Financial Independence: Redefining Retirement

December 17th, 2019
December 17, 2019
Joseph Vecchio CPA, CFP, MBA

What are you saving and investing for?

Why are you working so hard to save money and put it into special accounts like 401(k)s and IRAs? Why should you divide that money between stocks, bonds and other “investments” you’ve never actually touched or even seen with your own eyes?

What are you really trying to do here? What’s your end game?

The out-dated way of thinking is that you’re saving for retirement. You know, that thing you get to do in your 60s, after you’ve kept a stable job for 40+ years, and you finally have enough money to abruptly quit and enjoy your golden years.

But that’s an old school way of thinking.

There are more exciting possibilities available to people who are willing to think a little bit differently. And in this case, a small change in mindset can make a big difference in your investment success.

Introducing “financial independence”

The big problem with the idea of “retirement” is the assumption that everybody lives their lives along the same linear path and that you have to wait 30 or 40 years before having the freedom to make your own choices about how to live.

So when it comes to my personal financial plan, I no longer have a “retirement” goal. And when I work with clients, I take the focus off retirement as well.

Instead, I like to talk about financial independence.

Here’s what financial independence means to me: the point at which you’re free to make decisions based on what makes you happy instead of what makes you money.

Let’s dive into some of the implications of this definition.

The beauty of financial independence

From a purely financial standpoint, the idea of financial independence is somewhat similar to the idea of retirement. They both require you to have enough saved up so that you no longer have to work for money.
But from a psychological standpoint, there are some key differences that open up a world of possibility.

There Are Degrees of Financial Independence
Retirement is absolute. It’s an end point. You’re either still working or you’re not. Simple as that.

Financial independence has degrees, and those degrees give you the freedom to make some exciting life choices a whole lot sooner.
The end goal of financial independence is to eventually have enough money that you never need to work again. Not that you will definitely stop working (see below), but you have the option to stop if you so choose.

But financial independence can also simply mean having enough money to temporarily give up income in pursuit of something you care about.
Speaking from personal experience, it was that second type of financial independence that allowed me to start Shore Financial Planning. The savings we had in place allowed me to take time to grow my business into something profitable and sustainable while still handling my family’s needs.

We weren’t fully financially independent. But we were independent enough to allow me to build my business from scratch.
When you’re willing to think in degrees of financial independence, you open up a world of opportunities over the course of your lifetime.

Finding Your Life’s Work
While financial independence frees you from a dependence on income, it doesn’t assume that you stop working. After all, work done in support of a mission you believe in is one of the most fulfilling ways you can spend your time.
What’s more appealing: the idea of gritting your teeth through a terrible job just so you can quit decades down the line, or the idea of spending your days doing work you love because your financial position allows you to do so?

Financial independence supports your quest to find fulfilling work you believe in, rather than forcing you to wait for the day you get to quit a job you hate.

You get to make the rules
When you stop working towards retirement and start working towards financial independence, you give yourself so much more opportunity to create a life you enjoy, both now and in the future.
It’s no longer about reaching the same end point that everyone else reaches 30-40 years down the road; it’s suddenly about dreaming up whatever kind of life you want and starting to work towards it.

How would you start living your life if you no longer depended on your next paycheck?
Take a minute to think about that question right above. Or take a few minutes, or an hour or more if you would like.
Your answer to that question is the key to your financial success.

You don’t have to wait until you’re old and gray to start living a life you enjoy. You can use your money to buy your freedom a whole lot sooner than that if you want.

All it takes is a little change in mindset.

When you work with Shore Financial Planning, the financial advice we provide is ALWAYS in your best interest. As a Certified Financial Advisor, NAPFA Professional, and Fiduciary Advisor, Joseph Vecchio offers unbiased and conflict-free financial advice & retirement planning services.