Life is amazing. It is unpredictable. There are no guarantees. Life can knock you on your ass.
All of these are true and you have or will experience all those things at some point in your life.
The Financial Independence movement is appealing in so many ways. Freedom to what you want, when you want with this amazing one life that we have! We are here one time, so why spend it tied down by obligations such as a job, where we slave away to exchange our precious time for money.
Why doesn’t everyone do it?
We can get on board with that idea….to an extent. People are fantastic at earning money. They are better at spending that hard earned money because they “deserve” it! But when is that spending too much? That is the point where humans are so so terrible and misguided! We live in a consumerist world surrounded by social media and advertising. There has never been a time where literally every product is so accessible!! And it is just getting worse…
If we can find the line in the sand that separates necessary and unnecessary spending, the we are at step one of FIRE. Necessary spending is what you need to live and be happy. Unnecessary spending is all the other useless crap we don’t actually need but are tricked into thinking we need.
We really need to be more sensible with out money. The only way to do this is SPEND LESS THAN WE EARN!
I put that in bold because a lot of people spend more than they earn. Using credit cards, financing cars that are all too expensive, going on holidays when they are living paycheck to paycheck….MADNESS!
There are no guarantees!
Now, down to the point of our little post today, there are no guarantees in life! If you are living paycheck to paycheck, tomorrow could be the start of massive financial crisis 2.0, you might lose your job or have hours or salary cut back, then your paycheck to paycheck lifestyle is completely screwed! It snowballs pretty quick, you miss are car payment so you can pay for food, then the car eventually gets repossessed, then you default on a few mortgage repayments or worse yet on rent and before you know it, you are out on your ass! This is the extreme of bad case scenarios but not unheard of!
Knowing your situation could change at any stage, why would you not have a back up plan in the form of savings? After reading this, hopefully you will be laughing to yourself cause this is already stuff you know and I am preaching to the choir, or you are thinking huh, that makes total sense!
Saving and eliminating debt is only the beginning, but what about when you have reached FI? Again, no guarantees in FI either! Why? Cause anything can happen! The market could take a turn for the worse and take 4 or 5 years to recover, and it will recover, but what about those 4 or 5 years? You may not be able to withdraw the full amount you require to live without dipping into your principal savings sum.
Plan for the bumps in the road
FIRE isn’t sit on your ass and do nothing ever again. It can be, if all goes well and that is what you enjoy. You need to be prepared to frugal up and even go back to work to cover harder times. Most of you pursuing FI are going to be smart and driven people so you won’t be sitting back and doing nothing, you’ll likely already have created another form of income after FI just as a way to occupy your time, maybe by monetizing a hobby or passion.
I know that I would likely do some form of work after reaching FI because I actually enjoy working. I just do not enjoy my current profession. If I can avoid work altogether, that would be great. If I need to go back to a lower paying job, even part time, I would be happy to do that though. Plus I might meet new people or learn a new skill along the way!
But how can we limit these “hard times” for after reaching FI?
One of the big ones you read about, particularly in the US, is healthcare and the costs that come with unexpected illness/accidents. Thankfully, Ireland has free healthcare for citizens. There are also options to have private health insurance. At the end of the day, you get the same Doctors in public and private, mostly the same hospitals. The standard of care won’t be hugely different as someone who is genuinely sick will be seen to just as quickly in the Emergency Department regardless of they health insurance.
I talked a little about this in a previous post, but the main points are that housing is expensive and the average cost of living in Dublin is far higher than anywhere else in Ireland, so plan accordingly. There are plenty cities, with plenty jobs and opportunities, why do you need to be in Dublin? Plus, Dublin is usually within 2 hours travel to anywhere in except for the furthest out reaches. You can rent long term or buy a house. Remember that buying will eat into your savings, but maybe save you money down the line overall so weigh up your options. Also, never be afraid to downsize, do you really need all that space?
Maybe you don’t want to retire in your current country of residence? Geographic arbitrage is a well versed way of living the good life on the cheap. Move to Thailand for a year and live on €10,000/year instead of the chosen €40,000, without sacrificing lifestyle.
Again, another topic I have posted about but the jist is if you have reached FIRE, you can have a small amount of your Net Worth held in a cash account that is easily accessible.
There you have it, my two cents on the volatile nature of life! Plan ahead by imagining the pitfalls and hardships that may occur. Come up with a contingency plan. Minimize the emotional and monetary risk.
I am Steve, the author and owner of Fire-ish, where I try to share my story and help people towards Financial Independence with small tips and tricks that add up. Follow me on Twitter at @fire_ish and on Pinterest. I am trying to grow my readership so if you enjoyed this post, please share it!