Retirement and Financial Independence = Apples and Oranges

Most of the rhetoric we hear about saving money these days is the same old stuff. Yes, saving is important, but the messaging is all wrong!

Here’s what we hear most of the time:

  • Save for a rainy day
  • Save for retirement
  • Save for your family’s future

What I don’t hear as often is:

  • Save to increase your options
  • Save for pease of mind
  • Save to reclaim your right to think
  • Save for how it makes you feel today

It’s a fundamentally different type of thinking. And it’s what differentiates those who seek financial independence from those who merely seek to retire.

Traditional Retirement Thinking (TRT)

TRT tries to get you to think about retirement, which is often decades away. It’s just too far out to be meaningful. We’re to save so that our future selves have enough to live on to meet their needs but we can't even relate to this person. We don't want to relate to this person yet. Combine that with the belief that our wages will always go up and it’s why many of us wake up in our fifties and start scrambling to save "enough".

If you live for having it all, what you have is never enough.
— Joe Dominguez and Vicki Robin, Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence

TRT also makes us think of saving money as the denial of pleasure through budgeting. Budgeting tells us that we need to put money aside for emergency savings, retirement, and for larger purchases. That’s all fine and good, but the message that budgeting sends us is that once that money’s allocated, we’re entitled to spend the balance, whether it makes sense to or not. That’s the wrong mindset and it tends to lead to people think about the minimum they need to save to get by. It makes saving feel like a punishment!

Finally, TRT makes saving a duty as opposed to a worthwhile activity. Telling us that we need to save to ensure we survive a disaster or that we need to save so that our family will be OK if we croak doesn’t feel good. If anything, it makes us not want to save because maybe it will mean that nothing bad can happen to us and that we’ll live forever.

This whole approach is based on fear and I think that’s what makes people not want to save. 

Here are the messages the above provides: you’re going to grow old, you’re going to die, bad stuff is going to happen to you and you need to think about it every time you consider your budget and savings rate. Yuck!!!

That's why there's so much talk about automating retirement savings. It makes it hurt less. Who wants to do something that hurts?!

Financial Independence Thinking (FIT)

Unlike traditional thinking, FIT gets your saving behaviour working for you in the present because it's not about retirement. It makes you consider yourself as a free agent, able to change course in your life when you want to:

  • You save because you like the possibilities the money offers you now
  • You save because you like being able to follow your moral compass and only work in settings and for people that make you feel good about yourself and what you’re doing. 
  • You save because you like not having to worry about debt, bills, the next paycheque, etc. because you know how much mental energy that can sap from your body.
  • You save because it gives you a chance to listen to what it is that you want, not what others want from you—the latter being the unfortunate default.
  • You save because it makes you more effective at what you choose to do with your time because you can focus on the activity itself, not the potential externalities associated with it.
  • You save because it reduces the feeling of needing to compare yourself to others (who has their net worth stamped on their foreheads anyway?!).
  • You also save because it just friggin’ feels GREAT!

That’s a completely different way of framing the activity we call saving. Saving turns from an obligation to a rewarding activity. And, because we focus on what we’re gaining as opposed to losing, it’s self-reinforcing. 

Waste lies not in the number of possessions but in the failure to enjoy them.
— Joe Dominguez and Vicki Robin, Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence

A saving mindset keeps our lifestyle in check by getting us to ask ourselves whether spending the money will really make us better off. It makes us value our time and money much more than the traditional alternative. It makes saving a joy, not a punishment. And, the more joy we feel, the more likely we are to save. In fact, with this mindset, savings rates often increase, not decrease as our savings balance increases! How cool is that?!

So let me ask you: what's your approach to money? Is saving a punishment or a privilege? A preventer or an enabler?

Image credit/copyright: akeeris/

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