Financial freedom seems to be the ultimate goal for many people. Early retirement has remained a popular possibility in business to carry out cost-saving "restructuring" But as great as the idea of retirement sounds nowadays, there is also a downside to this: retirement increases the likelihood of clinical depression by 40 percent.
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Financial freedom seems to be the ultimate goal for many people. You can read about the blessings of early retirement all over the internet. The motto is: save money for a few years like crazy. Be cheap, invest with a high return, and then give up your hated job. What a dream!
Well, there are fewer possibilities until financial independence. But that doesn't matter because consumption doesn’t make you happy anyway. At least, when you listen to those who endeavor an early retirement and financial freedom.
Frankly, this hype about early retirement, financial independence, and especially frugality is getting on my nerves. It is time for a counter-speech!
The Original Idea Of Retirement
At the end of the 19th century, the average life expectancy was only 35 to 38 years. Therefore, people hardly needed to think about retirement. Those, who got significantly older, just continued to work. Or their children took care of them when they could no longer carry on their job.
In Europe, the development of a statutory pension system began in the 19th century. In Germany, for example, Chancellor Otto von Bismarck introduced statutory retirement insurance in 1891 in addition to health insurance.
It was a modest social net of benefits that Bismarck had created - but it was exemplary in Europe and a novelty at the time.
It was more than overdue because industrialization led working people into financial misery.
Bismarck recognized the danger. With these first social laws, he attempted to tie workers close to the state and prevent their radicalization. In other words, the social system was based on political calculation rather than charity.
This is also reflected in the retirement age: entitlement to a pension was possible from the age of 70 – an age that most workers at the time barely reached. After the First World War, the age limit was lowered to 65 years. But even this age was still difficult to reach at the time.
However, this development was very welcome with the industrial revolution. In this way, the factories could elegantly get rid of older workers, whose productivity continued to decline the older they got.
To this day, early retirement has remained a popular possibility in business to carry out so-called cost-saving "restructuring.”
From 100 to Zero
But as great as the idea of retirement sounds nowadays, there is also a downside to this:
A found that retirement:
Decreases the likelihood of 40 percent of people rating their health as very good or excellent.
Increases the likelihood of clinical depression by 40 percent.
Increases the probability of being diagnosed with at least one physical condition by about 60 percent.
Hence, what sense does it make when an arbitrarily chosen age limit is reached to reduce the work from 100 to 0 percent?
What are the reasons that motivate people to save money for early retirement voluntarily, considering these facts? Or to ask differently:
Why Do People Pursue Financial Freedom?
The psychologist presented his theory of the 16 motives in life in the 1990s. These act as a driving force for the human psyche:
The 16 basic needs, according to Steven Reiss:
Acceptance: The need to avoid criticism and rejection.
Social contact: The need for friendships.
Honor: The need to behave with moral integrity among a social (ethnic) group.
Romance: The need for sexuality.
Eating: The need for food.
Family: The need to raise one's own children.
Idealism: The need for social justice.
Physical Activity: The need to move one's muscles, to exercise.
Power: The need to influence other people’s will.
Curiosity: The need to learn.
Order: The need for structure and stable, predictable environments.
Revenge: The need to get even with someone.
Calm: The need for inner peace and to be safe.
Saving: The need to collect and accumulate material goods (also assets).
Status: The need for prestige, for social importance.
Independence: The need for self-sufficiency and individuality.
What role do these basic psychological needs play in our lives?
To simplify it, we feel happy when a basic need is satisfied above average. And we feel unhappy when the same basic need is unmet. So far, so good.
The thing is that every person has an individual constellation of basic needs. Someone has an above-average need for physical activity. Without exercise, this person feels bad. Another person has a distinctive need for rest.
He or she may go well without sports, but not without reading cozily on the couch.
Therefore, anyone who strives for financial freedom or early retirement most likely has an above-average need for independence combined with the urge to save (basic needs 14 and 16). Wow! Do you see where it leads to?
Why Don't More People Want to Become Financially Independent?
How can it be that some people strive for financial independence, and others do not? Is it because they have not yet found the corresponding financial blogs on the internet? I do not think so.
But something else is much more likely: As we have seen above, the basic needs 14 and 16 are not superior psychological motives for everyone! Other needs are more important to them.
For some people, the pursuit of power may play a greater role. For others, it may be status considerations that outweigh the need for independence. Those who retire early because of financial freedom would lose these preferred psychological motives.
Hence, it’s a question of the individual constellation of basic psychological needs that is behind the pursuit of financial freedom.
When the Job Sucks
Let's take a closer look at the need for independence. I have spent many hours on financial blogs dealing with financial freedom. I found some statements there that sound something like this:
Work. It means spending time on something I only do to make money. Although I enjoy my job, if I didn't have to do it, I probably wouldn't.
The system wants you to work until you are 70? "F***ck you!" Your boss sends you to the new subsidiary in the back of beyond? "F*ck you!"
Bored with the city you live in? Say “F*ck You!”, and start over somewhere else.
Honestly, who doesn't dream about it from time to time? When you get stuck in traffic on the way home in the evening. Or waiting for the bus to work in the drizzle of the winter morning.
Then being bawled by the head for trivial things, and having to spend the rest of the day being annoyed by the laziness and stupidity of colleagues.
All these impositions will vanish once the promised land of “financial freedom” is reached, right?
Therefore, the solution can only be: Suffer at work for a few more years, drastically reduce expenses, and save like a maniac!
Anyone who saves 70 percent of the net income can quit the job after 9 years. A great thing, because now you can finally do what you really enjoy.
The Question Is: Why Don't You Do it Here and Now?
Why are you willing to bear the challenges of this job for another 8, 10, or more years? Are you your own enemy? Do you hate yourself so much that you are willing to torment yourself for many years?
What I’m trying to say: Who says that once you've started a job, it's the end of the road? Where is the will for professional development and change? Where is the ambition to try something new in professional life? Becoming self-employed, starting a company?
I get the impression that among those people seeking financial freedom are many well-earning academics doing their job without any pleasure. And they seek salvation in financial independence.Of course, you can do it like this.
However, I find it quite sad to spend valuable years of life in an unsatisfied situation to be "free" sometime in the future. Consequently, the desire for financial freedom means that you don't feel free today!
And I find it whimsical that even younger people who have barely left their teens are already thinking about things like financial independence or "passive income". What kind of impression of work must they have to be seeking an exit before earning any substantial income?
4 Reasons Why Early Financial Independence Is Unimportant to Me
The emphasis is on early. Of course, it does make sense to become financially independent from a job until old age. This means, around age 60, I want to reach the point where I no longer have to work for money. That's why I build wealth through options trading and investing.
But "early retirement" or even "extreme early retirement" doesn't matter to me for the following reasons:
1. I Don't Like Financial Deprivation
I say yes to saving money, investing, and long-term asset accumulation. I pursue financial security and would like to achieve my financial goals.
But I definitely say no to frugalism, greed, and penny-pinching. Because that's just not the way I want to live! I don't want to have to ask myself every day what I can live without, like hardcore frugalists.
Of course, it’s nonsense to promise happiness from material possessions. And status symbols are more than superfluous. But I don't watch every penny in the supermarket or look for clothes in second-hand shops.
And if I feel the need to put money into my hobby or technical gadgets, or visit a fancy restaurant, then that's what I do.
2. I Prefer to Live Here and Now
In any case, I want to enjoy my life today and not in the future. Since my work doesn't torture me, it doesn't make me feel unfree or trapped in a hamster wheel. I won't say I love my job more than anything else. But I really like it, and I like to go into the office.
The only thing that drives me crazy is when the alarm clock goes off at 6 a.m. But is that the reason for saying I want to be financially independent? Or is it a reason for you?
If it’s the case: Do you have any idea when rich people get up? Some at 3 a.m.! You do not believe me? Then look at the daily routine of Mark Wahlberg, Dwayne Johnson, Elon Musk, Marc Zuckerberg, and all the other successful people.
My “work-life balance” or rather my “work-leisure balance” is already good today. Why should I change anything about it? And frankly, I can't imagine that being financially independent of employment would make me an even happier person.
Especially not if in return, I have to be cheap for several years as a frugalist.
3. Financially, You Are Never Really Free
True financial independence (including passive income) is nothing more than an illusion. Because if income from a job no longer finances your life, this "job" must be taken over by capital income like dividends, interest, or rental income.
In other words: Even with financial independence, there is a dependency on alternative sources of money.
On the one hand, some of them are dependent on market developments. On the other hand, in political decisions, if at some point a socialist-leaning government decides that capital income is an invention of the devil, and must be taxed "more fairly", then the fun will quickly end.
Of course, you can still move to another country, provided you didn't focus primarily on real estate.
4. I Would Keep Working Anyway
I had a long and challenging career at the beginning. But I have continuously worked to optimize my income situation, workload, and working conditions.
By and options trading, I built up a second financial pillar, which gives me an additional, time-independent "passive" income. I don't make any money from my blog right now. But I'm working on building a third source of income with it. It all takes time.
Maybe it will take 10 years. But I like writing blog posts, and that's why I keep going.
I had to learn it the hard way. But I finally accepted it because one day, I realized I don’t want to retire in the traditional sense. I don't want to be one of those retired people who just languish, get bored on cruises, and then end up dying in an old people’s home. I never will!
I would maybe reduce the working time at my regular job to have more free time. But I would still go to work. And if the universe will provide me with a fortune of a millionaire, maybe I will quit my job.
However, the reason for quitting my regular job would be to do other work, like getting involved in some projects for environmental protection.
And that’s the point. Most people associate financial freedom with quitting a job and then doing nothing, or doing something else but work. This is for sure a pleasure and a lot of fun. But in my opinion, it’s just like eating every day the same food. One day they will get tired of doing nothing.
Conclusion
If you feel a strong desire for financial freedom, ask yourself first:
Do I have a problem with my job? If so, what can I change so I no longer see work as a nuisance?If the job is not your problem: It is, of course, a legitimate goal to achieve financial freedom well before retirement age!
It’s as legitimate as running a marathon in under four hours, crossing the desert on foot, or walking the Camino de Santiago.
If the idea intrigues you, and you're motivated enough to save more than half of your net income every month: go for it!
But don't assume other people will show the same enthusiasm or even want to emulate you. After all, not everyone likes oysters, sushi, or foie gras in the same way. Not everyone has a high priority for Reiss’ needs Nr. 14 and 16!
What you should pursue, in any case, is financial independence from employment when you retire. In my opinion, financial freedom is when you go to work because you want to, and not because you have to do it.
You can also achieve a fortune with normal savings rates of between 10 and 25 percent and a solid investment strategy. It’s just important that you keep the balance between living in the here and now, and the future.
