{"id":6397,"date":"2019-10-12T09:31:51","date_gmt":"2019-10-12T09:31:51","guid":{"rendered":"https:\/\/www.foxymonkey.com\/?p=6397"},"modified":"2019-10-12T11:29:19","modified_gmt":"2019-10-12T11:29:19","slug":"opportunity-cost","status":"publish","type":"post","link":"https:\/\/www.foxymonkey.com\/opportunity-cost\/","title":{"rendered":"What is the opportunity cost of Financial Independence?"},"content":{"rendered":"\n

A reader and also friend of mine sent me the following response to my FI Getting real now?<\/a> post:<\/p>\n\n\n\n

Nothing wrong with trying to reach FI. And it\u2019s great you offer ways to make your earnings worth for people. Everyone with savings needs that advice. So what you write about has huge value.<\/p>

There is no one recipe to fit all people in life management and aspirations, so my view is personal and limited. But I think it\u2019s worth saying, as an alternative philosophy, because I think my goal is not dissimilar: a better life.<\/p>

Better life depends heavily on the ability to enjoy today. Not just with money but other stuff too. Job, creativity, relationships, volunteering, generosity, protesting for the environment\u2026 whatever. Certainly poor money management can lead to misery, that\u2019s another reason your blog is helpful.<\/p>

Placing focus on reaching a specific point of FI, perhaps too soon, seems a troublesome goal to me because it assumes that life is flat and stable and can continue better when you reach that goal, because you will have less dependancy on money. But to do that one is at risk of missing out on today. For example, you might trap yourself in a well paid but less meaningful job. Or If your work is meaningful and you are happy, you can still limit your true potential by avoiding risks to take on stability. Life is changing all the time and what we find meaningful today we might not find meaningful tomorrow.<\/p>

Assuming that when we get the right net worth we will be better off, can be misleading. The journey is often more interesting than the destination and compromising on that can lead to trouble. We are only young once and you can\u2019t buy the energy, risk ability, and good health when you grow older. That said, we all need insurance and pension for that reason, to avoid suffering when older. A small fortune can easily get wiped out with a bad disease or other misfortune.<\/p>

In my view, FI is something much bigger than ability to paying the bills plus savings. It is the power to influence the world around you, being financially strong and mentally eager to make things happen as you wish.
But real financial ambitions involve real risk. The less the risk the smaller the reward. And as you well know, one can afford to take more risk the younger one is. Even an early retirement means wasting productive years for the payout date.<\/p>

Now, no doubt we all need advice on managing wealth better to reach a better future! And often, this is a rewarding game in its own right.<\/p>Spyze<\/cite><\/blockquote>\n\n\n\n

Effectively, Spyze is asking: Does FI come at a high opportunity cost? <\/p>\n\n\n\n

So I started writing a reply to this comment and caught myself in almost a 1000 words long comment. Hence this post. Also, since meaning and purpose are quite personal to each individual, I want this post to trigger a discussion if possible. Please write a comment with your views!<\/strong><\/p>\n\n\n\n

The reason I like this comment so much is that it challenges the status quo of FI. I often try to find views different from my own. That’s how I get a better understanding of things and avoid confirmation bias<\/a>. Also when learning a new domain, it’s often meaningful disagreement that leads to better outcomes. You’re not really learning anything by reading things you already agree 100% with (unless it’s just for fun).<\/p>\n\n\n\n

I’d argue social media and the personalised google searches of today have made it even harder to find different opinions. Anyway, I’ve already deviated too much from the topic, somebody please stop me! On to the FI:<\/p>\n\n\n\n

First of all, thank you for such an insightful comment. I couldn\u2019t agree more that the journey is more important than the destination. As I\u2019ve mentioned<\/a> in previous posts, I strongly support the argument that you have to live happily on the journey to financial independence. Depriving yourself until the FIRE point is only going to make you miserable, therefore you should find happiness along the way.<\/em> <\/p>\n\n\n\n

Trading off experiences, creativity, work etc now to reach a particular money target in the future is pointless. For once, as Spyze has rightly said, you\u2019ll miss out on presence (YOLO..). But more importantly, there\u2019s no magic candy at the end of the journey. FI won\u2019t make you happier.<\/p>\n\n\n\n

In fact, people who\u2019ve already done it describe it as a short period of elevated happiness which then just falls back to pre-FI levels. Plenty of examples such as the Young FI Guy<\/em> blog and Retirement Investing Today<\/em> who struggled<\/a> to find purpose after reaching FI and moving to Cyprus.<\/p>\n\n\n\n

It\u2019s only when they change their lives to pursue meaningful activities that things get better. That you can do before<\/em> or after<\/em> FI. I think it goes without saying that if you can find a job you love (or create one) that also pays very well, then you’ve already won the game. But 1) how many people have this opportunity and 2) how much can you sacrifice in order to pursue more meaningful work (such as building your own company for instance).<\/p>\n\n\n\n

This blog is a good example. It takes a lot of my free time and a lot of research to write some of the articles, let alone interact with readers daily over email. I don’t mind spending it as it fills me up with joy and creativity. It\u2019s hard work but it\u2019s good<\/em> work, not a job<\/em>. I could postpone writing and sharing my finance knowledge until I have all the time in the world. But that would be postponing happiness.<\/p>\n\n\n\n

So I\u2019m squeezing 4-6 hours per week out of my after-work free time to do it. Wouldn\u2019t it be great if I had 4 hours per day<\/strong> to spend on it? Of course it would. But guess what, it doesn’t bring enough money. I wouldn\u2019t be able to support my lifestyle.<\/p>\n\n\n\n

As a friend who\u2019s winning the startup game (3rd year, good fundraise etc) recently told me when I asked him why he moans about needing a good salary, his response was: \u201cYes, I’m building a company, but I cannot eat equity\u201d.<\/p>\n\n\n\n

One needs some money to live. On one extreme, a person may work on extremely meaningful work and make close to zero money. Or one can make millions but be miserable day-to-day. Now wouldn’t it be great if one can do what they love while<\/em> accumulating lots of money? Of course, it would but it\u2019s less common. Find a job you love and you’ll never have to work a day in your life <\/em>goes without saying.<\/p>\n\n\n\n

Even programmers that are generally a very satisfied<\/a> group of people, have to do less enjoyable things like pointless meetings, file bug reports and do boring work from time to time.<\/p>\n\n\n\n

But it\u2019s a matter of risk appetite. At the end of the day, we all have to draw a line in the sand and pick our battles. I believe this is where the risk profile comes in and it’s what makes this question so personal.<\/p>\n\n\n\n

No one can predict the future. If one is stuck in a miserable job and counts \u201c9 years to FI\u201d then that\u2019s not a great way to live, is it. Equally, when you have good colleagues, work in a nice environment, a well-paying job that\u2019s good enough<\/em>, but you decide to quit everything to pursue your passion, I find that equally dangerous.<\/p>\n\n\n\n

So I\u2019m openly asking this question: is there a line between meaningful activities and financial independence?<\/strong><\/p>\n\n\n\n

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