Financial independence, or the concept of saving enough money that you never have to work again often decades before most people can retire, has gained popularity over the last decade. But it’s far from an easy goal to achieve so is it really worth it?
When most people hear the word ‘retirement’, images of grey hair, grandkids and leisurely days taking naps and short walks around assisted living facilities spring to mind. Many people think of the traditional retirement age, currently 67 in the UK.
At this government-defined age, people qualify to claim the state pension, which they have usually been contributing to for 30-40 years. They may also draw down on a private pension from their employer to cover their living expenses, which they have also been contributing to for multiple decades.
The FIRE (financial independence retire early) movement seeks to disrupt this traditional concept. While it may not be mainstream, since the pioneering book, ‘Your Money or Your Life’ written by Vicki Robin and Joe Dominguez in 1992, it has been slowly building momentum. FIRE encourages people to look at money and retirement through a different lens.
Radically reducing expenses and increasing income while investing the difference can enable people to build a big enough nest egg that they can live off small withdrawals for the rest of their life, and thanks to compound interest, not run out of money.
How is Financial Independence possible?
Achieving FIRE has largely been made possible by the 4% rule. First attributed to Bill Bengen in the 1990s, the 4% rule essentially stipulates that if you have 25-30x your annual living expenses invested in a low-cost index fund in the stock market, you can withdraw 4% a year and not run out of money for at least 30 years (or more as 4% is relatively conservative). For example, if you can live comfortably on $40,000 per year, you would need $1million invested. This is because the average return in the stock market is 7-10%, so if you withdraw 4% you are still leaving room for growth and accounting for inflation. Calculate your retirement number with is Financial Independence calculator.
Of course, this is not the only way to reach FIRE – the basic premise is that as soon as you make enough to cover your living costs passively, you can effectively ‘retire’ or stop actively working. This is typically done through property investing, stock market investments or business income (recurring income through product sales or royalties etc.).
In order to reach their ‘FIRE number’, many FIRE hopefuls live frugally and engage in ‘hustle culture’ – long hours of work in the short term because the desire for long-term freedom outweighs the temporary pain of maintaining a high savings rate (income minus expenses, aka the ‘gap’ of dispensable cash available to invest each month).
The concept of FIRE has received a fair bit of negative press due to accusations that Fire-ees are lazy or waste decades of their life in ‘retirement’ without contributing to society. Due to this, some members of the FIRE movement have adopted the shortened acronym of FI – Financial Independence. Not everyone wants to sip cocktails on the beach once they reach FI.
Some people in pursuit of FI wish to fulfil passions or volunteer – spend their life free of the traditional ‘rat race’ clamour for a salary and perhaps offer their time without the expectation of a hefty paycheque. Perhaps some wish to work but want freedom to choose without being dictated by salary and benefits and package and so on.
Not that there is anything wrong with wanting to slow down and enjoy your short time on this planet – again, the idea of constantly contributing, achieving and working yourself to death is a concept constructed by modern society. So, in conclusion, people in pursuit of Financial Independence have a whole range of motivations and circumstances; the basic premise remaining the same – getting to a point in which your passive income covers your spending so that you are not required to actively work for money.
How I found the financial independence movement
It was during maternity leave with my second child that I discovered the FIRE movement. After having my two children, I began to take money and savings more seriously. I wondered how (and if) we were ever going to be able to retire. How were we going to provide fulfilling lives for them now while also saving for their future? How did other people do it? I didn’t have a plan and it caused a fair bit of anxiety.
Unfortunately, for me, like many others, money is a taboo subject among the people I communicate with in ‘real life’. Talking about money is just not done, so I didn’t feel like talking to someone around me was an option. It was and still is bizarre to me that people are more willing to talk about their toilet habits than their bank accounts.
I feel quite strongly that this concept is hammered into us to by the ‘patriarchy’ to keep us ‘peasants’ down. If people don’t discuss what they get paid, they can be exploited; if people don’t discuss saving and budgeting tips, they will remain in a consumer debt cycle, and so on.
Large corporations will remain rich by exploiting the working (and middle) class for their own gains; allowing them to believe that by purchasing an expensive car, designer items or a large house with debt, happiness will be found. While we are busy working ourselves to the ground to pay for all this ‘stuff’ to keep up with the standards society sets for us, we are too burnt out and exhausted to stop and question this perpetual spiral of misery. I felt that misery all too keenly.
Thus, discussing these money worries with people around me was out of the question. I decided to do some research. It took siphoning through the usual blogs and YouTube videos on ‘how to buy a Ferrari and a beachfront home in a year by joining a pyramid scheme’ before I stumbled upon the Choose FI podcast. A lightbulb clicked on in my head as I rapidly consumed the content. Here were people sharing stories of living frugally, with purpose, sharing struggles and solutions publicly.
I finally, at long last, felt like I had discovered likeminded people. All of a sudden, here were people pursuing money, not to buy expensive clothes and cars, but to buy time. Freedom. The most important and only non-renewable resource available to us.
The next weeks and months passed in a blur of learning as the internet algorithms worked their magic and I discovered Paula Pant, Andrew Hallam, Mr. Money Moustache and countless other bloggers, authors and podcasters. I read ‘Rich Dad Poor Dad’ by Robert Kiyosaki. Although some of his ideas and teachings are dubious, this book was the one that changed my whole perspective on life and money.
Nothing has been the same since and I still use his framework to make decisions more than 3 years after reading. Buy assets first and use assets to fund liabilities. This simple but startling truth stopped me in my tracks. It was so obvious, so simple, and hiding in plain sight. Most people buy liabilities and not assets, which is why they don’t build wealth. I had been doing this for my entire adult life. I was 33 when I read the book, and a whole library of other personal finance books.
Needless to say, discovering the FIRE movement was life changing for me. Within weeks I had overhauled our budget, increased our savings rate and started investing. I was plunged into the world of finance, a world I had once thought was only accessible to balding white men in suits who possessed much more intelligence, superiority and insider knowledge than little old me. That’s what they want you to think. As soon as I discovered that managing and investing money was completely accessible to me and building wealth within my capability, the snowball gained momentum, leading to this website, blog and resources to help hitch others up onto the snowboard.
However, it wasn’t all smooth sailing. All of this was both the best and worst thing to happen to me at that point in my life. As with most extremes that we experience in life, they are paradoxical. The greatest strength is often the greatest weakness. The best things can come at a high cost, and it is our lifelong job to decide what is worth paying the price for and what isn’t.
Was financial independence worth pursuing?
Finding FIRE came at a difficult time for me. I suffered with post-natal depression after the birth of my second child, and having not experienced it with my first, I wasn’t expecting it. It isn’t something I would wish on my worst enemy. At the time (and I would never recommend this), I didn’t seek help as I was worried about what people would think of me. Instead, I reached deep into my muddied brain to pull myself out of it by reading, specifically around the topic of self-development and self-improvement.
I fell into the world of FIRE, and I had a renewed sense of purpose. And hope. And hope is a powerful motivator and healer. Stories about how average people achieved extraordinary goals and were willing to lay out their strategies and blueprints for others were extremely inspiring to me. Pursuing FI can provide you hope, a plan and a strategy to escape a toxic situation or strive for a better life on your terms. If you dream of leaving your corporate job to work part time in a café, following the concepts of Financial Independence can help you achieve your goal, making it a tangible reality rather than a pipeline dream.
The birth of the low-cost index fund coupled with the development of accessible and affordable brokerages was the start of a revolution of sorts for the ‘little man’. The awesome John Bogle sure left a legacy. Founder of Vanguard and pioneer of the index fund, a passive investing ‘basket of equities’ which tracks the market and is available to anyone, regardless of investing or economic knowledge, monumentally changed the investing landscape.
Never has it been easier for an average person to manage their own portfolio and start building wealth with as little as $100. When I realised that this wasn’t a dream reserved solely for bankers or lawyers with huge salaries, I took control of my financial future. This is an empowering feeling, and although people with higher salaries have more capital to build wealth faster, the mechanism to do it is accessible to all.
So, if it is really that easy, why isn’t everyone doing it, I hear you asking. I don’t know everyone’s circumstances, but I would hazard a guess that the force of the Joneses is strong and still holds the majority in its spell. The FIRE movement touts the exact opposite of what society tells us to do – get in debt, get a job, overspend, indulge in material consumerism etc. etc. And as that is the way that most people live, to tread a different path can be difficult. Societal pressure is real and can come from family and friends too.
In order to change, research shows that a community and support system is much more likely to help you stay motivated. We are herd animals after all. Although I didn’t have members of the FIRE movement as neighbours, having online communities served as a lifeline for me. I felt a connection and camaraderie with people, and when they spoke, their words felt like security, acceptance and assurance that the path I was travelling was the right path.
I honestly hadn’t ever felt like that before. I had just felt like an eccentric outsider, hiding my true self to fit in. All of a sudden, I didn’t care what people thought. My confidence grew as my community did. I didn’t care about driving an old car, dressing my children in hand-me-down clothes or living frugally. Now I was proud of my identity and that is an easier way to live than hiding behind a façade to fit in. Finding the FIRE movement represented so much more than discovering budgeting and investing. It was about shedding society’s expectations and reclaiming my own identity.
Finally, a huge benefit of pursuing FIRE is rejecting consumerism and becoming more conscious about living sustainably and frugally. This naturally coincides with a deeper care and connection for the environment. I felt more aligned with my values as I bought less stuff and embraced minimalism. I started listening to The Minimalists and their conversations resonated deeply with me.
I’m not saying my way is the best and everyone should be a minimalist but finding people who align with your deepest values is extremely freeing. As I walk further down the path towards FI, I have discovered that it isn’t really about money. That’s just the surface. It’s about building a life you love by aligning it to your true values.
The dark side of Financial Independence
You might be thinking at this point that I’m trying to brainwash you into joining the FIRE movement – it’s perfect, it solved all my problems, amazing, blah, blah, blah. Nope. That isn’t the case. Everything comes with a cost. Discovering the FIRE movement led to some very real downsides for me. They might not relate to your situation, but I wanted to share them nonetheless, because the dark side of Financial Independence isn’t shared enough.
There is truth to the old adage ‘ignorance is bliss’. A word of warning if this is your first foray into FIRE, dip a toe in sure, but once you’ve had a taste, it’s hard to go back. Not because it’s a cult as the media often touts. But because to join you have to become aware of some hard truths about yourself and society. I’ve touched on a few above, such as how we have been cloaked and manipulated to think and act a certain way.
But you also must delve into your own finances, run your retirement numbers and explore your murky relationship with money. That’s the cost of membership. And most FIRE members would see that as a good thing. Self-awareness, financial awareness. Great. I too think it is a positive thing.
But once you know the numbers, you can’t ‘unknow’ the numbers. Most people live in a bubble, seeing the future in some sort of optimistic and blurry bubble. I did too. What FIRE will do is cast a light, or more, burn away the mist, on that future. While having cold hard facts is useful as you can plot out a plan and strategy, if the goal posts are just a speck in the far distance, for example if you carry debt or have very little wealth currently, it can feel overwhelming. Even to reach that sort of wealth by traditional retirement age can feel like some distant dream.
But you have an awareness – if I don’t achieve these numbers, I can’t stop working! This can lead to a sacrifice of the present for an unguaranteed future. For some people, knowing the numbers and facts and working towards a goal can be an effective motivator and foster hope for the future.
But there are people who become obsessed with the numbers, overwork and sacrifice health and relationships for money. This is the dark side of the FIRE movement. It can lead to burnout and stress as people struggle to switch off and relax because there’s still more work to be done to achieve their ‘FI number’, which for most, is a long game and requires a steady pace and level head.
Despite all of its positives, the FIRE movement can exacerbate feelings of isolation and inadequacy. I talked about the online communities, which are fantastic, and I appreciate all the comments, discussions and people who take time out of their lives to support others on their financial journeys. But if you feel isolated from the people in your ‘real’ life, your feelings of loneliness can intensify. For me, finding people in my area who could relate to me was imperative to staying the course.
It’s human nature to compare yourselves to others. It’s how the ‘keeping up with the Joneses’ concept is so powerful; whether we like it or not, we compare ourselves to those around us. For me, it was liberating to stop comparing myself to my neighbours and peers, but I replaced them with people from the FIRE Movement. Dangerous territory, as so many FIRE members have significant wealth. Although they might not look ‘rich’ to their neighbours, many share their financials online and the money milestones people achieve are extraordinary. However, it is possible to transform this toxic comparison into a positive for yourself. Take that jealousy and turn it into admiration; use it as inspiration and motivation to work towards your goal.
These are some of the downsides of the FIRE movement that I have experienced along the way. It’s not that the FIRE movement is toxic or encourages me to think or do any of the things described in this article, but I find that it can exacerbate your own weaknesses and insecurities if you don’t put the necessary precautions in place.
How can I pursue financial independence in a healthy way?
If you succumb to some of the negative traits listed above, you could sacrifice decades of your life and achieve FI but have to spend your money and time recovering from your journey. That is the opposite of the intended outcome, which is to live a richer, more fulfilled life. I’ve heard stories of people missing out on their kids’ lives due to grinding it out at the office and regretting too late that they can never get that time back. Or becoming so obsessed with FI that their greed becomes overwhelming, and they wind up gambling their money in a high-risk investment and lose all their hard work.
So, how can you stay the course on this monumental journey and keep your head?
- Create your own, personal plan and write it down. Know your limitations and boundaries and stick to them. Remind yourself that everyone is different – some people will reach FI in 5 years, some in 30 years. The most important thing is that it is your journey, and you must enjoy it, or it defeats the purpose. Even if you find the FIRE movement in your 50s and miss the ‘retire early’ part of FIRE, implementing better money habits is a good thing for everyone. If you don’t earn a high salary, rather than accepting defeat, seek out ways you can live frugally without sacrificing your happiness or increase your income.
- If you find yourself in toxic comparison territory – perhaps you are late night scrolling in a Financial Independence Facebook group and you see someone celebrating millionaire status, whereas you are still battling $5,000 of credit card debt – accept the negative feelings, sit in them for a while, then reflect. Ask yourself why you are reacting like that. Is it because this person has achieved something that you desire? Try to shift the negative to positive and see what you can learn from their journey. Check the comments and write down any advice they give that you can take on board for your own journey.
- Always return to gratitude. When it all feels overwhelming and impossible, track how far you have come. It’s so important to set up a way to measure progress from the start, whether with an Excel document or colourful chart, journal or app. Celebrate your own milestones of success along the way. Remember that everyone’s circumstances are different, and everyone has their own struggles regardless of net worth. You might have something that they desire. Reflect on your life and write 3 things you are grateful for as soon as the negativity starts to surface.
- Try to find (or create) a face-to-face community to complement your online support. Social media, toxic as it can be, can be a vital lifeline and source of great wisdom if you use it smartly. But nothing beats in-person interaction and connection. If there aren’t people in your life who currently share your mindset, start a group in your area online and see who joins. Organise a meet up and you never know, you could meet lifelong friends. You don’t have to dump your current circle, especially if you have things in common with them and enjoy each other’s company but expanding it will serve you.
- In Andrew Hallam’s latest book, ‘Balance’, he defines success as four pillars – money, relationships, health and purpose – if one or more of these pillars are significantly neglected, the individual will not feel fulfilled or successful. Even if you achieve FIRE quickly, if you sacrifice your family or your health to get there, chances are it won’t feel like the success you desire. Every day, or week, or month – whatever works for you – it’s helpful to sit down and reflect on how you are working towards success in all areas. If one is lagging, plan ways you can chip away at it in the next week. It might be simple changes such as ‘I will leave the office by 5pm every day this week to read with my children before bed’ or ‘instead of finishing my work report this Saturday which can wait until next week, we will go for a family bike ride’.
For me, discovering the FIRE movement has fundamentally changed my life, no doubt about it. But it has been a paradoxical experience. When the veil was removed and my eyes were opened, all my insecurities and issues were exposed. But along with the blast of truth comes a realisation.
What people pursuing FIRE want most is freedom. Choice. Options. But once you realise that you already have that – there are many, many ways to achieve FI and many versions of FI (Coast FI, Fat FIRE, Barista FIRE etc.) – you come to the awareness that, as Jean Paul-Sartre wrote, ‘man is condemned to be free.’ I have never felt more strongly connected to the philosophy of Sartre than when I am aligned with the FIRE movement.
We all have the choice every minute of every day – love the journey or resent the journey. Admiration or jealousy. Choose to go to bed and get a good night’s sleep to continue chipping away at the dream tomorrow or push yourself further towards burnout? Live in perpetual regret of past decisions or forge forward towards a more optimistic future? You get to choose. You don’t have to wait until you reach FIRE.
Good luck on your journey. Remember that FIRE is less about reaching a certain ‘number’ or quitting your job and more about building a life that you truly value rather than one dictated to you by society. Take the raw self-awareness that becoming a member of the FIRE movement costs and open yourself to it, because on the other side is the life you truly desire.
Need a bit of support through these steps?
If you would like to book a financial accountability coaching session to help you work through these steps or stay accountable to your goals, send me an email at [email protected] or drop me a line via the contact form and we can see if we are a good match. Good luck on your financial journey – congratulations on taking the leap.