COMMENTARY: Early retirement may feel like a far-off dream for most people.
However, startup co-founder Shawn Low explains why there’s much more to achieving financial independence than retiring early, and why some of the concepts of financial independence may be useful even if it isn’t a feasible choice for you and your circumstances.
Low has experience founding, building and advising technology start-ups. He had previously co-founded Better.com, a platform aimed at making homeownership more accessible for all, and is currently working on a new venture. By Shawn Low
January is typically the busiest month of the year for recruiters. It’s when people have received their year-end bonuses, had lots of fun over the holidays with loved ones, and wonder why they put themselves through the grind for the other 11 months of the year.
“If only I could retire now and just have December all year round” is probably fairly high on the wishlist of many people in the workforce — so much so that there’s actually a whole lifestyle movement dedicated to helping people achieve that. A whole lifestyle movement to help people retire now and enjoy life all day every day? Sounds like a scam… and too good to be true.
This is the Financial Independence and Retire Early (FIRE) movement, one that has gained popularity in recent years.
In the U.S., famous FIRE adherents like Peter Adeney (aka Mr Money Mustache) caught the attention of the media when he retired at 30 years old. In Singapore, Morten Strange retired at 33 years old and still managed to raise a family with four kids.
But there are arguably many other people who achieve “FI” early but don’t pull the trigger on “RE”. After all, if FI is about having options, why retire if you enjoy what you do?
Also, many regular retirees who retire in their 60s already commonly cite a loss of purpose and drive in their life. Imagine experiencing that issue at the age of 35.
Of course, to each their own. Who is to say what a well-lived life means to another person?
Financial Independence (even without the Retire Early part) is a concept that clearly appeals to many. Just on Reddit, there are over a million followers of the subreddit r/Financial_Independence and over 28K followers of the local version r/SingaporeFI . Wow! That’s a lot of people. What does it even mean to be financially independent?
Simply put, someone is financially independent when they are able to pay their expenses for the rest of their life without working or being dependent on someone else. Perhaps asking the obvious here, but what’s so great about being financially independent?
A good way to think about financial independence is in terms of having options. Achieving FI does not necessarily mean that your life has to change, or that it automatically makes you more or less happy.
If you enjoy your job and are happy with your life in general, being FI may not actually change your life that much at all.
But if people are unhappy with their jobs or bosses (which seems to describe many people in Singapore ), then being FI allows you greater freedom to “just say no” and move on.
In a way, it allows you to take money out of the equation, and make decisions based on other things that matter to you. Financial independence part does seem like a good option to have. But how is it even possible to achieve it?
There are many paths to achieve financial independence, so perhaps it’s most helpful to start with the broad overarching concept.
FI adherents typically build passive income streams that provide enough income to cover their expenses. What’s passive income, and how is it different from regular income?
Income typically comes in two ways. There’s income from labour, which is the form of income we’re most familiar with. We go to work and our employers pay us a salary for that work.And then there’s passive income. Passive income comes from the ownership of assets.The oldest form of passive income is probably rent to a landlord. As the popular Netflix series “Bridgerton” makes abundantly clear, most of the aristocracy in the past didn’t really do much to deserve the rent. They just collected it because they happened to own the land through the birth lottery. So I wasn’t born rich. Then what? Fortunately, it is a lot easier to become an asset owner these days.There are assets that you can buy using income you have made from your job. […]
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