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Financial Independence does not always mean that you are extremely wealthy.

Now that I do not work all crazy hrs, I get to go out with friends more. I have noticed that they have things I do not have. I notice they spend money on things I do not.

I never really noticed before. I was just working hard and saving. Ok, I did notice that I brought lunch instead of having delivery.

And I did not go to 100.00 concerts. I did not eat out on a regular basis. But I did travel. I thought I had a great house and nice clothes.

But now I see what my frieds spend on clothing. Now I see how they are always buying "better" for their houses. And their cars: My one friend leases 2 hondas 2004's. My other has a new lexes. My other friend has a Bmw convertable. Their refrigerators have those fancy icemakers on the outside. What beautiful rugs they have. I must admit. Sometimes I wonder if they thing I am living in poverty. Before I observed them, I felt rich. I have two cars: One is a 1995 with 155,000 miles, another is a 1996 with 170,000 miles. But my savings is allowing me to buy a car every 10 yrs without taking a car loan.

I guess if I wanted all those other things I would not be financially independant. Actually, for my friends, my net worth would not mean FI for them.
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foolkath writes:

Financial Independence does not always mean that you are extremely wealthy.

I guess it depends how you choose to define "wealthy". I would rephrase your statement as follows: "The ostentatious display of the trappings of wealth does not necessarily imply financial independence."

I define "wealthy" as having the means to live comfortably, independent of the necessity to work for wages. My definition does not require distinctions to be made between those who are merely wealthy and those that are very wealthy or extremely wealthy. Purchasing lots of toys and expensive clothes does not imply the existence of wealth; it only means that those individuals have a lot less wealth than they otherwise would. In fact, such displays of wealth frequently indicate the opposite . . . . a lack of financial acumen and a need (born of insecurity) to seek social status and the respect of others through superficial displays.

It matters not what your friends think about your financial standing. It only matters what you think.

Regards,
FMO
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"It only means that those individuals have a lot less wealth than they otherwise would."


I probably would have a lot more wealth than I have if I gave up my dance lessons. But my dance lessons increase my quality of life. And I don't go into debt trying to pay for them. FI to me, means being able to include the "extras". In my life, dance is a passion of mine. In someone else's it may be that convertable.

Gee, with all this beautiful weather here, I"d like a convertable too.

So I"ll just have to review the money that is set away for my next car in a year or two. And I'll shop around til I find the one that I can pay cash for.


Living in FI is similiar to when you were saving to get here. But sometimes, you can afford something you postponed having when you were saving for FI. and believe me, it's worth the wait!
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<<But now I see what my frieds spend on clothing. Now I see how they are always buying "better" for their houses. And their cars: My one friend leases 2 hondas 2004's. My other has a new lexes. My other friend has a Bmw convertable. Their refrigerators have those fancy icemakers on the outside. What beautiful rugs they have. I must admit. Sometimes I wonder if they thing I am living in poverty. Before I observed them, I felt rich. I have two cars: One is a 1995 with 155,000 miles, another is a 1996 with 170,000 miles. But my savings is allowing me to buy a car every 10 yrs without taking a car loan.

I guess if I wanted all those other things I would not be financially independant. Actually, for my friends, my net worth would not mean FI for them.
>>


Very good observations.

For me, financial independence meant that I had the leisure time to teach two 11 year old boys how to bake pizza in a Dutch Oven using charcoal for dinner on a camping trip. They made three small pizzas and then one 14" pizza, all very good. I left them enough additional bread dough for two more 14" pizzas.

They should be able to provide a rather tasty meal for the boys in their Scout Patrol April 16th.



Seattle Pioneer
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I define "wealthy" as having the means to live comfortably, independent of the necessity to work for wages.

I'd define FI as having nothing to do with wealth. I would say that FI is completely personal. It's saying "I have enough". To one person, having "enough" may be enough to live in a log cabin in the woods, growing their own food. To another person, reaching FI may be having their investments throw off 80k per year, so that they can maintain the lifestyle they enjoy.

Personally, FI will mean somewhere around 50k or so per year, assuming our house is paid off. I notice that a lot of people associate spending money with "a lack of financial acumen and a need (born of insecurity) to seek social status and the respect of others through superficial displays". We tend to spend money at restaurants (we both enjoy going out to eat, neither of us really enjoys cooking), going to & renting movies, going on long vacations (hawaii, tropical islands, alaska, etc etc), and so on. I don't feel that any of these things are displaying any need for social status, it's just things we enjoy doing. And I feel that if we don't mind working an extra 5 years to add that much extra onto our savings so that we can maintain our lifestyle, then why not?

So I think not only does FI not necessarily mean wealthy, I think it has nothing to do with wealth. Independance can't be categorized.
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I notice that a lot of people associate spending money with "a lack of financial acumen and a need (born of insecurity) to seek social status and the respect of others through superficial displays". We tend to spend money at restaurants (we both enjoy going out to eat, neither of us really enjoys cooking), going to & renting movies, going on long vacations (hawaii, tropical islands, alaska, etc etc), and so on. I don't feel that any of these things are displaying any need for social status, it's just things we enjoy doing. And I feel that if we don't mind working an extra 5 years to add that much extra onto our savings so that we can maintain our lifestyle, then why not?

It's just a matter of what you enjoy and what you feel is worth the effort. For me it's cycling and flying, both expensive hobbies but worth it to me and they don't get in the way of my savings. As long as you plan for your it you can enjoy those vacations/ cars/ airplanes/ or whatever. However many people consume because they don't know better and they just don't understand that the reason they can never get ahead is because they are paying for last years lifestyle.

-- Dennis
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0gre writes:

However many people consume because they don't know better and they just don't understand that the reason they can never get ahead is because they are paying for last years lifestyle.

Exactly. I don't begrudge anyone the pleasures and yes, the luxuries that life has to offer. But like Stanley Johnson in the Lending Tree commercials, consumption can become a problem if it is for the wrong reasons and contrary to an individual's own best interests.

It is a national disgrace that so many people reach an advanced age with barely two nickels to rub together. Imagine the hundreds of thousands of dollars which they must have earned during a working lifetime that now provide no security. Just today the Employee Benefits Research Institute (EBRI) issued a press release contained the following:

"Workers Behind Schedule on Savings The survey found that most workers, buffeted by daily living expenses, say they are behind chedule in saving for retirement. But a large majority (66 percent) believes they will reach their savings goal by the time they stop working, even if they have only guessed at the amount of money they will need—an indication that many people's confidence may be misplaced. Why aren't workers meeting their own retirement savings schedules? The RCS found that three reasons stand out: The cost of paying everyday expenses (49 percent), child-rearing expenses (39 percent), and medical costs (35 percent). Just over half of workers (51 percent) said that high expenses are preventing them from achieving their retirement savings goals. Still, nearly 8 in 10 workers (79 percent) said they expect to have at least an adequate standard of living in retirement, reflecting an apparent confidence that they will be able to bolster their savings before they stop working or that they will be comfortable living with less. Another question, long part of the survey, found that 64 percent of workers are somewhat or very confident that they will accumulate the resources they anticipate they will need to retire. However, as previous waves of the survey have found, the 2005 RCS again suggests this may well be false confidence for many Americans: Less than half (42 percent) of those surveyed said they had even tried to figure out how much money they will actually need in retirement. Of those who said they had tried to calculate their retirement needs, 35 percent said they asked a financial advisor, but 37 percent said they came up with their own estimate and 10 percent admitted they simply guessed at the amount needed. The rest gave a variety of answers. Asked to evaluate their own timetable for planning and saving for retirement, more than half of workers (55 percent) said they were behind schedule by various amounts. But more than one-third of workers (37 percent) said they were on track. Workers reported their progress in planning and savings had changed little over the last year."

http://www.ebri.org/prrel/PR_692_5Apr05.pdf

Everyone thinks thing are going to retire but few have any savings or even a plan to achieve sufficient savings. Americans are great consumers and perhaps even greater procrastinators.

Regards,
FMO
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It's a sad story. Outside of TMF boards I know maybe three couples that have their plan worked out. It amazes me. The day DW and I finalized our plan, life got a lot easier. Knowing what you need and where you are relieves a lot of stress. It's also a great feeling knowing you're starting to get over financially. Once you get the E-fund and the basics covered you start to really snowball the savings. We now work because we want to. We know we could cash in our chips at any time and that is what FI means to me.

And anyone can do it. DW and I are living in one of the most expensive cities in America and have managed to save plenty for retirement. You just have to make it a shared priority.

As Forrest Gump said when he sold his stock in that "fruit company": "That's one less thing to worry about".

nmckay
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Nice to see you, FMO.

Totally agree that showing "trappings" most often does not mean the individual is wealthy. Often the purchase of such "trappings" indicates low self-esteem too.

I think most people who have accumulated some wealth are very low key about it. Friends get jealous, other people might try to sue, people have killed for less (as one friend said to me the other day), etc.

I generally think it is smart to downplay it if you have it. Also, most who get there do so by LBYM. Those types are not the type to flash anything other than a wry smile!

Petey


I guess it depends how you choose to define "wealthy". I would rephrase your statement as follows: "The ostentatious display of the trappings of wealth does not necessarily imply financial independence."

I define "wealthy" as having the means to live comfortably, independent of the necessity to work for wages. My definition does not require distinctions to be made between those who are merely wealthy and those that are very wealthy or extremely wealthy. Purchasing lots of toys and expensive clothes does not imply the existence of wealth; it only means that those individuals have a lot less wealth than they otherwise would. In fact, such displays of wealth frequently indicate the opposite . . . . a lack of financial acumen and a need (born of insecurity) to seek social status and the respect of others through superficial displays.

It matters not what your friends think about your financial standing. It only matters what you think.

Regards,
FMO
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Living in FI is similiar to when you were saving to get here. But sometimes, you can afford something you postponed having when you were saving for FI. and believe me, it's worth the wait!

Hi Kath,

That is the rub isn't it?!

Will you still be fit enough later to do the thing you've put off doing till later? Be it dancing or travel or whatever.

Petey

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<<Living in FI is similiar to when you were saving to get here. But sometimes, you can afford something you postponed having when you were saving for FI. and believe me, it's worth the wait!

Hi Kath,

That is the rub isn't it?!

Will you still be fit enough later to do the thing you've put off doing till later? Be it dancing or travel or whatever.

Petey

>>


Ideally, you need to carefully consider all the things that are important to you over your entire lifetime, and budget the ones that are important to you so that you can buy them when it's appropriate.

But that assumes that you have the wisdom to fairly balance the desire for travel next month and early retirement twenty years away. Ideally, you should neither neglect current pleasures nor long term needs and pleasures, but balance each in appropriate ways.

That hasn't usually been my strategy, though.

My frugal values lead me to have a bias towards saving and investing. But I listen to the needs and demands of my body and emotions, and aim to satisfy those needs and desires in suitable ways. That usually means deciding when I need to satisfy a need to get out of town or do something different, and then consider how to meet that need for recreation in an economical yet satisfying way.

The past year or so, I've been volunteering as an adult leader for the Boy Scouts and Cub Scouts. That leads to quite a bit of opportunity for low cost, fun activities. This Saturday I'll be doing a day hike with the Cub Scouts, and the following week and weekend camping trip with the Boy Scouts. I don't usually have to spend a lot of money for entertainment or recreation, because I think carfeully about how to meet my needs at low cost.



Seattle Pioneer
Who is easily entertained
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It's a sad story. Outside of TMF boards I know maybe three couples that have their plan worked out. It amazes me.

I had an eye-opening conversation...everyone else assumed that taking a loan from your 401k was normal and unavoidable. One guy was using it to pay off his vacation loan. Most of the other people were two-income couples. Even though I tried to play down what I was doing, it came out that my family (one income, six people) didn't ever borrow from the 401k, and the only reason we reduced the contribution from 10% to 8% was because of extra taxes involved in recharacterizing a regular IRA to a Roth. I didn't throw the information ou there, but I didn't lie when asked, "Do your parents help with the kids' tuition?" No, none of our parents help with tuition for the private elementary school tution.

They didn't really notice that we drive a van with 135,000 miles and an 11 year old chevy sedan. They didn't notice that three of the them had April tans from a Florida golf weekend, trip to South Carolina, and a Hawaiian vacation, while I was planning a camping trip "up north" in July. They didn't notice that this was a rare lunchtime brownbag discussion because my wife and I usually didn't accompany them for their "nights on the town." Before kids, we'd all go out, but after everyone had kids, they kept it up while we didn't. [One particular shocker--"We just don't know where the money goes." "Didn't you just spend $150 for a night at a hotel in the nearby big city just to 'get away from it all?'"]
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...using charcoal for dinner...

You know, the first time I made pizza, that's about how it turned out, too.

~w
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