The following is a guest post from Sam at How to FIRE.
If you’re not already familiar with the FIRE movement, there’s a good chance that you soon will be. It is a concept that is gathering pace, with people all over the world looking to achieve financial freedom. FIRE is an acronym that stands for “Financial Independence Retire Early,” but what exactly is it, and is there a risk of going too far?
What Does It Take To Achieve Financial Independence?
FIRE is a financial movement, which can involve working towards early retirement by saving a substantial amount of your income. Typically, people retire at the age of around 60-70, but many FIRE followers pursue early retirement. They often aim to retire in their 20s, 30s, or 40s instead.
The ultimate goal for FIRE enthusiasts is to be financially independent, but this usually means making significant sacrifices along the way. Every person is different, but generally speaking, someone who embraces the FIRE movement will try and save up to 70% of their annual income and utilize a FIRE calculator to track their progress. In addition to living frugally, FIRE followers also look for ways to invest in their long-term future.
Saving up to 70% of your annual salary is undoubtedly difficult for many people, but there are additional concerns. For some, saving can become an obsession, and it can impact every area of your life. If all you think about is saving and working towards early retirement, there is a risk of taking it too far and suffering in the short-term. There are many positives to being financially independent, but it’s crucial to be aware of the potential dangers of letting FIRE take over. This guide will examine some of the main reasons you should proceed with caution and avoid taking FIRE too far.
Why Shouldn’t You Take FIRE Too Far?
Being financially independent and giving up your job at 36 may seem like the ultimate life goal, but what happens if your plans start to infringe on your quality of life in the present? Sure, some short-term sacrifices are completely tolerable and expected. But, here are six reasons to consider adopting a measured approach to FIRE.
1. You’ll End Up Working a Job You Hate Just for the Paycheck
To be able to save enough to retire at an early age, there’s a chance that you’ll end up doing a job you don’t particularly enjoy just for the wage. There are apparent benefits to earning a high salary, but if you’re working long hours or don’t have any passion or enthusiasm for the job you do every day, you might start to dread getting up in the mornings. You’ll want to quit your job every day, and this routine will leave you wondering whether your efforts are really worthwhile.
The average person spends around 37 hours a week at work, and if you add overtime, that’s an awful lot of time to devote to doing something you don’t like. If every day is a challenge, and you never arrive at or leave work with a smile on your face, even the thought of retiring early may not be enough to keep you motivated.
2. Minimalism Gets Weird Sometimes
Many people choose to live frugally, but there’s a difference between trying to save money and adopting an extreme approach to budgeting. Minimalism is designed to simplify financial management, and it can offer a raft of benefits. If you’re on a mission to save, there’s a lot to be said for identifying priorities and setting boundaries in other areas. The trouble is that there’s always a risk of taking minimalism to a point where life can become a little weird.
Financial experts are all for people making an effort to save. But you’ve probably taken it too far if you’re recycling Ziploc bags time and time again, surviving on tasteless, bland meals because they’re cheap, or rushing to take advantage of yellow sticker sections at the store after a 12-hour day at work. Saving may be the priority, but it shouldn’t impede your health or enjoyment of life.
3. FOMO is Real
FOMO (fear of missing out) is a relatively new concept, but it’s one that can be a genuine consequence of following the FIRE movement. If you’re saving every single cent you can, intending to enjoy financial freedom in the future, it’s highly likely that you’ll miss out on both the big and small stuff now. However, financial independence and early retirement is certainly an admirable goal, and one that I have made for myself.
Sticking to your plan is crucial, but where do you draw the line when deciding whether something is worth spending money? Are you going to miss out on opportunities or experiences that may never come around again because you don’t want to part with any more cash than you absolutely have to?
It’s incredibly beneficial to think about the future, but going too far with FIRE means that you might miss out on the present. While your friends and family are socializing, going to weddings, organizing trips together and celebrating births, marriages, and landmark birthdays, for example, is it worth missing out to retire as early as possible?
4. A Lack of Flexibility Contributes to Disappointment
When you take control of your finances, you have a say as to how you spend your money. If you jump on board the FIRE movement approach, though, flexibility in terms of spending can seem significantly reduced in some aspects. Most people who follow FIRE try and save up to 70% of their income, withdrawing around 4% of their savings and investment gains.
If you take FIRE too far, life can become very rigid and routine. A lack of flexibility could compromise your freedom, contributing to disappointment. There’s also a worry that once you adopt a way of life that complies with FIRE guidelines, there’s no way back. If you want to change your mind either during the saving process or once you’ve retired, would you have the strength and conviction to do that?
5. Someone Else’s FIRE Timeline May Not Be Realistic For You
If you search for content related to FIRE on the Internet, you’ll find all kinds of stories and video clips that talk about retiring in your 20s, but this is not a realistic timeline for the vast majority of people. Everyone is different in terms of their expectations and the amount of money they’re able or willing to save. What works for one person may not be viable for another, and sometimes, timelines can encourage people to set unrealistic targets and to put excessive pressure on themselves. The reality is that you should only ever follow a timeline that is relevant to your situation.
6. Mental Health and Wellbeing Should Be a Top Priority
We live in a day and age where there are too many stressors, which can cause significant anxiety and depression in everyday life. Sometimes the pressure of hitting a specific savings target and spending goal can be too much to bear. Even worse, not accomplishing them regularly can contribute to immense guilt, which isn’t helped by the blunt expectations laid out by web gurus.
Putting this pressure on yourself and having a one-track mind can take a serious toll on your mental health and wellbeing. While you may be motivated and energized by the idea of achieving financial independence and even early retirement, there’s always a risk of becoming too consumed by saving and scrimping. If things don’t go to plan, this can be detrimental to your health and happiness.
Balance FIRE With Living for Today
There are many benefits to saving money and planning for the future. Reaching financial freedom is one of the best things you can do for yourself. But, it is possible to take FIRE too far. In truth, you’re already making much better progress than the majority of the population by taking control of your finances. So, try to relax and enjoy your journey while setting realistic targets. Don’t miss out on the present because you’re too fixated on the future.
Often, the best way to strike a balance between now and the years to come is to practice intentionality. You can be intentional in both your spending and savings. There are some things in your life that won’t be worth spending money on, and others in which you should spend unapologetically. For instance, I value traveling the world, so I use travel hacking to make it a possibility. In essence, only spend money on what you value, so you don’t miss out on what is truly important. This is how you can have the best of both worlds.
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