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What‘s the WHY behind the dream of early retirement? Behind planning your day however you want sooner than later in life? Behind never having to work again to pay your bills as money grows on trees (or in your stock market portfolio)? Behind working on the passion projects you always dreamed of even if you don‘t get paid for it (like mine of writing a book)? What drives people to want all of that and much more?
In this post I tell you the 7 reasons WHY our family (living in Europe/Germany) wants to achieve financial independence that may surprise you. I bet you‘ll find yourself in one or the other story down below. In wanting to have the choice….
… what to do with our most precious resource: our life time… what to work on (whether we get paid or not) that can have a positive impact on society… how we want to cherish life with our kids while they are at a young age. Ultimately my husband and I want to achieve FIRE because we believe this choice should be ours. And yours too!
Having the choice is the heart of the financial independence journey. But, I say it upfront: this journey is a hard one. It requires a lot of work to get there. You will need to make an effort to earn more money and save more money. But all of that hard work serves a purpose. YOU will have the choice one day…
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ToggleThis post is about families like ours who aim for financial independence. For us personally, our kids were our wake up call. Our initial WHY we wanted to achieve financial independence. But it goes much deeper than that. It all started with the dream of having the freedom of choice.
How about you? Have you dreamed of getting kids and becoming a family just to live life mostly apart from each other? Just to put your little one into daycare all day long at a couple of months old? No? But this is what most of us have to do (to get back to work). Don‘t get me wrong. I appreciate what our educators do in daycare centers. We were lucky to have the most amazing, kind and caring educators I could imagine for our little ones. Yet most of us simply have no choice when it comes to using daycare – whether we want to or not.
I struggled with that a lot. That‘s because I also have an ambition when it comes to my professional career and development. I love my kids more than anything else in this world. I guess you too. I highly appreciate having quality time with them. But I also love working and contributing to society. Maybe you too. And, I believe my little ones profit a lot from going to our daycare of choice.
So, what if you are super happy with daycare and your day job? If you love what you do for a living? If you worked hard to get there and want to keep your position (of power)? What if you earn enough to enjoy an abundant lifestyle? I get it. First-hand.
But, what if it won‘t always be that way? It‘s impossible to say if you‘d like to continue working the same way in 10 or 20 years. You never know what the future holds for you. Isn‘t it powerful to have the choice where you direct your most precious resource: your life-time?
I want to have the choice. Especially after I felt how it is not to have the choice. I want to have the financial resources to make a change in my career instead of being trapped within my finances. I just don’t like being limited. I never did. I want to make the right choice for myself and my family from a powerful financial place without having financial worries. How about you?
You see, when the work you do is entirely by choice you will discover the true purpose of work. Creating something that is bigger than you. Giving back and helping others in a way only you can offer. Why would you ever want to quit that?
In Germany (where we live) traditional retirement starts at age 67 for my generation. But it already has been discussed in public that retirement should start at age 69. That means an average employee like me could enjoy only around 10-15 years of retirement. A few might even have 20 retirement years if they live to be 90 years old. But no one is getting any younger at the age of 70 or 80 or even 90. Even if I would like to climb mountains or travel the world, chances are I simply can‘t.
I have seen many retirees facing a severe health issue at around the age of 70. Others had pre-existing conditions who got worse the older they became. Their mental and physical health deteriorated. To me that was really sad. People who have worked their entire lives (more than one full-time job) and were excited about retirement cannot enjoy it to the fullest. That doesn‘t mean that this has to be your or my reality. But you have to be aware of the fact that it’s like gambling.
Usually, people like you and I wait until around the age of 70 to gain complete control over the short rest of your life time. But, your life-time is the scarcest thing you have on earth and so precious. Once a minute, an hour, a day is gone it‘s gone forever. We all feel like we just don‘t have enough time. But are we taking action to get more free time? To even buy-back our life time (through financial independence)?
How would it feel like to buy-back decades of your lifetime? To truly cherish life to the fullest for 30 or even 40 years (as you retire in your 50s)? To be present for your family and truly living together as a family, every day? To be there for your kids when they will need you the most without having conflicts with your work schedule? To decide when you work and when not? To decide what you want to work on? How you want to help others and give back through your work?
Financial independence does not mean to retire early and then sipping margaritas on the beach all day long. Most FIREees work more than ever. FIRE means to find your true purpose in life and chase it. To find work you LOVE doing so much that you would even do it for no money. Once you found it you will do it forever even when you retire – no matter if you retire sooner than later.
Financial security is something our family is used to in a broader sense. It is an essential part of social welfare states in Western European countries such as Germany where we live. The idea is that the state kind of takes care of you financially, especially when you need it the most. Examples are times of unemployment, illness, pregnancy/postpartum, and retirement to just name a few. But, that picture started to crumble. Especially when it comes to retirement.
The state pension is already less than 50 % from someone‘s current income. But, the general recommendation is to calculate with living off of 80 % of your pre-retirement income in retirement. So, if you live in Germany you will have a financial retirement gap of 30 %. Do you know how big your personal retirement gap is? Where will this money come from when you will retire?
If you‘re interested in calculating it easily, take advantage of your own version of the Retirement Gap / Barista FIRE Calculator. I can highly highly recommend to engage with your personal retirement gap sooner than later. The earlier you start to close it the less you need to contribute to do so.
If you aim for financial independence you want to stop relying on (the money of) others to get that financial security. For the future in retirement and for the present. You rely just on yourself and your ability to take care of yourself and your family. Everything provided by the state (like a pension) is a bonus and nothing more. This is very important! So, you need to focus on earning more money to save and invest more money into your assets of choice (like a stock market portfolio).
Your goal is that your investments produce an income for you one day without you having to work for it. It‘s simply an individual retirement account. Now, you are financially safe from a series of life events that would otherwise have a dramatic impact. If your so called income-producing assets can generate enough money for you to cover your bills you are financially free. This concept is nothing new. It is way older than the FIRE movement itself. But to us it was new. And first, it even seemed impossible.
Today, we have already brought that greater sense of financial security into our family‘s life – at least for traditional retirement. My husbands’ and my stock market portfolio is already worth over 120.000 Euro. The good thing is that our portfolio can grow enough over the next few decades to close our retirement gap. That gives me peace of mind. I feel settled financially. But, to get there we had to make the right money choices and working a lot towards our goal. Read more about us here.
If you too consider to bring that financial security into your life by yourself I can highly recommend reading the book Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence. It is the book written by the founders of the FIRE movement so to say and really life-changing.
Pursuing FIRE is a great way to get clarity about the direction for your life. If you work for your own financial freedom it‘s like nothing else.
I am not working anymore to make a living. I am working to save as much money as possible and then invest enough money to create a passive income stream. One day that money should support me financially. I want to have that financial safety net and get a steady passive income. That extra money gives me a lot of peace of mind.
I feel like I have put myself into the drivers seat of my own (financial) future. So far, I thought I am exposed to the goodwill of others (to get a chance). But now, it feels like I took ownership over my life. Have you ever decided for or against a job opportunity because of the money? I have. But what if money is not an issue anymore? It allows you to pursue your true passion you had almost forgot about. To start those side hustles. To give your dream a chance.
Do you remember what you dreamed of when you was a child or teenager? Often we step on our dreams slowly but surely until they are forgotten. Adulthood came in the way. It came in my way. But I felt like I wanted to give my dream a chance (of becoming a writer) so that one day I could do what I want to do. Not what I have to do. While helping others and contributing to society with my work.
Just because we have the freedom of choice to stop working for an income it doesn‘t mean we stop working. It simply means that we get clarity about what kind of work we want to do. No matter if it makes money or not because that simply doesn‘t matter. I always tell my little one that working is an important and essential part of life. Because if we work (out of choice rather than necessity) we learn, grow and help others. But such kind of work looks different for everyone. How would it look like for you?
What does it mean to build generational wealth? Let‘s clear the term wealth in the first place to then look at what generational wealth really is about.
Wealth represents a certain level of richness. When someone is called wealthy he or she owns a fortune that mostly produces an income too. A wealthy person can live off of his or her wealth without having to work for an income anymore. Therefore, this person has to manage its finances really well. He or she has to think about the long-term goal (staying wealthy) when making any financial decision.
In contrast to that being rich is just a step stone on the way to become wealthy. If you are rich you can afford to buy depreciating assets like expensive sports cars or designer clothing. But those don‘t produce any income and lose in value over time (that‘s why they are called depreciating assets). In other words:
If you‘re rich you might have a fancy garage but a poor bank account and (early) retirement account. So, you might earn a lot of money but that doesn‘t make you wealthy. You still have to rely on you working for an income to pay your bills. But if you‘re wealthy you become an owner of capital. And that is exactly what we aim for (read more about us here).
Generational wealth refers to assets being passed from one generation to another within one family. An asset can be everything that can be sold for money and appreciate in value. That means its value becomes bigger over time. Prominent examples are stocks, real estate, businesses and material goods like art pieces, rare alcohols or precious metals such as gold.
Generational wealth requires that you do not consume your capital. Instead it should create even more capital over time. And as you won‘t live forever you will pass your capital to your kids one day. If they learn the wisdom of the right financial planning from you (hopefully) they will do the same and that cycle goes on. Sounds quite powerful right? But power comes with responsibility too and it‘s on you to teach that.
Building generational wealth is just a byproduct of become financial independent. For some it might be the main reason. But for most it‘s not. For me personally, it is one of the main reasons to become financially independent. I LOVE the idea of building wealth.
I’m determined to build wealth before I buy a fancy car, spruce up my home, or take vacations several times a year. Even if there‘s nothing wrong with that and entirely your choice, it‘s just not my pair of shoes for now. At least not yet. Not until my husband and I have built up our own small fortune. Then we can go out and buy that fancy car (we agreed on a not so fancy but still expensive VW bus). We can renovate our homes‘ bathroom (who really needs it). And so much more.
I will be honest. My husband and I had a really hard time after we decided to pursue FIRE. We questioned everything. From the way we eat and drink, to the way we go out or spend our free time. Clothing, vacations, gifts and so on. For the first time, we questioned our habits we developed so far. Was the life we had created, really the life we wanted to live as a family? Mostly the answer was no. To our surprise.
Questioning the status quo and being honest is hard. But it‘s the first step and maybe even the hardest part on the financial independence journey. Because this journey is one of self-discovery. If you commit to such an ambitious money goal as saving 50-70 % of your family‘s income to then invest it and build wealth, you will stumble. Because you must redefine your lifestyle. There is no other way. You have to change your habits. Mostly you will change them for the better for the long term.
For us, as a middle-class family, it first seemed impossible to retire early. No matter how much we would change. We thought people saving 50-70% of their income are nuts. Especially if they invest that money into the volatile stock market. Why should any rational person do this? But, after a year, we became some of those people. Today, we are about to retire in less than 15 years at around the age of 50. Our dream of early retirement is about to become a reality for our family.
But we had to change everything to achieve our ultimate goal of financial independence and early retirement. And every change was a change for the better. From the way we use our time in daily life, to the set up of our home, to our money habits and the set up of our financial situation in general. But even if we change for the better, that doesn’t make it any easier. Not even a little bit.
In our relationship I had always been the one who is not only more willing to change. But I also enjoy that process. I tend to say that I am quite extreme in that direction. I even moved three times in one year for my early professional career. I changed until I got the position I wanted. But then, I quickly asked what’s next. I cannot help myself but I need to move forward. That’s just how I am. I have a strong internal drive to evolve. I’ve always made risky decisions and never took the easy root.
My husband has a saying about that: “You’re never there” and that is very true. He is quite the opposite. He likes to settle and stick to one decision after making it. As you can imagine that constellation made it hard for us to pursue FIRE as a couple. But, we found our way. We were intentional about the changes we‘ve made. We got out of established routines and limiting believes as they no longer served us. Do they still serve you?
When you walk away today with at least one new idea to improve your personal financial journey towards F.I.R.E. I’d love to show you some more in the next post. If you haven’t already, you can apply to become a part of the community to not miss any new release. For that you can subscribe to our Newsletter below in the green footer.
I’d love to hear from you: Why are you trying to improve your familys finances? Let me know in the comments below!
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