Several years ago, the thought occurred to me that it might be possible to replace my salary with income from investment dividends. I was excited by this thought, but the sheer numbers required to do this made the task seem impossible. I had also not done any investing at the time, so I quickly surrendered my fantasy.
There are many good and bad ways to invest your money. I am by no means an expert, and have thus far subscribed to the simple, passive model of investing that uses index funds and growth-based mutual funds. So far this strategy has been working, though I can still expect plenty of volatility. What this strategy has done more than anything is convince me to spend less money, to waste less money, and to decrease my needs. My current pre-tax 401k contributions are 35% of on my income, but because I have cash savings goals to reach and my sanity to maintain, I have stopped here, though I could perhaps reach 40%.
Now, I talk about these things frequently. I’m probably boring many of my friends to tears. But one thing I haven’t talked much about is why I think the pursuit of financial independence can have such a powerful role to play in Christian missionary and volunteer work.
In searching for a good graphic, I found a map of the most expensive countries to live in. You’ll notice that the cheapest places to live are right around that 10/40 window. The whole idea behind financial independence is that you fund your cost of living through investment returns, and the lower your cost of living, the lower you need to invest. Going overseas to cheaper countries makes this significantly easier than staying in the United States. Depending on your target region or country’s average cost of living, you may be surprised how quickly you can amass the requisite capital to support yourself overseas.
Now, I believe that when God calls you to go, you go. As far as we are aware, the disciples didn’t sit around after Pentecost and run calculations to see whether they had the money to go out and make other disciples. They just went. And they frequently relied upon the support of churches, just as most missionaries do today. I don’t ever want to downplay the importance of those church relationships either. But those of us in the United States live in a world where a $50,000 per year salary is average. Sure, the cost of living is high, but I love reading Jacob Fisker’s blog because he challenges the cost of living to an extreme level, which will challenge just about anybody, and this has helped me to understand how I can decrease my expenses not just from a budgetary perspective, but from a deeper philosophical perspective as well.
A standard rule in finance is that you can safely assume a withdrawal rate of 4% in order to maintain your principle and survive market ups and downs. Paranoid people mark this lower, optimistic people mark this higher. You can just search google and find some good debates. I personally use the 4% rule.
Now, the average wage in Nepal (for example) is the equivalent of $200 USD/month. $200 per month is $2,400 per year, is 4% of $60,000. If you want to support yourself at the average wage of a working Nepali individual, using the 4% rule, you would want to invest $60,000, not bad at all considering that’s how much many people owe on their student loans! I am assuming you do not have debt, as you will definitely want to pay that off before you start investing too much. Now, I don’t think many of us could hack the average wage in Nepal, so you would probably want more invested. For some this may be difficult but for many this will be easy, especially on whether you are married and both of you work. Maybe you want to serve in Thailand, where the average wage is about $400/month? Then you will probably need $120,000 to supply that $400/month.
“You’re talking crazy! Nobody can do that!” Well, let’s say you’re married and don’t yet have kids. One of you makes the average of $50k and the other makes a bit more, $60k. Let’s say you both can live comfortably off of that $50k, then you can invest the entire $60k from the other spouse’s salary. At this rate, and giving some credit to taxes above your 401k limit, it would take less than 3 years to have $120,000 invested. In less than 3 years you could potentially maintain the average Thai income indefinitely! There is amazing potential to living in the United States and planning to serve elsewhere.
Now, again, I know not everybody is married (I’m not), and not everybody makes that much money. This will always depend on your situation. But I know plenty of couples who make good money together, or some where one person makes above average and the other person makes below average. You can work with what you have. Maybe you will have to rely on some support to do missionary work. That’s perfectly fine, and I’m sure there are plenty of resources online to strategize how best to do this. Having the money invested also doesn’t mean you shouldn’t be in contact with a church or organization.
In the Field
One thing I want to talk about that is very critical to all of this. In your quest to invest as much as possible, you learn tricks for saving money, you find that there are things you can do without that maybe you didn’t believe was possible before. This is so important if you want to volunteer in developing countries! As you begin to live on less, as you pursue this goal, your lifestyle begins to approach those of the people you will be working with. I’ve been learning to incorporate rice and beans into my diet and to cook my own food. This is going to make life so much easier when I do go overseas! It may be difficult to witness to people who might have serious life struggles when all you can do is complain about the things you no longer have, or if your house is always chock full of what may be extreme luxuries in those people’s eyes. (Does your life reflect what you believe is important? Do you really believe that Christ is our greatest need? Does your lifestyle reflect this?)
Having money invested can also allow you to more fully dedicate yourself to God’s work. If you can avoid the worry over money, then you should. I love the idea of serving a worthy cause and not being paid so that the organization can reach more people, or hire those who need the money. How great would it be to even teach another programmer to replace me in my role and make a good salary? That has to power to change families for generations!
Also, maybe you cannot reach an investment amount that can support you. If you find work in your target country or have adequate support, then you should still invest as much as you can beforehand so that the principle grows while you are overseas. If your money is growing for you, it can seriously ease the difficulty of adjusting when you return.
Returning missionaries face some very serious obstacles: the working world changes during those 10 years you may be away. Employers want your job skills to be fresh, and there are too many applicants for most companies to consider somebody even if they have a great work or learning ethic but no relevant skills from the past decade. Ideally, the work you do overseas keeps these skill up-to-date, but this is frequently not the case. This is why I would advocate investing much more than you need to maintain your target income. The more invested that you don’t need, the greater the effect of compound interest on your principle. Let’s say you haul butt and invest $500,000 in 10 years before launching off. If you only need a tiny fraction of this to live overseas, you could still see this grow to well over that in another 10 years! You could return to the States and expect closer to $3,000/month (if your investments reach 900k), which can buy you plenty of time to re-adjust to society here while updating your skills and getting back in the workforce, if you need. A 7% annual return on $500,000 is going to net much more than a 7% annual return on $5,000, so focusing on boosting that number beforehand to allow it to grow and outpace that 4% while you are overseas will make a big difference. Or you could cash some of that out to buy a house outright and save yourself rent and mortgage payments, an incredible feat given that you spent 10 years away from your home country’s workforce.
Well, ‘final’ being related to this post :). Some may be called to serve in countries more expensive than the United States, and very many are called to serve here. These are cases where our economic position does not help as much, and there is nothing wrong with that! Paid work is still fine in the cheaper countries, but it may be necessary in a more expensive country, and it may force you to lean on a network of people or churches. I don’t doubt there are many blessings associated with this. The financial independence community is held together by the general assumption that you are spending most of your time in your native country. I would argue it is still worth pursuing if one stays here, as it is still very achievable and may convince you to scale back on your excesses, and we all have those.
Since it’s been on my mind lately, I want to add a few thoughts on serving in the US. The most common strategy for massive investments involves renting to avoid the total cost of homeownership. This generally keeps expenses more predictable as opposed to house repairs which can be very unexpected. But, this is not the only strategy, of course! Many find that a lower, locked-in payment and serious elbow grease still allow them to invest massive amounts of money. Renting out extra rooms is another great way to produce extra income. I used to think that the smartest thing to do was pay off your mortgage quickly, but if the interest rate is low enough, your money will probably fair significantly better in the market as long as you are smart about how you do that. There is a lot of debate on the strategy here, of course, but what almost everyone in the FI community has in common is a dedication to living below their means and investing the difference. Also, houses are generally larger than their rented counterparts on a cost-per-square-foot basis. Using your house as a place of fellowship can be great, just don’t let your emotions convince you to overspend for this reason alone 😉