Broker Check
FIRE - Financially Independent, Retire Early

FIRE - Financially Independent, Retire Early

October 10, 2019

Some folks, whether 30, 50, or 70 years old, might feel they are too young to retire. But others, can’t wait to get retirement started. A millennial buzz word in the past few years has been FIRE, an acronym standing for Financially Independent, Retire Early. The basic idea is aggressive savings and investment combined with minimized living expenses.  It emphasizes the fundamental rule of personal finance – live below your means.

 There are some drawbacks to FIRE which don’t get much attention among the eye-catching headlines.  A few to consider include:

  • a fixed, required frugality in retirement
  • an assumption that nothing will go wrong
  • a lack of maneuverability to unexpected events immediately upon early retirement

 For many, navigating a continuous path to financial independence is a means to living their best life.  Financial independence provides the ability to handle unexpected events, take advantage of opportunities, and reduce stress associate with finances. For many, the idea of being financially independent is more appealing than retiring early. I see my role as an advisor to help clients leverage their entire balance sheet (investments, real estate, businesses, etc.) to assess their level of financial independence and enjoy the experiences associated with their best life, whatever that means to them.

 Whatever retiring means to you, and whenever you do it, there are various facets to consider:

  • Income
  • Expenses
  • Taxes
  • Healthcare costs
  • Longevity
  • Supporting family (financially and physically)
  • Home renovations
  • Balance Sheet management
  • Investment performance
  • Moving to a new home

This month, we will focus on the expense side of the equation. According to Consumer Expenditure Surveys (BLS) from 2015-2017, average household spending patterns for those with a bachelor’s degree or higher peaks at age 45 and drops about $1k each year from there.  What do you think about when you look at the chart below?

-  Do the expense numbers look too big or too small to you? If you have a month or two of expenses, see how your spending compares with the averages.

-  Many factors come into play with expense changes over time. These figures provide a window into the future and should set some expectations as a baseline when you map out your retirement.

-  Take a moment and do a mental exercise – visualize yourself 10 years from now and look back. Have your future you give the gift of hindsight to your present you so you can start ahead of the game. Will you tell yourself to go ahead book the trip to Europe? Or will you tell yourself to save more every month?

When you are ready to map out your retirement vision, let’s connect and get started.