Financial independence: the most neglected way to become happier

Scrooge McDuck skiing down a mountain of his cash

You might strive to make lots of friends, to meditate every day, to have a successful career, or to become extremely fit. And for good reason: those things tend to make people happy. But there is one straightforward way to become happier that most people neglect: achieving financial independence.

Financial independence means having enough money not to have to work again for the rest of your life. It means having enough money invested so that with reasonable investment returns, your money will probably never run out if you continue to spend what you spend now.

Financial independence does not mean never working again. It means you can provide for yourself even if you don’t work, or if you work part-time, or if you work a job that pays less than your current job. Being financially independent gives you the freedom to do what you want without worrying whether it pays the bills. Financial independence improves your odds of becoming happier because it buys you freedom.

People who are financially independent don’t have to work jobs they don’t like. They don’t have to work jobs far away from home that require a long commute. They don’t have to work jobs requiring them to check their work email in the evenings. They don’t have to put up with cranky coworkers. And they can work jobs that line up with their values.

Financial independence allows you to find a better job, but also allows you to choose to work less. When you work less, you’ll have more time for the other things that make you happy.

For example, I think that being in good health and having good friends is more important to happiness than being financially independent. But it can be difficult to stay healthy when you’re working full time. You might not have enough time to cook healthy meals and to exercise frequently. You might not have as much time as you’d like to spend with family and friends. When you’re financially independent, you’ll be able to see them as often as you’d like.

So financial independence dramatically improves your odds of becoming happier precisely because it allows you to do what directly makes you happy.

I said that achieving financial independence is a straightforward way to increase your chances of becoming happier. I didn’t say it’s the best way or the easiest way; you’ll need discipline to achieve financial independence. But it is straightforward because it is simple to understand and to do. Becoming financially independent requires that you make a plan, follow it, periodically check on your progress and, if necessary, adjust.

How, then, can you achieve financial independence? You spend less than you earn and you invest the difference.

That’s not what most people do. For example, consider a couple looking to buy a house. Such a couple will often add up their salaries and figure out how big of a mortgage they could get. Then they go shopping for a house they can just afford with that maximum mortgage.

It’s all right to want to buy the most expensive house you can afford, but when you do, you’re making a choice. You’re choosing to commit yourself to not having any savings unless your pay goes up or your other spending goes down.

If you wanted to achieve financial independence, you could instead ask yourself: “What’s the smallest house I need to be happy?” Maybe you’ll realize that you would be equally happy in a smaller, less expensive house. If so, your mortgage payments would be substantially less than your income and you could invest the difference.

As another example, think about what you’d do if you got a pay raise. When people’s pay increases, they often quickly find a way to spend the extra income. If you wanted to achieve financial independence, you could save and invest most or all of the increase. You’d be buying future freedom.

I only want to introduce you to the idea of financial independence now, so I won’t list all the ways in which you could save money or earn more. Suffice it to say that if you want to save more, you probably can. Search the Internet for “financial independence” and you’ll find lots of examples of people who’ve achieved it telling you how.

A quick word, though, on what you should do with the money you save. I recommend you buy stock index funds, which is easy to do and will produce a solid rate of return in the long run. It’s not the sexiest way to invest, but it’s the most sensible way.

Now, a common complaint I get when I spread the gospel of financial independence is that the idea sounds nice, but that clearly only people with huge salaries can achieve financial independence and so it’s not worth trying for average people. I understand this response. It’s difficult to build up enough savings to become financially independent. And when you’re not used to saving and investing, you may not realize how quickly money grows with time.

Consider the following, though: if you were to save 25% of your pay and get reasonable investment returns, you would be financially independent in 32 years. That means that if you were to start saving when you’re 25, you would be financially independent at age 57—ten years or so before the traditional retirement age. If instead you were to save 50% of your pay, you would be financially independent in 17 years. If you were to save 75%, you would reach financial independence in 7 years! So even if you’re fifty years old today, if you try hard enough to cut your spending and increase your income, you could retire ten years earlier.

I’ve only sketched the plan you’ll need to follow to achieve financial independence. If you want to get there, you’ll need to read much more about it and do some simple calculations about your own situation. You’ll also need the right attitude. The best way to build that attitude is to read Mr. Money Mustache’s blog. And the best way to learn how to invest in stock index funds is to read JL Collins’s stock series articles or his new book The Simple Path to Wealth. You should also peruse the Bogleheads wiki.

Finally, I want to stress that striving for financial independence is not an all-or-nothing proposition. Being 50% financially independent is still awesome. It means that, while you couldn’t stop working for the rest of your life (yet), you could work part-time. Or you could stop working altogether for a while, maybe for a year or two, and then return to work.

Financial independence is the idea that has most changed my life in the past years. I’m telling you about it because I think it can dramatically change your life too, for the better. I know it can sound like something you’ll never be able to achieve. That’s what I thought too, until I ran the numbers. You can become financially independent if you want to. And if you do, you’ll have so much more freedom to do what makes you happy. Think about it.

Showing vulnerability

Pencils with tips of various colors

When I meet a new person, I like to mention that I’m color blind in the first few minutes of conversation. This vulnerability—a disability, really—is a reliable conversation booster. People jump at the chance to skip smalltalk about the weather or traffic and to inquire instead whether that means I can’t see any colors at all. And how do I know when the traffic light is green?

Bringing up my color blindness gets conversations going because mentioning a vulnerability disarms the person you’re talking with. It signals that your goal isn’t to brag or impress and that you’re willing to chat about things that are not perfect. People find that refreshing.

Showing vulnerability works because it contrasts with what you normally hear from people. When you speak with your cousin for the first time in years, they might tell you about their new job and how much they love it. When you browse Facebook, you’ll probably see a parade of weddings, graduations, and babies. Many people only post about the highlights of their lives and not about their struggles.

Sometimes I go too far talking about my color blindness. When I go on about it, I can see in people’s eyes that they’re itching to walk away. The trick is to bring it up and stay on the subject just long enough to firmly establish the conversation. Then I need to change subjects quickly.

That’s because nobody I’ve just met wants to hear me talk about myself for a long time. They don’t want to hear me complain either. The goal isn’t to tell my conversation partner my life story, but to build some rapport. When you do this, you’ll be able to tell when the person you’re speaking with is engaged in the conversation. And when you notice that, start asking them questions. That’s your best bet to get a conversation going.

So next time you’re about to start some smalltalk, try mentioning one of your vulnerabilities instead. For instance, when you’re at a birthday party, you could mention that you’re pretty shy and you don’t know many people there. Often the person you’re talking with will understand and will help you feel more at ease or help you fit into the group. It might be uncomfortable at first to show your vulnerability, but try it.

And in case you were wondering, I do see colors—just not as many—and the green light is the one at the bottom.

Daytime places

Empty subway car

Yesterday evening I visited my family and made my way to their place by bus, ferry, and train during rush hour. The bus was late, the ferry was packed, and the train was both. If I had to make this trip every day as a commute, I might think the public transit around here isn’t very good.

Fortunately, I have the luxury of being able to avoid rush hour most of the time. Like stay-at-home parents, retired folks, and people working part-time or unusual schedules, I usually experience transit in the middle of the day. So when I take the bus, it’s sometimes nearly empty. I don’t run into many traffic jams either. And that’s despite living in Amsterdam, a city that’s growing quickly and that attracts millions of tourists a year.

So when people with a nine-to-five job tell me public transit around here isn’t very good, they’re not really talking about the same service that I am. They experience rush-hour service and find it lacking—which it does. I tend to experience off-peak service and find it great—which it is!

Most of us only see a small portion of the world and we see it at specific times. If you have a nine-to-five job that doesn’t involve traveling, you’ll see your office during the day, roads during rush hour, and your home in the evenings and weekends. You don’t get the full picture of these places. You don’t see their full identities. It’s how you see your dentist: at work, hovering over your face, but not when they’re playing tennis with a friend.

The changing nature of places might be obvious to the museum guard who works the night shift or the air traffic controller who sees the morning rush hour and the afternoon lull. But that isn’t the daily experience for many people, especially not for those with more or less fixed schedules.

So when people with regular jobs ask me what I like best about my break from working, the freedom to avoid rush hour is near the top of my list. It’s efficient to go places when they’re not as busy, because you can get around faster. But mostly I like how relaxing it is to avoid the crowds. The world seems more peaceful.

The danger of bookstores

Piles of books in a bookstore

Having a lot of unstructured time on my hands, I read quite a few books. In fact, I don’t think I’ve read books at this rate since I was in primary school. It’s such a pleasure to lose myself in a book on the bus or train to the point where I almost miss my stop. But as I read more books, an old problem has gotten worse: bookstores are now a dangerous place—for my wallet.

When I walk into a bookstore that has a selection I like, it’s as if I check my financial discipline at the door. It’s unusual for me to leave a good bookstore without buying at least one book. That’s been the case for a long time, but when I was busy with work or study I could tell myself not to buy (as many) books. I didn’t have time to read them anyway. Now that I have plenty of time to read books, my inner bibliophile has free reign.

Part of the problem is that I really like paper books. I like how light they are, I like that I can toss them around, and I like that I can drink coffee while reading a paperback without worrying about spilling any on the book—a paperback doesn’t have electronics that can break. It also looks good to have a collection of paper books on display in the living room.

Although I prefer paper books, I don’t dislike ebooks. Reading on an ereader can be convenient, particularly—I imagine—if you have a newer model with a big screen, a high pixel density, and backlighting, which I don’t. My ereader is fine, though. I doubt I’d prefer to read ebooks even if I had one of the latest devices, although I can’t say that for sure.

When I read, I use my visual memory. Sometimes I remember a certain passage that I want to re-read and I can usually recall which quadrant of the pages it was on. You don’t get that experience with ebooks and it’s one of the comforts that makes me prefer paper books. I suppose on an ereader I could bookmark such a passage, but how do you do that when you don’t know in advance which passage you’ll want to re-read?

I like hardcover books best of all. I tend to think they’re too expensive, but I’ll buy one occasionally. Fortunately, most library books are hardcovers, so when a book I want to read is available at my library, I win twice: it’s free and comfortable to hold while reading. To protect my wallet, the best thing I can do is to visit my local library and stay away from bookstores.

But the added value of good bookstores is their selection of books. The library may have many good books, but I’m more likely to hit upon an interesting book while browsing a bookstore. So while they remain a dangerous place for my wallet, I just can’t stay away from bookstores.

Why I love breakfast

Bowl of breakfast food

It happened a few years ago—I don’t recall exactly when. I started preparing oatmeal each morning, the non-instant kind. I had never spent much time on breakfast and usually ate bread with chocolate flakes or a bowl of yogurt. Then I discovered the wonders of a warm bowl of oatmeal and, later, a hot cup of coffee. Perhaps I was trying to balance my fast-paced job with a slow-paced breakfast. An act of defiance, of deliberately taking it slow.

Breakfast is one of my favorite parts of each day. When I take the time to prepare and eat a proper breakfast, I’m building a healthy mental attitude towards the rest of the day. When I prepare and eat my favorite breakfast, I spend time working on me before I get to anything else. And I do it without rushing.

It’s partly biological. By the time I have breakfast, which is usually between 7 a.m. and 9:30 a.m., the last meal I’ll have had will have been the night before, so perhaps 12 hours ago. That’s a long time not to eat anything.

The coffee is just as important to me as the oatmeal. I make my coffee using a Chemex, although I have a French press too. My favorite part is grinding the coffee beans by hand. It takes a surprising amount of force to turn my grinder’s handle and that might be precisely why it’s so rewarding to feel the coffee beans crack.

Curiously, taking the time for breakfast also helps me to go sleep on time. There were times when most nights I stayed up too late to get eight hours of sleep. Often it was to read in bed, which was a distraction from the reality that I wasn’t looking forward to the things I’d have to do the next day. Now that I have what you might call a breakfast ritual, in the evenings I look forward to the very first thing I’ll do the next morning. When you tremendously enjoy the first thing you do each day, it’s not so hard to get yourself to go to sleep.


No news is good news

Burning house and car

Take a look at today’s front page of your favorite newspaper, in print or on the web. Odds are that the top stories are bad news. Maybe they are about a mass shooting, about dysfunction in your country’s political system, or about how difficult it is for folks to find jobs these days. You’d think everything in the world is terrible and getting worse.

So when I say that “no news is good news”, I don’t mean that a lack of news is good news, as the traditional interpretation of the phrase goes. No, I mean that there is hardly any good news on the front pages of newspapers. Not usually on the front pages of news magazines either, although news magazines seem a bit less negative.

Journalists and news editors will cover whatever news people want to read, so I don’t think it makes sense to blame them. In fact, I don’t think it’s necessary to blame anyone. I’m even tempted to say that it’s not a problem that so much bad news exists. Not a problem for you or me, anyway, because a simple solution exists: don’t read bad news!

Except it is a problem. The omnipresence of bad news might make you think that the world is a much worse place than it actually is. When you spend less time reading big news stories and when you think about your daily life, you’ll likely find that the terrible things going on all over the world don’t affect you much. So to get a more accurate perspective on the state of the world, consider reading less news or different news.

Fortunately, plenty of other news sources exist. I tend to read to more specific news, such as articles about my favorite American Football team, the Eagles. I also follow blogs on topics such as local infrastructure development, personal finance, public transit, and bicycling culture. It’s news, but not the bad kind of news you’ll find in so many other places.

Mr. Money Mustache and Tim Ferriss have called the approach of reading less news a low-information diet. Mr. Money Mustache takes a hard line, suggesting that you don’t follow the news at all, with maybe an exception or two. For instance, he reads The Economist, with the intention to read well-researched stories once a week or so and not following live blogs of the latest bombing or political crisis.

I’m slowly moving away from closely following general (and thus often bad) news myself. A few months ago I canceled my newspaper subscription because I find myself being interested almost exclusively in the non-news parts of the paper. One of my favorite parts is a weekly feature that examines the structure of a particular family’s daily life. What time does each of the family members get up and go to bed? Does the family have breakfast together? What do the family members do after work in the evenings? But this feature is only a small part of the newspaper and I consider it a waste to subscribe to the entire paper, only to read a few parts of it. I’m looking for a magazine with stories like these, although I have plenty to read already. Maybe I’ll browse some magazines in my local library.

In the end, I’m not here to tell you to read less bad news. But I do want to stress that the world is a much happier place than newspapers make it seem. If you want to get a more realistic view of events that affect you, consider cutting down on the front-page news.