There’s No Right Way to Enjoy Financial Independence

As I resume writing about money, I've re-discovered just how opinionated people can be about personal finance. For some reason, many folks believe that there's a "right" way to pay off debt, invest for the future, and spend what you've earned. A corollary to this is the belief that anything that's not the "right" way is, therefor, the wrong way.

I don't agree.

I've long held that there's no one right way to do any of this stuff. There's no right way to pay off debt. There's no right way to invest. There's no right way to spend.

Sure, some methods offer quicker results or better returns, but that doesn't mean that they're right. It's great to push for optimal solutions, which is why we talk about paying off high-interest debt first and choosing index funds over other types of investments. But optimal and right are not the same thing. And "best" is something else entirely. (Sometimes the optimal method is the best method; other times it's not.)

If there's one lesson I've learned during a decade of writing about personal finance, it's this: Do what works for you.

We are not robots. We are human beings, which means we're complex emotional and psychological creatures. We don't make decisions based on optimal mathematical outcomes. We make decisions based on what we believe will make us happy. (What will actually make us happy is often different from what we believe will make us happy, but that's another story.)

We each have different wants and needs. We have different desires and preferences. What's right for me probably won't be right for you. Let's look at some real-life examples of the issue I'm trying to describe.

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What’s the difference between retirement and financial independence?

I've spent a lot of time lately reading about retirement and Financial Independence over at Reddit. Reading other people's questions and comments helps get a feel for the sorts of challenges they face as they boost their saving rate and cut their spending in order to pursue bigger goals.

For those unfamiliar, Reddit is a large internet community with discussion boards dedicated to different topics. Though redditors would cringe at this characterization, in many ways it reminds me of America Online twenty years ago.

I like to browse forums (or "subreddits", as they're called) on subjects like:

That last one merits more explanation. I'd never heard the term "lean FIRE" until I found the forum on Reddit. But I think it's something that might appeal to a certain group of Money Boss readers. According to the LeanFIRE subreddit: "If you want to retire before 60 with less than $40k in planned yearly expenses, this is the place to discuss it!" In other words, "lean FIRE" is a term for early retirement with minimal money.

Note: FIRE is an abbreviation for "Financial Independence/Retire Early". It's a catch-all term for folks who want to stop working before traditional retirement age. But what are the differences between early retirement and Financial Independence? Stay tuned! That's what this article is all about.

It's strange to me that the LeanFIRE subreddit considers a $40,000 annual expense "lean". That's 75% of what the average American household spends ($53,495 per year), which doesn't seem particularly parsimonious. My normal spending when I'm not traveling the U.S. in an RV is about $36,000 per year, and I don't consider myself frugal at all.

To my mind, people like Pete from Mr. Money Mustache (household spending of around $25,000 per year) and Jacob from Early Retirement Extreme (household spending of around $14,000 per year) qualify as lean FIRE. But $40,000? That's just slightly less excessive than the Joneses next door.

My desire to argue over what qualifies as a "lean retirement" highlights one problem we all have when we talk about money. Different words mean different things to different people. Today I want to explain what I mean when I use certain words and phrases at Money Boss.

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How to Set Goals and Resolutions You’ll Actually Keep

Welcome to 2016! I hope your year is off to a great start.

Because it's a new year, a lot of people are making lists of resolutions. I used to be one of these folks, carefully cataloging the faults I wanted to fix every winter. Not anymore.

It's not that I'm perfect -- as Kim could attest, I'm far from it! -- but I learned a long time ago that making a bunch of resolutions was a sure path to failure for me. There's a reason you see stories every April about how most people aren't meeting the goals they set at the first of the year.

Nowadays, I do something different, something that actually works for me. Instead of tackling several resolutions each year, I only tackle one.

Last year, for instance, my goal was to explore the United States by motorhome. (I just posted a trip summary at my personal blog, by the way.) In 2014, my aim was to publish and publicize the Get Rich Slowly course.

Here's a more relatable example: In 2010, I focused on fitness. I wanted to lose fifty pounds, so I tried to weigh every decision with that one goal in mind. You know what? It worked. I didn't lose fifty pounds that year, but I did lose forty. I lost the rest by the middle of 2011 and was the fittest I'd ever been in my life.

[Weight Loss Progress]

The main reason I was able to do this was that fitness was my only goal for 2010. Nothing else mattered. I didn't have other objectives clouding my view. I set one goal, and I worked hard to meet it. I picked the one thing in my life that most needed change, and I committed to changing it.

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Improve your negotiation skills with BATNA

If you want to know how to get the best deal possible, learn this simple acronym: BATNA. "BATNA" stands for "Best Alternative To a Negotiated Agreement." Often times the bulk of money made or lost is in the initial agreement. Negotiating a real estate sale, buying a car, and fighting for a raise or a promotion all require the proper usage of BATNA to get you the highest return.

The Best Alternative To a Negotiated Agreement is broken down as follows:

* What is your best alternative to a negotiated agreement if you do not purchase or sell?

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Bad customer service? Talk to the CEO

This month, I started getting collection calls. Apparently my Internet provider wanted $61 for a modem that I returned last May. I'd been trying to resolve the problem for months, but nothing seemed to work. No matter how many times I asked to speak with a supervisor and was promised that the matter would be taken care of, that "I'll be the last person you'll have to talk to," I was getting nowhere.

During the umpteenth call, I began to wonder if I was in the first circle of my very own inferno. Maybe I'd been damned to an eternity of crappy, staticky on-hold music, interrupted only by the assurance that my call was very important. Damned to repeat my story over and over to people whom I began to suspect were dwelling somewhere in the eighth circle.

Eventually, I hit a wall. The last supervisor I spoke to said that since I couldn't prove that I returned the modem, I had to pay for it. So now what?

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How I’m changing my relationship with money

As a teenager, I had a part-time job that was already mundane and dreadful enough, but then Kelly P. was hired. For whatever reason, Kelly and I were instantly repelled by each other. She thought I was too dorky to bear; I found her voice impossibly grating. She over-pronounced her esses.

All it took was one shift. One evening, Kelly and I were stuck together. Alone. For five hours. An entire shift of her whistling the letter "S." But by the end of that shift, we could somehow tolerate each other. Eventually, we liked each other. After a while, we even started going to lunch together.

My relationship with money is blossoming in the same way.

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Do you read the fine print?

We've all heard the advice to "read the fine print" before we sign anything, but does anyone actually do it?

I recently spoke with a man we'll call Randy. Six months ago, Randy went to a state fair, the kind that vendors of all kinds descend upon to hawk their wares.

One of those vendors was a hot tub company with a very recognizable name. They've been in business for decades. Randy stopped by their booth. "They had a specific color of cabinetry and material that was a perfect match for our deck, so I decided to order it," he says.

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What your loose change is really worth

"You've got to look for the date," my grandfather reminded me as we sorted through the loose change in my piggy bank.

I was five years old, and to me, the pennies, nickels, dimes, and quarters spread out on the floor in front of me amounted to a pirate's ransom, representing a lifetime of stooping down to the ground to pick up every dirty, forgotten coin I could get my equally dirty little hands on.

It was 1987, and while I loved to find the shiny, newly-minted coins imprinted with the same year, what I was really looking for were 1982 pennies. I loved that the penny was different from all the other coins; I preferred its tawny color to the lustrous gleam of the silver. And since I was born in 1982, the pennies minted in my birth year were the perfect fit for a precocious child who didn't quite fit in with the other kids in her neighborhood.

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What to do with all that clutter: sell it, swap it, give it away

This Saturday (May 14th) is Give Your Stuff Away Day, a worldwide celebration of getting rid of clutter. People all over the world will be gathering up their unwanted possessions and taking them to the curb, where they hope neighbors and passersby will adopt their stuff.

As the event organizers say:

Because of all the shopping we've done, many of us now own lots of great stuff we never use anymore. And for some reason, we don't sell or give it away. Lots of valuable stuff — just wasting away. Let's take all this stuff and over one weekend, make it available to others for free. Continue reading...

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Developing systems that work

In my fantasy life, I'm an organized guy. In the real world, that's just not the case. I do my best to stay on top of things — I make lists, use a calendar, ask Kris for help — but there always seems to be something slipping through the cracks.

Before we left for Africa, for example, I hid my wallet. I always do this when we go on a long trip. (I don't use my wallet when I travel.) And every time, I have trouble finding it when I get home. You'd think I'd develop a system — but no.

I'm not the only one with problems like this. Sure, there are folks out there like Kris and her sister — people who never let anything fall through the cracks — but they're few and far between. Most of us need to develop systems to help our lives run smoothly.

D

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