When we started this blog last year (2016) I had never heard of FIRE. I actually had to google it to find out it meant Financial Independence / Retire Early. Basically, there is this growing movement of people who are realizing you don’t have to work a 9-5 job your whole life and can go another way. Two people that you have probably heard of are Mr. Money Mustache and Financial Samurai. These two guys have gone about getting out of the rat race very differently but they have both been a huge inspiration for myself.
What Is FIRE
Let us start with a definition. Since this is my post, I will give you mine. I will have reached FIRE when my investable assets are 20X my average annual spending. If we spend $50,000 per year, we need a million dollars spread across 401ks, IRAs and brokerage accounts. I use 20X because that is a 5% withdrawal rate, which is aggressive, but it assumes you spend the same in retirement, you don’t get social security and you never earn another dollar.
Early retirement, for me, is about being able to leave behind corporate America and being able to choose if I continue to earn money. It is difficult to put an age number on “early” retirement as it is different for everyone. If you thought you would have to work till 75, but have figured out how to retire at 65, then that is early for you. Personally, our goal is to be done by 40, or 10 years from now.
Right now, I leave my house at 7:20am and get home at 5:40pm. Factor in the time spent getting ready and that is 11 hours per day, Monday – Friday. That is 55 hours a week, or roughly 2,750 hours a year. Working these kind of hours didn’t bother me until very recently and now it gets to me about once a week. I currently see my 8-month-old daughter about 1-2 hours per day during the week. I know I need to work to provide for her but that work-life balance thing is feeling off.
FIRE, to me, isn’t about being able to quit working, per se. I just want to be able to choose how I spend my time without having to factor in money. There is no way I’m leaving work at age 40 to just drink during the day, play golf and nap. I have every intention of continuing to work and earn money but it will be on my own terms.
When I look around at most of the people out there who have retired young, they are staying quiet busy with their blogs, traveling, writing books, coaching clients, maintaining rentals and caring for their kids. These people aren’t just sitting in a dark house with no A/C eating rice to survive.
How to Get FIRE
Spend less and save more. Sounds easy enough. If our annual expenses are $80,000 then we need 1.6 million before we can start transitioning out of “real” work. If we only spend $40,000 then we only need $800,000 which seems extremely doable in 10 years. We have been fighting hard to keep expenses in check this year. This is difficult to do with a baby in daycare, but we are making improvements every month.
Develop some passive income. People have different ways of doing this, but rental income seems to be far and away the most popular. In the next few years, we are looking to either turn our current house into a rental or purchase a rental property. Even just a few hundred dollars a month can help out tremendously to keep your nest egg intact during retirement. I am optimistic that I will still be blogging then, too, and will have developed some other means, through that.
Line up some kind of side hustle for retirement life. Like I said, early retirement isn’t about just sitting around doing nothing. That is depressing. 10 years is pretty far off, but blogging is a fantastic way to earn a little money and stay connected with people. I may also do some engineering work on a consulting basis. Difficult to say where we will be in 10 years.
Finally, being debt free isn’t required, but it would sure make things easier. You want your revolving payments to be as low as possible every month. If you could have your house paid off, it takes your annual expenses down a lot. I am not sure if we will be able to pull this one off if we get into the rental game. I would probably justify not being debt free as long as one of the houses was paid for.
Life is like a movie in which we already know the ending. When people get old and are dying, they always wish they would have spent less time working and more time with friends and family. Suddenly, money in the bank and all those promotions seem to not matter. Yet, we still charge straight ahead to watch the movie play out in our own lives. Reaching Financial Independence and being able to Retire Early is about writing a new ending to my personal movie.
Are you chasing FIRE? How do you keep a work-life balance until then?