We’ve all heard the term ‘rat race’, but have you really thought about how appropriate that analogy is to the lives so many of us lead?

When I hear the phrase, my mind moves to the image of the hamster spinning its way to nowhere. Our wheel comes in a different form, but it’s not really all that different. Many of us wake dutifully each morning before we’d like, slug down some coffee and mindlessly go to a job we may not actually like. We’re working hard, but not really getting any closer to living a life that evokes passion and wakes us from zombie mode. We all dream of tossing the alarm clock for a life that pulls us from our bed with no aid needed because we can’t wait to attack the day. Finding that life is called financial independence and can be achieved, but it takes time, persistence and focus.

Know Your Why

Before you start making drastic changes to work toward financial independence, you have to know why you want to change your path. If you’re not absolutely clear on why you want to move away from a job you hate, you’ll fail. Reaching financial independence will take time, dedication and sacrifice. You have to ‘know your why’ to keep you motivated. When we talk about ‘Why’ it’s usually big emotional reasons.

  • I want to spend more time raising my kids

  • I want to live my dream of traveling

  • I want to have time to volunteer

  • I’ve always dreamed of being my own boss

  • I want to do work I’m passionate about

Your reason may or not be above, but you get the idea. These things are big enough to keep you going when it seems easy to give up on the dream of leaving your job.

I Don’t Know Where to Start, So Screw It

You may dream of walking into your boss’ office to put in your notice, but how would you afford to live? Getting to a point financially where you’d get that option seems so daunting that most have no idea where to even start. How do you replace your income? You’ve got a mortgage, maybe a car payment, student loans and other expenses. We think we’ll never save enough to reach that point, so we find short term fixes to treat ourselves amidst the day to day. Here are some of the thought processes that stand in our way of reaching a place of financial independence. See how they can easily creep up to bigger expenses:

“I’ll reward myself after a long week with a nice dinner out this weekend.”

“Our life has been so crazy, let’s take that luxury vacation in the fall to escape.”  

“I spend so much time commuting that I deserve a head turning car with heated seats.”  

“My workday is so miserable that I want to come home to my dream home with an oasis pool in my backyard.”

Marketers know so well that we crave these things and they’re experts at exploiting us. We become our own worst enemies by creating expenses that just perpetuate the need to keep working harder to earn more to afford more 'retreats' in our day to day lives.  

I’m not saying that you can’t have nice things or that you need to eat Ramen and live in a box. I’m just advocating for more intentional thought about what we’re giving up when we make buying decisions, especially the big ones.

Throw out the term ‘Retirement’

I don’t really like the term retirement. In my opinion, it’s antiquated and really not what we're wired for. I’ve seen many folks work for decades at jobs they’re not really into waiting for that day when they can ‘retire’. They hit it, get the company watch, eat the cake and then head off to the golf course. Not long in, they find themselves unfulfilled, bored and sometimes even see their health deteriorate. How sad is it to think of someone who spent 30 years slaving away, finally reach ‘retirement’ and then pass away just a few years later because they weren’t able to take care of their health working their way to that day?

What if instead, we were working to build a life that we liked a little more each year? Maybe you dream having more time to work with a charity, build a business or travel with family? Why wait until you’re 65 to get there? You can get there sooner than you think, but it’s not a traditional ‘retirement’. Having the time, autonomy and financial capacity to start working toward your ideal life is financial independence. You have to take small steps each day, week and year to make it happen. This new type of financial independence doesn’t mean you’ll quit your job and never earn any income again. This idea of financial independence simply means that you’ll be earning income in ways that isn’t as painful as the 9-5.

It Won’t Happen Overnight

The guy selling you the ‘secret to financial independence in 12 months’ is just as bad as the marketer preying on your desire to find ‘retreats’ amidst your rat race. There is no overnight path to financial independence. Investing in stocks and bonds is what most financial advisors focus on, but this is likely only going to be a piece of that puzzle (spoiler: there is also little to no chance you’ll get rich quickly hunting for the next exploding stock). The path also is different for every person. It depends greatly on the lifestyle that you want to live. If you get to a point where you can live on $1,500/month, then obviously it’s going to be a lot easier to get there than someone with 3 kids currently working and living in a coastal city.

I've come to believe that the best things in life are the hardest. Reaching financial independence is certainly no different. 

Sounds great, but how do I get there?

I can’t answer this for you individually. There are many ways to reach it. Some take the approach of finding a high paying job, living well below their means and building a big investment portfolio that can sustain their ongoing expenses. Unless there’s a big difference in your income and expenses, this way can take a long time. I have, however, seen a few clients reach independence very quickly because they’re so disciplined at controlling their costs and lifestyle creep.  

Others are working on building additional income through businesses. That could be a rental property here or there. Maybe it’s an online business that starts small. Or maybe you have an idea for company that you'd be passionate about building. In general, I’m a big proponent of creating a business, but this is a post for another day.

The path to financial independence is different for everyone, but the common thread is that you need to start building your net worth and working toward creating income streams that can sustain the life you want. If you understand your why and reframe the idea of ‘retirement’, it can be closer than you think.

Andrew Mohrmann, CFP®, MBA is a fee-only financial planner and founder of Modern Dollar Planning, a St. Louis firm serving clients nationwide. Modern Dollar specializes in helping today’s professionals find their version of financial independence.

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