credit: Link Hoang
One topic that I’ve been obsessed about is the concept of reaching financial independence (FI) at an early age. It’s not about not working. It’s about spending time doing things that you want to do with your time. One obstacle that I face is that I live in a high cost of living city in NYC. Yes, I realize this is a decision that my family has made as moving to a lower cost area would definitely speed up our journey to early FI. However, we have no plans to leave the area because our family and friends are here.
I’ve always been a frugal person and a good saver. When I got my first job, I immediately signed up for my employer sponsored retirement plan. I also opened an IRA account thanks to the encouragement of my father. However, after reading stories of regular people reaching FI in their 30s and 40s, I started wondering if I could do it as well. While I had saved a good amount in retirement accounts, especially when compared to my peers, I was no where close to FI. I had to turbo-charge my savings and investing rate if I wanted to get there. I started to max out my 457 contributions and I increased my wife’s contributions. I also increased our contributions to each of our Roth IRA accounts as well. My wife and I are naturally frugal. Always have been. We had no consumer debt and never did. We were living well within our means, but having an audacious goal like early retirement/financial independence really motivated us to go from ordinary savers to extraordinary savers.
Saving Fatigue
Brandon from the Mad Fientist talked about how there were some dark times in his road to FIRE. He wrote that he went from being frugal to depriving himself and isolating him and his wife during his pursuit of FIRE. I am not facing that dark time. I am just uncertain whether early FIRE is attainable. And if it is not, would I be better off loosening the purse strings and coast to semi-early FIRE at age 55. If I was certain that I could hit FIRE, then by all means I’d push to get there. It’s hard to keep motivated when a goal is almost 10 years away. It’s even harder if you don’t know for sure if you’re reach it.
I’m already on track for semi-early retirement!
In my previous post, I wrote that I will have a pension at around age 55. I have no doubt that I would retire at that point. Actually, as a frugal family, I think we would be able to retire on the pension alone. But I wouldn’t want to do that. We save a good amount in our 457 plans as well as in our Roth IRA plans. Even if we loosen the purse strings, we would still save for retirement in these accounts. There is a calculator on my 457 provider’s website which tells you whether you are on track for retirement based on how much you think you’ll need, how much you’ve saved, and what you’re contributing to your retirement accounts. It tells me that not only am I on track for retirement at age 55, our savings rate exceeds what we’ll likely need in retirement. Of course, these are only estimates and being a bit risk averse, I’d prefer to overfund. Chances are if I don’t hit FI in my mid 40s, I’ll likely stick it out until age 55. Those golden handcuffs get stronger as the lure of a fully funded pension and subsidized health benefits might be too hard to pass up.
What would change if we ditched the early FI goal?
Many in the frugal and FIRE blog space write about value-based spending and intentional living. They write that if they came upon some extra money, they wouldn’t change anything with their spending. I have written that living a rich life doesn’t have to be an expensive life. That still remains true. But I would be lying if I said, my financial choices wouldn’t change one bit if I had an extra thousand dollars coming in each month.
No, I wouldn’t suddenly buy a fancy car or go out to expensive 5-star Michelin rated restaurants. That’s just not me. I’m never going to be a spendthrift wasting money on frivolous things. I do think that I would like to move to a bigger place at some point as we will likely outgrow our 850 square foot apartment. Housing is expensive here in this high cost of living area. This is the main area in our budget which would expand if we decided to loosen the purse strings. I’d be more likely to take on a higher mortgage or rent payment if early FI wasn’t the goal. I’d also be more likely to splurge on travel and entertainment activities too. And we’d be okay financially. We just wouldn’t be able to reach financial independence in our 40s.
Will I still want to retire early in 10 years?
Of, course I would, right? At first, it sounds like a silly question, but something that still needs answering. The main reason I’m obsessed with FIRE is because I feel like I have no time. My work days consists of a long commute as well as driving the baby to and from grandma’s for childcare purposes. By the time, I get back, it’s dinner time, bath time for the kids, and some household chores. When we wake up the next day, it’s the same routine. On the weekends, we try to run some errands while also making sure we do something fun with the kids. We also try to visit our parents. Many parents with grown children tell me not to miss these precious moments. Mr. Money Mustache and his wife retired early to rise their son together without the shackles of the 9 to 5 job. I’d love to have that freedom as well.
A lot can change in 10 years. By that time, my kids will be in the pre-teen to teenage years. Will they even want to spend that much time with good old dad? I haven’t really fleshed out what I would be doing in early retirement as it seems still far away. Sure, I’d love to spend more time on this blog, but would this blog still even exist? I would like to volunteer, spend more time with my wife, and travel. But, I have a decent amount of vacation days from my employer and my job isn’t too stressful. Is the extra freedom worth taking off my golden handcuffs? Would I enjoy spending a little more in the present rather than saving a whole lot for early FI?
So should I put the pedal to the metal and strive for FI or just take it easy?
Related posts: Just as I was facing this dilemma, I read some blog posts related to this issue. The blogger at Bayalis is the Answer said that you can’t fail at fire, because no matter what, you’ll get somewhere that is worth going. Likewise, Matt from Optimize Your Life, wrote that he is saving for FI because it gives you options even if you haven’t fully reached financial independence.
Ultimately, it’s up to you on the level of pursuit for FIRE. I don’t think I will ever stop working, but I want to get to $1 million in the bank as soon as possible because once that happens, I can start pursuing my passions more fully.
I’m still probably 5-7 years away from having a solid investment portfolio, but you never know, things are accelerating here and I’m very pleased with it.
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I would definitely like to be productive even if I “retire” early. I don’t think I’ll ever stop working, but what if my work doesn’t produce much income. It would be much easier if it did!
“Would I enjoy spending a little more in the present rather than saving a whole lot for early FI?”
It’s definitely a balance. The kids will only be young once. At some point they won’t want to spend as much time with their parents. Family vacations will be harder. Etc. I personally would not let that time slip away. That said, I don’t think it needs to break the bank. You can still be frugal and strive for FI while engaging in short term priorities too. Just takes some purposeful planning.
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Yep, I don’t want to let that time slip away. The toughest thing is not necessarily the money, but having the time and flexibility when you have a full time job. It is definitely tough to balance to juggle two competing interests.
I struggle with this ALL. THE. TIME. I think since I technically missed the “early” retirement boat, I now have to save a lot more to even consider retiring “on time” which leaves little room in the budget. But, I can’t just live like a hermit either. It’s tough…i still don’t quite have the answer.
When you have the answer, please let me know! =) It is definitely a struggle to balance wanting to attain both goals.
It’s certainly a personal choice, but I have found that the kids grow up quick. As they become teenagers they priorities shift and they spend less time with the family and more with friends. So be mindful of the time now.
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Yes, I can definitely understand that. While our little ones love and adore us, I can see just a little of that with my toddler. Whereas he’d be happy playing with mama and papa at the park (he still generally is), I can see some of his disappointment when his friends aren’t around.
It will always be a balancing act and definitely be different depending on your priorities. I don’t think RE is one that I really put a lot of stock into at current point because I cannot imagine not working. FI however, is different. I want FI so that I can have the option to cut back if I ever do want to. I imagine that is pretty much how many people would see it as well. But I also believe that you only live once and while I don’t collect much, I do collect experiences. So would I spend on a 5 star michelin meal? Yes, I would because food is my passion. But would somebody else? Maybe, maybe not. But on the flipside, I would live minimally and frugally to be able to fuel such experiences. It’s all a balancing act.
I don’t think I intend to not work but having the flexibility to pursue my interests and cut back is high on my list. I work in government and their policies are stuck in the past. Telecommuting and flex times are not something they want to offer. I guess you’re right about 5 star Michelin meals…to each their own, we each enjoy spending on different things.
The older our kids get, the more I want us to be more FI. We are in a different situation: homeschooling has kept family bonds super tight even through the teen years. Now that they are growing up so fast, I wish we had more free money for travel, etc. We screwed that up, but we’re doing what we can to make it right, and do so quickly, so we can spend more time traveling with the kids, etc. If I were you, I’d work big time toward FI for the next 2-5 years, and then take an early retirement or at least semi-retirement and enjoy your time with your kids before they get too much older. I have a feeling you’re closer to FI than you think. If I know you, Andrew, you’re overshooting the number you need to retire early. 🙂 I’d also consider moving out just a bit to lower housing expenses, but then again I’m not too familiar with NY so maybe that isn’t realistic?
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That’s awesome that you guys homeschool. I don’t think I’d have the patience for that! I wish FI was attainable in 2 to 5 years. I’m not sure I’m all that close, mainly because of the high cost of living in NYC. I guess it depends on your definition of FI. I think we’re financially secure and don’t worry all that much about money, but can we stop working and pronounce ourselves FIRE’D…definitely not! Moving to a lower cost area is absolutely something that crosses my mind but it’s a tough decision.
This is always a tricky path to walk. I try to save as much as possible without decreasing my happiness. I recognize that that is not actually a helpful statement, so let me give some examples.
My wife and I live in DC, so we are also in a high cost of living area. We could save a lot of money and get a bigger place by moving to a less safe area of town, but security (which leads to reduced stress) is a big component of happiness. We could also save a lot of money and get a bigger place by living way out in the suburbs, but we’d have a longer commute and less time together (and less time with future kids). We could reach FIRE sooner, but the savings would decrease our happiness.
For the same reason we splurge on vacations. Study after study shows that experiences give you more happiness than materials, so we spend a lot on experiences. Another benefit is that trying new things with your spouse strengthens your relationship, so traveling to places that neither of you has been is a double win.
I don’t have a set year or timeline in mind for reaching FIRE. I will get there when I get there. I want it to be sooner rather than later, but I don’t want to sacrifice my happiness or my relationships to get there.
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Great points. And finding that balance where I don’t decrease my happiness yet save a lot is a tricky balance. It has become harder now that we have two little kids. We had no need for a good school district, a bigger place, etc…but now we do. It’s is very difficult to have it all unless you’re willing to pay up. You’re right about experiences, and a lot of the problem with that sometimes isn’t even monetary (as in paying or not paying for it), it’s having the flexibility and time to experience it.
I set an arbitrary deadline at about age 45 since I feel like if I get past that age…I might as well get the full pension. It is that tempting!
For me, it comes down to time. Time is something we can’t make more of. While I think it’s very, very important to save (and create options), I also think it’s important not to miss out on opportunities today to spend time with family/friends and doing things we love. That’s where the balance comes in, but it’s not always easy. I think Matt hit the nail on the head when he mentions not sacrificing happiness or relationships to get there. That’s the key!
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You are absolutely right Amanda! Time is the most valuable thing and it is something I feel like I don’t have enough of. I just need to find that balance where I’m not sacrificing happiness while saving. However, going to work necessarily means I will lack time as that’s where I spend a large amount of my time (commute included).
I wanted to become FI ever since I was a few years old! But that’s not the point.
I believe balance is key. Striving to reach early retirement won’t be easy if you don’t give yourself a break every once in a while.
Aside from what Amanda mentioned, I’d like to add that trying to hard might lead to giving up on your quest to become financially independent. I’m experiencing this myself sometimes, I save and abstain from spending on wants, just to say “aww.. fudge it!” after a while and splurge. Of course, I feel guilty afterwards but that won’t bring my money back 😀
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Haha Adriana, that’s a pretty young start. I didn’t consider FI (nor my husband) until we came into the PF community.
A friend of mine is not a supporter of FIRE. Things happen, life happen, you could be dead tomorrow <- she said. It's rare but the chance is there. Her philosophy is spend everything while you can and worry about it later. That is also why she's 80K in debt. It's about balance, that debt of her is taking away her future (but I don't have the heart to tell her.)
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Wow, how did you even have that idea so young! I think maybe I’ve reached that point. I actually don’t mind saving and don’t feel like it’s that big of a sacrifice as I’m naturally frugal. The main issue I have is not having enough time.
Like other people I think about this ALL of the time as well. Part of this is that we are late to the game on FIRE and also we are hopefully going to have kids soon. However, that will mean I will be in my mid-40s when this happens and my kid(s) will need other things (e.g. university tuition). Having the benefits I do come with some other golden handcuffs and I don’t know if I want/could give them up. But I would like to be in the position to at least entertain the decision. I think that is what is most important for me. Of course by the time I reach FI I will most likely be 50 so what do I do then? Who knows.
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I think you’ll find that in 10 years, you may really start to resent/hate your job. So trying to FIRE is a hedge against that bad feeling. I think 10 years will come quicker than you think.
It is wonderful to raise our son together at home, but it is more work too. I’m always on duty, like right now, typing this at 5am after being up since 2am for my 2am – 7:30am shift.
But if you have a cushy job that’s not too stressful, I’d take things down a notch! The pension is HUGE!
Sam
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That’s very likely, but what if I don’t reach in 10 years. Then would I resent myself for sacrificing those 10 years? And in 10 years, my kids will be preteens. No diaper duty anymore and they’ll probably be more interested in hanging out with their friends! The pension is definitely a HUGE…golden handcuff! The job isn’t all that stressful but I do have a long commute and I feel like my time is very limited. If only they offer part time work or something, but my employer isn’t that flexible.
It’s a tough call. I would personally take it down while continuing to work for 10 years.
Isn’t that the inertia of large corporation employees and government employees? It’s actually be a nurse or of all employees who get older, which is why corporations are always trying to hire Younger employees. Take all your sick days, take all your vacations, spend more time with the kids. If they let you go, then hopefully they will at least give you severance.
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“He wrote that he went from being frugal to depriving himself and isolating him and his wife during his pursuit of FIRE.” This is one thing that I want to avoid. I generally agree that pursuing financial independence is important, but at the end of the day life is about more than having independence. If you lose relationships because of it, it just might not have been worth pursuing.
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Very true and I’ve done a decent job avoiding that, but not sure it’ll all be worth it in the end.
I’m 100% on the same page as you, with 3 young kids and the exact same questions. Can I accelerate the process at the cost of additional pain, or should I slow down and see in 10 years? Will my goals of FIRE be the same in 10 years? etc…
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I thought your FIRE timeline was a lot sooner.
I admit that “FI” is not something that I value as much as many PF bloggers. I value the experiences that I can have with my family and friends so much, and they bring me great joy. I am willing to sacrifice the “freedom” of the future for creating memories today. I still try and be financially responsible, of course, but saving for a future where I will be worry-free isn’t the end-all be-all for me.
I think the biggest part of FI that I value is have more time and flexibility. If my job offered that, I would probably be okay with staying longer.
The shackles of golden handcuffs are tempting, but if you over fund the nest egg plus hopefully Social security will help after 67 you should be OK. The only issue I see is the Healthcare dilemma in this country, and if they will fix the high costs. Also if you reach FI prior to 55, and move you’ll be able to make the nest egg last a few more years. A frugal person always finds a way to make things work.
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Yea healthcare is definitely a dilemma for those pursing FI. And I definitely think it’ll be easier if we move to a lower cost area but I don’t know if we want to do that either.
It’s funny how early in your career you may be super motivated to achieve financial independence, only later to find your priorities changing as the kids get older and you get closer to the pension and health benefits that you described. It’s good to recognize this problem early though so you can think about it and understand that ironically as you get closer to financial independence (and therefore have more to lose), you’ll likely feel more pressure to stay until 55. It doesn’t help that lawyers are the most risk-averse group on the planet, so as time goes on it is less likely that you’ll want to leave.
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Exactly. Our mindsets definitely change as our life circumstances change.
I live in NYC as well. So I get it. It is such a dilemma. A bigger place would be nice. But like many said, at some point if you are seriously depriving yourself, FI might not be worth it in the end. Fritz from Retirement Manifesto fell off the roof of his house (he’s ok) trying to save money by DIY-ing instead of calling a pro. In his recent post he wrestles with the same question :”Is it worth it? Is it worth my life?” I am wrestling with the same questions. And I have found that in many cases its not.
See that’s the thing. I’m not seriously depriving myself but being that FI seems almost unattainable, I wonder whether it’s worth it especially since semi-early retirement at 55 is pretty much assured. Interesting story about Fritz…glad he’s okay. I definitely wouldn’t risk my life to save a few bucks though. It’s a tough balance though sometimes.