Saturday, November 23, 2019

"The Golden Number," and why I don't bother with it

In the personal finance community, there are a lot of people that identify as pursuing FI (financial independence) or FIRE (financial independence retire early).  To a degree, I identify as both.  In both communities, there is an incredibly intense focus on what I call "the golden number."

The golden number is the end goal, a destination if you will.  It's the dollar amount that when achieved (in assets), will allow you to be financially independent because the money itself will create enough cash flow for you to live on without needing to actively work to earn money.  Now, achieving the golden number doesn't mean the person will necessarily stop working, but it becomes a real possibility because they know they don't really need to paycheck to fund their lives.  It's a nice idea, isn't it?

So, people get to work, budgeting, projecting, bean-counting, and finally come up with a golden number.  Next, they dial in their budget, maximizing every dollar earned, investing everything they can squeeze out.  In order to properly track progress, out come the monthly (or quarterly) net worth updates.  When you're squeezing so hard, you definitely want to see progress.  In fact, I love seeing progress.  Progress triggers incredible joy for me, but I have to be careful.  That's why I actually don't do those things.

You see, I don't have a golden number....and I don't do net worth updates.  In fact, I don't actually calculate either of these things.  I have a general idea of what my net worth is, and it makes me really happy, but I don't actually calculate or track it at all.  I know what my assets are (more or less, some things fluctuate) and I know what my liabilities are..  I'm not sure I need to go much further than that.  Right now, "more or less knowing" triggers joy for me.  But if I were to calculate my net worth today, and follow suit doing the same thing every thirty days in order to track my progress, I think it would have the exact opposite effect.  Rather than feeling such incredible happiness over how much debt I've eliminated, money I've saved/invested, I think my brain would get in the way of my feeling good.  I think my mind would start judging my progress.  I mean let's face it, "evaluating things" is one of the primary functions of the mind, isn't it?  The process of continuously "evaluating my progress" is likely to frustrate me, causing a scarcity mindset...

...And the golden number?  Why don't I calculate that?  Imagine, after all the bean-counting, I find that 1.7 Million is my golden number.  I suspect my mind would have a field day with that!  It feels like climbing Mount Everest!  On the emotional scale, it places me somewhere between anxiety, frustration, and hopelessness.  How many powerful decisions have you made from a place of anxiety, frustration, or hopelessness?  Furthermore, here's what I already know.  I know how much passive income comes in from my rental property.  I also know that we can have it paid off in a few years.  Additionally, I know how much income it will bring in once we do.  I know how much income we need to live, and the gap between the rental property and that amount.  I know that we're piling money into other investments.  All of those things make me feel really powerful.  I make good decisions and receive really good outcomes with money when I feel powerful.  That being said, net worth?  Golden number?  I don't think I'll spend much time or energy on that.

Now, if calculating your golden number or net worth makes you feel good, keep on keeping on!  As for me, I'm just fine where I'm at.