F.I.R.E (financial independence, retire early) caught a lot of flack over the last couple of years. Many people think it's unrealistic and risky. Some think you need $1 million in the bank to achieve early retirement, while some think that's setting yourself up for failure; leading to a major numbers debate. Others think it sends the wrong message to young people: “hustle hard for a short period then retire on a beach doing nothing forever!” Which leads to another debate on mental health and self worth. For many, the FIRE movement fuels the idea that millennials are idealistic and entitled, trying to skip ahead, cut corners, and jump to retirement while celebrating themselves a little too much. Even so, I believe everyone can learn something from the FIRE movement.
In my opinion, the FIRE movement is actually a major blessing. There is so much about it the media is getting wrong. Furthermore, even if you have no plans of following it, and instead plan to follow one of these other retirement strategies, there is something we can all take away from it. Today I'm going to break down what everyone is getting wrong about the F.I.R.E. movement and five things we can learn/takeaway from it. In my opinion, the more people practicing principles from FIRE, the better.
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What everyone is getting wrong about the FIRE movement:
The goal of F.I.R.E. isn't to retire early
*GASP* How could I write this blasphemy?! Afterall, in the very title of F.I.R.E. it says to retire early!
But I humbly disagree. The FIRE movement is not about doing whatever needs to be done in order to not work by some arbitrary age. In fact, no one is suggesting the Gen Z or millennials stop paying their rent only to get evicted, live in a van, all in the name of retiring by 50. That's the opposite of what the early retirement movement stands for. An eviction is a negative mark that stays on your credit profile for up to 7 years! Learn more about evictions and your credit report from Lexington Law here.
In reality, if you talk to anyone attempting to FIRE, you'll hear them cite reasons like “freedom” or “happiness” above all else.
When I dream about early retirement, it's not that I'm actually dreaming about never working again. I dream of total freedom. Spending my time however I want. In fact, I actually *like* working! My goal with my career has always been to find happiness and freedom.
When we take a step back and consider the true goals of FIRE are actually happiness and freedom, we are given an opportunity to completely break down an old idea that many of us have unfortunately adopted: the idea that cutting back is compromising/being punished and ultimately, being unhappy.
We can achieve true happiness and freedom on any budget while spending (or not spending) any amount of money.
Reducing spending does not need to be synonymous with feeling deprived.
For instance, do you love it when people cook for you? Well you don't need to hire a private personal chef for $250 to come to your house and prepare a five course meal. Instead, you can have friends over for a potluck. This allows you to experience a 10 course meal for $10, with a lot more love in the room.
Of course there are expensive hobbies that don't as easily fit this example; but you get the idea. Happiness and freedom are states of mind, not a number in the bank.
5 Things Everyone Can Learn From The FIRE Movement
Personal finance can be exciting
I love the F.I.R.E. movement because it actually makes personal finance exciting! Like reaching retirement by 45 is some sort of game. That becomes a massive motivating factor. No longer are people just excited thinking about how they would spend a million dollars, but instead they are excited thinking about how they'll get a million dollars. That's a major shift in mindset. We as a society aren't waiting to win the lottery and spend money; but instead we are finding new ways to actively earn and grow money. I call that a huge win!
An open and flexible attitude about money
We all grow up hearing a variety of money messages. Everything from, “money is dirty,” “it's better to be happy than rich,” to “money doesn't grow on trees,” and so much more.
These ideas are pretty interwoven into our fabric as a society. Meaning that we've all heard them from friends, family, the media, etc. for the better part of our lives. Subconsciously, these money messages get us stuck in a cycle with fixed ideas about how to earn, keep, spend, and save money.
But the F.I.R.E. movement challenges those beliefs. It forces people to open their mind about the possibilities of money. Finding new ways to earn, grow, and even celebrate it. It's tearing down years and years of financial insecurities and biases that have passed down generationally.
It's that same open and flexible mentality around money, that allows FIRE-ee's to weather financial storms much better. Yes, they may have wanted to retire by 45, but they also recognize that their ultimate goal was happiness and freedom.
Flexibility is a key factor in resilience. Meaning those who have already adopted a flexible money mentality, are on better footing to handle financial crises. Yes, there may be a mourning period over their short term goal of retiring by 45. However, they can have an immense amount of gratitude around how much better prepared they are for the impending recession. Historically, gratitude and a positive mindset are associated with better financial positions.
Paying for healthcare, education, and high cost of living may not be as scary as we think
When I started working for myself in 2015, the number one question I got was: “what about health insurance??”
Over the years, so many people have told me they wish they could start their own thing, but they are afraid of the financial toll health coverage will place on them. As a result, many chose to stay in a job they hate. The funny thing: most Americans greatly overestimate severe healthcare expenses according to this article from Lexington Law.
When you're just scrolling social media or flipping through news, you're constantly inundated with scary headlines: the average American doesn't have $400 in savings, the rising cost of education and housing, the disappearing middle class, etc.
If that's where research begins and ends, then yes, those seem like major obstacles. However, upon doing a deeper dive, and bringing in an open and flexible money mindset, we see just how small these obstacles really are.
For instance, my husband and I always talk about the fact we aren't going to force our children to attend college. Our families think we are crazy. But with the rising cost of education, impact of students, and the fact we don't really think it gives a competitive edge any more, we are letting our kids decide.
As a side note: if you are someone who has student loans, you are more likely to have unsubstantiated negative effects to your credit compared to someone who never had student loans. If you've experienced poor credit due to inaccurate, unsubstantiated, or unfair items on your credit profile, get your FREE credit report consultation today by click here from Lexington Law!
We believe that our kids may want to skip higher education and start a business (we both wish we would've) or begin working earlier. I began working in my former industry during undergrad, which allowed me to advance very quickly, even before earning all the credentials I'd need.
If our child wants to attend college they could always:
- apply for scholarships
- start working to pay for it themselves
- take on an assistantships, apprenticeships, etc. to lower the cost of tuition while at school
- shop around the most cost-effective way to get the degree/credentials they want (e.g. trade schools, community college for their AA then transfer to a university, setting up residence to qualify for out of state or out of country tutions, etc.)
Just to name a few ideas. For every problem, there is always an out of the box solution. Granted, it may not be conventional or the most comfortable in some people's eyes. However, if it's what you're choosing, then it's in alignment with the goal of all of this: to be happy and free. Right?
Showcase how much we can do with very little
If you saw my post on what it would look like for my family to live off $20,000 annually (lean FIRE) and $40,000 annually (FIRE) here, you saw just how much was possible with some out of the box thinking, a shift in mindset, and preparation.
FIRE shows us, that we can often do a lot more with our money than we are necessarily realize. Even if your goal isn't to retire early, but simply to just pay off debt, it can be the exact motivator we need. If someone gets pulled in and has a fire lit under them because they saw a headline about “how a 30-year-old paid off $100,000 in debt and saved $1,000,000 on a $50,000 salary” then so be it! Whatever it takes to get people motivated and excited about their financial situation works in my book!
Actually make investments that will pay you back; no matter what the stock market is doing
A lot of people think that FIRE is risky because it depends on a bull stock market and because it has potential for increased mental health problems as people float around without a purpose (something that historically has made most retiring seniors ripe for a bout of depression).
But the movement doesn't mean you float without purpose and are a bum. It doesn't mean you rely on the stock market either.
In fact, it means that you've reprioritized your life and are investing accordingly.
For example, instead of spending money on the latest fancy car, you opt for a bike that allows you to invest in your health. Investing in your health in such a way, can also lead to lower medical expenses down the road since regular exercise has continually been proven to increase health benefits. Furthermore, engaging in regular exercise and spending time outside have also been linked to improved mental health. Improved mental health means we keep fear at bay and studies have already shown that spending habits are connected to our emotions. Meaning, when we experiencing uncomfortable emotions, we tend to buy things we don't need for the serotonin hit. It's a psychological feedback loop providing a false sense of comfort.
My friends at Lexington Law put together this *amazing* guide of 22 Science Backed Ways To Invest In Yourself here to give you even more ideas!
After looking through that post, you'll hopefully start to see how “cutting back” spending doesn't mean deprivation. Instead we are investing in key areas of our lives that support overall happiness, freedom, and wellbeing.
Especially during challenging financial times, it's so important to clean house. Literally, spring clean your finances, get your at home workouts going, take care of yourself. If you're credit score isn't where you want it to be, contact Lexington Law today for your FREE credit report consultation. A lot of the best rewards credit cards (a key in making FIRE work for you in my opinion), only approve people in the “good” and “excellent” range. Plus according to a new survey more than 90% of people who have asked their mortgage lender or credit card issuer for a break on their monthly bill have been successful.
Lastly, I talk alot about the key to living your best life on this blog; and that's what the FIRE movement is really all about too. It's not just money in the bank. It's a lifestyle that actually takes care of the whole person.