Today’s post is going to fall a little more on the abstract side of the spectrum. To date, most of the posts you’ll find on Above the Canopy are somewhat technical, and oriented toward achieving financial independence.
But for many thousands of people in America, the traditional career trajectory (working for 30-40 years until fully retiring around age 65) is a poor fit for their values. The pursuit of financial independence often compromises the important parts of our lives, leaving us overworked and unhappy.
So in today’s post I’ll examine the difference between money-centered and happiness-centered living. We’ll cover what we actually need to be happy, and the role money plays in fostering a happy life. Finally, we’ll cover how you can arrange your finances to support a life focused on happiness & fulfillment. If you’re up for a “deeper” post and don’t mind me waxing philosophical, read on!
Traditional Financial Independence
Usually when we hear about financial independence, it’s used in the context of having enough assets to live off of comfortably. Whether they produce enough income to fully cover our living expenses, or the withdrawals from principal are small enough that we’re confident we’ll never run out of money, the idea is the same. Financial independence means we’re no longer beholden to employment, since we could live off our own assets if we wanted to.
This idea of financial independence also fits pretty nicely with our traditional view of retirement here in America, where there’s a stark contrast between “working” and “being retired”. Our working years start when we first enter adulthood. While we usually don’t have much to our name, we do have (hopefully) some ambition and a few skills we can use to earn a living. We go out and market these skills to potential employers and eventually get a job. If we’re lucky, it’s work that’s interesting to us and pays a decent wage.
Once we start our working years we begin to collect paychecks every other week, which we use to pay taxes, rent, and other living expenses. After the bills are paid we use anything left over to pad our retirement accounts, bank accounts or both.
At this point we’re in the phase of life affectionately known as the accumulation phase. We earn an income, use it to pay our living expenses, and save whatever is left over. Our savings grow with each paycheck, and our net worth accumulates over time.
We invest our savings in order to accelerate growth, and sooner or later we reach the holy grail – financial independence. If we wanted to, we could discontinue our employment and use income and withdrawals from our savings to pay our living expenses. We’re no longer reliant on our job for income. We can do whatever we want. We’re financially independent.