If I Were Rich…

We invited a family to join us for Saturday brunch last week. After we finished eating and our kids were playing with their kids, we sat down to chat. We were talking about the things that we like to do, and our friend told us that he really enjoys hiking, camping and mountaineering. Then he surprised me by saying, “When I’m independently wealthy, I’m going to go see Mount McKinley.”

I was intrigued, so I asked a few questions. Do you have plans to become independently wealthy? Is that something you’re working toward? He laughed it off as one of those daydreams, something that a person sometimes talks about, but doesn’t really mean. I let it go, seeing that he wasn’t serious about it. But it got me thinking that there’s a step to financial independence that comes well before the widely understood steps of earn, save and invest.

Believe. Most people wouldn’t believe they could retire before age 65. I freely admit that it’s not possible for everyone. But even among people who could achieve financial independence, few of them have seen anyone actually do it before age 60. Who in their 20s or 30s thinks about only working for 20 years or so? Maybe this is why young middle-class families don’t believe that it’s possible to retire young.

Without believing it’s possible, there’s no chance to come up with a plan that would make it work. When there’s no plan, there are no actions to take to make progress. And without moving toward the goal (that doesn’t exist), it’s impossible to achieve. Without having a goal of retiring young, there’s no point stretching to be able to save more. Instead, a family might as well spend money on all the stuff and on every activity that they enjoy.

I personally never had a plan to retire early. I just wanted to have enough money (independently wealthy) to be able to change jobs with no risk whatsoever. I want to be able to pick up and move to Hong Kong to teach in an international school, knowing that if it doesn’t work out, or if my work there ends, I can always come back home, without having to worry about work. I decided to stretch in order to save more, I worked on investing it wisely, and I was lucky with my timing. In the end, I was able to stop working far earlier than I expected. None of this ever would have happened if I didn’t have a reason to try and make it work. Instead, I would have just given in to lifestyle inflation.

When did you get the idea that you could become independently wealthy? Do you know others who support that belief? Are there people around you who doubt it’s possible?

7 thoughts on “If I Were Rich…”

  1. I got the idea after stumbling across Jacob’s blog (Early Retirement Extreme) on a bored afternoon of internetting. I read a bunch of his archives and immediately ordered his book, which I read through twice in a row. And now I am thick in the planning stages, learning to change how I spend (which sometimes is very difficult!).

    I’m from Vancouver but currently in Halifax for a while – one thing I’m thinking a lot about is whether to stay here. Cost of living, in particular housing prices, is so much better here. I’d like to own my home as part of my plan, and doing it here means shaving years off my work life. But family is out west!

    And basically no one around me believes it’s possible.

  2. I started to believe I could become independently wealthy a few years after I graduated college — I realized that to be “rich” I needed to earn more, save more, and spend less. I realized I didn’t need a $5M house or designer clothes to be happy. I’m still trying to figure out what the exact number is that I’ll need to hit in networth to feel “financially independent” — I also need to figure out it if it’s really possible. If the market recovers over the next 30 years like it did after the great depression, then the plan of action is to earn as much as possible now and invest as much as possible now. But who knows what the future holds. That’s the scary part. We could be very far from the “bottom.” And investing now can also insure that financial independence will prove impossible.

  3. It is tricky to find a target number to be comfortable with. I read about a study of wealthy people where they were asked how much money they would need to feel comfortable. In most cases, it was about double what they currently had. In that way, it’s seen as a moving target.

    It all comes down to how much you want to spend each month. Multiply that by 12 months and divide by 5% to find out how much money would produce that amount of income. I’d add at least 10% for a safety cushion, and then work toward that goal. Having a real number can eliminate the moving target.

  4. When I became debt-free in 1998 by paying off the mortgage, I began to realize I could become independently wealthy. At the time, I was still working full-time so one biweekly paycheck could now cover all of my monthly expenses and still have something left over. This was in the middle off the late 1990s boom market so whatever I invested in was going up very quickly, too.

    In 2001, I would switch to working only part-time but that did not slow me down much as I began making my ER plans. By 2008 they would come to fruition.

  5. I wish I had started reading all these early retirement posts 20 years ago. I am 45 now and nowhere near financially independent, but at least I am debt free and have a decent amount in my 401k and emergency funds. Like others, I feel like if I had double my current amount, I would feel «rich» and comfortable with retiring now. As it is, I can only hope that my career continues as planned and the stock market recovers at some point in the next 20-30 years…

  6. Tara, I hope you don’t lose sight of the fact that you’ve been successful, far more successful than most people your age, if you’re already debt free with an emergency fund and a 401(k). I’m not sure exactly how much money you will need to be able to retire, but I suggest finding that number so you don’t get into the position of waiting until you feel rich. And when you can see your progress toward that goal, you’ll have something to celebrate.

  7. Thanks Robert – the thing is, according to all the retirement calculators I’ve checked, the amount I already have in my 401k ($350K) will be enough for a comfortable retirement in 20 years IF the stock market ever goes up again. But given all the volatility and stagnation, I’m not confident that it will really happen. In the meantime, I need to keep working in order to keep paying my (very low) yearly expenses until I hit at least 60.

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