Fighting the Financial Independence demons

Like other solitary human endeavours, the road to financial independence (FI) is long and daunting.

The perfect conditions for demons to materialise and siphon away your confidence!

Catching you off-guard, they snicker in your ear that it will all be for naught.

Whoever gave these psychological trolls the log-in credentials to our minds wants shooting…

…except that it turns out to be us. If you’ve ever sent the self-sabotage brigade into battle against yourself then you may find the following scenarios familiar (and possibly the strategies I’ve used, helpful.)

Death

How about a nice, easy one to warm us up?

Naysayers ridicule FI-ers with the classic: “You might drop down dead tomorrow.”

Sure, it’s a statistically innumerate cliche, but it’s hard to shake the nagging fear that they might be right.

Over-emphasising the small risk of a catastrophic outcome is a known cognitive bias. So forgive me, but I often wondered how Mrs Accumulator and I would respond to an untimely diagnosis.

Would I jack it all in for a final few months of trying to make the last memories the most precious of all?

Or, would I work on in an ill-conceived attempt to give Mrs Accumulator more to fall back on?

(You’d think this one answers itself, but demon-slaying isn’t logical.)

I stopped the gob of this demon with a few pieces of paperwork, as follows.

Life assurance

The policy would have paid enough to see Mrs Accumulator alright if it had been needed. I cancelled the policy once we hit financial independence.

Monevator has some insurance articles that provide excellent food for thought.

Emergency instructions

A handwritten letter lays out where to find everything, clear instructions on what to do, and who to call for help.

Like many couples, we split family investment duties like this:

• I’m obsessed.
• Mrs Accumulator happily outsources the detail to me.

That’s just the way it is, so I’ve done my best to create a paper trail. It includes ‘boil it all down to a Vanguard LifeStrategy fund’ simplification measures, and ‘call The Investor for guidance’ emergency ballast. TI is an old friend of Mrs Accumulator as well as mine.

Obviously I’m trusting that TI will deploy his passive investing 101 module and not set Mrs Accumulator up with a portfolio of his favourite meme stonks, as featured on WallStreetBets.

A will

This should be obvious but it’s often missed by couples who get together early in life, never marry, and forget that they’re not as young as they feel.

Attitudes to death matter when thinking about these precautions. You may think it’s morbid, I think it’s practical.

Still, I wouldn’t blame anyone for putting the Admin Of Death at the bottom of their to-do list.

The payoff on completion is that it’s very reassuring to know you’ve done what you can.

Mental health setbacks

We don’t have a great tradition of talking about mental health in Britain. And it’s just occurred to me as I write, that I’ve never talked about this with anyone.

Some corners of the internet make financial independence sound like a short sprint to the finish line, blowing kisses to well-wishers along the way.

In reality, it’s a slog. The danger of a breakdown cannot be discounted.

It happens. I’ve seen it. We probably all know people who’ve been set back years, or permanently diminished, or quietly get by nursing a drink or drug dependency.

I’ve put myself through personal hell a few times. Though the stress was surmountable, it has left its mark. We’re all feeling our way through the dark, but you start to get a sense for where the cliff edge might be.

There’s a school of FIRE1 that says ‘cost-cutting is for the birds’ and that you must scale your income. Hit the career accelerator, show the CEO your brass nuts, and drive your pay up, Up, UP!

Survivorship bias tells us we’re not going to hear much from people who try that, and then burn out.

That was one risk I didn’t want to take. I decided to level out my career, and to focus on what I knew I was good at.

I found a mental comfort zone where I still accepted challenging assignments but I didn’t risk being overwhelmed.

This strategy meant that bonuses and merit rises kept the savings rate climbing but there was no boost from a big promotion.

There’s a small ego-hit to take but this was the right move for me. My overriding goal was to leave work with my sanity intact, not to win a few more pips on my epaulettes.

If you’re young, you absolutely should climb the career ladder as high as you can. The rungs become narrower through your 40s though, and can turn as slippery as snakes. So it can pay to hold fast rather than try to knock another 18 months or so off your timeline.

My other hedge against prematurely failing health was to take out an income protection insurance policy.

I discontinued this as soon as financial independence was within touching distance.

Loss of joy

This fear could be lost on anyone who became accidentally financial independent, or who is naturally frugal. But if you get there by suppressing your inner consumer, you can worry you’re forgetting what life is all about.

Consumer society causes us to over-identify with what we buy. For example:

• I shop in Waitrose.
• I eat out twice a month.* (*Life before COVID.)
• I deserve a gorgeous espresso machine.
• I am this chic outfit or sporty convertible.

You might get into stormy ‘We can’t afford that’ rows with a spouse. Or wonder what you’ve become when, instead of enjoying a night out with mates, you’re regretting the impact on your savings rate.

Will you be a joyless husk after a few more years of this?

The most important lesson I learned was to ease up a little.

I did charge hard at the mortgage. I’m not saying I’d have risked scurvy to pay it off quicker, but I didn’t spare the horses.

However I knew I had to pace myself better through the rest of the financial independence marathon.

• Good food is important to us, so let’s not skimp on that.
• But home-cooking proved better than restaurants any day.
• Go out with your mates and colleagues to the pub, but feel free to say ‘no’ sometimes.
• Also, everyone loves a summer evening in a park with a few cans and a frisbee.
• Paying up for quality makes complete sense for items that form the backbone of daily life. Computers, bikes, and comfy mattresses come to mind for me.

Never forget the value of things that cost little but mean a lot:

• Connecting with an old friend.
• Helping someone, even a stranger.
• A walk with family.
• Reading a book.
• Playing a game.
• Being silly.

Remembering the things for which I’m thankful helps, too.

“I’ll never get there!”

The middle section of FIRE is deadly.

After you’ve laid down your plans. After you’ve poured money into a cheap global tracker. When there’s nothing to do but rinse and repeat.

FOR YEARS!

You gotta gamify your brain because, without positive feedback, it’s gonna look for trouble:

• The plan’s not working. Quick! Change it!
• Why aren’t I FI ALREADY?
• I can’t go on like this.

I found two good ways to combat this.

Identify with your cause

It’s much easier to keep the faith if it’s part of who you are.

Yes, I am advising you to self-indoctrinate. You can brew your own personal FI Kool-Aid by making a:

Private commitment – Reveal your plans to a small circle of confidants that you don’t want to lose the respect of.

Public commitment – Find your community then nail your colours to the mast. Knowing I’d have to answer to the Monevator Massive has helped keep me on track.

A blog is mucho work though, so if you’re not feeling the TikTok alternative, you can cry “Freedom!” via FIRE-friendly communities such as:

• The FIRE UK subreddit
• Money Mustache Forum
• Early Retirement.org
• The Early Retirement Extreme Forum
• Your local FIRE Facebook Group

Make it part of your secret identity. Everyone’s got a hidden talent. The sort of thing we’re supposed to confess at some hideous dinner party, just after dessert and before the wife-swapping.

Being on your way to millionaire next door status is massively satisfying the next time some blowhard is banging on about their boat or is getting Glencarry Glenross on your ass: “I drive an $80,000 BMW, that’s my name!”

Milestone tracking

The second technique mitigates the financial independence journey being featureless like a trek through the Sahara. You can create a strong sense of progress by inventing your own milestones. Lots of them.

Here’s some examples:

• Recording your monthly or quarterly savings feats.
• Tallying your annual and semi-annual progress.
• How many months or years could you take off work if you reimagine your FU wealth2 as an emergency fund?
• How long would it last if you went part-time?
• Is your pot enough to live on in old age if you throw in a State Pension and compound interest?
• Is it enough to support your significant other if you did get knocked down by the proverbial bus?
• Can your savings to-date cover life’s essentials if not the luxuries?

Reward yourself by dancing a secret victory jig every time you pass a milestone. Dream up as many as you can. That way there’s always a moment to look forward to, along with the next holiday, the next date night, or whatever it is you treat yourself with.

Living in the moment is a nice trick but it’s hope that keeps us going.

Losing your job

The nightmare financial independence scenario is suffering a major drop in income with little hope of securing employment at the same level ever again.

You may not fear this. But if you work in a declining/hollowed-out industry, or a one-horse-town, or an occupation where ageism is rife, then it’s a clear and present danger.

Achieving financial independence now becomes a race against time.

The question is do you go all-in on your job in an effort to keep it? Doing so, you could raise your skill levels. Or over-deliver such that they’d be insane to fire you, for instance.

Promotion and pay rises could follow.

Or burnout and irreparable damage to health and relationships.

Even then, you could fall victim to politics or your function being outsourced to Narnia or wherever. (Those fawns will do anything for money.)

Alternatively, you can hedge your bets with a side-hustle that delivers instant extra cash and potential second career optionality.

I chose to pursue two very different side-hustles.

One I could do when brain-dead. It didn’t matter how knackered I was, I could always put an hour or two into it, and so make a few quid for the FU fund. It wasn’t fun, it wasn’t leading anywhere, but it wasn’t demanding either. A fair exchange.

The second side-hustle was an enjoyable outlet for talents no longer required on my main career path. That side-hustle is Monevator.

I’m pretty sure all my Monevator research could help me to transition to a new career in financial planning, in the event that I needed to. But I decided staying put was simpler and less risky.

Still, a side-hustle that blooms into a second career may revitalise you to the point that you hit financial independence, but no longer want to retire.

Or it can provide you with enough structure to help you adapt to your new life of leisure.

(Monevator is a disastrous time-sink from a hourly wage p-o-v. Do I regret it? Not one bit).

Stock market fail

This dread comes in two varieties.

Scenario one. You’re all-in on equities. A rapid market run-up puts you on the brink of financial independence but your eyes are dazzled by pound signs and hopes for more, more, more!

The market promptly bombs 30-50%. As a result it takes years to recover and your morale is shattered.

Do not be fooled. This can happen to anyone. Don’t believe the 100% equities hype. The Fed may not always be on your side.

Accordingly, a good few years before you make your financial independence target, put at least 40% of your portfolio into high-quality government bonds. They won’t earn much these days, but they will preserve your capital.

The exception is if you really don’t need your money (you’re never gonna retire) or your savings rate is super high (so you don’t really need the stock market to do the heavy lifting).

Scenario two. The market flatlines. It doesn’t blow up but it moves sideways during the years you’re stretching for financial independence.

This is just bad luck. I hope it doesn’t happen to you. If it does then know the stock market doesn’t need to do much of the work if you can get your savings rate high enough.

At a 70% savings rate, you can hit financial independence in ten years even if the stock market returns just 1% a year.

That’s one year longer than it would take you at the historic stock market average of 5% per year3.

The same returns create a difference of six months if you can push your savings rate to 75%.

Fighting your own demons

Hopefully your financial independence demons are infrequent guests, but we wouldn’t be human if they didn’t dine on our brains every so often.

I hope this post gives you some fresh meat with which to distract them.

I’ve made it to the other side, finally. But if you’re still wandering around the financial independence wilderness then take heart.

It does get easier and one day you will be flying.

Take it steady,

The Accumulator

1. Financial Independence Retire Early.
2. FU wealth is being rich enough to say – cough – “goodbye” to your boss on a whim.
3. In real, inflation-adjusted, terms

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