FI for Colorado Teachers Part 3: The “What Ifs” and the “Yeah, Buts”

TL; DR: This is the third in a series of posts for Colorado teachers that discusses some of the possible objections people have as to why they can’t achieve Financial Independence. Hint: if it aligns with your values, the objections are easily overcome.

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Part 1 in this series describes the “what” and the “why” of Financial Independence. Part 2 discusses the process of “how.” This post will focus on some of the objections people typically make when discussing whether achieving financial independence is possible, the “what its” and the “yeah, buts”.

First, a reminder that this series of posts is not saying that everyone should do this, it’s simply trying to show you a path on how you can do this if it aligns with your values and what you want for your life. So some of the following, especially the “yeah, buts”, might be valid for what you want. But this post will address those under the assumption that achieving financial independence and a “work optional” stage of life earlier than is traditionally expected is aligned with your values and is something you want to pursue.

The What Ifs?
Any time you try to make a long-term financial plan, you have to make a lot of assumptions. When we get to the case studies (starting with part 5 in this series), you’ll see assumptions that are made about inflation, investment returns, cost of living increases to the salary schedule, advancement on the salary schedule, increases in insurance costs, increases in the various limits in the tax codes, and many more. While we try to make reasonable assumptions for all of these, they are still assumptions, and actual experience will not match those assumptions exactly. Sometimes reality will be “worse” than the assumptions expect, and other times it will be “better”, but it will never be perfectly correct.

There are three ways to deal with this. First, many of the assumptions are interconnected, so when the actual experience is different than one of the assumptions, other of the assumptions are often affected in a similar direction and that helps balance it out. Second, you can try to make the assumptions on the more “conservative” or “less beneficial to you” side of things. For example, lowering the assumed investment return or increasing certain tax limits by smaller amounts each year. The spreadsheets in part 5 and the other case studies will allow you to make those changes, but they already have some “conservative” assumptions built in (like tax brackets and contribution limits increasing at a rate slightly below the assumed inflation rate). Third, and perhaps most importantly, is the idea of flexibility. As you live your life and actually experience whatever happens, you can (and will) make adjustments that can keep you on the financial path you’ve chosen.

So, what is the most common “What If?” that people are concerned about? The rate of return on investment is usually the biggest one. We have historical data that can give us a decent estimate on what that rate of return will likely be over a long time period, but – as all the advertisements say – past performance is no guarantee of future results. Plus our plan can be impacted a lot by something called “sequence of return risk”, in which when you get high or low investment returns can have a significant impact on your planning. (See this and this and this for more on sequence of return risk.)

How best to deal with this? You can adjust the assumption yourself in the spreadsheet, you can be flexible and make adjustments along the way (like increasing your savings rate to help make up for lower returns), or – and this is a big one – you can change your timeline a little bit. If investment returns are lower than your assumptions, that doesn’t mean your plan is kaput, but it might mean that your path to financial independence takes two or three years longer than originally projected. While that may not be ideal, keep in mind that what many folks should be comparing that to is a lifetime of “work not optional” and not achieving financial independence until their late 60s or so. Keeping in mind that context helps keep things in perspective.

There are many other “What Ifs?” that can come into play, like losing a job or illness. The way I think about those are two-fold. First, those are “What Ifs?” that will affect you whether you are trying to achieve early FI or not, and if you are doing the work to achieve early FI you will be in better shape if those “What Ifs?” happen than if you hadn’t been on this path. Second, this is another case where being flexible comes in. You can (and will) make adjustments along the way. Again, this is true whether you are trying to achieve early FI or not, but will actually be easier if you are.

The “Yeah, Buts”
The “What If?” objections can be addressed by changing the assumptions in the spreadsheet or being flexible and adaptable along the way, but the “Yeah, Buts” are a bit different. These typically fall into the category of, “I just can’t” or “It’s not realistic to….” . It’s important to keep in mind two things here. First, it is possible and realistic. But second, it may not be something you choose to do. This goes back to the idea that this path is not for everyone but, if it does align with your values and want you want out of life, than you can make the choices that make it possible and realistic.

So what are some of the “Yeah, Buts”? First is often, “Yeah, but I can’t live on that amount of money.” As was discussed in part 2, if you make good decisions around the “big three” of spending, then it is indeed possible.

Second is often, “Yeah, but I need a new car to get to work and therefore I’m going to have a car payment.” As also discussed in part 2, ideally you would live close enough to work that you (or at least one of you if you’re married) don’t have to drive to work, you can walk, bike or take public transportation. But, if you do need to drive, there are many, many, many reliable and affordable used cars that will save you a tremendous amount of money and don’t require a car payment (or, at worst, require a temporary car payment that you can then pay off within a year or two).

Third is often, “Yeah, but you assume that I’m starting out without any debt but I do have debt.” This might very well be true, although my hope is that we do a better job in the future of helping young folks not start out in debt. But, if you do have debt, your first steps will be to eliminate that debt. Does that mean you can’t achieve financial independence? No, it just means it might take you a few more years to get there, and it might mean that you have to work a bit harder making some additional money in the early years through additional responsibilities or side hustles in order to help you pay off that debt.

Fourth is often along the lines of, “Yeah, but as I make more money, I deserve to be able to spend more of it.” There’s nothing wrong with that, if that’s what you want. But if you sit down and figure out what actually makes you happy and fulfilled, and you determine that additional spending on top of meeting your needs and some of your basic wants doesn’t provide any more happiness or fulfillment, then you can increase your spending very modestly as your income grows and still have a very comfortable, but not extravagant, lifestyle.

Think back to how you lived in college, or perhaps your first few years out of college when you didn’t make much money. Most people were able to live just fine and were reasonably happy. If you can control “lifestyle inflation” as you start to make more money, then you can modestly increase your spending, life a happy and fulfilled life, and be on the path to Financial Independence. Again, it’s about choices and what you value, and then aligning your lifestyle with those values.

There are many additional “Yeah, buts” that we could discuss, but the response to those objections is generally along the same lines: align your lifestyle with your values, make adjustments as necessary, and then live your life. If the freedom and flexibility of achieving financial independence decades sooner matches up with your values and your desires, then you can overcome the “Yeah, buts”. If the “Yeah, buts” seem like too much of a sacrifice, then you can choose a different path.

  • Part 1: The Concept
  • Part 2: The Process
  • Part 4: Tax optimizing/401k/403b/457/Section 125
  • Part 5: Case Study: Teacher Married to Another Teacher
  • Part 6: Case Study: Teacher Married to a Non-Teacher
  • Part 7: Single Teacher


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