The first step many FIRE guru’s recommend to fledgling frugalistas on how to walk the path toward enlightened FU money generally centers on getting more intimate with one’s cashflows. “Get to know your finances with razor sharp focus.” And they’re right. How much you make or how much you have in the bank is meaningless without knowing how much you spend. Spending a lot or a little is meaningless without income.
A lot of finance bloggers have beaten this point to death. And many of those authors, whose day jobs are engineers, have backed up the statement with plots, graphs, figures, equations, and lots of detail-oriented math to hammer home what is so obvious and easy on paper.
Despite all of this “graph”-ic evidence, people fail. Survey after study after survey suggests the vast majority of Americans have no investments, and about a third of Americans, have no savings. Even in the deepest days of the Great Recession, the highest unemployment figures never got anywhere near the 1/3 mark, so why don’t more people have even a little backup cash? It’s apparently not a lack of gainful employment, so what is it? Why do people struggle against the forces of compound interest (an invention famously described by Einstein as “the eighth wonder of the world”)?
If it’s not on the income side, it must be on the spending side, right? The well-oiled marketing machine over at MMM has fired off a lot of tweets and more than a few articles documenting the symptoms of the problem: car habits, commuting, comfort, luxury, and the drive for more. For these spenders, diminishing returns appears meaningless so long as there is some actual return. Daily tweets attempt to combat this status quo behavior with a shock of hyperbole meant to snap the guilty out of these patterns and invigorate those just making the transition and in danger of falling back in. New tactical options such as the 4% safe withdrawal rate, saving ~90% of take home salary (via benefits of bicycle commuting), index investing, and genuine yet targeted hard work are all offered up as ideals to supplant the consumerist madness.
Does this tactic work? MMM gets millions of views a month. Their servers crash with the release of every new article. Other bloggers (brave new life and living afi) share their own tales of battle, while others master the chemistry of maximizing earning potential within the tax code (mad fientist).
But is all of this right for you? Will the revelation of a family who retired from corporate life at 30 to work for the family business and contract hours as a tradesman inspire enough zeal for lasting change? If you have the drive, will it last long enough to see out the FIRE goal? Is it financially feasible? Are you clever enough to optimize your life down to $20k spend per year and hold it there for the rest of your life? If money was not a consideration, what kind of life would you like to live? When money is a consideration, are you clever enough to optimize your wants and needs around these costs? If not, do you have the wit and fortitude to find hold a high paying job long enough to build up your capital?
What are your values and highest priorities? Would you rather control your time or sell that time for capital? What do you value in others? What do they value in you? Are any of these things likely to change over time? What do you find easy? What do you find difficult? Are you more worried about where you will be tonight or where your life will be next year or next decade? Do you ever think about these questions? Do these thoughts invigorate you? scare you? bore you?
As with anything in life, you have to know yourself first. Know that who you are can change, so the process of self-discovery never really ends. If you need ideas, research what others do with their lives. The fundamental principle to you might seem aberrant and inconceivable to someone else.
Yes, many personal finance mentors and early retiree guides will tell you to start your own path to FIRE by delving into the X’s and O’s of your accounts, but again, as society shows, the math is easy, the human side is hard.