August 2015 - Financial Avenue

I’ve seen this question arise numerous times on forums, blogs, and nearly each time I talk with an early retiree in-person. It seems like such a first-world problem. But I understand. Sometimes we as humans are so focused on achieving a goal, we forget to plan our next one.

This sort of happened to me when I graduated college. About halfway through college, I decided to transfer schools and graduate early. That meant I spent most of my time attending class, meeting with professors, meeting with classmates (to study), or practically living in my dorm’s computer lab. I knew the routine of both the morning and the night custodians. I knew I would take a break at 9:15 pm so they could clean my desk as they moved down the rows.

I met my goal and graduating early. But it’s strange. I don’t remember what it felt like. I don’t remember my last test. I don’t remember my last class. Before I knew it, it was over.

Ever since I could remember, I had been a student. I was a good student as well. Then all of the sudden… that life vanished. No more school. It was a shock. I had a few strong job leads lined up but I hadn’t really planned my career. How odd. It wasn’t a great feeling. I think this is how most people feel after reaching early retirement.

“I’m financially set. Now what do I do?”

I’m reading a book right now by Napoleon Hill. He’s a master at the art of self-improvement. I STRONGLY recommend you read his work.

In the book, he says we must keep track of our time if we want to live life to the fullest. That makes sense. Whenever I forget to set myself a schedule, I end up doing very little with my day. Or, nearly as bad, I let one task take up my entire day. How silly.

Napoleon Hill says we need to keep the same focus whether we are focused on early retirement or any other task. Early retirement isn’t about lazily walking around the neighborhood or pretending your new dog is a baby, that requires your constant attention.

Few people who reach financial independence would enjoy such a lifestyle.

So sorry, but reaching FI doesn’t mean a permanent vacation. You’re better than that. You’ll want to do more. This post is about what to do once you reach your first goal: financial independence.

More Work

You’re FI. You’ve learned how to attract money. That skill doesn’t just go away. Once you ‘retire’, work will have a way of finding its way to you. It may be as simple as when talking with a neighbor. Or perhaps work will find you when talking with a friend who owns a website. It’s like the Law of Attraction. Something that powerful doesn’t just stop once you reach a 4% safe withdrawal rate.

Once you retire, work some more. But with this money, do whatever you want! Lose it all to a failed startup? Who cares! Your lifestyle will remain the same. Do you want to donate all profits to charity? Go for it! May as well give it to someone who needs the money.

Yes, upon ‘retiring’ you will likely continue working.

Travel

Cliche, isn’t it? But it’s true. You’re older. Compound interest isn’t keeping you from spending money like it was before. Work is no longer the cornerstone of how you spend your time. My advice is to take two different approaches. First, you could plan far in advance. Book early to save on flights and travel packages. Approach number two means being spontaneous! If a Carnival cruise ship crashes, that means you can get last-minute discounts before the price shoots up again. Want to take a weekend getaway? Use online tools that’ll get you last-minute reservations for little to nothing. Traveling when old can be just as fun (or more so) than traveling as a kid.

If you don’t really enjoy traveling too much, you can simply take a gap year. You can slow travel or just stay at home and relax for a year. Perhaps you could do some DIY remodeling. Perhaps you could finally buy that 1994 Toyota Supra Turbo you’ve been lusting after for decades. It could be your new project car.

Reflect on Life

You’ve reached financial independence. If you’re reading Phroogal, you probably think everyone is doing it. Maybe most of the Phroogal readers are – but your still EXTREMELY special. The truth is, most people never reach financial independence – let alone do it early.

This being said, you’ve done what many people can only dream of doing. Consider starting a blog or writing an eBook. It doesn’t have to be profitable. Just share your wealth of knowledge.

Hone a Hobby

If you want to get into a hobby, go right ahead. You probably have the money to do so. However, beware – you’ll probably quickly turn it into a side hustle.

Do the Same Dang Things as before – Just Work a Little Less

Reaching financial independence doesn’t have to mean much more than saying, “Huh. Guess it looks like I could retire now.” *returns to work*

Staying One Step Ahead…

When I was in college, I didn’t plan my future career very well. That was mistake. However, I now have my career figured out. I’m working towards financial independence. What will I do after? Exactly the same things – just with less stress. That’s my plan.

What will you do with your financial freedom?

Our Inceptia Institute contributor, Christina Carroll, is a senior at the State University of New York at Geneseo, currently studying for her Bachelor’s in Personal and Professional Communication. Originally from Utica, NY, her aspirations include pursuing a career in Advertising or Public Relations, traveling the world, and successfully paying off her student loans with minimal headaches.

I’ll be honest: I am horrible with finances in general. I find budgeting difficult and confusing, I cannot file my own taxes, and I still do not know how a 401k works. The Financial Avenue online courses are a series of presentations designed for a student like me who needs to start at the beginning of the subject and be walked through it. I took the courses about college financing and credit cards, two subjects that I have been hoping to learn a bit more about considering my stage in life. The college financing course discussed different types of loans, repayment options, and offered tips on avoiding an insurmountable amount of debt (which sounds good to me!), while the credit card course looked at what a credit card really does, pitfalls to avoid, and the pros and cons of using a card.

Though I had the opportunity to attend community college free of charge while earning my Associate’s degree, I still needed to take out small loans for items like transportation, books, and living expenses. Now that I’m at a four-year institution, my loans are considerably higher, and the perils of college financing are more of a daily reality for me. Between room and board, tuition, and all the other bits that come along with being a college student, money is often tight.

The Financial Avenue program put many potential financial scenarios into simple terms; for example, it explained how interest can accrue. Luckily I am granted governmental loans and have not needed to seek out private lenders, which I now know often have far higher interest rates and complicated stipulations that can be difficult to understand. The trick is to pay off your loans as steadily as possible to avoid excessive interest that can add up very quickly.

Another common pitfall for college students is credit card debt. Having never actually used a credit card, I initially did not know much about them aside from how many people get into plenty of debt because of their use. Although I understand the usefulness of a credit card, I prefer not to use one unless absolutely necessary. This particular Financial Avenue course discussed common credit issues, as well as giving tips for successful credit card usage. If you miscalculate your spending and end up short for the month, you can easily dig yourself into a financial hole that is difficult to dig out of, potentially ruining your credit for the future. Rather than relying on credit cards, I’m going to stick with my debit card and only purchase what I have the money for at that moment, just to avoid mistakes like that. If you have a steady income and solid budget, credit cards can be a great resource. Just be sure you know what you’re getting into. With a little research it is possible to find your smartest option.

Debt is a crippling force if it gets out of hand, and it’s imperative that a student keeps up with his or her financial obligations. Loans and lines of credit can be great tools to get you through school or a difficult time, but they must be used in moderation. Never take more than you need, keep track of your spending, and be diligent with your bills. Like many other students, I find that it’s not always easy, but I also understand how important it is to stay on top of my finances in order to live comfortably later on. Making smart budgeting and spending a habit from the start is the real key to financial security for the rest of your life.

Month: August 2015

What To Do Upon Reaching Financial Freedom