When I first learned how much I needed to reach financial independence, I went what you could call excessively overboard. Rather than trying to reach a happy, maintainable level of spending, I cut it to the bone – even removing things I loved like travel, tasty food, and time with friends. I started micromanaging our household finances in the same way. It wasn’t long before my now-wife brought up how this change made her feel.
That conversation helped shed light on just how important it is to enjoy the journey. It’s great to have a goal, but not if it stifles all enjoyment while you’re working towards it. After that we began to have more heart to heart talks about what spending made us most happy and which we both agreed could be cut.
I’m not alone in this. So many people that learn about the FIRE movement reach this extreme at some point in their journey. One of the most popular posts in the /r/financialindependence subreddit even has a post that touches on this exact scenario: Build the life you want, then save for it. It’s a really good read that’s worth checking out.
I’ve always thought about the route to financial independence as a trip through the woods. How you take that trip depends on what you most want out of life.
Nature walk – This is the approach that most people take. They contribute some money to their 401(k), think of their home as their greatest asset and plan to retire when social security kicks in. People in this group are doing the minimum with their finances, and might not know what an index fund is. They’ll see some sights on their nature walk, but not much more than what’s visible from the parking lot.
Sustained hike – A balanced approach to growing wealth that focuses on a life you want that’s constantly improving. You still focus on growing your wealth, but balance that ambition with also growing your relationships, your professional skills and your hobbies. When you’re worn out on your hike you can stop and take a break, safe in the knowledge that you’ll pick things up again once you’re rested.
Full sprint – You want to go at 100% towards your goal. You’re willing to let other things in your life take a backseat while you work towards this. Relationships will struggle, your health will decline, your hobbies will languish and you’ll feel more alone. You’ll have more money more quickly, but struggle to create a full life. At some point you’ll either reach your destination and come to a full-stop or tire and change course.
The sustained hike approach focuses on growing your investments while also investing in yourself. Spending money on to exercise, learn, and build relationships is money well spent – when done right! There’s a world of difference between paying $5,000 for a home gym and $10 for a Planet Fitness membership. Find what provides the best return for your money and find a way to be OK spending on it!
Personal growth is only one area to find balance. There’s exploration into new interests, hobbies, housing and more.
Spend Lavishly
Ramit Seti from I Will Teach You To Be Rich brings this down to a simple mantra: “spending lavishly on what you love and cut ruthlessly on everything else”. Spend lavishly means giving yourself permission to open up your wallet for expenses that you absolutely love. Finding what you love is harder than it sounds!
At his talk at FinCon 2019 Ramit asked the audience what they would spend lavishly on. The answers were amazing.
One woman said she spends lavishly on shoes. She has over 100 pairs and every single one of them makes her happy.
Another woman said her pets. She boards them during the day so they’re not alone, she buys them everything and doesn’t bat an eye shelling out cash to keep her fur-babies happy.
For me it’s food. We’ve planned vacations around where we can get restaurant reservations. We’ve waited in the rain for the best soba noodle shops in Tokyo. We’ll splurge on the wine pairings to make a meal extra special. I even documented some of them on my personal site because they were so tasty. I’d recommend Vendôme and Olo especially.
Knowing what your splurges are makes it easier to cut other expenses in your life. This enables you to live a much more intentional and focused lifestyle and keep more money for what brings you the most joy.
Make A List Of the 10 Things That Make You Happiest
This is another great thought exercise to help understand your own values. Scott and Taylor Rieckens went through this activity in the documentary Playing With FIRE which helped set a path forward.
Side note: Playing with FIRE is a great introduction to the FIRE movement too. They’re another couple that goes overboard cutting spending before reeling things back and finding their sustained hike pace.
The activity is simple. Write down 10 things that make you happy in a regular week. I love that it’s based on a normal week and not around travel, holidays or events that can spike happiness.
If you’re in a relationship, this is a great activity to do with your partner. You can both create your lists on your own and then share them to learn more about each other.
My list is simple (in no particular order).
- Waking up in the morning without an alarm clock.
- Having coffee in bed.
- Getting out into nature on a trail or a park.
- Cuddling up with my wife to watch a movie.
- Petting our dog.
- Working on a programming project.
- Catching up with friends (which is a lot harder now since COVID-19).
- Eating a delicious meal.
- Bask in the post-workout glow.
- Enjoying a tasty beer or cocktail.
Nothing on this list needs to be expensive. We can enjoy a beer or cocktail at home. We can make meals that we love at home. I can bask in post-workout glow without paying for a personal trainer. You get the idea.
Once you’ve created your list, check and see: is anything on there really focused around money? It’s more likely you’ll focus on little moments, relationships and experiences. This is what you can build your life around! How happy would you be if you did everything on this list every week?
The point of this activity and Ramit’s is the same: it’s OK to spend money on what makes you happy. Sure, you’re not going to reach financial independence as quickly, but you’ll enjoy the journey much much more!
It’ll also make it much easier to transition your time if you stop working. If 100% of your life is spent trying to earn money, once that’s no longer your primary focus you’re gonna have a hard time.