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The FIRE (Financial Independence, Retire Early) movement is gaining more attention than ever before. Most of those dedicated to achieving FIRE follow a program of aggressive saving and investment that will allow them to step back from the world of work much earlier than traditional retirement savings plans would allow. There are a few misconceptions that surround the FIRE movement, though, and they can really trip you up if you’re not careful.
One problem with any kind of retirement is that it’s often seen as an end goal, rather than a transition. Retirement planning tends to focus exclusively on the finances, not on the practicalities. The truth is that retirement can be a challenging transition, emotionally and mentally, and it’s vital to have a plan in place for what you’re going to do with that retirement.
The old school view of retirement was that you stopped working. The new view is that you transition into work that you get to do, rather than work that you have to do. That work is often part-time, freelance, remote, or volunteer. Most importantly it’s work you enjoy, and you’re already financially independent, so it can be paid or unpaid, lucrative or barely-pin-money. It will almost certainly be very different from whatever you did as a career.
When you retire early it’s more vital than ever to look at the process as a transition. What do you want to achieve with the next section of your life? How can you do that? Having a purpose, a set of goals, and a reason to get up in the morning makes for a healthy retirement. Having a top-up income, however small, also takes the pressure off of the funds and investments that are supporting your FIRE dream. Financial independence has never been, for most of us, about not working. It’s about choosing to do work for reasons that are completely independent of finances.
You don’t have to look far online to find articles explaining exactly how you could achieve FIRE. So it’s easy to assume there’s a formula. While there is plenty of good advice around on the many and varied ways to achieve FIRE, there’s no one set formula that will work for everyone. For most of us, reaching financial independence will involve saving and investing more aggressively than our peers. It will often involve taking on less debt, and generally living more frugally. It will tend to involve various financial ‘hacks’ that will, over time, put us in a different position from others our age.
Here’s the thing, though. You can do FIRE your own way. What you need to do will depend on your situation, income, debt levels, lifestyle, windfalls you receive along the way, and a whole lot of other things. Most of all it will depend on what suits you. There is no formula. Or perhaps more accurately, there are many formulas. Finding the one that works for you will involve a lot of research and reflection.
Your strategy will be different from others. And it will reflect not only your current circumstances, but also how and where you want to retire. Some plans need more funds than others. So don’t assume you have to save 50% of your income, forego all unnecessary spending, or invest in a certain way. Building your own strategies to reach FIRE is as important as creating your own vision of how FIRE will work for you. It’s essential that those strategies aren’t so restrictive that you end up hating your life. Nobody wants to be miserable throughout their 20s and 30s just so they can retire in their 40s.
One of the more popular books about the FIRE movement is actually called Retire Before Mom and Dad. It’s an attention-grabbing title, but it’s problematic for many people, too. Depending on your background, cultural beliefs, and relationship with your parents, you may be uncomfortable with this concept. You may well feel that, far from retiring before them, you should be supporting them in their old age, or at the very least not giving up work before them and swanning off to drink that beer on the beach.
This discomfort can lead to the idea that FIRE is a selfish concept. But the reality is often the opposite. FIRE may mean that you’re more able to be there for elderly parents, or any other family member who needs you. If you retire early enough it may even mean you’re able to be there for your kids while they’re still young enough to care, as well. It’s important to put all the pros and cons of FIRE in perspective. There’s really no need to feel guilty about not working, even though you’re still officially “of working age”. If friends and family members make you feel bad for being retired while they’re still working, the most you owe them is advice of how they can put their own FIRE plans in place.
Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.