Part of my role here at Nine to Fi is to fully disclose the challenges that face the up and coming FIRE crowd. And while tax optimization, earning potential, and investment strategies all present challenges, there is nothing more challenging than the simple understanding of RISK in early retirement.
This post is going to begin to peel back the onion of risk for early retirees.
Life is risky
Every time we wake up and step out our front door, we are accepting a number of risks that we rarely consider.
Risk of tripping down the curb. Risk of getting into a fender bender. Risk of losing our job. You get the picture.
But we make those risks anyways. Every day.
Risks of FIRE
Now let’s take a quick look at the risks that we face as we approach financial independence.
First off, there’s the obvious: the risk of us not having enough money 10 or 20 years down the road. When we realize we are too old and unable to compete in the same industry that built the wealth in the first place.
Then, there’s the risk of feeling self-actualized in retirement. Many of us in the personal finance community excel at our jobs – we are smart, competitive, and motivated. It’s what got us to early retirement in the first place! However, when we retire, there is a very good chance the we might fall into the “dip,” that depression that you feel when you’re just not sure what to do. Not sure of your purpose anymore. Finding purpose outside the nine to five…
And just to rattle a few more off, there’s the risk of social security not being around, risk of expensive children and rising college costs, general cost of healthcare and other benefits you take for granted from your employer.
The picture starts to look a little grim on the early retirement front, doesn’t it?
But let’s not forget the most important risk of all…
The risk of working too long and living too short…
In the last couple of weeks, there have been a few tragedies that have happened in my world.
A young mother who just gave birth to her third child passed away unexpectedly only 2 days after giving birth…
A father of two discovered an illness and passed away in the span of 48 hours.
Both of these wonderful souls were seemingly of good health, with decades of life left to live.
The point here is that we never know how long our precious lives will be. I recently turned 30 years old, and I have noticed the pace of life begin to accelerate. Between chasing 3 kids, putting in 10 hour days at my day job, and helping to build an online business with my wife at night, there never seems to be enough time in the day.
That is the ultimate power of financial independence. We are unlocking freedom to truly enjoy our days without the servitude to a day job.
The challenge, however, becomes finding time to live in between the margins of building a life of freedom.
As we aggressively pursue FI, it is important to find a way to build balance into our lives.
Balance to both work intensely when it is time to do so, as well as relax a be fully present with loved ones when it is time to do so.
Here are some tips on how I’ve learned to do this:
In our ever-connected world, it seems impossible to simply disconnect. And if you begin to build a blog or have any side hustle that is internet-based, the pings and notifications never seem to stop. Make them.
When I get home from work, my wife and I both put our phones on Do not Disturb mode and put them physically out of sight.
We dedicate the evenings as family time, and turn the tech off until the kids go to bed.
Those hours are precious and have a lasting impact on the little ones as they see their parents fully engaged with them and not constantly flittering off to their phones.
Plan – Do – Check – Act
This framework (PDCA) comes from Toyota, the global giant in auto manufacturing. It is the the framework they follow behind all their problem solving activities.
The goal is to tackle problem solving in distinctly different buckets, where you’re able to hone in on each step individually.
This reduces rework, improves focus, and increases the chance you’ll actually make a lasting impact.
When you are trying to build your passive income streams to achieve FI earlier, you will be working in the fringe hours. The hour before the day job starts, and the hour after the kids go to bed and you pass out exhausted…
Think Big Picture
It’s easy to limit yourself to simply the next hour or day of your plan. But where do you want to be 6 months from now? 6 Years?
Part of what keeps me going is being able to directly tie the actions I take every day to the bigger picture goal of the next 5 years. It’s slow in the beginning, but over time you will see the momentum build, and it will be building in the right direction.
I blog and play around building online businesses because it is fun for me – not because of the money it can generate.
The time you spend outside of the day job should be spent on what fills you up. What energizes you and gets you excited to keep pushing forward.
Don’t get caught up in get rich quick schemes – simply do what you love, even if it isn’t lucrative at first.
With any side hustle that you start, consistency is key.
Don’t fear the risk
Working towards early retirement is an exciting adventure, and you shouldn’t be paralyzed in fear about your pursuit.
Take it slow, enjoy the journey, and steer towards consistency and fun – and you will see that the bigger risk is simply staying put and not living your adventure.
Life is short – take risks and live fully!