Drawdown Psychology and Capital Burn

ex-pat_scot

saver861 wrote: »

What is FI though? Is it something that is achieved or does it have the same value if it is given/inherited?


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To me, FI is the freedom from servitude- the ability to walk away when things are not as you wish. It's the "FU pot" that lets you sleep easy at night, in the knowledge that you are financially sound.

saver861

ex-pat_scot wrote: »

To me, FI is the freedom from servitude- the ability to walk away when things are not as you wish. It's the "FU pot" that lets you sleep easy at night, in the knowledge that you are financially sound.

Yes - thats one version of it. However, if someone living at a certain standard reaches FI but at a low standard of living, is it true FI or no.

Equally, someone who is starting with a certain sum, via windfall, inheritance etc, and reaches a standard of FI similar to someone else but who started with £0 then clearly one has done better than the other.

Put another way, if someone gets a lottery windfall, they can claim FI, however, someone who has achieved the same via lifetime career etc. the odds of the latter staying FI for the rest of their lives will be somewhat greater than the lottery winner.

badmemory

Isn't financial independence slightly different for all of us. For some it will be the ability to continue to take half a dozen holidays a year to exotic places and for others it is the simple knowledge that no-one can ever take that roof from over their heads. The last few years I worked for my last employer we were put on short time. I didn't care as I had already reached FI. The last year, when I knew I was going to retire on more than I had been earning, was better than for years because I knew I was actually, truly free. Now that is FI not necessarily stopping work but knowing that you really, really can.

saver861

badmemory wrote: »

Isn't financial independence slightly different for all of us. For some it will be the ability to continue to take half a dozen holidays a year to exotic places and for others it is the simple knowledge that no-one can ever take that roof from over their heads.

Correct. It is different for all. Equally, peoples circumstances can change so FI has to be able to cater for these changes etc.

How it is achieved is also different for many.

The point I was making that someone who has started with little and has managed to get to FI without dropping their standard of living, is the one who has truly achieved FI.

Some, will achieve FI by taking a reduction in their standard of living.

Some will achieve it with the help of windfall, inheritance etc.

Nothing wrong with any of these of course, but the test of true FI is maintaining it for the lifetime as well as catering for any significant change in circumstances etc.

All I'm saying is that the person who has achieved FI which maintains a similar standard of living at the time of FI, while also starting with nothing, i.e. without any windfall or inheritance etc, is more likely to have truly achieved it and be able to maintain it for lifetime.

Triumph13

saver861 wrote: »

Correct. It is different for all. Equally, peoples circumstances can change so FI has to be able to cater for these changes etc.

How it is achieved is also different for many.

The point I was making that someone who has started with little and has managed to get to FI without dropping their standard of living, is the one who has truly achieved FI.

Some, will achieve FI by taking a reduction in their standard of living.

Some will achieve it with the help of windfall, inheritance etc.

Nothing wrong with any of these of course, but the test of true FI is maintaining it for the lifetime as well as catering for any significant change in circumstances etc.

All I'm saying is that the person who has achieved FI which maintains a similar standard of living at the time of FI, while also starting with nothing, i.e. without any windfall or inheritance etc, is more likely to have truly achieved it and be able to maintain it for lifetime.

Some very valid and thought-provoking points in this and your previous posts. You are right that achieving FI off your own bat does convey a great feeling of achievement. Personally though, I'd happily have traded that feeling in for a big lottery win when I was already on the road to FIRE:)
I think perhaps a more fundamental issue though is the truth that you cannot make someone FI simply by giving them money. FI is much more about how you think and feel about money than about how much you have. The best way of all to help your kids to become FI is to try to teach them the joys and tricks of frugality, the traps of consumerism, the diminishing returns of spending more and more and the ridiculousness of trying to keep up with the Joneses. If you can help them find an FI mindset, then you will have done them a very great service.
There is clearly a risk that giving them money, if they don't already have that mindset, will just lead to lifestyle inflation and leave them further away from FI than they were beforehand. If you can get the mindset in place first though, then a gift of money can supercharge their journey and get them to FI much, much quicker. It's a difficult balancing act and one that needs to be tailored to the individual personalities of all concerned.

jamesd

Yes, the mindset is key. Lots of people just increase spending while those seeking FI probably do it much less if at all because it slows reaching their objectives.

saver861

Triumph13 wrote: »

I think perhaps a more fundamental issue though is the truth that you cannot make someone FI simply by giving them money. FI is much more about how you think and feel about money than about how much you have.

Yes, that is correct. It is a mindset thing rather than x number of £'s. Thus, conversely, no matter how much money you give someone you won't necessarily provide the mindset that goes with FI either!

I'm told even billionaires, lie awake at night with the fear that they could lose all their money.

The mindset is about striking the correct balance. Money is there to be enjoyed, especially having worked for it and been prudent as necessary throughout.

I think I'm particularly MSE and take advantage of all the giveaways etc that I can do. I have made around £1000 in the last year or so just opening bank accounts. I play the 0% credit cards and have done since it started in the 90's. Switch energy suppliers etc etc.

On the other hand, I have the full Sky TV package. While I like sport I could live without it if I wanted to. I do haggle to get the best possible deal tho. I change my car every 3 years within the manufactures warranty. I don't need to but I enjoy the newest model even though its lost 40% of its value the moment I drive off the forecourt! Of course, I have not paid anything in terms of repairs in over 25 years either.

Now, Mrs Saver is not nearly as MSE as I am in the sense of doing the bank accounts or the % credit cards etc. etc. However, if I pop my clogs tomorrow, she would carry on very efficiently in financial terms. The whole portfolio would need simplifying and she would need assistance with that part, but from thereon in, she would do her thing, travel etc but still fully manage the finances accordingly to see her out.

So it is necessary to have the correct mindset - but equally a healthy balance between making the most of it as well as making it last.