Milestones to Financial Freedom

[Tyler]

Another engineer INT* here. ; ). And I wholeheartedly recommend Shop Class as Soulcraft as well. Great book.

Nice list, Jake. The only things I'd add are a few steps between 1x annual spending in savings and 33x in savings, as that's a wide gap.

The moment your potential monthly investment volatility is comparable to your monthly income. This is when it really starts to sink in that 1) risk management matters, and 2) you're playing the long game and need to stop checking the markets every day. (it's why I love the PP)

The moment when paying of a mortgage (or choosing to keep "good" debt at a low rate) is a financial choice and not a pipe dream.

The moment before investment income covers your expenses, but when a low-paying but fun job is enough to make up the difference. This is where many make the jump to semi-retirement.

[PP67]

Add me to the engineer column...  Don't remember my profile but I can pretty much believe I am a very typical numbers/analysis type...

[Jake]

Nice list, Jake. The only things I'd add are a few steps between 1x annual spending in savings and 33x in savings, as that's a wide gap.

Good point, I agree completely. The difficulty I had was defining something that felt like a real turning point between those two. Maybe 5 years of expenses? Maybe when you bank a decade's worth of expenses? I like your suggestions too and will think more about it.

Re personality types, I'm ENTP

[Pointedstick]

Nice list, Jake. The only things I'd add are a few steps between 1x annual spending in savings and 33x in savings, as that's a wide gap.

Good point, I agree completely. The difficulty I had was defining something that felt like a real turning point between those two. Maybe 5 years of expenses? Maybe when you bank a decade's worth of expenses? I like your suggestions too and will think more about it.

Re personality types, I'm ENTP

Still a Rational! 

http://www.keirsey.com/4temps/rational_overview.asp

[hoost]

Nice list, Jake. The only things I'd add are a few steps between 1x annual spending in savings and 33x in savings, as that's a wide gap.

Good point, I agree completely. The difficulty I had was defining something that felt like a real turning point between those two. Maybe 5 years of expenses? Maybe when you bank a decade's worth of expenses? I like your suggestions too and will think more about it.

Re personality types, I'm ENTP

Still a Rational! 

http://www.keirsey.com/4temps/rational_overview.asp

Yes, that describes me pretty well.  ENTJ.

[smurff]

Like you guys I too was a recipient of the previous  UK education system benevolence and finished a PhD debt free.

In what discipline/academic field is your PhD?  I am ABD with my UK degree (economic history) having taken the Masters when my postgrad supervisor was forced to retire because of a neurological illness.

[MachineGhost]

I wonder how many of us are engineers (I am too). It's sort of interesting how many engineer types are attracted to mastering money and adopting small government/libertarian ideals. The INTJ profile strikes again!

Au contraire!  INFJ.

[Xan]

Engineer / INT(J|P) here.

[Greg]

Engineer ENTJ (I think, I'll have to check). And great posts here. I'm 25 right now and have about 7 years of expenses saved up right now (that is while still single- that value drops when I'd get married or have a kiddie.)

[Pointedstick]

Engineer ENTJ (I think, I'll have to check). And great posts here. I'm 25 right now and have about 7 years of expenses saved up right now (that is while still single- that value drops when I'd get married or have a kiddie.)

You might be surprised. It depends on who you marry, of course, but I saved a bunch of money in taxes once I entered the married tax bracket since my wife doesn't work. Of course, I happen to be blessed with a wife who's almost as into minimalism and financial independence as I am. Also, kids are a lot less expensive than many people think IMHO.

[Greg]

Engineer ENTJ (I think, I'll have to check). And great posts here. I'm 25 right now and have about 7 years of expenses saved up right now (that is while still single- that value drops when I'd get married or have a kiddie.)

You might be surprised. It depends on who you marry, of course, but I saved a bunch of money in taxes once I entered the married tax bracket since my wife doesn't work. Of course, I happen to be blessed with a wife who's almost as into minimalism and financial independence as I am. Also, kids are a lot less expensive than many people think IMHO.

Good point. My girlfriend at least right now is quite frugal and perhaps if I have a kid they can skirt the child labor laws and work to pay off their expenses such as diapers and other luxuries hah

[BearBones]

Back to the topic, I wonder if a potential milestone before your 5th (Annual passive investment income becomes larger than your annual expenses) might be having a job that you love and/or believe in so much that you don't have any desire to retire?

[Bean]

Back to the topic, I wonder if a potential milestone before your 5th (Annual passive investment income becomes larger than your annual expenses) might be having a job that you love and/or believe in so much that you don't have any desire to retire?

5th would be annual passive investment income exceeds annual "work" gross income.

[AgAuMoney]

having a job that you love and/or believe in so much that you don't have any desire to retire?

If you can find that, more power to you.  But I will wonder what is wrong with you...

I had my first passbook savings account by the time I was 10 (they paid 5-1/4% interest at the time).  I calculated many times then and ever since how much I needed to have put aside to pay my expenses.  Some jobs aren't bad.  Some jobs are horrible.  The only change is the urgency I feel to escape, but I've never had the desire to "do it til the day I die."

I just cannot see dedicating any significant portion of my time to satisfying the whims of either an employer or customers/clients.  It seems that even the best job has times where kissing up is required, and with that threat my time is never fully my own.  Maybe if I was fully financially independent I would keep doing some consulting where the aggravation and overhead to start a gig is small (unlike becoming an employee) and if the customer/client didn't like my opinion I could walk without worrying where/when the next gig would come.

Maybe I'm too cynical.  Maybe I'm a realist.  Or maybe its all a matter of perspective and from mine I'm just more interested in freedom to pursue my own interests without reporting to anyone when those interests change.

[stone]

AgAuMoney

Maybe if I was fully financially independent I would keep doing some consulting where the aggravation and overhead to start a gig is small (unlike becoming an employee) and if the customer/client didn't like my opinion I could walk without worrying where/when the next gig would come.

Perhaps, even if you did do that you would still get ample work. I guess someone who works purely out of the motivation for genuinely wanting to do a job properly can actually be more valuable to the client and some clients even have the wisdom to see that. Even some employers are like that. My guess (of course I havent a clue) is that many people in reality do work to that pattern pehaps more than they realise.
If I was a  patient of BearBones, I'd be reassured by him being motivated out of wanting to "do it right" rather than because he needed the job.

Perhaps the ultimate financial freedom is to not have financial considerations intrude upon your choices. Perhaps no amount of money is sufficient or neccessary for that.

[gizmo_rat]

I too was a recipient of the previous  UK education system benevolence...

Quite so, I didn't get where I am today (ahem) by not suckling on the state teat, I'd probably spontaneously combust if I started espousing small government. 

[dkalder]

having a job that you love and/or believe in so much that you don't have any desire to retire?

If you can find that, more power to you.  But I will wonder what is wrong with you...

I had my first passbook savings account by the time I was 10 (they paid 5-1/4% interest at the time).  I calculated many times then and ever since how much I needed to have put aside to pay my expenses.  Some jobs aren't bad.  Some jobs are horrible.  The only change is the urgency I feel to escape, but I've never had the desire to "do it til the day I die."

I just cannot see dedicating any significant portion of my time to satisfying the whims of either an employer or customers/clients.  It seems that even the best job has times where kissing up is required, and with that threat my time is never fully my own.  Maybe if I was fully financially independent I would keep doing some consulting where the aggravation and overhead to start a gig is small (unlike becoming an employee) and if the customer/client didn't like my opinion I could walk without worrying where/when the next gig would come.

Maybe I'm too cynical.  Maybe I'm a realist.  Or maybe its all a matter of perspective and from mine I'm just more interested in freedom to pursue my own interests without reporting to anyone when those interests change.

I have both a brother who is a tenured science professor and a brother who has founded a very successful company with several employees and I assure you that for both their job is also their greatest hobby. For myself, the same held for the past 10 years, although there were certainly also some uncomfortable weeks. Of course, I cannot know if it will stay like this forever: Rule 1) The future is uncertain. So striding towards FI while pursuing your greatest hobby is the best hedge against adversity in both the present and the future.

[BearBones]

I just cannot see dedicating any significant portion of my time to satisfying the whims of either an employer or customers/clients.  It seems that even the best job has times where kissing up is required, and with that threat my time is never fully my own.

What if you were your own boss? What if you were helping people? Or building/sculpting/painting beautiful things? Or writing children's books? Or making a specialty wine at your Sonoma valley vineyard?

The ideal vocation is without great distinction from avocation, IMO.

[Jake]

I just cannot see dedicating any significant portion of my time to satisfying the whims of either an employer or customers/clients.  It seems that even the best job has times where kissing up is required, and with that threat my time is never fully my own.

What if you were your own boss? What if you were helping people? Or building/sculpting/painting beautiful things? Or writing children's books? Or making a specialty wine at your Sonoma valley vineyard?

The ideal vocation is without great distinction from avocation, IMO.

I think it's awesome to find a job that is your calling. If your "work" is something that you would do for free anyway, then the fact that you make an income from it is a bonus. The key distinction in my mind is that if you are financially free you can do that job you love as long as you want and you also don't have to do it. You are free to change your mind about loving it and stop working, or try something else, or carry on loving doing it. It's an optional activity undertaken for fulfilment and not a requisite activity undertaken for survival.

[Pointedstick]

I just cannot see dedicating any significant portion of my time to satisfying the whims of either an employer or customers/clients.  It seems that even the best job has times where kissing up is required, and with that threat my time is never fully my own.

What if you were your own boss? What if you were helping people? Or building/sculpting/painting beautiful things? Or writing children's books? Or making a specialty wine at your Sonoma valley vineyard?

The ideal vocation is without great distinction from avocation, IMO.

I think it's awesome to find a job that is your calling. If your "work" is something that you would do for free anyway, then the fact that you make an income from it is a bonus. The key distinction in my mind is that if you are financially free you can do that job you love as long as you want and you also don't have to do it. You are free to change your mind about loving it and stop working, or try something else, or carry on loving doing it. It's an optional activity undertaken for fulfilment and not a requisite activity undertaken for survival.

This is a very important point. Additionally, if you're the kind of person who's always exploring new things and constantly gaining new interests, it would suck if your you had to pass up your new ideal vocation because it didn't make you enough money to live on. That's another big flexibility that financial independence gives you: the freedom to work at a low-paid yet highly gratifying job should you so desire.

[stone]

Jake

I think it's awesome to find a job that is your calling. If your "work" is something that you would do for free anyway, then the fact that you make an income from it is a bonus. The key distinction in my mind is that if you are financially free you can do that job you love as long as you want and you also don't have to do it. You are free to change your mind about loving it and stop working, or try something else, or carry on loving doing it. It's an optional activity undertaken for fulfilment and not a requisite activity undertaken for survival.

I think that there are two axes to gaining that feedom and both are on a relative scale. One axis is your contentment with doing available work. And the other is your contentment with living with a certain amount of money. If you are delighted doing any kind of work and delighted living with diddly squit money then you will inevitably be financially free. If you are very fussy about what work you like (eg only want to be a mission to mars astronaut, constantly receiving heartfelt awe from everyone or whatever) or always want to have the world's biggest yatch(s) and palace(s) then you will never be financially free.

[BearBones]

The key distinction in my mind is that if you are financially free you can do that job you love as long as you want and you also don't have to do it. You are free to change your mind about loving it and stop working, or try something else, or carry on loving doing it. It's an optional activity undertaken for fulfilment and not a requisite activity undertaken for survival.

Very true. But even if you are not financially free, if you really love what you do, you are much more likely to be successful. There is a giant feedback loop involved. Such people go the extra mile, they are curious, and they are happy. Because of this, they get very good at what they do, and they receive a lot of perks that make them even happier. They are also tend to be much more adaptable.

So, ideally, I think that finding something you love (or just looking squarely at you attitude if it sucks) translates to fulfillment much more predictably than reaching a particular milestone to financial "freedom."

[BearBones]

Good point, Stone. I have been focusing on the former. But moving in the direction of Pointedstick and other EREesqe folks here is equally important. Thanks.

[stone]

Bear Bones

if you really love what you do, you are much more likely to be successful. There is a giant feedback loop involved. Such people go the extra mile, they are curious, and they are happy. Because of this, they get very good at what they do, and they receive a lot of perks that make them even happier. They are also tend to be much more adaptable.

I was really impressed by train cleaners in Japan. They clearly took massive pride both in getting the trains spotless and being ultra polite to the travelers. I don't think you need a particularly fancy job to have the opportunity  to excel and get pride from it.

[Pointedstick]

Good point, Stone. I have been focusing on the former. But moving in the direction of Pointedstick and other EREesqe folks here is equally important. Thanks.

My personal ideal is having a resilient life. Part of that is becoming so valuable to my employer and/or customers that they keep wanting to pay me, and I really appreciate how you highlight the importance of this part, BearBones. But the other part of my idea of a resilient life is having the financial freedom to step back and take a break from the work if you desire. Maybe you want to be the primary caretaker for your kids for a while. Maybe you want to learn to play the guitar or write video games. Maybe a relative falls ill and you want to take care of them. These are activities you are buying yourself the freedom to pursue by not being dependent on a career for your income.