The FI Life, With ‘The Escape Artist’
Barney has been writing about financial independence, lifestyle optimization, philosophy, and psychology – with great humour and flair – on his blog since 2013.
I (Stephen) discovered Barney’s blog in mid-2018 and devoured the whole thing over a few weeks. I read many sections twice and shared the most inspirational posts with friends and family.
So as a huge fan of Barney’s work it was an honour and very exciting to have him on the Good Life guys podcast.
Stumbling On Financial Independence
Barney is most famous for writing about FIRE (Financial Independence/Retire Early). He is a leading member of the UK FIRE community.
We began our discussion with a brief exploration of what FIRE means.
In 2013 Barney stumbled across the Mr Money Moustache blog. MMM is a Colorado-based software engineer who saved hard, lived a non-materialistic lifestyle and reached financial independence at age 30. MMM’s story resonates strongly with Barney because it mirrored how he had been living for two decades.
By saving half of his income from his lucrative accounting job in the City of London Barney had amassed a substantial ‘wealth snowball’. And when he read MMM’s story and applied MMM’s mathematical equations to his own finances Barney realised that he had already reached financial independence!
What Is Financial Independence? The 4% Rule
Financial Independence is reached when you have enough money put away in savings and investments that you can live off 4% of the total each year.
‘The 4% Rule’ (or the 4% safe withdrawal rate) states that if you withdraw only 4% of a portfolio of stocks and bonds every year the portfolio’s value will last in perpetuity.
An example of the 4% rule is… if you need £20,000 per year, a portfolio worth £500,000 (£20,000 being 4% of £500,000) will supply you with your £20,000 forever.
Full financial independence is reached when you can live off 4% of your portfolio’s value. And financial independence is a natural precursor to retiring early.
FI Provides the Freedom to Focus on What’s Most Meaningful
Different people aim to achieve financial independence for different reasons. But ultimately it always comes back to a universal desire for freedom. Freedom from unwanted responsibility. Freedom from the need to hand over the vast majority of our finite hours on this planet in the building of someone else’s dream just so we can pay the bills.
Financial freedom is a means to living a more meaningful and enjoyable life on your terms. Allowing you to do more of what is important, meaningful and enjoyable and far less of what isn’t.
A Question of Values
Contrary to popular belief, the most important learning to be done in your quest for financial independence has nothing to do with investing strategies and everything to do with values.
All our behaviours stem from our values and beliefs, so attempting to change behaviours without first evaluating values and beliefs is like trying to stop an overflowing bath from flooding your house by ferociously moping instead of just turning off the taps.
The first step in financial freedom is an understanding of what we value and how financial freedom will give us more of that. Without this, we will forever suffer from conflicting motivations that pull us in every direction. We might say saving is incredibly important to us but we still eat out 5 nights a week. Then feel guilty. Rinse and repeat.
You need to lay out a hierarchy of values for these internal conflicts to be resolved. And this is far from some rapid mental calculation, to truly discover what you want from life, you must dedicate at least a day to this process.
Values are the foundation upon which everything else is built. Want to save more? Check your values. Want to spend less? Check your values. Want to retire early? Check your values.
Now, this does not necessarily mean you’ll end up sacrificing all the finer things in life. Your values are your own. Don’t live for someone else. Don’t live as you think others want you to live. But decide where your values lie so you can stop the stress and the guilt. If you’ve decided that you’re unwilling to sacrifice those brunches or monthly shopping hauls for anything, then at least you can indulge with complete assurance that you’re living life on your terms.
How to Make Frugality Easy
This simple change was an absolute game changer for me.
Instead of deciding whether to buy something purely based on how the thought of the purchase made me feel, I began thinking about how many hours of work it would take me to pay for that item.
Now I know this sounds too simple to be effective, but don’t overlook it.
How many hours of your life are you willing to exchange for that bottle of wine, that fast car, or that nice watch? This is a far better question to ask than ‘do I like this?’
And better questions beget better answers. The answer here overwhelmingly being ‘no!’
Tie this tip in with a deep understanding of your values and you’ll have an extremely solid foundation of frugality to begin building your bastion of independence – that thing no one can take from you.
Bronnie Ware – Regrets of the Dying
Bronnie Ware is a palliative care nurse who wrote an influential blog post and book about the five most common regrets of the dying.
The five regrets are:
1. I wish I’d had the courage to live a life true to myself, not the life others expected of me.
2. I wish I hadn’t worked so hard.
3. I wish I’d had the courage to express my feelings.
4. I wish I had stayed in touch with my friends.
5. I wish that I had let myself be happier.
To understand how to live the good life, it is essential to learn from those who have lived the bad life. We must know what to avoid, we must know what is truly important and what isn’t worth our time or energy.
The five regrets of the dying help put life into perspective. It becomes easier to identify what matters. In relation to financial independence, it allows us to come to terms with the fact that we will die and so must look to optimise our finite moments here for the things that truly inspire and uplift us. And deep down, we all know it’s not that Ferrari or this Armani suit.
These regrets are something to be revisited often, for our environment, the people in it, and our biology are all conspiring to pull us back into the world of consumerism and grinding and fear; and only in revisiting these fundamental truths often can we keep ourselves aligned with what will actually fulfil us.
Stages of Financial Independence
Financial independence is not necessarily a binary thing. There are degrees of financial independence. We can be closer to or further away from financial independence. All of us can organize our financial affairs and live in a way that moves us closer to financial independence.
Being neck-deep in credit card debt is being very far from financial independence. Being out of debt, and having 6 months of living expenses saved up is being much closer to financial independence.
The 4% rule is the finish line. But there is a ton of value to be gotten from simply moving along the path to FI, even when the finish line is miles and decades away!
Certainly, previous mistakes do not justify present mistakes. Therefore, your previous misuse of money is not justification for continued misuse of money. Start from wherever you are as it’s the only place you can start from, and take pleasure in the small steps forward rather than looking at how far there is left to go.
Financial Independence Is FREEDOM!
The five regrets of the dying are key ingredients to a happy and meaningful life for a majority of human beings. And financial independence provides the freedom to focus on these key ingredients. Don’t regret your life, LIVE it, and live it well.
This was a great, fun episode of the Good Life Guys to record. A big thanks to Barney the Escape Artist for taking part.
We hope you guys enjoy the wisdom he is bringing in this episode!