I like to talk about financial independence on Money360 quite regularly. It is the big financial goal on my horizon, a state in which the money I’ve saved up and the investments I made are returning enough money so that I don’t have to actively work for income any more.
Whenever I talk about it a bit too much, though, I usually hear from a few readers who tell me in no uncertain terms that financial independence is impossible for them and for many other Americans.
Financial independence is possible for everyone who is capable of holding down a steady job. Having said that, financial independence is a very difficult goal to achieve, one that almost all Americans fail at.
It is not impossible. It is just very difficult, even for people who happen to have a great job.
There are a bunch of reasons why it is so difficult.
First of all, delayed gratification is very hard for our human brains, and financial independence is all about delayed gratification. In order to achieve financial independence before very old age, a person simply has to spend a lot less than they earn, and in doing so, that means that said person is choosing to forego a lot of the pleasures of life.
Most people won’t do this. Options like living in a van when making a decent salary aren’t even on the table for consideration. Things like living on a true low-cost diet centered on extremely low-cost staples like rice and beans are completely overlooked. The idea of a life without a cell phone or a computer or a Netflix account or cable? Not going to happen.
All of those things are examples of delayed gratification. They’re simply a choice to live a less pleasurable life now in exchange for greater pleasure later. In this case, that greater pleasure comes from the freedom from work.
Second, self-imposed responsibilities make the path even more difficult. You choose to get married. You choose to have children. You choose to own a house with expensive maintenance. You choose to have a job that’s chock full of stress and hard choices.
(Note: I originally had a poorly-worded note here referring obliquely to difficult choices new parents sometimes face after conception followed by realization that they are wholly unprepared for parenting, as well as the difficult choices sometimes faced by those wishing to become parents, in too few words. In my personal experience, adoption is a powerful but often overlooked option in such situations. There are countless wonderful families with adopted children and many families excited to adopt. It can be a challenging option to consider for all involved but a potentially very positive one for all involved if done after serious reflection. I have removed the original note.)
I’m not saying that any of those choices are the wrong choice. I’m simply stating that all of those choices are ones that make the path to financial independence even harder than before.
Life offers you lots of choices. Sometimes, the right choice leads you away from financial independence because you have values that rise above financial independence. That’s perfectly okay, but it means that the path to financial independence becomes even harder.
You simply cannot “have it all.” When you choose one path, another one becomes more difficult to climb.
Third, the only route to doing this quickly is with a high income, which is difficult for most people. While you don’t have to have a high-income job, financial independence with a low income job requires a level of sacrifice that many people are unwilling to make, as alluded to above. The higher your level of pay, the easier the path to financial independence becomes, period.
The path to a high paying job isn’t easy, either. Many people find themselves in a situation where the training and skills needed for a high paying job are either beyond their grasp or are prohibitively expensive and time-consuming.
The reality is that the vast majority of people simply wind up putting other life goals and ambitions before financial independence. They often make that choice nearly unconsciously, or they make those choices and fully commit to them before the idea of financial independence ever crosses their minds.
Those decisions are often so set in stone in their minds that they don’t consider a life without those choices, and with their choices set in place, financial independence becomes, for all practical purposes, unattainable.
I’m guilty of this in my own life. I’m married, which can make financial independence harder – it only makes things easier if you have a spouse committed to the same goals and committed to being your partner for life. I have children, which almost always makes financial independence harder. We live in a reasonably nice house – we could be living in a smaller one. We’ve both chosen careers with some time flexibility when we could have focused on earnings instead. We go on summer family vacations.
All of those choices take me away from the goal of financial independence because I’m putting some other value in my life ahead of financial independence. That’s okay.
The key thing to remember is that when you put other values ahead of financial independence, you make an already difficult goal even more difficult, often pushing it up to the edge of impossibility or beyond.
Financial independence is possible for everyone who chooses to make it a top priority in their life. It might even be reasonable in a relatively short timeframe if someone is lucky enough to have a high paying job.
Here are some questions to ask yourself if you’re considering raising the priority of financial independence in your life.
Are you considering having children? Children make financial independence very difficult. No matter how you slice it, children come with a lot of unavoidable expenses all the way through their childhood and well into adulthood. From the food and clothing and shelter to the educational expenses and the toys and the organized activities, they’re expensive, and they will pull you away from financial independence.
Are you married to someone who shares your financial independence goal? If you’re married, you really need to have a spouse that’s similarly committed to financial independence. If your financial goals aren’t in alignment, you’re going to find that your marriage is on very difficult ground very quickly, especially if you make a financial goal a top priority and your spouse does not agree.
Can you live in a much smaller home? Can you downsize in order to drastically cut your mortgage, your utilities, your insurance, your homeowners association fees, your property taxes? All of that goes down drastically if you move into smaller quarters. Also, living in smaller quarters puts some constraints on how much stuff you can buy, further saving money.
Can you stop eating out and prepare your own simple meals? Many people with busy lives find themselves in a routine where many or most of their meals are eaten at restaurants, taken out from restaurants, or delivered, and many more meals are prepackaged affairs. All such meals are quite expensive compared to making a simple meal from basic ingredients. Get familiar with your own kitchen and start making meals for yourself. You’ll drastically slash your food expenses.
Can you cut down on your entertainment subscriptions? Cable? Netflix? Home internet? Cell service? Amazon Prime? HBO? Do you really need all of those? Do you really need any of those? All of those services primarily exist to provide entertainment, so look for entertainment elsewhere. Listen to the radio. Watch over-the-air television. Read books checked out from the library, or download podcasts there to devices you already own and listen to podcasts. Go to free community concerts. Get involved in community groups. Find entertainment that isn’t draining hundreds a month from your pockets.
Can you eliminate a car? Maybe you can commute to work using mass transit – the bus system the subway system. Maybe you can bike to work. There are lots of potential options that would allow you to eliminate the cost of car ownership, or cut your automobile count from two to one. Doing so eliminates the cost of registration, fuel, maintenance, repairs… cars are simply a giant money pit.
Those are the kinds of questions that people ask themselves if they’re really serious about financial independence. They involve cutting into aspects of life that people sometimes aren’t comfortable trimming down, but if you want to have financial independence, it hast to be a priority over many of those things, which means you have to make some tough choices.
In the end, the answer is simple: yes, financial independence is possible for most people, but most people aren’t willing to make the choices needed for financial independence. Instead, good personal finances are used in their lives to achieve other goals. Doing that is completely acceptable, but it does mean that you’re likely closing the door on financial independence.
Remember, though, that when you choose to open a door in your life, you close another, and vice versa. Our lives are made up of a complex array of choices. The life we have is forged by the choices we make for ourselves.