I was talking recently with someone from the FIRE (Financial Independent, Early Retire) community who asked me if we were FIRE.
I did not know how to answer. Is there a "kind of" FIRE?
What do I mean by that? I'll come back to that in a moment, but first we have to come up with a definition of FIRE.
What is the definition of fire?
Unfortunately, there are many subjective gray areas in the terms "independent financial" and "early retirement".
Let's start with "financial independence". The most common definition is that of someone who has a nest egg that costs 25 times his expenses because of the 4% rule. However, as this article pointed out, the 4% rule may not be accurate. Almost nobody talks about it, but the expenses can vary considerably over time. Our expenses will change so much that I found it easier to estimate our next 45 years of expenses and just use an average.
We have essentially an uncertain and vague rule associated with a moving target. This leads to a huge gray area when you try to set financial independence.
Unfortunately, the definition of "retiring earlier" may be more difficult. Ten years ago, I tried to come up with a definition of retirement and in many ways even earn income as a blogger counts for a retirement. This does not necessarily mean sitting on the beach with a tasty drink. With my guard company, I sometimes like dogs that I have so much that it's strange to think it's a job.
If you say that blogging and that the dog is a job, I would not disagree. However, from this point of view, I do not know if I will ever retire. Even with the blogs and the dog guard, I could take 3 months to live in Spain. In this scenario, I would be limited to the income of a blog, but it would still be a lifestyle in retirement.
When I unite these two nebulous concepts, I struggle to reach a precise definition of fire. I could say that I think we are financially independent, but you could look at the details and conclude differently. Some people might broaden the definition of retirement to include me, but it would be unanimous that my wife's career in pharmacy does not meet any reasonable definition of early retirement.
So are we FIRE?
Given the details of my wife's career, we are certainly not the RE part of FIRE. However, in 7 months she will be eligible for retirement with a very good military retirement. We could make financial arrangements to help us through these 7 months.
I think the best answer to know if we are FIRE comes from this song:
"Whoopty fricken doo." No, I'm not talking about this part of the song. Instead, it's "I could if I wanted to".
(It would be more accurate to say "we", but that does not suit the song as well.)
For most people who go on fire, it is a gradual improvement in savings and investment, month after month. Unless the market is experiencing dramatic fluctuations, it is in fact a boring process of buying more and more shares in companies or index funds and increasing these expenses by 25%.
For us, it's three main things:
- The aforementioned pension of the wife – Again, it's a pretty big number compared to national averages. Also, because of the military, we can have access to health care that most people would not have. Finally, its GI bill should cover half of our children's college expenses (unless they attend expensive private schools where they will cover less). For many people, this situation alone gives them a fast track to FIRE.
- 2027 – What's going on in 2027? Our principal residence and investment properties have their mortgages repaid. That means our living expenses go down by $ 30,000 and our income increases by about $ 40,000. It's just the typical evolution of your income / expenses of $ 70,000. (This is a joke.)
- Children's school – Because of the two situations mentioned above and our satisfactory financial situation in other areas, we have been in a position to invest in the education of our children. We have a very good discount, but it's still a lot of money.
The "we could if we wanted" comes largely from this last point. If we eliminate this expense, we could probably be FIRE if we sold all the investment properties and paid our principal residence. That would probably describe us as LeanFIRE in the eyes of most people. However, this series of movements is not something we do not want to do. They are not very smart in the long run.
After 2027, in the long run, I think we can clearly say that we will be fatFIRE. It's been a few years since I updated the article entitled "What does an annual retirement income of $ 200,000 look like"?
So when a blogger asks me if we are FIRE, leanFIRE or fatFIRE, I guess I should answer no to be precise. However, I think going with it, FIRE is not the smart choice for us right now.
Am I the only one who thinks it's one of the most unique personal financial situations?
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