The one thing that all of us have the same amount of every day is time.
No rich person has more than 24 hours a day, and no poor person has less.
So understanding that value proposition all of us have in trading our time for money is one of ten lessons that our poster, Tawcan, has learned during his FIRE journey that he shares with us today.
Although I grew up in a household where my dad retired in his early 40s
and a couple of my cousins reached financial independence and/or retired early in their 40s, I had never really put much thought or energy on financial independence retire early (FIRE) in my 20s. While I was living frugally, I wasn’t investing my money efficiently and I lacked a core investment strategy.
This changed just before I turned 30. Someone gave my wife and me a book called Secrets of the Millionaire Mind and our lives were forever changed. We aspired to make changes in our financial plans and how we manage our money. We knew FIRE was a possibility and we started investing in dividend-paying stocks with the plan to live off dividends by 2025 or earlier.
Ten years into our FIRE journey, we’ve made great progress on our goal of becoming financially independent. We are appreciative of this journey and how it has transformed our lives and made us more rounded people. We also have learned many lessons that we wouldn’t have learned if we weren’t on this journey.
I’d like to share with you the ten lessons I’ve learned so far on our FIRE journey.
1. FIRE is not the finish line; it’s a journey
Many see reaching FIRE as the finish line. For them, it means an escape from the rat race. However, I believe we can’t see FIRE as an escape route, a happy ending, a finish line, or the solution to everything. Reaching FIRE certainly doesn’t mean you will magically become happy and live happily ever after.
If you don’t work on yourself during the FIRE journey and improve yourself, you will continue to face the same challenges over and over.
Look at FIRE like a journey. It is very important to enjoy the journey and work on yourself while on this multi-year journey. So take the time to learn new skills, take self-improvement courses, gain new hobbies, make new friends, provide a helping hand in your community, etc.
2. Have a core investment strategy
In my 20s, although I was investing in the stock market, I was trading in and out of stocks frequently. I also invested heavily in high MER mutual funds and low-interest-rate GICs. In other words, I didn’t have a core investment strategy and my money wasn’t working very hard for me.
Since starting our FIRE journey, I learned to get in line and stay in line. I learned the importance of having a core investment strategy.
For us, it means investing in both dividend-paying stocks and index ETFs. This hybrid investment strategy allows us to have a predictable dividend income every month while staying geographically and asset diversified. By getting rid of high-fee mutual funds and so-called “high interest” GICs, on top of investing in the stock market for the long term, our money is working much harder for us.
Having a core investment strategy also means that we stay focused. We aren’t constantly switching back and forth between different investing strategies and losing momentum. If we want to test out a different investment strategy, we can still do that, but we use a small percentage of our portfolio.
For example, less than 5% of our overall portfolio is invested in growth and more speculative stocks.
3. Ignore doubts and noises around you
The FIRE movement has gained popularity in recent years but it is still a niche movement. The niche nature of the movement means that many of your friends and family do not know about it and will cast doubts when they learn what you’re working on. Unintentionally, they may also try to sabotage your plans.
It is important to ignore doubts and noises around you. Believe in yourself, connect with like-minded people, find support from the FIRE community, and stay focused while on this FIRE journey.
4. Understand your whys
Many people start their FIRE journey because they hate their jobs and because they are not happy with their lives. But FIRE isn’t the magic pill, it will not make you happy all of a sudden.
It is important to dig deep, cut through the BS, and really understand why you want to become financially independent and one day retire early.
Perhaps it’s because you want to have more time to spend with your kids. Perhaps it’s because you want to have the ability to go skiing on a Tuesday morning. Perhaps it’s because you want to be able to volunteer at the local soup kitchen without having to worry about money.
Find your reasons.
5. Stop comparing
Becoming financially independent in less than five years doesn’t make you more successful and taking 20 plus years to reach financial independence doesn’t make you a failure either.
Because we are all different individuals, our FIRE journey will never be alike. Therefore, we need to stop comparing our journeys with each other. Instead, support each other and help each other along the way.
And remember, financial independence retire early does not define success in life.
6. Learn from others
Over the last ten years, I have learned so many new things from other people regardless of where they are on their FIRE journey. I am grateful to have connected with so many like-minded people and have learned so much from them. A quick coffee meetup can quickly turn into a multi-hour discussion on FIRE and life. I am always amazed at how kind and willing people are in sharing their knowledge.
We don’t have to be on the FIRE journey by ourselves. The FIRE community is extremely strong and supportive. Lean on the community and learn from others. Most importantly, remember to give back when you can!
7. Don’t over-optimize
Many of us FIRE seekers like to optimize things. We strive to optimize our budget, expenses, taxes, time, etc.
While it’s important to optimize whenever possible, it is always important to step back, look at the big picture, and question whether further optimization is necessary.
Is it worth your time and effort to save that extra 0.05% investment fee? Is it worth your time and effort to drive an extra 3 km to save $0.05 per liter of gas? Is it worth your time and effort to switch back and forth between discount brokers just to save commission fees?
Sometimes the answer is yes, oftentimes the answer is no.
8. Spending isn’t the enemy
Spending money isn’t the enemy. Do spend money on things that you value the most.
Therefore, there’s nothing wrong with buying coffee, or chocolate, or eating out in moderation if that brings you happiness. Heck, if you value fitness (and you should), it’s totally OK to spend money on that gym membership, on a bike, or the home gym. Stop labeling these as guilty pleasures. Because they are not!
Now if new clothes bring you happiness, do spend money on new clothes. There’s absolutely nothing wrong with that.
There’s no point in making yourself miserable while on the FIRE journey. If you are, there is an extremely high chance you will abandon this journey completely.
Make this long FIRE journey as enjoyable as possible by spending money on things that you enjoy while eliminating expenses on which you don’t enjoy spending.
Stop seeing spending money as the enemy; it’s how you approach money that matters the most.
9. Be open to changes
Let’s face it: life is fluid. Just because your FIRE target is $1 million or you plan to reach financial independence by age 52, things can and will change.
The FIRE spreadsheet that you created is great at developing models and drawdown plans but it won’t be able to predict the unexpected. I’m 100% certain that none of us had built a multi-year global pandemic into any of our FIRE plans.
When life gives you lemons, make lemonade. Be open to changes along your FIRE journey. Be open-minded. Adapt and change.
10. Enjoy the present moment
Sadly, I have encountered many unexpected deaths in the last ten years – the death of co-workers, the death of friends, the death of family members, and the death of a beloved pet.
Many of us are constantly looking forward to the future. We look forward to the fancy dinner reservation, we look forward to the vacation in two months, we look forward to retirement, we look forward to kids growing up and moving out, etc.
But it is far more important to enjoy the present moment. Learn to enjoy and savor this very moment. Because before you know it, it’s gone forever.
Do take time to really enjoy that nice latte you just made or purchased. Take the time to really enjoy the laughter you’re sharing with your friends or family. Take the time to really enjoy the book you’re reading.
Plan for the future and enjoy the present moment.
I’ll end this post with something I wrote a while ago…
We all exchange our time for money. We then use the money to purchase things we need and want in life. Yet when we need time the most, we find we cannot buy time with our money.
Isn’t this ironic?
Rather than using money to purchase things we want in life, focus on using money to purchase things we need and things that bring joy to us. Focus on investing money for a better future.
More importantly, use the time you have on your hands. Don’t keep telling yourself the most dangerous phrase: “We’ll do it next time.”
Because how can you guarantee there’s going to be next time?