Episode Summary
In this episode, Mike and Maggie share 10 FIRE Extinguishers, that is 10 items that can extinguish your financial independence journey. We talk through things like mindset, keeping up with the Joneses, FOMO, saying no to your kids, lifestyle inflation, a job loss, and much more. If you can recognize these potential pitfalls along your personal finance journey, then you can proactively avoid and/or prep for them.
Episode Notes
We start off with a reminder on what FIRE is really all about. FIRE stands for financial independence retire early, and we tend to focus as much on the financial independence portion than we do on retiring early part. Retirement for us is not about doing nothing, but instead about doing what we want, when we want, how we want, and on our terms. It’s about the freedom to have choices on how we spend our time.
There are 10 FIRE extinguishers we talk through:
- Your mindset. You may hear about the concept of financial independence and think, “I can’t achieve that.” That’s a myth. Almost anyone can reach FIRE. It’s not about how much you make, it’s about how much you spend. There are people on teacher’s salaries who have worked hard to reach financial independence. It’s available to you if you want it.
- Keeping up with the Joneses. This is feeling like you need things just because you’re trying to impress someone else or have what they have. You live in a certain type of neighborhood and you feel like you can’t drive into it with your 2003 Ford Explorer, but you can!
- FOMO – Fear of Missing Out. Not related to impressing others, but seeing others on social media primarily, having fun and wanting to do the same.
- Lifestyle Inflation. Also “lifestyle creep”, where what you have slowly becomes normal and you always want just a little bit more. Often as your salary gets higher you spend the incremental amount to inflate your lifestyle.
- Your spouse or partner not being on board. If you have a partner or spouse in your life, then this journey is undoubtedly easier if they are on board. We share some ideas for getting them on board.
- Criticism or judgement from others. This is the opposite of many of the items above. You actually could feel somewhat isolated on this journey and get some level of criticism or judgement from your close friends and family. Don’t let that deter you! Remember why you’re doing this. We recommend connecting with like-minded people to expand your friend group to others that you can relate to more.
- Your kids guilting you into things. Remember, you’re the parent and you’re in charge. Telling your kids no builds character and teaches them important lessons about what’s important in life. You might think you’re depriving your kids, but that’s not true, you’re instead teaching them important values and principles.
- A job loss. Though it’s hard to avoid this and sometimes just happenstance, you can do some things to ensure a lesser chance of this happening. Make yourself indispensable at work. Maggie loves the book Linchpin if you need some guidance here. You can also proactively manage your career, network, and skills so that if/when you do experience a job loss, you’re more easily prepared to find a new one.
- Aging parents who need your help. We recommend you speaking with your parents about their finances, and planning proactively to ensure they are in a good spot. Don’t be afraid to discuss this with your parents. Also consider long-term care insurance and other proactive efforts to avoid these costs hitting you.
- An unexpected big event. This could be anything. It could be a huge medical expense, an injury that stops your ability to work, a lawsuit, the death of a loved one, or many other things. There’s not much you can do to avoid this, but there are things you can do to financially prep for this so you’re not overly put out when something does unexpectedly happen.
Our top 3 takeaways for this episode:
- Almost anyone can reach FI if that is their goal and priority, and if they are willing to potentially make some sacrifices. We actually don’t think of these things as sacrifices, as we’re building towards something important we care about.
- Be mentally strong. Half of these extinguishers are all in your head and can be solved for by your mindset.
- Plan for the things you can plan for, and don’t stress about the other things. For example, don’t stress about an unexpected big event if there’s nothing you can proactively do about that now.
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