What would your boss say if you came in and requested a 40% salary increase for the next year? And a 40% increase the year after that? Would she happily agree? Or would the cadres at your company think that you are more than insane?
A few years ago, we could expect a 40 k€ return from our investments for that year. The year after, this had increased to 60 k€, as it happened to be a good year. The year after that, it was up at 80 k€.
That's a 100% increase in our income from investments per year over two years, or roughly an increase with 41% per year. All that just because we save and invest conservatively in our pathfinder portfolio.
This is after-tax, in-our-pocket (or rather, investment account) money. So in many regards, much better than paycheck-money.
Now, compare that to how our salaries increased during the same period. These years were good to both of us, as we had changed job and had some salary progression. In the same time, that increase was hardly above 10% per year, so very, very far from the 40% increases in investment income.
This increase in investment income keeps rolling forward in a pace that is much, much quicker than any salary progression.
So, as all proponents of the FIRE-movement knows, there's a point where the investment income can cover for one's basic needs.
Let's ask for a radical salary increase, shall we?
But there's also a point where the investment income is as big as the salary itself, and then - quite quickly - comes a point where the salary income just can't match the investment income at all under any realistic assumptions.
That's the point when a very substantial increase in salary - which for most people would mean a very drastic increase in responsibility or required skills - doesn't really do a significant change in total income nor wealth.
And then, suddenly, there's no salary that can realistically be paid, in any wage-based profession, that can be economically interesting to us anymore.
Truly not a slave
This is the point where we loose financial connections the labour market, at least for all kinds of normal, labour-market-based monetary reasons.
We suspect that we have no inherent feeling that such a point in the financial journey exists. It should always be economically useful to work and earn one's living, right? Yet take any billionaire. There is no economic way of employing them with motivation of any normal paycheck.
There's a point like that for you and us as well. In Sweden, the take-home after-tax average salary after 5+ university studies is around 40 k€ (yes, we're in Europe, but the point still holds). That is a number we swooshed by several years ago with our investment income alone, and then continue to go beyond, with a very significant increase in our "investment salary increase" every year.
The progression, as we saw with the numbers, is such that our bosses would be very surprised if we asked them to please keep up with our investment income increases with matching salary increases.
When most people hits a million euro, and keeps lifestyle inflation at bay, then it starts to get really hard to make significant improvements to one's economy by working for a monthly paycheck. The investment income becomes more than twice as large as what one earns via the paycheck.
Suddenly, as sudden as how quickly a surprise avalanche builds up, it's no longer possible to employ us anymore, at least not for economic reasons.
Then truly, we're not slaves any more.
At that point, only our own devotion can buy our time.
Farewell,
//antinous&lucilius
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