{"id":612,"date":"2021-06-07T12:00:00","date_gmt":"2021-06-07T12:00:00","guid":{"rendered":"https:\/\/moneywithkatie.com\/why-you-shouldnt-deprive-yourself-in-pursuit-of-financial-independence\/"},"modified":"2025-09-05T17:03:02","modified_gmt":"2025-09-05T17:03:02","slug":"why-you-shouldnt-deprive-yourself-in-pursuit-of-financial-independence","status":"publish","type":"post","link":"https:\/\/moneywithkatie.com\/why-you-shouldnt-deprive-yourself-in-pursuit-of-financial-independence\/","title":{"rendered":"The Math Behind Why You Shouldn\u2019t Deprive Yourself in Pursuit of Financial Independence"},"content":{"rendered":"

\"\"\/<\/p>\n

\n

Money blogger says what?<\/p>\n

Isn\u2019t this a website where I\u2019m supposed to tell you that you\u2019ll never be rich and free if you indulge in all your silly whims? <\/p>\n

Sure, sometimes \u2013 but today, I want to share something I\u2019ve been thinking about with regards to the path to financial independence.<\/p>\n

\n

For the uninitiated, financial independence (or \u201cFI\u201d) describes a financial state in which you have so much money invested that you never have to work again<\/strong> \u2013 in other words, you\u2019re financially independent from the working world. Work is optional.<\/p>\n<\/blockquote>\n

If this is the first time you\u2019re hearing about FI, you probably assume you\u2019d have to have many, many millions of dollars for this to be true \u2013 but it\u2019s probably a lot less money than you\u2019d think. To learn more about FI, how it works, and why<\/em> it works, check out this post<\/a>.<\/p>\n

In the meantime, let\u2019s break down why an article with this title even needs to be written.<\/p>\n

The obvious temptation when pursuing FI<\/h2>\n

When I found out about financial independence, I felt like someone had just handed me the cheat code to life. <\/p>\n

All I have to do is save 25x my annual expenses? Easy! I\u2019ll start right now!<\/em> She said, driving her leased Acura RDX and toting around her Louis Vuitton Neverfull. Narrator: She did not.<\/p>\n

Because even when you\u2019re \u201conly\u201d trying to save (read: invest) 25x your annual expenses, that may not be tens of millions of dollars \u2013 but it still might be somewhere between $1M and $2M. Considering that the average household income of an American family was around $68,000 in 2019<\/a>, it takes a while to save $1M or more \u2013 even if you\u2019re saving half your income. (Which is, spoiler alert, why most people do <\/em>take 40 years or more to reach retirement age.)<\/p>\n

After all, let\u2019s pretend our family was saving half their income at $68,000 per year \u2013 $34,000 before tax, because I\u2019m lazy. <\/p>\n

Using the government compound interest calculator and assuming an average rate of return of 7% with +\/-2% variance each year, it still takes this family 17 years to hit their $1M benchmark. <\/p>\n

So what is our FI-hungry family probably tempted to do?<\/h3>\n

Cut every corner possible. <\/p>\n

When you\u2019re fired up about FI (pun intended), the temptation is obvious \u2013 consider the calculation.<\/p>\n

Annual expenses<\/strong> * 25 = your FI number that\u2019ll support you indefinitely, as long as you only ever withdraw about 4% per year.<\/p>\n

How do you both (a) make the FI number smaller and (b) save it faster? <\/p>\n

By spending less.<\/p>\n

This is why spending less does <\/em>do more for your FI pursuit than earning more, because spending less shrinks the number. <\/p>\n

Let\u2019s make it real:<\/p>\n

Family spending $34,000 * 25 = $850,000 to reach FI<\/p>\n

Family spending $30,000 * 25 = $750,000 to reach FI<\/p>\n

Spending just $4,000 less per year cut the FI number by 11%. <\/p>\n

While this might seem like a slippery slope that you\u2019d like to find yourself on, lowering your expenses more and more, it\u2019s still a slippery slope. <\/p>\n

This hypothetical FI-hungry family is likely going to be pretty willing to start cutting extra costs anywhere they can find them. That\u2019s why \u2013 when most people hear about the financial independence community \u2013 they imagine a bunch of boring-ass people eating brown bananas and saving 90% of their income, living like the Duggars got cut off from their TLC contract. <\/p>\n

If you want to hit FI as soon as possible, you\u2019ll probably overcorrect at first.<\/p>\n

Why is this a bad thing?<\/h3>\n

While the temptation to deny yourself and sacrifice at every turn might feel noble \u2013 prudent, even, if you still harbor immense amounts of Catholic guilt like I do (blessed are the poor, right? They will inherit the Roth IRA!) \u2013 it\u2019s problematic. <\/p>\n

I\u2019m not talking about the emotional or psychological reasons it\u2019s problematic.<\/p>\n

I\u2019m talking about the mathematical reasons<\/em> why this strategy has no longevity. <\/p>\n

Your FI number has to sustain you forever. By investing 25x your annual expenses, you\u2019re all but guaranteeing you can withdraw 3-4% per year in perpetuity to live on without running out. <\/p>\n

If you get your expenses artificially low in order to reach FI, you\u2019re going to set yourself up to live the pauper\u2019s lifestyle forever. <\/p>\n

Remember that, once you\u2019re FI, you still want to enjoy your life<\/h2>\n

I\u2019m all about sacrifice (Catholic guilt, remember?). Hustle, hustle, work, grind, pack your lunch, brew your own coffee \u2013 whatever! I\u2019m into the ethos of #WorkEthicMania.<\/p>\n

But let\u2019s not lose the forest through the trees here \u2013 the point is to be able to walk away from work if you want to (or at the very least, have the freedom to choose your work without considering income as a factor \u2013 pretty cool, huh?). It\u2019s freedom.<\/p>\n

What happens when you hack, scrimp, and deprive your way to FI? You basically guarantee that the only lifestyle that FI number can support <\/em>is the one you\u2019re currently living \u2013 and that doesn\u2019t feel very freeing. <\/p>\n

Here\u2019s the reality: When you reach FI, you very well may decide to stop working. You\u2019re probably going to have a lot more time on your hands<\/em>. You don\u2019t want to feel like you can\u2019t leave the house or do anything because your FI number is only supportive of a lifestyle that\u2019s intensely minimal if that lifestyle doesn\u2019t feel good to you<\/em>. Then you\u2019re trapped.<\/p>\n

The operative words: \u201cA lifestyle that feels good to you\u201d<\/h3>\n

Some people can happily <\/em>live on $15,000 per year. The van lifers know all too well that it\u2019s possible. But if that\u2019s not what you want, even if you can<\/em> get your monthly expenses that low (and lower your FI number accordingly), your financial independence won\u2019t feel very good. <\/p>\n

How do we find balance?<\/p>\n

It comes down to intentional spending (ew, do I sound like a wellness blogger now?) \u2013 spending your precious dollars where they add value to your life, vs. sleep-walking through the beauty aisle at Target and buying any product that came from a semi-decent brand team. <\/p>\n

If you feel like you\u2019re crossing the line into true deprivation (read: never treating yourself, ever), you\u2019re probably setting yourself up for a lifestyle that\u2019s not sustainable (at least, not enjoyably) in the long-term.<\/p>\n

The one caveat to the deprivation tactic<\/h2>\n

The reason the math doesn\u2019t support deprivation as a means to FI is because it changes (reads: lowers) your annual expenses artificially, and then locks you into that lifestyle by lowering your FI number, too.<\/p>\n

If you really want to get there faster<\/em>, you can calculate your FI number based on your ideal lifestyle \u2013 the amount of money you want<\/em> to spend every month to enjoy your life \u2013 but then spend less (sometimes, a lot less) than that in the interim so you\u2019re able to save more and get there faster. <\/p>\n

For example, I\u2019m spending about $2,500 per month right now. That means my FI number is $750,000.<\/p>\n

But am I really living it up? Living high on the hog? No. <\/p>\n

Do I want to lock myself into spending $2,500 per month for the rest of my life? No, I don\u2019t think so. I don\u2019t want that restriction. Because sure, I can pull it off now, but what about in 10 years from now? 15? 20? I don\u2019t want to reach early retirement and then realize that I\u2019m miserable or that I\u2019ve limited my options.<\/p>\n

So I don\u2019t shoot for $750,000. <\/p>\n

Instead, I\u2019m really shooting for $1.25M. If I can hit $1.25M, I\u2019ll feel plenty comfortable leaving traditional employment and venturing out on my own to do any number of things. <\/p>\n

4% of $1.25M is $50,000 per year, or $4,160 per month \u2013 about $1,660 more than I spend now. <\/p>\n

That cushion feels good to me, because as it is, I\u2019m certainly not depriving myself \u2013 but I\u2019m also not drinking a $5 cold brew every morning, and in early retirement, maybe I\u2019ll want to. <\/p>\n

In summary<\/h2>\n

Financial independence is supposed to be about options. If you deprive yourself in order to get there faster (by artificially lowering your FI number), you\u2019re actually depriving yourself of the very thing you set out to achieve in the first place: freedom.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Money blogger says what? Isn\u2019t this a website where I\u2019m supposed to tell you that you\u2019ll never be rich and free if you indulge in all your silly whims? Sure, sometimes \u2013 but today, I want to share something I\u2019ve been thinking about with regards to the path to financial independence. For the uninitiated, financial independence […]<\/p>\n","protected":false},"author":178814,"featured_media":2463,"comment_status":"closed","ping_status":"open","sticky":false,"template":"si-template-single-post-taxable-investing.php","format":"standard","meta":{"footnotes":""},"categories":[37],"tags":[44],"class_list":["post-612","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-independence","tag-taxable-investing"],"yoast_head":"\nThe Math Behind Why You Shouldn\u2019t Deprive Yourself in Pursuit of Financial Independence - Money with Katie<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/moneywithkatie.com\/why-you-shouldnt-deprive-yourself-in-pursuit-of-financial-independence\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Math Behind Why You Shouldn\u2019t Deprive Yourself in Pursuit of Financial Independence - Money with Katie\" \/>\n<meta property=\"og:description\" content=\"Money blogger says what? Isn\u2019t this a website where I\u2019m supposed to tell you that you\u2019ll never be rich and free if you indulge in all your silly whims? Sure, sometimes \u2013 but today, I want to share something I\u2019ve been thinking about with regards to the path to financial independence. 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