FIRE (Financial Independence, Retiring Early) is a worthy goal to target. There are a huge number of positives with this modern movement, but FIRE is a double-edged sword.
Yet, no one likes to talk about the dark sides of FIRE. So, let’s buck that trend and do just that!
I’ll be discussing this from a retiring early point of view…
The Dark Sides of FIRE
Contrary to popular belief, you don’t live happily ever after once you reach FIRE.
Yes, there is life (ups and downs) even after FIRE.
Realize that FIRE is not an endpoint, rather it’s a transition point. The reason why I know this is I’m heading into my 5th year of early retirement.
While there are many incredible benefits and advantages to FIRE, there are some dark sides to FIRE which need to be faced and navigated.
Here are a few which I’ve faced firsthand and how I’ve learned to deal with them.
Quitting Too Early
Sometimes you can’t time your exit from the workforce perfectly. In my case, I was working for the company that acquired our IT support company. Although I had a 3-year employment agreement, the parent company seriously misrepresented their values during the acquisition. So, I found myself hating my new “job” which I had inadvertently created. After negotiating a favorable severance agreement, I officially left (1.5 years post-acquisition).
It was a bit of a strange time because although I always intended on retiring early, I found myself wondering if it was too soon. I would have preferred to have saved up an asset base closer to $2M instead of the $1.2M we had accumulated at the time.
Quitting too early is certainly a problem because you need to continually manage your cash flow tightly in order to maintain your capital base. As an early retiree, I face more years of uncovered assets coupled with inflation than most.
Part of this solution was to create some side hustles. And luckily for me, my wife didn’t have any desire to follow suit. Supplemental income is important during FIRE to ensure you aren’t drawing down on your assets prematurely.
Oh, don’t discount timing luck. By taking an early retirement at the beginning of one of the strongest bull markets ever (2013 – ???) it’s allowed us to actually increase our net worth while I haven’t been working.
Finally, it’s helpful to become comfortable with a worst possible case scenario. What if we lost 50% of our assets or more? What if all of our supplemental income dried up?
The answer is that we’d be FINE. We’d still have enough to support our family. I could always go back to traditional work. And, there’s always geographical arbitrage (living somewhere else with a significantly lower cost of living)!
If you’re getting close to FIRE, embrace the fear of quitting too early. It can be helpful if you use it to plan and strategize, but don’t let it paralyze you. Sometimes you just need a little financial faith.
Deciphering the Relationship Between Net Worth and Cash Flow
Another dark side of FIRE is related to Quitting Too Early. You see, it’s hard to separate net worth and cash flow sometimes.
Net worth can give you an inflated sense of well-being. However, it’s crucial to also watch your cash flow simultaneously.
In our case, we had a smaller $1.2M net worth in 2013, but our cash flow was strong with my severance, unemployment, wife’s salary, real estate investments, dividends, etc. As such, we were able to save and invest the excess money for a good couple of years.
Fast forward to today and you’ll see that our net worth has increased healthily to past $2M. However, if you’ve been reading our monthly financials, you may have noticed our cash flow has been weaker and even negative some years.
Net worth and a healthy cash flow are both important metrics to watch during early retirement and critical to reaching a comfortable FI base (aka critical mass).
I’m certainly glad that I’ve been tracking online every month as it’s been keeping me honest to watch the dynamics of our finances in real-time.
Killing Your Momentum
Chances are if you are in a position to FIRE, you have built up some pretty good momentum with your career. When you officially pull the plug on your traditional 9-5 to step into retirement early, all of that momentum of earnings, savings, and investing comes to a halt. There are opportunity costs on both sides of the equation.
If your former career was a large part of your identity, you’ll have to re-invent a new identity that maintains your internal values.
This part of FIRE and retiring early has been challenging for me. I fully transitioned to a SAHD (stay-at-home-dad) and love this role. However, a piece of me misses the thrill of building a business day-in, day-out.
To compensate for this momentum shift, I’ve had to learn to slow down and be okay with things taking longer than before. I had to learn to be okay with my new identity and stop beating myself up that I’m no longer performing a traditional male’s role.
Creating this blog has been a great way to re-create some of the lost momenta. It’s not only a site to help others, but a place for me to self-assess and also to grow. During the past few years, I realized that my number one priority is to be fully present for my family. This includes being a SAHD, a supportive husband, and a good friend. Secondly, comes all of my investing and entrepreneurial endeavors, including this blog, coaching, FBA, etc. Time is one of my most valuable assets these days, so it’s important for me to direct it and create momentum in the places which I will find the most fulfillment.
One thing that I did right, in the beginning, was to take time for myself to “figure things out”. I spent a lot of time self-reflecting on what was important to me and ultimately how I want to contribute moving forward. Thankfully I have had a supportive wife, in-laws, and friends which made this process that much easier.
I’m still evolving, but I’ve removed a lot of former stress I had by focusing on things I can control and who I can serve. This is where my momentum is building these days. 🙂
Having New Marital Problems
Being married can mean a lot of happiness. And, on the flip side, there will be inevitable downs to balance things out. You have to take the good with the bad if you want to make a marriage last.
Taking an early retirement out of turn with another spouse can bring special challenges, even if you both agree to it prior to pulling the trigger.
In our case, it was a strange transition when I had been the primary breadwinner in the family for over 15 years, and then suddenly I wasn’t. Next, I became the primary caregiver (SAHD) for our young children and this inevitably changes the parental dynamic.
Intellectually this new life could make sense, but when your 3-year-old cries out in the middle of the night and doesn’t want Mommy, but Daddy. Mommy can’t help but feel slighted. This isn’t anyone’s fault, but it can create tension and lead to resentment unless addressed head-on.
It’s taken us awhile to realize what’s been the underlying issues, but persistence and love are the cure.
We have to make it a priority to take time for ourselves alone. Thus, last year was riddled with alone time to travel different places and simply reconnect. (BTW, if you’re married, you should be doing this during your pursuit of FIRE as well!)
Facing FIRE Anxieties
Once you step into your FIRE life beyond a traditional career, there is a good chance that others around you will still be working. This throws you into a new realm of potential loneliness and social examination.
You may begin to miss socializing with your professional peers. After all, humans are social creatures by nature.
The key to facing these dark sides to FIRE is to get back out and network. Consider making a blog and joining the FIRE community of bloggers. I’ve met so many incredible people both online and sometimes in-person. Check out FinCon if you’ve never been. It’s a blast and super helpful at the same time.
One of our deepest human fears is not being enough. And, by entering into the realm of FIRE, you may face this fear head-on. Not everyone understands what FIRE is, or how it happens. So, you may even hear some of the ridicule about your current position in life.
- Doesn’t that guy ever work? What a deadbeat.
- Who does he think he is?
- He’s so full of himself. All he cares about is money.
- Must be nice to come from money.
- He must be loaded if he doesn’t need to work, I wonder why he’s not more generous?
Here’s the thing to remember tho…
What you think of me is none of my business. – Dr. Wayne Dyer
Finding and cultivating the emotional intelligence to navigate these insults and avoiding the creation of self-limiting beliefs is so helpful to finding joy in FIRE.
Don’t get me wrong, it’s okay if you find these negative ideas floating around in your head every now and then. The trick is to recognize it and simply let it go away.
Isn’t it bizarre that we can have two completely opposing beliefs? I say choose the more empowering one and keep discarding the others.
The next step is to raise your standards. Chances are you are able to FIRE because you were willing to do things others were not. You naturally have higher standards than most of society, so it’s your job to associate with those who will help you to at least maintain and raise your own standards consistently. Find a new peer group that will support your current position and even enhance it.
It’s true that playing with FIRE can sometimes get you burned! But, it’s not enough of a reason to end the pursuit of it.
Facing the dark sides of FIRE is an opportunity to grow. It’s a chance, to be honest with yourself and to realize money is simply a magnifier of who you already are inside. You are not defined by FIRE one way or another.
I suspect there may be more FIRE challenges down the road, but I’m going to have to rely on my financial faith that I’ll get through it just fine.
I hope you decide to continue down the path to FIRE, and for those of you already here, be willing to teach and share openly.
Readers, what are some dark sides to pursuing FIRE? How have you dealt with them? How did it (will it) feel when you’ve reached FIRE, or a portion of it?
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