The other day I overheard two of my coworkers discussing retirement.
The first individual mentioned how they were aggressively saving in order to retire and at that point would finally start checking items off their bucket list.
However, the second individual refused to save for retirement. His argument was that he didn’t know when he was going to pass away and therefore should live everyday to the fullest.
When you think about it, both arguments are valid.
Financial Independence is a Spectrum
What I appreciated about that conversation was that it highlighted a common misconception about financial independence: there are only two choices that you can make.
Those two choices can be categorized as:
- Deprivation – You are saving aggressively but potentially not living your best life today
- Carpe Diem – You are living your best life today but are not saving for tomorrow
However, the truth is that there are more then these two choices.
In reality, these two choices represent opposite ends of the financial independence spectrum.
Furthermore, the different points on this spectrum represent different combinations of both options.
So where is the sweet spot?
Unfortunately, there is no one-size-fits-all answer.
Instead the answer to that question is determined by looking at our individual life preferences.
Let’s take a look at both ends of the financial independence spectrum in more detail.
Deprivation
Merriam Webster defines deprivation as:
The state of being kept from possessing, enjoying, or using something
Merriam Webster
By definition, the act of being frugal and building our savings is a form of deprivation. We are actively choosing not to spend money today so that we can enjoy it later.
This moderate form of deprivation is the foundation to achieve financial independence.
However, extreme amounts of deprivation can have adverse impacts.
Extreme frugality will build our savings, but not necessarily build our lives.
While our net worth will experience rapid growth, there is a cost to this unsustainable growth. We may be actively sacrificing things that we genuinely enjoy and bring happiness into our lives.
This can manifest itself as thoughts such as: “I am OK with sacrificing things now so I can be financially independent sooner.”
If we find ourselves having those thoughts, we need to remember that tomorrow is not guaranteed.
With that being said, let’s look at the other end of the spectrum.
Carpe Diem
Carpe Diem is a Latin phrase meaning “Seize the Day.”
This phrase is the ancient and more poetic version of “YOLO.”
The idea behind Carpe Diem is that we should be actively enriching our lives everyday because there is no guarantee of tomorrow.
When you think about it, Carpe Diem is the reason why most individuals pursue financial independence.
“I would rather not work and instead use that time instead to live my best life.“
Ironically going full YOLO early in our lives (and not saving) can hinder ourselves in going full YOLO later in life via financial independence.
As a result, we may feel tempted to accomplish everything on our bucket lists while we are younger and have the time and energy to do so.
However, we should also remember that life is a marathon and not a sprint.
We need to make sure that we are leveraging the single most important asset that we have: time, aka the fuel that powers the compound interest that will build our wealth.
Defining Where You Stand on the Financial Independence Spectrum
We are only give one life.
To make the most out of it, we need to have that conversation with ourselves to determine what combination of Deprivation and Carpe Diem will bring us the most happiness.
Despite what we read and see online, the reality is there are probably very few people that are happily living on either extreme of the financial independence spectrum.
If someone is happily living a life of extreme deprivation, that doesn’t necessarily mean it will work for you.
Likewise, we should be aware of the lavish lifestyles curated on social media and how they are not accurate representations of reality. As a result, we shouldn’t set goals based on these unrealistic representations.
Living a well-balanced life means embracing the concept of moderation in all things. However, that moderation between the two forces is determined by our unique perspective.
Fortunately, when it comes to financial independence, there are many different lifestyles representing the different combinations of these two forces.
Where I Stand on the Financial Independence Spectrum
When I first discovered the idea of financial independence, I was all in.
I knew that if I wanted to retire as early as possible then I needed to aggressively save and invest.
Over the next four years, I ramped up my savings to the point of extreme deprivation.
My net worth skyrocketed, but I found that I was not any happier. I was experiencing money dysmorphia and became miserable.
I felt guilty for wanting to spend money on myself because that would lower my savings rate.
I knew something needed to change. The extreme deprivation lifestyle that I was living was impeding on me living my best life.
I needed some to add a pinch more of YOLO into my life.
A month later, I bought myself a $1600 electric skateboard that I had wanted for a very long time. I also booked a weekend trip to New York to finally see Jack Johnson in concert with my brother.
OK, maybe that pinch was actually like a few cups of YOLO 🙂
Nevertheless, I made it point going forward to tell myself it was okay to spend money on myself.
Once I embraced this mindset, I found that my overall satisfaction with life greatly improved.
Final Thoughts
At the end of the day, moderation is the key to living a well-balanced life.
Have you had a similar experience with pursuing financial independence? Have you ever been on either side of the spectrum? What did you do to find balance?
Thank you for reading! 🙂
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