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Is Financial Freedom Worth It?

 My retired parents are traveling the world in exotic locations while my sister and me in the prime of our age are working hard, saving up for a retirement,  which we are not even sure we are going to live for.

 So, I understand why the financial independence retired early movement, also known as the F.I.R.E. Movement is so lucrative for so many of us. So, I really wanted to dissect in this episode what is F.I.R.E.

F.I.R.E. is actually a sustainable way of living, and today I am writing about my personal thoughts of pursuing the fire movement.

What is the F.I.R.E. movement?

 For newbies. F.I.R.E is also known as the Financial Independence, Retired Early movement. The proponents of F.I.R.E suggest that you work really hard for 10 to 12 years of your life or career, save aggressively, meaning over 50% of what you earn, and then live off the savings for the rest of your life, spending three to 4% of that savings pot annually.  This requires extreme discipline.

There are a few other strands of the F.I.R.E movement called the 'lean FIRE', the 'Fat FIRE', and so on. If I personally had to identify with any version of the FIRE movement, I would probably be identifying with the 'Fat FIRE' version, which basically says that I don't believe in extreme frugality. I will save up as much as I need to live my current style of living through my retirement.

But why are we talking about financial independence anyway?

It is because for most of us, we are tied down to a certain location during a certain number of hours within the week doing a particular job that we may or may not want to do. We have limited holidays that we can take within the year. So, if we wanted to take off for a hike on a sunny Wednesday afternoon, convincing your boss about it would probably be an uphill task. I, myself, definitely resonate with the freedom angle of the FIRE movement.

The benefits of the FIRE movement are extremely lucrative. Like you can take off a sunny afternoon to do whatever you want to do, or you go and spend two months of the year in an exotic location without having to answer to anyone.

 The FIRE movement has definitely gathered a lot of momentum within my generation, which the millennials and Gen Zs are following.  But before getting into my personal take on the FIRE movement, let's discuss what economics really says about income, consumption and savings across the length of your life.

So, if you ask an Economist, they'll say, try and smoothen out your consumption through the course of your life. What this means is that during your peak earning years, save up quite a lot of money. When you are less able to work, which would probably be when we are over seventies or eighties, you want to live off the savings that you have accumulated through the course of your peak earning years. This is a very traditional way of looking at retirement. Most economics textbooks won't talk about investment strategies or the expected inflation you might have through the course of your life. So, as an economist myself, I personally sometimes struggle to agree with the assumption.

 However, within economics as a subject, there's quite a lot of research that has gone on to consumption smoothening, and in principle, I completely agree with the fact that you want to smoothen out your consumption curve through the course of your life.

I will take it one level further and say what you want to do is smoothen out your utility through the course of your life. Utility is, not only your consumption, but also essentially how much value you are deriving from that piece of chocolate cake or a holiday to Thailand or buying a designer handbag, optimized for happiness.

Economics aside, how practical is it to live out the FIRE propaganda?

 We've already discussed the benefits of FIRE and they're extremely lucrative. However, let's look at the flip side of it. Walking the path of the FIRE movement requires extreme self-discipline and financial discipline, which means that you need to be extremely frugal. You have to make sacrifices. You probably don't want to take up a loan or credit card debt, even if you could pay them off. It involves a lot of frugality in terms of coupon cutting and looking out for deals.

All of this is great, but it's not necessarily something I enjoy.  So, for me personally, it feels like I'm trading the hours in the office to be looking for deals, which doesn't necessarily make me want to wake up in the morning excited.

Personally speaking, the FIRE movement doesn't really resonate with me too much because it propagates extreme scarcity in the first few years of your career life with no promise of a certain bright future. So, to me it feels like I'm sacrificing my present for an uncertain future.

Yes, to a certain extent, when you think about retirement planning, that's what you are doing.  But, in traditional retirement planning, you are really planning for about 25 to 30 years as opposed to, when you are talking about the FIRE movement, you are planning for about 45 to 50 years.

Who knows what could happen in 45 to 50 years? The interest rates could change dramatically. Inflation could completely change.  Dollar might not be the strongest currency in the world. The new world order might not be the same politically, and you might have a lot more uncertainty that you need to cater for. All this means that you might, actually, even have to go back to work and with lesser skills, because I'd imagine that after your retirement, your skills would not have evolved to the expected level.

Therefore, while I understand the lure of financial independence and retiring early, I personally don't feel like it's the most practical way to living. I would rather optimize for happiness through the course of my life rather than sacrificing happiness in the 10, 15 initial years and saving aggressively.

Now, you might say that, well, happiness doesn't only depend on money. I do not deny that.  However, money actually really helps in gaining certain experiences and experiences bring happiness.

 So, my personal challenge with this philosophy is, I cut back aggressively without really trying out different things in my current life. I am not even sure what I want to do in life, whether that be reading a book or skiing or traveling around the world, and I have no idea at retirement what I will enjoy through the next 45, 50 years of my life and how much that would cost. At 23, how can I be making a decision for my 50-year-old self who very well might want to fly business class?

While you'll have financial independence and won't have to depend on a boss for a certain amount of time, you probably still will be worried about your finances and worrying about finances is my personal worst nightmare.  I do not want to have to think a lot about my finances. I want to be able to live my day to day without wondering where my next paycheck will come from, whether my savings will sustain through the rest of my life. While I still believe that I want to save and invest my money, I don't want to make it the be all and end all of my life. I value my freedom.

Actually, in most corporate jobs after the pandemic, we have the ability to do some amount of remote work, if not completely remote work, if that doesn't flow to your boat, you can find a freelancer nomadic lifestyle, or you could start a business where you are your own boss rather than someone else telling you what to do and when to do.

 In this respect, I think Tim Ferriss's concept of mini retirements through the course of your life that he speaks about in, 'The Four Day Work Week' resonates the most with me.

Anyway, if we are optimizing for happiness, is it not more practical to be happy right here, right now, doing whatever we are doing and actually try to better our lives today? Create a life that you don't want to really retire from. For example, I absolutely love my job. So, if someone told me go and become a full-time creator, a YouTuber, I would miss a tremendous part of my life.

 In reality, what I want to create is a life that I don't want to retire from, and this means knowing yourself, knowing your strengths, knowing the environments that you thrive in, and creating more of that in your day-to-day life.

I have other friends who are exactly like me. Who don't really want to retire because they are enjoying their work so much, whether that be within their day jobs or by starting a side hustle or by building a business of their own. So, you ultimately want to create a life that you don't want to retire from, rather than creating this goal of financial independence only, after which you allow yourself to be happy.

 Why not allow yourself to be happy and then create everything from there? Because that is true abundance. That is really saying I'll be happy no matter what. The world is full of happiness. The world is abundant in opportunities and really live from that abundance psyche that I keep talking about.

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