FIRE is not DEAD!
FIRE is a Spectrum.
When I discovered that I could achieve Financial Independence and then Retire Early, I visualized my life split in two: the before, and the after.
I though “ok, there will be a point in time, if my wealth grows with time, when I will be able to tell that I’m FI! Before that I’m not FI. After that I’ll be FI forever!”
That point in time corresponds to the instant I’d reach my monetary goal, i.e. once I have FU Money.
Of course the point in time is not fixed, because how my wealth evolves over time depends on many factors like absolute savings, and investments performances.
But there’s a very clear model, mostly based on Certainty.
Well, Not exactly.
How to pick your FU Number? Easy! You need to anticipate your future spending needs for your after FI life, which could be a decade or two in the future. And you need to pick your SWR religion: 4%? 5%?? 3.5%? pi%? 2.5%?
Even at the starting blocks of this journey you can perceive a lot of fog around your plans and your future outcomes, but you can easily dismiss it via adding extra margins of safety: “I could always cut my expenses”, “I’m not counting on social security”, “I’m planning for the worst sequence of returns possible”, “I can always go back to work!”.
Welcome back, Certainty!
Now: how to make your FIRE dream come true?
Of course with a working pattern that keeps Certainty around, i.e.:
Work work work until you reach the magic number!
Then you’re 100% free and you can enjoy life. You’re FI, you can now Retire Early and no need to work anymore!
I’ve never fully understood those who say “I aim to be FI, I don’t care about Early Retirement”
What the hell do you mean? If I reach FI it’s because I’m working on a high paying job and saving a shit-ton of money… it’s unlikely the very same job that’s paying me so much is also so fulfilling that I’d work at it even if I were FI!
The only exception being entrepreneurship. If you’re working on your mission and you love it, FI or not you will pursue it. Elon Musk doesn’t give a crap that he’s FI, he’s not going to Retire Early. He’d do what he’s doing even for free. Even paying for it (which is what he actually did, since he self funded his companies).
Anyway, you and I are not Elon Musk. If you’re here on my blog, you’re probably pushing on the pedal like all of us on a job you don’t like much, or in the best case a job you won’t do for free.
So that was my model: work hard to reach FI as soon as possible, then decide. I had a long list of passions, and I knew new things were coming, new opportunities to do something better with my time, to leave an impact, to not waste my skills working for a corporation (even if earning more than a quarter of a million per year).
I loved the options FI would unlock, but sure thing I was going to quit my job and be more intentional with my life once I reached FI!
But then I started questioning the model.
Is there really a monetary amount that would make me “free”? What would I need to give up for that freedom? Like… I know I could be financially free if I move my family to Burundi, but is it what I really want?
Will I be comfortable withdrawing from my principal at that point?
Is the 4% Rule really safe?
Over time I realized that Financial Freedom is not a single event.
Financial Freedom is a Spectrum.
My mental model changed.
Of course there are situations where you can really tell that one is financially free. Bill Gates is free, for example. You don’t even need to go that far. We agree that a 2.5% SWR or a 2% SWR are reasonably safe. Hence we can say that a 40-50x multiplier of your yearly spending is what you need to be undoubtedly free.
At the same time, it’s ok to model yourself as 100% unfree if you don’t have a certain amount saved. I’m very conservative: I’d say if you don’t have 3x or 5x your yearly spending you should behave like phase 1 in the previous model, i.e. work work work save save save as much as you can.
Others could feel brave enough with just 0.5x, i.e. a 6 months emergency fund in their bank. Enough to take some actions, like quitting a job you hate to look for another one.
Anyway, I had my 5x epiphany back when I quit my job at GameCompany: I was leaving ultra cheap, 500 EUR/month, and I had accumulated ~30k EUR. 5 years of living expenses. The feeling of having 5 years of expenses saved gave me a sense of power. How likely is it that I run out of money? Whatever I do – given that I don’t squander my fortune – there’s no chance I won’t find another opportunity (or create one) within 5 years. A lot of power. Little I knew about how expenses can grow quickly over time, with a family and more needs coming…
So at 5x, or 3x, or <insert_your_slavery_killer_multiplier_here> you start feeling tiny bits of freedom.
The freedom/slavery split improves with the growth of your “savings multiplier”. once you reach 25x you’re FI according to the 4% Rule (if you spend 4% of your wealth it means your wealth is 25 times your expenses). But nothing really changes. Yesterday you had a 24.95 multiplier, and maybe after you cross the magic 25x then in a month you’re back below it because market crashed.
Ok, how to deal with this? How to embrace Uncertainty?
How to change my actions accordingly?
I had no idea.
I kept hoping the old “working model” would keep working while I figured it out.
And then I kept grinding until I reached the magic number.
Work work work 100% push save a lot work grind… and then Quit & Hope, knowing that there’s still a long tail of odds that I’m actually not FI. Do you want to chase Certainty? Well, grind until you reach 40-50x (i.e. SWR of 2-2.5%), and bring the odds of failure below 0.1% – mind that it’s never zero.
But reaching 40-50x is tough… very tough. Even with a Saving Rate of 50% it takes 3 decades. Is it worth? Is it worth sacrificing your life and be unhappy until you reach sure certainty you’ll be financially free?
No, it’s not.
I found myself lost in this loop: I don’t like my job, so I want to reduce the odds of failure as low as possible, so I will work more, so I will hate my job even more, so I need the odds of failure to be even lower because I can’t even think of coming back to work, so FI number is pushed further in time…
No way out.
Then other players joined the party
You might find yourself holding a good dose of freedom with 20k yearly spending and a 200k Net Worth, sitting at a 10x multiplier… but then you raise your spending to 30k and you’re now below 7x. Then a kid comes, and you’re now spending 50k per year and you’re back in total slavery at 4x.
You want to have Certainty, right?
But guess what, my dear 20-something FIRE seeker, you have no idea how much you’re going to spend in the future. And that’s true even if you’re awesome at keeping lifestyle inflation at bay (like I think I am). Family happens, moving to HCOL happens, children happen… your spending regime moves over time. It usually grows, but it can also shrink. You might feel you don’t have enough, but maybe if you move to a cheaper place, or if your kids leave expensive Swiss child care, you might discover you need less.
And while you plan for your FI Number, slowly walking there, aiming to reach the magic number in more or less a decade… you realize there’s another universe expansion effect, a dark energy that’s not helping you reach your goal in the allotted time.
It’s called Inflation.
I’m not talking about the impact of inflation during withdrawal phase (according to a SWR model). Those withdrawals are planned to be inflation adjusted.
I’m talking about your current goal if you’re starting your journey today.
You might plan like this: “I spend 40k per year, I’m happy with 4% rule, I need 1M. Cool, I should be there in 10 years!”
Then in 10 years 1M is worth less than it’s worth today! Your FU Number should slowly grow over time, to make you able to start the withdrawal phase with the same purchasing power of today’s 40k. Your target is always moving, sadly it’s moving in the wrong direction!
And maybe during this decade you realize 40k – even inflation adjusted – is not enough because… well, life!
I couldn’t wrap my head around those two extra factors.
The old model doesn’t work.
Certainty had to be killed.
That’s why I said that FIRE is DEAD.
Mind that I’m not giving up on my goal, I’m just growing up.
So, what’s the solution?
I don’t know of course. What I would recommend to anybody seeking FIRE who is still at the starting blocks of their journey is the following: FI is a spectrum, so let’s make RE a spectrum as well.
Let’s not split your work life in two. There’s no before and after on the financial side, let’s not have a before and after on working side as well!
Push harder until you have enough safety (3-5x for me, your mileage may vary), then take steps toward your ideal life. Work less, change job, take a lower paying job that you like more. Keep saving anyway.
Then as time passes you might reach the point of “coasting”, i.e. your wealth will reach real freedom alone in X years, you just need to cover your expenses. That’s the territory of all the altFIRE (Barista, Semi, Coast, Lean). Take advantage of your partial freedom, and enjoy life.
Maybe at one point you feel confident to quit your main job to start working on a passion gig, aware that you’re not 100% free but confident that you’ll produce enough income to still move toward full freedom.
If you hate your job, do not push harder to reach an arbitrary number earlier. Find a way to improve your life now.
The day you reach FI should just be a normal day, a day where you don’t make any drastic change because you are already moving toward your ideal life since years.
Do you think I’m stating the obvious?
Take a look at this fresh r/fi thread (there are hundreds of them):
This gal is 24 years old, and already hates her job. There’s one thing that relieves her from her job: horseback riding. But it’s too expensive and it would slow her down in her FIRE Journey…
But no! Fucking no!
Well, as I said elsewhere, it’s always healthy to push yourself at the boundaries of comfort. I don’t 100% trust my feelings, I have mixed feelings (which by definition I shouldn’t trust?) toward Free Will, but let’s not even get started on this today. Maybe it’s ok to try to see “how real” is the joy your hobby is providing you, or if it’s something you can substitute in some cheaper way. Try something different, but if you realize that you want it badly, then screw FI! Life is not a Journey. Dance!
What about myself?
Well, I can’t change the past. But if I could go back in time I’d quit my last job at Hooli 2-3 years before, and would try something else. Maybe I’d be 2-300k less rich by now, but I might also be still in love with writing software, and generally happier.
My vision as a young FIRE seeker was: work work work hate myself until I reached a magic number… then send my boss to fuck off, and live my awesome life without having to work a day anymore because 4% rule works 100% of the time.
My vision today is: work, save, accumulate until you’re ~20-30% Traditional FIRE. Then leverage this power to find a better job or negotiate a 80% position. Once you’re 50% FIRE you should already design your ideal day and make progresses toward that dream life. Like: taking long sabbaticals, work 60%, work a lower paying job, and so on. Let your wealth grow on its own. Once you’re 80% FI you’re already Free. Not monetary speaking (you’re never really free), but I’d bet that nothing will ever go wrong in your finances forever. You showed skills that put you in the top percentile of human population, you fucking rock! Just don’t retire to leisure, but try to leverage your inner desire to produce something useful with your time and skills. Something good will happen to you.
Have a nice day!
P.S. I can’t link More to That’s post about Money, and Mr Money Mustache’s post about Confidence enough… Even though both have a fully intentional twist at the end, I like to be more grounded into “money and spending”. But I love their approaches. Maybe I have room for growing up and leaving Fear behind 🙂