Pondering Financial Independence On Independence Day

by: Roger Nusbaum

Improve your critical thinking by reading articles you're likely to disagree with.

Make yourself more financially resilient.

Be skeptical and ask questions.

This article originally appeared on ETFmaven.com on July 4, 2018.

I spent my July 4th watching baseball (the Red Sox were on at 8am my time and the Padres then played at 1pm) and doing some reading including a couple of very different articles looking at the same general topic; independence.

The first article was something of a Libertarian manifesto written by Daisy Luther at The Organic Prepper. I shared this post on my Facebook page and talked about cultivating critical thinking skills by reading things that will challenge our beliefs and this post certainly does that for me. I do not share the extremity of her views and quite a few of them I disagree with entirely, but there are still interesting points made. It really is a long read but toward the end, she lists 20 things to "make your life a declaration of independence."

Number 11 was to stay out of debt. She appears to believe that the system is rigged to entrap us under a debt load that we can never escape from. While I do not think the system is rigged, it is true that credit is widely available, credit providers don't necessarily have an incentive to try to teach people how to use credit responsibly and not surprisingly, many people get in trouble with debt. Maybe not bankruptcy-trouble but at the very least being indebted such that they can't save properly for the future. I quote Nassim Taleb all the time on this matter, we all learned from our grandmothers not to get into debt. Every aspect of your life will be easier when you avoid debt (and are under-mortgaged). Ditto, living below your means.

Number 16 was to develop multiple streams of income. I've written about this for years and did it from my late 30's until just a couple of months ago. Hopefully, TheMaven evolves into a decent income stream too. I've talked about cultivating streams of income like monetizing a hobby. As Daisy says, multiple streams mean you are not overly dependent on one income source. This obviously increases resiliency in the face of adverse circumstances.

Number 1 is to be skeptical of the news. Where this blog is investment related, I'll tweak it to stock market news (although it pertains to all news). Every now and then, maybe more frequently, you will hear something on stock market television that just doesn't make any sense. The famous Bear Stearns monologue from Jim Cramer all those years ago comes to mind in this context. He says one thing about that segment, just about everyone else who saw it thought they heard something different. I have no idea what he meant but what doesn't make sense is that there was no need to say anything on the subject. It made no sense.

Number 7 was take control of your own health. It is reasonable to think that in such a financially huge industry (healthcare), there will be conflicts that result in your best interests not being the top objective. Many years ago I started including "don't drink soda" in a lot of my posts. Soda is so bad for you, it might as well be cigarettes. This evolved into my learning about carbohydrates and my concluding that all the things that we were taught about why a fatty diet is bad for us actually pertain to a sugary diet. About 16 months ago I greatly reduced my carb intake and lost 25 lbs I didn't know I needed to lose. You should do your own research and draw your own conclusion but that is my conclusion. Then after you research that, regardless of your conclusion, go learn about statins.

While there is a lot that Daisy writes that I simply don't agree with, being more self-sufficient, asking more questions and living a simpler financial life are all points that resonate with me and are consistent with my 14 years of blogging.

Quartz had an introductory look at FIRE which stands for financial independence, retire early, which is a subject we've covered here dozens of times. There is something of an extreme fringe built into FIRE. The Quartz article mentions one guy who is saving 90% of his income by living in his truck. If you go looking, you will find articles that talk about other extreme measures that some go to in order to leave a job they don't like in order to retire at 30 or 35 or 40 or any other age that sounds young to you.

Lower hanging fruit on this point ties in with what I said a few paragraphs ago about living below your means and not being over indebted. I think of wealthy as making enough to pay the bills, set some aside for the future with a little left over for some fun. Regular readers have seen that one many times. If you dive into Daisy's manifesto, you will see that sentiment as a recurring theme to what she is saying and it pertains to FIRE, not in terms of retiring at 30 but more accessibly, not having to worry about money fairly early on which results in generally less stress; it is one less thing to worry about.

Fruit that isn't hanging so low is the idea that so many people don't like what they do. I don't doubt the veracity of that statement but these financially self-sufficient concepts we're talking about make it much easier for you to leave the job you don't like for something you do like even if that new endeavor pays less. Forget about $1 million at 30, what if you're 45 and have 80% or 90% of your number socked away? Your number should be driven off of your expenses not your income. Where you have more control over your expenses, your number then can be smaller. So if you're 45 and have 85% of your number and could get a job you know you'd love that meant a large cut in pay, would you do it? The answer is ultimately an individual determination but anyone in this scenario does have the financial option of switching to the lower paying job, they don't necessarily need to save as much. The people over-indebted with a big mortgage, two car payments and couple of credit cards which prevents them from saving adequately don't have this option.

Right on cue, Nassim Taleb tweeted the following;

My wife and I have this bit (I've mentioned this before) where I say, I think I am going to retire. She will ask me what I intend to do. "Oh, I will probably hop on the computer, do some reading about the stock market, maybe later write a blog post and place a trade if need be. A little later on, I'll go to the gym." She then wryly asks, so you're just sick of getting paid for that routine. The implication of course is that if you love what you do, you won't want to retire. I started saying years ago that I don't want to ever retire, and while that still is the case, we save like we are desperate to retire last year in case, in the name of being financially resilient/independent, I change my mind or we encounter some sort of adverse circumstance.

In trying to build your own investment process, I talk about taking bits of process from various sources to create your own process. That also applies to life more broadly. There is plenty to Daisy's post and what I know about the FIRE lifestyle that are not for me, but that doesn't mean there aren't useful tidbits in there to learn from and perhaps improve your life.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.