All the best things are free

A snowball of increasing wealth came from the simple concept that money is equivalent to hours of life.

This idea made us pay attention to the fulfilment, value, and happiness we were getting from the things and experiences we spent our money (hours of life) on.

We cut out all the waste. Our spending reduced massively with no reduction (actually an increase) in happiness.

Somewhere in the back of my mind an additional improvement was being mulled over.

How to deal with the temptations that still arise as FI funds increase:

Wish lists of things that could be bought, shiny new things seen in friends houses, expensive vacations, the lure of a Tesla, etc.

A new way of thinking about spending

When we make a decision to purchase something we rarely think about the other things we are saying no to. The same is often true with how we spend our time.

We often see a thing, decide we want it, and if we have enough credit go ahead and buy it.

We very rarely compare very different things when making purchasing decisions.

The way to deal with this is to rank everything in your life that you have spent money on or could spend money on. Also include the things in your life that cost no money at all.

This exercise was enlightening and an instant cure for those creeping temptations. I found that at the top of my list, the most fulfilling ways I spend my time, were activities that are completely free (and a few that are nearly free) …

Time with family and friends
Time outside
Walking and hiking
Cycling (~$100 per year for maintenance | $2500 FI pot required to cover this for life)
Reading new books (~$60 per year | $1500 FI pot)
Photography
Rock and alpine climbing
Writing
Creating software
Listening to music
Wild swimming
Running
Learning piano
Learning French
Mountain Biking (~$100 per year for maintenance | $2500 FI pot)
Painting and sketching (~$100 per year | $2500 FI pot)
Surfing (~$100 per trip | $2500 FI pot)
Minimalism

Note: The FI (financial independence) pots above are based on the 4% safe withdrawal rate. 25x the annual cost. If you’re using a 3% safe withdrawal rate this would be ~ 33x the annual cost.

Where spending is worth it

When it came to the activities that actually cost a bit more the list was full of experiences rather than things (not surprisingly). Again the things at the top of the list in terms of fulfilment were lower cost than some of the bigger ticket items further down the list (especially any new car or a larger form of shelter).

There are things in this list that bring so much joy into our lives that I’m willing to ensure our FI pot can fund them for life. I’m willing to put the time in now, to earn the extra money, so that we can include them in our post retirement lifestyle (for example trips to the mountains for Skiing with family and friends).

These activities provide so much more fulfilment than those tempting things further down the list. They make it easy to say no to the temptations that will not provide anywhere near as much pleasure.

We could have Skiing trips for life for less than a bigger house or a new car would cost and these would provide much more joy.

Obviously each of these trade-offs is personal. Ranking the things in your life makes it easy to see what you are happy to spend on and what is of little value to you.

Working out the FI pots is enlightening

Part of this exercise involves working out the FI pot required to include a given experience or thing in your life post early retirement.

For example a $1000 vacation per year is going to require $25,000 invested in your FI pot to cover for life at a 4% safe withdrawal rate (SWR) or ~$33,000 at a 3% safe withdrawal rate (SWR).

Running costs for a home (even after the mortgage is paid off) of $6000 per year needs $150,000 invested at 4% SWR or ~$198,000 invested at 3% SWR.

Key things I learned

I learned a lot doing this simple exercise:

Enjoying free things is the best route to freedom
Time spent in flow creating things is both free and rewarding
The difference between free activities and those that cost any money per year is huge in terms of the FI pot you need to fund them for life
The amount you spend on shelter and transport has the most significant impact on your time to Financial Independence (housing and new cars are over-priced due to the widespread use of debt for their purchase and they have significant ongoing running costs)
The ongoing running cost of a home requires a significant FI pot to fund for life (even after you’ve paid off your mortgage). It is worth seeking ways to reduce this as much as possible.
One-off purchases of high-quality high-value things (second-hand where possible) is okay if they give you a lot of pleasure or functionality (Bicycles | Speakers | Walking Boots | iPhone | Kindle | etc.)
Pay attention to the FI pot required to fund any service you regularly pay for (e.g. Film and Music streaming services)
Buying an asset that provides pleasure, pays for itself, and provides passive income is a triple win