It has been eight years since Finn and I embarked on our journey towards financial independence (FI). This journey has been a mix of exhilaration and challenges, each step filled with valuable lessons that have not only shaped our approach but also strengthened our resolve.
Throughout our journey, we’ve faced numerous challenges and made many mistakes. Each obstacle served as a crucial learning opportunity, helping us refine our strategies and reinforcing our commitment to achieving financial independence.
Our approach to reaching FI has evolved, especially since reaching certain milestones. We like to track our progress towards FI in two distinct ways. One method focuses on the incremental steps towards both FI and Financial Independence, Retire Early (FIRE), while the other method categorises FIRE into three types: Lean, Coast, and Fat. We are currently on the path to achieving ‘Fat FI,’ which represents a more abundant style of financial freedom. For more detailed explanations of these terms, please click here.
In reflecting on our journey, Finn and I often discuss what we might have done differently—those ‘should’ve, would’ve, could’ve’ moments. Here are some of the mistakes we’ve made and the invaluable lessons we’ve learned from them:
1. Misunderstanding the ‘Why’
Many start their FI journey without fully grasping their underlying motivations. It’s common to hear tales of individuals who fixate solely on monetary targets, neglecting the deeper reasons behind their pursuit of financial independence. I discovered this firsthand when Finn and I moved to the Philippines. During our time there, I wasn’t working in a traditional job but was helping Finn with his projects. This period made me realize that retiring from work wasn’t my ultimate goal.
We cherish traveling the world, but equally, we value engaging in meaningful work that provides fulfillment beyond financial rewards. Having the freedom to pursue meaningful activities with a clear purpose brings far greater satisfaction.
It’s crucial, therefore, to clearly define your personal reasons for seeking FI before embarking on this journey. Whether your goal is early retirement, spending more time with family, or the flexibility to try new careers, understanding your true motivation is key to developing an effective strategy that aligns with your values and life goals.
2. Not Setting Clear Financial/Investment Goals and Milestones
At the onset of our married life, Finn and I hadn’t set any concrete financial goals. We found ourselves saying, “Everyone is buying or building a house, so should we!” But why? We simply followed the crowd without a distinct plan or understanding.
When we decided to build a house, it coincided with a looming downturn in the property market. We lacked thorough research on the location or understanding of market trends from professional investors, instead relying on advice from a mortgage broker who wasn’t even investing in the property market himself!
Looking back, had we known better, we would have opted not to build at that time. Instead, we might have invested in the share market and waited for the property market to shift in favour of buyers, or approached building our home more strategically.
Lacking a clear roadmap left us directionless and purposeless. Establishing specific, measurable financial goals is crucial for navigating the journey to financial independence effectively. Whether it’s setting aside funds for retirement, purchasing a home, or freeing yourself from debt, having clear objectives provides a guiding light that keeps you motivated and on track.
3. Understanding Our Financial Level Before Following Financial Gurus
In our eagerness to secure our financial future, Finn and I initially overlooked how important it was to align our investment strategies with our personal behaviors and lifestyle. When we picked up the ‘Barefoot Investor’ book, it felt like we were discovering a whole new world of financial strategies. Enthused, we attempted to implement every suggestion from the book for over a year. It was only after scrutinizing our expenses in a detailed spreadsheet that we realized we were actually spending more than before, attempting to adhere to the suggested splurge ratios. It was a bit of a wake-up call!
We quickly adjusted our budget back to its original state, which had suited us well. The bucketing method advocated in the book is an excellent strategy for those struggling with financial discipline, but it may not suit everyone, especially those who are already deep into their financial independence journey or who naturally save a substantial portion of their income.
Before adopting any new financial strategy, it’s crucial to evaluate your current spending and saving habits. Compare these with the recommended practices to see if they truly offer an improvement. If a new approach can enhance your financial well-being without compromising your lifestyle, then it’s worth considering. Otherwise, it might be best to stick with what has proven effective for you.
4. Resisting Lifestyle Inflation
As Finn and I progressed in our careers and our income grew, so did our inclination to indulge in discretionary spending. We became victims of lifestyle inflation, often tempted to upgrade our possessions and experiences significantly.
During one of the early years of our financial independence journey, I convinced myself that I needed to abandon our FI goals to afford social outings and holidays like my colleagues. This mindset inevitably led to increased spending on luxuries and non-essentials.
The justification was that it was acceptable to spend more because we had secured jobs with higher salaries. However, a reality check came six months later when I was going through our finances and noticed a consistent pattern of deficits. The spreadsheet was a sea of red every month. This was a wake-up call. I realized I was continually dissatisfied with my jobs, and maintaining such a lifestyle was not aligning with my deeper aspirations.
Although it’s perfectly reasonable to reward ourselves for hard work, unchecked lifestyle inflation can seriously undermine long-term financial goals. It’s crucial to practice mindful spending and clearly differentiate between needs and wants. This discipline helps in maintaining financial stability and ensures that lifestyle upgrades do not derail our path to financial independence.
5. Investing Without Adequate Knowledge
In our early days of investing, Finn and I encountered several stumbling blocks due to our lack of understanding. One significant misstep was in property investment, which taught us to approach investment decisions with caution, particularly given the substantial impacts associated with property markets. We realised the importance of understanding market trends and timing our investments more strategically.
Initially, in our enthusiasm to capitalise on promising share market opportunities, we failed to appreciate the significance of diversification. Focusing our investments predominantly in one asset class exposed us to heightened market volatility and increased our risk profile. To mitigate this, we shifted towards purchasing more Exchange Traded Funds (ETFs) as they offered built-in diversification, serving as a safer investment cushion.
Spreading investments across both shares and properties can lead to a more resilient and balanced portfolio. If you’re uncertain about where to invest in shares or properties, it’s wise to consult with multiple experts or utilise software tools that provide thorough market analysis before making any investment decisions. This proactive approach can help safeguard your investments from unforeseen market fluctuations.
6. Overlooking Self-Care in Our Financial Pursuits
In our fervent quest for financial independence, Finn and I too often put self-care on the back burner, prioritising work and financial goals over our wellbeing. This imbalance led to significant tolls on both our physical and mental health, undermining our overall quality of life.
It’s crucial to remember that achieving financial independence is more of a marathon than a sprint. It requires maintaining a delicate balance between diligently pursuing financial goals and ensuring personal wellbeing. Emphasising self-care, setting healthy boundaries, and nurturing meaningful relationships are vital for sustained happiness and fulfilment.
My own experiences with panic attacks and insomnia, triggered by a high-pressure job that offered a better salary, were a stark reminder of the importance of not pushing oneself too hard. Similarly, Finn, who once worked up to 12 hours a day including side hustles, chose to resign from his full-time job. This allowed him to focus on what began as a side hustle but eventually turned into a more profitable and less stressful full-time role from home.
The lesson here is clear: working smarter, not harder, and prioritising our wellbeing, is far more beneficial than merely chasing a higher income at the expense of our health. The pursuit of an additional $10,000 per year is not worth significant personal strain or stress.
7. Underestimating the Power of Continual Learning
In our drive for financial independence, Finn and I initially underestimated the significance of ongoing education and continual learning. About three years into our FI journey, we found ourselves deeply engaged, devouring books related to FIRE, subscribing to the Barefoot community, listening to multiple podcasts daily, and routinely updating our spreadsheets for income and outgoings.
However, over time, we began to feel as if the stories were all too familiar, and nothing new was being said. We stopped seeking out fresh insights, leading us to fall behind on emerging trends, best practices, and innovative strategies. This oversight limited our potential for growth and optimisation until we recognised our mistake.
Committing to lifelong learning is crucial for maintaining a competitive edge in the ever-evolving financial landscape. Adopting a growth mindset, actively seeking new learning opportunities, and remaining open to feedback and adaptation are key to achieving sustained success and staying relevant in the field of personal finance.
8. Disregarding the Value of Patience and Persistence
Throughout the inevitable highs and lows of our financial journey, Finn and I sometimes fell victim to impatience and despondency. We found ourselves disheartened by temporary setbacks, which led us to question our ability to meet our long-term goals.
Patience and persistence are truly invaluable virtues. Real progress takes time, and setbacks are simply part of the journey. By keeping steadfast faith in our abilities and persisting through tough times, we can navigate challenges and achieve our aspirations.
After our struggles during COVID, we turned over a new leaf.
Once we had reviewed all FI trends, our finances, and our status, we embarked on a new journey—slowing down our pace towards financial independence to tackle a business venture that offers us fresh perspectives and achievements. We still face ups and downs but are now enjoying extensive travel to numerous countries more than ever, all while saving a substantial amount of money that aids in our continued investment towards achieving one million dollars in shares. With our current income, we anticipate reaching this goal within the next one or two years, all while thoroughly enjoying what we do.
In conclusion, our path to financial independence has been marked by a series of challenges and victories. While mistakes are inevitable, it’s our capacity to learn from these errors and adapt that ultimately shapes our success. By embracing these lessons and applying them conscientiously, we are confidently navigating our way towards financial independence with resilience.
I hope sharing our experience helps you map out your own journey. I welcome any questions you might have.
Have you faced similar challenges or learned other valuable lessons on your journey to financial independence? Share your stories with us; we’re keen to learn together and support each other in achieving our financial goals.