Inflaming the Hustle: Deciding When (and when not) to FIRE

I am firmly from a place of both struggle and privilege. What I mean by that is that I know what hunger feels like, and I understand precisely how lucky I am to be a complete stranger to that world today in a way that I wasn’t as a child. I was lucky to cross the tracks every day to go to school; and I was lucky to find myself traveling to a brand new hood to find out what college meant, instead of choosing between prison, welfare and death like my childhood friends. Sitting on my little hill with my Ivy League education and my Ph.D., it’s often hard for people to realize that I grew up tasting government cheese and buying overripe fruit off the back of a truck. Those $2 bags of food were the difference between eating and not eating for too many weeks. But as I consider where I want my future to go, I can’t help but recognize that every young person should have the goal to hustle hard and early so that they can live in the way that is most fulfilling to them.  

Build– use your early years to strategically diversify and build your skills. Get involved in your community in a way that matters, and while you’re doing that, discover what you enjoy. Dig in: start to build your mattress money and emergency fund and avoid debt (dig out of it if you already have some). Build your network by working hard and often in your chosen space so that you become great at one or two things and the people around you recognize you for it. During this time, take special care to build your critical skills as well.  Take a course at your local community college or take a course at a local 4-year university. Get a professional certification or license and add a trade or capability that you might enjoy doing on the weekends (like studying the coursework for a real estate license). With your savings, can you add passive income like an investment property or market investments? Can you start a business?

Get some financial education! Take a personal finance course, listen to podcasts and learn the life skills to set yourself up for success: learn to budget, make mattress money happen, get out of debt, make an emergency fund, then go!

Use up less than you bring in. Spend significantly less than you earn and aggressively save and invest the balance. If you can keep your standard of living static and limited, you can create and move towards your vision for the future. What is it that you want to achieve in your own version of retirement, and when you do you want to arrive there? What do you want to do with the freedom that the “retired” state allows?

Avoid debt like the plague. Seriously. Debt is an emergency, so why would you walk into that willingly? With the exception of a fixed-rate mortgage (30-year or 15-year fixed rate that is at or less than 25% of your take-home pay with at least 20% down), remember the guiding principle: if you don’t have it, don’t spend it! Along these same lines, though, remember that you can guide others in these same principles. Don’t let people ‘borrow’ from you. This is also debt, just in the other direction. If you lend your money out, considering it a gift will save a lot of heartaches, headaches, and relationships, and you will leave significant space for the people you love to prove you wrong.

Learn the ways of investing. Max out your retirement vehicles (Roth accounts, 401k, 403b, and IRAs), and talk to your accountant about converting what you can to Roths. Invest in passive income through real estate investing. More on that another day.  Build a bridge account– the account for your investment savings that will carry you between early retirement and the age you can legally withdraw from your retirement accounts without penalty (for Roth, that is 59.5 years of age). Finally, max out your Health Savings Account (HSA), if you have access to one through your employer. This will allow you to take the balance with you into retirement and as you have medical expenses in retirement, these funds will grow, tax-free, for spending on healthcare expenses.

Earn and save money the best ways you know how. Consider what sacrifices you’re willing to make now in order to be comfortable later on in you life. With those in mind, downsize and increase efficiency in your living circumstance. Consider sharing your living space, or one of the many ways to have free or low cost living altogether. Also, if you’re prepared to purchase, consider purchasing a home you can share and have someone else pay your mortgage (or skim some profit off the top!) by buying a multi-family, renting out extra bedrooms, the basement/attic or an Additional Dwelling Unit.

So, as you think about these things, think, also about what your savings goal is. Calculate how much you will need to retire, and add 15% for emergencies.  There are a million and one calculators on the internet that will allow you to estimate exactly how much you will need in liquid savings to retire. What these calculators tend not to do is identify what happens to that plan in the event of a medical emergency. Suze Orman gave a blazing critique of the FIRE movement earlier in 2018 for this very reason. While I do not agree with her assessment of the movement overall, and frankly feel that she misunderstood the core purpose of freedom built into FIRE, Suze does make a point that resonates me at an academic in this field.

Health care costs are ridiculous. Point blank. And they’re getting worse.  Beyond that, they leave millions of families around the world bankrupt after catastrophic healthcare costs hit families in times of greatest need– when they’re sickest and most in need of help. Plan for your emergency in your retirement. While your retirement number should account for the cost of healthcare in the calculation (please check that the calculator you’re using does), it will not account for a medical emergency. Add some cushion. Avoid counting on Social Security or programs that could potentially be eliminated. Plan to pay for your healthcare. And then, add 15% for the unplanned cancer diagnosis. If all goes well, you will be able to use that money for travel or leave it as a legacy for the next generation.

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