The FIRE Movement vs Work Till You Die

Justin WallerNewsLeave a Comment

In our polarized world, extremes often get highlighted. For example, in a recent study, the Federal Reserve Board concluded that 40% of Americans can’t afford to pay for an unexpected $400 expense. However, this often-cited extreme isn’t an accurate representation of reality.

The Fire Movement

The FIRE movement (Financial Independence, Retire Early) frequently finds itself situated at the extreme end of the financial spectrum. In the FIRE community, individuals are celebrated when they save in excess of 50, 60, and sometimes as high as 90% of their income. Essentially, the more you save, the less time you have to work.

On the other end of the spectrum, you have those who don’t set aside much (if any) savings for retirement. This approach essentially requires you to work until the day you die. Not only does this sound grim, but it’s also completely unrealistic. As we age, our health prevents us from working at the same pace that we could in our 20’s. At some point, you will have to stop working and enjoy your golden years.

A Happy Middle Ground 

It is easy to think there are two extremes and nothing in the middle, but I think the middle is wrongfully ignored. The financially well-balanced, well-adjusted individuals reside in the middle. You won’t find any Maseratis here, but you also won’t find a lot of financial desolation either. Instead, you will see some weekly dinners out with family and friends and you will see a healthy long-term financial picture. 

This picture will also include a healthy balance of travel/hobby expenses and hard-earned fun.

This is not to say that balance is easy. In fact, maintaining balance is pretty difficult. If you are clipping coupons and selling bodily fluids on Craigslist, there might be a celebration there.  If you are leveraging yourself to the gills and going on fancy vacations all the time, there are distractions there. 

However, in our polarized world, staying well-balanced often comes without fanfare.  The daily sacrifices and the daily celebrations can add up to a great life, but it won’t be a life highlighted by the extremes.  

How to Live a Well-Balanced Financial Life

I will spare you the clickbait type list of “10 ways to financial freedom before the age of 40” and the like, but I will give you these 5 steps for living a well-balanced financial life:

  • Know where you are financiallyThere are two important metrics that you should focus on here: Net Worth and Cash Flow. You can calculate your net worth by subtracting your liabilities (what you owe) from your assets (the value of what you own). Alternatively, cash flow refers to the movement of money (both incoming and outgoing). These two metrics will give you an accurate picture of your current financial situation.
  • Think about your priorities – What is important to you now? What things do you anticipate being important to you in the future? Figuring out where your priorities lie will help you create a road map for your finances.
  • Know where you want to go – You will need to make some realistic calculations of your future income, sustainable withdrawal rates, and net spendable targets. Once you’ve set your targets, you have something to aim for as you build a financial plan.
  • Build a plan – Once you’ve got an idea of where you want to go, you need to develop an actionable plan to get there. This will require an effective wealth accumulation strategy that takes all of the aforementioned calculations into account.
  • Have options When things don’t go according to plan, you need to have a back-up plan (or six) to avoid disaster.

Comparing the Past, Present, and Future

“Comparison is the thief of joy.” – Theodore Roosevelt.  

I would qualify this quote by saying that comparison to others is the thief of joy. Comparing your income to that of your neurosurgeon cousin will just make you unhappy. However, comparing yourself to you from a year ago (or even a future version of yourself) is a healthy way to make progress. 

It allows you to take note of the improvements you’ve made and celebrate how far you’ve come. 

Comparing your financial situation today to where you were a year ago could also help make you aware of a financial issue that needs to be addressed.  

Thinking about where you really want to be in a year will give you the energy and passion to make your dreams come true, one step at a time.

Q: How do you eat an elephant?  

A: One bite at a time.

Focus on what you can control and live your great life.

If you could benefit from a financial coach that can help you find balance in your financial life, we should talk! Click here to schedule a 30-minute (virtual) conversation today! We can discuss your unique situation so that you can learn more about Waller Financial and determine if we’re a good match.

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