In what I think is evolving into a dialogue, Gordo Byrn follows up on my Five Questions(tm) (if Apple can patent a rectangular phone with rounded edges, I guess I can trademark that now) with a thoughtful response on how he views financial independence for himself and his family.
He relies on an important concept that we all live with every day: your happiness is much more a function of your needs and desires than it is of your resources.
Most people express it this way: H = R – E. Happiness = Reality Minus Expectations.
I think that misstates the relationship. It’s not linear: it’s geometric. In fact, H = R / E. Happiness = Reality DIVIDED by Expectations. Taken to it’s illogical extreme, it is theoretically possible to have infinite happiness when you reach the point where you have absolutely zero expectations.
Gordo illustrated with an example from his own life where he was happy essentially living out of his car and training all the time. Other authors like Steven Pressfield
(The War of Art
) have shared similar episodes where the act of “turning pro” (in Pressfield’s words) required the relinquishment of all other worldly pursuits and interests. This exchange is one that the true artist is happy to make, and in fact needs to make.
Most of us find fulfillment in a variety of pursuits, and are more like the 46 year-old Gordo than the 30 year-old version. The principle remains the same.
My original question: how large of a pool of assets do my significant other and I require in order to live in the manner which we desire for the rest of our lives?
Gordo’s point is entirely valid: it may be simpler, easier, and ultimately more beneficial to work on the “desire” part of the question than the “assets” part of the equation.
Other things to think about:
1. I hate the word and the concept of “retirement.” I think it is a complete mirage. Turning 47 this year, chronologically I am probably over half way through my time on this planet but my hopes and dreams are to remain a positive contributor to society as long as I am drawing breath. This may or may not include deriving an income for my efforts. In my own life and in my work for clients I refer to being “financially independent” as the goal: my decision to work for income is completely detached from my need to derive an income.
2. As important a goal as that is for myself and my clients, it is not the be-all, end-all of the human experience. My wife and I have made important choices in how we live and have raised our children for the past 20 years that meant foregoing financial opportunities that would have put us closer to independence. We did this because other aspects of family life were more important to us. As I like to tell my clients, I have made plenty of errors but I have few regrets.
3. The balance comes down to having an honest conversation between you (at your current age) and “you” (at age 70, or 85) and being fair and truthful to both of you.
4. An aside about transparency and financial advisors: all of my clients receive a report at least annually showing all of the costs of ownership of their investments. This is not hard to do, and requires no additional effort on my part. No professional should ever be embarrassed to discuss the price of his services. If your advisor cannot or will not do this, I humbly suggest you are not in a healthy professional relationship.
The Clear Value of Planning
My title is a play on Gordo Byrn’s piece from this morning. Perhaps like him, my...