, 70, sometimes even 80% of their income (A.K.A. the masters of The Wealth Pipeline). Toward the end of 2018, the Bureau of Economic Analysis found that the average personal savings rate was around 6-7%. So, it’s safe to say these “F.I.ers” are doing something radically different.

Modern financial planners say a good savings rate is about 15% - and they are completely right. Given enough time, you will retire very wealthy at 65 with a 15% savings rate. However, if you experience the daily routine described above, you may not be willing to wait until 65. Different results call for different actions.

F.I.ers make small changes to increase their savings rate. Here are a few:

- Cut the cord - Substitute Cable TV for Sling, Netflix, or Hulu

- Decrease the Phone Bill - Switch to Mint Mobile or Consumer Cellular

- Shop around for Insurance to get the best rates - Homeowners, Car, Renters

- Buy a house you can easily afford

- Buy used cars

- Limit your Food bill - Pack lunch, eat out less, manage your grocery bill well

- Cut recurring expenses you never use

These few changes can save hundreds or thousands of dollars each month and double/triple your savings rate right off the bat.

If this is the first time you’re hearing about this, you’re probably skeptical.

Common Thoughts

This is crazy! I don’t want to live in a cardboard box and eat ramen in order to retire early. What kind of life is that?

It comes down to what you want now vs. what you want most. If you want a nice house, a new car, and the latest $10,000 iPhone that now reads minds (and that you’ll need to upgrade in two years), you’re going to sacrifice a lot of time working to have those wants. If what you want most is to spend more time with family and create some margin/flexibility in your life, you may have to give up some of those things.

No one is living in a cardboard box and eating ramen to retire early. We are merely making small changes in the way we think about and spend our money. If you make enough of these small, everyday changes, it might move the needle on your path to early retirement. Worst case, you save money and make a dent in the number of years you have to work.

I like my job! I don’t want to just sit on my couch all day not contributing to society. That sounds boring!

If you like your job, that’s awesome- keep working! This is not the anti-working movement- this is the financial independence movement. We are striving to build up enough wealth that earning money is no longer necessary. If you want to keep working, by all means keep working- but when you achieve financial independence, you gain the freedom to stop working the minute you stop loving it. Retirement, to me, doesn’t necessarily mean stop “working” - but having the freedom to spend your time on your own terms. Learn a new language, take up woodworking, start a business doing something you love, volunteer, start a non-profit, spend more time with your kids, learn to make amazing meals, read more, start a YouTube channel, travel, etc.

Don’t you need several million dollars to retire?

It depends on how much you spend! For the average person that spends $60,000 a year it would take approximately $1,500,000 to retire. The general rule of thumb is that you should withdraw 4% of your investments every year during retirement. In theory, if you are only withdrawing 4%, your investments should continue to grow at a steady enough rate to last into perpetuity. To calculate the amount of money you need to become financially independent, multiply your yearly expenses times 25. Not only will cutting expenses help you to increase your savings rate but it will also lower the amount you need to reach financial independence.

How does Financial Independence gel with living a Christ-centered life?

There are only two people that can answer this question for you- you & God. The Bible supports the idea that how you spend your life is more important than how much money you make or how many things you can buy. However, none of it matters if your heart is in the wrong place. If you are doing this because you hate work and want to lay on the beach all day, or just don’t want to have to wake up early, your motives are questionable. But, if you are doing this to spend more time with people, strengthen relationships, and invest in God’s kingdom, then financial independence will free you to do this in ways that others cannot.

As you strive for financial independence, you’ll be scrutinizing your expenses line by line. You’ll come across your giving/tithing line and it will (hopefully) be so large that you’ll be tempted to decrease it. If you want to know how this idea gels with a Christ centered life, how you handle this situation will tell you all you need to know.

For most people this is a brand new way of looking at finances. It might seem unrealistic or impossible but this movement is gaining traction and the earlier you get started, the better. If you’re interested in learning more, here is a great article that talks about just how possible early retirement is. As always, I would love to hear your thoughts and ways you are striving for financial independence!

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