Top Ten Topics in the F.I.R.E. Community

We have some amazing mentors in the Millionaire Money Mentors forums. Some of them are even accomplished authors!

Over the past few weeks I’ve been sharing excerpts from some of these authors’ works.

Today we have an excerpt from F.I.R.E. for Dummies — a book that I loved reading and is now my go-to for introducing people to F.I.R.E. 

It’s written by one of the mentors in the forums and makes for a great Christmas present (if you need any ideas).

The section today contains two top ten lists — ten hot topics in the FIRE community and ten tips to make your FIRE journey fun!

With that said, let’s get to today’s excerpt…

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Ten Hot Topics in the F.I.R.E. Community

In the F.I.R.E. community there are lots of tactics and strategies that help fuel your journey. Some are deemed to be critical components that many people are nearly obsessed with. They are hot topics I hear repeated all the time and you will, too. In this chapter, I share the ones that stand out. 

Building Community

The F.I.R.E. community is a small sliver of the population, so it’s no wonder we gravitate toward each other. The way we think about finances is quite different than most people, and you might not have many friends or family who even get the concept of F.I.R.E. You may find yourself seeking out like-minded people either online or in a local community. There are plenty of options. Your preferred social media or community platform is a good place to start. 

Being around others who espouse the same thinking is how we have fun, and it helps us grow. Some of the F.I.R.E. philosophies go against the norm of spend, spend, spend, and we openly talk about money when others think it’s taboo. We nerd out on advanced money topics while others shy away. We want to talk about our finances all the time when everyone else around us would rather not. To get your fill and charge your battery, community is key. 

Reducing Expenses

Although there seems to have been a shift to focusing on value, reducing and keeping your expenses in check in areas that don’t really matter to you is one of the ways to get some quick wins when you’re early in your F.I.R.E. journey. Reducing expenses can create more room to spend on the things that do matter. The goal is to be intentional with your cash flow — aligning your spending with what you value. Read more about expenses in Chapter 14. 

Being a DIYer

This book literally has “do it yourself” (DIY) written all over it! This was born out of realizing how simple some financial stuff has become; it’s so simple, you can DIY. A good example for many in the F.I.R.E. community is investing. To many people, it seems complex, but keeping it simple with something like a low-cost index fund and automating the contributions makes it an easy thing to DIY rather than paying someone else to do it. 

DIY has a lot to do with control of both your time and money by taking care of certain tasks on your own. You will decide what’s worth it and what’s not. 

Increasing Savings Rate

Savings rate is a key metric of building wealth regardless of how much you make (see Chapter 4). It is a function of creating a gap between your income and expenses. Your savings rate is simply the percentage of your income that you are saving and investing. The higher your savings rate, the sooner you reach F.I.R.E. 

Those on the path to F.I.R.E. keep up with their savings rate and increase it along with their rise in income. It doesn’t have to be 50 percent or more, but remember that the conventional recommendation of saving 10 percent is for those seeking to retire at the traditional retirement age (in their 60s), not people who want to retire decades earlier.

Using Spreadsheets 

Ask most people in F.I.R.E. community what they use to track their finances (see Chapter 4), and many will say a spreadsheet. I think this probably started because most of the pioneers in the F.I.R.E. movement were engineers or tech pros. 

The real reason people often use spreadsheets is that going down the F.I.R.E. path is a departure from the traditional time frame that many financial calculators are built around. Some calculators don’t even let you put in a retirement age younger than 55. The customization freedom you have with spreadsheets gives you lots of flexibility. 

Investing in VTSAX

When I saw “VTSAX and Chill” on a T-shirt, I knew it was an obsession, but the message was valid. Keep investing simple. 

VTSAX is the ticker symbol for the Vanguard Total Stock Market Index Fund, which measures the investment return of the overall stock market. It’s a mutual fund (a basket of stocks) that includes more than 3,500 U.S. stocks, including well-known companies like Apple, Amazon, and Tesla. F.I.R.E. people love it because it is simple, has a low fee, and represents the total U.S. stock market. 

Many feel that it’s simpler to stick with one and done, meaning investing in just one index fund is sufficient. It doesn’t make for an entire investment portfolio, but for someone who doesn’t know where to begin, it’s a good way to start learning that investing doesn’t have to be hard. VTSAX happens to be a Vanguard fund, but every fund company offers a similar version of this total stock market index fund. 

Putting Money in HSAs

Health savings accounts (HSAs) are great in general but are valued even more by people retiring early. You have to be on an HSA-eligible plan to make contributions, but the characteristics of this account are like no other. Beyond just the triple tax savings you hear about (tax free going in, while it grows, and coming out), you do not have to be a certain age to take the money out like you do with some other tax-advantaged accounts as long as you’re using it for qualified medical expenses. A few of the other features that F.I.R.E. people get excited about with HSAs are 

• You can invest the money in the account. 
• You don’t need income from a job to contribute like you do with other tax-advantaged accounts. 
• You can reimburse yourself for qualified medical expenses at any time in the future (like after you retire early or in your older years). 

Converting to Roth IRAs

Funds in a Roth IRA account can be a great bridge for early retirement because the contribution portion can be withdrawn anytime for anything, tax and penalty free. 

Traditional IRAs don’t work the same, but you can convert those funds to a Roth IRA — something called Roth conversions. The taxable funds you convert (generally) cannot be distributed from the Roth IRA without a 10 percent additional tax (penalty) until the earlier of five tax years or age 59.5. After you meet one of those requirements (typically, it’s five years for F.I.R.E. people) you are free to withdraw the converted funds for anything (the growth is handled differently). 

So why does the F.I.R.E. community get obsessed about Roth conversions? Because retiring early may put you in a very low tax bracket that makes it advantageous to do this because you can end up paying little or no tax. You can do a series of these and start a “laddering process” (called a Roth conversion ladder) that provides for funding a long early retirement. Read more about Roth IRAs in Chapters 15 and 17). 

Roth conversions are a bit on the advanced side of things, but its why I say the F.I.R.E. community is filled with brilliant people who love talking about these strategies. The best explainer on this is by one of my favorite bloggers, Mad Fientist. Visit www.madfientist.com and look for the “How to Access Retirement Funds Early” article. 

Investing in Real Estate

This is another big subset of the F.I.R.E. community because owning rental real estate can create a way to both speed up your F.I.R.E. journey by increasing your income and create passive (or semi-passive) income in early retirement. Having this type of income stream could minimize what you need to take out of your investment accounts. 

Real estate investment can be long term (annual leases with tenants) or short term (like Airbnbs). It can also include what some call “house hacking.” For instance, you may own a multi-family unit, live in one of the units, and rent out the other unit(s). There are other clever maneuvers for house hacking. 

One of the most popular real estate investing platforms is BiggerPockets (http:// www.biggerpockets.com/).

Using Travel Hacks and Travel Rewards

F.I.R.E. people often love to travel. It’s one way to express a sense of freedom (and fun), but it’s not cheap. It can get even more costly when it involves mega travel, like overseas trips or periods of extended travel (a week or more). 

Travel rewards enable F.I.R.E. people to travel on the cheap, especially when someone can “hack” the travel rewards system. The bonuses and rewards you can get from credit cards can be significant, and the word gets around about which cards have the best bonuses. Airfare and hotel rewards often have incredible deals, primarily for opening new accounts. 

The big caveat for taking advantage of these reward credit cards is to pay the balances off every month so you do not incur any interest charges (which would negate any rewards you would earn). Used efficiently, this can be a great way to make the F.I.R.E. journey even more fun.

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Ten Tips to Make Your F.I.R.E. Journey Fun

I wouldn’t have gone down the F.I.R.E. path if I’d been told I had to give up certain things, and neither would you. Remember that each person’s journey is unique to them. You will customize your path to F.I.R.E., and it should revolve around what makes you happy and gives you joy. It may take some time to design what this looks like for you, but this chapter gives you some tips that will help get you on your way. 

Explore Your Why of F.I.R.E.

This can be one of the hardest parts of your journey. It’s easy to figure out what you don’t want to do (such as being tied down to a job you don’t like), but zeroing in on the things you are most passionate about and want to retire to may take a little more thought. Knowing what’s on the other side of F.I.R.E. will help motivate you. 

The exploration of finding your “why” can be fun. You may not have ever been able to clear your mind and really think about what you’d want to do if money were no object. You don’t have to figure it all out in a day, but you’ll enjoy the process. I sure did! It was so much fun trying new things. When you do this, you get to focus more on what matters to you and take steps to start designing your own life. 

Give Yourself Grace

You’ll run into roadblocks and make some mistakes on your path to F.I.R.E., but roadblocks and mistakes are both teaching tools that sometimes help us learn lessons better than pure success can. So don’t be hard on yourself when things don’t go perfectly. You can’t anticipate everything. Just take complications as teachable moments. (Someone once told me that if I didn’t make mistakes, I wasn’t even trying.) 

Start Learning What You Are Most Curious About

I get asked the question all the time: Where’s the best place to get started with F.I.R.E.? Of course, some personal finance stuff is boring and may not exactly get you excited, so my answer always is to start with what you’re most curious about. Having curiosity is a great motivator and will keep you digging. 

Because people tend to procrastinate on things they don’t like, starting with what you’re most curious about makes it easier to get started. Much of personal finance is interrelated, so answering one question will lead you to many others. Before you know it, you will be deep into the perpetual learning process, and since there’s always something new, it doesn’t stop. 

Learn in the Style That Best Fits You

Knowing your learning style can be a game changer as you navigate your F.I.R.E. journey. Some people love reading (blogs, books) and that’s the way they learn best. Others may hate reading books or blogs but do great if given the same information in an audio book, podcast, or video. Give some thought to your preference. Figuring out what works best for you will help make learning feel more like entertainment than an assignment.

Many content creators are now multi-platform because they know people like to consume information in different ways, so if you find a podcast that seems valuable, but you’re not into listening, see if that creator also has a blog. 

One of my favorite podcasts, Journey to Launch (www.journeytolaunch.com), had been in this audio format for over five years, but the host, Jamila Souffrant, recently wrote a book (Your Journey to Financial Freedom, Hanover Square Press). The book format probably introduced a whole new audience to her work because some people prefer to consume content by reading books rather than listening to podcasts. 

Align Your F.I.R.E. Plans with Your Values

Sometimes your values may not exactly align with the F.I.R.E. community or its approaches. That’s okay. There is no money-saving tactic that is worth putting your own values in question. The goal is not to be the fastest to the F.I.R.E. finish line but to move in the right direction. Fulfillment along the way wins out. 

Maybe you take a lower paying job at a nonprofit because you’re passionate about its mission. Or maybe you provide financial support for other family members. Both of these examples may slow down your path to F.I.R.E., but the tradeoff of your values to get there sooner probably would not be worth it. 

Focus on the Things You Enjoy That Support Your F.I.R.E. Goals

I don’t like to recommend giving up what you enjoy to pursue F.I.R.E. Some things are just too important or too much fun to ditch, but you can often do those things and still move toward F.I.R.E. There can be ways to integrate what you enjoy into your F.I.R.E. plans.

If you love travel (as many in the F.I.R.E. community do), you can do it in smart ways, like using travel rewards or picking destinations strategically. You can even start teaching others about traveling and perhaps find some way to monetize it.

Don’t Cut Expenses for Things You’ll Be Miserable Without

Some of the words that used to be firmly connected to F.I.R.E. were frugality and minimalism. While being frugal and minimalistic can help on your path, going overboard can make you miserable. Being miserable for years as you make your way to F.I.RE. is kind of missing the point of getting to your happy place. It’s important to keep expenses in check, but balance that with spending on the things you value. 

What you value will be different from what others value, and that’s okay. You may choose to live in a high cost of living area like San Diego, California, whereas someone else may choose to live in a low cost of living area like Hickory, North Carolina, and tout it as the best way to save money. If you’d be miserable in Hickory, North Carolina (no family there, it’s not close enough to the beach, and so on) it could be a huge drag on the way you feel on your F.I.R.E. journey because you won’t be happy. 

Find Communities and People That Feed Your F.I.R.E. Journey

Whatever your niche is, there’s a community that matches it. Even though your current social circle may not have anyone that shares your desire to F.I.R.E., you don’t have to do it alone. There are many others who are not only like-minded but probably at the same place as you on the journey. Seeking out those people can give you the support system you need to make the journey a lot more enjoyable. 

ChooseFI has an extensive list of different communities based on locale or shared interests (www.choosefi.com/community). You can also do an internet search for in-person events such as Camp FI, Camp Mustache, and EconoMe or other local meetups.

There is even a growing cohousing community in Georgia that is aligned with the F.I.R.E. movement called EAGLE (Efficient And Generous Living Environment). EAGLE Cohousing (www.eaglecohousing.com) was started in 2016 by CampFI founder Stephen Baughier (see Chapter 3).

Celebrate Your Wins

You’ll reach milestones along the way, such as paying off all your debt or getting to your first $100,000 net worth. Mental milestones are important, too, such as no longer being afraid to invest in the stock market. Celebrating your wins is a way to acknowledge your hard work and progress.

That feeling can be very powerful, and the refresh will keep you motivated toward your big win of achieving your time freedom. Read more about celebrating your wins in Chapter 9.

Your F.I.R.E. Path Does Not Have to Be Flawless

The biggest thing I learned after reaching F.I.R.E. is this: Precision is not required. I wish I had learned that lesson sooner! I debated at times whether I should contribute to a Roth IRA or a traditional IRA or if I should switch my cell phone plan to a cheaper carrier.

I realized that no single decision I made could wreck my finances or F.I.R.E. plans as long as I understood the big picture: living on less than you earn and investing the difference. I was probably too hard on myself, and I don’t want you to feel the same way.