In America the idea of delayed gratification is well taught to us at a young age. The idea of working hard and being rewarded is paramount to the American Dream. For this reason it is very intimidating to consider making any life / work decisions that go outside this line of thinking. Despite knowing this model does not work for everyone, we still see it as the way to being successful and having a good life. But does it really bring happiness? Do we even know what will make us happy anyways?
It can be easy to see the benefits of making a big career change, but it is hard to know what we may regret for it. Most of us do not make these changes for fear of the unknown and that it is easier to keep the status quo.
There are risks to consider with any decision one makes in their life. A valid question to ask is how much risk is there in the American Dream model to begin with? What if taking perceived risks are actually no more risky than following conventional wisdom? Just because most people follow a set plan, does not mean there are not other ways to do things.
This does not mean you can throw all financial responsibility out the window either. There must be a plan to build up some financial security. Even very responsible savers do not know how much money we really need for retirement. Even when we speak to a financial advisor that can give us an exact figure, they are still relying on a complicated computer model that must make assumptions for the future inflation rate, interest rate, investment return, and life expectancy. If anyone of us could accurately predict just one of these number over the next 30 we would be considered a genius or extremely lucky.
The point is these models can be useful to give an idea of what it would take to pay for retirement through a time period very similar to the current one we are in. However, there is no way to know what the economic conditions will look like when you finally do retire. Therefore, it is entirely possible that the conventional model that has worked in the past, may not be best suited for the future after all. Many have this fear deep down and this is what causes people to continue working a job they do not enjoy just so they can hoard “more” money for a retirement they have no idea how how long will last or cost. This is very understandable.
The future is Unknown
The key problem going down this route is that we trade a lot of our life for a future that is unknown and not guaranteed. There are many of us that work a very stressful job to save as much money as possible and hope to have enough to be taken care of later in life. These are jobs that if we were to retire and realize years later that the money was running out, that we could not jump back into. This could be due to being too old to handle the physical and emotional stress, or the industry may have advanced beyond their skill set. This is a scary concern and it is understandable why many work far longer at a job they do not like sometimes at a cost to their health
The far better approach would be to make a slight variation in this model. While, young and strong take on the job even if stressful and save as much of the income as possible. Then with some financial security in hand start looking at other jobs or a self run businesses that one may be interested in. The advantage here is that you can find satisfaction in work in something that you can do even in retirement. As long as you are making some income, while you are retired this can take away the fear that you will run out. Instead of working 50 or 60 hours a week your whole life up to retirement, you can ease this off well before, but know you will continue to work at the relaxed pace for longer.
Benefits of having some financial Security
Another route you can take again relies on building up some financial security. There is no way to escape working hard, and that is okay, but it is important to make the hard work pay off. In this case once you have some savings to rely on, you can feel more at ease at your job. If you are not spending on a large car payment and mortgage, then you do not have to stress as much about a layoff. Having the reserves can make a job under those circumstances seem much more stressful than it is. If this financial burden is removed, the job may just become more enjoyable then ever thought possible. Even if it does not, with some financial security you could take a risk leaving the job to try something else. You may find that you miss parts of the old job, and that can be troubling, but you can take this knowledge with you in finding yet a new job that is a better balance of what you really desire.
Freedom to pursue Opportunity
If you are not saddled with a large mortgage you have the freedom to move anywhere that you like for new job opportunities, or to run your own business. There are many reasons why we believe we must live in one place and generally the job is the main factor. A lot of people wonder what it would be like to live in a foreign country, but do not do it out of fear, losing out on career advancement, or saving for retirement. This is easy to understand, but sometimes the bigger picture is missed. As long as you are saving more money than spending, then you are making progress towards retirement. There are many foreign countries where the cost of living is very low, but so is the pay. As long as you can find some work, and have interest coming in from your financial security you can still be making progress to retirement.
It does not need to be a foreign country either. There are other parts of the US where living costs are much lower, and the pace of life is more relaxed. Some people make 5x the money working in silicon valley, but they spend 5x as much in rent and other increased living expenses too. As mentioned in previous posts, they can still be well served taking the higher paying job in the higher cost of living area as well., But there are also those who are not saving anything at all and are not seeing a benefit to the hard work. If they really enjoy the work then that is a benefit, but if they are not, they might consider a lower paying job, in a more affordable city.
From these examples we can see that financial security does not mean you need to have enough money to never have to work again. It just means that you can take a risk, and in doing so may end up earning less money, but still be well positioned for retirement.
Taking time off to Recharge
Another idea is taking mini retirements, or extended vacations, rather than putting your head down and working non stop to 65. If you work hard for 5 years, maybe consider taking 3 or even 6 months off as a time to refresh. This time can allow you to really think about what you have been doing and if it is in line with what you want to do with your life. This gives you the opportunity to enjoy your life now and not postpone everything for later. I think many people would be happier if they took 6 months off for every 5 years of work. Let’s do the math if you start working at age 20 and want to retire at 65 that is 45 years of working.
45 years / 5 years = 9 breaks
9 x (6 month breaks) = 4.5 years of lost wages
65 (retirement age) + 4.5(lost working time) = 69.5 as the new target retirement age
It may well be worth retiring just under 70, but having nine extended breaks throughout your life to do what you really want to do.
Having your cake and eating it Too
Let’s think about the last example again, but now include the financial security that has been mentioned previously. If you were earning good amounts of yearly income from investments to offset the lost income during the six month vacations being taken you wouldn’t need to work any additional years at all. It is very possible you could make up those lost 4.5 years from the interest alone and still retire at 65. If you are especially disciplined with keeping living costs low you may be able to still retire before 65 with the time off as well.
Now granted if you kept taking the time off it is likely your career may not advance as fast nor be able to earn as much in yearly income as if you worked straight though. If you want to buy lavish things then this plan would not work for you. There is a very real trade off here, but what can be more valuable than time itself.
The key takeaway is that if you can build up some financial security it can help you overcome the fear of taking risk. If we can get away from comparing our wealth and possessions with our neighbors we will see that some decisions we used to think of as risky have no risk at all. You can craft out any type of lifestyle you wish by building up financial security and following a plan that is right for you.