Eight Reasons You Will Never Reach Financial Independence

Reaching Financial Independence

This post was first published in September 2019 and updated in August 2021.

To say that the financial independence movement has gone mainstream would be an understatement.

Podcasts, Youtube videos, Twitter “experts”, and more blogs that one could (or want to) ever keep track of.

Heck, they even made a movie about it!

Now, it’s true that learning from others is one of the best investments of time anyone can make. 

The challenge is, however, is that you also need to understand what NOT to do.

Everyone is happy to showcase their crypto gains. Shouting from the rooftops about their financial mistakes – not so much.

Even those who are well on the way to financial independence need to watch out for the proverbial iceberg.

Miss a beat – and watch your FI ship sink like the Titanic, just when you were steaming full speed ahead.    

In order to avoid that outcome, you need to understand the qualities that can torpedo your quest for financial independence. 

Below, I am listing the top eight attributes of people who never reach financial independence. 

If you think you have got any of the traits on the list below, you may want to take remedial action before it’s too late.

1. You Simply Don’t Want To

No one really talks about this but the reality is that a lot of people who don’t reach financial independence simply don’t have it on their radar. 

Step outside the FI community echo chamber and you will realize that the majority of folks aren’t aware of the concept. 

Others have a vague awareness of it but file it in the “too hard” or “not interesting” category. 

I personally know quite a few people who have ended up in well-paying jobs and mistakenly assume the good times will last forever.

Whatever the reason is, you simply can’t reach financial independence if you don’t set out to do so.  And for many folks, that’s just fine.

2. You Don’t Take Ownership And Action

We have all met someone in this category.  This person knows what the problem is and sometimes even understands what needs to be done to fix it. 

But days, months and years go by and nothing happens. 

There is no shortage of excuses.  First, there is no time.  Then parents/spouses/kids get in the way. 

Then they change jobs and their employer just doesn’t recognize their talents.

The list of excuses is endless.  Then you bump into the same person twenty years later and guess what? 

While others have been designing and executing on a strategy to achieve their goals, these people are still making excuses for not making any progress. 

3. You Don’t Understand The Basic Concepts

The beauty of financial independence is that you don’t need to be a Nobel-prize winning economist to understand it. 

The basic concepts are simple and have been explained ad nauseam. 

However, despite the incredible work everyone has done to dumb down the basics of FIRE for everyone’s consumption, you do need to be able to understand a handful of simple concepts:

  • Importance of budgeting and spending less than you make
  • The basics of investing, including the relationship between risk and return, the importance of compounding, and the concept of inflation
  • The differences between the various asset classes (cash, bonds, stocks, real estate)
  • Importance of diversification
  • Advantages of passive investing over active money management
  • Basics of personal taxation, legal tax-minimization strategies, and investing in a tax-efficient manner

I’m sorry to break it to you but if you don’t have a grasp of the concepts above, your chances of achieving FI are slim to none. 

4. Reliance On Cash Savings

This should really be in bucket #3 above but is absolutely crucial, so I wanted to break it out. 

If you keep the bulk of your savings in cash without a good reason, you are probably losing money. 

It’s that simple. 

Long-term inflation runs at about 3%. 

Interest on cash deposits rarely exceeds 1% these days – and that’s if you are lucky. Last time I checked, HSBC was giving me 0.1% on my money.

If you have £100k sitting in a cash account yielding 0.5% interest and inflation is 2.5%, you lose £2,000 in real purchasing power every year. 

Here’s an alternative way of looking at it:


Do you want this happening to your money?

Keeping a significant chunk of your net worth in cash unless you have a great reason to do so (i.e. saving up for a down payment) is one of the worst financial decisions you can make. 

I used to be supremely focused on moving my cash to the highest-yielding account every year.

However, in today’s interest rate environment, it’s kind of like competing to be the tallest dwarf.

These days, going long equities or property is the only way to preserve your wealth. 

5. You Don’t Take The Time To Educate Yourself

Gone are the days when information was recorded on parchment paper and only accessible to the privileged few. 

Today, there are hundreds, if not thousands of quality resources covering all the information you need to build a prosperous financial future for yourself and your family.

But as with anything in life, you need to invest the time and effort if you want to reap the rewards. 

No one expects you to know and understand all the concepts in #3 above. 

Equally, you shouldn’t expect to reach financial independence if you don’t even take the time to learn about the basic tools to build your wealth.

6. You Are Risk Averse

Everyone’s tolerance for risk is different – and that’s okay. 

However, just as you don’t want to be relying on a trip to Vegas to build up your nest egg, you also shouldn’t expect to achieve meaningful results with zero risk.

Stock markets fluctuate by the minute. 

Debt markets react to the latest interest rate decisions by central banks. 

Real estate values follow multi-decade cycles. 

Let’s face it, there is a high likelihood that any investment you make may decline in value – albeit temporarily. 

Ability to tolerate these short-term fluctuations is crucial if you want to be in the game of generating meaningful long-term returns:

Annual investment in the S&P 500

Success in life – and investing – is all about staying in the game.

Otherwise, you will end up in bucket #4 above, sitting on a pile of cash while it continues to lose it’s purchasing power. 

7. You Cannot Delay Gratification

 All the good things in life take time.  It takes years to build a comprehensive skill set and a successful career. 

It takes months, if not years of physical exercise to start seeing results.

Financial independence isn’t any different. 

You won’t see meaningful results (other than feeling well organized and your spouse being mildly amused) after two weeks of saving and budgeting. 

A few months in, you may have made a small chink in your mountain of debt or built up a tiny cushion of savings.

It will most likely take at least a few years of diligent saving, investing and educating yourself until your debt is paid off, your emergency savings pot is giving you a proper margin of safety and your investments are generating dividends and capital appreciation at a solid clip.

The road to success is a long one – and there isn’t much interesting going on in the first decade or so:

Path to your first millionHowever, that first decade is a rite of passage.

You don’t get to the oasis without slogging through the desert first.

The famous Stanford marshmallow experiment proved that people who can delay gratification enjoy significantly better life outcomes. 

If you haven’t got the willpower to make the right long-term decisions, you better build it up NOW.  Your future self will thank you every day. 

8. You Lack Consistency

The final item on the list unifies all the other ones. 

You may well be brilliant at what you do but you will never be successful unless your brilliance is underpinned by consistent effort day in and day out.

To use a tennis analogy, flashes of genius will win you points and games but consistency will win you sets, matches, and tournaments. 

Is That It?

You will notice the list above has several glaring omissions. 

For example, I didn’t include things like “You don’t have a high-paying job” or “You are too old” or even “You live in a third-world country”.

These omissions were 100% intentional. 

I know people on disability benefits who have a better grasp of their finances than high-flying management consultants. 

I know people who immigrated to a new country at the age of 40 with just a couple of thousand dollars and a family to support. 

Those same people retired at 60 with a paid-off mortgage and a healthy investment portfolio. 

In most extreme cases, there are immigrants born into sheep herding families who don’t even know their birthday – yet go on to become billionaires. 

If there’s one person in the world that deserves your honesty, it’s yourself. 

If you are serious about reaching financial independence, you need to take a long, hard look in the mirror. 

If you see any of the traits above, some proper remedial action may be in order.

Otherwise, the tomorrow you are hoping for will never come.   

Thank you for reading – and good luck!

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Banker On FIRE is an M&A (mergers and acquisitions) investment banker. I am passionate about capital markets, behavioural economics, financial independence, and living the best life possible.

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20 thoughts on “Eight Reasons You Will Never Reach Financial Independence”

  1. Great post! How about “you grew up poor and spend your life trying to escape that scarcity lifestyle”. Kind of hard to save with that type of mindset (but I personally see this alot).

    1. Thanks!

      The scarcity mindset would make a great addition. Think it impacts even those who are well off. My family invested in the stock market so I was very comfortable with that, but it took me much longer to get into real estate as we didn’t have that “habit” in the family.

      In contrast, I know some brilliant people with great real estate portfolios who just won’t dip their toe in the stock market.

  2. I love how this article is inclusive of all incomes and is instead a set of universal rules which we can all relate to! Sometimes it can be easy to reduce our finances down to our income, but really our mindset is a much bigger influence on our financial independence. Great post!

    1. Banker On FIRE

      Circumstances play an important role, but your mindset is key.

      I know people who literally started a new life in their 40s and ended up far ahead of the game by the time they hit 60.

  3. Pingback: The Sunday Best (10/20/2019) - Physician on FIRE

  4. Very shrewd advice. One thing I’ve noticed in my circle of a dozen or so wealthy and very wealthy friends is that none of us lived by a written budget, even before we were multimillionaires. We all were able to escalate our income at a higher pace than our lifestyle inflation. I’m by far the most frugal of the bunch, and probably the poorest, but all of us have way more than we’ll need to make it to the cemetery in style. But even in my case we never had a written budget. We spent all we wanted to spend and still maxed out every available retirement account and found we had much money leftover with no place to put it except in taxable brokerage accounts in mutual funds. I think probably because none of us were born wealthy and grew up with pedestrian tastes. But we all had the talent to make high incomes and to accelerate our net worth at a pace that grew faster than our desire for the finer things. We literally were able to buy anything we wanted and still save and invest aggressively. I can’t remember a single time when I told myself I couldn’t afford something. If we wanted it we bought it. We just never wanted too much. I really think the tales of high earners who go broke are outliers, most of us end up wealthy because we out earn the cost of our desires. I also think written budgets are a great idea, especially for median earners who do not have as much surplus money above their basic needs.

    1. Whilst you did not use a budget I will venture that you were fully aware that you were “spending less than you make”. FWIW, I suspect such behaviour (not budgeting) is pretty common place.

      1. @Al Cam

        Would think so. Some people just know where their money goes and the rest live in a state of budget-less bliss!

      2. You are exactly right! We tended to track what we spent, loosely, and would have adjusted if we saw we were overspending. It is type of budgeting I’ll admit, good point.

    2. @steveark

      Indeed. We don’t budget either but we do track our expenses and calibrate up or down on a post-factum basis.

      Same thoughts re: spending money. I think long and hard before buying things, but when I do buy them, I don’t mind spending enough money to get myself a top-quality item.

      Then, of course, I use that item for a VERY long time (I only recently got a new phone after my iphone6 died on me)

      Really pisses of my parents and my wife because I never need anything for my birthday or xmas!

      1. That’s very much what we do as well. Being easily satisfied with “enough” has got to be a common trait among first generation financially independent people.

  5. @steveark & @BOF

    Forecast spending is indeed a key parameter when considering [early] retirement – some may even say it is amongst the very key numbers. FWIW, IMO, longevity is probably the #1 requirement. For a variety of unrelated and fortuitous reasons I tracked our spending (sometimes more loosely than others) for more than two decades prior to jumping ship. At no time have we ever budgeted as such. Two things struck me from our dataset, namely: the volatility of year to year (and also month to month) spend and that there was a discernible shape to the annual spend over time. I often wondered what, if any, influence these artefacts would have. There is now quite a lot of info available from both the US and the UK about annual spending shape that I found useful. And finally, only a handful of days ago, ERN has dug into the volatility questions in his inimitable style, see:

  6. Start the FI journey as early as possible is crucial to let the compound interest trigger but it is also true that without the proper mindset mentioned in the article it is definitely impossible regardless the age.

  7. goodmoneygoodlifecom

    For me, my main struggle is this:

    “Advantages of passive investing over active money management”

    I try my best to consistently invest in index funds and diversify, but sometimes I just get an ‘idea’ and pick individual stocks or play with options lol. Quite fun, but expensive.

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