Fire is a passionate and unforgiving substance. It keeps you warm, heats your meals, and provides light in the dark. When wielded carefully, it is a force to be used for good. Financial FIRE (Financial Independence Retire Early) is no different. We all remember what it was like when that FIRE lit up the dark cave in which we previously lived.
It was a true light bulb moment.
Yet, we must understand that like any other fire, financial FIRE must be wielded carefully. If we share it with everyone we come across, some conversations will likely result in combustion.
Where does the heat come from when we discuss FIRE with colleagues, partners, or friends?
It comes from the three components that allow us to achieve FIRE and then embolden us to want to talk about it:
1) Having a high Wealth Accumulation Rate (> 25-50%).
2) Investing efficiently with the money we save.
3) Living a frugal life and keeping your expenses low.
Before you discuss FIRE with everyone you meet, bring a FIRE extinguisher before talking with the following four groups of people.
Group 1: The Joneses
It’s hard to keep up with the Joneses.
The Joneses have it all! Awesome cars, the house, private school for the kids, designer clothes, and they eat lavish meals and travel on the regular. They fly first class, of course.
Why does this crew get burned by FIRE discussions? Because it’s hard to achieve FIRE when you are upside down in debt, which is normally the case for most Dr. Joneses.
This may come as a surprise to you, but spending money does ≠ wealthy. If you are in training or a newly minted professional, read that last sentence again.
In fact, spending a lot of money on stuff usually means the exact opposite – people are failing to build wealth.
The Joneses’ net worth is usually and unsurprisingly very low.
This group of people will get upset with you if you discuss frugality in front of them. They’ll tell you to “live a little!” They support the notion (despite the study shown below) that spending more money makes you happier.
Someone much wiser than me once said it would be easier for a camel to pass through the eye of a needle than for the rich to reach the promised land. It’s tough for the rich.
They’d have to give away all of that stuff that doesn’t build wealth first!
Group 2: The Inefficient Investor
This group could be subdivided into a few others.
That division would include: the person with a “financial guy,” those that are “too busy,” and the ones who think they have it all figured out and, yet, are investing in individual stocks, actively managed funds, or some extreme portfolios. Either way, they don’t understand that index funds are king.
We can argue the merits of using someone else to help with your finances, but the truth is simple. If you can learn to do it yourself, it’ll save you money. That’s unless you don’t have the mental fortitude to stick to the plan in a down market.
If you save $50,000 per year and gain 8% in the market, a 1% AUM (assets under management) will cost you around a million dollars in a typical thirty year career. It can cost you much more in retirement.
Let that sink … millions lost over your life. Still think you don’t have the time to figure this stuff out?
Oh, and using actively managed mutual funds with an expense ratio of 1% will do the same thing when compared to index funds. It’s the same math.
Doing both (the AUM financial advisor and actively managed funds) really puts you even further behind the eight ball.
Investing can be quite simple (and efficient), if we want it to be.
The investing efficiently side of the FIRE argument (typically in low cost index funds with expense ratios <0.1%) really burns the inefficient investor.
When the discussion starts, they will stop you short and tell you they simply don’t have time to work this stuff out. The irony is that they would have a lot more time after they retire early if they would just put in a small amount of work now.
Sharing FIRE concepts with this group is unlikely to change their mind, and much more likely to tarnish your friendship.
Don’t get burned.
Group 3: People ahead of you on the journey
This one should be obvious.
If you are sharing how you plan to FIRE when you are 45 and the person you are talking to is 65, then there is a high chance for that conversation to go south!
No extinguisher would be powerful enough for this conversation. Just avoid the conversation when possible.
Just be considerate and avoid having a FIRE conversation if people substantially older than you are around. It’ll save you the pain and loss of friendship.
Group 4: The moral imperative group.
I’ll readily admit that I focus much more on the FI (Financial Independence) than the RE (Retire Early) aspect of FIRE.
So, this group doesn’t get all hot and bothered by my financial discussions as often as the other groups. However, it’s still an important group to mention.
When I get to my FI number, I’ll simply cut out the parts of my job that I don’t love. That should happen around the age of 45. Maybe sooner. But the current plan is to keep working until 50.
If you have similar plans, you should know that there is a group of people who feel you are doing something morally corrupt by leaving the workforce early. Particularly if you have a job in medicine.
You spend ALL of those years obtaining specialized training in order to help people. Wouldn’t you feel bad if you just gave it all up and stopped helping?
What will all those people do? Who is going to fill your shoes?
The simple answer is that I plan on cutting back, not quitting all together. I have some specific things I’d like to retire to, and some of them include still doing medicine for people who really need it. Likely on the mission field.
If you really do plan to retire early, FIRE topics will turn heads and create some judgement. Be prepared to answer how you will contribute to society if you plan on leaving the gig early.
It’ll save you from pulling the pin on that extinguisher.
So, who SHOULD I talk with about FIRE?
You should discuss FIRE with people coming behind you on the path or currently on the path next to you. This may prevent them from making many of the same mistakes that others have.
Otherwise, they end up being one of the Joneses with lots of stuff, but little wealth.
It also helps them make a strong plan to build wealth by shedding the debt they have, preventing further accumulation of debt, and saving efficiently.
Financial independence is important. For me, I feel like I can truly be a better doctor when my financial situation does not feel like such a burden.
My family and I have a plan, and I know if I stick to it that we will get to our goals.
Once financially independent, I get to practice the parts of medicine I want to because I choose to and not because I have to. That’s a sure way to job satisfaction.
The take home here is simple. Be careful who you share your FIRE with. It may kindle a spark in our younger medical trainees or younger colleagues, but will often light your relationships at work on FIRE in the groups described above.
It is hard keeping such a powerful secret to yourself, but sometimes it is worth it. Find the right outlet. You’re currently reading mine.
Otherwise, share FIRE at your own peril and be ready and willing to become a FIRE fighter.
Have you ever shared FIRE and gotten burned? What would your advice be to others on this topic? Who told you about FIRE and how do you initially receive the idea? Leave a comment below.