The Risk of Building Too Much Wealth

I hear it often repeated that you can always make more money but time is the currency that you can never get back.  It only flows one way and that is away from you.  In the movies we often see the greedy try to take too much and get caught.  We see the greedy trying to carry too much treasure and dying under the load.  It’s an old trope that seems to suggest that greed is bad.  However, unless you are Gordon Gekko, we kind of all knew that already right? Anyone remember the fall of 2008 in the fall of 2008?  After all, it’s one of the 7 deadly sins and we’ve all watched enough movies to know what happens when the crook says, “you know what Johnny this is my one last score and then I’m out.  I’ll get a nice quiet place with Amy and take up that obscure hobby that makes me relatable.”  Cue the death by cop scene. 

We all learn the lesson to appreciate what we have now and not be greedy.  After all, I already have a nice quiet place with my lady so maybe I should just be happy right?  However, the problem is that we suck at defining what greedy means and like a frog slowly being heated to boiling in water, we also suck at seeing slow change happen when lifestyle expenses creep up over a few years.  I wrote in a previous post about a survey of the ultra wealthy (average of $78M net worth) where respondents claimed that in order to feel financially independent they would need 25% more than they already have.  In other words, I would only feel safe if I had another $20M on top of my $78M.  Does this seem silly?  Is it any more silly than wanting $3M invested when you can live off of $2M invested?  

Fear Based Greed

This post is not about the malicious or cartoonish greed that we see in the movies but rather the fear based greed that perpetually says that I almost have enough but just need 10-25% more.  Because while everyone seems to be writing about the gloriousness of achieving financial independence, few are talking about the tragedy of building too much cash at the expense of the time that you have left to live. 

Why is it that critics lament that those seeking financial independence and early retirement may make a mistake and not save enough having to go to work again at some point. However, no one is lamenting that many are working themselves into an overly rich grave and none of us know how much time that we have left in our time account.  What if it is almost empty? All the money in the world can’t get it back.  After all, if one doesn’t save enough money he may be forced to make some more money somewhere down the line.  However, if one trades too much of his time for money, he simply dies with lots of regret and an unfinished life. 

I know too many friends that have sizable savings and have future plans for repairing relationships strained by work. They have future plans of becoming the person they have always seen themselves as. They have future plans of finally learning the joys of french cooking (or some other hobby).  I also know too few friends who are actually doing something about those things.  When pressed they claim that they simply don’t have the time.  While it is work that is taking up 10 hours per day of their time, many lack clarity for when they may have enough saved and should change their behavior and decision making.

Realistic Financial Planning

There are plenty of guidelines for how much one needs to save to be financially independent. The 4% rule is one common one

. However, it seems that those that continue to hoard wealth either want some cushion beyond the 4% (how about 25% more and call it the 3.2% rule) or else they have an exorbitant budget.

I have seen a budget from a well established financial blogger claiming that his household needs $200-300K to get by each year while other bloggers are sharing budgets of less than $25K per year for a similar family.  This disparity should give one pause.  Even in a high cost of living area, a budget of $200K or more per year may indicate that some virtues of frugality could be employed to slash that budget and reach financial independence with far more time left in one’s ever dwindling account.  The problem in my mind is not that one who is already financially independent would want to up their budget to $300K or even more.  By all means, spend away if that spending can be supported by excess wealth that has been created in your post FI life.  The real risk is that those working to reach FI never get there because of a needlessly unrealistic model.

Why Claim Financial Independence As Soon As Possible

This post is intended to make the case that you claim financial independence as early as possible rather than pushing it out until you have just 25% more. I will offer up that getting to financial independence as early as possible gives one flexibility and that flexibility is never a bad thing.  With that flexibility one can choose to up their budget into the multiple six figures as additional income comes in to support it post FI. One can also hold their budget and spend their time in such a way that they have no regrets on their deathbed whenever it comes.    It is hard to explain how much better work is when you don’t have to do it but rather choose to do it because you decide that the company mission is worth it or you have career goals beyond money.  It is also hard to explain how empowering it is to be working for one’s self by choice to achieve joy and happiness rather than working for someone else out of necessity to get money. For me personally, this shift in mentality has been the life changer.

What do you think and are you holding out for just 25% more?