“You are not supposed to optimize for money; you’re supposed to optimize for happiness.” – Mr Money Mustache (Pete Adeney)
For some reason, throughout my entire life I have always needed to, or at least felt the need to, understand the “why” behind taking any action. Once I better understand “why” the action I am about to take is important I become much more motivated to get it done and get it done to the best of my abilities.
Let me give an example, last year I worked as an intern in Spain at one of the country’s largest 20-gallon water bottle and water fountain delivery companies. Rather than choosing a specific role within the company, such as sales, water deliveryman, call center help desk, or warehouse assistant I was initially put on a rotation within the company where I spent 1-2 days in each role. The purpose of this “rotation” was to help me better understand what each role entailed and what kinds of skills were required and what kinds of skills I would need to develop in order to be successful so I could pick what suited what I wanted to do best.
This was an amazing opportunity for me as I am the type of person who learns by getting my hands dirty. Not only did this rotation help me better understand each role on a granular level, it actually helped me better understand how the entire company works as a whole. I learned how difficult it was for a salesperson to attempt a “cold-sale” by walking in to a new business place and trying to convince someone there to allow a 10-day trial of the water. More importantly, I learned the importance of the deliveryman’s role in dropping off the 10-day trial before the customer had too much time to rethink their initial decision. I learned how important it was for the warehouse manager to have the warehouse stocked just to the right level as to not have too much water but also have enough in case a delivery vehicle got off schedule and couldn’t make it to replenish stock. The main point I’m trying to make here is that having insight in to each role taught me to think bigger than just the task at hand, it made me think about how my actions played a role in the entire business which in turn gave me more motivation to perform at my best.
With that being said, I wanted to write a post digging in to why I decided to pursue an early retirement and financially independent lifestyle. I’m not writing this to try and persuade anyone that what I am doing is right or that everyone else should be doing the same thing – rather, I just wanted to help other people understand my thought process. If nothing else, maybe it can at least cause some people to reflect on the type of lifestyle they have chosen and think about why they are doing things the way they are, even if they continue doing what they are doing. Before I try and explain the motivations behind my new life pursuit I need to start off by explaining what being “financially independent” and “retiring early” means.
I should start off by stating I am by NO means any sort of expert on this topic and am just beginning my journey. I will explain things to the best of my ability and will make mistakes (probably many mistakes) along the way but will do my best to correct myself and grow as I move forward. According to Wikipedia, financial independence “is a state in which an individual or household has sufficient wealth to live on without having to depend on income from some form of employment.” This wealth can come from a multitude of places including stocks, real estate, side hustles like Etsy, Shopify, or other streams of money.
If you dig in to the journey to financial independence a bit you will learn that there are different levels you need to achieve to get there. In the most basic levels you start off by just making enough money from your job to cover all of your expenses, as your move higher and higher you start being more and more in control. You begin to be able to build a buffer so that unexpected expenses and opportunities don’t leave you in a bind. Then you pay off your debts (at least your high interest debts) and move towards finally making enough money outside of your job to pay for your basic living expenses. If you want to go further than this, you can go towards financial freedom where you have built enough income outside of your job that you can fund your current lifestyle expenses and any desired lifestyle goals as well. An example of financial freedom could be that someone owns enough rental properties that the cash flow they receive each month covers all their lifestyle expenses and even allows them to pursue lifestyle goals such as making music, traveling, or even purchasing that new car they want.
That covers one side of the equation, the other side is the “retire early” part. I think of this part as answering the question of what you will do with your time once money is no longer pushing you to “work.”
“The difference between us and them is that they’re working because they want to and not because they have to.” millennialboss.com
I remember asking a friend of mine if she had read one of my favorite books by Tim Ferriss, The Four Hour Workweek. Her response was that she didn’t read it as she didn’t like the idea of only working 4 hours a week as it sounded boring. Her response was very interesting to me as it made me think about how I defined “work.” For instance, I really enjoy reading in my free time but while I was in school I was forced to read and it always felt like “work” even though I was doing the same thing I enjoy doing today. Then it dawned on me that maybe it wasn’t the actual act someone may or may not enjoy, it might be whether they are doing something because they “want” to vs. because they “have” to.
This made me think about a quote I saw on J’s site, MillenialBoss, “The difference between us and them is that they’re working because they want to and not because they have to.” In my eyes, “retiring early” can really be interpreted however someone wants to interpret it. Once you are financially independent or financially free you can still go to the same job you have today but be retired because now you are doing it not because you are dependent on the salary but rather because you chose to be there. However, you can also choose to spend your time doing whatever you want to do. That can be things like pursuing hobbies you have always wanted to dedicate more time to, traveling, teaching, or really anything. The bottom line here is that both the financial goal and defining retirement are both very personal decisions and really need to be decided on a case-by-case basis by each individual person.
So, why is financial freedom and early retirement something I want to achieve? The simplest way I can put it is that I want to have the time and money to be able to do the things in life that are most important to me. Before I quit my job at Accenture I used to get annoyed at the fact that 5 days a week I spent 8+ hours each work day inside of an air conditioned building instead of being able to be outside and enjoy the beautiful California weather. I didn’t like the fact that if I didn’t sleep well the night before and I wanted to sleep in a bit on a weekday that it was against “policy.” On top of these things, I have so many interests from learning how to act, to salsa dancing, to videography, to traveling and I felt like it was hard to squeeze everything in after work or on weekends (though to be frank I probably could be more efficient with my time in addition to pursuing financial freedom). Lastly, I didn’t like the idea of being limited to 2 weeks of vacation a year – what if I wanted to take a month or 2 off?
Then, one day my older sister recommended I read a book by Tim Ferriss called the 4 Hour Workweek. Its funny, I talked with my sister the other day about this book and how it was a turning point in my life. I don’t know why I decided to read this book in particular as people had always been recommending books and I never really took the time to read them. For some reason or another I decided to read Tim’s book and it was what author Ryan Holiday refers to as a “quake moment.” A moment in your life that seems to shake everything and have huge effects. Tim’s book asks its readers to think about things in your life you have always dreamed of doing, crazy things like learning another language, living in another country, becoming a professional dancer, or even living as a digital nomad. Then, he breaks these “crazy” dreams down in to smaller, bite-sized actions you would have to take if you were to try to make them a reality.
Think about it, if you wanted to quit your job and live abroad for a year, how much money would it actually take? $10,000? $50,000? $100,000? Lets do a quick back of the envelope example:
Lets say you wanted to move abroad to Spain for a year and learn Spanish. From personal experience, I would recommend going to school for 3-6 months to build a basic foundation and then get a job where you are forced to talk to people. If thats the case, your costs would probably be broken down in to a roundtrip flight to Spain, rent, school, food, insurance, spending money, a little money for travel, maybe a metro card, that that about covers the major categories. Now, lets break those down
- A flight right now to Madrid from San Francisco costs around $1,000. I’m sure you can find a better price than that if you really look but lets just be conservative and go with this price.
- While I was living in Madrid I spent about $500/month on rent. I should note that I was living in a nice part of the city so if we are shooting for being on a budget I think $300-$400 is very possible. Lets go with $400 to be safe.
- At the school I went to it cost around $200/week to attend classes full time so that puts you at about $800/month
- While I lived in Madrid I tried to bring my lunch to school everyday and cook breakfast as a way to save some money. That costs about $50/week and if you ate out for dinner 5 times per week that might costs you another $50-$60/week. In total we can say $400/month for food
- I paid around $80/month for a global plan that allowed me to see local doctors in Spain
- Spending Money
- I think $300/month is a decent amount of money to spend on things outside of food. That gives you about $75/week.
- In Europe you can find pretty cheap plane tickets if you are smart about how you search, lets say you take 1 trip every other month and that trip costs you $300. That is about $1800 in total for 6 trips.
- Metro Card
- I don’t even think this is necessary for a rough estimate but lets just add it. I spent about $60/month for a metro card that let me travel all around the city freely.
So, lets add all these costs up for a yearly and monthly total:
- Total for the year
- Flight: $1,000
- Rent: $4,800
- School (for 6 months): $4,800
- Food: $4,800
- Insurance: $960
- Spending Money: $3,600
- Travel: $1,800
- Metro Card: $720
- Year end total: $22,480 (And this is if you were to be very liberal with spending money. If you are comfortable being bit more conservative with your money you could probably get away with $15,000-$18,000
Now, I know what you might be thinking. $25,000 is a lot of money! And the truth is that it is! However, depending on how serious you wanted to get with things you can get to that number though a bit of hard work and saving. I was able to save up around $20,000 by really cutting down on my expenses and putting away $2,000/month in the bank each month for 10 months. During those months I spent time at the gym, I read books, I went out with friends but was more conscious about my spending, and I was driven to stay focused by thinking about the bigger picture goal I had for myself which was to move to Spain. Looking back, 10 months of hard work was nothing for the ability to move to Spain, experience life in a completely different country, and learn a new language!
The bigger takeaway for me here is that I want to be able to do these types of things in my life anytime I feel like it! Not to say I’m going to move to random countries all the time, though the sound of that does sound fun :). Rather, just knowing I can do things like saving up and moving to Spain will give me some satisfaction. The life experience of living in Madrid, struggling daily to be able to communicate, starting to get traction with basic conversations, making my first Spanish friends, and finally being at a level where I could work at a Spanish company speaking completely in Spanish was one of the best experiences in my life and I want the freedom to be able to do things like that again without being tied down to a job.
With all these things in mind, I came to the realization that financial freedom is not something that is going to just happen on its own. It will probably be something that is going to take a huge amount of energy, effort, and persistence. So the real question here is “how bad do I want it?” Rather than trying to convey to you in words how bad I want this, I’m going to try and let my actions speak for me.
That was a long post, sorry! But I don’t think my thoughts would have fit in to a smaller amount of text. I hope you got at least a peak in to why I want to go towards this mystical lifestyle of financial freedom. I hope to share more about my journey as I move forward. I hope you have an amazing day!