Financial Independence: I may have joined a cult

Financial Independence: I may have joined a cult

By Mr Chaos on October 15, 2018 in Finance

Earlier this year I came across a totally new way of looking at life and finances – via the growing ‘Financial Independence’ (FI) movement. Since then, I’ve spent most of my time down every conceivable rabbit hole reading blogs, books, and listening to podcasts. Specifically on what and how I should be spending my money. I became rather evangelical about the solution – so evangelical I wondered if I’d joined a cult. But I’m sure it is not a cult. Pretty sure.

Cults aside – for now – I know what you’re thinking. What on earth could be interesting enough to drag me away from a spreadsheet?

Financial independence or FI is a simple concept. It means having enough income from your assets to cover your expenses – so that you never have to work for money again.

This is nothing new – most people call it retirement and aim to get there on their 65th birthday. 

At work… At home…

But what if you could get to a point where you could be FI in your 50s, or 40s, or even earlier? Perhaps before most of your life had passed you by. Retire when you’re 40? Yes, I know that you hate daytime TV.  Why on earth would you change your life to watch more Judge Judy? But who said that not having to work for money = more daytime TV. For me, FI is not about more money or less work, it’s about a better life.

Getting to FI would allow me to design the life I want and spend my time exactly the way I want to. It’s like winning the time lottery. If you want to stay in a job you love, you can.  If you want to spend more time with your family or travel or on a hobby… You can. If you want to work for a charity or a cause that can’t afford to pay you – You. Can. FI is not about what you can’t. It’s about what YOU CAN.

So now you’re thinking that ‘you can’ sounds kind of cool, but the money bit seems impossible. And you’re right, it is impossible… if you live like everyone else.

But what if a few changes, when aggregated, could make enough of a difference so that you reach FI much earlier in life.

The math/money bit is easy in principle but challenging in practice.

First the easy bit. If you can save 25 times your annual living expenses, there is a strong historical precedent that if you invest the funds wisely, you have enough saved to never have to work for money again – unless of course you want to.

But saving 25 times your annual living expenses seems impossible. If you upgrade your home and car every few years and allow lifestyle inflation to consume all of your income, then it is impossible.

If you want to retire at 65 and maintain your lifestyle post retirement, you’ll need to save 15% of your income. However, if you start early and save 30% of your income, you’ll be financially independent around your 50th birthday. If you can get that savings rate to 50%, then you’ll be FI by 40.

You can increase your saving rate by either increasing your income or decreasing your expenses. Cutting costs is easier as it’s within your immediate control. It has the added benefit of reducing the amount you need before becoming FI – ie. if you cut your annual costs by $1,000, then that is $25,000 LESS that you need to save.

For example, if your annual living expenses are …

  • $30,000 you need $750,000 invested to never have to work again unless you want to.  If you earn the current US median household income of $61,000, and you can live on $30,000, then you are well on your way

And if you want to/can live off…

  • $15,000 well then, you only need $375,000 invested

For us, FI is not about deprivation. It’s not about living on beans and rice for the next couple of decades. In my mind, there is no point in living a life of extreme frugality that neither you or your family enjoy. Life is about the journey, and committing to 20 years of misery doesn’t sound like a great journey. A three-hour car trip with our kids is bad enough. Just imagine 20 years. No thanks.

But, I’m willing to bet that you spend significant sums on things like cars without spending much time considering the long term impact. For example, would you rather have a new car every two years, or accept driving an unattractive, economical car into the ground in exchange for flexibility to finish working five or ten years earlier? Neither answer is right – you just need to decide which of these is in line with your values. For the record, if you have any intention of reducing your spend, whatsoever, you need to start tracking it. TODAY.

I know you think I’m nuts. Trust me – you aren’t the first. I’ve spoken to a few friends about FI, and of our plans to be more intentional about our personal finances in the coming years. The reaction of most is to a mixture of pity and concern. My sister-in-law asked me if I had joined a cult. And this is before I told her that I was going to a FI conference for a week in October (they did want my money for that…). Even my wife was skeptical, at first. Now, she is a die-hard convert. It. Is. Not. A. Cult.

And just in case you need convincing, a cult requires you to lose your independence financially not gain it! I definitely still get to make my own decisions. I think.

For us, regardless of when we get there, FI does not mean giving up work. It means more time with our kids. It means meaningful work that makes a difference in the world, regardless of whether we get paid well or at all for it. It means living a life that is consistent with our values, and where we do not have to compromise what is second best for our family, just because we need to work for money.

One final point. FI is not an all or nothing concept. Building up your investments gives you flexibility to change paths during the journey. Perhaps that’s switching to a less stressful or part-time job so that you can spend more time with your family. Or it could be taking an extended break with your family to travel the world.

The alternative is living pay check to pay check. Knowing that you’ll be working until you are 65 or beyond just so that you can keep up with the Jones’. Having to unquestionably follow orders at work because you can’t afford to lose the job. Hang on, now THAT sounds like a cult…

On the off-chance that you want to hear a little more to make up your own mind, I’ve set out a few resources below that you may find helpful. There is so much excellent content in this space, that there’s not much point repeating what others can say more eloquently or comprehensively.

Have you heard of the FI movement before?  I’d love to hear your thoughts.


  • Ellen Hatcher
    Ellen Hatcher - reply

    Great and informative post Mr. Chaos. I love how it was full circle back to wait working til your 65 sounds like a cult. Enjoyed the post and will be sharing the site. Good luck and can’t wait to see you and Mrs. Chaos in future travels!

    Mr Chaos - reply

    Ellen, thank you so much for reading and for sharing! I’m looking forward to our paths crossing again in the future!!!

  • Amanda - reply

    I so love this post – funny and full of great information for future FIers who run across your blog. You guys are going to totally rock the FI path AND I am really looking forward to following your journey from here on out. You’re right up there with all our mentor FI friends who’ve been blogging for years. You should offer to do a guest post for Mr 1500!! I have a hunch this blog is going to go big. ❤️

    Mr Chaos - reply

    Amanda, thank you for your kind words!!! I’m looking for some inspiration for a post for Mr 1500, who has already kindly offered a slot. I thought about covering the extinction of dinosaurs, but that may not go down so well with his audience!!!

  • Dan - reply

    Hi Mr C,
    I really love your writing style, perspective and the manner in which you make your points. You have a gift for pulling it all together while holding the reader’s (my) interest. I am sending this to my sons. Oh to be in my 20’s with these resources in hand.
    On a different note, discovering you guys as members of our extended tribe was a joy. I can’t wait to cross paths again in the near future.
    Cult – LOL 8-^)

    Mr Chaos - reply

    Thanks for sending to your sons. I hope they follow in your footsteps. Starting young gives you so many opportunities to design the life you want to lead. Life always throws a couple of spanners in the works, but if you start early, you have more time to build a safety net, and to come out the other side. All the best in your final few months of paid work!!!

  • Jen
    Jen - reply

    What if you only start at 40…. ?!🙈😬

    Mr Chaos - reply

    Hi Jen, This is a great question – and similar to another question I sometimes hear – ‘what if I have a low income?’ Both make it harder to get to a position where you can ‘retire’ early, but both make it even more important that you make sure every dollar is working for you and in a way that lines up with your values. A great first step is tracking expenses.

    Financial independence is not all or nothing – and having the flexibility that comes from meaningful savings can be liberating. I wish we knew about FI 20 years ago, but we didnt. But we are fortunate in having savings that have enabled us to make life choices that are not the best financially – but have been the best for our family.

    Someone smarter than me said that the best time to start saving was 20 years ago. The second best time is today. Tour question sounds like a great topic for another post!

  • Mcfarland Jen Spence
    Mcfarland Jen Spence - reply

    Thanks for the encouragement… definitely think we need to make some changes now rather than waiting for a windfall!

  • Kate
    Kate - reply

    Agreed, you should do another post answering Jen’s question and running some numbers from those who have a low income and are starting late. To show that it’s still worth it. Plus, maybe some tips on tracking expenses i.e. good apps to use and where to start if you’ve never done it before.

    Mr Chaos - reply

    A post on how to track spend is already in the works! Great minds and all that…

    Will also pull together some examples for people starting late. My view is that intuitively it must always make sense to take better financial decisions, but agreed that it would be helpful to wrap some numbers around this!!!

    Thanks for reading.

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