Some Hidden Challenges of Debt Freedom and Financial Independence

Most of the time – well, let’s be honest, almost all of the time – I talk about all of the positives of achieving debt freedom and working toward financial independence. It opens up a lot of personal freedoms that aren’t available if you’re living paycheck to paycheck. It makes a ton of “background stress” and some moments of intense stress just utterly disappear. Life’s difficult moments are a lot less disastrous. The process of achieving those things has unveiled a lot of things in life that I might have never appreciated. I’ve mostly just given up things that I don’t miss (after a bit of transition, sometimes).

That doesn’t mean that everything about financial improvement is great, however. There are a lot of drawbacks to achieving debt freedom and chasing financial independence, and while many of them can be mitigated to some extent, a lot of them are just some negatives in the face of a lot of positives.

Here are some of the realities that I’ve found along our path to debt freedom and our ongoing path to financial independence, and what we’ve done (if anything) to mitigate those challenges.

You’re likely setting aside other life goals along the way. If you choose to achieve debt freedom, there are probably some choices in life that you’re not choosing.

As an example, one of our big life choices was to cut down on our traveling. In the years before our financial turnaround, we travelled to Europe, to Mexico, to the Caribbean, to Canada, and all over the United States. In the first several years after that, neither one of us left our state or any states adjacent to us for non-professional reasons. We have gone on a few longer trips since then, but even most of those have been camping trips or trips that were heavily centered around visiting family members. If we had kept up our previous travel-rich lifestyle and not found a good middle ground for us, we would likely still be in debt at this point.

Do we still want to travel all over the world? Sure, but we recognize it as a secondary goal, one likely to be achieved when we reach financial independence. We do want to enjoy a small bit of international travel as a family before our children leave the nest, so we’re planning two or three such trips in a few years, but we’re already saving for them.

Maybe you’ll end up choosing not to live in a huge house, or choosing not to live in a wealthier neighborhood, or choosing not to travel as we once did. Maybe you’ll choose a higher-paying career path that you don’t enjoy as much, or find yourself in entrepreneurship when you didn’t really expect or even quite want that path.

The reality is that opening the door to financial freedom means closing the door to some other things in your life. You can’t “have it all” – you only have so much time, so much energy, and so much money in life. The trick is figuring out which doors are the right ones to open and close, and there is no easy guide to that.

For us, our choice to cut down on our travel was due to the realization that there were a lot of low-cost things we wanted to do with our vacation time that we would highly enjoy without spending tons on long-distance travel. One of our goals, for example, is to camp for several days in every national park, most of which we can reasonably drive to and pitch a tent for a really low-cost vacation that we’ll both enjoy. Sure, the door is largely closed to expensive travel, but we’re still enjoying a lot of meaningful vacation experiences that Sarah and I both value and desire.

Just because you close the door on a super-expensive home doesn’t mean you don’t live in a nice home. Just because you close the door on an expensive prestige neighborhood doesn’t mean you don’t live in a nice neighborhood. Just because you close the door on driving new luxury cars doesn’t mean you don’t drive a nice car. It just means that you’re choosing to close an ornate door while leaving a perfectly worthwhile one open.

You have to say “no” to smaller things you can easily afford. Let’s break this down a little bit.

When you first commit to getting yourself free from debt, you’re probably living the same paycheck to paycheck lifestyle as 78% of other Americans. That means that you’re spending every dollar that you bring in.

The first step to fixing that is to start spending less than you’re bringing in. Hopefully, it’s quite a bit less than before, so you have some room to work with. Then, you take that money you’re no longer spending and start applying it to eroding your debt – you build an emergency fund, then start taking out those debts as fast as possible.

Then, one day, you find that most if not all of those debts are gone. Not only are your day-to-day spending habits far lower than they were before you started all of this, your monthly bills are far lower, too, because you paid off most if not all of your debts.

In other words, it feels like you have a ton of disposable income. That’s great, of course! You now have the resources you need to start building toward financial independence, early retirement, or whatever other goals you may have.

However, one thing you will notice as you move through this process is that you gradually have more and more and more disposable income. Early on, it’s actually pretty small, and you’re probably not seeing it as much as you’re dumping it into paying off debts, but as a lot of those debts start falling away, you start to realize that you’re really spending a lot less than you earn.

What that does is that it makes you realize that you actually really can afford a lot of smaller perks in life. You can afford things like a nice coffee maker or a new iPad or a nicer car and so on without putting yourself back in the debt shackles, and it becomes pretty tempting.

To me, this is a lot like the feeling I get several minutes into a good hard exercise session. I’ve done what I came to do, right? I’ve exercised. I’m theoretically in better shape than when I started, and it’s awfully tempting to just quit now and go relax.

Here’s the thing, though: I know that if I stick with that exercise, I’ll hit what I like to call the “euphoria” state, a state I often reach when I do moderate intensity exercise for an extended period of time. I’m not killing myself, but I’m breathing heavy and sweating, and then there comes a point where I start to feel great. It’s a physical state that I really enjoy reaching, and I would never reach it if I stopped at the eight minute mark because it’s tempting to do something else.

The same is true with a financial journey. Sure, I could give into lots of temptations in my life right now. There are a lot of things I’d like to have in the short term. I’d love to have a Philips Avance pasta maker, because I love making homemade pasta and this would remove a lot of the labor. I bet having an Apple Watch would be cool. I’m tempted to get a treadmill desk. I could list a lot of smaller things, too.

I could afford all of those things easily, with no debt whatsoever. All I’d have to do is trim back some of our savings for the month. It would be so, so easy to talk myself into those items.

Here’s the thing, though. If I start opening the door to things that I want but don’t really need without any restraint, I’m going to be closing the door to my financial goals. The only way to keep moving forward toward my financial goals is to put some restraints on my wants.

So, how do I restrain it? I simply budget a certain amount each month for hobbies and non-essential items. The pasta maker would fall into that, as would the watch and treadmill desk. If I really really really want something, well, I can save for it for a few months and then buy it without feeling bad.

This still doesn’t change the fact that I know I could afford such things if I wanted to, but I choose not to do so because I know that opening that door means that I’m abandoning financial restraint, which means that I’m closing the door on my big goals. Financial restraint got me here, and financial restraint will get me to where I want to go. It just means saying “no” sometimes.

Interactions with professional peers and social peers can sometimes be difficult when financial issues and spending patterns come up. My wife and I are close friends with a couple that goes on exorbitant trips every nine months or so – Japan, Thailand, New Zealand, and so on. Another close friend of ours travels to her vacation home in Mexico on a regular basis. We have other friends who drive brand new cars – a Lexus and a Tesla. One person I love dearly lives in perhaps the nicest home I’ve ever seen. All of those people are within a stone’s throw of our age and are following similar career paths as us.

The thing is, in each of those situations, we don’t have anything to really share when the things that matter most to them come up. Our comparable vacations as of late have been a camping trip to Yellowstone and a driving trip to the Great Lakes – yeah, not really conversation worthy when someone is telling you about Thailand. Right now, two used Toyotas sit in our driveway, so luxury car conversations aren’t really thrilling. Our home is a pretty modest family home with many inexpensive elements and choices – pretty hard to compare that to something straight out of Architectural Digest.

At the same time, none of them (with possibly one exception) are going to retire any time soon. They’re all going to be working until they’re very old, often at jobs that they seem to not like or have major issues with. Both Sarah and I have jobs we like, and we’re soon going to be in a place where we can just walk away if we so choose.

In other words, when we sit down to chat with people our own age about the things we’re doing and the stuff we own and the careers we have and the challenges of life, there are a lot of things that we simply don’t have in common. I often find myself politely listening and just interjecting with questions occasionally. I probably come off as quiet because I don’t have much to say about our own travels or home or cars or possessions. When people start grumbling about mortgages, I don’t have much to say there, either, that won’t come off as judgmental or some kind of oneupmanship. I generally just agree that mortgages are not fun and we move on from there.

The reality is that, as noted above, 78% of people live paycheck to paycheck and a healthy number more live pretty close to it. It turns out that there are a lot of conversations that take a paycheck-to-paycheck lifestyle pretty much for granted and center around all of the things that people spend money on and how onerous and unfair debt is. It can be hard to navigate those conversations without seeming judgmental or else sharing experiences that are kind of outside the norm of the conversation flow. I absolutely loved my Yellowstone trip, but it’s kind of awkward to bring it up when the other people in the conversation are comparing notes on Japan and Thailand, and it’s rather awkward to say that you’re mortgage free when everyone else is talking about their hated mortgages.

The key problem here is that people are trying to seek out ways to signal relative social status to each other, and one way to do that is to talk about experiences and possessions. It can be difficult to navigate that conversation when you’re intentionally aiming for fewer possessions and different lifestyle goals.

In general, my strategy is that I listen and ask a lot of questions, but don’t offer up too much unless specifically asked, and if I can, I try to nudge the conversation away from travel and experiences and possessions and finances into areas of more interesting common ground. I try to talk about day-to-day hobbies or career experiences or things like that instead.

A lot of modern culture shouts at you that you’re a “cheapskate” or otherwise flawed. This is something of an extension of the previous point, in that many people use possessions and experiences as a tool to figure out some degree of relative social status when they don’t know each other well. Why do we do this? Well, the culture around us offers up tons and tons and tons of cues that we should do exactly that.

Television programs and movies constantly use experiences and possessions as simple ways to indicate relative social status. We see beautiful people living a life of comfort surrounded by expensive possessions and having expensive experiences and those things push natural buttons of desire within us. This happens with almost everything, from television programs to advertisements of all kinds, from “newscasts” to online articles, and let’s not even talk about social media. All of those things constantly show us experiences and things that will improve our life in some way, even if in the end it just boils down to social status signaling.

Those types of ideas are constant, and they often come with the underlying message that you’re somehow flawed if you’re not buying these things or having these experiences. I find that the more I watch television, read the news, or engage on social media, the worse I feel about myself. I’m constantly looking at the highlight reels of the lives of others, and the comparison to the own dingy realities of my own life can leave me feeling awful in many regards.

So, what do I do about it? One tool is to simply have a healthier media diet, one that doesn’t leave me with negative feelings about myself or others. I mostly read books and long articles and essays; I don’t watch much television and avoid most of what would be considered news. I used to be much more involved on social media, but I have cut it down to very little over the last several years. Another tool I use is to remind myself what I am choosing on my path to financial independence. I am choosing things that can’t easily be shown, like peace of mind and freedom of choice.

Is it a perfect solution. Nope. Does it work pretty well most of the time? It sure does.

Charity becomes a troubling question. This is an extension of the previous issue of having plenty of disposable income if you were not applying it to your financial goals. If you’re aware that you do have access to this income, the presence of charitable needs in the world can be a very strong draw.

Charitable giving has always been a matter that I have struggled with as we improved our financial state. If I’m earning more than I’m spending by a fair sight and have at least some level of security, what right do I have to hoard more money if people are out there starving or animals are being abused?

There are a lot of good arguments and counter-arguments to be made when it comes to charity and a person’s obligation (or not) to give to those less fortunate. Suffice it to say, it is a troubling concern for me.

Before we go on, let me be clear that I don’t believe that whether you give to charity is a sign of whether you’re a good person or not. There are real reasons not to give to charity, or to be extremely selective in terms of what charity you give to.

First of all, I recognize that saving money is not really in opposition to charitable giving. If you save money for the future, you retain the ability to choose to give that money in the future if an appropriate cause presents itself. When Sarah and I die, much of our net worth will be given to charity, something that wouldn’t be true if we spent recklessly.

Second, having financial security means that I am far less likely to need charitable giving or become reliant on charitable giving in the future. Again, if I spent recklessly, this would be much more of a risk.

Third, our primary financial goal is essentially early retirement, after which much of our retirement time is planned to be used for volunteer work, giving our time and talents to those causes which we believe in.

Still, even given those reasons to be prudent, there remains a strong desire within me to give to charities. Charitable giving is something that Sarah and I carefully discuss, budget for, and give to the charities of our choosing automatically. We maintain an annual charitable budget that’s large enough for us to itemize our taxes, even with three kids and no mortgage, while still maintaining a healthy pace on the road to financial independence. We feel good about the choices we’ve made.

In the end, even though these challenges (and others) are present along our financial path, we still find far more value in pursuing it than reverting to “paycheck to paycheck” financial habits. The peace of mind and widening of life opportunities that come from having firm control of your finances is simply too valuable for us to give up.

Good luck.

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.