While I’ve shared a lot of advice and tactics so far, I realized I haven’t fully shared the details of our Master Plan to reach FIRE (Financial Independence/Retire Early). The details aren’t too complicated, otherwise we probably wouldn’t understand or follow it!
The plan
- Build frugality into our lives while having fun and get to a savings rate that will at most require ten years of work
- Invest most of the savings in the stock market, and use the rest to make small bets on riskier investments that have the potential to pay off BIG and accelerate our path to FIRE
- Figure out what we love about life along the way, so we know what we’ll want to do when we retire (other than travel)
- Retire, travel, have fun (and probably kids)
That’s it.
The details
Be frugal, save hard
Step 1 is pretty easy, especially if you don’t take yourself too seriously, realize you’re going to make mistakes, and just shoot to get a little better each month and year. If you look at it as a game, it’s fun!
The hardest part about this step is getting to a savings rate that brings retirement down to ten years or less, which requires a savings rate around 65-70%, assuming you’re starting from nothing. Given we’ve been at this for a bit, our target may be more accurately portrayed by saying we want to retire by 35, if not before.
If we were on the median US income, this would require some extreme frugality, but we’re not, so it doesn’t. By some standards, we’re extremely frugal, but by others (Mustachian standards, for example), we’re not. I like to spend on food. Some of our friends are probably more frugal than us in some areas, although less in others. Overall, I would describe us as “moderately frugal.”
Invest
Step 2 is even easier, assuming you’ve accomplished step 1. Like most in the FIRE community, I’m a passive index investor. I mostly invest in low-cost total stock market funds (Vanguard where possible) with a few bonds thrown in, take advantage of all my tax advantaged accounts, and try not to leave too much money sitting on the table.
There are a couple areas where my investing philosophy departs from the traditional FIRE strategy or at least the passive index fund investor strategy, however. Given we’re investing such a huge proportion of our income, I figure I have a little bit of wiggle room or “play money.”
While the vast majority of our savings go into the stock market, occasionally I come across opportunities that are highly risky, but could pay off big if they succeed. One example of this would be cryptocurrencies. I treat money I invest in long, risky bets like these as play money, and only invest money I’m willing to lose 100% of. I think of it similar to gambling or paying for entertainment.
Ultimately, the couple thousand I’ve bet on these over time would hardly have been noticed if lost and are worth many more thousands than what I put in, although it could easily have gone the other way. I don’t recommend this unless you know what you’re doing and have a lot of capital to spare.
The other area I’ve departed from passive index investing (although perhaps not as much from the FIRE community) is in real estate. We bought a house at the end of last year, with the idea of accelerating our path to FIRE while improving our lifestyle. So far, the house has been much more expensive than expected, but only time will tell. Either way, we’re having fun.
Have fun, figure out our passions
This is the most important part! Many in the FIRE community seem to look at the “working” years as a sort of trial they have to endure until they reach the “Holy Grail” of FIRE: retirement. I think this is slightly misguided.
This is the real secret to life—to be completely engaged with what you are doing in the here and now. And instead of calling it work, realize it is play.
~ Alan Watts
For starters, work doesn’t have to be a grueling experience to endure. My thought is you should learn to find the play in whatever work you’re doing. In fact, I’ve recently started calling my “work” aka my job “play” and viewing it as a game I’m choosing to play for a little while, which is technically true. Surprisingly, this subtle shift makes a huge difference!
If you really hate your job, you should find something better to do with your time that still pays. Nothing is worth enduring hell, and if you give up enjoying life now, there’s no guarantee there will be a “then” to enjoy in the future.
You could drop dead before finishing this article or die in a nuclear Armageddon. Sure, it’s improbable, but the point is that each moment is a gift and should be treated as such.
I’ve realized for some time that FIRE was starting to serve as a sort of excuse for me: a way to kick an important question down the road. What is my passion? What do I really want out of life? What will I do when I retire?
For Mrs. Wallet and I, part of that answer is teaching yoga. For me, part of the answer may be this blog. Only time will tell, but you’d better bet we’ll have fun along the way!
When I hear about people who retire and find themselves unhappy or wanting to go back to work, my guess is they never answered these questions and expected retirement to solve all of life’s problems for them and make them happy. The truth is, retirement won’t make you happy, any more than any external thing or accomplishment will.
Sure, you’ll feel good for a moment, maybe even a long moment, but then you’ll go back to all your normal human concerns and questions about life. If you’re not answering these questions and having fun along the way, you’re setting yourself up to be disappointed when you look back at all the life you could have lived.
For Mrs. Wallet and I, travel is an important part of having fun and figuring out where we fit in the world, which is where travel hacking enters the picture. We’re not willing to sacrifice seeing the world and having fun, even while on our “mad dash” to retirement. It doesn’t hurt that it helps the ‘ole pocketbook, either.
We also do some other things to try to see if we can’t speed up our journey to FIRE while having fun by doing things like experimenting with side hustles. When we want to hang out with friends, we have them over to our place or go to theirs instead of the bar or a restaurant, and we’ve found that we vastly prefer this.
Much of FIRE is more about figuring out what really makes you happy in life than about just saving money, but luckily the two generally seem to coincide. Money doesn’t and won’t bring you happiness.
Retire, etc
While I just covered how we expect to have fun along the way, I expect us to ramp it up upon retirement. In the next four or five years I expect we’ll have an even clearer picture of what turns us on about life and where our passions lie; we’ll see.
Upon retirement we’ll probably take at least a year or two of extended travel to destress from work, prioritizing countries with low costs of living first to help manage sequence of returns risk. After that, we’ll likely invest more time and energy into our yoga business (if it still exists), this blog, and any other passion projects we’ve picked up along the way.
We’ll likely also have a kid or two, enjoying the freedom to actually raise them ourselves that FIRE will provide, and any other fun things we can think of. At that point, the world is our oyster even more than it is today. Who knows what we’ll actually do when the time comes.
Our spin on FIRE
Many people view FIRE as a sort of “be all end all” goal. I believe that’s a trap and can set you up for disappointment. Life is much richer than playing the financial game and retiring early, and you shouldn’t wait till retirement to figure out what really turns you on about the world. Equally importantly, each moment is a gift, and you should treat it as such and have fun along the way!
After reading the shockingly simple math behind early retirement and looking at how long it would take to retire at different savings rates, I decided ten years was the most I was willing to work. This is our take on and plan for FIRE. What turns you on about life? Do you have a different take on FIRE?
Love,
(Your) Wallet
