Are you on F.I.R.E.?

Have you noticed the significant uptick in the number of articles in the past few years about young people who save 60+% of their income, limit their expenses to the bare minimum and retire before age 40?  The name for this movement is F.I.R.E.: Financial Independence, Retire Early.

There are a couple of great takeaways from this movement:

1. Financial independence is attainable.
2. Discipline with money now leads to more freedom later.

These two lessons are liberating and helpful in creating a financial plan. If you make smart decisions with your money, one day work will be optional.

Where the F.I.R.E. movement loses is me is in finding the appeal of the extremes to which some people go to be able to quit working in their thirties or forties. Is freedom from a regular job at a young age worth the sacrifices that are required?

Working two or three jobs, living without a car, or dining out, or vacations, just to be able to continue the same minimalist lifestyle later while not having to work does not appeal to everyone. Many people would choose instead to live life in a more enjoyable way now, while also planning carefully and saving money to be able to retire at some point.

Not only does the cost of this lifestyle seem high in terms of sacrifices made, I am not sure that the end result is something most people really want.  Many people are choosing to continue working, part-time or full-time, past retirement age because they love what they do.  Work can be very meaningful. Giving that up at a young age may not always be a good thing.

Let’s imagine that there is a continuum, where the F.I.R.E. devotees are at one end—willing to give up nearly every comfort in the present in order to be financially free at a young age.  On the other end would be those who prefer to live in as much luxury as they can afford and have little regard for the thought of ever stopping work.

Most of us fall in the middle, though our individual trade-offs would vary. For example, I would rather retire early than drive a luxury car, but I would prefer to work a few more years than give up our family vacations.  My husband (who has been talking about retirement since he was in his 20s and his dad retired), has decided that he would prefer to work a little less now, while our kids are young, and delay retirement a few years beyond his initial plan.

This can be a handy quick tool for evaluating a spending decision: is it worth delaying retirement?  Would I prefer to have a fancier home, or retire sooner?  Would I be willing to work more or longer to send my children to private school?  Does having a vacation home appeal to me more, or does working less sound better? Understanding the trade-offs can lead to a financial plan that actually does make you happy.

I love the book Happy Money: the Science of Happier Spending. The review by Dan Gilbert on the front cover starts with: “If you think money doesn’t buy happiness, then you are not spending it right.” In the book, the authors (Elizabeth Dunn and Michael Norton) explain their research into what financial habits lead to happiness and which ones don’t.

My favorite chapter is about “Time Affluence,” the feeling that one has enough time.  I loved it so much I wrote a blog post about it. It fits well into this argument, in that it demonstrates that sometimes having more money makes us feel more strapped for time, and thus more stressed.  Like everything, it is a trade-off.

Our mission is to help as many people as we can worry less and enjoy their lives more through financial planning and investment management.  That looks different for each person or each couple.  The overall goal is the same: making sure that financial needs and wants are met.  The details vary greatly based on the unique expectations, concerns, goals, resources, and preferences of the client. We would love to help you develop your plan.  Contact us today.