Money Insecurity
Money Insecurity
It is easy to paint financial independence as a nirvana. Easy to say that it is a goal that once attained will allay all worries and anxieties. But I think this viewpoint is a little disingenuous. My path to early retirement has been rather circuitous. Although I am currently downsizing and fading, I’ve found leaving the work place much harder emotionally than reaching FI. The one more year phenomenon is real. It may be a product of the first year phenomenon. We might be altogether kidding ourselves with the idea of safe withdrawal rates. I certainly don’t have all the answers. But one thing stands out above the rest. Money insecurity persists long after financial goals are met.
It persists in good times and bad. It continues whether you are FI, RE, FIRE, FIOR, or whatever catchy acronym you choose. And it persists whether you have a blog, or podcast, or You Tube channel.
Definitions
Money insecurity is intimately tied to the idea of enough. Enough can be defined in many ways. Possibly it is the 4% safe withdrawal rule. Or the shortcutted 25X rule. The more conservative in the group whittle these numbers down even more aggressively. They might shoot for 3%. Maybe even 2%.
The logical assumption would be that once enough is attained, money insecurity would disappear. The perpetual money machine would continue to spew out dollars and all fears and anxiety would disappear.
The reality is much more sinister. Our worries persist no matter what the balance at the bottom of our ledger.
Addicted to Money
We are addicted to money. Or addicted to making money at least. Look no further than the personal finance blogosphere. I’m not pointing any fingers. But name one who isn’t making a little income. Name one who doesn’t have some side hustle, monetized blog, or financial consulting gig. I bet you will have a hard time.
I am just as guilty. No matter how filled my coffers, money insecurity persists. To the point of lunacy.
What if I spend $250K a year?
Could there be a world war?
What if healthcare costs skyrocket?
The dooms day scenarios are overwhelming and major drivers to income buffering.
And it’s not just bloggers. Almost every financially independent person I know has some source of side income, rental income, or ancillary project.
Human Nature
I’m starting to believe that money insecurity is just plain human nature. It mocks us in the face of iron clad mathematics. It turns out that when it comes to cash, us hardcore savers don’t like risk. How many of you have played around with a retirement calculator such as FIREcalc? Ever notice how you summarily manipulate the data until you come up with a 100% success scenario? How many stop at 99% and decide it’s good enough?
No one.
In fact, financial freedom is not freedom at all. it is a perverse state of ecstasy teetering on agony where numbers are crunched and re crunched at a sickening pace.
How else do we explain monthly income reports? If we were truly free would we even need to calculate?
Final Thoughts
I have found one and only one solution to money insecurity.
Income.
The only way to truly allay the anxiety is to have a little (or not so little) stream of cash trickling in above and beyond investment returns. Maybe it is a monetized blog, financial consulting, or a few hours of work a week at the local coffee store.
The possibilities are endless. Even more so when you are free to pursue your passions and create from your heart.
This whole retirement thing is overrated.
Why fight money insecurity when you can sidestep it ?
Good point. No matter how much padding you build in your portfolio it still is an uneasy feeling when you start the drawdown period.
No one likes to see the value drop and the only way it doesn’t is if you build passive income streams to support you in retirement. That’s what I am attempting to do to create a basic income floor
Yep. i think we are all stuck in the accumulation phase. It just feels better.
Awesome points here Doc! we all have that tendency to be a little insecure about money…. no matter how solid our financial house looks. Thus comes the appeal of the side hustle, or monetized blog…. as long as we build out these income streams and have some sort of money flowing in every single month…. we feel a little more comfortable.
Great post!
Thanks half Life. Someone from my offline life referred me to a personal finance post on his google feed yesterday. It was yours!. I was like, hey, I know that guy.
Agree. The whole retirement thing is overrated. It’s just one model. Work hard, save up, at a certain age, retire, and enjoy retirement. While the model works for some, maybe even many. It doesn’t work for all. I’m a big proponent of crafting your own life.
I think the majority of us don’t really retire. We just exert more control over what type of work we are doing.
Finally ! An honest accurate post regarding retirement !! thank you !!
Thanks Gayle. Glad you liked it. I try to be as honest as possible in my posts.
I realized this early. I wouldn’t feel safe having a pile of money that I should be able to live on forever. That’s why I chose a different investment strategy; it doesn’t rely on the markets going up or down or the companies paying dividends. It’s all about building monthly cash flow. Once you see the cash flow has been consistent (and rising) over a long period of time, money insecure fades away.
I’m definitely addicted to making money. I will probably always like to have more of it and I will always use it as a meassuring stick to track my success.
smart move !! how many rentals do you have ?
I bought my first property with 2 apartments this year and I’m saving up for the next one. I’m also building monthly cash flow with other alternative investments. It takes time to get the snowball rolling but you gotta start with what you have.
Apartments or condos are often a good way to break into real estate as well as house hacking.
Uncorrelating from the market is always a good idea.
wow..good for you..smart
My philosophy on the subject is as follows: when you have enough, it frees you to take the chances you may have otherwise been unwilling to take due to fear of risk. Obviously, whatever “enough” is will vary, but I am confident that most people who have reached their FI and still have income streams are doing the work more out of passion and interest than fear of the unknown, although I’m sure that does represent a certain factor.
I think that is the best case scenario.
I’ve been studying the serotonin system. It turns out serotonin is prime in animal hierarchy. High levels of serotonin correspond to high levels of status in the hierarchy. People with low levels have low status. Hence SRI’s. Money is another name for status, and the acquisition of and protection of money is primarily a defense of status. One more year is a defense of status. A side hustle is defense of status. But the defense goes to a sub-cortical level, to structures in the mid brain. The point being there is likely a biochemical rational why we hang on with such tenacity. There is likely a biochemical rational for disordered greed. I’m not saying it’s cut and dried but there is likely a sub-cortical biochemical thread that is in control of the probable outcomes in your life. In a recent post we discussed is FI equal to freedom or is FI equal to slavery? It’s likely both/and. It’s dominance likely comes from a place where we at once seek the security and leisure FI offers but on the other hand dread the death to self the loss of status necessarily inherent in quitting. So we come up with a lot of half assed gigs that look something like not quitting especially if we are RE. RE is anathema to status. Full retirement age retirement on the other hand is not anathema, it is expected and the status to some extent is protected.
Consider PGA players. Tournament players attain status according to their winning even to the point where they don’t need to qualify. Old players retire and enter the Seniors tour. Many Seniors can easily pick the pockets of lessor tournament players. Status is maintained though declines as time goes on and the senior is still venerated. I’m a retirement age retired physician and I still have my status as a retired physician. I think to some extent it’s the status of money (serotonin) that drives the FI community and all it’s verbiage and scheming. It’s the status of money that drives manipulating FIREcalc to 100% success. It’s the status of money that causes one to whip out “mastery of real estate”, or financial blogging or consulting or what ever other dodge you come up with as a sop to loosing status in a “society”. One release is to go ahead and plan your retirement with fine granularity until you die and into your legacy. Planning for FI is at best half way there. If you retire at 30 you have 60 years to look forward to constant worry. If you plan into your legacy you will have planned beyond your death. If it’s a good plan you will then have nothing to worry about and you will know freedom. Another is to worry about yourself as compared to yourself. It’s your life, If you spend your time worrying about MMM or GCC you just as well spend your time pissing in your boot.
I think we do a lot of pissing in our boots. I like equating money with status. At some point we must learn to let go. Granular planning helps. But in the end, we really don’t like uncertainty.
I agree that income helps allay money insecurity. When I retire, I will likely rely on monthly income from rentals, my pension, my wife’s pension, social security, and investment dividends. Any additional income from side hustles will be icing on the cake and I will likely not touch my investment investment capital growth.
I’m a big fan of diversifying income streams.
This is why Mrs. RB40 isn’t ready to retire. Our numbers are good and I’m secure with it. However, she doesn’t feel secure without the income. She’ll just have to work on it. At some point, the pain of working will overcome the feeling of insecurity and she’ll retire.
I’m more of a try it and see kind of person. I took some risks and it worked out.
She also gets you guys healthcare, right?
I definitely look forward to being able to scale back the closer I get to FI, but I bet I’ll have a source of income for as long as I live. Particularly if some of these more passive side incomes that I can do from home take off.
Good points, Doc G.
Side hustles from home rule. Especially with young children.
Money is more than a tool. It’s a drug. It’s hard to cut off the flow once the cash hydrant has been on full blast. The best security blanket is a quilt of $100 bills.
Sounds like quite a blanket.