Financially Independent At...37?

Do's and don'ts of the FIRE retirement plan.

"Did some financial planning and it looks like I can retire at 62 and live comfortably for eleven minutes."

I found this article on Marketwatch by Chris Mamula who "retired" at 41 and who blogs about the FIRE concept which stands for Financially Independent Retire Early. Many look at Mr. Money Mustache (MMM) as being one of the primary bloggers in this realm. Mamula says you can retire early without taking on the extreme frugality that MMM is known for. Mamula also said that focusing on whether MMM is actually retired is the wrong thing to look at. In the context of being retired, MMM is not, but he is clearly financially independent which is where the entire conversation has been moving; from "retirement" to financial independence.

When I shared the Mamula article on my Facebook feed it drew a few comments and one of my replies was the "idea of independence seems much more achievable on a wide spread basis" than retirement the way our parents and grandparents lived it (or are living it).

Many years ago I made comment about my being kind of retired when I was 37 which is when started this phase of my life; working from home, managing money, blogging and every once in a while going on a call with the fire department. Embedded in my circumstance, I am acutely aware of how lucky I have been, is loving what I do. We've all heard the saying that if you love what you do, you never work a day in your life. That sentiment contributed to my idea of independence.

MMM gets there with passive income from real estate, an investment portfolio and side gigs and there may be more than that. I've posted about other bloggers who appear to be living a FIRE lifestyle who are maybe less well known than MMM. To the extent pursuing this interest you, the idea would be to learn what others have done and not copy them but maybe take ideas that can be realistically adapted to your circumstance. Multiple sources of income is an essential building block for making this easier and MMM appears to have mastered this, there is much to learn from his blog on the idea. I think this is is crucial for success whether it is a some sort of traditional job, side gigs, portfolio income, passive income or a combo of all four.

Every now and then you see an article about someone who is 30 or 35 who has accumulated $1 million and retired. Starting in your early 20's and saving a lot of money relative to your income won't result in $1 million for too many of those people when they get to 35. It could happen but has a low probability. Someone who is lucky enough to have a high income at an early age, have awareness to start out with a very high savings rate all at a time there is a bull market could have a a pretty decent nest egg at 35 but I would caution against a 40 year old retiring, retiring in the traditional sense, with $1 million. That's a pretty good sum for someone in their 60's expecting to live 30-35 years but would be very challenging if that amount had to last for 50-60 years with very little in the way of Social Security waiting them (Social Security is derived on the highest 35 years of earnings, retiring at 40 with no further earned income would mean a lot of zero years included in that formula).

As mentioned, I started this phase of my life at 37. I put in more hours being "independent" than I ever did with any other work but not punching a clock and not having a daily commute play big roles in my idea of FIRE. It wouldn't surprise me if that was very low on other people's lists of priorities. You obviously need to understand your priorities and build around them whether you're thinking early retirement or a more traditional retirement age.

If you're going the FIRE route you really need to increase your financial robustness as Nassim Taleb might say. For us that meant have a very low fixed monthly budget which might be harder today as our health insurance was less than $300 month back 2003. I had just a handful clients back then and made a little writing for The Motley Fool (all from home) which all covered out minimal expenses.

Our experience with concept, I think long time followers of MMM are seeing something similar, is that the various things we do have all evolved, grown a little bigger as a function of luck and hard work. Lat year we added a potential future source of passive income, we bought the cabin next door and listed it on Airbnb and have had good luck with bookings, even in the winter. It will be paid off when I am 66 (we took a 15 year) which would be good timing if we need the income it would kick off.

If we need the income makes an important point which is there is no way to know what the future you might want to do or will need in the way of financial resources. This contributes to my intent to save like we are way behind where we need to be despite not wanting to actually retire...as of now. My thoughts on not retiring have been the same for many years but this could change in the future, I don't know so we try to save a lot.

A new idea to emerge from the financial crisis is that the American dream of owning a traditional home and retiring in your 60's is dead which helped to underpin the Tiny House Movement (THM). One sentiment underlying THM is buying a tiny house in your twenties and side-gigging as needed without having a traditional job. The expenses in this scenario are usually very low so easy to cover but this is a terrible idea because I believe it sacrifices the future. If you're interested in FIRE, you might want a solid financial base underneath your plan. Being 45 with 20 years of fun under your belt and $10,000 in the bank isn't too financially robust. Using a tiny house as part of a FIRE or traditional retirement downsizing is something I've written about frequently and I think can be a great solution.

A big part of FIRE is devising a strategy that is financially robust and there aren't any short cuts to making this happen and you don't have to rush into an unnecessarily shaky plan. Being 50 can still be very young with plenty of time to do whatever you want to do in your FIRE scenario.

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