The Simple Path
The Simple Path
I have argued before that there is a simple path to financial independence. This is no big secret. Maximize income. Save. Invest. Side hustle. Simple, yes. Perhaps not easy though. You would think that it would be in the grasp of the great majority of the population to eventually attain such a goal. Maybe financial independence is too lofty, but at least financial security.
While I think this discussion is fairly pedestrian, it does bump up against something far more interesting. Being part of this community and reading all the hoopla and press lately, it is easy believe that this is a grass roots movement of the people.
I think this belief is wrong. Financial independence will always be part of the fringe.
The American Dream Script
Perhaps the biggest reason why the simple path lacks resonance is that it is somewhat at odds with the American dream script. While both the FI community and your typical citizen embrace the idea of humble beginnings, our greater culture espouses a far different view of wealth.
The point is not just to overcome one’s economic woes, but rejoice in the luxury and splendor one can afford after doing so. The American dream is nothing without the big car, showy house, and exotic vacations. All things the average Jane and Joe Jones buy into.
If you think you are going to convince the Joneses to be frugal and budget carefully, your sadly mistaken. We’ve been taught to rejoice in the making of money, not in the careful management of it.
The Lottery Mentality
For many, the simple path to wealth is akin to playing the lottery. You are either blindingly lucky or exceedingly skilled. Either way, most Americans believe that the odds are against them accumulating wealth. The idea of having a million dollars in the bank feels like a pipe dream.
We accept mediocrity because we have been taught that rank speculation or impossible feats of strength and intelligence bring wealth. We quit before even starting because the journey is far too long and arduous.
Most give up before they have even tried.
You Only Live Once
The simple path is further destroyed by the you only live once philosophy. Not only does the American dream script focus on the spending of wealth, but the lottery mentality teaches us that the likelihood of reaching financial independence is fleeting. Thus, if you get a little money in your pocket, why not spend it?
You only live once!
This attitude, however, insures that wealth accumulation is blindingly slow. Then, when the populace realizes that life actually continues far past the twenties, there is a huge amount of sacrifice necessary to keep one’s head above water. The power of compounding has been lost for decades.
There are many lives lived ( many new beginnings and endings) between the age of thirty and eighty. Most will have little funding to support these lives.
Final Thoughts
The simple path will never catch on. Financial independence will remain a mystery to most. It is not supported by the American dream script. We have been fed a lottery mentality that eschews simplicity. We hang onto YOLO when we are young, and then pay for it dearly when we get older.
Changing this will take a lot more than passionate people and a few catchy acronyms.
It will take revolution.
‘Financial independence will always be part of the fringe.’
Agree.
‘We’ve been taught to rejoice in the making of money, not in the careful management of it.’
Yes, this can be a fatal mistake. Almost any level of income or wealth can be outspent or depleted.
Although there are some people on average / below average incomes who achieve FI. I think that usually an above average or ‘high’ income will be a pre-requisite to achieve FI.
‘most Americans believe that the odds are against them accumulating wealth’.
Isn’t there some truth to this belief. Expensive accommodation and food, poorly paid and insecure work, shallow professional networks and low access to capital and higher income jobs mean that the accumulation of wealth does appear to be an uphill battle for the average person. I’m not saying that these obstacles are insurmountable but they can certainly be daunting.
‘It will take revolution.’
But where would the revolution come from, and why? There are many vested interests that benefit from the status quo (including members of the FI community, arguably the value of investments largely derives from excess spending corrected / received from third parties). If you’ve ever seen the Matrix, you’ll recall that some preferred being plugged into the system and didn’t want to ‘wake up’ and face the reality of their situation.
HH
Completely agree
I wouldn’t call the path simple. If you want to be wealthy you need to be strictly mechanical about it. Strictly mechanical in a risk optimized portfolio will not hit a home run. It will merely and consistently bat in base hit after base hit year in and year out.
Isn’t that simple? Maybe not easy but simple?