FINANCIAL FREEDOM is the ability to spend our days doing what we love—and, with any luck, it will come with age. As we amass more wealth, we should become less motivated by fears of layoffs and hopes of bigger paychecks. Instead, our motivation should come from within, because we are increasingly free to focus on the things we’re passionate about. This, I believe, is one of the three pillars of a happy financial life: We have fewer money worries, we have the wherewithal to enjoy special times with friends and family—and we have the freedom to spend our days engaged in work we love.
Indeed, in the psychology literature, there’s much discussion of so-called extrinsic vs. intrinsic motivation. Being self-motivated is celebrated as crucial to mental wellbeing and fulfilling our full potential. This seems reasonable: Wouldn’t you prefer to spend your days doing what you want, rather than what others tell you to do? As I have discovered in my semi-retirement, there’s great joy in working hard at things I care deeply about.
To be sure, some folks love their job. That gives them the best of both worlds, because they can devote their time to something they’re passionate about, while also getting paid to do it. But for those who aren’t so crazy about their work, amassing wealth should allow them to focus less on the extrinsic motivation of the workplace—and eventually, with retirement, to leave behind the world of pay raises and layoffs. Instead, they can focus their energies on the things they love doing.
But here’s the surprise: While it seems older workers ought to become more intrinsically motivated—and certainly it seems desirable—it doesn’t appear to happen. Studies suggest that many older workers are just as extrinsically motivated as younger workers. Why are older workers still worrying about keeping their job and earning more money? I suspect bad financial habits, coupled with a flawed retirement savings system, have a lot to do with it.
A recent study by The New School’s Schwartz Center for Economic Policy Analysis found that, among middle-class workers and their spouses currently age 50 to 60, as many as 40% risk falling into poverty or near poverty once retired. Many folks, alas, put off saving for retirement or suffer financial misfortune during their working lives, so they desperately need to stay in the workforce and earn more money to amass a decent-size nest egg. That creates financial stress that could have been avoided if they’d started saving at a much younger age—and it means they miss out on the sense of wellbeing that comes with controlling how you spend your days.