While the financial independence (FI) community has grown in recent times, the whole concept is still not appealing to most people, if they even know about it.

There is a big difference between contributing to your 401k versus living on $25,000 per year.  Most middle class people, if they are really determined, can find a way to set aside a small percentage of their income.  But the idea of living on $2,000 per month or having a savings rate of 50% or more just seems miserable to most people.

Living on $2,000 per month sounds miserable to me, at least in this stage of my life with a family.  When I was in my young 20s right out of college, I was living on less than $2,000 per month.  But that was when I had two roommates and my health insurance premiums were something in the neighborhood of $10 per pay period.  Everything was much cheaper at that time, but particularly health insurance.

I have heard claims from people of living on $7,000 per year.  This seems absurd to me, unless you are being subsidized such as living in your parents’ basement for free.  Even the claims of living on $25,000 per year seem absurd for someone who has a family.  In today’s world, health insurance can cost you $10,000 per year right off the bat, unless you work for an exceptional employer that covers most of it.  In most cases, you would only find an “exceptional” employer in the form of the government.

I have discussed a lot recently about the financial independence/ early retirement community.  I already think that the 4% rule is going to steer people wrong, especially when we see a major market crash.  And if you have your money in a money market fund, then you are not going to be living off the interest because you aren’t going to get a 4% return.  You are going to eat into your principal savings amount.

You could have your money invested somewhere other than stocks making a decent return.  But real estate has its own set of risks, and it is also not purely passive income in most cases.  And in the case of a business, that is probably not going to be purely passive either.

Within the financial independence/ early retirement community, I also hear a lack of discussion on the issue of inflation.  That is a huge factor that should be considered, yet it seems to be largely ignored.

People who retire early because their living expenses are really low are probably making a mistake.  If you can actually live on $25,000 per year, then 25 times that (4% rule) is $625,000.  For someone who is, let’s say, 45 years old, that does not seem like very much money to retire on.

Don’t get me wrong here.  That person is far better off than the person who is living paycheck to paycheck and has little in the way of savings.  But it will also be hard for this early retiree to go back to work because his savings fell short.

With such a low budget of just over $2,000 per month, you could be set back significantly with one major expense such as a medical event.  And as I already mentioned above, what happens with inflation?  If prices double over the next two decades, you will be spending over $4,000 per month and likely eating into your principal savings.

Again, there are also no guarantees of returns.  If you have your money in stocks, that is really scary, which is what many in the community advocate and do.  Imagine retiring on just $625,000 and then seeing a major stock crash that cuts your portfolio in half or more.  Good luck living the next 4 decades or so on just $300,000.

The other aspect in all of this is personal, and it involves enjoyment and life pleasures.  While we should certainly take advantage of the many enjoyable things in life that are free or close to free, we should also acknowledge that some things just cost money.

What kind of life would it be to live on just $25,000?  I don’t really like the idea of early retirement anyway because most people should be doing something productive.  That could mean working on a calling or a passion, but it should still be something.  But I certainly could not imagine not working while also living on a small amount each month.  Wouldn’t you want to earn money and take a nice vacation or enjoy some different experiences?

In conclusion, I like the idea of saving money and adding freedom and flexibility to your life.  With that said, you shouldn’t be striving to leave a particular job.  You should be striving to go into something.

And if you are going to go the financial independence/ early retirement route, make sure you are factoring everything in.  You should account for recessions, inflation, and unexpected expenses.  You should also factor in a scenario of getting bored and wanting to do new and exciting things.

If you make a high income and are achieving financial independence because you are living a middle class lifestyle while earning an upper class income, then you will be much better off than the person who is retiring early just because he tries to live on such a tight budget.

The whole idea of achieving financial independence is to have freedom.  But if you then have to live on $2,000 per month, that doesn’t sound like very much freedom to me.  It sounds like a rather dull life.