The flames of the FIRE (Financial Independence Retire Early) movement can spread rapidly. Just like a campfire stacked with kindling, the flames are tall, flickering, and bright at first, but over time, these flames subside leaving the dull glow of smoldering coals.
But you don’t cook on the flickering flames. This short blast of high heat would scorch the outside, leaving the inside raw. You do your cooking on the coals, sustaining just the right level of heat over a longer time.
Having an open mind, self evaluation, and taking bold action are critical to igniting the FIRE and the bright dancing flames of the initial burn.
Patience is the Smoldering Heart of the FIRE
What’s the big deal with Patience?
Pursuing FIRE can be summed up simply as:
- Live below your means (cost cutting, lifestyle optimization, avoiding lifestyle inflation)
- Invest the difference (i.e. index funds, real estate, etc.)
- Automate this process as much as possible (don’t let yourself be your own worst enemy)
- Keep this up for YEARS
What good is a 50 percent savings rate for one year, if you only save 10 percent the next year? Skip eating take out for a month, then relapse the next month? Drop cable, but add it back when your favorite show comes back on to stay up to date with your friends? These quick measures are like searing a rack of ribs over the flames for a few seconds then yanking it off the heat. It’s gotta cook right? Put it back on! The financial impact of these actions is just a blip on the radar with no lasting impact.
Stacking 10 years of 50 percent savings would get most people substantially closer to FIRE. Giving up going out to eat for all but a few special occasions can save you thousands each year. Drop the cable and keep it dropped. Wait until your show is available through the streaming service you already have! It’s time that unlocks the awe-inspiring power of compounding. Much like 3 to 4 hours at 225 degrees unlocks the magic of baby back ribs.
Patience also keeps us from being our own worst enemy. We tend to have a habit of changing things, just for the sake of changing them. As we see trends in the market we tend to jump in and out of investments at the worst times, which diminishes our returns. Fidelity famously authored a study that showed their investors with the best returns were dead. The group with the next best returns… had forgotten they even had an account!
Why is Patience so difficult?
The discovery of FIRE brings with it a burning passion for change. You are surrounded with opportunities for improvement (such as paying off credit card debt, reduce dining out, canceling subscriptions, moving investments to lower fee index funds, etc.) that you can immediately take on. Addressing these low hanging fruits result in quick, relatively easy wins`that give you momentum. You start to become accustomed to the frequency of these improvements. However, over time, the space between these wins grows. As you optimize your lifestyle and cut out wasteful spending it becomes harder to find opportunities for improvement.
I’ve reached the smoldering coals phase of my pursuit of FIRE
As a family we’ve knocked out a lot in the past couple of years.
- Paid off our vehicles
- Paid off our student loans
- Sold my truck and replaced it with an efficient car (and paid it off too!)
- Cut out a lot of our dining out/fast food costs through meal planning
- Significantly reduced our grocery bill
- Moved our investments to Vanguard
- Started to max our our 401ks
- Started to max my HSA
- Negotiated significantly lower insurance premiums
So we’ve done quite a bit to set ourselves up for success. Now all we need is time… a bunch of it.
I find myself frequently checking our Personal Capital account. As if somehow I will find that a decade worth of gains will suddenly appear out of nowhere. The same holds true to this site’s stats. Checking, rechecking and then checking again. It’s like if I keep staring at the numbers a magical solution will manifest itself. This repetitive chart gazing is not healthy or helpful. It’s a distraction from work that will actually advance us toward our goals.
Further compounding the anxiety is that the taste of early success only deepened the desire to reach FI. I started to truly believe that this whole crazy idea is actually possible. In doing so, the day to day stress and tedium becomes almost unbearable. How can I keep putting up with this stuff when I know there is a better way?
This anxiety can be counterproductive. I start thinking of ways to save money while losing sight of the balance that is so important to keep the FIRE burning. Going too cheap could result in a flame out. The forced focus can detract from family time and strain relationships.
How do we (I) find Patience?
Break Larger Goals Down into Smaller Ones
While reaching FI is the pot of gold at the end of the rainbow, that reward is a long way off. I need to feel like I am making continued progress towards this goal. So I’ve been trying to break it up into smaller milestones. As an example, I look at goals such as reaching one quarter of our FI number (1/4 FI) or 1/2 FI. I think we are roughly 1/8 FI right now.
On an even shorter horizon, I look at our progress towards specific saving and investment goals, such as maxing out all tax deferred accounts or a possible company stock purchase amount.
Trust the Process
While its helpful to track our progress to the goals listed above, there is only so much within our control. The stock market rises and plunges with no regard to how much we scrimp and save. You could lose tens of thousands of dollars in the same month you’ve doubled your contributions (October 2018 says Hi!). However, I believe that given a long enough time frame, this volatility will average out. So instead I focus on our savings rate. On a month to month basis, I look at increasing our contributions to our investments and savings accounts.
Focus on Different but Correlated Goals
When I get frustrated with slow progress towards FI, I try to shift gears to another goal I have been chasing. That could be eating better, losing weight, focusing on career advancement, taking on a DIY project, mastering a new skill, or getting through a book or two on my reading list. I find that making headway towards one of these goals results in gains towards reaching several others.
As an example, mastering a healthy recipe helps me to improve my health and increase our savings rate since it’s another delicious meal that we can avoid going out for. Another example: tackling a DIY project often results in forced learning of a new skill, a fair amount of exercise and significant cost savings. That’s 3 wins in a row there. Recently, I have become enamored with travel hacking. We just started working towards our new bonus. Success here will result in more travel (yay!) and reduced vacation spending!
So the next time someone chides you to “Just have a little patience”. Know that they really are speaking in your best interest. And remember that staying the course can really help you minimize the time it takes to reach FI!