The goal to achieve Financial independence, Retire Early (F.I.R.E) is no easy endeavour. It takes commitment, determination and most importantly, time. The earlier you start, the more you can take advantage of compound interest.
The best FIRE stories we hear are of those that starting saving in their early 20s and retired in their 30s. The desire to replicate such an achievement is what spurs many down to same path. These are often people earning over 100k and live a decade of extremely restricted living standards.
Starting your journey towards FIRE in your 20s can come with a catch. You may feel like you have to give up on enjoying certain aspects of live. It might seem like you can’t exactly be a free spirit when you have a cautious eye on the budget.
This makes you ask a big question, should I save and invest in my 20s or just enjoy life? If you’re in your 30s or 40s and could do it all again, which one would you choose?
Your Money Or Your Life?
The problem is that we often see money as a binary concept. You either have it or you don’t. You save money now or later. You save money or you have fun with it. The truth is that saving money and living a great life are not mutually exclusive options.
For example, you can build a portfolio that is self-sustaining, so that when you spend it replenishes itself. You can have your cake and eat it. The same can be said for saving money.
FIRE forces you to develop good money habits and prioritise where you money flows. A by-product of this having more money for the things you enjoy. You can create money structures that efficiently funnel money to where you need it. The development of these habits are centred around some two key principles:
Automation
Prioritisation
This means that you will have a financial structure where you save money effortlessly. By the time you get to 30 you won’t feel the pain of saving like many in your cohort will. On the other hand, many of your colleagues and friends will have spent their 20s engaging in frivolously and undisciplined spending.
< Explore: 12 Actions In Your 20s That Will Give You Better Money Habits For Life >
Avoiding The Scarcity Mindset Is Key
You can put yourself in something of a scarcity mindset by trying to achieve FIRE. Many might wish they had not come across FIRE until later in life. This is because it can make life feel like more of a grind than it already is. I remember a period after I discovered the FIRE movement where I felt very reluctant to spend money.
All I wanted to do was save, invest and retire early. Looking back I can’t help but feel this was part of a quarter-life-crisis. Which stemmed an adverse reaction to the idea of working for the next 50 years. I felt that I needed to do everything in my power to not spend the rest of my life working.
This isn’t a mentality you want to embrace in your 20s. I’m glad I persevered through this stage of FIRE. That’s because I learned that FIRE isn’t just about saving money. It’s now a journey centred around embracing the entrepreneurial spirit.
Focusing On What You Enjoy
I’m now much more focused on finding paid work where I can more easily fall into flow states. This is the mental state of fully immersion, energized focus, full involvement in an activity. Freelance writing work has been a major step forward for me in the last couple of years. The shift towards a more flexible, location independent work style has also been key.
Outside of work I’ve continued to invest in the stock market whilst still travelling all around the world. I’ve visited the likes of California and Vietnam and even Australia.
< Explore: How I Tripled My Net Worth & Plan To Reach Financial Freedom By 2036 >
Conclusion: It’s About Finding Balance
I’ve found it’s important not to let other peoples FIRE stories dictate where I should be on mine. There are plenty of others out there with a higher savings rate and more in the bank. Personally financial independence is much more than a financial journey to me.
Investing in your early 20s has it’s benefits (e.g. compound interest) but your income will be on the lower end of it’s earning potential. This means it’s hard to save and invest a higher proportion of your income compared to your late 20s and early 30s. I had to be much more restrictive in my 20s to save half of what I do now.
Designing A Balance Money-Life Balance
A healthy balance between saving money and experiencing life has been much better for my wellbeing. When you focus too much on the financial journey you become impatient. This results in dissatisfaction and unhappiness.
By focusing on this more balanced philosophy, you will seek ways to improve your quality of life in the present whilst investing in your future. As long as you can consistently invest a decent amount of your income, you can still take advantage of compound interest. Financial independence will then take care of itself.
Just like my investment strategy, I am also keen to build a passive FIRE strategy. I’ve set things up for success and now it’s time to focus on life.
Focus on work-life balance
Build side hustles and additional sources of income
Create incredible experiences and travel the world.
Trackbacks/Pingbacks