Although I am a big FIRE fan, there are certain instances when Financial Independence (FI) may not be the right thing to do.
Background on the List
There is nothing that works for everyone, no matter how good it is. The same is true for Financial Independence (FI). Although I am happy to have been on the FI journey, I think FI may not be right for everyone / in every situation. Below is a list of six such cases.
One note about the list below. It does not contain the usual myths about FIRE. Things like people get lazy after they become financially independent. Or that they spend all their time at the beach doing nothing after getting to FIRE. Getting to FI takes a lot of planning, hard work, and patience. Typically people who can do this are not the types who are likely to spend their post FI life doing nothing.
Another thing I hear often is, what if you run out of money after retiring early? There are no guarantees in life, but you can plan for this by having a conservative withdrawal rate.
The list below is organized into three areas: before you start your FI journey, during the journey, and after you get to FI.
Before You Start on the FI Journey
1. Wrong Reason (FOMO, running away from something, etc.)
I was guilty of this. My reason for starting the FI journey was that I was tired of working 24×7 at my job. I was constantly busy and thought that once I get to FI, I will never work again. While there is nothing wrong with the approach, I now realize that running away from something is not ideal.
You have to run towards something.
During my FI journey, when I had sufficient money saved, I was able to take more risks. I used my FI superpowers to get a job that has a better work-life balance. My initial reason for pursuing FI was not that important anymore.
The same logic applies to doing FI because your friend is doing it or other people are posting about it on the internet. FOMO can be a big factor. But it is best if you have your own reason to do FI. Maybe you want to start your own charity, have enough money to travel the world, spend more time with your kids, or never feel stressed out about money. Determine why you want to do FI.
2. Going it Alone
There is nothing worth doing without having your spouse / partner actively bought in and supporting it—especially FI since the FI journey can take many years. FI also takes a lot of sacrifices which is impossible to do if everyone is not bough-in.
For example, one of the big things we did to get to FI was drastically reduce our spending. If MrsFiner were not okay with this, it would never have worked, or at least it would not have worked as well.
When I started my FI journey, MrsFiner was ambivalent about it. That was because she was not really sure if I was having a mid-life crisis! Or if this was something I was going to do for a few days and then give up. Even I was learning about FI when I started – so even I was not sure about it.
However, after a while, we both agreed that this was a good idea. Having both of us on the same page was a big plus. It not only helped us stay on the FI path, but it also made the journey a lot more fun.
During the FI Journey
3. Not having Patience
Although I knew this before I started my FI journey, I underestimated just how painful the waiting period is. When I started, the money that I saved and invested looked tiny compared to how much I would need to get to FI.
On top of that, the money growth rate seemed small too. For the first few years, I was thinking I was not getting anywhere.
Having patience and belief was the reason I did not give up. And over time, things started looking up. One of the other things that helped was the magic of compounding kicked in eventually, and my portfolio started growing faster.
In this day and age of instant gratification and get-rich-quick mentality, it can be difficult to persevere through the FI journey.
4. Sacrificing Too Much
After discovering FI, it is natural to want to get to FI as soon as possible. This is called Fast FI. However, sacrificing too much for FI can be bad too.
The most powerful pillar for FI is saving. In trying to get to FI, some people go to extreme lengths and cut down their expenses, depriving themselves. One thing to note here is that the FI journey takes a lot of time, and living a depriving life for so many years is not fun.
I am not a fan of Slow FI either. I did not want to spend many years getting to FI in my 50s. So I went with Fast FI, but I made sure I did not sacrifice things I valued.
After the FI Journey
5. Thinking FI will make You Happy
I learned this after I got to FI. Initially, I had imagined that getting to FI would make me happy. I was surprised to discover that getting to FI did not make me any happier than before FI.
It actually makes sense now. Having one dollar more than your FI amount does not feel much different than having one dollar less the day before. Life suddenly, miraculously, somehow does not change after that extra dollar.
This may sound strange, but Happiness does not have much to do with FI. If someone is a naturally happy / optimistic person, FI can make them happier.
If someone is naturally unhappy, FI will make them more unhappy. They will have more time after FIRE to focus on their unhappiness.
6. Oops, You Changed Your Mind
There is nothing wrong with changing your mind. I have changed my perspective on a lot of things. Sometimes it is because I learn new information. Sometimes it is because my thinking changes with age. The way I think when I was 20 is not the same way I think now that I am 40.
One of the big risks with FIRE, especially the Early Retirement part, is that someone changes their mind after retiring early. This may happen because they may no longer want to do whatever they were running towards. Or they may want to something different. It may simply happen because their thinking changes as they grow older.
If someone retires early and then wants to get back into the workforce, it can be tricky. Typically it isn’t easy to get back at the same level / salary after a long time away from work. Also, not many employers will understand early retirement and why someone would want to work again after retiring.
In Conclusion
This article is not meant to dissuade anyone from pursuing FIRE. It is more of an attempt to shed light on potential pitfalls so that you can make the right decisions on your FI journey. Good luck!!
Now that I am at FI, I am thinking forward and planning for early retirement.