6 Reasons to Try the FIRE Movement

The idea behind FIRE is if you can earn more money, live on less, and save and invest the rest, you can cut years — or even decades — off of your working career. Of course, the FIRE movement has its problems. 

Not everyone can save 50% or more of their income to work toward FIRE. And most who retire early continue working in some capacity to avoid running out of money early. Also, achieving FIRE is considerably easier during times of economic prosperity — no matter what anyone says, it would’ve been a lot harder to get excited about FIRE in 2008 when the Dow dropped by 33.84%!

Achieving FIRE and retiring early sounds good in theory, but it’s actually very hard to execute in a real-world sense. But here’s why you should try anyway.

6 Reasons FIRE Still Works

But, you know what? I would argue that anyone who can, should at least try to pursue FIRE anyway. As I’ve become more interested in financial independence, I’ve learned that there are side benefits to cutting expenses and learning to save money and invest more. Some advantages to FIRE don’t even have anything to do with money at all.

If you’re on the fence about FIRE, here are some of the reasons you might want to change your way of thinking and get on board.

1. Encourages Living With Intention

After reading Michael Hyatt’s book, Living Forward, its concept of “drifting” stuck with me. Drifting occurs any time you’re going through the motions in life, but living without any concrete plans or goals. 

Maybe you’re going to work every day, taking care of your kids, and keeping up with bills. But in these day-to-day tasks, you’re not actively achieving anything in particular. 

You’re just waking up and getting by.

With the FIRE movement though, you learn to live with intentionality because you’re forced to focus on your spending, and the specific goals necessary to reach financial independence. 

As you pursue FIRE, you can’t simply drift through life in hopes that the numbers work out in your favor. To have enough money to retire early, you need a plan. You have no choice but to set goals, and the act of doing so forces you to get real about how you’re living and what you really want in life. 

Are you saving to buy a house? Are you saving to pay for college? Are you saving to retire early? Whatever your goals are, FIRE forces you to reverse engineer your long-term plan so it’s actionable and intentional today.

2. Feels More Financially Secure

Here’s another potential side benefit of pursuing FIRE — you get the opportunity to feel more secure and sleep better at night. This is something I personally experienced when I started becoming FIRE-minded, but it’s also backed up by research. 

In fact, a 2019 survey from Schwab showed that 63% of people with a written financial plan said they felt financially stable, compared to only 28% of those without a financial plan. Further, 56% of people with a financial plan said they felt “very confident” about reaching their financial goals.

If you’ve ever felt helpless about your finances before, then this probably makes total sense. Having a plan provides some comfort — even if you are far away from your goal. At least you’re working toward something, and that provides peace of mind. 

3. Forces You to Take Control

I don’t always agree with everything Dave Ramsey says, but I do love some of his best quotes. One example is:

“You must gain control over your money or the lack of it will forever control you.” — Dave Ramsey

The point I’m making is that, if you don’t ask yourself important, uncomfortable questions, you might never get control of your finances — or your life. 

Think about it this way. If you’re drifting through life and spending money without really saving for a goal, you’re at the mercy of your job and outside factors that affect your income and savings. But if you learn to take control of your spending, you’ll also learn to take control of your future finances in ways you probably never realized before.

When most people start pursuing FIRE, they realize right away that the biggest part that’s in their control is their spending. The other side of that coin is, of course, how much you’re able to save.

A recent survey from the Federal Reserve Bank of St. Louis shows the average American set aside 5% to 8% of their income in savings. In contrast, those who pursue FIRE, frequently save 50% to 70% of their incomes toward their goals. 

When you find a way to save a large percentage of your income, this means you’ve taken control of the reins. You have goals and you have a purpose, and your money is no longer controlling your future. You are.

4. Empowers You with Information

According to a joint study from PwC US and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University, only 24% of millennials demonstrate basic financial literacy. And, even with minimal knowledge of their own, only 27% had sought out professional financial advice. 

This is one area where even studying FIRE can leave you dramatically ahead. After all, pursuing FIRE or even reading about it forces empowers you with information about saving and investing for the long haul. 

For example, through FIRE you’ll randomly learn personal finance lessons like the 4% rule for retirement and how to create a budget. These are cornerstone concepts of the FIRE movement. 

You’re also forced to think about your income and your financial situation in a brand new way. This includes questions, like “How much are you actually earning?” and “How much interest are you paying toward debt every month?”

As a financial advisor, I can tell you for sure that a lot of people don’t know the answer to any of these questions because they’ve never thought about it before. You wind up learning so much that can help you along the way toward your goal.

5. Learn How to Budget and Question Yourself

I remember back in the day when my wife and I first started getting serious about budgeting. We’d sit down to look over our bills, and were shocked by some of our ongoing expenses and subscriptions. 

These budgeting “meetings” made a big difference in how we worked together to achieve our financial goals. When we sat down to look over our expenses, our income, and where we were headed, we found ways to spend less without affecting our quality of life.

Now, I hate budgeting, but I do think it’s an important part of pursuing FIRE — especially at first. After all, you can’t really work toward major financial goals if you have no idea where your money is going every month. 

And, the thing is, you can’t really argue anything when you start budgeting and tracking your expenses. You get the chance to see where your money went, in black and white, and you get the opportunity to act accordingly. This may sound like a huge buzzkill, but I’ve found that taking control and budgeting is actually really empowering. 

Crazily enough, not enough people have any idea how they spend the income they work so hard to earn. In fact, a recent survey from the budgeting app Mint found that 65% of respondents had no idea how much they spent last month. 

When you ask someone pursuing FIRE how much they save each month, these people know. In fact, they often know their savings amount down to the penny. 

6. FIRE Helps You Be Grateful

Finally, there’s one more major benefit of FIRE that goes largely ignored. I’m going to call it the “contentment factor”. It’s the ability to be content with what you have. 

Everything involved with FIRE — tracking your spending, cutting things you don’t care about, creating long-term goals — can really put your life in perspective for you. It also makes you realize you might have more power over your life than you realized. That’s a pretty amazing lesson. 

And of course, learning contentment leads to learning how to feel grateful. How amazing is it that, in this broken world we live in, you can earn a living, care for your family, and set aside something for the future? How amazing is it that you have the chance to work hard and retire early, and then spend decades doing whatever it is you love?

This brings me to a quote I love from Oprah:

“Be thankful for what you have; you’ll end up having more. If you concentrate on what you don’t have, you will never, ever have enough.” ―

Oprah Winfrey

This is what I love about FIRE; it really encourages you to be grateful and teaches you to be content with what you have. After all, there is no way you could ever save 50% or even 30% of your income without these lessons. 

Pursuing FIRE teaches you that you don’t need the hottest pair of sneakers, and that you might not need that cable television package you pay for each month. It teaches you that a huge car payment isn’t worth it, and that any “friend” who judges your car probably isn’t a good one. 

Learning about FIRE makes you ask yourself all of these questions, and sometimes, that’s all it takes to realize how good you have it.

Garth Brooks once said that “you aren’t wealthy until you have something money can’t buy.” 

And perhaps that’s the greatest benefit of pursuing FIRE. You learn that happiness and true contentment comes from within. And that, my friends, is priceless.

The post 6 Reasons to Try the FIRE Movement appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

Let the Roaring 2020s Begin

First some great news: because of your support in reading and sharing this blog, it has been able to earn quite a lot of income and give away over $300,000 so far.

The latest $100k of that happens at the end of this article. Please check it out if you want to feel good, learn more, and even join me in helping out the world a bit.

As I type this, there are only a few days left in the 2010s, and holy shit what a decade it has been.

Ten years ago, a 35 year old MMM and the former Mrs. MM were four years into retirement, but not feeling very retired yet. We stumbled out of 2009 with a precious but very high strung three-year-old, a house building business that was way more stressful than it should have been, and a much more rudimentary set of life skills. It was a time of great promise, but a lot of this promise was yet to be claimed.

Ten years later, despite the fact that I have one less marriage, one less surviving parent, and ten years less remaining youth, I am in an even better place in life right now, and would never want to trade places with the 2009 version of me. And on that measure alone, I can tell it has been a successful decade.

This is a great sign and it bodes well for early retirees everywhere. Compared to the start of the decade, I am healthier and stronger physically, wealthier financially, and (hopefully) at least a bit wiser emotionally. I’ve been through so much, learned so much in so many new interesting fields, and packed so much living into these 3653 days. A big part of that just flowed from the act of retiring from my career in 2005, which freed me up to do so many other things, including starting this blog.

It has not always been easy, in fact the hard times of this decade have been some of the hardest of my life. But by coming through it all I have learned that super difficult experiences only serve to enrich your life even more, by widening your range of feelings and allowing you to savor the normal moments and the great ones even more.

Ten Years of Learning in Three Points

I think the real meaning of “Wisdom” is just “I’ve seen a lot of shit go down in my lifetime and over time you start to notice everything just boils down to a few principles.

The books all say it, and the wise older people in real life all say it too. And for me, it’s probably the following few things that stand out the most:

1) This Too Shall Pass: nothing is as big a deal as you think it is at the time. Angry or sad emotions from life traumas will fade remarkably quickly, but so will the positive surprises from one-time life upgrades through the sometimes-bummer magic of Hedonic Adaptation. What’s left is just you – no matter where you go, there you are.

2) But You Are Really Just a Bundle of Habits: most of your day (and therefore your life) is comprised of repeating the same set of behaviors over and over. The way you get up, the things you focus your mind on. Your job. The way you interact with other people. The way you eat and exercise. Unless you give all of this a lot of mindful attention and work to tweak it, it stays the same, which means your life barely changes, which means your level of happiness barely changes.

3) Change Your Habits, Change your Life: Because of all this, the easiest and best way to have a happier and more satisfying life is to figure out what ingredients go into a good day, and start adding those things while subtracting the things that create bad days. For me (and quite possibly you, whether you realize it or not), the good things include positive social interactions, helping people, outdoor physical activity, creative expression and problem solving, and just good old-fashioned hard work. The bad things mostly revolve around stress due to over-scheduling one’s life, emotional negativity and interpersonal conflict – all things I am especially sensitive to.

So while I can’t control everything, I have found that the more I work to design those happiness creators into my life and step away from things that consistently cause bad days, the happier and richer life can become.

Speaking of Richer:

I recently read two very different books, which still ended up pointing me in the same direction:

This Could Be Our Future, by former Kickstarter cofounder and CEO Yancey Strickler, is a concise manifesto that makes a great case for running our lives, businesses, and even giant corporations, according to a much more generous and person-centric set of rules.

Instead of the narrow minded perspective of “Profit Maximization” that drives so many of the world’s shittier companies and gives capitalism a bad reputation, he points out that even small changes in the attitude of company (and world) leaders, can lead to huge changes in the way our economy runs.

The end result is more total wealth and happier lives for all of us – like Mustachianism itself, it really is a win/win proposition rather than any form of compromise or tradeoff. In fact, Strickler specifically mentions you and me in this book, using the FIRE movement as an example of a group of people who have adopted different values in order to lead better lives.

Die with Zero*, by former hedge fund manager and thrill seeking poker champion Bill Perkins sounds like a completely different book on the surface: Perkins’ point is that many people work too long and defer too much gratification for far too long in their lives.

Instead, he encourages you to map out your life decade by decade and make sure that you maximize your experiences in each stage, while you are still young enough to enjoy each phase. For example, do your time in the skate park and the black diamond ski slopes in your 20s and 30s, rather than saving every dollar in the hopes that you can do more snowboarding after you retire in your 60s.

Obviously, as Mr. Money Mustache I disagree on a few of the finer points: Life is not an experiences contest, you can get just as much joy from simpler local experiences as from exotic ones in foreign lands, and spending more money on yourself does not create more happiness, so if you die with millions in the bank you have not necessarily left anything on the table. But it does take skill to put these truths into practice, and for an untrained consumer with no imagination, buying experiences can still be an upgrade over sitting at home watching TV.

However, he does make one great point: one thing you can spend money on is helping other people – whether they are your own children, family, friends, or people with much more serious needs like famine and preventable disease.

And if you are going to give away this money, it’s better to do it now, while you are alive, rather than just leaving it behind in your estate, when your beneficiaries may be too old to benefit from your gift anyway.

So with this in mind, I made a point of making another round of donations to effective causes this year – a further $100,000 which was made possible by some unexpected successes with this blog this year, combined with finding that my own lifestyle continues to cost less than $20k to sustain, even in “luxury bachelor” mode.

And here’s where it all went!

$80,000 to GiveWell, who will automatically deliver it to their top recommended charities. This is always my top donation, because it is the most serious and research-backed choice. This means you are very likely doing the most good with each dollar, if your goal is the wellbeing of fellow human beings. GiveWell does constant research on effective charities and keeps an updated list on their results – which makes it a great shortcut for me. Further info in my The Life You Can Save post.

Strategic Note: I made this donation from my Betterment account where I keep a pretty big portion of my investments. This is because of tax advantages which multiply my giving/saving power – details here at Betterment and in my own article about the first time I used this trick.

$5000 to the Choose FI Foundation – this was an unexpected donation for me, based on my respect for the major work the ChooseFI gang are doing with their blog and podcast and meetups, and their hard-charging ally Edmund Tee who I met on a recent trip. They are creating a curriculum and teaching kids and young adults how to manage their money with valuable but free courses.

$2000 to the True Potential Scholarship Fund, set up by my inspiring and badass Omaha lawyer friend Ross Pesek. Ross first inspired me years ago by going through law school using an extremely frugal combination of community and state colleges, then rising to the top of the pack and starting his own firm anyway. Then he immediately turned around and started using some of the profits to help often-exploited immigrant workers in his own community with both legal needs and education.

$1000 to plant one thousand trees, via the #teamtrees effort via the National Arbor Day Foundation. I credit some prominent YouTubers and Elon Musk for promoting this effort – so far it has resulted in over 20 million trees being funded, which is a lot (roughly equal to creating a dense forest as big as New York City)

$5000 to Bicycle Colorado – a force for change (and sometimes leading the entire United States) in encouraging Colorado leaders and lawmakers to shift our spending and our laws just slightly away from “all cars all the time” and towards the vastly more effective direction of accommodating bikes and feet as transportation options. Partly because of their work, I have seen incredible changes in Denver, which is rapidly becoming a bike utopia. Boulder is not far behind, and while Longmont is still partially stuck in the 1980s as we widen car roads and build even more empty parking lots, these changes slowly trickle down from leaders to followers, so I want to fund the leaders.

$5000 (tripled to $15,000 due to a matching program that runs until Dec. 31) to Planned Parenthood. Although US-centric, this is an incredibly useful medical resource for our people in the greatest need. Due to emotional manipulation by politicians who use religion as a wedge to divide public opinion, this general healthcare organization is under constant attack because they also support women’s reproductive rights. But if you have a loved one or family member who has ever been helped during a difficult time by Planned Parenthood, you know exactly why they are such an incredible force for good – affecting millions of lives for the better.

And finally, just for reasons of personal and local appreciation, $1000 to the orchestra program of little MM’s public middle school. I have been amazed at the transformation in my own son and the hundreds of other kids who have benefited from this program. They operate a world-class program on a shoestring (violin-string?) budget which they try to boost by painstakingly fundraising with poinsettia plants and chocolate bars. So I could see that even a little boost like this could make a difference. (He plays the upright bass.)

You could definitely argue that there are places that need money more than a successful school in a wealthy and peaceful area like Colorado, and I would agree with you. Because of this, I always encourage people not to do the bulk of their giving to local organizations. Sure, it may feel more gratifying and you may see the results personally, but you can make a much bigger difference by sending your dollars to where they are needed the most. So as a compromise, I try to split things up and send the lion’s share of my donations to GiveWell where they will make the biggest difference, and do a few smaller local things here as a reward mostly for myself.

So those are the donations that are complete – $99,000 of my own cash plus an additional $10,000 in matching funds for Planned Parenthood. But because environment and energy are such big things to me, I wanted to do one more fun thing:

$5000 to build or expand a local solar farm.

This one is more of an investment than a donation, but it still does a lot of good. Because if you recall, last year I built a solar array for the MMM Headquarters coworking space, which has been pumping out free energy ever since. My initial setup only cost me $3800 and it has already delivered about $1000 in free energy, more than the total amount used to run the HQ and charge a bunch of electric cars on the side.

So, I plan to invest another $5000, to expand the array at HQ if possible, or to build a similar one on the roof of my own house, possibly with the help of Tesla Energy, which is surprisingly one of the most cost-effective ways to get solar panels installed these days. These will generate decades of clean energy, displacing fossil fuels in my local area while paying me dividends the whole time, which I can reinvest into even more philanthropy in the future.

What a great way to begin the decade. Let’s get on it!

* Die With Zero is not yet released, but I read a pre-release copy that his publisher sent me. The real book comes out on May 5th

** Also, if you find the scientific pursuit of helping the world as fascinating as I do, you should definitely watch the new Bill Gates documentary called Inside Bill’s Brain, which is available on Netflix.

Source: mrmoneymustache.com