What is the opportunity cost of Financial Independence?

A reader and also friend of mine sent me the following response to my FI Getting real now? post:

Nothing wrong with trying to reach FI. And it’s great you offer ways to make your earnings worth for people. Everyone with savings needs that advice. So what you write about has huge value.

There is no one recipe to fit all people in life management and aspirations, so my view is personal and limited. But I think it’s worth saying, as an alternative philosophy, because I think my goal is not dissimilar: a better life.

Better life depends heavily on the ability to enjoy today. Not just with money but other stuff too. Job, creativity, relationships, volunteering, generosity, protesting for the environment… whatever. Certainly poor money management can lead to misery, that’s another reason your blog is helpful.

Placing focus on reaching a specific point of FI, perhaps too soon, seems a troublesome goal to me because it assumes that life is flat and stable and can continue better when you reach that goal, because you will have less dependancy on money. But to do that one is at risk of missing out on today. For example, you might trap yourself in a well paid but less meaningful job. Or If your work is meaningful and you are happy, you can still limit your true potential by avoiding risks to take on stability. Life is changing all the time and what we find meaningful today we might not find meaningful tomorrow.

Assuming that when we get the right net worth we will be better off, can be misleading. The journey is often more interesting than the destination and compromising on that can lead to trouble. We are only young once and you can’t buy the energy, risk ability, and good health when you grow older. That said, we all need insurance and pension for that reason, to avoid suffering when older. A small fortune can easily get wiped out with a bad disease or other misfortune.

In my view, FI is something much bigger than ability to paying the bills plus savings. It is the power to influence the world around you, being financially strong and mentally eager to make things happen as you wish.
But real financial ambitions involve real risk. The less the risk the smaller the reward. And as you well know, one can afford to take more risk the younger one is. Even an early retirement means wasting productive years for the payout date.

Now, no doubt we all need advice on managing wealth better to reach a better future! And often, this is a rewarding game in its own right.


Effectively, Spyze is asking: Does FI come at a high opportunity cost?

So I started writing a reply to this comment and caught myself in almost a 1000 words long comment. Hence this post. Also, since meaning and purpose are quite personal to each individual, I want this post to trigger a discussion if possible. Please write a comment with your views!

The reason I like this comment so much is that it challenges the status quo of FI. I often try to find views different from my own. That’s how I get a better understanding of things and avoid confirmation bias. Also when learning a new domain, it’s often meaningful disagreement that leads to better outcomes. You’re not really learning anything by reading things you already agree 100% with (unless it’s just for fun).

I’d argue social media and the personalised google searches of today have made it even harder to find different opinions. Anyway, I’ve already deviated too much from the topic, somebody please stop me! On to the FI:

First of all, thank you for such an insightful comment. I couldn’t agree more that the journey is more important than the destination. As I’ve mentioned in previous posts, I strongly support the argument that you have to live happily on the journey to financial independence. Depriving yourself until the FIRE point is only going to make you miserable, therefore you should find happiness along the way. 

Trading off experiences, creativity, work etc now to reach a particular money target in the future is pointless. For once, as Spyze has rightly said, you’ll miss out on presence (YOLO..). But more importantly, there’s no magic candy at the end of the journey. FI won’t make you happier.

In fact, people who’ve already done it describe it as a short period of elevated happiness which then just falls back to pre-FI levels. Plenty of examples such as the Young FI Guy blog and Retirement Investing Today who struggled to find purpose after reaching FI and moving to Cyprus.

It’s only when they change their lives to pursue meaningful activities that things get better. That you can do before or after FI. I think it goes without saying that if you can find a job you love (or create one) that also pays very well, then you’ve already won the game. But 1) how many people have this opportunity and 2) how much can you sacrifice in order to pursue more meaningful work (such as building your own company for instance).

This blog is a good example. It takes a lot of my free time and a lot of research to write some of the articles, let alone interact with readers daily over email. I don’t mind spending it as it fills me up with joy and creativity. It’s hard work but it’s good work, not a job. I could postpone writing and sharing my finance knowledge until I have all the time in the world. But that would be postponing happiness.

So I’m squeezing 4-6 hours per week out of my after-work free time to do it. Wouldn’t it be great if I had 4 hours per day to spend on it? Of course it would. But guess what, it doesn’t bring enough money. I wouldn’t be able to support my lifestyle.

As a friend who’s winning the startup game (3rd year, good fundraise etc) recently told me when I asked him why he moans about needing a good salary, his response was: “Yes, I’m building a company, but I cannot eat equity”.

One needs some money to live. On one extreme, a person may work on extremely meaningful work and make close to zero money. Or one can make millions but be miserable day-to-day. Now wouldn’t it be great if one can do what they love while accumulating lots of money? Of course, it would but it’s less common. Find a job you love and you’ll never have to work a day in your life goes without saying.

Even programmers that are generally a very satisfied group of people, have to do less enjoyable things like pointless meetings, file bug reports and do boring work from time to time.

But it’s a matter of risk appetite. At the end of the day, we all have to draw a line in the sand and pick our battles. I believe this is where the risk profile comes in and it’s what makes this question so personal.

No one can predict the future. If one is stuck in a miserable job and counts “9 years to FI” then that’s not a great way to live, is it. Equally, when you have good colleagues, work in a nice environment, a well-paying job that’s good enough, but you decide to quit everything to pursue your passion, I find that equally dangerous.

So I’m openly asking this question: is there a line between meaningful activities and financial independence?

opportunity risk

What’s the optimal amount of risk?

In corporate decision making, the optimal amount of risk can be summarised with one word: Enough. The risk a company should take should be enough to meet its goals (maximize shareholders profit, service debt, build a competitive advantage through innovation etc). Take more risk and you’re risking going bust. Take less risk and you’re not strong enough to beat the competition.

Having a goal means that you have a tangible target. By definition moving towards a tangible target means you’re not moving towards different ones (unless they’re on the way). Similarly, pursuing financial independence means you need some income and controlled expenses to create a surplus. Spend less than you earn -> Invest the surplus.

Therefore, one cannot take extreme risks and at the same time pursue FI, not as a primary goal at least. Which is in line with what Spyze is saying.

The opposite is true as well. One cannot just save without taking any investment risks, or they will never manage to create a cashflow that’s high enough to remain independent.

Therefore whether financial independence is troublesome or not, depends on each person’s goals. I place my freedom to do what I want higher than my wish to change the world or become the CEO of a multimillion dollar company. Different people want different things.

I’m quite happy knowing that every year my passive income replaces things I used to have to do with things I choose to do.

Although this blog is usually about money, it may sound strange that accummulating millions of ££s is not the goal. To do so, that would require me to take a higher risk than the one I currently need in order to buy control of my time.

After all, this blog is more about living a lifestyle designed around fulfilment and less about becoming rich. If reaching a particular net worth was the only goal, I would do things very differently (not live in a £600k flat, take expensive holidays or buy lots of gadgets to name a few). Or if making millions was the goal, I wouldn’t be working for someone else, but more likely try to build the next big thing in my private company while also working harder.

People often fantasise about making millions in the next venture only to fall prey to survivorship bias.

It’s not a particular wealth target I’m obsessed with. It’s not really about FI but the lack of FI that annoys me. The need to depend on clients/projects/salaries to support my lifestyle. Time is extremely valuable to me because it is a finite resource and it is essentially mine. I can trade my time away for money by working a job, but I can never buy it back. It is just gone…

I may be quite lucky that FI comes natural to me as part of my high earnings / frugal lifestyle. Most of my happiness has always come from simple things and mostly from creating experiences. And since I get no joy from owning toys such as Louis Vuittons and Aston Martins, becoming financially independent is kind of inevitable.

To sum up, FI is not going to make you happy just by reaching it. But FI is a happiness enabler. Selling my time for money is not the goal. The goal is to be financially able to do the things I do today without having to “rent myself” out.

The power of having options in life is underestimated. For example, I could decide to work for 6 months on my algo-trading bot which I used to build and perhaps release it as a software to the world. Or I can help readers manage their finances better by dedicating myself to blogging full time. On the more recreational side, exploring the world with slow travelling and raising kids come to mind.

All these activities are very meaningful to me but involve a risk higher than my threshold right now. The risk is that they won’t bring enough money to maintain my standard of living let alone secure my future. And it’s one that I cannot afford to take.

I accept the argument that FI limits risk taking to a certain extent while pursuing it. But to play devil’s advocate try to answer this question: Out of 100 people at work, how many would work for free? Continue at their current role but without getting paid anything. 1? Maybe 2? Are the other 98 reading Foxy Monkey and pursuing FI? Probably not. So why are they’re not moving since they’re not perfectly happy?

Some want a good work life balance, are happy enough, some others are lazy, or just incompetent. But most importantly, some people are just not risk takers. Not everyone seeks higher risks and that’s ok. Otherwise capitalism wouldn’t work. I guess that’s human nature too.

Therefore the question still remains: Would a person do something differently if FI wasn’t their primary goal? I think most people wouldn’t but that’s just my view.

Ok, that was a long monologue… Time to hear from you in the comments!

Let’s Meet This Thursday!

foxy monkey meetup libertine pub

This Thursday, 17th of October is our little gathering. Please come along, I’d like to meet as many of you as possible and have some meaningful conversations! You’ll find me in this cosy pub.

A few people already said they’re coming which is great!

Where: The Libertine Pub, 125 Great Suffolk St, London SE1 1PQ
When: 18:00 – 21:00

Please don’t hesitate! Let’s have a drink, share some helpful tips and have meaningful conversations around personal finance, investing, career, etc.

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3 thoughts on “What is the opportunity cost of Financial Independence?”

  1. For mine, financial independence is an enabler rather than a goal. It provides the luxury of choice about how time gets invested, and also takes away the excuses.

    The thing is most folks who were miserable before reaching FI will be just as miserable afterwards (albeit possibly miserable about different things). Happiness, contentment, fulfilment, and all that good stuff comes from within rather than an arbitrary cash flow or net worth number.

    So to me the financial good habits or discipline instilled by pursuing financial independence are a good thing, something most people would be better off were they to apply them to their own finances.

    The sexy marketing bit to help sell that message, the seeking early retirement part, is in many cases a bit of a fools errand. The seekers could make changes and choose to be happier/less stressed/more balanced today but instead defer it until some arbitrary point in the future.

    You’re right that we can’t bottle time. We also don’t know how much we get. The day after reaching FI we could be abducted by aliens or hit by a bus. If we didn’t enjoy the getting there part, then we’re doing it wrong.

  2. I’ve often seen that risk avoidance leads to far greater risk. Seen that at a personal level, at company level, at a country level, and we all seen it with certain huge companies who went bust 💥 because they failed to change and adapt see, Thomas Cook. See, changing involves big risk. Especially when you are in a successful operation – well, sort of.

    One can rightfully think, “better is the enemy of the good”. But it’s important to distinguish what are we are after here? Are we after lifestyle? earnings? comfort? wellbeing? Fulfilment? Security?

    I have noticed that people value lifestyle and earnings more because these are tangible and measurable and have a straight up impact on life. Fullfilment is hard to measure and changes all the time. One should not expect a life of constant fulfilment or walk in the park. For one thing, it can be boring.

    That said most people unfortunately, struggle to find their true purpose in life. Some childhood dreams, (to be the best footballer player or a rock star) die later on in life. Some take a deep breath and change career mid-way through and others dive into midlife crisis. FI seems a goal for the affluent generation who are blessed with high salaries and small assets to play around with. That is a game in its own right and to a meaningful to a lot of people. Whether that’s a mission for life… I am not sure.

  3. This is not a race to most risk-taking but a balanced life with happiness at its core.

    As Maslow’s pyramid shows, once you’re healthy, safe and warm, then friendships and self-esteem come next. Self-esteem is boosted by doing challenging work and feeling valued. These are two very powerful motivations on the way to fulfilling all your needs.

    For me, FI is just a state where you will have more options. In business terms, more options to be more selective about your work, your clients, your partners, your working hours etc. And of course, how you want to split your life between work and non-work activities. Having options is underrated and probably the most intangible asset of FI. Earnings and net worth are just pointless without defining what they represent to each one of us.

    Owning big assets is not the end game for everyone, nor is taking big risks. Some people can be happy with less as long as it buys them what they want. Others may be multi-millionaires owning big assets. But the former may have something they latter won’t have. Enough.


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Hi! I’m Michael and I love writing about different ways to earn, save and invest our money. Coffee addict :)

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