Of trash cans and retiring early
I am part of this American Facebook group about financial independence – and the comments never fail to amaze and amuse, One person asked on the group if other people also go to the dumpsters behind supermarkets to find food to eat. Needless to say, my eyes almost popped out of my head!
Some people have strange ideas about financial independence and retiring early (FIRE). By the way – if you want more info on FIRE, read my article here!
The retirement conundrum
The other day I heard a financial advisor explain the fine balance between retiring due to bad health and retiring with lots of money. Imagine your plans to travel the world and enjoy your money later gets shattered due to bad health, for example. On the other hand, living for the now is also an issue – as we don’t want to die from hunger at 65 when we might be forced to retire.
In this lies the conundrum: we don’t know what the future holds. We could live until 150 or die tomorrow – and this is often used as a tool of fear.
In reaction to this, I find quite a few people in the personal finance community (who are not quite the FIRE type) with the response: “I love what I do. I will work until the day I die”.
But, again – we don’t know what the future holds.
You could stop enjoying your work.
Or medically decapitated.
You could have a mental breakdown.
You could become so tired that you just cannot continue working.
You could start favouring drinking coffee and not tea.
What do I really care about?
Regret and fear are twin thieves who would rob us of today.
– Robert Hastings
Without trying to downplay the importance of proper risk management and investing for the future, let’s consider a simple principle by Ramit Sethi: If it doesn’t add value, don’t spend money on it. If it does, buy that coffee!
I see so many people buying big cars and expensive homes to impress their friends. I am not denying that it’s awesome driving a new car. I am merely questioning if the happiness it brings is worth the price tag.
And the price tag is often our future. For me, I don’t value big homes and fancy cars. But I love coffee. And I spend money on coffee.
The lesson is this: if you value what everyone else values, you will spend what everyone else spends.
Think expensive cars.
Think expensive homes.
Think fancy clothes.
It is also worth enjoying the labour of our hands without guilt and overindulgence – and still with the view of early retirement.
Fat Fire and Lean Fire
Some people decide to sacrifice everything so that they can retire early – insurance, medical aid, people and even coffee. This is called lean fire. If I pursued lean fire, everyone would be killed and my basement would have an excellent use. As Kwashiorkor so often used to point out – Frugal is all about sacrificing his coffee to FIRE.
But this is not who I am.
I find fat FIRE to be good in the sense that we get to enjoy today – and the small things that bring us joy. The idea of fat FIRE is that you don’t cut expenses to the bone. You up your income but not eat out of dumpsters.
This means you will still be able to enjoy your coffee at a good coffee shop, but not at the cost of tomorrow.
The art of fat FIRE is that you need to know your income, expenses and know when you will retire – and the risks and rewards of postponing early retirement.
Prioritising financial independence retiring early
If people follow the fat FIRE ideology, that doesn’t mean financial independence isn’t important. It just means that it happens a bit slower.
The priority should be on you knowing that you will reach retirement before you’re not able to work anymore.
Lean FIRE is the idea that you will sacrifice anything to retire early, whereas fat FIRE means you still want some luxuries – and you can still retire earlier than your peers.
No one knows the future. And for this reason, we need to enjoy what we have today, but not at the cost of tomorrow.
As long as you know at your current savings rate how long it will take for you to retire – all will be good if you put the plan into action.