3 Biggest Downsides to Pursuing FIRE
Let me just start by saying that, obviously, I am a big fan of FIRE. I mean, I am writing a blog about it aren’t I? I dedicate a lot of my life to trying to reach FIRE myself, and I really enjoy it when I can open other people’s eyes to the idea of FIRE. But if you are blindly following a movement like FIRE, and you become obsessed with just reaching that end goal, then it can in turn become a detriment to yourself, both now and in the future.
In this post I want to talk about the three main downsides that need to be acknowledged while pursuing FIRE. These downsides are easily manageable to ensure that you get the most out of your FIRE journey, as well as your life post FIRE.
So, what are these downsides?
- Saving to reach FIRE can be too restrictive for your present self-enjoyment.
- There is a risk of aiming for your FIRE goal only for it to lead to nothing.
- FIRE can be inflexible.
You might notice that each of the downsides is not a definite, like I said, they can be managed. It is important to be perceptive of these downsides right from the start and along your FIRE journey. Once you are able to acknowledge these potential downsides, you can use them to your advantage to ensure they do not happen to you.
Saving to reach FIRE can be too restrictive for your present self-enjoyment
As I have mentioned in previous posts, the best way to reach FIRE is to increase that savings rate. If you want to reach FIRE as early as possible, you need to be able to one or both of the following:
- Have a high savings rate (talking about 70% + mark)
- Earn a significantly high income (around $180k +)
This is not to say that you cannot reach FIRE without either of these things (my savings rate is currently only around 50% and my income is well below six figures even before tax). I only say the above if you were wanting to reach FIRE as early as possible. I am talking late 20s or early 30s.
But on the first point, becoming too frugal and saving too much money can impact you on your present life. If you spend your whole life constantly counting every cent, making sure you are saving every dollar you can, the amount of financial stress you will be bringing onto yourself will not be healthy.
Following on from the above, to have a well-rounded life, you need to have some extra joy in your life, and that might be that cup of coffee that you just want to have every morning. It might cost you an extra $5 per coffee and you know you do not NEED that coffee. But maybe you could still have a nice cup of coffee from a fancy coffee once every couple of weeks to give your life just that little bit of luxury.
Spending money on things that you value, that are important to you, is good. Just because you have this lofty goal of reaching FIRE in the next decade, does not mean you need to forego everything you enjoy in your current life just to try and achieve future satisfaction.
On the second point, sometimes trying to scrape every dollar you can from extra side hustles, getting another job, selling items from around the house, while it all sounds great in theory, sometimes it can just be a waste of time.
A lot of the time these side hustles take a lot of time and effort for extraordinarily little gain, you might find yourself putting in dozens of hours a week for an extra $50 of cash, and then you need to ask yourself. Is that amount of money worth the extra stress of working and less living you are having?
Now, with, some side hustles it can be extremely financially lucrative, and even if they are not, if you really do enjoy doing your side hustle, even if you do not make a lot of money out of it but feel it is worth your time, then by all means keep doing it.
For example, I have a little side hustle of woodworking where I typically make planter boxes on Gumtree for people. It does not give me a great amount of money, maybe about $1,000 profit over a year. But I really enjoy woodworking, and it allows me to practice and develop my abilities so that when I am making things for myself, I make better quality items. Not to mention just about all the money I do make from my side hustle I just put back into new tools and materials for my own projects, so I do not do it for reaching my FIRE goal, just my own personal thing.
There is a risk of aiming for your FIRE goal only for it to lead to nothing
I think a lot of people who are on the FIRE journey, do not actually give enough thought about what they are planning on doing once they reach retirement. In fact, I think the general population rarely give much thought about it either. I suppose everyone just looks at their older relatives and assume they will be doing pretty much what they are doing, plodding around home, playing lawn bowls, playing golf, gossiping with other old people, babysitting grandkids, going on caravan trips around Australia – all those sorts of things.
That is all well and good to start doing those things when you retire at 65. But what about when you retire at 45, or even 30? Suddenly, you have up to 35 extra years that you need to fill with something that you can find fulfilling for such an extended period. I mean how many games of lawn bowls can you play before it loses its thrill?
But don’t let this sway what I believe, I think that retirement can and should be awesome. Especially when you reach it at a relatively young age. But you definitely need to have a plan for once you get there. So while you are on your FIRE journey, make sure you take into account what you want to do in retirement to pass the time, also make sure you think about the financial implications of what you think you want to do as this might affect your FIRE number.
Whether it is travelling, spending time with family, starting your own business, having a plan for early retirement can help minimise this risk of aiming for your FIRE goal only for it to lead to nothing.
FIRE can be inflexible
I do not believe this one is that prominent, but some people may still fall into this trap. There is no right or wrong way to try and do FIRE. But a lot of the time people set up their goal, have their forecasts and have a plan in place of what their total asset value will be at a certain date, and by pushing this out to the future they might know exactly when they will be able to reach FIRE.
For example, you are 30 years old with $200,000 saved for retirement. You have a FIRE goal of $1,000,000 that you want to reach at 45. Using compound interest you know that over the next 15 years you need to invest $30,000 each year to reach your goal (assuming a 5% return).
But 15 years is a long time, have a think about where you were in life 15 years ago. Think about how different your life is now compared to what it was back then. More importantly, think about where you are now and if it has anything to do with what you were dreaming of 15 years ago? I know for me my life has given me many ups and downs and where I am now I would never have predicted 15 years ago.
So now try and think about where your life is going to be 15 years time? It is nice to have dreams and goals, but you also need to realise that so many things can happen that affect the outcome you are trying to achieve.
For example:
- You could get a better (or worse) job that pays more (or less)
- The market might provide greater (or worse) returns than 5% on average
- Your expenses could go up or down
- You could move
- Your goals could change
- You living situation could change (you might start a family, or lose a family)
FIRE CAN and SHOULD be flexible, because you never know what life is going to throw at you. You need to be able to roll with the punches and adapt your plan to suit whatever comes your way. It is important to not get discouraged if you need to update your plans, even if it means pushing out your retirement date a couple of years.
Conclusion
All the potential downsides mentioned above can be easily controlled, but it is important to make conscious and knowledgeable so you can make informed decisions. And it is important to realise the long term impacts those decisions will have on your life (both financially and personally).
Overall, I believe FIRE brings a lot more positive elements to a life than any potential negatives, but it is not truthful to state there are no potential downsides associated with the FIRE life.