W2 Independence, A New More Inclusive Umbrella

W2 Independence

W2 Independence

We have antiquated definitions for work.  Antiquated for retirement.  We describe the FIRE community but I think we do it injustice.  Many are not retired at all, they are writing their blogs, doing their side hustles, managing their investments.  Making money although they have actually reached W2 independence.

I think we need to break things down a bit.  Undoubtedly our main goal in life is freedom and security.  We strive for such things by accumulating wealth.  Wealth accumulates by a process we mostly refer to as work.  Who or what does that work, how enjoyable it is, and whether we call ourselves retired or not is somewhat arbitrary.  I like to think in terms of asset classes.

The Asset Classes

I generally refer to four asset classes: stocks, bonds, real estate, and human capital.

Stocks and bonds are paper assets and one needs principal to create wealth.  Once that principal is present, the work is mostly done by the paper itself.  Sure the investor has to exert energy learning how to diversify and monitor those investments, but mostly things run on auto pilot.

Real estate similarly requires principal.  A property is bought and then either flipped or rented.  The work is split between the asset itself and the manager of that asset.  The remodel or rental requires sweat equity and an allotment of human time.  Work.

Now human capital is an asset we often forget to talk about.  I would further separate this category into the business asset class, and the W2 asset class.  The business asset class consists of self-made revenue generating activities in which one pays oneself.  This is certainly work, but it’s work for one’s own gain.  No other hands in the till.  We are our own boss.  The W2 asset class consists of working for someone else.  We get paid a salary and generally take orders from the man.  And working for the man sucks, so we strive for W2 independence.

The Unifying Principle

In fact, the unifying principle of the FIRE community is not that we don’t like to work, it’s that we loathe the W2 asset class.

In other words, we want to stick it to the man.

Mr. Money Mustache, Root of Good, Retired By 40, MadFientists, etc. are not FIRE.  They are not retired early.   They all do work and make money (on blogs, real estate, appearances, businesses).

I prefer to call it W2 independence.

What do you think?

Doc G

A doctor who discovered the FI community but still struggling with RE.

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6 Responses

  1. Susan says:

    Very nice article. I’ve been “W2 independent” for 7 years now and I love not having to contribute to FICA. You’re right that money is flowing in from stocks, bonds and real estate. I see it as having my money earn for me instead of myself.

    One point I’d like to add is that if someone is incorporated, the “man” might just be themselves! I did have an S Corp for a while and although there was a W2, I could decide how to split things so there was also dividends.

  2. Harry says:

    Although not “RE” having the FU money is freeing in itself. Two more years and I plan on being my own “The Man” . Looking fiwfard to adding another blog to my reading list.

    • Doc G says:

      Hey Harry. Welcome. FU money is the best, isn’t it? In a well diversified portfolio, I’ve found that pumping up the business asset class can supercharge your returns.

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  4. Hi I really enjoyed reading this post

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