This article is part of the My FI Journey series – click here to access the full journey.
A Lot of Questions!
Financial Independence (FI) is not a mainstream idea yet. My friends and relatives were surprised when I told them that I was on the FI journey.
Some thought it was just a fad that would go away. Others did not understand what FI meant. One of my cousins told me that I was having an early onset of mid-life crisis!
But, their questions helped me think through some FI details. It is always good to test your ideas, especially if your entire retired life depends on it!!
Now that I am Financially Independent, below are my thoughts on the most common questions:
Q1: Early retirement, huh? What will you do when you don’t have a job?
This question comes up primarily because people associate their identity with their job. When we meet someone new, one of the first questions we ask is – What do you do?
More than anything else, our job defines who we are. Someone may be a mother, a wife, a painter, and a hundred other things. And she may also happen to work at a bank. But when asked ‘What do you do?’ – the answer most likely will be ‘I am a banker’.
I was no different. When asked what I do – I would most likely reply that I am a management consultant; I help companies with their strategic issues.
Eventually, everyone retires. What happens to your identity then? The benefit of retiring early is that you are still (relatively) young, so you have time to figure out your post-retirement life.
Lastly, I am not even sure if I want to retire. Becoming financially independent does not automatically mean I should retire. I like my job, especially now after reaching FI.
Q2: Isn’t early retirement risky?
Yes, early retirement is risky. Traditional retirement (retiring in your 60s) has been around for a long time and feels less scary.
However, survey after survey has shown that older people’s biggest regret is working too much and not having enough time for family, friends, health, hobbies, travel, etc. After getting old, no one complains that they spent too much time with their kids. No one complains that they took care of their health or traveled a lot.
So what is a greater risk? Getting to FI and then deciding if you want to retire early or if you want to continue working. Or getting to 65 and then figuring out that you spent too much time working; at the cost of everything else.
Q3: Why are you depriving yourself?
It may seem like that, but I am really not. I am spending just as much, if not more, on the things that I value or that bring me joy – like health and travel.
However, I have cut down on all other expenses. I do not care about my internet speed as long as it works. A car for us is something that helps us get from one place to another – not something that we need to upgrade every 2-3 years. Saving on things like these does not mean I am depriving myself.
By definition, I cannot deprive myself of things I do not care about.
Not only is this helping us save money, but it also keeps our house clutter-free. And, our consumption is much more sustainable – not just for our budget but also for the planet.
Q4: What will you do when the next downturn comes?
I don’t know for sure. It is impossible to predict when or how bad the next downturn will be. I have planned for it, but as Mike Tyson once said – ‘Everybody has a plan until they get punched in the face!’.
I am not sure how my plan will fare when the actual downturn comes. But I feel good that my investment portfolio is conservative. And, thanks to my FI journey, I have built up a financial buffer to withstand the next downturn.
On second thought, maybe I should ask this question back to my friends! Will their job be safe during the next downturn? And even if it is, is it prudent to depend on just one source of income (job) for their livelihood?
Q5: Good for you; my job doesn’t pay much.
This is the reason I hear the most for not doing FI. However, FI does not depend on your income – it depends on your savings. If you do not make a lot of money, it is even more important to think about FI – since it will help you build up wealth.
In 2018, a TD Ameritrade survey found that around a third of respondents who were financially independent had incomes between $50,000 and $99,900. Clearly, you don’t need a six-figure salary to get to FI.
The math behind FI is pretty simple, and it works. There is no magic to it. The only magical thing is how few people know about FI.