This article is more than 2 years old, but it’s a great time capsule: I wrote an updated version in December 2022 you can check out here.
About once a week, I receive a message that goes something like this:
“Hey! I think all of this is super interesting, but I’m curious. Why do you want to retire early? I love my job. In fact, it’s the reason I get up in the morning. Hell, I’d do it for no money. Actually, I basically make no money. Anyway, why do you want to retire early?”
Just kidding. It doesn’t go quite like that, but the general sentiment stands: People are confused. (Related: I wrote about why everyone should strive for financial independence, regardless of whether or not they intend to retire early, here.)
Before I dive into my own explanation, I want to include the opening paragraph from Scott Trench’s “Set for Life”:
“Let’s talk about the American Dream. Traditionally, for the majority of us – at least for those of us in the middle class – it means consistency. It means buying a nice home, in a nice neighborhood, and having a nice life. It means that after a thirty- or forty-year career, we plan to retire using a formula that historically hinges on having saved 10 to 15 percent of our income and having invested in a 401(k) or other retirement vehicle.
The problem with this formula is that the working person following it will be forced to work for wage income for the better part of his day, during the best part of his week, throughout the best years of his life. At best, he will retire with a modest amount of wealth, late in life, and be forced to hope it’s enough to last.”
F***.
That sounds like a pretty dreary take on “the dream,” huh?
I’ll never forget the first time I had this realization, way before I ever heard about “FIRE” (financial independence, retire early).
It was around 8 a.m. on a Tuesday about 6 months into my post-graduate life, and I was schlepping from the parking lot to the office building. Wobbling on a pair of pointy-toed heels that I thought made me look professional and balancing a lunchbox in one arm and an overpriced leather laptop bag on the other, I remember sweating through my dress and being struck by a horrifying thought:
Holy shit. Is this it?
Is this the dream I’ve been chasing since I got my first internship and decided climbing the corporate ladder like a capitalist Alex Honnold was my life’s work?
I have to carry these bags, in these shoes, into this building at 8 o’clock in the morning, every morning, for the next 40 f***ing years?
Keep in mind, I loved my job. I was one of the uniquely lucky individuals who actually somehow managed to get her dream job right out of school. I was ecstatic, and yet…
A panicked emptiness developed in the pit of my stomach. I felt trapped.
Not trapped by my job in particular, but by working for a paycheck. It launched me into a multi-month span of time where I felt overwhelmingly nostalgic for high school and college, when things were always changing, my sense of personal responsibility was an illusion, and the world was a blank canvas.
I felt like I had finally arrived at the raging party everyone told me about for the last four years, and it was just someone named Pam’s 40th birthday party with a couple of guys in button-down shirts standing around a punch bowl and talking about customer acquisition.
It had very little to do with my actual job and a lot to do with the fact that it felt like I had just entered into the longest expanse of “grind” of my adult life: working 9-5 until you turn 65 and shut down the cubicle for good.
It’s probably no surprise, then, that when I heard about the financial independence, retire early (FIRE) movement that I dove in headfirst. People were retiring in their thirties?! How? People who didn’t create apps or invent the next unicorn were leaving their corporate jobs barely 10 years after starting them, and I was intrigued, to say the least.
Financial independence and retiring early offer another path that just makes more sense to me.
I’ve always had this working theory that most of the workforce in the United States is under-motivated and complacent. And why wouldn’t they be? A lot of us are 20 years into a fairly unfulfilling slog – that person, 20 years into a data entry job, is probably not waking up every morning determined to change the world. For that reason, most employers are getting a half-assed, half-baked version of the amount of available energy and effort from any given individual.
At that point, the goal is merely making it to the weekend. Every week. (That lame Gary Vee quote comes to mind: “If you’re living for the weekend, your shit is broken.”)
I’ve always thought the concept of an economy wherein each person could support themselves by producing the thing, idea, or service that actually lit them up would be an overall more efficient one with a lot less lost productivity. But of course, all work has to get done, and not everyone can make a living doing the thing that they love. I’m not a utopia apologist – but I do think financial independence is the closest thing we have to a way out.
What if you could work hard enough, save aggressively enough, and invest early enough that your time in the traditional workforce could be a blip? A stepping stone on your path toward purpose?
My goal is to have $1M (give or take) invested as quickly as possible while not completely depriving myself
And as of this writing, I’m clocking in around $230,000 at age 26, which means I’m about 23% of the way there. (If you’re curious, I wrote a post called How I Saved $100,000 by Age 25 a few months ago.)
And that million-dollar figure isn’t arbitrary, though it may seem like it – once I have $1,000,000 invested, I’ll know I can withdraw 4% – or $40,000 – per year to “pay myself,” and “retire” from traditional work, if I want to. Because of how compound interest works and the average return that one can expect (6%, after inflation), the money will always replenish itself – indefinitely.
This post isn’t intended to be a step-by-step guide to financial independence, but that’s a pretty good summary. Right now, I spend about $32,000 per year. Allowing myself the ability to spend $40,000 bakes in some breathing room. (It also happens to be the maximum a single person can declare as long-term capital gains income from investment accounts without paying a single dollar in taxes, which wasn’t coincidental in my planning. Mama likes to beat the system.)
Financial independence isn’t about whether or not you like your job. It’s about having control over your time.
Some people who reach financial independence leave their jobs pretty soon thereafter, because they know they no longer need the money. Others stay, because they realize they actually like their jobs and want to be there.
You approach things differently when you’re actively choosing them. That’s the spirit of FI – when your time is truly your own, you get to make decisions based on what’s actually best for you.
To me, that’s the definition of freedom: Having the power to choose for yourself.
What I’ll do when I retire
Whatever the f*** I want!
Just kidding. Right now, my plan is pretty simple – leave the traditional work force and work on Money with Katie full-time.
Because while I’ve toyed with the idea of trying to make this full-time now, I realized I don’t want Money with Katie to become something I have to rely on for income (at least, not yet).
I love the idea of being in full control over my week, how hard I work, and what the outcome is. I love the idea of taking time off when I know I need to, instead of muscling through and dancing with the inevitable burnout that accompanies it. I love working for myself, by myself (which makes me sound like a weird loner, but if you’ve ever had a project that’s just yours, you probably know what I’m talking about).
I love the idea of doing what I want, when I want, with who I want, for as long as I want – and I trust myself to still produce, create, and contribute to society even without a W2 income. My job is not my identity, and I don’t measure my worth in this world by how many promotions or raises I can stack on top of each other before my sixties.
Does that mean I dislike traditional work? No – I love the people I work with, and generally get the privilege of working on pretty cool stuff. But a job is a job. Anything you have to do for money is ultimately an exchange of your time (your most precious resource) for a paycheck, and that exchange can be a trap if you live too close to the edge.
Push it to the other logical extreme: If you’re living paycheck to paycheck (the opposite of financial independence), you don’t have any options. You need your paycheck desperately just to sustain the next two weeks of your life. You want out? Too bad. You’ve got a mortgage and a BMW payment. You don’t get to press the eject button, because then the walls of the townhome come crumbling down.
That’s not my American dream.
What that means for me now
Wanting to live like nobody else in your thirties generally means you’ve got to live like nobody else in your twenties, too.
This means that – in the short term – there are some “sacrifices” required (I’m putting sacrifices in quotes because, ironically, I’m happier now than I was when I had resigned myself to the standard path).
I know everything I buy delays freedom by a few days because of the power of compounding. Every purchase decision is weighed against that eventual outcome, and that means I generally live on “less” than most (don’t get me wrong, I’m definitely not depriving myself – there’s still a $23 dry shampoo on my bathroom counter).
It also means I can’t just work one job. The savings from one job simply aren’t enough to get me to $1M invested quickly – right now, I have four sources of income, and I spend the better part of every day working. (I’m convinced this is something you get used to, and working from 6 a.m. until 8 p.m. isn’t so bad when you mostly like your different gigs.)
If I were working four jobs to sustain a high-consumption lifestyle, I’d probably tell you it wasn’t worth it and quit at least two of them – supporting a bedazzled designer jeans habit is a little less psychologically fulfilling than working toward your eventual emancipation from Corporate America.
Final thoughts
I’m not a fortuneteller, and I’m not foolish enough to think that a plan I set for myself when I’m 26 years old will function like an inevitable roadmap for the rest of my life. Things change, people change, economies change.
But I’m making decisions in my present-day life with the intent to provide Future Katie options – so she can stay at work, if she wants, or stay at home with a kid, if she wants. So she can make decisions based on what’s best for her, not what’s going to pay for the Mercedes lease.
And maybe by the time I get there, Money with Katie will be a distant memory – but if I know myself at all, something will have certainly taken its place. Someone who achieves FIRE after hustling their ass off for the last decade usually doesn’t decide to permanently kick back and drink shower beers forever once they hit FI (though that’s also an acceptable alternative, if you so choose).