There's a new movement in America these days. In many ways it's always been with us, but it has been growing rapidly in recent years as adherents find each other through the internet.
On my web site, pretired.org, I call it "pretirement," although others have simply called it “early retirement” or just “financial independence.” When you throw around terms like “financial independence”, however, visions of massive wealth fill our heads and we feel like that’ll never be us. “Early retirement” makes us think of young dotcom millionaires, who got rich early and left the corporate rat race. But many of us -- those of us on the political left, especially -- don’t want to spend our lives chasing dollars at the expense of our families, communities and country.
But what if there was another way?
The pretirement movement is about using simple math, science and logic to unlock the secrets of financial independence WITHOUT being a millionaire.
I am no expert and I actually still have some distance to go on my own journey. But I wanted to share my perspective with the DailyKos crowd, many of whom could benefit from a fresh look at their own financial lives. (I’m a longtime Kossack under a long-abandoned user ID. I’ve even taken a trip or two to the rec list many years ago!)
To me, pretirement is a (sort of) new stage of life. Back in the day, workers (mainly dad) would head off to work each day, return home for a homemade dinner with the family and zone out in front of the TV until bedtime (or some variation thereof). This would repeat until this man was old and then he would be able to retire and he’d enjoy his sweet corporate pension and social security.
Those days are long gone. Not only is mom also working today, but dad’s pension is also gone. And the idea of working for a single company for an entire career is almost unheard of. To make matters worse, companies are often way too happy to shed their older workers. The glut of 50+ workers who are unable to find full employment is unprecedented. Even workers in their 40s often feel they have a target on their back already.
So if the old paradigm was school>work>retirement, the new path looks like school>work>pretirement>retirement.
Pretirement doesn’t mean you don’t work. It means you don’t HAVE to. It’s about choice and freedom.
The first step in reaching pretirement is to challenge some conventional thinking. For example:
- Challenge the idea that investing just a small portion (10% or whatever the financial planning industry is pushing these days) of your income over the years is enough to actually reach your goals.
- Challenge the idea that a long commute to work is normal or sane.
- Challenge the consumerist mentality that you need to keep up with the latest and greatest.
- Challenge the perception that everyone needs to own a house or that it’s a path to wealth.
- Most of all, challenge the idea that buying anything but a house with credit is anything but insane.
The next step is to do some math.
First of all, if you have credit card debt at all, stop reading right now and go get rid of that. The following is for people with enough financial sense to try advanced mode.
The math we’re going to do right now is fortunately very simple. Add up your monthly bills. Then cut those expenses down to the bare minimum. That means excluding your cable TV bill. Your iPhone bill. Your eating out dollars. Once it’s down to your food, housing, utilities and similar costs, you know your freedom number. Multiple by 12 to make it into a yearly number.
Next compute how much money you’d need to have invested to generate that number. I'd say counting on earning 5% is reasonable in today's world, but if that's too aggressive for you, pick 3% or 4%. Now you have a savings target.
Finally, scrimp, save and work as hard as you can to reach that number. You won’t get there investing 10% of your income. And you definitely won’t get there investing zero, as many Americans do.
But I can’t afford to invest – I’m barely making ends meet as it is!
Nonsense! Look, we’re living in an era where consumer goods are CHEAPER THAN THEY EVER HAVE BEEN. I’m not going to get into the sickening behavior of American companies and the government who have exported well-paying jobs wholesale at our expense. I’m just saying as a matter of fact, you can buy many household goods cheaper than at any time in history. Unfortunately that has turned into Americans into a weird consuming machine, rather than discriminating customers. “Oh these socks are on sale for 20 for a dollar? Oh, well, if I don’t like them, I’ll just throw them out and get new ones.” That’s largely where our money is going, buying stuff we don’t need with money we don’t have.
I say buy quality, buy local if you can, and buy things just one time and let everyone else spend away their futures on disposable garbage. But more importantly: Don’t buy at all if you don’t have to!
By opting out of the consumer waste treadmill, you’re going to instead channel those funds into building up your freedom fund, otherwise known as your Fuck You Money. As you take on that more sophisticated approach to using your dollars wisely, you’ll build up your pretirement fund quickly.
And never again will you have to work because you have to, it’ll be because you want to. Maybe your own business, maybe part-time, maybe just in your garden or raising your kids. The point is, it’ll be up to you. By defying the experts and the American consumerist mindset, you’ll have set yourself free.