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Can YOLO (You Only Live Once) and FIRE (Financial Independence, Retire Early) be compatible or will they forever be at odds? If you find the right balance between saving and spending, you may be able to abide by both philosophies.
How do you strike that balance? What gets prioritized?
Everyone’s answer will be different, but using the framework below will help you save for tomorrow without feeling like you’re sacrificing too much today.
This guest post was written by Money Saved Money Earned.
People today, especially young people, are often caught somewhere along a continuum of two competing philosophies: YOLO vs. FIRE.
On the one hand, you only live once (YOLO) is a frame of mind that encourages living your life to the fullest while you can, even to the extent of behaving in ways that carry risk. On the other hand, FIRE (financial independence, retire early) or simply FI (financial independence) is a state in which one has enough money to cover their living expenses without needing to work.
Both have pros and cons, and like anything in life, too much of a good thing can become bad. But for many, it can be tough to strike a balance between saving and spending, and many tend to go all-in on one extreme or the other.
This article will discuss the concepts of YOLO and FIRE, why you need a balance, and some tips for finding a balance between saving and spending that works for you.
YOLO or FIRE?
It is true that you only live once, but it’s also true that you should also try to prepare yourself for a rainy day. Unfortunately, many tend toward one extreme or the other when it comes to these concepts and may find themselves backed into a tight spot or unhappy along the way.
There are appealing aspects to both sides of the spectrum, as well as drawbacks.
You Only Live Once
As previously stated, YOLO is all about living your life to the fullest. Thus, it is somewhat of a modern take on carpe diem or “seize the day.” But unlike carpe diem, the term YOLO also carries some darker associations.
You only live once applies to enjoying your life while you can, but it is also used in conjunction with risk-taking behaviors.
For example, people have gone through with a decision they know isn’t sound but will claim YOLO as their reasoning. This could be buying something they can’t afford, engaging in unsafe behavior, or any number of inherently risky things.
Financial Independence, Retire Early
On the other hand, FIRE or simply FI is a frame of mind that encourages you to increase your income, decrease your spending, and invest as much as possible until you reach a point where you have enough assets to cover expenses for the rest of your life without needing to work.
Some individuals take the concept a step further and officially retire from their careers or switch to working on projects they enjoy.
Whatever route you intend to go, becoming financially independent puts you in an extremely secure position where you theoretically don’t need to worry about money anymore. Removing this financial burden allows you to focus on what truly makes you happy and what gives you fulfillment. That could be travel, continuing your career, or pursuing passion projects.
Although everyone would be in a better financial position if they pursued FIRE, there are some downsides. As with YOLO, some may be tempted to take it to the extreme with FIRE and spend almost no money on wants in the hopes of reaching FI as soon as possible.
On the other hand, some may work continually and burn themselves out with side hustles in hopes of reaching FIRE sooner, and still, others may struggle to reach FI at all due to their circumstances.
Worst case scenario, some may struggle in retirement or become ill or injured and unable to enjoy their retired lives fully.
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Why Balance?
While both YOLO and FIRE are appealing in their own way, the safest and likely most fulfilling option would be to have a balance between the two as you go through life. Tipping too far one way or the other carries risk and may lead to unhappiness or worse.
Everyone will have slightly different tolerance levels and goals, so you’ll need to carefully consider what matters most to you and then build a plan that balances your portfolio of YOLO and FIRE optimally for you.
Here are 3 things to consider when building your optimal balance.
Protection
It’s true that you only live once and want to enjoy your life along the way. Plus, no matter your goals, everyone needs to practice self-care to remain able to pursue those goals.
However, it’s also important to ensure that you are adequately protected from hardships that may befall us. No matter how secure your job or how good your health, it’s always best to prepare for the worst to some extent.
The best way to protect yourself is to make sure that you have at least 3-6 months’ worth of saving for an emergency fund. An emergency fund will allow you to handle most unexpected expenses or loss of income while giving you time to get back on your feet.
Some other things you can do to protect yourself are to keep your debt low, insure against calamity, and invest for your retirement every month, even if it’s only a small amount.
You can live your life, but you must have a buffer against hardship at the same time.
Health
Behavior that negatively impacts your health applies to both YOLO and FIRE. You want to minimize risk-taking behaviors often associated with YOLO, as well as the burnout that can come from a strict work-filled frugal life while pursuing FIRE.
Your health is the biggest asset you have, and you don’t want to ruin it by overindulging or neglecting your body. Whatever you’re pursuing, it’s important to eat well, be active, and avoid injury and behaviors that could damage your health.
Additionally, you’ll want to balance YOLO and FIRE because your health may deteriorate due to things out of your control at some point. You don’t want to be in a place where you have a lot of money but never experienced anything, or where you’ve done a lot of things but now can’t properly care for yourself and can’t work to bring in the money to do so.
Again, you want to balance saving and spending by working for what you want while not burning the candle at both ends.
You Just Never Know
Aside from the reasons mentioned above, you want to strike a balance between saving and spending because you just never know.
You never know what will come at you in your life or even how long you will live. You could get sick, be involved in an accident, or be the victim of a freak event (like a pandemic).
And the thing is, any of the above may not even happen to you, but rather to someone you know. For example, there are plenty of spouses who become caregivers, or parents who care for children, or children who care for parents.
All of this isn’t to scare you or to dwell on the negative, but you just never know with life, and so it’s smart to hedge your bets and make sure you have a balance between having fun and being prepared.
How to Strike a Balance Between Saving and Spending
Now that we’ve made a case for the need to strike a balance between saving and spending, how do we accomplish it? After all, most seem to naturally gravitate toward one side or the other and may have a hard time pulling back from their preferred side of the spectrum.
The truth is everyone will have a different allocation, and you’ll need to think about what balance works best for you. You’ll also likely find that you’ll need to rebalance as life goes on and your priorities shift.
No matter where you fall on the spectrum, these 5 things should be staples for maintaining a balance between saving and spending.
Prioritize Saving/Investing Early
As previously mentioned, you must have an emergency fund of some kind. Preferably, you’ll want to build up to an emergency fund of 3-6 months for those unknowns that will eventually befall you.
Additionally, you’ll want to prepare for living to and through retirement age by starting to invest in retirement accounts. You won’t be able to work forever, or at least not at the level you can while young.
The years spent investing are more important than the amount, so you should begin investing whatever you can spare a month into your 401(k) or IRA now.
Live Within Your Means
Living within your means should be a goal no matter your other targets in life. It involves not spending more than you bring home and not funding your lifestyle with debt.
On the other hand, living beyond your means may help you YOLO but also puts you in a precarious financial situation. When you fund your lifestyle with debt, you are one hardship away from losing the things that make up that lifestyle. You want to avoid getting into a situation where you have liabilities and no way to repay them.
The great thing is, there are ways to balance YOLO and FIRE while still living within your means. For example, instead of traveling abroad, take a day trip instead. Instead of going out to an expensive restaurant for date night, make a meal and watch a movie together at home.
There are plenty of ways to get fulfillment in life without spending a fortune.
Pace Yourself
There is a saying about doing everything in moderation, which applies to YOLO and FIRE. You don’t want to wait too long to get started, but you don’t have to do everything at once either.
Instead, pace yourself.
If you love to travel, take one big trip or several small ones a year. Prioritize putting something in your retirement accounts monthly. If you’re paying off debt, make sure you make your minimum payments and then try to add a bit on top of them.
Whatever your goals, know that you’ll likely need at least a few years to accomplish them. In the case of FIRE, you’ll likely need at least a decade, and YOLO can be indulged in to some extent all along.
Find a pace that works for you and that you can sustain. Don’t burn yourself out or ruin your finances by staying in one extreme.
Evaluate What Really Matters
Evaluating what really matters to you and your family will be at the heart of finding that balance between saving and spending.
If you’re a high-income earner and could reach FIRE after a few years of frugal living, it may be worth buckling down and foregoing any YOLO for that short time period. On the other hand, if you have no savings or retirement investments, it may be worth it to give up fun things for a time to build some financial security.
As you go through life, periodically reevaluate your lifestyle and choices to see if rebalancing is in order. It would be best if you found a balance that works for you and prioritizes what matters most to you so that you can try to find happiness with the cards you’ve been dealt.
Final Thoughts
What is your balance between saving and spending? Do you YOLO? Do you FIRE? Are you somewhere in between?
No matter your goals or priorities, some balance between saving and spending will always be needed. You want to enjoy your life as much as you can while still living within your means and shielding yourself against unknowns.
What will your balance be?
4 thoughts on “YOLO vs. FIRE: The Balance Between Saving and Spending”
Agree 100%! Moderation in all things, The Middle Path- whatever you want to call it. Where does it lie? For me, in evaluating how much value something holds- how much joy it’s likely to bring me. Like the good Dr Dahle says, you can do anything but not everything.