A couple of months ago, our five-year-old son was relieved to discover that he could have two best friends. For weeks he had been trapped in an innocent teenage triangle where both children wanted him to be their exclusive bestie. They threw their arms into the yard and came home agonizing over which to choose. We told him he shouldn’t do it, and the moment he believed us, he got excited.
Over the years, we have seen a similar false option affecting the FIRE community (financial independence, early retirement). Both viewers and enthusiasts have disagreed on the acronym and whether the “FI” or the “RE” carry more weight.
For some, it’s all a matter of financial independence. They love the job they do, it gets done with it and they may not even have the idea to retire early. For others, early retirement is the issue. They have very high savings rates in the hopes of quitting smoking forever before they turn 40.
But this obsession with making either side a permanent state rather than an ongoing process prevents us from recognizing all the solutions that lie in the middle. When you realize you don’t have to choose one or the other, as our five-year-old discovered, you get back in control of your financial plan.
1. Collection is a viable alternative to retirement
We all tell ourselves stories of money, but the history of “ideal retirement” has lasted for decades, even though the number of people working beyond retirement age has grown steadily since the 1990s. For most people, the idealized concept of retirement is an agreement between you, your employer, and the federal government. Do your part to work a long career and constantly set aside 10% and, if you’re lucky, your company will do its part and match a part of it. When you turn 65, you can quit your job and live off your nest with a little help from Social Security as a safety net.
This idealized narrative is buried in our cultural lexicon, reinforced through business profits, public policies, and financial planning tools, even though, in reality, each party has been unable to maintain its share of the business. With an average savings of $ 25,000, most retirees don’t live entirely on the money they saved during their years of work. For many of us, retirement will include earning income in some way.
And while most corporations now offer employer-sponsored retirement funds, stubborn gender and race wage gaps still create unequal contributions for a large number of employees. What about the future of Social Security? At best, uncertain. According to the 2021 annual report of the Social Security Board, the fund’s cash reserves will be completely exhausted in 2034.
Modern concepts such as empty years, semi-retirement, and sabbaticals foreshadow how the world is changing. We all play a role in making work and retirement not binary terms with rigid definitions and become more relevant terms for these times. You don’t have to wait until your golden years to enjoy a lifestyle that doesn’t depend on work, and you don’t have to focus on earning an income with an all-or-nothing attitude. You have to think differently about your career.
2. The myth of meritocracy hurts everyone
It only takes a few years working in an office to realize that meritocracy is a noble lie that we are paid to believe. We know that hard work guarantees you more work. It’s okay to feel proud of our work ethic, but it becomes problematic when we make it our identity and continue to push the limits of our physical and mental health.
Basically, we all deserve to live a life that puts our needs ahead of the endless list of unsolvable problems at work and that starts with setting a solid goal for the duration of your career. We recommend 15 years, divided into three different five year sprints.
3. If you don’t give a purpose to your income, someone else will.
The first five years of your 15-year plan should be spent paying off debt and establishing healthy financial habits to mitigate the pay-to-check cycle in which nearly half of Americans earning more than $ 100,000 find themselves. Sure, maybe five years you don’t have enough time to eliminate all of your debt, but there are few drawbacks to committing to a concentrated period of time to pay it off.
Frugality is nothing to be ashamed of. If you can make frugality a fundamental part of your life and accept it, you can avoid the traps of consumption that we encounter on a daily basis.
Think of it this way: every time you get rid of a debt, you basically increase the amount of surplus cash you have. Doing it early and often during your work years is like giving yourself a boost. Imagine that you no longer expect someone to decide that you are worthy of more money. This change in mindset alone does more for self-empowerment than most regular employee development programs.
4. Traditional savings rules were not created with all of us in mind
The second five years (ages 6 to 10) are critical and should be devoted to acquiring skills and finding your superpower. A superpower is a skill that can support you in the long run, beyond your years of full-time work. Whether it’s your ability to manage a team or your ability to close a sale quickly, the skills you develop throughout your career can and should be used to create revenue streams outside of your main job.
This is especially important if your identity is marginalized in the workplace. Most traditional financial rules do not reflect the lived experience of people of color and other marginalized groups. Experts talk about saving between 10% and 15% of income, but there is little mention of wage gaps or biased hiring practices. Whether your boogeyman is racism, sexism, nepotism, or edatism, you need to incorporate externalities, such as the “black tax” and the maternity penalty, that should be left out.
Reads: How this 38-year-old man came out of “deep poverty” to get FIRE at his 30s as a billionaire owner
Savers are currently facing huge challenges such as record inflation, financial market volatility and the threat of automation. The good news is that we have enough information to incorporate history and data into our decision making. Establishing income that is independent of your employer will not only provide you with a safety net, but can also accelerate your financial independence.
5. It has more to do with money than watching it grow
This brings us to the last five years, from 11 to 15, which should focus on building an escape hatch and its exit from the world of work. Right now, you have a decade of experience in your belt and you have developed the financial muscle memory around investing.
So what? Perhaps the most important reason to leave is to know the deepest purpose beyond what financial independence can buy. Conflict over money is the leading cause of divorce in the US; two-thirds of parents working in this country suffer from parental exhaustion, and there is no shortage of organizations and non-profit organizations that have no funding or leadership.
How do you want your life to be once you’ve been charged? Ideally, financial freedom will help you become a better partner, a more empathetic, energetic parent, and someone to add to your community.
Julien and Kiersten Saunders are the authors of “Cashing Out: Win the Wealth Game by Walking Away” (Portfolio, 2022). They are the co-creators of the Rich & Regular lifestyle blog and organize a series called Money on the Table.
Month: This teacher who retired early at the age of 29 is sailing for FIRE after the divorce divided his property
Also read: Second hand clothes, no car, cutting firewood to heat my house: Why the FIRE movement is too frugal for me