It feels so good to leap into the land of FIRE… but have we really thought about what we’re giving up?
I love the people in the FIRE community. They are masters of their own universe. Through thrift and savings, they have achieved, or are achieving, financial independence. Their financial health does not rely on one single source of income (a full time job), over which they have limited control. They spend less (usually far less) than they make, thus never worry about debt, job loss, or financial ruin.
But after hearing one blogger’s story on Bigger Pockets (of whom I am a great fan), I was given pause. Dan and Mindy, the podcast hosts, were talking to the Financial Panther, a sharp guy who is getting by on side hustles and an ever growing blog.
To do this, he left his partner track job at a white shoe law firm at 32, some five years after getting his law degree. That’s when I went from “You go, man!” to “Ummm… huh?”.
It seems like there are a lot of FIRE adherents out there that are leaving promising careers in tech, medicine, and law to house sit and walk dogs. Which makes me think that they are not always fully considering the opportunity cost of moves like this.
Before embracing the RE part of FIRE, here are some questions I think we should all ask ourselves:
Have you thought about what your income potential is from your current career?
I left my job in my 40s in part because I just didn’t see much more upside. My field prized youth, and there were very few people in their 50s in my current or former workplaces. And importantly, I didn’t have the political skills, ambition, or frankly the intelligence to be running a major division. So the decision was easy for me.
However, if I were in my 20s, or even 30s, I would have thought twice, and probably taken pen to paper to calculate opportunity costs. I would advise creating a spreadsheet to do this, estimating how much you could earn in the next 10 years in your current job, and include the following elements:
- Future raises
- Likely bonuses
- Bumps from potential promotions (you can be conservative here and assume a very slow path)
- 401k contributions and matches
- Health care costs
- Value of stock options
I would add all these up just to understand what you are giving up by entering the land of RE, or even just downshifting. If you want to switch to side hustles, they don’t need to (nor should they) match what you could have made by staying put – but you should at least understand the trade-off.
To what extent are you running away from a bad situation, vs. running towards a long held goal?
On Twitter and in blogs, people complain bitterly about workplace stress, toxic environments, politics, etc. And I certainly can empathize, especially as a veteran of 20+ years in Fortune 50 companies. But before abandoning both your job and your career, would it at least be worth it to see what else is out there? Also, this sounds awfully cynical, but have you thought about just doing your best until they fire you? I have seen people employ this strategy, and they ended up being the “last man standing” and were actually promoted!
What will you do with yourself, once you RE?
Personally, I don’t find the post-FI lives described in blogs, Twitter and Instagram to be that inspiring. You can only hike, work out and lay on the beach for so long before life becomes, in my opinion, very boring. And please: “travel” is not a vocation. It’s like eating dinner – a pleasant, short term diversion, but hardly a reason to exist. We need goals to stay vital, and the workplace provides these in abundance. So if you do leave your job, this will be a big void to fill.
In the long run… how will your spouse feel about being married to an RE?
In my observation, when one spouse is working full time and the other is retired, it can create a lot of conflict and resentment. To start with, priorities and schedules are highly misaligned. And frankly, I think that a lot of people find a nonworking spouse to be, well…kind of… unsexy. There are exceptions of course: many men seem to be fine with their wives leaving their careers to take care of the kids (though this is hardly “nonworking”). But on the flip side, would a woman with a well paying, high powered job find their husband just as desirable if he was home all day, blogging, planning budget travel, and walking dogs? This may be/is a sexist thought, but some women I know would feel like they have another child at home vs. a husband.
Are you OK with your peer group succeeding spectacularly on the same career path you left?
Imagine yourself at dinner with a group of former co-workers at the company you left 10 years ago. You left that life to blog, travel, and surf in Costa Rica. They stayed on in the toxic, political cesspool that was your former company. How would you feel if several of them had been promoted several times, and were making mid-six or even seven figure salaries? Would you try to probe for signs of stress, burnout, or regret? Would you find yourself trying to validate your decision?
This recently happened to me. Someone who used to work for me rose to a very senior position, was only working moderately crazy hours, had a work life balance and was pulling in a boatload of cash.
That could have been me… no scratch that, it could not have been me. He had a way with people (his license plate says “Schmoozer”) that I never had, so he deserves to be where he is, whereas I do not. Would you feel the same way when encountering spectacularly successful former co-workers?
Now back to the Financial Panther. He has 15,000 followers on Twitter and a very impressive website. He seems, for someone that has retired early, like a pretty successful RE-er. However, he claims that he has only made $600,000 in the last ten years. Conservatively, I would double that to include income from his blog, and assume $1,200,000 in 10 years.
A fast Google search indicates that the average (equity and non-equity) partner at a top (top 100-350 in the U.S.) law firm makes $877k per year. If you took this salary and lived a FIRE (or semi-FIRE) lifestyle for 10 years, I would imagine you’d be worth at least $5-$10m. Financial Panther pegs his own net worth at $177k. Admittedly, this is apples to oranges, and it would be more appropriate to see where Financial Panther is in 10 years (he’d probably just be starting out as a partner right now). But you have to admit that the difference is stark.
Now there’s nothing wrong with forgoing a potential eight figure net worth to walk dogs and deliver Uber eats. There are many psychic, emotional, and even physical advantages to the latter. But you should at least enter a major life choice like this with your eyes wide open to the opportunity cost, both immediate and long term.
A version of this post originally appeared in Your Money Geek.
Have you calculated the long term opportunity cost of “RE”? What have you found? What did you decide? Tell me in the comments below!
Categories: financial independence