Financial Independence/Retire Early...is it for you?
Unless you have been living under a rock when it comes to trends in the finance world then I would guess that you have heard of the concept of FIRE. For those of you who haven’t then let me quickly get into what it is so that I can tell you exactly why it can suck, unless that is, you do it properly.
You see, a few years ago I, like many people, stumbled across a man named Mr. Money Moustache, or at least that’s what he went by online. Now, maybe I felt a kinship to him because him and I are both Canadian or maybe it was because he was introducing me to one of the most obscure financial concepts I had ever come across. The concept was Financial Independence, Retire Early otherwise known as FIRE where the goal is to save big to amass enough wealth to retire before the traditional age of 65. In most cases, those chasing FIRE will save diligently, with a normal target being a few million dollars, and then rely on the 4% rule to draw from their nest egg into perpetuity. As a young adult, new to the working world, the thought of retiring at say, 35 was intoxicating. This has to be some sort of scam I told myself. Well, I soon came to learn that it isn’t a scam however after researching further, it appears that the grass isn’t as green as I anticipated it would be when it comes to retiring early.
Now, on the surface it would seem evident as to why someone would want to retire early. Being retired means having the ability to lounge on a beach in Mexico, take in endless amounts of sun and sip margaritas until your heart’s content right? Well, for most people retirement is not quite this glamorous. It is basically living the same lifestyle as they were when they were working just without the whole work component. And for many people, this is enough of a carrot to chase to justify striving for a high savings rate and wearing their frugality as a medal of honor.
However, I sometimes wonder if people truly ask themselves why they are striving to hit this financial goal (i.e. to amass a few million dollars) or if they just dive right in and get to work. For instance, are you trying to retire early to get away from that boss who micromanages you or are you doing it to ease the financial stress you feel on a day-to-day basis? I think some motives are definitely more pure than others.
Before I get into some of the troublesome aspects of the FIRE movement, I want to make something very clear – I totally respect those going on this financial endeavour. The amount of sacrifice, discipline and planning it takes to retire decades earlier than the masses is no easy feat, but I do think that it can strip away many of the non-financial joys of life. So without further ado, here are a few reasons why striving for FIRE sucks.
#1: You Have To Put Off Age-Specific Activities
As I just mentioned, reaching FIRE takes a ton of sacrifice however sometimes the sacrifices may be too steep for what the ultimate reward provides. Sure, you may be ecstatic when you can quit your job at 45 and unlock those 8 hours a day you were previously handing over to your employer however what did it cost you?
As a late 20-something, I have come to realize that there is a time and place for many things in life. For instance, I just can’t drink like I used to. A night out used to just cost me a few bucks and potentially cab fare for my friend who drank too much. Now, a few drinks and staying up a little bit past my bedtime means a sluggish next couple of days. In short, some activities are easier to do and more enjoyable at different stages of your life. So, where am I going with this example? The thought here is that there are just some things you need to do in life when the time is right and by chasing early retirement voraciously you may just miss out on them.
One example that comes to mind is travelling. Anyone who has travelled abroad can tell you that the learning and enjoyment you can experience when seeing new cultures and meeting new people is almost priceless. I say almost priceless because travelling can be expensive. When I went to Italy in 2017, the trip cost me roughly $3,500 and it was worth every penny. However, for someone in their 20s saving vigorously to hit their retirement target, this is not likely to be money they will want to trade for extending their FIRE timeline. Now, this FIRE aficionado may argue that they can travel once they’ve retired but I think anyone can attest to the fact that travelling while you’re young and when you’re middle age are two different experiences. When you’re 25, clubbing in Ibiza is normal. When you’re 45, you’re just that old dude that girls need to watch out for.
Now, there is nothing wrong with pursuing an ultimate goal like FIRE but life experiences that you can never get back will likely be a cost you must bare and sadly I don’t think enough people consider this cost before diving head first into this feat.
#2: You Defer Happiness To The Future
If you’ve ever said, “I’ll be happy when…” then you already know where I’m going with this point. When you put yourself on the path to retiring as early as possible, you will automatically be deferring your happiness into the future. Even if you think that you love your frugal lifestyle, the pursuit of any lofty goal will inherently attach some future happiness to it. And if you’re like any other normal human being then you already know that we find it much easier to focus on what we don’t have than what we do. In short, most of us are not the best when it comes to practicing gratitude. And as such, every day that you are not yet at your FIRE figure, you will have thoughts running through your head of how much better life will be when you can: a) hand in your two weeks notice at work b) finally live the life you’ve always wanted c) not have to stress about covering your bills anymore etc. So for this reason, chasing FIRE can impact your day to day happiness and who can really put a price tag on that?
#3: You May Inadvertently Distance Yourself From Others
Remember that time when you went vegan and your friends and family thought you had joined a cult? Sure, they didn’t agree with your food choices but that didn’t mean that they loved you any less. Well, chasing FIRE is not the same as this popular diet regime but it can have some similar impacts on your social life oddly enough. You see, many people who follow strict diets tend to judge the food choices of others and the same generally goes for those who are living very financially conscious lifestyles in order to achieve their lofty monetary goals which in this example is retiring early. For instance, you may start to look down on others who spend tons of money buying new cars, going on vacation or even buying Starbucks daily because you have sworn off those activities by committing to the FIRE lifestyle. But even if you can overcome these sentiments, how do you think others will feel about you?
For instance, if you aren’t willing to even spend $20 to go out to dinner with a friend then how often do you expect to get invited out? Or, if your idea of marriage is a handshake at city hall when most significant others desire a large wedding then do you really think you will be able to find the person of your dreams while chasing this financial milestone?
I hope you are starting to see that all of our decisions in life have ripple effects and having to maintain extreme frugality doesn’t just impact your day to day life but the lives of those close to you. Therefore, I think it’s fair to say that it sucks that your relationships can be compromised due to having such a narrow focus in your life but as I alluded to in the beginning of this article, FIRE doesn’t have to suck when you do it properly!
So how do you pursue early retirement without sacrificing every moment up until you leave your job for good?
I believe that at the crux of the early retirement pursuit is a desire to leave the working world not because people dislike work but because they dislike the work they are doing now. Chances are, this fierce amassing of funds is just an escape plan from a life they can barely cope with on a daily basis. On the flipside, having a career you enjoy can bring you a ton of fulfillment and I think that this is a point that can’t be overlooked. You see, if you love what you do every day then you will probably never want to retire hence not needing to kill yourself financially in order to stash cash and call it quits. As Seth Godin puts it:
“Instead of wondering when your next vacation is, maybe you should set up a life you don’t need to escape from”.
Therefore, in order to do FIRE right I think you need to first assess your motives and if running away from a terrible job is the main factor then maybe you need to take some time to rethink what pays your bills.
Now, assuming your motives are pure when deciding to retire early so that for example you can spend more time with your kids or volunteer more often, I believe that you must ensure you are still living a life you enjoy before calling it quits. Now, does this mean retiring at 45 instead of 35? Probably. But the benefit will likely be the increase in your quality of life during these 10 years when you are not squeezing the life out of every penny and are instead living a little more freely (financially that is) while still moving towards FIRE. Commonly coined as “Slow FIRE” this method allows you to make the journey towards retirement as enjoyable as the final destination and I believe this is a much healthier way of approaching early retirement. For example, your kids will only be young for so long so take that trip to Disney World while you can. Sure the $10,000 it costs for the trip will set you back a short amount of time on your quest to retiring early but you can never re-create that experience when your kids are grown (see putting off age-specific activities above).
What I want to drive home in this article is that working towards any financial pursuit is commendable. It takes skill and discipline to achieve monetary goals, especially one as big as early retirement, but the pursuit should not come at the cost of decades of discontentment. In my eyes, retirement should be just another event in your life, the by-product of doing things right financially, instead of the sole purpose of it. Remember, like anything else in life, our pursuits come with a cost-benefit decision to be made and before you dive into the FIRE endeavour, do not just ask yourself what you are gaining, but what you are giving up as well and when you do this, FIRE may not suck so much!