Saving – The Basics

A common misconception is that you have to be super-rich to FIRE. This stigma continues to propagate even with more information and relative wealth available than any time in history. Why though? First of all, we are more interested in outliers than averages. The average is boring, so when you visit online forums, blogs, and articles on FIRE the most popular articles tend to be completely unrealistic.

More people want to read about the corporate guy who worked 60 hour weeks to retire with 10 million dollars or the couple that went from 0 to retired in 6 years than the average FIRE enthusiast who did it the good old fashion way: making a steady income and saving until it hurts. Remember this fact when you set your goals, and be realistic with yourself on what you can handle both fiscally and mentally.

Another reason for the misconception is survivorship bias. The people who write long-winded posts about their situation or blog weekly aren’t going to be the people who started down the FIRE path and gave up after 6 months. Those people called it quits and pretended they didn’t really want to FIRE anyway, either because they want to save face or because they are in denial.

Which brings us to our second point of saving: Perseverance is the key to success. Closely linked to point one about being realistic, you can’t give up on your dreams because saving gets hard. When you start to save, it means giving things up in other areas of your life that are convenient or fun, but also expensive. When you decide to stop eating out so much or limit your nearly constant weekend getaways so that you can put that money toward a larger goal, you’re going to feel like you’re losing something. You’ve adapted to the comfort of being able to go out to McDonald’s whenever you want, so when you can’t anymore, you’re going to miss the food that you’ve grown accustomed to, and crave the convenience of not having to prepare or cook anything. You might feel like you’re going stir crazy and need to get out of your own house.

These thoughts and reactions are normal, and will eventually go away. Depending on how drastic the changes you’re making are, you may want to increase your savings rate incrementally to ease the transition. For example, if your goal is to save 60% of your post-tax income, and currently you aren’t saving anything, try increasing your savings rate by 5% each month. This way you’re not giving up everything all at once, which will make you more likely to succeed. Think of it as building up momentum.

Right about now you may be thinking to yourself “But the doctor and the accidental entrepreneur both got to eat out and they still FIRE’d, and made it look easy!” You’re right of course, but remember, these people are the exception, not the standard. Which brings us to saving point number 3, don’t compare yourself to others! It is very easy to get discouraged when your first starting out. After all, everyone else who knows FIRE exists are already ahead of you! You may want to give up when you think about how hard you worked these last couple months and you only have $2000 to show for it, but that just means that you are $2000 ahead of where you were when you started. Track your progress and compare it against your previous self and your previous situation. That way, disappointment is preventable. You may not be able to save 95% of your income like some crazy you read about on the internet, but you can do just a little bit better than last week/month/year! There is no reason to kick yourself for not becoming a doctor or not saving $20,000 last year. You can’t change the past and it may not have even been possible for you. Instead, set a goal to save $20,000 this year, and go do it!

Finally, a piece of advice that may seem counterintuitive. Once you have established yourself and your budget, and you are in the routine of saving, do your best to stop thinking about it. Why, you ask? because otherwise, it will take over your life. Automate as much as you can. send a portion of your paycheck immediately to retirement accounts. Set up automatic transfers to a bank account or investment account that you don’t check regularly or can’t see the balance for at all. Don’t think about ways to take your saving further when you’re already at your limit. FIRE can’t be your only life goal or you will be bored and depressed. Find balance in your life by focusing on saving when you need to, and continue to working hard at your job, paint on the weekends, and set that next health goal at the gym, or whatever you are into. Lead a happy fulfilling life to the best of your ability, life is too short to only think about money.

More on saving money:

  • A beginners Guide to the 3-fund portfolio
    Background This is a book that I am taking from the bogle heads forum, which has become closely linked to the FIRE crowd. They don’t expressly cater to the idea of early retirement like we do, but their goals and ideas align closely enough that we of the FIRE community can gain a ton of value from the ideas…
  • Coronavirus: The Importance of a Cash Cushion
    The economy was great going in to corona It seems like it was just yesterday that everyone was driving to work, rush hour was in full effect, and everything was functioning like normal. The economy was doing great, unemployment was at a low point, and everyone was planning their summer vacations. Now the streets are empty. A blanket of…
  • Credit Cards are Evil and Here’s Why
    They are (unfortunately) necessary Everyone needs a credit card. It’s basically a requirement in today’s society. Trying to avoid credit cards because they’re evil unfortunately just isn’t possible in the world as it stands today. “Why would I want something evil?” You might be asking yourself. The fact of the matter is that the benefits of having a credit…
  • Retire Early on Low Income
    Your Salary Size Doesn’t Matter Not everyone has control over the amount of money they make, but everyone has control over the amount of money they spend. If you spend more than you make, you will go into debt, and if you are in debt, your spending will increase because you will be paying interest in addition to all…