Money Is An Intermediary

We often have a problem with words in the English language. This is no more apparent than when we in the financial independence community talk about retirement. We sing the praises of early retirement but usually do a horrible job defining what that term really means As I have lamented in the past, we kid ourselves with the concept of safe withdrawal rates. Most of us will continue to do work long after we have abandoned the W2 asset class. So what is work? What is employment? These questions are rarely discussed in our community because it is assumed that the meaning of these concepts is the same for different people. I think a bit more clarity is needed.

Work consists of activities we do to create goods and services.

Employment is the act of creating goods and services for another person or business often in exchange for money.

And money is an intermediary.

Work

The nature of work is simple but yet misunderstood. Work is something that we will do all our lives. It never stops. Not even in retirement. At it’s most basic, work is an activity we do to create goods and services. This is true regardless of whether we are doing this work for ourselves or for others. When we are doing it for others, we call it employment. If I wash dishes at a restaurant every weeknight on a regular basis, I have provided a service to the restaurant owner. That owner can pay for this service by either feeding me or providing some other essential good or service in return. Or he can pay me for this service with money. Money is an intermediary.

At home, after eating dinner, I also wash dishes. This is a form of work. In this case, however, I am providing a service for myself. In exchange for doing that work, I get clean dishes as well as forego the necessity of employing someone else to do the activity for me.

Instead of doing it myself, I could ask my wife to do the dishes and agree in exchange to give her a back rub. This may be an even exchange of services without the necessity of money as an intermediary. Or I could pay my son a small sum for doing the dishes.

In all these situations, work is being done.

Employment

Employment is the act of providing goods or services for someone else in exchange for (hopefully) an equivalent amount of goods and services. Taking our example from before, I can exchange my dishwashing to the restaurant owner for dinner or I can ask for money. Money is the intermediary. It is the holder of goods and services till I can exchange them for other goods and services.

Money Is An Intermediary

Money has no value unto itself. It is an intermediary. A holder of goods and services. It is potential energy. When I save up money, I am collecting an I O U that can be spent almost universally. After collecting my paycheck as a dishwasher, I can run over to the local grocery store and exchange my IOU for a gallon of ice cream. I have now transformed my work of doing dishes, into an IOU from my employer in the form of money (an intermediary), which can be exchanged for a good (ice cream) from the owner of the grocery store.

So What Is Retirement?

In my humble opinion, following this reasoning, we can finally come to a reasonable definition of retirement. Retirement is when you have saved up enough of these IOUs in the form of money ( remember money is an intermediary) such that you never have to be employed again. If you are interested in early retirement, you can get there by a few different pathways. You can front load work by providing lots of goods and services early in your career and hold all this potential energy in the form of money as an intermediary. And, or, you can consume markedly fewer goods and services by being frugal. Most of us do a mix of both.

At some point, you will have enough money saved up to cover all your future needs for goods and services minus those you are willing to provide for yourself. This is retirement whether you continue to make money or not.

No matter what, you are still going to work. You are going to do dishes and clean your car. You are going to vacuum the cat hair out of your carpet.

If you are fatFIRE, you may expend some of your intermediary to have others do that for you.

But you won’t escape it altogether.