There’s a saying that you can get things “Fast, cheap, or good. Pick two.”
This saying is meant to imply that you cannot have all three of those things. At least, you can’t have all of them at a high level. If you want something fast and cheap, it’s probably not going to be very good (hello, McDonald’s). If you want it fast and good, it ain’t gonna be cheap (the military knows a lot about that). And if you need it to be good and cheap, it’s probably going to take some time. Commercial space travel, anyone? The commercial space ventures going on right now are cheap in comparison to earlier attempts, anyway. And they are good. But boy did it take us a long time to get there.
Ease, Speed, or Wealth. Pick Two….Max.
You may know this concept as the Triple Constraint. In simple terms, the Triple Constraint is the three constraints that have to be balanced against one another in a project – scope, time, and cost.
The way I see it, there’s a similar Personal Finance Triple Constraint. You can have high levels of ease, financial independence (reaching it very fast), or wealth. You (probably) can’t have all three. In fact, many people won’t even get two. But I’d argue that everybody is trying for a high level of at least one of those things.
Let me explain.
I define high levels of ease as a financial environment that requires minimal thought and worry. It may be characterized by having a financial advisor take care of your finances. Maybe it means you just shove money into a target date fund and let it do the work. Or maybe it just means being able to pay your bills without worrying about having enough money to buy groceries afterward.
People seeking ease in their finances probably:
- don’t want to closely track their spending or investment performance
- want to be able to eat out without worrying about the effect on their wallet
- follow (or want to) the standard retirement advice of saving 10%. That retirement account might be 100% invested in a target date fund. They probably don’t like a lot of risk in their investment choices
People seeking ease probably also work for someone else. It’s a lot easier to be an employee than to be an employer, at least from a money aspect. Employees know with a fairly high level of reliability how much they will be paid and how much work they have to do to get that money. Employers have to make it up as they go, at least in the early years. And they may have to sacrifice several years of income if they are starting their business from scratch. That’s not easy at all!
The ease seekers are the core of America. This is what the average American is really going for. They know they won’t be rich, and they’ve never heard of financial independence the way we talk about it in the personal finance sphere. Those concepts aren’t even on the radar for them, or if they are it’s probably in a “yeah that’d be nice but it isn’t likely” kind of way. But most Americans can achieve some level of ease in their finances. Even if they carry consumer debt throughout their life, even if they are barely scraping by (or not), ease is something most people want more of from their money.
Then there is the goal of a high level of speed. By this, I’m referring to reaching financial independence (not necessarily early retirement) as quickly as possible. Many people don’t have this goal, for various reasons. I haven’t met anybody opposed to the theory of financial independence, but I have met plenty who choose ease instead. Striving to reach financial independence quickly just doesn’t sound fun to them. They are perfectly fine waiting for age 65 just like everyone else.
That’s how we do it here, right? That’s what Americans do.
Except for those of us that don’t want to wait. Shout it with me.
What do we want?
When do we want it?
For some of us, achieving financial independence as quickly as possible is the key objective in our financial planning. For some people that’s because they don’t like working, but there are other reasons too. Being able to pursue a passion is one. Or you could have a family situation that’s driving your desire – for instance, wanting to stay at home with your kids. The reason isn’t what connects us – it’s the drive.
Then there is wealth. And by wealth, I mean dolla dolla bills, y’all. Being wealthy in other ways (health, friendship, love, etc) is extremely important. It’s just not the point of this post.
Everybody’s vision of what “wealthy” means is different, so I don’t want to put a dollar amount on it. For the purposes of this post, wealth is just having so much money that you don’t even have to think about it. Most of us striving for financial independence will still have to think about money, because we aren’t going to be saving so much that we exceed our FI number by many times over.
In order to become truly wealthy in America, you generally have to do one of three things:
- Win the lottery (extremely unlikely)
- Receive a very large inheritance (possible, but still not too likely)
- Be very successful in business. This is usually but not always through owning your own business
The Personal Finance Triple Constraint
The theory behind the Triple Constraint is that each of these things is a trade off. Increasing the importance, and therefore effort, you place on any of them will necessarily cause one or both of the others to suffer. Maybe not a lot, but some.
If you want your finances to be as easy as possible, you are most likely going to give up some money. FIREes and wealth seekers will take the extra effort to earn and keep their money by doing things ease seekers may find excessive. For instance, working 80 hour weeks or learning the tax code to maximize loopholes. While you can achieve quick financial independence or wealth while also keeping your financial life easy, it’s probably not going to be quite as fast or quite as much money.
Note: index funds are one of the exceptions here. They are super easy and popular in the FIRE community and recommended by some of the wealthiest people in America (ahem, Warren Buffett). Index funds are for everyone!
If you want to achieve financial independence quickly, there are going to be some trade offs there too. It’s probably going to be difficult at times. You’ll have to make sacrifices and go against the grain of society. Even if you can do it without stretching your finances, there is also the problem of having friends and family constantly challenge your goals.
People will tell you that your goal is unrealistic. That it’s not worth it. That you deserve nice things. Because financial freedom isn’t nice, apparently. Or my favorite, from the wealth seekers – “It’s impossible to live on that amount of money!”
If you want to be wealthy, you can probably achieve financial independence too (it also depends on your spending) but it’s likely not going to be very easy – it’s going to entail hard, hard work. And depending on how you define wealth, it may take a long time.
There are major sacrifices in pursuing wealth…unless you win that lottery I mentioned earlier. In that case, put the money into some index funds, kick back, and enjoy your ease/speed/wealth trifecta.