The Truth of Early Retirement and The FIRE Movement

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The Financial Independence, Retire Early Movement (FIRE)

Personal finance seems to be making a comeback. Books are written, podcasts recorded, and Youtube videos are increasing in abundance, all centered around the topic of financial independence. The theme continues by extending the conversation into a concept known as early retirement. Early retirement is predicated on demonstrating discipline and consistency with your finances, all in an effort to quit working as quickly as possible. Could it really be that simple? Has everybody been missing the bus on finances? Will this financial independence retire early (FIRE) movement last?

Why the "FIRE" movement can be misleading

I must admit, I am fairly skeptical when it comes to large groups with common agendas (this stuff sounds cult leadership to me). Don't get me wrong, I do believe the FIRE community has produced many positive outcomes, but my concern is that there is no platform to host the individuals who failed. We only ever hear about the success stories in this community. 

Focusing on early retirement, as a sole motivator to get your financial house in order, is a rather dangerous game to play. When pursuing finances as a means to an end, one has a tendency to lose sight of the joys of life, or even stop pursuing them altogether. I am certainly not advocating for the collection of material possessions but rather restarting the search for meaning and happiness in life. There is a level of diversion that is difficult to quantify when we take a myopic view towards any one particular outcome - in this case, early retirement. 

Author Ramit Sethi encourages his readers to "automate and live outside of the spreadsheet" in his book I Will Teach You To Be Rich.

What concerns me the most about general guidelines and universal advice on finances is the notion that personal finance is inherently personal. It is unique to your own individual needs. Your path to financial freedom and financial independence does not have to be based on retiring early, although it certainly can be.

Most of us want to work. Some of us even enjoy some of our current work. Yet it is not enough to keep us from wanting something more. That something more is a definitive purpose which our day job presently interferes with.

The FIRE community tends to focus too heavily on residual income strategies, passive income development, and advanced blueprints for access to retirement funds through Roth conversion ladders. These strategies are aimed at using money as a means to an end and using money as a means to an end is a slippery slope worth investigating further. 

The fact is, money is a necessary medium of exchange for goods and services, especially in the United States. We find truth and solace in adages like "no free lunches" as most things in life are not without monetary cost. The simple truth is that the less that you have in savings and the more you have in debt, the greater difficulty you will likely have navigating through life. 

Accumulating wealth and eliminating debt will certainly open up opportunities and breathing room necessary to explore and pursue your passions. On the contrary, I am not convinced that you need as much as they say you need before pursuing your passions. Going well beyond debt elimination and attaining positive net worth of 3-5 times your annual expenses seems to provide diminishing returns and takes too long for most people to stay with. I believe that saving and investing anything beyond 5 times your annual expenses might be completely unnecessary and a source of undue stress for many of us. There is not a huge difference, in my mind, between 5x annual savings and 25x annual savings (a popular FIRE milestone) when considering your freedom to pursue alternative occupations. Most of us cannot even fully quantify what it is like to have 5 years worth of expenses saved, let alone 25 years worth. The trick is learning when enough is enough.

Consider the difference between having a financial buffer of 5 years of expenses compared to 25 years of expenses. Obviously, the answer is there is 20 years difference. However, getting to the 25 years mark still does not address the underlying problem (neither does 5 years). Your overall lack of a definitive purpose in life. 

I have little confidence that an aggressive pursuit to save 25 times your annual expenses to achieve a FIRE milestone will actually contribute in any way, shape, or form to your ability to discover meaning and purpose. Certainly you will become an excellent savor and a savvy investor along the way. But will you become a better person? Will you generate value for others along the way?

Of course you could just wait to save the requisite amount and then begin your pursuit but you need to ask yourself one serious question: Are you willing to wait that long?

The infamous post by Mr. Money Mustache suggests that finding out how many years before your can enter early retirement is much easier than you think. This is an excellent post and has been life changing for many folks. If you have not read his post, go do it now and then come right back here. If you are already familiar with it, keep reading.

I do not want to ruin the moment for anyone but after assessing the numbers highlighted in table and graphical format on his pillar post, I could not help but wonder if everybody is willing and able to wait that long. For example, consider that it still takes 17 years to achieve early retirement by saving 50% of your take-home pay. That's a long time. If you can bump your savings rate up to 65%, you can do achieve FIRE at just over 10 years. 

The math above assumes a starting point of zero net worth. Many are already ahead of that and many are well below zero, in the negative net worth category. If you are close to early retirement, already have a significant positive net worth with no debt, by all means finish your pursuit of FIRE. For those of you who are much further away (most of you are), I urge you to consider much more attainable and realistic milestones for your medium to long-term goals.

Debt elimination is huge. If you are not there yet, this is one of the best places to start.

If you have finally broke even and said goodbye to toxic debt like car loans and student loans, it is time to start building a positive net worth. I don't know about you but starting at zero and saving 50% of my take-home pay for 17 consecutive years (204 months) seems like a very long way off and would be nearly impossible to stay motivated for.

Contemplate some important questions when considering if 25x annual expenses is really worthwhile:

• Could you begin your quest for purpose and meaning much sooner than waiting for 25x annual expenses?
• How much more comfortable would you really feel saving 25x annual expenses vs. 5x annual expenses? I suggest the difference is much less thank you think.
• Would you not be satisfied knowing that all expenses, bills and obligations, would be covered for 5 full years without you bringing in a dime?  

My concern with the FIRE movement is that it causes a lot of individuals unnecessary levels of suffering along the journey. Sure, we hear about all the folks whose lives were "changed" the moment they reached the coveted quarter century savings mark. How many are we not hearing about that this advice caused obsessive or pathological levels of focus around money and savings? The truth is, I was one of them.

My personal truth about early retirement

When I first began learning about personal finance and discovering the concept of early retirement, I was all in. Along the way I listened to the ChooseFI podcast, read many personal finance books, and listened to the latest advice from "influencers" about how to attain financial freedom. It was great, while it lasted.

Then I started accumulating a positive net worth. Six figures. A quarter of a million. $400k. My wife and I kept hitting these milestones but, admittedly, felt diminishing returns and satisfaction along the way. We had to stop and take a moment to consider whether we needed to keep pursuing the 25 times annual expenses mark, or whether we actually already had enough.

Forgive me but I am just not convinced that we truly need much more than a few years worth of expenses saved up before we can take a giant leap of progress towards pursuing our passions in life. 

Early retirement does not seem to encourage the pursuit of purpose in life, until after you reach early retirement. What if that is not soon enough for most people? What if we are only really hearing about the success stories, and there are many more failures that go unknown? We all need purpose. Dr. Viktor Frankl famously discussed the importance of purpose in his personal memoir about surviving the holocaust, Man's Search for Meaning.

The FIRE movement is centered on the concept of achieving your number, the target net worth and savings so that you can have "F-you" money and walk away from your present job. I agree, having F-you money is very valuable in life. But the real value is in attaining that number so that you can do the things you really want to do in life. Does it really need to be a full 25 times your annual expenses? For some it might. For many others, we can get to work on pursuing our passions on much less.

Trust me, as badly as you think you want to, you may not really be seeking to retire. You may be convinced this is the solution to your problems but I would suggest that your lack of definitive purpose is the real tragedy at work here.

Remember, retirement means doing nothing for work. Consider the Oxford definition of retirement quoted below:

Retirement - "the action or fact of leaving one's job and ceasing to work"

Now that we know the true definition of retirement, is that really what you are looking for? I enjoy working when the tasks I do are meaningful, purposeful, and impactful to others or myself. I like the notion that somebody else is willing to pay me for my time. Are you really hoping for that to end completely? Or do you just want to be paid for your time to do something else? Perhaps something you enjoy much more that provides much greater purpose and service to your community.  

Using money as a means to an end is the enemy of happiness. Really, using anything as a means to an end is the enemy of happiness. Do the things you do in life because you want to, not because you expect something in return. This concept is hashed out in best-selling author Mark Manson's work Everything is F*cked: A Book About Hope. If you are the type of person who would not do the current job you are doing if it did not pay, then I encourage you to get your financial house in order so that you can pursue something else.

What society certainly does not need is a bunch of retired 30 and 40 year-olds not contributing positively to society and the workforce. Society does need more people pursuing purposeful work.

Reaching financial independence, for me, is about permitting myself to do the type of work and choosing my own suffering in exchange for long-term benefit. In his book, Manson introduces the concept of choosing your own suffering as a form of "self-limitation". The example he provides to the reader is that the ability to choose your pain in life is the real magic. Take physical exercise for example. You choose to suffer through the short-term pain of exercise in exchange for the long-term benefits of greater strength, endurance, mobility and improved health. That is the power of choosing your own suffering in life.

So What Are We Doing Instead of FIRE'ing Ourselves?

We are setting ourselves up to choose our own suffering. Picking our pain in life, not trying to avoid it. Life will be filled with pain and suffering regardless of whether we try to avoid it, therefore quit trying to avoid it. Rather, set yourself up so that you can choose your pain points in life such as physical exercise, financial planning, sauna bathing, cold showers, proper nutrition, meditation, and whatever other hormetic stressors you can devise that will benefit you in the long-term.

When you are paycheck to paycheck, saddled with debt, you are not in a position to choose your suffering. You need your current job with the long hours, arbitrary rules, and tedious demands that come along with it. You rarely can afford to step away and fully pursue your passion. You're stuck. Many of us are there. Many of us have been there for decades. Even I was there. It wasn't pretty.

"25x annual expenses"
"4% withdrawal rates"
"Geo-arbitrage"
"Passive income strategies"
The above are all common terminology of FIRE community. You may certainly use some, or all of them as you so choose, but make sure you are using them for the right reasons. Make sure you have assessed whether you really need a full 25x annual expenses, or whether you can take a leap of faith much sooner in life. An emerging, and increasingly popular, pivot on FIRE is instead referring to attaining a "work optional" status. When you hit work optional, you have many months, and hopefully years, worth of savings and investing accumulated so your reliance on your present job is minimal.

I encourage you to separate the "FI" from "FIRE". Focus solely on financial independence (FI) aspect and move towards a position of financial strength to allow yourself to pursue your passions in life sooner rather than later. Financial Independence permits many opportunities for you to no longer be beholden to your present job, especially if you dislike it greatly and do not find purpose in your work.

The biggest problem in the FIRE community is the underlying concept that we should eventually be able to attain a life with freedom to recline in a hammock everyday if we so choose. The major flaw of this underlying ideology is that there will always be a part of your life that will suck. Always. Therefore trying to avoid it altogether is a fruitless endeavor. 

Assuming that we can eliminate hardship and suffering in life is completely impractical and ironically tends to lead to greater suffering and unhappiness.

The real power is when you are in control of choosing your suffering. As mentioned above, physical exercise is a great example of choosing your suffering. The short-term costs are certainly worth the long-term benefits. Me sitting down and writing this post when I would rather do just about anything else, is another example of choosing your suffering. I am choosing to do this, rather than something else, with the concept that there will be some future return.

I encourage you to move forward and pursue your passions as quickly as possible. Plan, save, and invest along the way and assure your financial house is in order before doing so. Eliminate your debt and attain a positive net worth and then quickly move onto more meaningful aspects of life, such as defining your purpose.

As always, leave your comment below on how you felt about today's article. Love it or hate it, life is not about retiring. Going through your entire life with one goal, to retire, seems like just about the worst form of hell on earth. I challenge you to look further and realize that your problem is not that you are not retired, your problem is that you just haven't yet found out why you are important to the world, however big or small that importance may be.