Pursuing Financial Independence: Now What?

Yesterday, Matt challenged readers to figure our their financial priorities. That post generated some interesting responses, including one in which a reader wondered: “Now what?”

I’m at the “now what” stage. We have paid the car off, and a fat savings account. We do not plan to pay off the house because we want to move soon. Not sure that the house will sell for the amount we paid. 401(k) is funded.

This is a great question. We spend a ton of time and energy focusing on getting out of debt, building an emergency fund, funding our retirement accounts, saving for college, paying off our mortgage, etc. But once we get a handle on these things, what’s next?

It’s not uncommon for people to be so focused on their daily lives that they don’t give any serious thought to what the future holds. In fact, if you ask around, you’ll find that a lot of people will flatly state that they’re pursuing “financial independence” without really knowing what they mean.

This is actually an issue that fellow blogger JD Roth tackled about a year ago when he wrote the following about the so-called “third stage” of personal finance:

I’ve reached a place of financial security. My income is good. I save and invest. I don’t spend frivolously. Now I find myself in the enviable position of having to decide: Should I decrease my workload, or should I use some of my income to invest in the things that make me happy?

Unfortunately, JD didn’t have the answer, and neither do I. In fact, I’ve struggled mightily with this issue. Should we charge ahead toward the finish line (retirement) trying to get there as quickly as possible? Or should we slow down and enjoy the ride?

There are no easy answers. Moreover, just as Matt pointed out when he wrote about financial priorities, the “right” answer will vary from person to person. With that in mind, I’d like to hear your thoughts…

Stepping back and taking a look at the big picture, what are your long-term goals?

18 Responses to “Pursuing Financial Independence: Now What?”

  1. Anonymous

    I have the same issues. I have way too much of my extra money sitting in CD’s because I got scared out of the market in 2009. Even though I don’t need the money, I hate that it isn’t working for me. I am definitely a saver but frustrated that it is so hard to find anything of value in. That is the big problem for those of us who have eliminated debt and saved alot but still need our savings to grow to retire or retire early. I am 45, little mortgage (400k equity in house), several 100k in retirement plans amd 225k in cash but still need to save another million to retire comfortably.

  2. Anonymous

    There shouldn’t really be a “now what”, because finances is a continuum where you reallocate monies towards some other financial goal(s). It doesn’t matter what goal(s), you should still account for them.

  3. Anonymous

    I’m kinda in the same boat: debt-free, fully funding my 401k, nice savings/e-fund account. But in becoming this person I’ve completely changed my habits. I still save, don’t spend much, and am content with my life; e.g. I used to travel all over the world and racked up a ton of debt doing so with nothing to show for it aside from some photos and a few tchochkes, and now I’m pretty ambivalent about travel. I now have a job that I actually like — after almost six months of unemployment — that pays very well, and I’m uninterested in an early or even temporary retirement.

    I guess what I mean is I can afford whatever I want; it’s just that I don’t want anything anymore. My car is 18 years old, I rent a little condo that is sparsely furnished with cast-offs and a few things from IKEA, my clothes are plain but sturdy, etc. About the only “want” I have right now is a 27″ iMac, but there is nothing wrong with the old 20″ one I have, so that’s that.

    Oh and I also micro-loan via kiva.org, give to a few select direct-action groups e.g. msf.org hodr.org and have done some volunteer disaster response with the latter, so there’s that.

    Any ideas how to spend my money? 😉

  4. Anonymous

    The problem is that it’s really hard to cut back work hours. I’ve ended up working full time twice (for one year, and then later for 2 years) because decent-paying, benefit-carrying part time jobs are really, really hard to find.

    Even the people I know who contract or technically work for themselves have a really hard time cutting back on hours. You can bring in a partner, or hire an assistant, but stuff comes up that the junior folks haven’t run into before… that’s why retirement is the goal for most people, our society is really not structured well for less-than-full time paid work.

    Which is a shame. At one point there was a real movement toward people working fewer hours so everyone could have a job. Now we seem to think working 40, 60, 70 hours a week is a badge of honor – at my company people like to brag that they have two full time jobs. There’s no feeling that it takes away from your effectiveness at either one of them.

  5. Anonymous

    Nickel, thanks to you and J.D. Roth, I’ve been working on my financial literacy and frugality for a couple of years now. For me, “Now What?” will never be an issue because money has become a hobby for me.

    I’m not greedy, but I do have fun trying to see where I can cut expenses and how much more I can stash away for the future this month. Don’t get me wrong, I don’t deprive myself and I still give time and money to good causes, but for me studying money and the way we deal with it is as much fun as, say, playing video games is for ohers.

    There will always be a reason to save, whether it’s for yourself or your kids, so I don’t know if “Now What?” will ever be a relevant question in my family.

  6. Anonymous

    It seems funny that after obtaining financial freedom we don’t know what to do. We spend our years working and paying off debts that when we finally done it all we are left with an emptiness and loneliness. But what we should do is start enjoying some of the joy that we have work so hard to achieve. So the Net Worth is now over full take time out and pamper yourself. Then look around what you can contribute to via charity/volunteerism.

  7. Anonymous

    Great post and great question.

    Here’s how I look at it: As long as I’m enjoying my work, I’ll continue doing it. Once my bases are covered (debt, emergency fund, 401k), any extra money goes toward additional investments — with the ultimate goal of financial independence.

    However, if I find myself no longer enjoying my work or lifestyle, I can scale back the investments or shift money into current activities instead of saving for the future.

  8. Anonymous

    Interesting question: whether to charge ahead to the finish line or slow down and enjoy the ride. I guess it comes down to whether one sees life in the day-to-day things, or something that won’t be lived until certain goals are accomplished.

    The interesting thing is that statistics show that a large portion of the population actually dies within a few years of retiring. They are probably the same people that looked at all those ads about retired people living it up on the beach or the golf course, and saved so they could do the same.

    The reality is that for most of those people who saved and saved for the perfect 10 retirement, they will end up spending their money on health issues.

    So I say, life is in the day-to-day moments. Live the life you want today and tomorrow while you still have it.

  9. Anonymous

    We’ve finished paying for college (x2), have a nice emergency fund, our retirement savings are on track and we’ll even have a traditional pension when we retire (currently 48 yrs old). So we’ve concentrated on investing in DRIPs (all high dividend paying stocks + no broker fees) and bonds. Total allocation around 70/30 (stocks/bonds, including 401K, IRAs and 403b). We also give to various charities every month, our alma mater, United Way, Komen and a Luekemia research foundation. Future plans after we relocate to the NE is to buy a condo in Fort Lauderdale (they are on sale). We have worked hard, but still feel very fortunate to have reatined employment over the past 18 months. I work in Chemical manufacturing and my wife is a high school math teacher. Sounds like we’re close to being in the third stage, we both enjoy working still.

  10. Anonymous

    When I get to the third stage I plan to begin investing for a temporary retirement or sabbatical. I think 2 years of not having a day job would be wonderful. I could also use the opportunity to convert some retirement money from tax-deferred to Roth for very little tax cost. Another benefit is if I am able to do this while I have children in college. If I fill out my 10% tax bracket and go no further my kids can get great need-based financial aid for a couple years.

  11. Anonymous

    Thanks Bodark, What I guess I’m trying to figure out is where to park the left over money after everything is maxed out. I’m trying to weigh overall return versus tax efficiency. We are not in a high bracket, but I would still like to lessen any tax burden.

  12. Anonymous

    @Erik – You’ve got a few things going there, but first is Qualified money (e.g. pre-tax money)this is 401(k), 403(b) etc.. once you max that out (see IRS regulation for each plan type annual limits). Then you hit Roth (or post tax money), here you can save until you’re blue in the face… Roth, Money Markets, Direct Investments.

    You have two choices: 1) learn it yourself, 2) pay a professional to advise you. Chances are both course will lead you to the same result (see Darts vs. Stock Broker). But, the output will be directly tied to what you save versus consume, no matter the mix of PRE/POST tax or vehicle.

  13. Anonymous

    I would like to know where or how to stash extra retirement money or a retirement clone. We both max out our Roths each year. My wife has a 403B, but it’s all annuities, which, fro me, are very hard to figure out expense-wise. I’m trying to keep my non-retirement portfolio tax friendly and just feed that. Any other advice would be great!

  14. Anonymous

    My goal has always been to work as little as possible. That’s been my major motivation for living frugally and staying out of debt – I like to volunteer, I like to travel, I like to play video games, I like to take days off and take my kid sledding.

  15. Anonymous

    Regarding whether to plow ahead toward retirement or enjoy the ride, once you reach that comfortable stage, we try to do both. In general we are plowing forward toward retirement; however, we occasionally get unexpected money: bonus at work, side job, large gift, tax return, etc. We often use those to help us enjoy the ride, like putting in wood floors, or going on a little vacation. It works pretty well.

  16. Anonymous

    For me, I know the third stage is a little ways off. My job is such that I won’t exactly be able to scale down (salaried position), but maybe I start contemplating some type of early retirement or maybe I’m helping my kid(s) with a house or their retirement. I can’t wait to have the problem of deciding what I’ll do with the extra money.

  17. Anonymous

    Once I reach the “now what stage” or “the third stage” I plan to give incredibly of both my time and my finances… I’m really excited to reach this place in life.

    I also plan to spend my time on hobbies, no longer worrying about money or earnings but just spending time doing things I want to do. Most of these things will probably center around my God, and around helping others… I believe these are the things that make me the most happy.

  18. Anonymous

    My long-term goals are to fund some of my children’s college; retire with dignity; pay off my house; get out of debt; create lasting memories with my family.

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