“Two is One, and One is None”

Two is One, and One is None: Building Redundancy into Your FI Plans

In the world of survivalists and the military, there’s a simple but powerful saying: “Two is one, and one is none.” It highlights the importance of redundancy, in other words, having a backup plan for anything crucial. If you only have one of something and it fails, you’re left with nothing. But if you have two, you have a safety net.

When it comes to Financial Independence (FI), this mindset can be a game-changer. It’s not just about reaching your FI number; it’s about ensuring your plans are resilient enough to withstand life’s inevitable curveballs. Let’s explore how applying the “Two is one, and one is none” philosophy can fortify your FI journey.

Income Streams: Don’t Rely on Just One

Many of us start our FI journey relying on a single source of income which is usually our job. But what happens when that one income stream disappears? I’ve been there. After more than a decade at Lloyds Banking Group I was made redundant. Fortunately, I had a sizable range of investments even without counting the payment I received for leaving the bank. Some of these investments pay a regular income, and that gave me peace of mind knowing that I could still afford the essentials.

Relying solely on one employer is the definition of “one is none.” Diversifying your income, whether through side hustles, freelance work, rental properties, or even dividend-paying investments turns that single point of failure into a robust system. If one stream dries up, others keep you afloat.

Investment Diversification: Don’t Put All Your Eggs in One Basket

The same principle applies to investments. Putting all your money into a single stock, or even a single asset class, can be risky. Markets fluctuate, sectors fall out of favour, and companies go under. However, global index trackers can do a lot of the work for you when it comes to diversifying your investments. I don’t think you need to get bogged down in huge amounts of technical analysis with this. A simple split between low-cost index funds with an emergency fund in cash, with a few other investments is enough for me.

Mental Health & Resilience: Safeguard Your Mindset

The road to FI isn’t just about numbers. It’s also a psychological marathon. Burnout, stress, and even post-FI identity crises are real.

Building mental health redundancy means having coping mechanisms and support systems in place. For me, adopting and caring for elderly cats has been a huge source of fulfilment and stress relief. It’s a reminder that life isn’t just about reaching FI – it’s about enjoying the journey. Being able to give a loving home to Sweep, Bobbity, and Poppy has brought us so much love and joy, even if the ending is always heartbreaking.

Similarly, having hobbies, mindfulness practices, or a strong social network can act as emotional buffers. When one coping strategy fails, another is there to pick up the slack. Also, Lego. Lots of Lego.

Emergency Funds: The Ultimate Backup

An emergency fund is the epitome of “Two is one, and one is none.” If your main income stops or unexpected expenses pop up, having a cash buffer means you won’t need to tap into long-term investments or rack up debt.

Aim for at least 3-6 months of living expenses in a readily accessible account. Some even advocate for a tiered emergency fund—cash for short-term needs and low-risk investments for longer-term emergencies.

I’m content to have a cash lump sum in an easy-access account, and a couple of credit cards with sizable credit limits. As I write this, I’ve got £20k of credit available to me, but less than 5% of it is currently used and will be repaid in full tomorrow when I’m paid.

If you’re going to have credit cards as an emergency fund, you must be disciplined enough to not spend recklessly on them. If you don’t have that discipline, credit cards are a risky proposition.

The Bigger Picture: A Resilient FI Plan

The ultimate goal of FI isn’t just to stop working. It’s to build a life that’s resilient, adaptable, and fulfilling. By embracing redundancy, you’re not just protecting your finances; you’re safeguarding your mental health, lifestyle, and future.

Life is unpredictable. But with the right safety nets in place, you can navigate those twists and turns without losing sight of your goals.

Remember: Two is one, and one is none. When applied to your FI plans, it could make all the difference between financial freedom and financial fragility.

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