Financial Independence Is Not Just a Number

[00:00:01] Welcome to Business Finance and Soul. My name is Shaun Enders and I'm a curious entrepreneur. I love exploring business, personal finance and consciousness. I'll jump around topics, offer my opinions and occasionally interview interesting people. Looking forward to going on this journey. Let's be curious together.

[00:00:21] Welcome back to Business Finance and Soul. Today is a solo episode and I am thinking a lot about the practicality of financial independence, retire early, so the FIRE community.

[00:00:46] And there's something that has just really emerged for me personally. And so I want to talk about this because I think that there's a huge opportunity to continue to pursue FIRE or as I've called and been chasing most of my adult life, Freedom Fund.

[00:01:09] But there's something incredibly attractive about the idea of early retirement. You know, you work hard, you save aggressively, you invest consistently, you hit a number and then you walk away. But for a lot of people, that vision I know for me personally, it creates hope, it creates discipline. Absolutely. It creates a reason to say no to unnecessary spending. So you can actually buy your freedom for tomorrow. And I understand that very deeply.

[00:01:40] The Freedom Fund for me has been not retirement in the traditional sense, not, you know, sitting on the beach forever, not disappearing from the world. I still like the Matrix. I like to plug in and play the game and, you know, enjoy making money in the pursuit of it. But it's more about freedom. The ability to know that if I ever needed to walk away from work, I could.

[00:02:08] And that ability to make decisions from a place of choice instead of fear. And I think that that's the ultimate freedom that we're all looking for. That ability to look at our family and know that we're okay. That's always mattered to me. But the older I get and the farther I get into parenthood, the more I realize something extremely important. When you have kids, your future expenses are not fully knowable.

[00:02:36] So I want to talk about that today because this is really aimed at individuals that are thinking about lean fire. We're going to get into that because there's different versions of fire. If you're building your life around lean fire, it's where you're retiring early with just enough to cover very modest lifestyle choices.

[00:03:02] It's exciting because you can achieve your number faster, but your margin of error is very tight. There's chubby fire where you have more cushion, more flexibility. And then there's fat fire where you have a significant amount of assets, much larger margin for lifestyle surprises, more optionality.

[00:03:25] Of course, we'd all choose fat fire if we had unlimited amounts of resources in front of us. But the journey to get to fire is the most important part, whatever path you're on. And so this today is focused more on the lean fire, especially those with kids, because although there's no path that's right or wrong,

[00:03:50] the fact that lean fire doesn't allow you to factor in things for the future that you can't see, that's why I want to focus on it today. I don't want to dissuade you from going this route, but I want you to think about things as you go this route. Because the plan, especially for lean fire, it assumes a certain version of your own personal future.

[00:04:18] You estimate your housing costs, you estimate food, you estimate health care, you know, basic kid expenses. Maybe you're forecasting college, and then you have to build that spreadsheet to be able to look at this and go, okay, all of these things have to be factored in with an assumption.

[00:04:40] And some of those assumptions, you know, you can use inflation, maybe use that for food or energy, maybe even housing. Some of it you can factor that in. You can use that and spreadsheet your way to an answer. And if you're disciplined, maybe those numbers really work. But here's the problem. Our kids are not spreadsheet assumptions.

[00:05:07] And this is kind of crazy, and I'll share, you know, my own personal story with you. But I'll get to that in a moment. But our kids are not static beings, right? You know, they're living, changing, growing human beings. And sometimes their lives open doors that you could never have predicted. Maybe your child becomes an incredible athlete. Maybe they fall in love with music and show their real talent.

[00:05:37] Maybe they get into theater, dance, robotics, art, debate, hockey, equestrian pursuits, right? Some other world that requires time, travel, coaching, equipment, training, or tuition. And these are things that you can't necessarily see because, hey, you didn't live through it. You didn't grow up with those same aspirations.

[00:06:03] So when you model things out on your spreadsheet, you're not really taking into account their future desires or their future opportunities. You're just thinking about, well, this is how I got along. I went to public school and it worked out for me. So my kids can do the same. And maybe that's the case. And maybe that's the way it'll work out. Maybe the kids don't have any ambition or aspirations that change meaningfully your budget. But what if they do?

[00:06:29] Maybe they get accepted into a school that could change the direction of their life. And suddenly the question becomes very real. Do we support this opportunity or do we protect the plan, right? That's a real question. And it's not an easy one. And this is not an episode about telling you what you should or should not do. As I mentioned, this is not me saying everyone needs to spend every dollar on their kids.

[00:06:57] And it may also, you know, lead to other things that you couldn't have forecasted. You know, this is just simply a cautionary example of what happens when you cannot fully see around the corner. Because that's the truth of life. You can forecast it, but you cannot fully know.

[00:07:19] You can build a beautiful financial model, but your children may grow into people with dreams, talents, and opportunities that you just never saw coming. And if your version of early retirement has no room for variance, those surprises can become really hard. So as I mentioned, I'm going to use my own life as an example. This is pretty exciting.

[00:07:42] You know, as I've stated, I've always chased a freedom fund, a number where once I hit it, I could theoretically walk away from work. And fortunately, I still love what I do. I love building my business. I love working with people. I love recruiting. I love the conversations, the strategy, the challenge, and the meaning behind it. So I'm not sitting here desperate to stop working. And thankfully, that matters. Because earlier this year, my daughter was accepted into a top boarding school.

[00:08:12] This is a dream for her. And in no way could my wife and I have forecasted years ago that this would be part of our future. When your kids are little, you think about diapers, sports, holiday parties, maybe saving for college. We did. We started a 529 plan, and we put away, you know, modestly every year an amount that we expected would cover quite a bit in the later years during college.

[00:08:41] But you don't necessarily look at your toddler and say, one day she may leave our house three years earlier than expected to pursue an incredible educational opportunity. That isn't something that we factored in. Maybe it is for you. And if it is, it's easier to model. Let's say you went to boarding school. Maybe it was a familial path that just was expected. Well, of course, maybe private school was going to be part of the plan when they were younger.

[00:09:10] And so you start factoring that in. But here we are. My 16-year-old daughter will be leaving our house three years ahead of schedule. Already emotionally, that's a lot. Financially, also a lot. Because what that really means is it's college-like tuition showing up three years earlier than expected. And that's not the kind of expense that you solve by cutting out coffee, right?

[00:09:34] That's not what we would look at and just say, well, let's just reimagine our grocery store budget. Or let's cancel Netflix. This is not going to be solved by cutting. It's a major annual expense. And had I already retired early under a lean fire model, I would not have any variance built in for a major life change. And we'd be facing a very different conversation.

[00:10:04] We could either tell her no. Or maybe I would have to go back to work. Now I've been away. Are my skills relevant? Right? You know, can I get back into work easily? Would I be making the same money that I was making prior to? So all of those are things that you have to look at when you think about these future potential expenses, especially with children. Now if they're for you, of course you can hold off. You can sacrifice.

[00:10:33] But what's that look like when you're looking your kids in the eye? And that's the part I think people need to think about. Because financial independent is supposed to create freedom. Right? But if the plan is too light, it can actually create a different kind of pressure. You may be free from work, but you're not free to respond to life. And that's an important distinction. Because life does not stop changing once you hit your number. That's a huge one.

[00:11:03] And I want to just make sure that we double click on that for a moment. Because there's this idea, especially within the fire community, there's an obsession on hitting a number. It's hitting that point, that inflection point of where you can pull the ripcord and you can say, I'm done. I'm firing on Monday. And that's great. But life doesn't stop. Right? Things evolve.

[00:11:32] Things change. And it's hard to Monte Carlo every single potentiality between your own personal life, then your spouse's, and most certainly your kids. Because they don't stop evolving because the spreadsheet says that you're done. New opportunities do not ask whether or not they fit within your withdrawal rate.

[00:11:56] And parenting often requires a lot of flexibility that's difficult to model 10 or 15 years or 20 years in advance. And that's why when it comes to lean fire and kids, I think caution is warranted. Not fear. Not judgment. Just caution. Because just enough may be enough for the life that you currently see. But it may not be enough for the life that shows up later. And believe me, your kids and their opportunities.

[00:12:22] Listen, it's great that you have time for them and that you are there for them. They're always going to remember that. And that's special. At the same time, they're always going to remember the opportunities that they had to pass up because you didn't have the finances. You didn't have the ability to support that next level of their dreams. And that's where liquidity matters. Optionality matters. A margin for safety matters. The ability to earn again matters.

[00:12:52] The willingness to adjust. That matters. And the dream of early retirement is very powerful. But I think the better dream is freedom with flexibility. Especially when you have children. So how can you prepare? First, do not build your plan around perfect conditions. If the plan only works if nothing major changes, it may not be strong enough. Now, I do this. It's the same thing.

[00:13:21] If you run a business, you're doing these same planning exercises. You hope for the best, but you plan for the worst. What if a client leaves a major client? What if revenue gets wiped out because of, hey, COVID. We've been through that. What if you lose a key employee? What if you get sick? These things all matter when you run a company.

[00:13:47] And in your household, it should be similar in terms of how you think about things. Kids get older. Their interests get more expensive. I actually didn't believe that when I was supporting two kids in daycare. And I was told, oh, yeah, well, they get expensive later also. And I was thinking, I'm spending upwards of $3,500 a month. I don't think it's going to get more expensive than this. But their needs become more complex, right?

[00:14:17] Their opportunities become harder to predict. So that's something you want to be aware of, right? So first, don't plan around those perfect conditions. Second, build a real variance fund. Not just an emergency fund for like a broken water heater or job loss. A life expansion fund. And this may be new to discuss.

[00:14:39] But it's something that I think really, really sets the tone for how you feel about, you know, going through and deploying your freedom fund or full fire. A life expansion fund is a fund for things that you did not know you would care about later. And if your kids don't take advantage of it, believe me, you can deploy it in a lot of fun ways. But that could be private school.

[00:15:08] Like us, boarding school. It could be travel sports. Very expensive. And a lot of parents are doing it. Could be expensive music lessons. Could be therapy. You know? We don't know how your kids are going to unfold. It might be helping your child through a difficult season. You know? It might be saying yes to an opportunity that was just simply not part of the original plan.

[00:15:36] Third, be careful about making early retirement the only goal. It's easy to get singularly focused on this mission. It's exciting. If you're attracted to fire, you're probably that type of person anyways. You probably have an intense discipline and a propensity towards setting a goal and wanting to attain it. But just be careful about making that the only goal. Because sometimes the goal should not be to never work again.

[00:16:04] Sometimes the better goal is to build a life where work becomes optional, meaningful, flexible, or on your terms. If you start with that in mind, maybe the opportunities you look at and that you take on will lead you down that path that give you that flexibility. I'm very happy that I chose a career where I can meaningfully make more money based on the effort that I put in.

[00:16:31] So I might have thought, hmm, I'm going to be able to relax a little bit. I'm 48. I'm going to be able to relax a little bit at 48, 49. Take my foot off the gas just a little bit. Because I've been going hard for so many years. And my daughter pulled an audible.

[00:16:48] And now I'm looking at it and going, well, I can either put my aspirations in front of her or I can do what the whole point of life is about anyways, which is really living for someone else. Not just myself. Doing the hard work. And so for me, it gave me a new excitement, a new goal to go after. Now, it means that I've got to dial it up a little bit in terms of my energy and effort. But I'm proud of this.

[00:17:18] And I talk about it with my daughter. I talk about the Freedom Fund. I talk about, you know, what this means. Not in a way of where I say this puts me under pressure or stress. But in a way where we discuss it and I go, yeah, I really, really want to make it my mission to try to cash flow your education here. I want to support you through this journey. I'm certainly proud of what you've accomplished. And that's just me. That's something that I get excited about. Everybody's going to get excited about something different. Not one size fits all.

[00:17:48] But for me personally, it gives me a renewed sense of mission, if you will. And, you know, there's a big difference between being trapped in work and then choosing to keep working because it gives you that purpose, that income, you know, the optionality. And so I'm choosing to create a new mission. Fourth, I want you to consider maintaining earning capacity.

[00:18:18] So if you retire very early, especially under lean fire, you've got to ask yourself the hard question. If life changes, how easy would it be for me to earn again? Could I consult? Could I pick up part-time work? Could I restart a business that I slowed down? Can you freelance? Can you return to your industry and your job? Because freedom is not just about the size of the portfolio. It's the ability to adapt. We should all see that right now. I mean, we're in an AI era.

[00:18:46] I'm not even sure where portfolio leads us in five to ten years. AI is disrupting the conversation in ways that we hadn't anticipated, you know, ten years ago, five years ago, maybe three years ago. That's how fast things change. Fifth, talk openly with your spouse about what you're willing to say yes to. That's a huge one, right?

[00:19:11] Because the one person that is a yes doesn't mean the other person is a yes, right? One person may be committed to the early retirement plan while the other person may feel completely differently about a child's opportunity. And you don't want to be that grump, that person that is just putting yourself above everyone else. Believe me, it's not a good look. And you won't feel great for it.

[00:19:40] You don't want to be having the conversation for the first time when an acceptance letter comes through the mail or a tournament invite or a major opportunity is sitting on the table, right? And finally, just remember above everything that money is a tool. The goal is to not just win the math game.

[00:20:01] It's to build a life with peace, with options, a life where you can support the people you love without creating financial chaos, a life where your future self isn't trapped by the decisions of your younger self made with very incomplete information. Do I believe in the freedom fund? I believe in financial independence. I still strongly believe in saving, investing, building a life where money gives you choices.

[00:20:29] But I also believe that when you have kids, you need to leave room for the unknown. Sometimes the unknown is not a disaster. That's how we think of it sometimes. It's, oh, it all goes horribly wrong. Here's my buffer. You know, sometimes that unknown is a huge opportunity. Sometimes the thing you didn't plan for is the thing that your child has been dreaming about.

[00:20:58] And when the moment comes, the real freedom is being able to say, well, we can consider this. Maybe not an automatic yes, but not an automatic no. You know, we have enough flexibility to have the conversation. And that, to me, is the best version of financial independence.

[00:21:17] That is the essence of why you want to become independent in general, is to independently make those decisions of where you can say, hey, I didn't plan for it. I didn't know it would be here. But here we are. And because I put myself in a good position, we're going to go ahead and take advantage of it or not. But again, that's your journey.

[00:21:44] All I'm expressing here is that you want to be in charge and not have your back against the wall of where it's an automatic no. So I hope this is a timely conversation for whatever's happening in your life. If your kids are small, expect the unexpected. Expect big opportunities. Expect you're raising kids that are going to achieve at a high level.

[00:22:08] If your kids are at that age where things are starting to unfold, you probably know exactly what I'm talking about. Either through your own family or through people that you know. So as always, I'm appreciative that you're here. Please leave a review for us either on Spotify or Apple. I love seeing the feedback. I continuously receive emails about how an episode impacted you. And I always welcome that.

[00:22:37] So thank you. As always, stay curious.