Am I On FIRE?

11:22 PM James 0 Comments

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FIRE (Financial Independence Retire Early) is a grassroots movement that excites me greatly. It's been fascinating to follow the many blogs and podcasts of people self-confident enough to go so against the grain of American consumerism. And there's good reason to: while American households make an average of $74k per year, two-thirds of them would have trouble coming up with $1,000 for an emergency like a hospital bill or a car repair. I can't imagine wants to go through life like that, being stressed about unexpected events that turn into financial emergencies.

But until FIRE, our culture has so much attached baggage to good financial behavior:
  • That's what rich people with stock portfolios worry about, not me, I'm just a normal person. 
  • Only geeks can understand all that math and financial concepts, I don't get it and I don't want to be a weirdo.
  • People who obsess about their money are greedy and antisocial. I like hanging out with my friends and having fun. Besides, I don't want to be one of those 1%ers who don't care about the rest of us.
  • Everyone has (credit card debt, student loans, home loans, car loans, etc). I have my whole life to work, so why wouldn't I (go on that trips, buy that car, buy that house, go to that school)? YOLO.
FIRE, on the other hand, is a welcome antidote:
  • People in the FIRE community practice asking not what you do for a living, but what you enjoy doing outside of work.
  • They acknowledge that not everyone wants to have to work their entire lives or until they're 65. This is something most of us can agree on and get excited about!
  • As a consequence, the discuss pretty quickly turns to how to achieve the option to work less or stop altogether. This is something that many Americans think is utter fantasy. Financial advisors treat this (early retirement) like super-extra credit or a luxury for the rich. But it's not - it's just cause and effect. Want to work less and enjoy life more? Figure out how.
  • FIRE isn't made up of rich people - just people who are willing to think about and make tradeoffs to make their lives better. And that usually involves saving money somehow, either by making more (career hacking or side hustles) or saving more (frugality, index funds, retirement accounts, tax strategies, credit card rewards) - all of which are within anyone's reach, once they realize they don't want to have to work forever to support their lifestyle.
  • No one judges you for not having the newest, best, or most expensive thing. If you do sometimes, it's fine, as long as it fits your values and goals. 
  • There is a bit of one-upsmanship in the areas of extreme frugality and travel hacking, but that's just certain subgroups' version of coupon clipping. People like to make games out of anything. Those things are options but definitely not requirements. And it's nice that if there is any social pressure, it's in a direction that saves people money.
That said, where do I stand on the tenants of FIRE? I'll go through a few of them:

Credit card rewards 

The FIRE community has dove deep into maximizing the value of their credit cards. Some use churning, or opening new cards in rapid succession to cash in on sign-up bonuses. Some chase the best hotel and airline point exchange rates. Some use travel hacking, and build their trips around the best bang for their points.

This is all great, but I'm too boring for that (OK, that's my polite version - I think it's a waste of my time). I have a 2% cash back card (MasterCard Double Cash) and stick to that. I tried churning for a year, but I felt like having all the points in different places was really inconvenient. I also realized that after that year, I had a bunch of accounts with short lifetimes, which actually hurt my credit score. At my point in my life, lower mortgage rates save me thousands per year, so I prefer to have a decent credit score than a free plane trip now and then.

If I were still a frequent traveler or a single person, I would probably give travel hacking more of a shot. It seems like a practice that anyone with discipline could master.

High savings rates

While the average American's savings rate is less than 5%, and 15% is Dave Ramsey's stretch goal, the FIRE community is claiming savings rates of 30%, 40, even 50%, and sometimes more. The shockingly simple math of early retirement is highly motivational in this regard: while folks saving that 5% may never retire, getting to 30% will allow you to easily retire at 50.

My favorite financial planner, Pete The Planner (who has a phenomenal podcast), prescribes saving at least 20% of your income, and really wants Americans to get to 35%. I'm more in his camp - which would make me more like the FIRE community than like the typical spendthrift American - and I'm somewhere in his recommended range. But I doubt I'll take my savings rate past the 50% mark until my career hits "baller" status and I have a title with the word "president" or "chief" in it. 

Why? I live in a high cost of living (HCOL) area in southern California with an amazing wife and kid, which ups the YOLO factor for me. Sure, everything's a balance, and I try to stay on track for both college and retirement. But there are lattes to sip, choo-choo trains to ride, dates (and playdates) to enjoy, and occasionally, non-travel-rewards-trips to embark. 

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I used to be the ultimate long-term planner. I saved everything, spent nothing, and that may have been the right thing to do... when I was in my 20s. But with a family, I have a responsibility to take care of them... and that doesn't just mean in the long term. The Bible says tomorrow is not promised, and Jesus says not to worry about tomorrow, because today has enough trouble of its own. I don't want to be a spendthrift, but I also can't in good conscience deprive my family of experiences that bring us joy and show them I love them. It's not right to save everything for retirement, at the expense of today.

Side hustlin'

Many FIRE followers say there's nothing that'll give your FIRE plan a shot in the arm like a side hustle. Conceptually, a second income stream that lets you up your savings rate from good to better is like a Tesla upgrade that takes you from Fast up to Insane Mode. Of course you'd want that. But like the Tesla, there's always a cost. Time. Or effort.

There's a reason why Americans watch over 30 hours of TV a week (apparently a true statistic, despite how impossible it seems to me) - apparently it's easier and more fun than actually doing a side hustle. So, side hustles are hard. I mean, there's Uber, which is easy: you just drive, but the money won't change your life. Then there's the 4-hour workweek (which is really more like a 10,000 hour career pivot): it'll make you money, but not the alluringly high hourly rate you might expect.

My version of a side hustle has been real estate investing with my wife. It's passive enough that it doesn't feel like a part-time job, but active enough to require serious research and bold decisions. And like I've written before, the money can be pretty good. We like that it's made us experts in the local market and taught us a lot of little life lessons over the last 5 years.

Real estate isn't going to be the right thing for everyone. Heck, with the market as hot as it is, I'm not even sure it's the right thing for me anymore. So I'm looking at other ways to keep hustlin':

  • Helping my in-laws take their online store to the next level
  • Helping my wife get a design business off the ground
  • Doing something with an online course I created, and thinking about making another
  • Consulting, teaching, or getting more involved with my local community
FIRE as yoga

I do yoga. Yoga means different things to different people. For some, it's a total religion, with the "ohms" and mantras and chakras and kombuchas (hey, I live in SoCal, give me a break). These people probably attend a high-end studio, drink fermented herbal teas, and definitely go to retreats.

For others, it's a helpful practice where you take what you can, when you can, and challenge yourself to do more when it works for you. These people probably drop into a class at 24 Hour Fitness or ClassPass, drink craft beer, and wear shirts that say namaste in bed.

FIRE is kind of the same. Some people clearly get into it much more than others. While the most popular voices skew to the religious side, that makes total sense, because they're the innovators. Why would people want to read a blog by a dude who's lukewarm about FIRE, when they can read about people who pay zero income tax, travel the world for free on credit cards, and sell their cars so they can bike around town and plan intentional communities? I love reading and hearing about that stuff, even though I'll probably never do a lot of it.

I do FIRE too. My view on FIRE is that it's a helpful practice. I'm better off for being aware of FIRE, getting inspired by the amazing community, and thinking outside the box of nihilistic American consumerism. By being part of the FIRE community, I'm getting new perspectives every week, and learning things I can incorporate into my life.

So what if my definition of early retirement is 50 instead of 30? So what if my definition of frugality is buying a $4 dinner at my work that would cost me $20 at a restaurant? Or grabbing my wife one of their free iced lattes on my way home? FIRE is a big tent. And I guess I'm in that tent. And the cool thing is, the door's open to anyone.

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