My dad started me on planning for my retirement when I started university.
In addition to getting packed off to school with tears, well wishes, and extra pairs of sock and underwear so that I wouldn’t have to do laundry as frequently – I also got a 3″ floppy disc. For the younger readers, the floppy disc was our equivalent of a USB key and a substantial upgrade from the cassette tapes and stone tablets we used leading up to that. On this disc was my budget in a Quattro Pro spreadsheet and it came with a copy of The Wealthy Barber by David Chilton.
The basic premise was to live within your means and save money for retirement right away so that you can maximize your retirement nest egg. There is a lot wrapped up in that single sentence. I got to see it in action with my parents who retired at 55 and my uncle who retired in his early 40s.
I have kept up the spreedsheet budgets and my homemade excel retirement calculators since I started my practice to track progress and plan for the future. The joke between my wife and I is that we are always on a five year plan. This past year, I started really looking at it more closely for the reasons outlined in Why I am Doing This – A Blog of Ice and FIRE.
So, the concept of Financial Independence and Retire Early (FIRE) is not new. However, it has evolved and matured enough to have a catchy name and a number of great bloggers writing about it.
What I am really seeking is balance in my life and happiness – FIRE is a tool for that.
I think of FIRE as having three main pillars that support living a balanced and happy life. One pillar is earning money, the second is spending money which together make up the FI piece. You are considered FI when your spending needs can be met by using income from your invested money without relying on working. The third pillar is the retire early (RE) piece.
The FI pillars came relatively easy for me.
I am a high income earning professional and living within one’s means is easy when you have considerable means. I have made financial indiscretions that I regret. The torches in the pillars in the headlining picture of this post cost about $10K and you can’t see the other three that don’t friggin’ work. The above picture is the most use I’ve had of them this summer, but they serve to remind me that complicated and expensive is not necessarily better or worth it….. every time I look out my kitchen window. That said, overall I generally followed my parents and uncle in terms of general frugality and spending my money where it counts.
This put me in the enviable position where I could be considered FI if I reduced some of my living expenses down into the range of the average Canadian who still lives a very comfortable life. That had me looking at the option of RE.
The RE pillar I struggled with and decided to redefine.
I will detail the reasons for that in another post, but I think that many professionals face the same internal conflicts and issues when looking at retiring early. There are other options besides traditional retiring early – like working part-time, changing your practice to focus on areas you enjoy while jettisoning those you don’t. FI gives you power and freedom to do those things without worrying about the financial aspect. Even reading the blogs from many successful FI bloggers, they really aren’t retired in the sense that they just sit around on the park bench, feeding the birds, or talking about the weather and kids these days. They are living active, fulfilling lives and doing “jobs” they enjoy (like blogging), raising their families, volunteering in their communities, or travelling. I really think of RE as more of a “RE-focusing” of how you spend your time. It is moving away from spending your time working for someone else to working towards your own goals more directly.
Like flames, the Pillars of FIRE entwine and aren’t static.
If you focused solely on one of the pillars, the flames would consume you. For example, if you focused all of your efforts on earning money, but you spend it all (a common problem for high income earners) then you won’t have enough FI to RE-focus your time on important things. Fortunately, there is a lot of synergy between the pillars – for example, going for a walk with your family is both frugal and focused on important outcomes like health, family bonding, and modelling those things for your children. The amount of emphasis that you put into each pillar is also not static, but changes over time with your personal and professional life cycle.
Like straight out of a Disney movie, life goes in cycles.
As persons, we start out as babies, grow into kids, then walking hormonal bags, many of whom will eventually reproduce, and then raise the next generation.
The professional life cycle has been described as “learning, earning, and returning” with people moving sequentially through those phases of their career spending about 1/3 in each phase. I actually think that we aren’t necessarily bound to the phases sequentially, but rather that we are always yearning for “earning, learning, and returning” as part of human nature. The emphasis of each aspect and how we actually do it just shifts over time. With FIRE, the proportion of time spent with emphasis on the second phase can be shortened allowing more time for “learning and returning” dominated phases which I personally find more fulfilling.
Having a happy and fulfilling life is the goal and balancing the pillars of FIRE is key.
How can we do this?
- Spend some time learning about how to manage your finances both currently and for the future. This means looking at how you earn money, how you spend it, how you save and invest it. Work towards FI.
- Think critically about what is important to you and how that matches up with how you spend your time and money. RE-focus.
- Act on #1 and #2.
- Rinse and Repeat. Personal and professional life is an revolving cycle and FIRE will dance and shift over time like flames.