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I know that investing in your 401K or RRSP doesn’t sound exciting or even remotely interesting. If you hate your work, the last thing you want to focus on is your retirement funding, especially if you have a long work life ahead of you and it feels like a total slog already. I was there, and believe me, it was hard to wrap my mind around the idea of working in a cubicle for 40+ years. Every time I thought about it, I wanted to cry. With that, let’s give you something more inspiring to think about – a way out 🙂
I Wanted Out of My Career Almost As Soon As I Got Into It
I used to really hate my job. It was soul-sucking on every level, from getting up early and commuting in traffic, to doing work I had zero interest in for 40+ hours a week. For an INFP who needs to feel connected to their purpose in the world, this is a slow death. It wasn’t that I had a bad job – by anyone’s standards, it was great! It also wasn’t that I didn’t like the people I work with – they were awesome, too. It just wasn’t what I wanted to do at all. I had zero engagement in my work and for someone like me, that’s not a healthy place to be for such a protracted amount of time.
How I Stopped Resenting Work
I spent a lot of time experimenting with different corporate roles and even a few startups. During that time I focused on finding my passion because I assumed if I had to work for most of my life, I might as well love what I do. This is sound logic, but I struggled to find that passion so I kept finding myself back in jobs I didn’t like just to pay the bills. This felt so depressing because I believed that my work life was at least 20 – 30 years from being over and I’d just have to live with being miserable. I held this belief because that’s all I knew – to work until you’re 65, then retire.
Enter – Financial Independence and Early Retirement (Yes, It’s Possible)
What I realized after stumbling on the FIRE movement is that there’s another way to think about time, work and money. It turns out there’s a way to plan your life so that you’re not slogging away at a career you hate for 40+ years. I also came to realize that passion and income don’t always have to be synonymous for life satisfaction. Alternatively, you can leverage your career to fund your basic needs, freeing up time and creative energy for pursuing your passions, or just focus on saving enough to kiss your work life good buy all together.
Sounds sexier than just investing in your 401k – right?
Financial Freedom in Stages – How to Plan Your Career Escape
The following three stages of financial freedom are designed to help you think about how you can best leverage your earnings, savings, and spending to help you live the way you want to. It might feel out of reach if you’re dealing with a lot of debt, but no matter where you start, if you have a game plan and a strong commitment to action, you can get to stage one. From there, you will have a level of freedom that can change the way you think about your caerr for good.
#1 The “FU” Fund Stage – 6 to 12 months of Living Expenses in Cash
This is the stage of life where you have enough money stashed away that you can tell your crazy boss to go “ef” him or herself. You’re no longer living paycheck to paycheck and if push comes to shove, you can choose to remove yourself from a situation that’s causing you misery. I have done this and let me tell you – it’s a really nice option to have. Not only does it feel good to say no to someone who places unreasonable demands on your time and energy, it’s also incredibly beneficial to your mental and physical health.
How much do you need to fund your FU stage? I recommend a minimum of 6 -12 months worth of living expenses, not invested in equities, but in a high-yield savings account. Yes, this can also be your emergency fund, but I want you to see it as more than that. It’s your mini-freedom fund. I should also point out, this assumes you’re without debt. If you have debt to work through, that needs to go away first.
#2 The mini-retirement stage – Your Annual Spending x 15 (or 18 to be even safer)
This is the stage where you could not just tell your boss where to go, but you could also give your entire career the middle finger if you wanted to. It’s here that you’ve saved enough that you could live like a king or queen in a third world country (or some parts of middle America). This is an interesting stage because you could potentially retire from full-time work, but you would still need to keep some level of income coming in, just to supplement your investment income.
At this stage, you’re looking at roughly 15 to 18 times your annual expenses in post-retirement investment income. So, for example, if your annual expenses are $60K, and you were willing to earn $20K per year through part-time work and fund the remaining $40K with retirement income, then you would need to have $600K – $720K saved. That might seem like a lot, but with focused attention, you can get here. I see examples of it every day in the FI community, and keep in mind, the more you are able to reduce your annual spending, the less you need this figure to be.
#3 Your Full “FIRE” Number – 25 x your Annual Spending
The acronym FIRE stands for financially independent, retired early. That means you have enough in investments that you don’t need to work another day in your life. Nice thought, eh? You might be thinking that this is entirely out of your league, but it’s not. Most of us do end up retiring, but it’s the early part that isn’t very common. That said, if you can keep your expenses low, not only can you save more of your income, but you also need much less in retirement. So how much is that exactly? The FIRE community suggests 25x your annual expenses, so if you spend $40K per year (and you don’t see that changing), then you can call yourself financially independent and consider retirement once you hit $1 million dollars.
What Financial Freedom Means To Me.
There’s only one thing in my life I haven’t yet bought yet – my time and freedom. While I consider myself squarely planted in the mini-retirement stage, I still have to work (not much, but some) in order to maintain my lifestyle. But to me, nothing feels more exciting or worth striving for than my freedom. Even though I know I’ll always work as a writer/consultant, I never have to take a job I don’t want just to pay bills, ever again. That’s an awesome feeling to have.
I know these financial milestones may feel a million years away to you, especially if you hate the job you’re in today. But by understanding the stages of financial independence you can start to guide your income, spending and saving with a new idea of freedom in mind. In turn, the more freedom you have, the greater control you’ll have over the work you do in your life.
Small choices can lead to big results!