Saving gives you the ability to deploy your money towards improving your financial situation. Investing that money not only unlocks financial freedom, but it also allows you to Choose Work You Love.
I’ve mentioned before on this site that work is an essential part of living. Whatever we put our time and effort towards, we are working on something. Often, our commitments and expenses force us to work on things or in ways that don’t align with our ideals.
Investing – and the freedom that comes with it – puts you in a position to be able to choose what you work on. It also allows you to discover how you want to work, and create a lifestyle that allows you to work in that way.
Welcome to the Investing Series – my thoughts on how you can use investments to create a life you love, that allows you to Choose Work You Love.
What Is Work?
Work is anything that we can commit ourselves to. I describe work as the challenges we overcome in our daily lives. Your job is a type of work. Looking after loved ones is work. And your hobbies and interests that don’t earn any money can be considered work, too.
Everything we do is an investment in something. Therefore, even work can considered a form of investing. Investing your time and effort into something that you hope to transform into a desired output is a form of work.
It’s easy to think that work is just your job. But actually, work is everything you commit yourself to. Work itself is an investment.
Working For Rewards
Work is often thought to be tied directly to a reward.
When you work a job, you get paid based on the number of hours you work. If you do work around the house, you get to enjoy the fruits of that labour while living there.
The ability to tie your work to a fixed output (a wage) is a big motivator to get people to work. Most people I know wouldn’t work their job if they don’t get paid to do it!
Knowing that your actions will be directly compensated helps put meaning to your work. You work a job to earn money, which gives you a place to live and allows you to buy what you need.
Linking these together helps cement the value of work in your mind. However, problems arise when we get used to work always being tied to some sort of reward.
Why People Don’t Start Businesses
There’s nothing wrong with jobs. In fact, jobs are the best way to create financial security and provide for yourself and your loved ones.
There’s also nothing wrong with money being your only motivation for working a job. We all need money to live, and sometimes you have to do a job you don’t enjoy to meet your needs.
That said, our society makes a consistent wage an addictive substance.
By providing a consistent salary that meets your needs, a business can keep you trapped within the system. If a job provides just enough money that you don’t need to do anything else, then you may not do anything else. There’s little incentive to grow or change if your job provides everything you need.
I’ve written previously about my thoughts on how employment over business ownership became the norm. In my eyes, a job is a tool that extracts the value of your work. And with most people working as employees, it’s become easier and easier to separate this value.
It’s essential to invest while working as an employee. Operating your life with a profit is what gives you the freedom to invest in businesses and capture some of this value for yourself.
But if businesses make all of the money, why don’t people start businesses and work for themselves? I think there are a few reasons why:
- People spend so much money that they require consistent income
- Continuously earning money becomes essential to maintain their lifestyle
- Sacrificing their primary income source is too risky
Luckily, all of these problems are solved by investing.
The Purpose of Investing
Investing solves all three of the problems above. It can provide an income that is separate from your time inputs, and once fully developed, can entirely replace your salary.
The important thing is that just like work, investing your money requires consistent effort to see its rewards.
We invest to triumph over entropy and inflation. Growing your wealth and increasing your ability to use it is why we commit ourselves to our work.
Investing while taking a salary absolves some of the risk of investing. You can continue to cover expenses while building an additional source of income.
Making more money is always great, especially if you didn’t have to commit time to doing it.
But in my eyes, investing isn’t necessarily about making more money – it’s about making a similar amount of money with less effort. We don’t need to continuously increase the amount we are earning if we already earn enough to survive and invest to meet our goals.
How Investing Rewards You
Your financial investments will ideally increase your wealth in one of two ways: they will appreciate in value, or they will provide you with income.
This income stream can allow you to replace your salary over time. As mentioned above, this could replace your salary entirely.
You can take this in many directions. A common strategy is to build a nest egg so large you’ll never need to work again. Another is to leverage it earlier to create mini-retirements interspersed throughout your career. You can even use it to scale down the amount of hours you work, especially if you can also increase your hourly rate.
Non-financial investments reward you in different ways. The act of committing your time and effort towards a particular goal will make you stronger, faster, smarter, or otherwise better at whatever it is you’re doing.
Being a better friend or partner, a healthier person, or a good basketball player doesn’t happen because you want it to. It’s a possible reward for all of the effort that came before.
Why Early Retirement Doesn’t Make Sense
A lot of financial independence advice suggests building up this income source as much as possible, so that you can retire early and never earn another dollar with your labour again. You can use your investments to cover your expenses indefinitely.
I personally think this strategy is suboptimal for a few reasons.
Firstly, the implication that you will never trade your time for money again doesn’t make sense. A person who has saved and invested their way to early retirement will likely have many skills that make them an extremely useful worker.
This means that regardless of what work they choose to perform after retiring early, they’ll likely end up making some money from it. Remember that work isn’t just a job – it’s every endeavour you commit yourself to.
Retiring early also means forgoing many years of income earning potential. While compounding massively impacts investment growth, I still don’t believe that maximising income earlier in life is optimal. You can work throughout your life in a sustainable manner instead of turning your back to it entirely.
There are also tax considerations associated with frontloading your income. As income is usually taxed on an annual basis, earning all of your lifetime income earlier in life could result in tax inefficiency.1
Furthermore, early retirement is predicated on the intent to stop working entirely once you achieve the required amount of saving. If this is correct, it suggests that you will spend years doing something that you don’t want to do – that is, working more than you want to.
Humanity & Work
I believe humans by nature want to work. As a species, we have continued to invent, build, and create incredible things. Many of the things we take for granted today would be considered magical – or heretical – by ancestors only a few hundred years ago.
The idea that we want to commit ourselves to nothing is an absurdity.
I believe that we want to control how we work, what work we do, and who we work with. Being able to negotiate on these matters means that you can Choose Work You Love.
Investing not only creates the space for you to figure these things out for yourself, but it allows you to charge towards that ideal.
Why You Need to Choose Work You Love
Being able to Choose Work You Love gives you all of the power. Not only can you work the amount you want to, but you control the work you do, too.
Working on things you enjoy, in a way that works for you, isn’t something that happens overnight. It’s a moving goalpost that you are constantly moving towards.
Your hobbies, interests, beliefs, and values will change dramatically over your lifetime. Being able to choose to work in a manner that aligns with your personal beliefs is a huge advantage you hold over others.
You can continue to experiment with jobs, business endeavours, or working styles that align with your values to find what works best for you.
Closing
Gaining the ability to Choose Work You Love is a vital component of a life well-lived.
If you don’t have power over how you work and what you do, then your work has power over you.
Investing helps shift the balance of power in your favour, and allows you to do what you truly enjoy.
Being able to Choose Work You Love is what allows you to do exactly what you want, and benefit the maximum amount from it.
Whether you are pursuing Financial Independence or not, I see Choosing Work You Love as a non-negotiable. The journey to FI shouldn’t be challenging or miserable – it should be a by-product of a well-intentioned and carefully designed life.
A life you can build on your journey.
Thank you for reading.
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- This is an exercise for the reader for investigate further, as I won’t comment further on tax strategy. ↩︎