The Dangers of FIRE (Financial Independence, Retire Early)
This FIRE movement has spread quite a bit in the last decade. Becoming Financially Independent with the goal of Retiring Early (FIRE) is quite enticing. Here is how we define these terms:
- Financial Independence: the ability to afford all living expenses without the need for employment
- Early Retirement: leaving employment before the age of 62 (many aim for retirement between 45 and 55 years old)
In essence, we want to achieve financial independence by maximizing our savings rate, which can be obtained by spending less and/or increasing income. This will in turn give us the freedom to retire as soon as possible.
There are plenty of testimonials from people that have saved up enough to cover all their expenses in early retirement. They generally take one of two routes:
- Save a large sum of money that they will continue to withdraw from in retirement
- Create enough sources of passive income to generate a livable income each year in retirement
That being said, I’ve found myself tunnel-visioned on the benefits of early retirement, like the opportunity to travel more, sleep more, and pursue business ideas and hobbies I’ve put on hold. Financial independence simply gives us options, which is very appealing.
But there can be some downsides to our lifestyle and health if our attempts to FIRE are not handled appropriately.
I wanted to share what I’ve noticed about this FIRE movement and those that put every waking minute into achieving FIRE.
As I started considering FIRE, I realized all the ways I’m wasting my money.
When I start budgeting, I found the expenses I didn’t need and cut them out of my life.
When I started saving and investing, I realized that more of my money should go into a high-interest savings account instead of a high-end restaurant in the city.
In pursuit of financial independence, the only thing that mattered to me was economic self-sufficiency.
I never thought about others, or my relationship with them, because they would become roadblocks in my path to FIRE.
What we can lose in our goal of early retirement is our social awareness. We can lose sight of how this world is lacking and how we can help. We lose sight of how our friends are lacking and what we can do for them. We often treat ourselves like gods, believing that we deserve to live a certain lifestyle, leaving everyone else behind.
What to do about it
Something that was very pivotal for me was understanding the power of money to do good in this world and my ability to give.
We can always give something. Anybody nearing financial independence is almost always in a position to give. Maybe it’s
3% of their income. Maybe it’s
10%. There’s no hard-set rule. Either way, there is always a number of dollars or a percentage of our income we can joyfully give.
Giving includes but is not limited to:
- Tithing or donating to the local church
- Donating to non-profit organizations or charities
- Supporting your parents in their old age (in-home care, assisted living, etc)
- Saving money to respond to one-off needs that community members may have (emergency fund for others)
Some employers will actually perform similar 401(k) matching to charitable giving, allowing us to give maybe
5% of pre-tax income while doubling it.
Passive income and passive outcome streams. As a result of all this, we can begin sectioning off a portion of our investments as our charity money, hoping to one day become financially independent with passive income streams as well as passive outcome streams. I may or may not have just made up this phrase, but I kind of like it.
2. Stress and Anxiety
I work in an industry that pays above-average salaries to most employees. However, I was still obsessed with the idea of having more money.
My first thought when I wake up has always been, “How much money did I make last night?” or “How much did I save this week?”. My thoughts during the day always include, “What if I saved just a little more right now?” and “I wonder how well my portfolio is doing…”.
I already know how privileged I am to be in the position I’m in. I know I should be able to live comfortably in the next few years.
But I found myself worrying about money every single day.
I found myself worrying about financial instability in my future family that doesn’t exist yet.
I found myself worrying about how I’ll stay alive in a HCOL city.
I found myself worrying about how I’ll support my parents with my savings and my investments.
What to do about it
One explanation helped me quite a bit.
Assessing our own joy. If we are unable to find joy in our life right now that includes a comfortable salary, savings, investments, an emergency fund, enough to go on vacations once in a while, then no amount of extra money will bring us joy.
I realize that even if I get a
10% raise, I’ll still worry about the same things as I was before. My work and investments were such a big part of my identity that I couldn’t even partake in small-talk that wasn’t money-related. I found I missed out on so many opportunities to make meaningful relationships.
This ultimately means that even if I achieve financial independence completely, I will never be fulfilled in it.
I was also under the impression that financial independence was the only way to “succeed” in the future. It was the only way to know if I’ve made it.
If my only path to success is one filled with worry and devoid of joy, then what am I doing putting all my effort into saving every last penny I earn?
As crazy as it sounds, sometimes money isn’t the answer. I decided to look elsewhere for that sense of joy and security. I decided to seek deeper relationships with friends and family and found that sometimes these journeys aren’t worth it if they’re done alone.
There is so much more to say, but maybe I’ll leave that for another time.
Financial independence and early retirement is a great goal to have. It drives and motivates people. We all want that kind of financial freedom in our lives, but we don’t want to lose sight of the world around us.
While all our paths are different, I hope my thoughts helped you or were at least interesting to read. Keep pushing through 🙂