What’s My Money Personality and How Will it Affect How Fast I Reach FI (Financial Independence)? 🤔
When you are in the journey of debt paydown, savings, and investing to achieve early retirement, there isn’t one way to reach FI (financial independence). There are multiple factors that include but aren’t limited to your level of income, where you live, your lifestyle, and your money personality.
Some people might be a natural saver and be comfortable with living a Spartan lifestyle, renting a room in a house, and eating nothing but noodles, eggs, and bread while socking away every possible dollar into low fee index funds. If you’re the type of person that is a natural saver, and don’t mind living a very simple and minimalist lifestyle and want to supercharge your journey towards debt paydown, this might be your money personality. If you take great joy in finding ways to hack your grocery shopping and find other ways to save you can look towards people like early retirement extreme for this method or even Mr. Money Mustache who is a demi-god in the early retirement world. If being a natural saver is a part of your natural personality or you can temporarily adopt the habits that allow you to comfortably crank up your savings to be uncomfortable for a short period of time (with the goal of early retirement at the end) you can easily retire under 10 years. Delaying gratification in order to reach financial independence and retire early at an accelerated rate is a small price to pay to be able to free up your life for more options but it isn’t right for everyone.
Other people might be used to living a more expensive lifestyle, choose to rent an apartment or buy a home in a high cost of living city (San Francisco, New York, Hong Kong), budget eating out multiple times per week, and prioritize multiple international trips per year. They want to be comfortable without worrying about cost-cutting and not reduce their lifestyle too drastically. Living a Spartan lifestyle equivalent to the natural spender isn’t worth retiring early under 10 years. A natural spender may want to prioritize living their best, most fulfilled life every day. Instead of delaying gratification, they want to reward their hard work and not worry about renting out a room in their house just to pay off their mortgage faster. This of course isn’t true for everyone that is a natural spender but some natural spenders would rather prioritize spending on valuable experiences that bring them joy and they are comfortable with retiring within 10-15 years and still enjoy every moment of their life on the way to achieving FI. This money personality or scenario might not be right for everyone as well.
It’s important to try to figure out your own money personality in order to understand your own spending and savings habits. Once you understand that, you know how to best budget, save, and invest in a way that works for your money personality and doesn’t cause you to sacrifice past the point of what’s comfortable. It’s important to not directly follow someone else’s path to achieving financial independence because it might not be the right path for you. If you decide to live with five roommates, cut down your food budget to $100 per month by cooking all of your meals at home but have to constantly feel left out from outings with friends and end up hating your life, is it worth it to reach FIRE (Financial Independence Retire Early) early? FIRE doesn’t look the same for everyone and requires self-awareness to know the best way for you to reach it without pulling your hair out.
Over the past four months I’ve figured out what money personality I have and how it will affect how quickly I reach financial independence. I’m not a true, natural saver but I am definitely not a natural spender either. I fall somewhere in between but tend to learn more towards being a natural saver depending on the time of the month. I’ve built up a 6-month emergency fund, opened up a Roth IRA and brokerage account and contributed to both of them monthly. I’ve decided to go with an early retirement fund to draw 4 percent from before I turn 60, and a normal retirement fund (Roth IRA) to add to my other account that will be growing tax-free. I’ll be eligible for Social Security at 62 but I’m not counting on that.
My goal is to reach financial independence when my basic living expenses can be covered when my Vanguard total stock market and total bonds account reach 25x my yearly spending. That doesn’t mean I’ll stop working altogether, or maybe I will, who knows!
I have a vague timeline for when I’d love to hit this goal, but I’m not married to it 😊. I’m focused more on having a solid emergency fund that makes me feel comfortable, automating my investing, enjoying life at the moment, and not thinking that being retired early will make me happy. It will just take away the burden of needing full-time work to cover my living expenses. It will free up my time and mind to dive deep into passion projects, long term travel, and maybe even a career change. Who knows?
I currently live in a high cost of living area currently but I don’t spend money carelessly. I believe in living in a good apartment, eating healthy food, but not beating myself up for buying a few goodies here and there. My plan is to relocate to a lower cost of living area in the US by the end of this year (2020) since I have been working from home since mid-March and my location doesn’t affect my role. I work in technology sales and spend the majority of my time on phone calls, emails, and Zoom calls.
I hope that you found this blog post valuable and it made you think about your money personality. What kind of money personality are you? Are you still figuring that out for yourself? Comment below on what kind of profile you identify the most with.
