We often get asked what advice we would give to someone working towards FIRE (financial independence retire early) and there are some great posts out there full of advice from the FIRE community. Most of the people who reach out to us for financial coaching start with questions about investment accounts, annual withdrawal strategies, and health care costs. Once we get through those basic financial topics the conversations move on to focus on the personal and emotional money topics people want to talk about in detail.
When we talk about the personal side of the FIRE journey there are a lot of common themes. The topics we hear about the most include stress over deciding when to resign from work, concerns about setting time and money aside for elderly parents, grief about losing friends who aren’t comfortable with FIRE related values and goals, anxiety about needing to move to a different location to lower expenses, fear about not having enough money to handle health care and long term care, and relationship challenges in a marriage or partnership from working towards FIRE.
We had a lot of those same concerns ourselves before we reached FIRE in 2018. Since then we’ve been looking back at our own FIRE journey to unravel the emotional side of what we experienced when we were working towards FI. Everything seems clearer now with hindsight!
In Our Case…
We needed a financial plan for our money, and we also needed a personal plan for all of the emotional aspects of completely changing our lives. Building our Personal Money Statement helped a lot but we didn’t do that until we were at the end of our FIRE journey, and that didn’t cover some of the other emotional issues we were dealing with during the earlier stages of working towards FI.
As we got serious about reaching FIRE we started feeling distanced from a lot of the people in our lives. We certainly weren’t sharing our goal of early retirement with our colleagues and friends at work. And our conversations with our closest friends started to change when we became less interested in talking about advancing our careers and spending money, and more interested in talking about saving money and changing our lives. When our values about our time and money changed we felt like we were no longer on the same page with many of our friends and family, and it became clear that we didn’t have a lot of people we could talk to who could really understand what we were trying to achieve.
Our biggest challenge during our FIRE journey was our fear of not having enough money. That fear was especially hard on Alison. We were both nervous about pulling the plug on work and trusting in our investments, which made us slow to test our portfolio and declare that we were financially independent. We were in a place of uncertainty when we were working towards FIRE and that uncertainty influenced our decisions as well as the pace of our decision making. We finally verified that we had surpassed our FIRE number in 2017, and in 2018 we verified that we had the early retirement funds we needed in our brokerage account. Looking back we know now that we could have retired a few years earlier than we did. We can’t go back in time so we’re focused on enjoying today, planning for the future, and being available for other people working on their own FI plans.
When we were working towards FI I needed more flexibility and a faster pace, while Alison needed more evidence and a slower pace. Alison and I process information very differently and we have different communication styles too. But we share the same goals, we listen to each other, and we always want to find a way to compromise and reach conclusions we’ll both feel good about. We certainly had our frustrations and miscommunications along the way, but we know our biggest success during our FIRE journey was our relationship. When people started reaching out to us to talk about their experiences on the path to FIRE we realized how lucky we are and how common it is to have relationship stress from your FI journey.
Since so many of our financial coaching sessions focus on these same topics, there are four main pieces of advice we like to share…
1. Go Deep With Your Numbers
First, know that 4% is a generic safe withdrawal rate (SWR), and generic advice is not a perfect fit for many of us. There really isn’t a single portfolio number or SWR that we can all copy and paste into our FIRE plans. Everyone has a unique set of financial circumstances to consider, which is why personal finance is so personal. When we were looking for our FIRE number and SWR we started with the generic 25x living expenses calculation as a baseline, and then we factored in everything that’s unique about our finances and our personal goals. We do want to leave a legacy for our nieces and nephews, and we want to be able to give generously now, and we want to have a healthy annual budget with plenty of wiggle room in our spending. We also want to be prepared to cover larger medical expenses that we might have to face, and we want to be able to self insure for our long term care needs when we’re elderly. On top of all of that we want to travel a lot during retirement, possibly even while keeping a home of our own that we can return to as needed. So we did a lot of planning and calculating before we arrived at our own FIRE goal of saving 33x our 2017 living expenses before retiring. We also wanted to make sure we tested our portfolio with a wide variety of data points since we had not worked with a financial advisor in any capacity while managing our own portfolio of investments and creating our FIRE plan. We still test our portfolio with our calculators and other people’s calculators. But we don’t worry about longterm portfolio recovery after normal market dips during our retirement, and we definitely don’t think about taking our money out of the market and stuffing it in a real or metaphoric mattress. We just want to feel confident about having enough accessible cash in our brokerage account in case our overall portfolio is damaged by black swan events, a major recession, extreme inflation, or a market price bubble during our early retirement years. Which is why we didn’t want to rely on anything higher than a 3% SWR in early retirement.
Second, build a withdrawal plan that will cover your financial needs from beginning to end, especially if you retire early. If you ever plan to retire it’s certainly a good idea to have plenty of money saved in traditional retirement accounts like 401k’s, IRA’s, and Roth’s in the USA, or RRSPs and TFSA’s in Canada. But if you want to retire before those accounts are intended to be accessed it’s also important to have a plan that funds your early retirement years without depleting your retirement accounts while you’re still young. We retired with half of our net worth saved in our brokerage account to provide us with completely accessible funds to withdraw during our early retirement years, along with a five year emergency fund (which is now down to a three year emergency fund since we bought a house last year). We want to leave our IRA and Roth retirement accounts baking in the oven until we are at least 59.5 years old, and we only plan to begin making withdrawals from those types of accounts after we can do so without penalties. We plan to take early Social Security at 62 in order to preserve our investment portfolio. We also want to make annual Roth conversions to move funds from our traditional IRAs to our Roth accounts, which increases our taxable income today but will also reduce future required minimum distributions (RMDs) after we’re 72 years old. And lastly we plan to withdraw funds from our Roth accounts when we’re elderly to cover our long term care needs. It’s important for everyone to evaluate their own unique expenses and budget items so you can build a withdrawal plan that fits your family, lifestyle, location, living expenses, health care needs, and personal goals.
2. Be Open to All of Your Options
Sometimes people can only see a clear path forward if they are open to new ideas. Sometimes people just need to give themselves permission to really consider big changes and new ideas. Being able to fully explore all of your options is a stepping stone to being brave enough to put your decisions into action. We first came up with the motto “All Options Considered” in 2007, when we were making a change from individual stock investing to owning rental properties. We wanted to give ourselves permission to try anything and our new family motto helped. There were plenty of times during our FIRE journey when we felt stuck in our circumstances or scared to make big changes, and we’ve used the idea of All Options Considered for every big financial decision we’ve made since 2007. It definitely came in handy in 2017 when we set dates for quitting our jobs, selling our condo in Seattle, and completely changing our lives. In 2020 when the whole world changed because of the pandemic we sat down to consider all of our options again and we came up with a new lifestyle to fit our new surroundings. All Options Considered has been a great mindset for us and it’s an idea we want to share with others.
3. Build a Community
Human beings are social creatures, even those of us who are socially awkward introverts thriving in isolation are still incredibly social creatures. We have lots of FIRE friends now but we didn’t start building our community of FIRE friends until 2018 when we had already reached our FI goal. Our FIRE journey was pretty isolating since we couldn’t talk to our work colleagues about our plans and most of our friends and family weren’t comfortable talking with us about money in detail. We found the FIRE movement in 2014, but we didn’t find FIRE community people at that time that we felt like we could relate to or wanted to become friends with. As shy introverts we didn’t feel comfortable reaching out to people we had come across on the internet back then. But we are different now and we have learned that we sometimes make really important close friends after one of us just reaches out with an introductory message on Twitter, or Instagram, or Facebook, or a blog. If we could go back in time that’s one thing we would do differently, we definitely could have made more of an effort to start building our FI community back then. Being able to talk openly with people about all of your financial independence related plans, dreams, and questions makes a huge difference. So if you’re one of those people or couples who feels alone on the path to FIRE like we did, be brave enough to introduce yourself to others who are also working towards FI and to people who have reached FIRE already. No matter where you are on the path to FI or what your particular circumstances are, there are amazing people in the FIRE community who can relate to you and be supportive!
4. Build a Written Plan for Your Financial and Emotional Needs
In a sense we took our earliest steps towards FIRE in 2005 by starting to manage our own portfolio and by committing to learning everything we could about investing. By the time we opened a joint brokerage account and joined a women’s investment club we felt like we were on top of our finances, but back then we didn’t have a real FIRE plan and we weren’t always focused on a clear goal (just saying “we need to save more money and we want to retire early” is not a clear goal!). We also didn’t yet have the personal finance vocabulary or support structure we needed. One thing that would have helped us back then was a detailed plan to keep us moving forward. We were just drawing whatever lessons we could about what to do and mostly what not to do from our family members, including both successes and failures. When we found the FIRE movement in 2014 we identified a few good examples to learn from in other bloggers, podcasters, and authors, and our plan started to take a vague shape.
In 2017 we finally took the time to build a complete written plan we called our Personal Money Statement (PMS). Having our PMS written out meant we knew what our goals were and we knew how to react or not react during different financial events. Our PMS gave us the structure, personal accountability, and confidence we needed to quit our jobs and leave our career focused lives behind. I wish we had done a better job of creating a FIRE plan sooner, including both financial and emotional planning to help us get organized early on, but we got to it eventually. Anyone could benefit from taking the time to organize their goals and needs in a written document, and the earlier that kind of plan takes shape the better. Having something to continue referencing and updating over time during your FI journey could be helpful and reassuring!
So There You Go!
The nuts and bolts of reaching FI include more than numbers and calculators, there are just as many personal and emotional things to figure out along the way. So here’s our advice: Focus on all aspects of your FIRE journey and your life, not just on money, and remember that you are not alone!
No matter where you are in your FI journey, take some time right now to think about your personal and financial goals and make real plans for what you need. Take the time to build your own FIRE number, SWR, and withdrawal plan based on your circumstances and goals, and make sure you have accessible funds if you’ll be retiring early. Create a personal plan that considers where you’ll live, who and what your life will include, and what it will take to get there. Find a community to talk to about your finances, and all of your fears and concerns too because you’re going to need support and encouragement along the way. Lastly, keep an open mind… All Options Considered!
We are not certified financial professionals. For more information about us please read our Disclaimer.