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- Herausgeber: John Wiley & Sons
- Kategorie: Ratgeber
- Sprache: Englisch
Take control of creating your own financial independence and the option to retire early on your terms
The Financial Independence, Retire Early (F.I.R.E.) movement has inspired many to optimize their finances and retire sooner than they ever imagined. This creates the time freedom and happiness you want years, or even decades, before the traditional age. F.I.R.E. For Dummies shows you how to make financial freedom and early retirement a reality. With the easy-to-follow steps in this guide, you can set yourself up to follow your big dreams without worry of money being an obstacle. Decrease debts, taxes and expenses while increasing earnings, savings and investing, is what gets you on the road toward building your wealth. You’ll learn how to maximize this process and speed up your time to financial independence and retiring early.
- Discover why the Financial Independence, Retire Early (F.I.R.E.) movement has grown so rapidly
- Get concrete instructions and advice for retiring earlier or putting yourself in the powerful position to leave your job on your terms
- Plan and organize your finances in a way that doesn’t make you feel reliant on a job to financially thrive
- Overcome the common obstacles for retiring early like losing social connections, filling your time, strict rules around accessing retirement accounts early or health insurance
- Learn from someone that has achieved F.I.R.E. and helps light the way for you on your own journey
This is the perfect Dummies guide for anyone looking to move from the basics of their finances to reaching F.I.R.E. and enjoying the time freedom it creates. Regardless of where you currently are with your money or career, now is the right time to get started.
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Veröffentlichungsjahr: 2024
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F.I.R.E. For Dummies®
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Table of Contents
Cover
Title Page
Copyright
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Beyond the Book
Where to Go from Here
Part 1: Getting Started with F.I.R.E.
Chapter 1: What Is F.I.R.E.?
Understanding the F.I.R.E. Philosophies
Grasping the Power of F.I.
Who Wants F.I.R.E. and Why?
What Ignited the F.I.R.E. Movement?
Examining the Public Perception of F.I.R.E.
Tasting the Different Flavors of FI
Chapter 2: Personalizing the Process of Reaching F.I.R.E.
The Big Picture, Compressed
The Attraction to F.I.R.E.
The Continuum of Learning and Stacking Your Knowledge
Turning What You Learn Into Action
Chapter 3: Understanding the Mindset and Psychology behind F.I.R.E.
Examining Who Can Reach F.I.R.E.
Acknowledging Adversities and Advantages
Normalizing Conversations about Money
Finding Your F.I.R.E. People
Catching Up When You Feel You’re a Late Starter
Part 2: Organizing Your Finances for F.I.R.E.
Chapter 4: Knowing and Tracking Your Numbers
Your Total Earnings
Your Total Expenses
Your Total Debt
Your Savings Rate
Your Net Worth
Your F.I.R.E. Number
Calculators and Tools
Chapter 5: Understanding How Taxes and Credit Scores Work
Reviewing Tax Rates
Capitalizing on Credit Scores
Chapter 6: Getting Your Hands on Documents and Account Information
Old Retirement Accounts
Tax Returns
Insurance Coverages
Student Loans and Other Loans
Title of Ownership for Major Assets
Social Security Estimates
Rights and Royalties
Documents and Account Information Checklist
Chapter 7: Reviewing Possessions, Probate, and a Plan for Your Estate
Understanding the Hate for Probate
Brushing Up on Your Beneficiaries
Titling Your Assets
Organizing Common Estate Planning Documents
Chapter 8: Using Financial Professionals
Knowing What to Expect of Financial Professionals
Working with F.I.R.E.-Friendly Experts
Chapter 9: Celebrating Your Wins
Early Achievements
More Exciting Milestones
Part 3: Increasing Income, Savings, and Investing
Chapter 10: Working Wonders by Growing Your Income
Maximizing Earnings and Benefits from Your Job or Side Hustle
Capitalizing on Passive and Semi-Passive Income
Reaping the Rewards of Other Income
Chapter 11: Moving Fast by Increasing Your Savings Rate
Understanding Why Your Savings Rate Matters
Determining Your Savings Rate
Figuring Out Where to Save
Chapter 12: Investing and the Undeniable Power of Compound Growth
Is Investing Too Complex?
How Does Compound Growth Work?
Why Start at Work?
Making Passive Investing Work for You
The Three Steps to Investing on Your Own
Managing Your Investments
Part 4: Decreasing Debt, Expenses, and Taxes
Chapter 13: Are You Doomed If You Have Debt?
Stopping Debt from Stopping You
Choosing between Paying Off Debt or Investing
Knowing That Credit Doesn’t Equal Debt
Determining Your High-Priority Payoffs
Addressing Low-Priority Payoffs
Dealing with Loans from Workplace Retirement Accounts
Chapter 14: Do You Have to Cut All Your Expenses to the Bone?
Prioritizing What You Value
Evaluating the Big Expenses
Being Smart Rather Than Just Cutting
Chapter 15: Can You Really Control Your Taxes?
Taking Advantage of Tax-Advantaged Accounts
Understanding Tax Benefits of Regular Brokerage Accounts
Giving Yourself Some (Tax) Credits
Bunching Donations: A Wise Way to Itemize
Finding Advantages for Small Business and Self-Employment
Understanding FICA Taxes
Paying Attention to Tax-Free Income
Finding F.I.R.E.-focused Tax Experts
Part 5: After F.I.R.E.ing: Things to Do after Retiring Early
Chapter 16: Planning a Graceful Exit from Your Job
Counting Down to Early Retirement
Writing Your F.I.R.E. Resignation Letter
Walking Away Gracefully
Sharing your plans publicly
Celebrating with a FIREment Party
Chapter 17: Planning Your Post-F.I.R.E. Income and Health Insurance
Applying the Infamous 4% Rule
Being the Engineer of Your Income
Building a Bridge: Strategies for Early Retirement
Taking Early Distributions from Tax-Advantaged Accounts without Penalty
Getting Health Insurance for Early Retirement
Chapter 18: Planning for the Later Retirement Years
Playing Catch Up
Projects, Pensions, and Passive Income
Uncovering the Truth about Social Security and F.I.R.E.
Revisiting Your Estate Plan
Considering Long-Term Care Options
Part 6: The Part of Tens
Chapter 19: Ten Hot Topics in the F.I.R.E. Community
Building Community
Reducing Expenses
Being a DIYer
Increasing Savings Rate
Using Spreadsheets
Investing in VTSAX
Putting Money in HSAs
Converting to Roth IRAs
Investing in Real Estate
Using Travel Hacks and Travel Rewards
Chapter 20: Ten Tips to Make Your F.I.R.E. Journey Fun
Explore Your Why of F.I.R.E.
Give Yourself Grace
Start Learning What You Are Most Curious About
Learn in the Style That Best Fits You
Align Your F.I.R.E. Plans with Your Values
Focus on the Things You Enjoy That Support Your F.I.R.E. Goals
Don’t Cut Expenses for Things You’ll Be Miserable Without
Find Communities and People That Feed Your F.I.R.E. Journey
Celebrate Your Wins
Your F.I.R.E. Path Does Not Have to Be Flawless
Chapter 21: Ten Big Names to Know in the F.I.R.E. Movement
Vicki Robin
J.L. Collins
Mr. Money Mustache
Mad Fientist
ChooseFI
Our Rich Journey
Millennial Revolution
rich and REGULAR
White Coat Investor
Financially Intentional
Glossary
Index
About the Author
Connect with Dummies
End User License Agreement
List of Tables
Chapter 1
TABLE 1-1 The Different Flavors of F.I.
Chapter 2
TABLE 2-1 Accessing Funds When You Retire Early
TABLE 2-2 A Few of My Superpowers and Weaknesses/Challenges
Chapter 3
TABLE 3-1 Normal Retirement Ages as of 2020
Chapter 4
TABLE 4-1 Debt Checklist
TABLE 4-2 Years to Retirement Based on Savings Rate
TABLE 4-3 Savings Rate Escalation
Chapter 5
TABLE 5-1 FICA Tax Breakdown
TABLE 5-2 Capital Gains
TABLE 5-3 2024 Long-Term Capital Gains Rates (Single)
Chapter 6
TABLE 6-1 Disability Insurance Taxation Rule of Thumb
TABLE 6-2 Documents and Account Information
Chapter 7
TABLE 7-1 States That Allow Beneficiaries on a Home or Vehicle
Chapter 8
TABLE 8-1 1% AUM Fee Translated into Dollars
Chapter 10
TABLE 10-1 Common Employee Benefits
TABLE 10-2 Sample Unemployment Benefits
Chapter 11
TABLE 11-1 Why Your Savings Rate Matters
Chapter 12
TABLE 12-1 Impact of Employer Match
TABLE 12-2 S&P 500 Index Returns
Chapter 13
TABLE 13-1 Allocating Debt Payoff and Investments
TABLE 13-2 Pros and Cons of Workplace Retirement Loan
Chapter 15
TABLE 15-1 2024 Retirement Contribution Limits
TABLE 15-2 Tax Treatment of HSA Versus Retirement
TABLE 15-3 Tax Credit Versus Tax Deduction
TABLE 15-4 Standard Deduction 2024
Chapter 17
TABLE 17-1 Growth of 403(b) and 457(b)
TABLE 17-2 COBRA Premium Example
TABLE 17-3 COBRA Coverage
Chapter 18
TABLE 18-1 2024 Retirement Contribution Limits Catch-Up Amounts
TABLE 18-2 Social Security Calculation Using $8,000 AIME
List of Illustrations
Chapter 1
FIGURE 1-1: Building Wealth for F.I.R.E.
FIGURE 1-2: F.I.R.E. summary.
Chapter 2
FIGURE 2-1: The growth of financial literacy courses in schools.
Chapter 3
FIGURE 3-1: The mechanics of building wealth.
Chapter 5
FIGURE 5-1: Credit score categories.
Chapter 12
FIGURE 12-1: $50 a week millionaire card
Chapter 16
FIGURE 16-1: My F.I.R.E. letter.
Chapter 18
FIGURE 18-1: Years in early and normal retirement.
FIGURE 18-2: Social security estimates example.
Guide
Cover
Table of Contents
Title Page
Copyright
Begin Reading
Index
About the Author
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F.I.R.E. For Dummies®
Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com
Copyright © 2024 by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
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Library of Congress Control Number is available from the publisher.
ISBN: 978-1-394-23501-8 (pbk); ISBN 978-1-394-23502-5 (ebk); ISBN 978-1-394-23503-2 (ebk)
Introduction
Welcome to F.I.R.E. For Dummies!
F.I.R.E. (Financial Independence, Retire Early) is an aspirational goal that sparks curiosity in many. It’s an approach to personal finance that helps you reach your financial goals in a compressed time frame so that you get to financial independence much sooner than you may have ever imagined. It’s like personal finance on steroids. “How” you get there involves following a simple recipe that is openly talked about in the F.I.R.E. community.
The Retire Early part of F.I.R.E. is the powerful position you may want to be in, but if you love your job, you may choose not to. The important thing is that you have the flexibility to walk away on your terms at a moment’s notice if you decide that’s best for you.
Although F.I.R.E. and its simple principles are available to all, some people don’t even know this possibility exists or discover it much later in their careers. (You don’t know what you don’t know.) Luckily for you, you’ve found F.I.R.E. For Dummies, which can be your guide on your path to F.I.R.E.
About This Book
I reached F.I.R.E. in my 40s and learned a ton on my journey, but I knew I still had a few knowledge gaps to fill. So, I went on to earn certified financial planner (CFP) and accredited financial counselor (AFC) credentials to help fill in the blanks. I’m an educator at heart, and I want to share a perspective rooted both in facts and experience. In this book, I shrink advanced topics down to approachable chunks that are easy to digest.
An important element of this book is explaining the mindset around F.I.R.E. People who pursue F.I.R.E. depart from the status quo to do something different than most people. When you’re going against the grain in this way, it’s important to have encouragement, and you’ll find that emotional support peppered throughout the book.
Each person’s road to F.I.R.E. is unique, but it’s possible for anyone, even those who have more challenges or obstacles in their way. It’s not a perfect journey for anyone, and when you read some of my non-F.I.R.E. anecdotes, you”ll know what I mean.
You can find a lot of disparate and confusing information out there, but this book guides you through all the important areas in a well-organized, easy-to-follow format in true For Dummies style.
Foolish Assumptions
I’m so glad you’ve picked up this book and trusted me to share my expertise on F.I.R.E. As I wrote this book, I had an audience in mind; here are a few assumptions I made about you:
You have basic financial literacy and want to learn more. Even if you are a high school student, you can grasp the concepts in this book, especially if you’ve had a personal finance class (required by over half of U.S. states in order to graduate).
You are at the early stages of your wealth-building journey and have a desire to learn how you can accelerate the process and reach financial independence and the option to retire early.
You’re new to F.I.R.E. or want to fill the gaps of knowledge that you may have while on your journey.
You want to learn more about the F.I.R.E. movement and the philosophies of creating time freedom.
You have overcome a few obstacles or challenges in your life and want to turn your finances around.
You have a desire to explore the mental and emotional side of money to help you move your finances in the right direction.
You have basic investment and tax knowledge but want to gain a better understanding of them.
You want to hear from someone who has reached F.I.R.E. and has additional expertise that can help simplify the related concepts.
This book is basic enough for any to follow, and it breaks down some complex topics in a way that will have you feeling confident you can put the pieces in place to reach F.I.R.E.!
Icons Used in This Book
Throughout this book you will find useful icons to enhance your reading experience and to note specific types of information. Here’s what each icon means:
This icon marks tips or best practices that can help make things a little easier for you.
This icon points out information you’ll want to remember and perhaps read twice.
This icon points out more detailed or technical information that may not be essential but still helpful.
When you see this icon, watch out! It marks important information that may save you headaches or notes something to avoid.
This icon indicates that I’ve given an example of how you might apply the information. Examples help reinforce what you’ve read.
This icon draws attention to a personal story that might help reinforce what I’ve just explained.
Beyond the Book
In addition to the material in this book, you can also find some access-anywhere information curated just for you online at dummies.com. I’ve included a helpful list of F.I.R.E. calculators and resources for finding a F.I.R.E.-friendly financial planner. Just enter F.I.R.E. For Dummies Cheat Sheet in the search box to find the Cheat Sheet.
Where to Go from Here
This book is organized so that you don’t have to read it from start to finish. You can check out the table of contents or index and go straight to the chapter that’s most interesting or valuable to you according to where you are in your journey. Pick and choose or go to selected portions of the book without feeling lost.
Part 1
Getting Started with F.I.R.E.
IN THIS PART …
Find out what ignited the F.I.R.E. movement, the basics behind achieving financial independence and retiring early, and the attraction to the powerful time freedom it brings.
Know the steps to reaching your F.I.R.E. goals by understanding your “why,” stacking your knowledge, and turning what you learn into action.
Explore the psychological part of your F.I.R.E. journey by acknowledging your feelings around money, examining the realities of your unique financial situation, and embracing F.I.R.E.-friendly communities to help support you on your path.
Chapter 2
Personalizing the Process of Reaching F.I.R.E.
IN THIS CHAPTER
Seeing the big picture in less time
Understanding why so many people are drawn to F.I.R.E.
Stacking your knowledge and turning it into action
Having the ability to retire early is a lofty goal for many, but it means retiring from a job, not life! Being able to retire early means reaching a level of financial independence — something everyone aspires to.
Some like to call F.I.R.E. a process, but I call it a journey of departing from the norm — just a little reframing that I learned in my financial psychology classes. Regardless of how you describe it, F.I.R.E. requires the planning and intentionality I talk about in this chapter. Figuring out how to optimize the steps on your journey is what will help shorten the time it takes.
In this chapter, I show you the big picture for reaching financial independence and explain how it can be compressed into a shorter period, why so many are attracted to F.I.R.E., how to stack your knowledge, and how to turn that knowledge into action.
The Big Picture, Compressed
Everyone has heard some version of what it takes to build wealth:
Live on less than you earn and invest the difference.
Don’t spend everything you make.
Always save something.
Grow the gap between your spending and income.
I remember my dad uttering these “rules” time after time because he wanted his kids to do better than he had. When I was younger, I didn’t exactly know what he meant, but it turns out he knew exactly what he was talking about.
These ideas are not new. My dad and earlier generations figured these out and passed the philosophies down. What is new is the path and time it takes to build wealth and reach financial independence. You can think of it like gamifying the process and knowing how to play. Fortunately, in this game, almost everyone can win without worrying about competition.
In this section, I help you reevaluate how you define “retirement age” and break down important aspects of how to build wealth to get you to your goal.
Redefining “retirement age”
You may have anchored your idea of retiring based on messaging from societal norms. Retiring early is traditionally defined in a few different ways:
Social Security defines early retirement before age 67.
Many rules around retirement accounts won’t let you access them without penalty until age 59.5.
Many employer retirement plans won’t allow benefits to start until age 55.
But F.I.R.E. puts you in control of defining retirement age for yourself, and it may be significantly younger than 55. I retired at the age of 49, but others have managed to retire far younger. So instead of taking 30 to 40 years to accumulate what you need for retirement, the time can be more like 10 to 20 years. Just let that sit for a moment … you are slashing the time to retirement by half — creating the life you want much sooner than you may have ever imagined.
Having the resources to retire is a function of what you earn, how much of that is spent, and investing the difference. This can also be expressed as your “savings rate,” which is simply the percentage of your income that you are saving and investing. The higher your savings rate, the less time acquiring wealth will take. It doesn’t have to take 30 or 40 years of work to reach a point of financial independence to have the option to retire early. What if you could cut that time in half? Wouldn’t that be worth the effort?
Living on less than you earn
When I was finishing college and barely able to make ends meet, I thought living on less than I earned was nearly impossible. I always had more money going out than was coming in. I knew that working a job that paid close to minimum wage to cover my tuition and other expenses would never get me ahead. Fortunately, I finally found some relief once I finished college (reducing my expenses) and started making a higher salary as I started my career (increasing my income).
You have some flexibility in how to get to the state of living on less than you earn. The two primary levers are increasing your earnings and decreasing your expenses:
You can increase your earnings through your salary, a side hustle, or income-producing projects. Your main job may have opportunities for bonuses, promotions, stock options, or other financial benefits. Besides your main job, there are ways to bring in additional income that you create on your own as a self-employed person or entrepreneur. Many people find real estate to be a lucrative way to increase earnings.
Chapter 10
talks more about growing your income, including a few creative ways you may not have thought of before.
You can decrease your expenses by spending money on what you value and cutting what you don’t. No deprivation is required here; it’s important to set up your spending in a way that you will stick with, and feeling deprived all the time is no way to encourage longevity. If an expense gives you joy and fills you with energy, that’s probably not what you want to cut out because it’s something that matters to you. I would say that smart spending matters just as much as cutting spending, and shining a light on your expenses helps you get more confident and intentional about where your money is going. You may be able to decrease expenses through one or two big hits such as housing or vehicle costs or many smaller hits like canceling streaming TV subscriptions you forgot you were still paying for or shopping around for car insurance to get a lower rate.
Some of us are better with one of these levers than the other, but you’ll see the greatest impact if you can do both at the same time. This “live on less than you earn” concept is partly achieved through simply using your favorite budgeting or cash flow management tools to help with tracking because it’s hard to measure what you don’t track. You can use an app on your phone, create a spreadsheet, or write it out with pen and paper. If you want to dive more into these areas, check out the book Budgeting For Dummies by Athena Valentine Lent (Wiley).
Investing the difference
The difference in your income and expenses is the most powerful opportunity to grow your wealth. The bigger the gap, the more you have to
Save and invest
Spend
Most people feel like you have to choose one or there other, but the reality is that you can do both. In a lot of financial dilemmas two definitive options are pitted against one another. It rarely has to be absolute, and in a world of multitasking, most of us can handle doing more than one thing at a time.
Most people choose to increase their lifestyle as their income increases, and they find themselves on the “hedonic treadmill.”
Hedonic treadmill is the tendency for people to quickly return to a base level of happiness despite experiencing major positive or negative events.
If you want to be in the optimal position for F.I.R.E., saving and investing more as your gap increases gives you the power to get there. Savings alone is not enough, but this is often a catch-all word that includes investing. In reality, you can’t save your way to wealth if your money is just sitting in a bank account. It is unlikely to outpace inflation (around 2% according to the Federal Reserve: www.federalreserve.gov/faqs/economy_14400.htm). You have to invest money to truly see it grow, and one of the most common ways the F.I.R.E. community does it is through the stock market. You can take a very simple approach that revolves around one or more index funds that is
Passive
Low cost
Broad market
The easiest example is the S&P 500 index fund that simply mimics its benchmark.
The S&P 500 includes the 500 largest and most widely held U.S. companies.
Former CEO of Berkshire Hathaway, Warren Buffet, is considered one of the world’s greatest investors. He was a genius at handpicking great companies to invest in. However, even he was a big believer in the idea that most people are better off investing in a simple index fund. In fact, in 2008, Buffet threw out a challenge to hedge funds (funds that actively pick stocks in an effort to outperform the market). He bet $1,000,000 that an S&P 500 index fund would perform better than hedge funds over a ten-year period (2008 to 2017). The outcome didn’t surprise many people: The S&P 500 index fund beat the hedge funds.
The other wildly popular index fund that the F.I.R.E. community is enamored with is a total stock market fund. VTSAX (Vanguard Total Stock Market Index Fund) is the most admired. Its slogan of “VTSAX and Chill” is very cute and expresses the sentiment that investing can be an easy and hands-off endeavor. Of course, Vanguard is not the only mutual fund company that offers a total stock market mutual fund. All the other major brokers (Fidelity, Schwab, T. Rowe Price, and so on) have something comparable.
A total stock market index fund includes all 3,500-plus publicly traded U.S. companies (not just the 500 largest like the S&P 500).
The S&P 500 or the total stock market index fund basically allows your risk to be spread across a lot of stocks versus investing in a single stock or trying to handpick individual stocks. You don’t need to watch what these funds are doing every day; index funds are built around the premise that over the long term (20, 30, 40 years), the stock market is likely to go up. Stocks can be volatile in the short term with frequent ups and downs, but this movement usually averages out over time to result in gains over the long term.
Another way to invest the difference between your income and expenses is to contribute to your employer’s retirement plan like a 401(k), 403(b), or TSP (Thrift Savings Plan). The bonus of these types of accounts is that they usually come with an employer match and tax advantages. You choose what funds you are investing in, make automatic contributions every pay period, and watch your money grow over the long run. If you’re a self-employed person or investing in other accounts beyond your employer, the result is similar; you just have to put in a little more effort, and there’s no company match.
I know, I’ve made investing sound pretty easy, and it absolutely can be. It can be as complex or as simple as you want, but research has shown that complexity doesn’t equal better performance.
The Attraction to F.I.R.E.
I’ll admit, one of my initial attractions to F.I.R.E. was the hot acronym.
I had become very savvy with my personal finances, but financial independence? Retiring early? No way. Those things were not even in my scope of awareness. I was a skeptic.
I was drawn to the idea of cutting out early from my job and focusing more on the things I loved, on my terms. Imagining how F.I.R.E. would change your life fulfills deep desires around work and happiness, including things like
Escaping a toxic job you don’t like
Freedom with your time before you’re too old to enjoy it
Controlling your life choices without depending on a job
But for many of us, it seems impossible at first.
Many people dream of achieving these things without needing to work 40-plus hours a week until they’re 60-plus. You have to pay your bills and need money to live, and what F.I.R.E. does is remove money as an obstacle to following your dreams or doing whatever it is you value.
Pensions as a reward for working a long time at one place started disappearing in the 1990s. The decline accelerated to the point that today, you’d be very lucky to find an employer (besides the government and a few very large companies) that offers a pension. The elimination of that perk diluted the attraction of giving a single employer your best years. Many of the benefits that came along with a pension (such as retiree health insurance) became less and less common, too.
The significance of this history is that the security that kept so many people tied down for decades to one employer is nearly gone, and I think that opened the door for people to consider how to plan for retirement on their own rather than depending on an employer to do it for them. Some people view this lack of professional guidance as a negative. After all, what individual employee is equipped to manage their retirement as well as highly trained institutional pension fund managers? Almost none. But people who viewed that as a positive would probably be a part the F.I.R.E. community.
The psychological aspect of F.I.R.E.
The facts and figures of retirement planning (your savings rate, the difference between your income and expenses, and so on) are important, but the most powerful part of F.I.R.E. is psychological. The feelings and emotional aspects of retiring early are motivators that go beyond what you track in your spreadsheets and apps. Some of those emotions come from how you grew up or were socialized around money and finances. Those experiences influence us and how we look at life and happiness.
For example, if a person grew up with a dad who worked hard every day and died only two years after he retired, that history plays into their thoughts about retirement. If a person’s mother was stuck in a job that she hated going to every day because she needed to pay the bills, that person’s thoughts about working are shaped by that experience. If a person hates their job because they feel they aren’t doing meaningful work, those feelings factor into their life choices.
Take a pause and invite yourself to deeply consider F.I.R.E. Allow yourself to take a look at your reasons for your interest from a mental standpoint and let them sink in. Do something to clear your mind and imagine your dreams: meditate, do breathing exercises, take a hike or a walk. The idea is to step away from the hard numbers and see the bigger picture of what you want your life to look like. Let your F.I.R.E. plans support that dream. Your plans to pursue F.I.R.E. should be an addition to your quality of life, not a subtraction. The following reasons were some of my motivators:
Having more time with my adult daughter
Becoming more involved as a financial literacy advocate
Mentoring others who may have struggled in a similar way as I did growing up
The escape from the toxic job
Think about a day when you were fed up with work. Perhaps it was during a Monday morning team meeting that started with a condescending tone, the useless metrics that just caused you to be placed on a performance plan, or the constant warnings that you’d have to return to in-office work when you’re doing just fine working from home.
Everyone has something that makes them unhappy about working. A 2021 Pew Research Center survey (https://pewrsr.ch/3hVWMfr) identified the top reasons Americans quit their jobs in 2021:
Low pay
Lack of opportunities for advancement
Feeling disrespected at work
Resignation rates in 2021 were high, giving rise to new phrases like great resignation, great reshuffle, and quiet quitting. (See the glossary for definitions of these terms.) I’d say that a good remedy for these issues is what I call “planning your great escape.”
It’s unfortunate, but you are not alone if you have a job that you don’t love or even perceive as being toxic. In fact, it is one of the big reasons people tell me they’re seeking F.I.R.E. They have a negative work environment, unfulfilling work, a horrible boss, or something similar pushing them away. This is enough to make you want to leave and do something different.
When you’re in this position, you can choose to do one of three things (or a combination):
Stay and tough it out at your current job
Leave your job
Start planning for F.I.R.E. so you can quit your traditional job for good
It’s this last option that leads many people discover the F.I.R.E. movement by searching online for something like “How do I retire early?” The results are many blogs, articles, podcasts, and YouTube channels dedicated to the topic, which help people realize they’re not the only ones seeking to cut out early from their day job and trading their time for money.
Financial independence from a job
There are people that say they love their job and don’t want to “retire early”; they just want the financial independence part of F.I.R.E. For example, hating my job was not my primary motivation to retire early. I stuck with the same employer for 21 years and never felt compelled enough to leave (although the thought creeped into my mind a few times). I enjoyed the work I did (most of the time), and I was very thankful for the perceived security of a regular job that included
Great benefits
A steady paycheck
Career growth
One of the big things I loved about my job was that I made some great friends with coworkers I will always value.
I was also interested in building the financial independence that would give me that breathing room I so longed for. My simplistic way of thinking about it was that if my employer suddenly eliminated my position or downsized my department, I didn’t want to be thrown into financial insecurity when I knew a paycheck wasn’t coming. I remember how awful it felt when I was laid off previously (in my 20s), which caused fear and uncertainty that I never wanted to feel again.
It’s important to recognize the difference between a job and the work that you do. You can leave your job but continue your work. Here’s what I mean:
A job is at a community hospital, but the work is nursing people back to health.
A job is at a public school, but the work is educating children.
A job is at a big cybersecurity company, but the work is keeping people safe online.
A job situation can change in an instant with a new boss, a reorganization, or changes with your employer — all things out of your control. You take control back when you have planned your F.I.R.E. exit and shift your thinking about your job.
A negative situation isn’t the only reason that you may decide to retire early. You may be trying to get to something more compelling on the other side, such as doing meaningful work outside the confines of a job. Your work may become even more impactful once you’re able to do it on your own terms. Choosing who you work with, how many hours you want to devote to the work, and the areas you focus on is now up to you. So, by all means, escape the toxic job but continue doing what you love.
Freedom with your time
When I left my job in 2019, I had a mental white board where I visualized a plan for my time. At the center was the thing I knew I’d be doing for the rest of my life, which was financial literacy. Everything else I did would somehow revolve around that.
I planned years prior to figure out what this freedom with my time — time freedom — would look like for me. I think that my mission of creating a financially literate society helped motivate me even more to work toward F.I.R.E.
You may not know what that thing is for you, but you’re more likely to find it when your mind is clearer and not cluttered with someone else’s dream.
The newfound time freedom that comes with F.I.R.E. will get you thinking about a bucket list of sorts. Some people may ask what you will do all day if you don’t have a job. This is something most people never get a chance to explore because they think they’ll be working most of their lives.
For most of my career, I had never really thought about how I’d spend my time if I didn’t have to work because I was taught to
Find a good job with good benefits
Work there for a really long time
Then retire with a pension or 401(k)
Most people confine themselves to this process, and companies offer financial incentives like benefits, matching 401(k) contributions, stock options, and more to keep exceptional employees. But that doesn’t mean you have to buy into the idea. In fact, this mindset is referred to as the golden handcuffs — financially, this process looks tempting and provides security, but it locks you in to someone else’s dream.
Control of your life choices
There’s a certain level of satisfaction you get from controlling your own destiny. During your working life, you often have to turn over some control to an employer, and they make a lot of choices for you (at least while you’re at work). They set the mission, the priorities, and even the hours you work. Can you just change this norm? The idea of F.I.R.E. says you can, and that is a big part of the allure.
The life choices I’m talking about are a part of your planning. This is your opportunity to think about how things would look if you ruled the world (at least your world). Here are some big questions to get your juices flowing:
What is your life’s work?
What’s your passion?
What do you love getting up in the morning to do?
You may have asked yourself these questions before, but they become a lot more fun to ponder when you’re working toward financial independence. You can move your life in the direction that gives you the most satisfaction instead of falling in line with the way your boss or manager wants it. You don’t even need to have it all figured out, and it doesn’t matter if those goals are big or small.
Your main goal may not be to retire formally, but creating the space to experiment can be eye-opening. Your F.I.R.E. journey will be one of self-discovery.
Your why of F.I.R.E.
If you haven’t picked up on it already, there are many reasons why people seek F.I.R.E. It may seem like F.I.R.E. is a way to run from situations you don’t like: a toxic workplace, not doing work that’s meaningful to you, not having control of your time.
But what’s your why for the other side of F.I.R.E.? Finding what lights you up and gets you excited will give you extra fuel on your path to F.I.R.E.
Many people have trouble with defining their why, so you’re not alone if you’re not sure. It doesn’t have to be a grand plan — just things that bring you happiness. It could be getting more sleep. It could be more traveling (like many in the F.I.R.E. community love to do). It could be work that you’re doing on the side but would love to do more once you reach financial independence or retire.
You may not have ever been in a position to imagine what you’d want to do if money was not an obstacle. Many are conditioned from a young age to think of work in terms of money. I’m not saying that you can’t make money from doing the thing you love, but knowing that you would do it regardless of the money makes a difference.
