Is the FIRE Dead? 3 Ways to Adjust Your Financial Independence Goals
Is the FIRE out?
If you made grand plans based on a Financial Independence Retire Early (FIRE) strategy, the past few months may have been tough as you watched your retirement nest egg ride the economic roller coaster.
The FIRE movement — in which you have enough wealth to live on for the rest of your life without the need for traditional employment — gained popularity in the past decade as the stock market ascended to new heights.
Adherents to the FIRE movement typically live off of their investments, in addition to passive income, real estate and freelance passion projects.
A lot of those sources of revenue have been affected by the pandemic and social distancing orders.
But that doesn’t mean you should give up on your dreams of financial independence, according to Jake Northrup, Certified Financial Planner and founder of ExperienceYourWealth.com.
“It can be difficult to have your lifestyle be controlled by or at the mercy of the investment markets,” he said. “I think that’s where you think through, ‘What is it about FIRE that we really value and that we really love?’”
If you still have dreams of ditching the 9-to-5 — or already have — we have some tips to help you keep your FIRE burning.
How to Follow the FIRE Movement During a Recession
If you’ve read anything about the FIRE movement, you’ve undoubtedly seen the headlines that promise people can retire at 35 by living on dried beans and making $3 million on the stock market.
We’re not talking about those people.
Instead, we’re talking to you, the real person who doesn’t want to work a 9-to-5 job until they’re 70 only to look back with regret on all the things they missed out on because they never had “enough money.”
That’s what Amanda DeSonia and her family from Racine, Wisconsin, decided when they started on their FIRE journey.
She and her husband were frugal before the FIRE movement was little more than an ember: They started on the path when they got pregnant shortly after marrying waaay back in 2002.
DeSonia recalled how money was tight enough back then that she had to return items to the shelf in the grocery store when she exceeded her weekly grocery budget.
Want more ideas for how others have made the FIRE movement work for them? Here’s how another couple achieved their financial independence.
Now the couple has their three kids. DeSonia said she and her husband have rediscovered ways to save — from re-assessing monthly subscriptions to cutting back on fast-casual dinners — that they had let slip amid their busy lives.
“This pandemic has given us skills we have gotten lazy about,” she said. “When you have time to sit down because the world has slowed down… there’s value in teaching your children that but also doing it for yourself.
“Every penny does add up.”
She noted that the FIRE lifestyle for her family is more about the freedom from constantly having to decide if they could afford to do things they enjoyed rather than just quitting their jobs.
“We have lived through financially insecure situations and we understand how emotionally taxing and draining it is,” she said. “I didn’t want to live in fear of never having enough money.”
The goal of FIRE isn’t supposed to be about accumulating a pile of cash so you can do nothing for the rest of your life, Northrup agreed. It’s about finding the way to do more of what you want.
“I think it’s less about stopping to work and more about freeing up your time in a way that aligns with your values,” he said.
If you’re wondering how you can continue — or start — on your own path to financial independence amid the current economic turmoil, check out these strategies to keep the FIRE going.
1. Create a More Agile Budget
Things change. So your budget that worked last year — or even last month — might no longer work for you.
Instead of sticking to one, consider creating multiple budgets, depending on your current situation.
If you’re working with the same budget from your pre-pandemic days, it’s probably time to make some adjustments — check out these tips about how you can do it.
“Identify a lean, a moderate and a fat budget that you’re able to toggle between depending on your financial situation,” Northrup said. “It might be difficult to further cut your budget right now, but on the positive side, I think it’s a unique time when you can determine what your barebones, minimum monthly spending is right now.”
By identifying the absolute minimum cost it would take to live on a monthly basis — rent, transportation, food — you can build to next-level budgets that let you add expenses gradually rather than opening the floodgates.
2. Test Drive Your FIRE Life
If you’ve been planning to retire early, but haven’t taken the leap yet, consider this an opportunity to decide how much of this is what you really want — good and bad.
“This is a really fantastic time for people to test out how would early retirement work in practice,” said Northrup, who added that the decision can be emotional as much as it is financial.
If you’re still employed and your investments took a nosedive, for example, how would you be feeling right now if you didn’t have your income?
And if you’ve been laid off or furloughed, how do you feel about having the extra time right now? Are you enjoying the freedom or missing some aspect of work?
Northrup said he advises his clients to reconsider how much they dislike working vs. how much they dislike a particular job or schedule. This time away from the workplace could give you the chance to discover the difference.
“Work is healthy for you — you have that sense of purpose, mental stimulation,” he said. “But plan to do it in a job you love in a way that fits your ideal lifestyle.”
3. Stay Flexible
You could lose your job. The stock market could tank (again). Locusts could descend upon us. (At this point, anything is possible, right?)
Whatever your FIRE plans were, there’s a good chance they were affected by recent events. But while the pandemic may be historic, changes in the market aren’t. Recessions happen on a regular basis, even if it’s been awhile since the last one.
So if you were banking on Airbnb income that suddenly doesn’t look so secure, maybe you’ll need to stick with your full-time job a few more years before you can retire.
“It’s OK to be behind on your plan, and I think what you can do is revisit,” Northrup said. “Is that plan still what you envisioned — are there any changes to it?”
A financial plan should always be evolving, but if your goal was to retire early or to have more time to travel, now may also be the time to ask yourself if recent events have changed what it is you want out of life.
“What was it about FIRE in the first place that really motivated you and then ask yourself has that changed?” he said. “And if that hasn’t changed, then you shouldn’t abandon ship now.”
Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.