I’m just going to start this off stating this post may rub some people the wrong way.\u00a0 And that’s totally fine.\u00a0 I can’t please everyone.\u00a0 All I can do is speak my mind.<\/p>\n
Let’s face it.\u00a0 The majority of the developed world has a spending problem.\u00a0 A big one.<\/strong>\u00a0 And with that spending problem comes a lack of savings problem.<\/p>\n According to Forbes,\u00a078% of people live paycheck to paycheck. <\/a>That is a HUGE percentage! On top of that,\u00a0Magnify Money conducted a study\u00a0<\/a>using data from the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC) to estimate the average and median household balances in various types of banking and retirement savings accounts. The results show that the median American household has $11,700 saved up.\u00a0 That’s it.<\/p>\n While of course I would never wish for coronavirus to have spread to the magnitude it has so far and for the entire globe to have to face these pandemic events\/catastrophes, I truly hope that this event serves as the financial wake up call most people need when it comes to having an emergency fund and saving for your future self. Sadly, it likely won’t, but one can hope.<\/p>\n No one wants to talk about money because everyone seems to be spending all their money and then has nothing to show in their bank accounts for all their years spent grinding at their cubicle. I recognize our privilege and I completely understand some people are scraping by on minimum wage or low income jobs. Those are not the people I am speaking to on this post. I truly feel awful for the millions of people filing for unemployment assistance at this time.\u00a0 If we can learn anything from what’s going on in the world, it’s that we all could use a good lesson in personal finance, especially those who are earning middle-upper incomes.<\/p>\n The importance of having an emergency fund, remaining out of debt (or aggressively killing off your debt), understanding needs vs wants, living below your means, and building wealth by investing has never been more apparent in the past 10 years until this month.\u00a0 We were all blissfully chugging along as the stock market continued on its bull run thinking life was good and we were invincible.\u00a0 We were collectively spending our money as if we had no cares in the world. Yet we forgot that the best time to prepare for bad times is during good times. And here we are, being hit with a dose of reality – it’s not always rainbows and unicorns.\u00a0 If you don’t have a savings plan in place, THIS IS YOUR $*&@%$^@ WAKE UP CALL.<\/p>\n For those who are not prepared right now, you likely feel hopeless.\u00a0 You may feel like the world is ending.\u00a0 How can you pay this months rent check or mortgage payment? What is the government doing to help out? How long is it going to take for my stimulus check to come in? Who is going to help me get through this rough time?<\/p>\n Which leads me to a related tangent.<\/p>\n I have always supported getting help when you need it. Whether someone is living in poverty or lost their job due to unforeseen circumstances. It is very interesting, and very frustrating, to see the hypocrisy going on.\u00a0 Even though more and more people increasingly rely on government, they want to pay fewer and fewer taxes.<\/p>\n What do I mean by that?<\/p>\n The tone of many people across the world is that they need help.\u00a0 They lost their jobs, or they need to take care of their children or elderly parents, or they need to self quarantine, etc. and they are banking on this stimulus package to get through these tough times.\u00a0 Yet, many of these same people are also all about anti-government assistance and look down on people who rely on assistance from the government to get by.\u00a0 They are now in that exact category of people that they look down upon and are demanding a stimulus package for higher earners too.\u00a0 Why?\u00a0 Because even though they are high earners, they haven’t learned the concept of saving for a rainy day.\u00a0 They are upset that some people on unemployment will now be earning the same amount as them, possibly even more.<\/p>\n Again, I have NO issue with anyone receiving help at this time.\u00a0 We all need to collectively get through this to see the economy flip back and start moving in the positive direction again.\u00a0 I have an issue with their sudden change of attitude towards government help when they need it.\u00a0 I read this line last week and had to share it: This shows a poverty of a different kind: of values, kindness, compassion, and community.\u00a0 That struck a massive chord with me and it’s so so true.<\/p>\n Of course, I hope they find the resources to get by.\u00a0 I also hope they find a new perspective that regardless of hard work, anyone can find themselves needing a handout or a hand up in life.\u00a0 I hope people realize how important a strong government support system is.\u00a0 I hope people shift their views more left after realizing how important a role our taxes play.<\/p>\n Think about it this way, our taxes are essentially our emergency fund from a country wide perspective.\u00a0 Taxes are a savings plan that are enforced at the federal level.\u00a0 When you look at your government for support, you are looking at them to have a healthy savings account in place to bail you out.\u00a0 In order to prevent inflation from making your currency worthless, the other way to create this healthy support system is through higher taxes.\u00a0 I recently read the book The Nordic Theory of Everything<\/a> and it turns out to have been a very timely decision to have read it earlier in March.<\/p>\n Guess which countries consistently rank at the top of the happiness reports? Those with very healthy social nets. Aka those paying high taxes. Of course, these countries aren’t perfect, but I truly think there is a lot to learn.<\/p>\n I am not trying to belittle anyone in this situation.\u00a0 If you are one of the 78% living paycheck to paycheck and you have been negatively impacted financially by the global events taking place, I truly do feel bad for you and wish there was something I could do to help.\u00a0 Luckily, many governments across the globe are stepping in to help get their countrymen and women through these tough times.\u00a0 The point I’m trying to make is, if taxes increase down the road (and I sure hope they do), understand the reason why.\u00a0 Higher taxes are NOT a bad thing.<\/p>\n Through this blog we are TRYING to show you how to take control over your finances and see money as a tool vs money controlling your life (of course we are not the only ones, there are many great FI bloggers out there<\/a>).<\/p>\n Many people may be thinking… so this is the end of the FIRE movement eh? There go all those wild dreams of retiring early in your 30s or 40s right?<\/p>\n NOT. AT. ALL.<\/p>\n If anything, this makes those of us pursuing FI so thankful<\/strong><\/span> to be in the situation we are in.\u00a0 In times of turmoil, people should be wanting financial freedom more than ever.\u00a0 If anything, I’m hoping that the life changing power of financial independence is going to be brought front and center to millions of people.\u00a0 Personally, the Modern FImily is sleeping well at night.<\/p>\n Why?<\/p>\n We have enough cash in our account to last us 6 years.\u00a0 That’s not a typo – years, not months. We also have enough bonds in our portfolio it live off of for another 5-6 years.\u00a0 That’s over 11 years of ammo until we need to touch our stock portfolio.\u00a0 It is HIGHLY unlikely that once it does come time to touch the stocks in our portfolio, that they will be valued where they are today.\u00a0 Of course we are worried about the state of the global economy and the health of our loved ones, but we are not worried about our finances.<\/p>\n Now, over the course of the next year or so we plan to throw some of this cash\/bonds towards our stock index funds to ensure our allocation is where we want it to be over time.\u00a0 Because we shifted from having 90+% of our portfolio invested in stocks during our aggressive wealth accumulation phase and now only having ~60% invested in stocks, we have the opportunity to rebalance at this time and funnel some of the cash and\/or bonds into stock index funds and buy stocks when they are on a huge discount (and around here we are all about shopping sales). So far we have deployed about $10,000-$15,000 towards stocks (more on that on our next quarterly net worth update<\/a>).<\/p>\n I will bet that if you are on your path to FI and lost all or most of your income during this time, you are sleeping much better than someone who also lost all\/most of their income and is living paycheck to paycheck.\u00a0 If you’re on team FIRE and you recently lost your job, there’s a very good chance that you have a healthy savings account funded to get you through this downturn. You also have the power to not have to say “yes” to the very first job opportunity that comes your way.\u00a0 Essentially, you are in a position of strength.\u00a0 More importantly, you have the right mindset to help you get through this time.<\/strong>\u00a0 You’re an innovator, an optimizer, an organized spread sheet lover, and are in tune with your spending habits.\u00a0 Those four qualities tend to run common among those of us in the FIRE space.\u00a0 If you need to think creatively to reduce your expenses, you do.\u00a0 If you need to come up with some alternative to bring in some income, you do.<\/p>\n Those of us who have been investing for awhile and are comfortable with the stock market, know that the market will go up.\u00a0 When?\u00a0 Who knows.\u00a0 No one knows that side of the picture.\u00a0 But we know that it will eventually go up and we know not to sell our stock investments during times like these and to stay the course.\u00a0 We are NOT panic selling.\u00a0 We are not trying to time the market.\u00a0 We are not looking to invest in speculative individual stocks.\u00a0 We know not to touch our healthy emergency fund during times like these but if we do have excess income coming in, we invest like we normally do.\u00a0 We have a plan in place, we know our spending habits because we track our expenses to the T, and we don’t make rash decisions with our investments.<\/p>\n “Be fearful when others a greedy, and greedy when others are fearful.” – Warren Buffet<\/p>\n If anything, MORE people should be wanting to learn about personal finance during times like these.\u00a0 More people should want to have a better grasp of where all their hard earned pennies go.\u00a0 More people should want to be looking out for their future self.\u00a0 More people should not want to feel completely tied to their jobs to survive.\u00a0 More people should want to be in control of their finances.\u00a0 More people should no longer want to be blissfully unaware of their finances as you cannot just hope for the best.\u00a0 More people should be wanting to understand what a “savings rate” means.\u00a0 More people should want that freedom to be able to actually sleep at night during times like these.\u00a0 And if they don’t, then that goes back to my point above, and they should want higher taxes so at least the government is looking out for them if they don’t want to take responsibility financially.<\/p>\n Right now it’s never been more apparent that there’s a difference between acting rich and actually being wealthy.\u00a0 Those who flaunt their high incomes and have nothing to show for it are feeling the pain.\u00a0 Those who understand the concepts of saving, investing, and compounding are the ones sleeping well at night.\u00a0 We are the ones embracing times like these.\u00a0 We see the great buying opportunity in the market.\u00a0 We are getting caught up on sleep.\u00a0 Or spending more time as a family.\u00a0 Or going out for long adventure hikes.\u00a0 Or trying out new recipes at home. Or reading books we’ve meant to read for awhile now.\u00a0 And we’re not feeling stressed out while doing so because we have a runway to support us during tough times.\u00a0 <\/em>That’s the big difference.\u00a0 Those on the FIRE path are getting a taste of what their future life could look like (in a weird set up of course).\u00a0 Pretty much everyone else is in panic mode.<\/p>\n The last point I want to make is that in a very weird-hard-to-describe-way, I’m honestly glad the markets are getting a shake up.\u00a0 The FIRE movement has taken off the past year or two and suddenly everyone wants to join the party.\u00a0 Of course, the more the merry, but it’s easy to “see the light” when times are good.\u00a0 It’s during tough times where you can be challenged.\u00a0 Life can be bumpy, even in the best of times, so to only plan for the perfect scenario is foolish, at best.\u00a0 Is the pursuit of FIRE right for you?<\/p>\n Maybe you are realizing early on that you are not comfortable with your asset allocation and need to adjust according to your risk tolerance.\u00a0 Maybe you now see why we are more comfortable with a sub 3% safe withdrawal rate vs the highly touted 4% rule <\/em>within the FIRE community.\u00a0 Maybe you now see why we shifted a lot of our stock index funds over to cash (in a high interest savings account) and bonds as we approach our FIRE date.\u00a0 Maybe you now see that a specific age to retire is not the true end goal but rather it’s being mentally comfortable when you do decide to pull the plug.\u00a0 Maybe you now understand the importance of flexibility and creating a life you want to live post-FIRE while you’re still bringing in an income in case you need to push things out a bit longer.<\/p>\n This last sentence has been our biggest take-away from the past year and what we are trying to communicate on our blog – the transition to work part time as been the best thing for us as I already feel retired yet we’re still saving 50% of my part time income.\u00a0 Make sure you are enjoying the journey along the way.<\/p>\n I’m not trying to be a Debbie Downer with this post.\u00a0 I’m just trying to provide a clear picture of what you need to be thinking about while on your FI journey.\u00a0 It’s not always going to be good times and you have to have a plan in place for situations like these that make make you alter some of your previous thoughts or assumptions.\u00a0 It shouldn’t be only about a specific number or a specific age.\u00a0 It should be about designing a happy life along the way.<\/p>\n Stay the course.\u00a0 An investment plan established during a calmer time should not be abandoned in the midst of a market downturn.\u00a0 Let the benefits of diversification play out.<\/p>\n I’m hoping people are more conservative with their spending habits once COVID-19 has finished running its path. I’m hoping the thrifty habits we are nurturing during these difficult times will stay with us.\u00a0 I’m hoping people will take debt more seriously and invest in their priorities more mindfully. I’m hoping emergency funds will become more prevalent and healthier in size.\u00a0 I’m hoping consumer debt is no longer the norm.\u00a0 I’m truly hoping that people will lean onto the power that comes with financial freedom.\u00a0 And as we survive this storm as a global society, I’m hoping we will come out to the other side with more clarity, poise, and vision of what truly matters in life more than ever. In a rush to return to normal, use this time to consider which parts of normal are worth rushing back to.\u00a0 The little things are the big things.<\/p>\n What do you think?\u00a0 Did I totally turn you off with this post?\u00a0 Or were you able to relate to my thoughts?\u00a0 Would love to hear your thoughts below in the comments.<\/p>\n If you liked this article and want more content like this, please support this blog by sharing it.\u00a0 Not only does it help spread the FIRE, but it lets me know what content you find beneficial.\u00a0 Writing is NOT my strong suit and it honestly takes me hours to write each post so the more encouragement the better!\u00a0 Engaging in the comments below keeps me motivated.\u00a0 You can also support this blog by subscribing to receive emails anytime a new post is published.\u00a0 Thank you FImily!<\/p>\n We believe in stacking up life hacks to keep your enjoyment levels to the max without depleting your bank account.\u00a0 Here are some ways to further educate yourself and save thousands of dollars over your lifetime by making some simple adjustments:<\/p>\n I’m just going to start this off stating this post may rub some people the wrong way.\u00a0 And that’s totally fine.\u00a0 I can’t please everyone.\u00a0 …<\/p>\nWake Up People<\/h2>\n
Respect For Taxes<\/h2>\n
Is This The End Of The FIRE Movement?<\/h2>\n
Support This Blog<\/h2>\n
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