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By Dr. Jim Dahle, WCI Founder
Most people never become financially independent—at least without considering Social Security and/or pensions. I’m not talking about being financially independent from their parents; I’m talking about not needing to work for money ever again.
However, I expect the majority of WCIers to become financially independent at some point—some earlier than later. Some of those will FIRE (Financially Independent; Retire Early) while others will continue to work on a part-time basis or even exactly as they did before. Some will become even more financially successful as the years go by for whatever reason (including the ability to take more business and other financial risks due to their financial security). A smaller number of people will eventually reach a point where money simply becomes irrelevant to their lives.
Perhaps you have heard the analogy that money is like oxygen. When you have enough of it, you don’t think about it at all. When you don’t have enough, you can’t think about anything else.
When I go scuba diving with my wife, she is essentially in a state of oxygen irrelevancy. She knows that no matter how much she breathes or what she does underwater, she has more air in her tank than she will ever need. She’s always going to have to come up sooner than she needs because I’m going to be the one who runs out of air (since I’m bigger). No matter how much I conserve my air down there, I’ve never come up with more than she has. More air does not change her dive and will not change her dive as long as I’m her dive buddy.
In the same manner, for those who have reached money irrelevancy, more money does not change their life in any significant way.
How Much to Reach Money Irrelevancy?
Financial independence is relatively easy to calculate. While people can argue about the exact number, something in the range of 25 times your annual expenses is a nest egg that will allow you to never work again and maintain your lifestyle.
To calculate a money irrelevancy figure, you need to think about how additional money above and beyond that FI amount will change your life. Most people who get a little more than their FI amount will increase their spending. We did. Leif Dahleen, founder of The Physician on FIRE did (he bought a boat and built a new house). That’s pretty natural. Maybe you take vacations that are a little nicer (and go on them more often), pick up a toy or two, renovate the house, upgrade the cars, whatever.
Since this spending is often not just a one-time spend but can represent an ongoing spending commitment (hiring house cleaners, the insurance and maintenance on a second house, etc.), that also increases the FI amount. It actually moves you further away from money irrelevancy (and maybe even financial independence), at least for a while.
As your wealth increases beyond FI, you can also start optimizing your finances less. You don’t have to watch money market yields to transfer money between different types of money markets. You don’t have to swap brokerage accounts chasing signup bonuses. You don’t have to do Backdoor Roth IRAs. Travel hacking becomes a bit of a silly sideshow. You don’t have to manage your rental property yourself. You don’t have to have 10 asset classes in your portfolio. Your money is becoming less relevant to you.
Eventually, even your asset allocation becomes irrelevant. Barring a hyperinflation scenario, you could put all of your money into cash AND STILL have enough to maintain all of the spending you can come up with for the rest of your life (and still have money left over). At that point, you’re simply working on your financial legacy. Every additional dollar you obtain (whether from earned or unearned income) is either going to be left to your heirs or given to charity (either now or at death).
For people like us, who have capped how much we dare leave our heirs, it will all be going to charity at a certain point. Maybe you feel strongly about the exact amount you’re leaving to charity, but for most people, you really don’t care all that much.
Money has now become irrelevant.
More information here:
Life After Financial Independence: Two Perspectives
Financial Independence Is Not the Holy Grail
Quite a Privilege
It’s quite a privilege to have what is the most important thing to many people—the thing they spend 40 or even 80 hours a week to get—become irrelevant. It can become comically ironic too if your work involves finance. How much time do I now spend a week thinking about, writing about, and talking about something that is increasingly meaningless in my personal life? I’m hardly alone in this regard. Many WCIers love their work and continue to do it even after FI.
It doesn’t take that many years of work beyond FI to reach money irrelevancy. It’s probably less than 5-10 for most.
Increasing Quantity and Quality of Life
For most people who get to this point, the focus gradually turns. Even though few of us act like it, we all know that money is not the most important thing in life. I would venture to say that almost nobody reading these words would be willing to switch places with Warren Buffett. You would rather have your remaining years than his billions. So, instead of focusing on acquiring more money and optimizing the use of the money you have, you focus more on gaining more time and improving the quality of that time. Your workouts become a higher priority than your work. What you eat becomes more important than how fast you can get it and wolf it down.
A psychologist once said,
“The utility of your career peaks at maybe 35 or 40, and it starts to decline pretty rapidly after that. And what happens if you’re fortunate is you have someone in your life that you love, that you’ve woven yourself together with, and you have some kids so that you have something to do from the time you’re 50 until the time you’re 80. And so it’s a real mistake [to ignore family for career]. It’s a barren future without children. I can tell you that. It’s a real mistake.”
Obviously some people don’t find the person they want to be with or raise kids with, or they run into infertility issues. Or perhaps they’re asexual/aromantic or childfree by choice. That’s not my point, although I do think it is important to realize that what you think at 25 will make you happy at 35 or 45 is often wrong. My point is that when money becomes irrelevant, relationships with your partner, your children, your extended family, and your friends should become even more important to you than they were before. You’ve maxed out the financial aspect of your life. You’re working on maxing out the health aspect of your life. Now it’s time to max out the relationship aspect of your life.
More information here:
The Unspoken Risks of NOT Retiring Early
Functional Longevity: What Use Is Retirement If You Can’t Move and Think?
It’s a Continuum, Not a Destination
As you become increasingly financially successful, money will become less and less relevant in your life. It may never become completely irrelevant, and that’s OK. But a certain level of financial success is mandatory to allow you to put money into its appropriate place in your life.
What do you think? Has money become irrelevant to you yet? Do you think it ever will? How much money would it take for you to stop caring about money? What will you do then? Comment below!
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