One of my favorite things about my commitment to write two posts a week is — unexpectedly — that I frequently find myself scraping for some idea of what to write, often in the wee hours when a post is already overdue, and it’s in those moments of feeling like there’s nothing there that I connect the dots for myself on the simplest truths. Not that those hours of grasping are fun in any way — let’s all remember the oft-misquoted line, “I hate writing, but love having written” — but forcing myself to write on a schedule, and not just when I’m inspired, has absolutely made me a better writer, and it’s made me face up to opinions I’ve held in the past that maybe weren’t especially well formed or informed, because I’m constantly revisiting the same questions. Half-baked ideas or mindless recitations of conventional wisdom fall down quickly under that constant scrutiny.
(Aside: This post is addressed to those who have a solid understanding of financial independence already, but if that’s not you, keep reading! The formula is in here!)
One of the questions any financial independence enthusiast loves to get is the first one: “How do I get started? What’s the first step?” And I bet almost anyone reading this can give a very detailed answer, loaded with information about the particular wealth-building strategy you follow and perhaps a spiel, too, about all the ways we can each cut out our mindless spending. Which is great! We should all be sharing what we’ve learned with those who might be interested in walking a different path in life, one they opt in to affirmatively, instead of just forgetting to opt out.
I have the incredible privilege not only of writing this blog, but of getting lots of questions from folks from all different life circumstances. That you trust me with your life stories and your intimate financial questions means so much to me. But it also tests me, in the best way possible. I’m forced to confront my ill-conceived notions or half-baked ideas not only in writing posts, but also in answering those questions. And I’ve learned something big over time, as I’ve interacted with more of you:
There is no universal advice that works for everyone.
As well-intentioned as we are in sharing our FI enthusiasm when people ask, we need to know that whatever particular advice we share will only work for some people, perhaps even a minority. Others might smile and nod, or even ask follow-up questions, but they’re thinking to themselves, “Well that’s nice for you, but it doesn’t work for me.” And if our answer to that is some flippant response like, “You must not want it badly enough,” we’re failing them, and we’re probably craving the validation of being able to prove that our own approach is the right one but just haven’t admitted it to ourselves.
Fortunately, though advice may not be equally applicable, there is a formula we can share that works universally, regardless of what circumstances someone is starting from. And it gives us lots of room to share our own stories — or to write our own if you’re the one just beginning. And that formula is what we’re talking about today!
The Failure of Prescriptive Advice, Especially for Early Retirement
If someone came up to me and said, “Hey, I heard you’re retiring early! How should I structure my savings to do what you did?” I could easily jump into an answer like, “Definitely max out your tax-advantaged accounts like 401(k)s or 403(b)s and various IRAs if you’re not over the income limit, and then sock all the rest away in taxable investment accounts so you have enough unrestricted assets to cover your early retirement years.”
“All the rest?” that person could rightly ask. Because I’ve just implied that saving more than $36,000 in a year (the $18,000 per person 401(k) limit times two, assuming a couple) is a given. Which, in a country with a median household income of $56,500 (per the U.S. Census Bureau’s 2016 report) before taxes is a completely unfair assumption. Even for those who earn much more than that but who aren’t accustomed to aggressive saving, that will sound like a ton of money, and it is. I’ve just given factually accurate but also completely terrible advice.
The Success Formula Begins With Questions, Not Answers
How I should have answered that person instead is with questions, these three in particular:
What is your ultimate goal, and on what timeframe?
Do you have a clear sense of what you need to do to reach it, and do you have the means to make that happen?
Have you found a system that works for you, that will help you be successful and keep you accountable?
After we know the answers to the three questions, we can follow the formula that works for any goal and any set of life circumstances.
Ingredient 1: Big Vision
The big vision is where many of us start. What would we rather be doing with our time than working? That’s a fun question to daydream about. And while not everyone has a clear idea of what they want to retire to, most of us share the vision that not working every day would be a whole lot more fun than working.
That big vision is what gives each of us our “why,” which is an essential ingredient in the formula. It helps keep us moving forward when we get discouraged, because we badly want to reach that preferable end state. Last year, when I was in the depths of work despair and didn’t think I’d make it to the end of this year if I was still working, it was the focus on the end goal — eyes on the prize — that kept me going. (And then, thank goodness, work got much better this year. In part thanks to the Year of No.)
But the big vision all on its own isn’t enough to ensure our success.
Ingredient 2: Roadmap to Get There
If we have a destination in mind but no map, we’re bound to get lost. That’s why a roadmap — a detailed plan — is the next essential ingredient in the formula. For someone pursuing financial independence, that roadmap might include a year-by-year or even month-by-month savings target, taking into account income, expenses and any circumstances that might change along the way (raises, rent increases, mortgage payoff, etc.). For a totally different goal like making a career change, it might include researching the best education programs, enrolling and finishing studies, pursuing externships, networking and going on informational interviews.
What matters is that the roadmap is suited to your circumstances — a map with driving directions on the interstate isn’t helpful if you’re planning to walk on surface streets and paths. Our plan of saving well over the 401(k) limits each year works great for us, but isn’t the right map for everyone.
But even with a big vision and a roadmap in place, we don’t have all the ingredients we need to reach those monster goals.
Ingredient 3: System That Works for You
The final and equally crucial ingredient in the formula to reach any huge goal is a system that works for you. For years I thought I sucked at money because I could not get budgets to work for me. I made the fundamental attribution error about myself. Fortunately, the problem wasn’t actually that I couldn’t save or lacked the character necessary to do so, it was that I hadn’t found the right system that would help me be successful. It was only when I discovered paying myself first and net worth tracking, through the simple act of having my paycheck split so that a small portion went straight into savings instead of all of it going to checking, and by creating a simple Excel spreadsheet, that I realized I could actually be good at this financial stuff.
Which makes total sense, because essentially all of my successes in life have been a result of building systems that keep me accountable, for I am deeply lazy if left to my worst impulses. It’s why I got the loudest alarm clock I could find while in high school and put it on the other side of the room (and later upgraded in college to a boombox with an alarm on it and blasted myself out of bed), and it’s why I am such a big fan of apps that track exercise and nutrition and motivate me to keep the numbers in the preferred zones, so that I don’t sit on my butt all day eating Cheetos. It’s why I force myself to blog twice a week, no matter what, so I don’t accidentally quit.
I’ve learned that, to make money work optimally for me, I need to hide it from myself, and then I can do great. I’m also fine using credit cards to max out my points and then paying the bill at the end of the month, but that wasn’t always true. While I was paying off my student and credit card debt, I was insistent that we use only debit cards, so I’d know at all times how much we had. That was the system I needed then, and I don’t need it anymore. Some people are okay with credit cards, while others find them disastrous. Some are budget rockstars and thrive with them, while others need to trick themselves as we do. And the systems that work for each of us may change over time. We’re still figuring out how we’ll manage our cash flow in retirement, for example, because that’s totally different than now, while we’re still getting regular paychecks.
The best system is the system that works for you, the one you’ll use. Not what works for someone else, or what the conventional wisdom says is best. And if you pair that system to stay accountable with a vision of where you’re headed and a roadmap to get there? You’re unstoppable!
Applying the Formula
Instead of attempting to replicate what someone else has done to reach a similar goal, what each of us should do instead is learn what we can from what they did, and then decide which pieces of each ingredient in the formula — big vision, roadmap, systems — do or don’t fit our own needs and circumstances.
There’s so much detailed info out there, so much of it incredibly inspiring, that it’s easy to want to take exactly the steps someone else took. But that may not ultimately help us if our destination is different from theirs, if we’re traveling there by different means, or if we respond better to different systems. Instead of applying their advice, apply the formula.
Do you use something akin to this formula to work toward your big life goals? Or on the flipside, anyone focused on only one or two of the ingredients instead of all three and found that success was harder to achieve? Or even felt like a failure because you didn’t reach your goal? (The problem likely isn’t you — it’s that your formula needs that last ingredient!) Any other tricks you’ve found for answering questions about FI without giving advice that may end up being totally out of line with what that person needs to hear? This is sticky stuff — let’s discuss it all in the comments!
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