Over the next few weeks, whilst the blog is on a break, I am posting some older articles that new readers may not have gotten a chance to read. This one originally posted in February 2020.
When I first discovered the concept of FIRE, I went in all guns blazing. Cutting costs big time, until I couldn’t cut anymore.
It was exciting for a short while before I realised I had cut too much. I wasn’t happy.
But maybe it was worth it?
Cutting down my time to work to only 10 more years was exciting, knowing that I would be financially independent at age 45.
Why I am slowing down on my path to financial independence
10 years is a long time to be unhappy with work or spending levels. I’m glad I quickly came to that realisation and we increased our spending back to a level that we were happy with. It was still a great savings rate, but just not as much as from the outset. Sure, it delays the time to financial independence slightly, but well worth it if it means being happy in the present. Now I need to focus on the removal of unfulfilling work.
When I first discovered financial independence, I was all about the retire early part of the FIRE equation. I mean, it sounds great. Retire early – yes please, sign me up.
But now I don’t care much for early retirement. Financial independence is the important part for me. That is the part that provides options. I’ve realised I like work. It just needs to be the right work and financial independence allows you to be more picky.
Want to retire? Retire. Want to work? Work. Financial independence allows you to design your life in a way that you would live whether you were retired or not. If work is a part of that, then fantastic.
I have found that most people who retire early are ambitious people that like their life to have challenge and purpose. And for many people, work provides that challenge and purpose. So that then begs the question, if all early retirees are continuing to work in some capacity anyway, then why be so aggressive with your savings rate or work for so long in the first place if it makes you miserable in the meantime?
That is why I have changed my tune. I would much rather take the slower path to financial independence, than the quick path. The visuals of each path can be seen in the fantastic drawings below:
Standard path. This is the path the majority of us take. Work full time until age 65, then retire from the workforce.
What you think FIRE looks like. Retire early and then never earn a single dollar from work again.
What FIRE actually looks like. It is pretty rare that someone ambitious enough to retire early stops being challenged. As a result, earned income is only natural even after early retirement. Even if it less than you were on, you now have the flexibility to decide on your favourite work.
What Coast FIRE looks like. Yes, exactly the same as what FIRE looks like, except you can pull the plug on full time or unenjoyable work much sooner. So, if you are going to be working in early retirement anyway, it makes sense to withdraw from full time work before reaching full financial independence to buy some time back.
By taking the slow path I can enjoy my retired lifestyle much sooner than I would have otherwise. By taking a gradual drop in pay to give me more time available, but not ditching pay altogether.
Financial independence is not always a straight line
We plan to build a house in the near future. This is going to be incredibly expensive. If I were to continue in my current full time job, our time to financial independence would be extended by about 5 years as a result of this decision to upgrade our housing. Instead of 45, I would be age 50.
That means another 10 years or so working full time in a job that I am not entirely passionate about, as there are many other things I would rather be doing with that time.
So instead of working another 10 years in this not ideal state of being, I can go part time in a few years. At a job which obviously takes up less of my time, but a job that is also much more rewarding and fulfilling.
By being in the position to be able to slow down, I can take on much more enjoyable work, even if it is at a reduced rate. In this instance, it will be as financial advisor where I get to help people gain clarity over their financial matters by developing plans for the future. That is what I am passionate about.
There comes a point in life where you need to decide what is enough. Most of us have an insatiable desire for more money. Which can be OK when we are young. But as we get older, then time becomes much more valuable than money. Best to spend that time how you please, instead of in pursuit of more money just for the sake of it.
By going part time, I am extending my timeframe to financial independence out even further. Probably closer to late 50’s now. Am I FIRE fraud? I don’t believe so.
My perspective has changed from setting up my desired life to later in the future, to setting up my desired life much sooner.
Part time work will allow me to pursue my other interests, which I don’t have much time for now. Tennis, bike riding, volunteering, my children’s schooling, travelling our country, and reading.
Don’t get me wrong though. It would have been extremely difficult to get to this level of financial confidence and options without the last 6 years of accelerated savings. It has set us up to be able to make these decisions to slow down now.
Coast FIRE
There is a term for this you may have heard before, called Coast FIRE. Where basically you have saved up enough money to only do part time work or take on a lower income as long as you don’t touch your investments. Basically slowing down before you get to financial independence.
So the plan is to earn enough to cover our expenses only, not needing to add to our savings, but letting our investments continue to grow untouched until full retirement.
The formula if you are interested is:
Target FI number/(1 + (expected inflation-adjusted return)) ^ (standard retirement age - your current age) = amount you would need to be coast FI today.
So if I make the following assumptions:
Target FI number $1,000,000
Expected investment returns 5%
Retirement age 60
Current age 40
I would need:
$1,000,000/(1+(.05))^(60-40) = $376,889.
With the given assumptions, that $376,889 today would grow to $1 million in 20 years. Obviously the result of your calculation is only as good as the assumptions, which could be way off.
Final thoughts
Having a young family has totally changed my idea of FIRE. I no longer want to work full time in the most important years of my life from a family perspective. My daughter is turning two soon and we may have more.
To me, it makes far more sense to spend as much time with my kid(s) as possible while I can. Once they are older they will probably want nothing to do with me, and then will leave the house.
Most people don’t get to retire until after the kids have left the house. But by then, the most important years in their growth has gone. In fact, there is research that suggests that parents will spend 90% of their child’s entire life with them in just the first 18 years. Doesn’t leave much quality time after the age of 18 does it?
By retiring from full time work later in life, for those that have a family, I think we have it backwards. If we can, freeing up more time in our younger years is a great thing.
I’m not here to tell you which way is best to design your life. This is my life and what I think is best for us. You do you.
I guess more than anything, I am explaining why I am no longer pursuing early financial independence. Although, with this change, I will feel like I will already be financially independent. Much like the Mexican fisherman, I would be working in early retirement anyway, so why not design life that way now.
Instead I am trying to live my best possible life sooner, rather than later, whilst still preparing for the future. And coast FIRE will give me that. I feel like I will be getting the best of both worlds - time and money.
If you need help with your personal retirement planning, then get in touch today.
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here