Financial Independence Lessons From Ben Franklin

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Ben Franklin was arguably the first Financial Independence & Retire Early (FIRE) “blogger.” His almanac and pamphlets were the blogs of his day.  He was a truly self-made man who was eager to share his timeless wisdom.

It is hard to overemphasize the lasting impact of this one man.  He was a scientist, businessman, philosopher, inventor,  humanitarian, and politician. Today’s post spotlights his financial advice and experience with Financial Independence (FI).  He was an early example of how one can retire early.  After building his reputation and printing business he retired early to pursue other interests. 

His many ‘side gigs’ (e.g. Poor Richard’s Almanack) helped grow his wealth rapidly. He turned over his business to a partner at the ripe old age of 42.  Although he did not become inactive, he no longer needed to work for money.  He had reached FI.

Ben Franklin’s Income Streams

• Print shop – an integrated media conglomerate
• Printing press
• Publishing house
• Newspaper
• Almanac series
• Partial control of the postal system
• Successful books he printed (e.g. the first novel published in America)
• A network of profitable partnerships
• Franchises across several states
• Pennsylvania real estate

He created wealth through multiple ‘side gigs’: private business, franchising, marketing, publishing, networking, and exploiting new technologies.  These are the same approaches that work well today and are emphasized at conferences like FinCon.  He continued to reinvest his profits into his businesses and into real estate (property in Philadelphia).  He noted that making money seemed to get easier over time.

“After getting the first ‘100 pounds’ it is easier to get the second.“

Some now say, “The first million is the hardest!”  Accumulating money was not his primary goal.  Despite his extraordinary financial success, he didn’t have the soul of an acquisitive capitalist.  He thought it better for people to say “He lived usefully” rather than “He died rich.”  Once he reached Financial Independence he saw no reason to keep plying his trade to make even more.

He struck an agreement with his printing business partner, David Hall.  Ben would step down from all day to day operations of the press.  David would pay Ben 50% of the profits (650 pounds annually) for the next 18 years. Since common clerks at that time made 25 pounds a year, his passive income would now be equivalent to several hundred thousand dollars.

Financial Independence and the Freedom it Brings

Financial Independence & Retiring Early (FIRE) freed him up to get more involved in science experiments and politics.  There was now plenty of time for things other than work and he had a lot of interests.  Some of them were reading, studying, learning, and conversing with friends.  He wanted time for travel, to conduct science experiments, and to get more involved in politics and humanitarian work.  He had a lot to retire to, not just something to retire from.

Financial Independence freed him to turn down monetary inducements “kickbacks” that he felt inappropriate.  Financial Independence allowed him to be just and impartial.  His passive income more than covered his needs.

The governor of Pennsylvania offered him a patent and a lucrative business arrangement based on his “Franklin stove.”  Franklin turned down the opportunity.  Giving away the technology was nobler in his view.  He felt indebted to others who created prior inventions and he wanted to give back.  Besides, he didn’t really need the money.  Or so he thought.

Financial Independence in Jeopardy

So how did things go for him when he got closer to a modern retirement age?  Well, not so hot actually.  When Franklin turned 60 years old his financial agreement ended.  He still had other passive income (interest, dividends, and rent from real estate) but it wasn’t enough to maintain his lifestyle. Despite his reputation (from his Poor Richard days) of being thrifty, he had grown accustomed to some of the finer things in life.  His new life included kegs of premium beer, nice clothes, travel, and dinner parties.  Who could blame him after all he did for our country and for humanity? 

It was a shock when his income dropped at age 60.  He explained to his wife, Debra, that when one’s income drops the outgo must drop as well.  Otherwise, destitution is where they would be heading.  Their investment income would support them, but not at the level they were used to.  He told his wife that they both needed to cut back on spending.  They also had to cut back on their daughter’s upcoming wedding.  He wrote with a tone of fear and desperation. 

Passive Income Stream Dried Up

It was a sad struggle of an aging man.  He even tried to extort money out of his old partner.  He threatened to compete against their own printing house unless Mr. Hall continued to pay out some of the profits to him.  When Mr. Hall balked at this, Franklin pointed out that the contract had ended and there was nothing that prevented him from competing.

One wonders if Ben had regrets at that point?  Did he regret not continuing to build businesses or not making the business contract longer?  Was turning down the financial opportunities along the way (e.g. the Franklin stove) a mistake?  He wasn’t one to share his inner doubts and turmoil so we will never know.  Nevertheless, he seemed a bit blindsided by the drop in income even though it was 18 years in the making.  Despite this rather sad disruption of his financial independence, his early advice on money is worthy of our study.

From this, I drew a conclusion: Beware of future expenses.  When we retire early we may underestimate our future costs.  These increase from inflation and “lifestyle creep.”

Wealth-Building Tips From Franklin

Benjamin Franklin is one of the most quoted people on the planet.  One quote that is virtually always misquoted is, “A penny saved is a penny earned.”  Modern authors/bloggers criticize this saying since saving is better than a 1-to-1 deal.  That wasn’t the way I remembered the quote so I looked it up.  Here it is, “A penny saved is TWOPENCE clear…”  So even before there were income taxes, Ben understood that you could reach your goals better by cutting costs and saving money than by out-earning your problems.

After looking this up, I learned several of his other valuable quotes.  Here are a few of my favorites.

Work on Yourself Before Blaming Others

• “The taxes are indeed very heavy… but we have many others… We are taxed by twice as much by our idleness, three times as much by our pride, and four times as much by our folly.” [ed. Maybe we should focus on what we can control rather than what we cannot?]

• “Women and wine, game and deceit, make the wealth small, and the want great.” [ed. The temptations haven’t changed much, have they?]

Don’t Waste Time

• “Dost thou love life, then do not squander time, for that is the stuff life is made of” [ed. Time management becomes life management.]

• “Work while it is called today, for you know not how much you may be hindered tomorrow.”  “Never leave that till tomorrow what you can do today.” “Be ashamed to catch yourself idle when there is so much to be done for yourself, your family, and your country.” [ed. Time is of the essence.]

Rise & Grind

• “The sleeping fox catches no poultry. There will be sleep enough in the grave.” [ed. Sleep deprived?  So what!]

• “Early to bed and early to rise, makes a man healthy, wealthy, and wise.” [ed. Starting the day early and well has been a secret to my success!]

• “Diligence is the mother of Luck, and God gives all things to industry. Then plow deep while sluggards sleep, and you shall have corn to sell and to keep.” [ed. The harder I work, the luckier I get.]

Work Hard

• While laziness travels so slowly, that poverty soon overtakes him. Try with a business, let not that drive thee.” [ed. Laziness is our enemy.]

• “Sloth, like rust, consumes faster than labor wears; while the used key is always bright” [ed. Too many of us worry about working too hard or not getting enough rest.

Avoid Debt Like the Plague

• “Rather go to bed supperless than rise in debt. Get what you can, and what you get hold, is the stone that will turn all your lead into gold.” [ed. Don’t buy a Tesla when you have student loans!]

• “Industry pays debts, while despair increases them.” [ed. Work to pay off those student loans.]

• “But what madness must it be to run in debt for these superfluities?”[ed. How many medical students or residents take out an extra $1K loan to go on a vacation?]

• “Think what you do when you run in debt; you give to another power over your liberty. If you cannot pay at the time, you will be ashamed to see your creditor. You will make the poor, pitiful, sneaking excuses and by degrees, come to lose your veracity and sink into downright lying. The second vice is lying, the first is running in debt.” [ed. As Dave Ramsey made the biblical quote famous, “The borrower is slave to the lender.”]

Cherish Your Time Off

• “Leisure is time for doing something useful.” [ed. We have forgotten how to use leisure properly. Hint, it isn’t watching reality T.V.]

Don’t be Overly Trusting

• “But with our industry, we must likewise be steady, settled, and careful, and oversee our own affairs with our own eyes, and not trust too much to others.”  “Not to oversee workmen is to leave them your purse open.” “Trusting too much to others’ care is the ruin of many.” “A little neglect may breed great mischief.” [ed. Many doctors get taken advantage of since they are overly trusting. To quote Ronald Reagan, “Trust, but verify.”]

Learn from Experience

• “Experience keeps a dear school, but fools will learn in no other.”[ed.  Follow Ben’s advice and you won’t have to make terrible mistakes and then learn from them.]

Focus on Saving not Spending

• “If you would be wealthy, think of saving as well as of getting.” “The Indies have not made Spain rich, because her outgoes are greater than her incomes.” [ed. Many doctors think they can earn their way to financial success. No.  You must live below your means.]

Watch the Little Expenses

• “Beware of little expenses. A small leak will sink a great ship.” [ed. How true. He discovered the ‘latte factor’]

• “Constant dropping wears away stones and by diligence and patience the mouse eight into the cable; and little strokes fell great Oaks.”[ed. Work a little bit on your goals each day.  Over a year you will see great changes.]

• “Always taking out of the meal-tub and never putting in, soon comes to the bottom.” “When the well is dry, they know the worth of water.”[ed. If you are broke after paying the Mercedes lease, country club dues, etc. pay attention to this truth.]

• “Gain may be temporary and uncertain, but ever, while you live, expenses constant and certain.” [ed. Beware of taking on new expenses even if they are apparently offset by revenue.  The expenses are usually more certain and predictable than the revenue.]

• “It is easier to build two chimneys than to keep one in fuel.” [ed. Don’t just look at acquisition costs (e.g. a fluoroscopy machine) look at the ongoing costs.  Beware – that McMansion may have costs near 10% of the purchase price.]

Money is Very Important

• “If you would know the value of money, go and try to borrow some; for he that goes a borrowing goes a sorrowing.” [ed. It can be tough to get a decent loan.]

• “For age and want save while you may; no morning sun lasts a whole day.” [ed. Let’s make hay while the sun shines – bill many wRVU while we are still paid well to do so.]

Avoid Keeping up with The Joneses

• “And it is a true folly for the poor to ape the rich, as for the frog to swell in order to equal the ox. Vessels large may venture more, but little boats should keep near shore.” [ed. Don’t pretend to be rich as many doctors do.  And we thought this came out of the work by The Millionaire Next Door authors?]

If you like this post you will love Franklin’s own books: The Way to Wealth & his Autobiography (the most popular autobiography in the world).  I also recommend Walter Isaacson’s biography of Franklin.

We can’t all be Ben Franklin, but maybe we can learn from his advice and life-choices.  What do you think?  Did he make the right decision to retire early?  Do you find inspiration in his life story?

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