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.

Four Approaches to Financial Independence

As you know, Financial Independence occurs when you have enough saved to support your spending levels for the rest of your life. But what does that mean exactly? A lot of people want a magical number that will indicate when they’ve accumulated enough to retire. But what is that number? Can you say you’re FI once you have a million dollars in the bank? Two million?

Truthfully, there isn’t a single magical number that’s right for everyone. Financial independence comes at different places for different people. It depends on how much you want to spend and what you’re willing to do to maintain your lifestyle.

• At $12,000 per year, you could practice “extreme early retirement”“. Take Jacob Lund Fisker, for example, the original early retirement blogger. He and his wife currently live on about $10,000 per year. At this level, your life is very DIY. You intentionally remove yourself from the economic machine. Personally, I don’t want to live at this level. But for some, like Jacob, it’s plenty.
• At $24,000 per year, you and your family could enjoy a modest lifestyle in an area with low cost of living. This is what Pete (a.k.a. Mr. Money Mustache) does. That means using 2-1/2 tanks of gas each year and dining out only once every few months, but making the most of your environment. It requires conscious effort.
• At $36,000 per year, you could live like me — which means in extreme comfort. When I’m not on a cross-country RV trip, I spend about $3000 per month. I live in a top-floor condo on the Willamette River in Portland. I buy groceries at an organic market. Kim and I eat out once a week. But we intentionally cut back in other areas, such as transportation in order to afford all of this.
• At $48,000 per year, you could live like the average American family, enjoying all of the luxury that entails: a nice car, a nice home, and wanting for nearly nothing. (Actually, the average American household spends $54,000 per year, but we’ll use $48,000 because it makes a pleasing proportion to these other levels.) At this level, your life is luxurious but you have to work more to maintain it.

People can be financially independent at any of these levels of spending. If you have billions in the bank, you could be financially independent while spending $10 million per year.

Let’s use my friend Jim from Wallet Hacks as an example. He too is financially independent. Because he’s managed to accumulate so much wealth, he lives what he describes as a “decadent” lifestyle. His family spends $120,000 per year, which includes $4500 per month for a mortgage and $2800 for daycare. (Jim spends as much on daycare as I do for a year of normal living!)

“I’m an extreme case,” Jim told me. He spends a lot, and he knows it. But he also knows that his savings can support this level of spending.

My colleagues and I have each decided the level of comfort that’s right for us and our situation. There’s no right or wrong answer, but no matter which level we choose, there are costs. You have to be willing to pay the price for the lifestyle you choose.

Jacob is willing to pay the price in terms of time and DIY to spend less than $12,000 per year in early retirement. I’m not. Pete is willing to pay the price in terms of comfort and convenience to spend less than $24,000 per year in early retirement. I’m not. I’m willing to pay the price in terms of dollars to enjoy the luxury life at $36,000 per year. Jacob and Pete are not.

None of us is wrong. Each of us is right — for ourselves. And you are right for you, so long as you deliberately choose to pay the cost — in time, effort, and money — required for your lifestyle.

Ultimately it comes back — as it always does — to knowing what you want from life, from having goals and purpose. When you’re clear on your mission, you can make decisions to support your own individual path to happiness.

A Question of Values

You probably won’t be surprised to learn that personal finance bloggers talk a lot amongst themselves behind the scenes. We’re always emailing each other about various problems and questions and points of discussion.

I recently asked Jacob about the notion of “leanFIRE”, which is a term used to describe folks who retire early with less than $40,000 per year of spending. I liked his response:

I think relative perceptions follow the Wheaton scale in that anyone who spends 25% less than their subjective peer group will consider themselves lean, whereas they would probably consider anyone who spends 50% less to be too extreme; 75% less is just crazy. Whereas someone who spends 25% more would be thought of as wasteful and 50% would just be reckless and out of control.

I think this is a great way to frame the issue.

Each of us naturally thinks that our choices are best (if not “right”). We think we have things figured out. Because we think our solution is the best solution, we think that others who choose to be more extreme than ourselves are borderline crazy. At the same time, we think those who haven’t learned to live like we do are lackadaisical or lazy.

In reality, neither is true. As I said before, each of us is different. I don’t want to live like Jacob or Pete. I like my lifestyle. Could I live on $24,000 per year (or $12,000)? Sure, if I had to. But I don’t have to and I don’t want to. But that doesn’t mean I’m right and Pete is wrong. It just means we have different priorities and values.