By Dr. Jim Dahle, WCI FounderMost people never become financially independent—at least without considering Social Security and/or pensions. I'm not talking about being financially independent from their parents; I'm talking about not needing to work for money ever again.
However, I expect the majority of WCIers to become financially independent at some point—some earlier than later. Some of those will FIRE (Financially Independent; Retire Early) while others will continue to work on a part-time basis or even exactly as they did before. Some will become even more financially successful as the years go by for whatever reason (including the ability to take more business and other financial risks due to their financial security). A smaller number of people will eventually reach a point where money simply becomes irrelevant to their lives.
Perhaps you have heard the analogy that money is like oxygen. When you have enough of it, you don't think about it at all. When you don't have enough, you can't think about anything else.
When I go scuba diving with my wife, she is essentially in a state of oxygen irrelevancy. She knows that no matter how much she breathes or what she does underwater, she has more air in her tank than she will ever need. She's always going to have to come up sooner than she needs because I'm going to be the one who runs out of air (since I'm bigger). No matter how much I conserve my air down there, I've never come up with more than she has. More air does not change her dive and will not change her dive as long as I'm her dive buddy.
In the same manner, for those who have reached money irrelevancy, more money does not change their life in any significant way.
How Much to Reach Money Irrelevancy?
Financial independence is relatively easy to calculate. While people can argue about the exact number, something in the range of 25 times your annual expenses is a nest egg that will allow you to never work again and maintain your lifestyle.
To calculate a money irrelevancy figure, you need to think about how additional money above and beyond that FI amount will change your life. Most people who get a little more than their FI amount will increase their spending. We did. Leif Dahleen, founder of The Physician on FIRE did (he bought a boat and built a new house). That's pretty natural. Maybe you take vacations that are a little nicer (and go on them more often), pick up a toy or two, renovate the house, upgrade the cars, whatever.
Since this spending is often not just a one-time spend but can represent an ongoing spending commitment (hiring house cleaners, the insurance and maintenance on a second house, etc.), that also increases the FI amount. It actually moves you further away from money irrelevancy (and maybe even financial independence), at least for a while.
As your wealth increases beyond FI, you can also start optimizing your finances less. You don't have to watch money market yields to transfer money between different types of money markets. You don't have to swap brokerage accounts chasing signup bonuses. You don't have to do Backdoor Roth IRAs. Travel hacking becomes a bit of a silly sideshow. You don't have to manage your rental property yourself. You don't have to have 10 asset classes in your portfolio. Your money is becoming less relevant to you.
Eventually, even your asset allocation becomes irrelevant. Barring a hyperinflation scenario, you could put all of your money into cash AND STILL have enough to maintain all of the spending you can come up with for the rest of your life (and still have money left over). At that point, you're simply working on your financial legacy. Every additional dollar you obtain (whether from earned or unearned income) is either going to be left to your heirs or given to charity (either now or at death).
For people like us, who have capped how much we dare leave our heirs, it will all be going to charity at a certain point. Maybe you feel strongly about the exact amount you're leaving to charity, but for most people, you really don't care all that much.
Money has now become irrelevant.
More information here:
Life After Financial Independence: Two Perspectives
Financial Independence Is Not the Holy Grail
Quite a Privilege
It's quite a privilege to have what is the most important thing to many people—the thing they spend 40 or even 80 hours a week to get—become irrelevant. It can become comically ironic too if your work involves finance. How much time do I now spend a week thinking about, writing about, and talking about something that is increasingly meaningless in my personal life? I'm hardly alone in this regard. Many WCIers love their work and continue to do it even after FI.
It doesn't take that many years of work beyond FI to reach money irrelevancy. It's probably less than 5-10 for most.
Increasing Quantity and Quality of Life
For most people who get to this point, the focus gradually turns. Even though few of us act like it, we all know that money is not the most important thing in life. I would venture to say that almost nobody reading these words would be willing to switch places with Warren Buffett. You would rather have your remaining years than his billions. So, instead of focusing on acquiring more money and optimizing the use of the money you have, you focus more on gaining more time and improving the quality of that time. Your workouts become a higher priority than your work. What you eat becomes more important than how fast you can get it and wolf it down.
A psychologist once said,
“The utility of your career peaks at maybe 35 or 40, and it starts to decline pretty rapidly after that. And what happens if you're fortunate is you have someone in your life that you love, that you've woven yourself together with, and you have some kids so that you have something to do from the time you're 50 until the time you're 80. And so it's a real mistake [to ignore family for career]. It's a barren future without children. I can tell you that. It's a real mistake.”
Obviously some people don't find the person they want to be with or raise kids with, or they run into infertility issues. Or perhaps they're asexual/aromantic or childfree by choice. That's not my point, although I do think it is important to realize that what you think at 25 will make you happy at 35 or 45 is often wrong. My point is that when money becomes irrelevant, relationships with your partner, your children, your extended family, and your friends should become even more important to you than they were before. You've maxed out the financial aspect of your life. You're working on maxing out the health aspect of your life. Now it's time to max out the relationship aspect of your life.
More information here:
The Unspoken Risks of NOT Retiring Early
Functional Longevity: What Use Is Retirement If You Can’t Move and Think?
It's a Continuum, Not a Destination
As you become increasingly financially successful, money will become less and less relevant in your life. It may never become completely irrelevant, and that's OK. But a certain level of financial success is mandatory to allow you to put money into its appropriate place in your life.
What do you think? Has money become irrelevant to you yet? Do you think it ever will? How much money would it take for you to stop caring about money? What will you do then?
This blog took the concept of financial independence to a whole new level! I loved how it explored the idea of money irrelevancy and the mindset shift it requires. It made me rethink what true financial freedom really means. In my opinion, aiming for money irrelevancy is a powerful way to focus on purpose rather than just wealth. Truly insightful and thought-provoking!
Never thought about a money irrelevancy stage. Thanks for sharing your thoughts on it. I hope to reach F.I. in 3 years and then hopefully this money irrelevancey stage another 5 years later. I like my job, but reaching these milestones will be very rewarding.
I’ve recently reached this stage after an unexpected windfall and find it rather weird: the decisions I make about money are larger than ever in an absolute sense but much smaller in a relative sense. After decades of frugality though I find it difficult to changes my habits. Also, is there a moral hazard in not looking for sales, negotiating less aggressively for cars and houses, or spending more than necessary on tax or financial advice? I feel I should still be a good steward of money even though (or perhaps because) most of my estate will ultimately go to charity.
I’m curious, since you are anonymous, what amount of money do you have that you are calling money irrelevancy? What are your expenses?
So what multiplier of your expenses would you call money irrelevancy? 40x? 50x? How is this different from fat FI?
People who are fat FI think about questions like this. People for whom money is irrelevant don’t. I found a website that suggested being able to spend $100K a year (so a $2.5M or so nest egg) is fat FI. I suspect for most people who are fat FI, if their portfolio were $5 million instead of $2.5 million, they’d spend $200K a year. It’s really not that hard to do, I promise. But would they spend $300K a year if they had $7.5 million? Maybe, maybe not. $400K a year with $10 million? Probably not. $800K a year with $20 million? Almost surely not, right? Depends on the person of course so this is a personal definition. But using your “40x, 50x” metric, I’d guess we’re talking about something like 75-200x maybe for most people. But again, for some it’s less and for others it’s more.
I’d think it’d be the ability to take a 50% decline in one’s portfolio and still be able to spend what you’d like without fear of running out of money. Or could look at it as if you spend on the high end of what you like, and it feels like you’re spending a lot, that would still equal less than a 2.5% withdrawal rate. That’s the ballpark I think.
If you start flying net jets I suspect you’d no longer have the feeling of money being irreverent. Good for you for keeping your lifestyle somewhat in check. Looking at billionaires spending there’s always something to buy if you don’t set limits.
I’ve priced it out, but it’s been a while. It was something like $500K up front and then $250K a year a couple of years ago for a 9 seat jet. It’s a lot but not insane for many WCIers. Maybe money isn’t yet irrelevant for us since we didn’t buy it. Maybe I should start flying first/business class more first. I can only think of two trips I’ve done in the last few years when flying private would have made it a dramatically better experience for me. Or maybe I’m just a cheapskate. Dunno.
Not sure how many straight doctors (who make their money 1 patient or one shift at a time) ever get to that point where they’d have an extra 6.25 million for netjets (4% withdrawal rate for $250k / year) vs entrepreneurs who can uncouple their compensation from an hourly rate. You know better than me, though.
Seems like from their website it’s now $280k from 25 hours of jet time. Quite a bit more than even business class to Europe that’s in the $4k – $6k range.
I’m just feeling fortunate to be able to buy overpriced $7 coffee. With bogleheads investing (so no possibly of 10x+ single stock success stories) and a normal doctor job seems that level of wealth for netjets will always be out of reach, but maybe not business class tickets.
It’s definitely extravagant, but remember you’re paying $4-6K to fly ONE person to Europe business class. I might pay $40K on NetJets to fly 9 people to Canada to go heliskiing on Net Jets. Yes, it’s more, but it’s not THAT much more. Plus we saved two rental cars and two days in the lives of 9 people (because flying commercial we would have had to fly into Calgary and drive 4 hours afterward instead of flying straight into a small town), there’s some value there too.
As far as how a “straight doctor” can earn enough to buy a NetJets subscription, consider a doc or two doc couple making $800K a year and saving 30% of it starting at age 35. By 50, earning 5% real a year, that doc has a net worth of $5.2M in today’s dollars and is still making $800K a year. She figures she can coast FIRE now and use $250K a year to pay for NetJets. When she retires at 65, the nest egg will be $10.8M in today’s dollars and should be able to support that sort of expense okay. Besides, your commitment with NetJets is only 3 years, not 30. If you can no longer afford it, you cancel it, stop your $250K a year expense and get some chunk of your $500K back.
No, academic pediatricians aren’t going to get a NetJets subscription two years out of residency. But are there WCIers who can afford that sort of expense now and in retirement? Absolutely. The more you use it, the better a deal it becomes. There’s your buy-in, and a monthly fee, and then an hourly expense for each hour in the air. But the more you fly the more hours in the air your buy-in and monthly fee are spread over, lowering the hourly cost.
I just want to let you know that this post + this response to this post is gold, and that I hope to hear more like this. I only mention that because I read some people commenting that they did not like this blog post.
I am in the position of the 50 year old doctor you gave an example of, except I am 38 and have a similar net worth (higher if you include my medical practice) + am pulling in over $1m a year consistently in clinical income. Prior to you writing this response, I thought about whether something like netjets would be a good idea as a next step – but then it just seemed reckless. Now, after hearing you give this example, it no longer seems as reckless. Something about hearing it from another person written out this way helps.
I think there has to be a small percentage of readers, who, like me, applied WCI principles since residency, and now have graduated out of a lot of the content, and are dying to hear more content on things like this. I’d summarize it as, content that appeals to people who are at this stage, and who are trying to balance the concepts from the book “Die with zero” with the principals learned from WCI that got them to this point.
Glad to be of service.
Interesting topic and very variable. I am at 75x but still don’t consider money Irrelevant.
But it definitely is irrelevant vs Time. As we get older Time and Health overtakes Money in relevancy.
75x!! Amazing job. I hope you use some of your money to make your live easier and more fun.
The stage of money irrelevancy is experienced by some multiple times in life. If they have parents who don’t say no, they don’t look at the price of that new watch. But this post is about those who have hit financial independence, and there are many people who can and should feel apathetic to certain nuances of they money (worried about asset allocation constantly, working tirelessly to conduct every transaction in the most tax-efficient manner, not traveling or donating as much because they want to leave their kid a certain 7 figure sum. I’ve seen all of this. It’s a good stage to be in though!
I think if you could eat decently without looking at the prices too much at grocery stores, eat out at ok restaurants a couple times a month, have good quality clothes (not fancy brand names), drive mid-range cars (not fancy EVs or others), go to one or two vacations out of towns a year, live in a good school district with a median house, kids could go to local good schools and do a few extra curriculums (not super competitive ones that cost $100k a year, a couple of grants a year for each activity), kids could go to state universities with fully paid tuitions/fees, some gym memberships and hobbies for oneself (not super expensive), that is quite money irrelevancy. People think they need more because the desires are more, eating at fancy places, shopping at wholefoods/organics/farmers market exclusively, fancy clothes/cars/gadgets/subscriptions, fancy vacations, big houses (3000+ sq feet), cleaning ladies, designed landscape, private schools, private tutors, private lessons, fancy gifts, private colleges, the list could go on and on and on. Honestly, people here live a better life than 90% of the population in the world, yet they still discuss whether 5 million dollars is enough or not.
Yes, it’s a website all about first world problems isn’t it?
Just reminding how lucky the readers and the writers are actually, haha. Especially when they face money issues, they could take a step back and appreciate what they already have.
By the way, there is a small cohort of healthcare providers (physicians, NPs, nurses etc.) who face challenges getting out of toxic working environment due to the credentialing process of the new employers almost always require direct supervisor references. If their relationship with the direct supervisor sours, it could be a career killer. I have seen a few who actually ended their career due to no references from former direct supervisors despite clear explanation. The process to challenge the status quo is too lengthy and taxing, so some just chose to give up. Could you please do an article about this, warning newcomers to the field how to navigate the credentialing processes especially with negative working experiences, gaps, etc. and proper financial planning for these types of risks. Or how to spot toxic places in the first place to avoid them etc. Thank you.
Not sure I know all that much about that. Sounds like you might be a knowledgeable resource though. Any interest in a guest post on it? It could be done anonymously.
https://www.whitecoatinvestor.com/contact/guest-post-policy/
This was a thought provoking post, Jim. My relationship to money has evolved as I have become more wealthy. I don’t sweat the small decisions any more. I will drop 40k or more on a nice trip without concern.
When I was younger, I thought 10 million was the number where money would become irrelevant. But I am now around 40 million in net wealth and we have started spending money on lots of things unrelated to our personal needs. We spend around 300 or 400k on ourselves, splurging for travel and personal services like a chef and housekeeper, but we also spend an additional 400k on others because we have the ability to help. We further spend a six figure amount on charitable giving and are working towards a goal of reaching a seven figure annual sum. I am still working but my spouse no longer works.
At this point I would consider us to be financially independent and very secure, but I don’t think I will feel that money is completely irrelevant until the net wealth goes up perhaps another 10 million, which should occur in the near future.
When our wealth level became quite substantial, it did require a shift in psychology. “What do I want to do with my time?” This had become a decision that was mine alone to make without external forces requiring me to do anything.
Reminds me of the quote attributed to John D. Rockefeller was asked how much is enough — “just a little bit more”
I think it also depends on whether you grew up poor or not- I would venture to say that that fear of becoming poor again never goes away even with the millions in the bank… it’s like a tattoo from your earlier days…
How different are the blog posts from a few years ago. All the ideas of MMM and Retirement Extreme to money irrelevancy. I’m not anywhere near the irrelevance mentioned, even so, everything is now automated, bills get paid, and squeezing every nickel is long gone.
It’s as though climbing the mountain looks attainable but difficult, but once achieved, the other side of the mountain is a fun slide downhill.
I’m sure there has been evolution in my writing over the last 15 years. You can only write what you know. But I think this is also somewhat the natural progression of most successful WCIers.
Thanks for the shoutout, Jim!
I suppose we are in a state of money irrelevancy, and I have acquired some nice things in the last few years (25′ tritoon, a fully electric vehicle (Kia EV6), and the brand new lakefront home). Still, when it comes to day-to-day spending, my habits haven’t changed all that much.
The story I tell myself is that I don’t want our kids to experience an abrupt enhancement in their lifestyles or to abandon their relatively thrifty ways before they have any real money of their own. My wife and I have money, but they’re broke, and they’ll need good money habits to become wealthy themselves. They’re teenagers now, and we’ll be empty-nesters in about five years. Then I’ll have to come up with a new excuse for my frugal ways.
In the meantime, I don’t mind spending some money on experiences. In the week before I saw you in Minneapolis — you’re recovering nicely by the way — I treated myself to three sporting events (Vikings and Golden Gophers football, Twins baseball), and three concerts (Descendents, Lemonheads, and Soul Coughing). And we continue to travel as a family when we can, which is primarily in the summertime these days.
Cheers!
Leif