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Should You Be Asking – How Long Until I Can Retire?

If I had a dollar for every time that I ‘ve seen this question explored in personal finance blogs and podcasts, I could certainly retire a little earlier.  To be honest, I think this is the wrong question to ask. Let’s trying asking the question a little differently.

How long will it take you to achieve financial independence? –  This is clearly better because some people don’t want to retire in the traditional sense.  They just want to know that they could.  Maybe they will quit their 9-to-5 job and buy a small business or maybe build some other sort of side hustle.

How long will it take you to achieve your financial goals? – This is better yet because not everyone has the same financial goals.  Some people want to retire at 35 with a $700,000 investment portfolio and live modestly off of the $28,000  they should expect to generate in inflation adjusted terms (using the 4% rule).   And, others may want to retire at 55 with a $2,000,000 portfolio and live more extravagantly off of the $80,000 they should expect to generate.  And, still others may want to retire at 70 with a $5,000,000 portfolio and live off of $100,000 while still growing their portfolio so they have a larger legacy to leave their kids.

(By the way, if you don’t know about the 4% rule, you should really read the following article that Pete over at Mr. Money Mustache wrote.)

How long will it take you to be happy financially? – I think this might be the real winner.  Why should the goal be to reach some arbitrary end point – whether it be retirement, financial independence or an investment portfolio of a certain size?  I would argue that you can be incredibly happily a lot sooner.

Right now, my threshold for financial happiness is to live in a warm climate, earn $200,000 a year of which at least 50% is generated by passive income or businesses that we own, and have both our 9-to-5 job and our businesses not be location dependent (ie we can do them from anywhere – including internationally).  Even though we only started actively working towards these goals a couple of years ago, we’re doing OK.  My wife’s business should generate at least $60,000 in profits this year.  That’s not quite the $100,000 that we’re looking for, but we can get there in a year or two.  Both her business and my day job allows us to live anywhere in the US (so we’re still missing the international piece).  The only thing that is conspicuously missing is living in a home base in a warmer climate.  So, that’s our goal for the next two years – to have a palm tree or maybe a cactus in our front yard.

I’ve spoken with quite a few people over the last 5 years about how they define happiness.  Here are some of the answers that I’ve heard.  Think about whether it makes sense to incorporate some of these into your personal formula for financial happiness.

  • To Own Your House Outright – It’s the American dream, right?  Well, depending on where you live, this can either be doable in 10 years (or less) or in 30 years.  If you think about it, there are a few ways to achieve this quickly.
    • Live In a Small / Cheap Place in a High Rent Location – a small two bedroom apartment or even a “tiny” house in the Northeast perhaps?
    • Buy More Space in a Low Rent Location – a 4 bedroom house in a more rural area, maybe?
    • Channel Some of Your Savings into Paying Down Your Mortgage Faster – whether you live in a $150,000 condo or a $1,000,000 house, making a couple of extra mortgage payments a year can get you to home ownership long before your mortgage is over.
  • To Have 50% of your Household Income Come from Businesses You Own – Regardless of whether your annual income goal is $100,000 or $500,000, it’s still quite doable to start a business that generates 50%  – $50,000 to $250,000 – in profits.  Your business could be as low-tech as owning a couple of laundromats or as high-tech as starting an e-commerce store.
  • To Work Remotely from a Home Office – This may seem like a trivial thing, but think about all of the amazing ripple effects that would result.  You could save the time and aggravation of commuting.   You could save money on dry cleaning and eating out.  You can more easily avoid annoying co-workers.  And, most importantly, you can set your own schedule.  Whether you want to start a side-hustle or be able to coach your kid’s soccer team, it’s a lot easier to do it without nosey co-workers peeking over your shoulder or giving you the evil eye when you leave the office at 4:00 PM every Thursday.
  • To Live in Your Ideal Geography (Ideally with a Lower Cost of Living) – Would you prefer to spend your off hours on the beach or on the ski slopes?  It just makes sense to live in a place where you enjoy being outside and that doesn’t have to mean in the great outdoors.  Maybe it means living in an urban center where you can walk to the gym and 20 different restaurants.  Historically, the problem has been that people have been forced to live close to their employer and not all employers have offices near the beach or ski slopes.  Imagine how sweet it would be to combine this goal and the last one – you could work for a New York company (hopefully earning close to a New York salary) while living in a 4 bedroom, ocean front house in Louisiana that only costs $350,000.  As long as you have good internet service and are close to an airport, it should be doable.
  • To Work in a Job that You Like – This may sound obvious, but so many of us get trapped in jobs or job functions that we hate.   There are a million reasons why including
    • Picked the Wrong Major in College –  I mean how’s a 19-year-old supposed to know whether they want to be an accountant for the next 40 years of their life?
    • You Make Too Much Money or Have Too Much Seniority – Moving to another job or changing job function would mean taking a salary significant cut.
    • You’re Now the Sole Income Earner – Are you trapped in the job that you had when your spouse had your first and second child and you collectively decided that one of you should stay home with the kids?

These are more common than we would think.  Sometimes it’s worth making less to not hate the eight hours of your day between 9 AM and  5 PM.

I’m sure that many of you have financial happiness goals that I haven’t heard.  Please put them in the comments below, if you do.

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