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Today I’m excited to share a guest post by Jessica, a co-writer on one of my favorite personal finance blogs The Fioneers. In this post, she shares how she has been able to buy back time and freedom in her life far before she has achieved financial independence.
My life today looks completely different than it did one year ago.
I was miserable last year. I was consistently working 45-50 hour weeks. My commute was 45-55 minutes each way. I had an extremely stressful job in a toxic work environment with a controlling boss.
I would come home every day and crash on the couch because I had used up all my mental energy. I’d try to relax and get a good night sleep, but that would only add enough energy to the “tank” to get me through one more day.
I had very little personal life to speak of. If people asked, “What do you like to do with your free time?” I would somewhat jokingly answer, “What free time?”
I was depressed and anxious, and I wanted to get out.
Stumbling Upon Financial Independence
I had been introduced to financial independence, and I thought it was a really great idea.
I thought the only way to achieve it was to continue working a high-paying job so that I could have an even higher savings rate. Then I could get out of the rat race completely in 8-10 years or less.
It was time to leave my job, but I thought I needed to find something better. At that point, better meant higher paying, something I’d enjoy more, and with an organization whose mission I believed in.
Unfortunately, jobs that met these requirements were few and far between.
Fast forward one year later to today, I am thriving. I work part-time (3 days/week) in my field in a nonprofit organization whose mission I believe in. My boss is great, and I have an incredible level of flexibility and work-life balance. My commute is 20 minutes by train.
While I don’t make more money, I now have an excess of mental energy. I write weekly for my blog and I love to engage with my readers and the personal finance community generally.
I no longer feel like I hate all housework or errands because I now have time to do it without being completely exhausted. I have plenty of time to do things I enjoy, like connecting with family and friends, reading and writing, and spending time outside.
My life feels balanced and meaningful. I’m content and know that I’m working towards my ideal life.
While change is never easy, I have made remarkable progress. There are two financial independence concepts that were key to this complete reversal, including:
1. Using your money to buy back your time.
2. Envisioning your ideal life.
I’m not yet financially independent, so these two concepts may seem counterintuitive. Yet, I have already figured out a way to work a lot less and have many more elements of my ideal life now.
Throughout this post, I hope to be able to provide you with the roadmap that helped me think about my life and my financial freedom differently. I hope it inspires you to create your own roadmap.
Use Money to Buy Back Your Time
When I was introduced to financial independence, I was introduced to the concept that we “pay” for money with our time. I had never really thought much about the connection between time and money besides the fact that I needed to work to make money to pay for things.
There’s a famous quote by Henry David Thoreau that illustrates this point nicely:
“The price of anything is the amount of life you exchange for it.”
After learning about this concept, I began to think about work and money differently. Instead of using my money to make the stress of my life more bearable, I could save and invest the money. By doing this, I could completely buy my way out of this work system that was making me stressed and miserable.
This paradigm shift is often accompanied by people becoming much more intentional with their spending, which was certainly true for both my husband and me.
I became more reflective of what made me happy and truly added value to my life and what didn’t.
We decided ordering take out added no more value to our life than eating home cooked meals. Mindless grocery spending added no more value than meal planning. Buying books from Amazon added no more value than borrowing them from the library. Attending concerts or events that we weren’t super excited about were no longer a good use of our hard earned dollars.
If I compare our monthly spending in the first half of 2018 to the first half of 2019 so far, we are spending on average about $1,400/month less. We did this all through making intentional small changes in our eating, shopping, and travel habits.
This paradigm shift around money allowed us to dramatically increase our savings rate to about 60%. Tracking your savings rate is the most important metric when you are pursuing financial independence, and it’s directly correlated with your timeline. For us, this savings rate, accompanying our current wealth, gave us a FI timeline of about 8-10 years.
Create a Vision for Your Ideal Life
It’s really motivating to truly understand this concept. Often when people finally understand the concept of buying back time by controlling your spending, it’s common to focus on speeding up the journey as much as possible.
It’s easy to fall into this trip.
But if you are pursuing financial independence, I hope you have a reason for doing it. It’s vital to create a vision of your ideal life. Financial independence is such a long-term goal that this vision will keep you grounded along the way.
People also say that it’s as important to know what you are “retiring to” as what you are “retiring from.”
There are many ways to envision your ideal life. We reflected on the question from Your Money or Your Life:
“What would you do if you didn’t need to work for a living?”
We considered what we enjoyed doing, what our life’s goals were, what we wanted to accomplish, etc.
Our ideal life looks something like this:
- Location independence because we love to travel and experience new places and cultures.
- A healthy balance so that we have the creative energy to focus on passion projects like our blog, photography, and other hobbies.
- Strong relationships with family and friends.
Your ideal life may look very different than ours, and that’s okay. Each person’s ideal life will be unique.
Ask New Questions about Time and Money
Envisioning your ideal life and understanding the mechanics of FI does not automatically mean that your life will be better.
In fact, I was actually more miserable. My job turned sour pretty quickly, and I decided to quit without having another job lined up.
This led me to a period of reflection about what was really important to me and the purpose of financial freedom.
During this time of reflection, I realized that I didn’t want to be miserable for the next 8-10 years, working a high-paying and stressful job, until I could retire from the workforce completely.
My mother-in-law had just been re-diagnosed with cancer, and it was a reminder for us that our lives are not guaranteed. Anything could happen.
Before I quit my job, I was asking myself the following questions:
- How can I increase my income as much as possible, so that we can increase our savings rate?
- How can I spend my money as intentionally as possible so that we can reach FI earlier?
After quitting my job and reflecting, I began to ask myself different and somewhat complementary questions:
- How can I spend my time intentionally to have a full and meaningful life?
- How can I balance my long-term goal of financial independence with my short-term goal of building a life I want to be living now?
When I learned about FI, the mechanics told me that we use our time to buy money. If we don’t spend that money, we can invest it to buy back our future time. It’s a virtuous cycle.
After we began to spend our money more intentionally, I realized that I didn’t have to wait until I had 25-30x my annual expenses saved up to start buying back my time.
Because we were keeping our expenses low, we actually didn’t need to use our time to “buy” as much money. I could use more of my time on things that brought me happiness and fulfillment.
I could forgo additional income and buy back my time now to use in whichever ways I wanted.
Buying Back My Time… Now
I ended up accepting a part-job to better align with this new direction.
My decision to work part-time was a decision to buy back my time now. This decision enables me to live elements of my ideal life now (balance and creativity) while also having time to work toward the elements that we don’t yet have (location independence).
Before thinking about financial freedom in a more nuanced way, I didn’t realize that it would be possible to buy back my time now while on the path to financial independence.
As of right now, we are about 20% of the way to FI, meaning we have about 6-7x our annual expenses in investments.
If I had stayed in my full-time job and continued to increase my income, we could have had a savings rate between 60-70%. This would mean that we’d be able to reach FI in 7-8 years or so. However, I knew that I’d very likely be miserable for the next 7-8 years.
By working part-time, we are still expecting to have a savings rate between 55-60%. For us, this means that we could still reach full financial independence in about 10 years.
Instead of buying back all of my time in 7 years, I’m extending that timeline by 2-3 years. In exchange for those 3 years, it frees up more than 1,000 hours of my time per year.
I’m choosing to buy back over 1,000 hours of my time each year.
This time frees me up to focus on my well-being, passion projects like The Fioneers, and consider starting my own business on the side. All of these things help me to live a fulfilling life now and work toward building a location independent lifestyle.
Beyond working toward our ideal life, we’ve also been able to virtually eliminate overspending caused by stress. I now have time to create a travel hacking strategy, meal plan, cook at home, and proactively invite friends to do free or low-cost activities.
Make Shifts Along the Journey
As Fioneers, we don’t see financial independence as a two-stage journey where you work as hard as you can now to retire as early as possible to a life of eternal bliss.
We see financial independence as a multi-stage journey where we are making small decisions and shifts all along the way to align with our ideal life as much as possible.
Having a degree of financial freedom now, even if we aren’t fully financially independent, gives us the opportunity to make many of these shifts now. I don’t have to defer a life I want to be living until some future date.
If I’m living a life I want to be living, there’s no rush to reach financial independence.
What is one small change you can make now to avoid putting off your ideal life?
Zach is the author behind Four Pillar Freedom, a blog that teaches you how to build wealth and gain freedom in life.
Zach's favorite free financial tool he's been using since 2015 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.
Although the bulk of his net worth is invested in index funds, his favorite place to invest in individual stocks is M1 Finance, a site that allows you to build a custom portfolio of stocks for free.
His favorite way to save money each month on his recurring bills is by using Trim, a free financial app that negotiates lower cable, internet, and phone bills with any provider on your behalf.
His favorite micro-investing app is Acorns, a free financial app that takes just 5 minutes to set up and allows you to invest your spare change in a diversified portfolio.
His favorite place to find new personal finance articles to read is Collecting Wisdom, a site that collects the best personal finance articles floating around the web on a daily basis.
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