The Financial independence Head Game
The Financial Independence Head Game
There really is a simple path to wealth. Financial independence may be hard, but it is certainly not complicated. Sure you can argue about definitions. You can squabble about the actual appropriate safe withdrawal rate or the benefits of investment verse speculation (I’m not going to delve into all that at the moment). Thus, it follows, that everybody and their brother should be on the way or financially independent already. Right? Of course this is not the case. I would argue that a strikingly small percentage of our population has either found this space, or has been successful in reaching the goal of financial freedom. Furthermore, once financial independence is reached, few have the emotional stamina to pull the trigger and leave a lucrative job. The reason why is both simple and confusing. Most of us are failures at the financial independence head game.
We have all the tools necessary to reach financial independence, live a life of purpose and connection, and leave our jobs at the proper time.
Yet most of us don’t.
The Power of Limiting Beliefs (Reaching For FI)
Why in the world does everybody not strive towards financial independence? One of the major reasons is the belief that it is utterly unattainable. The number of limiting beliefs is so large that they are almost hard to count. And all of them start with the single most horrible of phrases. I can’t:
- Save enough
- Make enough
- Invest enough
- Do without things
- Eat at home
- Ride my bike to work
- Build a business
- Start a side hustle
The list goes on and on. The problem with I can’t is it usually means something entirely different from it’s literal meaning. it usually means I didn’t try, or I won’t, or better yet I’m scared.
These limiting beliefs sap away success before anything is even risked. And this is the problem with the financial independence head game. Instead of embracing unsuccessful attempts, it causes many to focus on failure mitigation.
You can’t fail if you don’t try.
The Money Mind Meld (Living With Purpose)
The financial independence head game is no more clear than when considering the money mind meld. As we have discussed on this blog, our big audacious dream of financial freedom often becomes the goal itself instead of a means to an end. Financial independence should always be considered Plan B. A life of purpose, identity, and connection should be Plan A.
When meaning is stripped from life and all our energies are focused on bank accounts, reaching the number becomes a jarring, vertiginous exercise.
What now?
A difficult question to answer for one who has not built a strong identity and purpose into the financial independence journey.
The One More Year Phenomenon
There is no doubt that leaving the work place, even a disliked job, is often difficult. This is especially true for high W2 wage earners like myself. The math tells me that I could have retired a long time ago. Yet the wall of fear has kept me from going any further than my half retirement.
I have become a victim of the financial independence head game. No matter how secure I feel in the theory, I’m finding the emotional pull of the workplace and my own uncertainties holding me back.
The golden hand cuffs are a real and often self-imposed. No matter how many times we run the FireCalc simulations, we want the success rate to be 100% every time. And even then we manipulate the variables to model all sorts of disasters and unlikely events.
We are all trapped in the accumulation phase.
Final Thoughts
Reaching financial independence, avoiding the money mind meld, and escaping the one more year phenomenon should all be easy. We have math and science behind us. We have a whole philosophy of happiness to lean on. Yet, time and again, the financial independence head game turns us sure winners into losers.
We are emotional, imperfect, human beings.
Sometimes it’s hard to do what is good for us.
We’re all dealing with our own little wall of fear Doc. My new side hustle idea is to start a factory that makes golden handcuffs, that way I’ll always have some around 😉
Not a bad strategy.
After being at FinCon, I realize that this whole journey is really about attaining a point in our financial lives that gives us the freedom to pursue self-actualization. That might happen with a job, a business, or with a new life of travel or growth in areas that are just simply fun, personally stimulating or new things to try. But yes, it is hard to make that jump. Once you do, it is amazing to find that the skills that brought you here are with you always. The people who have gotten to FI have built the strength that will help them should they meet with one of those unknown scary possibilities. None of us know what our future holds, but financial security sure makes us better able to weather a storm.
I agree. We are missing the fact that being FI makes dealing with adversity better than those who are not.
There is no “wall of fear”. There is neurobiology and that is what is in control when it comes to survival. 2 sub cortical centers in the brain play against each other, a reward center and a risk aversion center. The reward center has some ability to turn off risk aversion, hence the ability to drive 100mph while drunk, but the risk aversion center operates in a way that making a risk averse choice is 4 TIMES MORE LIKELY than taking a risk even when a risk is the obvious choice (like buy low sell high). This is how humans are wired. In addition we are used to being taken care of. Healthcare, steady paycheck, vacation, a strong likelihood of persistence in lifestyle, pretty much all you gotta do is show up and the risk in your life is transferred to your employer. It’s his job to see all the T’s are crossed and I’s are dotted. If you go “on your own” you take all of that risk upon yourself. With a 4:1 risk averse bias no way in hell you’re leaving. In addition if your employer is dealing with your risk, you are “free” at least emotionally to behave with some added risk. Buy a $80K car when a $30K car will do? Hell ya you deserve that! Get your butt a million bux in debt? No problemo, I got Real Estate man! Retire early? Heck man it’ll all work out, life is simple right? Lemme see work 10 years live off the interest for 50 yea, yea, that’s the ticket, I read it in a blog. Remember Mr Reward Brain has the ability to turn off Mr. Risk Averse Brain, and Mr Cerebral Cortex doesn’t even recognize he’s getting boned. It’s the reason you can convince yourself to jump out of a perfectly good airplane. Neurobiology has an evolutionary component and Mr Risk Averse Brain is MUCH OLDER than the 1/2 inch of Mr. Cerebral Cortex. 4:1 odds? In the end we all be shootin craps. Advertising is almost entirely based on trying to turn off risk aversion. Advertising is entirely about changing the 4:1 odds.
Interesting take. The FIRE crew seems to be shooting in the eye of the risk aversion part of the brain.
FIRE uses advertising and as such IS designed to turn off risk aversion, and millions of words are published to further that sentiment. Whether it’s a mirage or real can only be known at a far future date since it will take decades to fail if it does fail. FI can be advertising (4% x 25) but also IS the act of acquiring properly risked security, enough to carry you through till death. FI is not dominated by RE but by a more rational statistical sustainability.
How good the FI plan is, is a statistical reality that is neither controlled by adverting or the biological 4:1 aversion. It’s learning to think like an AI thinks and then behave like an AI behaves. An AI would never buy high and sell low. If it bought high it would hold since recovery is statically inevitable. If it had free cash or appreciated assets like bonds, it would use the cash or sell some appreciated bonds (aka sell bonds high) and buy low even in the face a downturn because that is the correct statistical move. It would not run out of money since it was properly risked at the outset.
It’s definitely worth thinking about since in the future markets will be run by AI and if you’re making decisions based on 4:1 risk aversion, or dopamine induced emotional suspension of risk aversion, you will consistently lose in my opinion. Deep Blue (super computer) beat Gary Kasperov in 1997. Deep Blue could muster 12 gigaflops (a measure of computing power) and statically search 200 moves into the future. The Samsung Galaxy S5 has more power than Deep Blue. It can muster 142 gigaflops.