You probably already know what Financial Independence Retire Early (FIRE) is (if you don’t see here) and are maybe even well on your way to achieving it but after reading this may find that you had fallen for some common misconceptions around the idea.
I have spent the last 4 years or so infatuated with the idea of early retirement and overall, the potential to do whatever I wanted with my time. However, over that period I have learnt that a lot of people, even those within the movement themselves, are carrying around some seriously flawed thinking.
So, in this blog post I wanted to share a few common FIRE mistakes/misconceptions with you.
As much as this could be put down to personal preference a lot of people seem to make the mistake of trying to live off as little as possible not only now but also in the future in hope of reaching FIRE faster. This is often due to flawed thinking; the idea of FIRE is to have freedom and if one brings their expenses down too low, they run the risk of simply ending up trapped by money again now and even in retirement! This is without mentioning the risks you run by trying to retire without much of a margin/safety net.
While you can certainly plan an early retirement well and have a pretty good chance of smooth sailing, many forget how difficult a normal retirement is to plan in of itself, and simply do not go to the lengths required to plan for an early retirement. Adding extra years in retirement brings with it significant consequences such as greatly increased risk of running out of money in retirement or encountering large unexpected costs. A good example of this is the famous 4% rule, simulations have shown this to have relatively high failure rate when adjusted to accommodate an early retirement and while adjustments can be made to account for this, many are simply not making them.
This point is almost on the other end of the spectrum to point one, a lot of people are sceptical of the idea of FIRE as they believe in order to retire early (or more towards doing so) you must give up many things you enjoy in your life now. While there are different levels of FIRE, this thinking is often flawed. While some may choose to sacrifice some or a lot of what they enjoy now for a more enjoyable future, for many, moving towards FIRE simply involves educating themselves on the deceptive consumer market we are surrounded by, a bit of self-discipline and a conscientious mindset. For example, not buying a brand-new car or the latest flagship phone.
This one is a bit more simple but incredibly common, many seem to think FIRE means sitting on the beach and doing nothing, this is not the idea of FIRE. Many if not all of those who are aiming to retire early are doing so to do the things, they love that may not bring in an income or enough of one. While others just don’t want to have to worry about if what they are doing makes money at all. For example, art, music, sports, spending more time with friends and loved ones or volunteering.
Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation.