This is a quick guide explaining how sustainable finances can lead to deeper social connections and freedom to pursue passions, ultimately reaching a retirement culminating a meaningful and fulfilling life.
There are three ways to retire:
- Work until your government social security or employer retirement plan kicks in, then spend less than your monthly check.
- Save a bunch of money during your working years, then slowly chip away at it while in retirement, hoping that you don’t run out before you’re dead.
- Invest your hard-earned money into a source of passive income (like index funds) and keep your expenses below the level of earnings (through capital gains and dividends). Doing this means you’ll never spend your original amount of invested money, so you can (financially) live forever and never worry about money again.
The minmylife community strives for option (C), in what we call sustainable finances, also known as financial independence. The crux is in answering: how much do you need before you reach your financially-sustainable retirement? The answer depends on two factors: (1) make an assumption on how much return on investment you’ll earn in perpetuity (a safe estimate is 4%), and (2) determining what your expenses will be in retirement (and having the discipline to stick to that number). Using our calculator here you can easily find your magic retirement number.
The trick in reaching sustainable retirement much earlier is reducing your expenses. In today’s time-constrained environment we’ve grown accustomed to paying for “mandatory” products and services such as haircuts, oil changes, snow plowing, childcare, produce from the grocery store, and new outfits to wear each day. In reality, up until very recently in history, all these things were luxury items reserved for the extremely rich.
Instead, in the past, everyday people grew their own food, made their own clothes and repurposed them till they were rags, did their own manual labor around the house, and provided basic services within the family or immediate community. Exchange of money for these things is relatively modern, and the expectation that we all purchase these things, regardless of our economic status, is even more recent.
The truth is: we don’t need to buy these things. When we stop working so much simply with the aim to have money to spend on these things, we can repurpose that time to do them ourselves within our family and community. Tangentially, the social bonds which we desperately seek in today’s time-starved economy will strengthen, and as a result our community will prosper from a renewed sense of belonging and cohesion.
When you’re not worried about money, you have an abundance of time, and you have the support of your social group, you’re free to pursue a passion-driven life. This starts with deep introspection—a values analysis and brainstorming of your passions. With this mental frame work you’ll be guided through life’s decisions toward achieving a fulfilled, meaningful life. What a great way to retire!
Want help in finding your passions or identifying areas to improve your financial position? Check out our coaching page.
Bottom line: The trick to a financially stress-free retirement where you can bask in the ultimate human experience of deep social bonding and achieving a passion-filled life is to reduce your expenses, invest your hard-earned money in vehicles of passive income, and be disciplined to spend less than the returns.