The Challenges of Financial Independence and Early Retirement

February 20, 2019
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The road to early financial independence can be demanding, yet rewarding. It’s important to understand the obstacles you will face on your FIRE journey.

At Illumination Wealth, we’ve been excited to talk about the February FIRE movement (Financial Independence, Retire Early) on our blog all month long. It’s an important topic because every single one of our clients is looking to achieve early financial independence through sound investments, strategic financial planning, and smart wealth building and lifestyle strategies.

We recently collaborated with Scott Rieckens, an author, who just released his latest book Playing With Fire: How Far Would You Go for Financial Freedom? It’s a great read and we suggest you pick it up if you are serious about your own FIRE goals. In the book, Scott tells his own story as he struggled to achieve financial independence. He ultimately got on the path to where he wanted to go, but he faced plenty of challenges along the way.

That’s what we’d like to talk about in this article: the challenges can you expect to face when striving for financial independence and early retirement. The truth is, the journey is going to be a little different for everyone because nobody can ever perfectly predict what is going to happen. What’s the old saying? “You plan, God laughs.”  You never have all the information when you start planning. You just have to do it, work hard and stay focused to reach your dreams and live your best financial life.

Making Sacrifices

Unless you are incredibly lucky with every investment you make, working toward an early retirement will require some significant sacrifices. You will have to cut back on your spending now in order to put as much money as you can into savings and investments. This can be hard for many, especially when you earn a lot of money and are used to spending most of what you make. The reality is, you are sacrificing either way. Why not sacrifice in an effort to create the ultimate freedom?

Starting Early

The earlier you start your FIRE movement, the more likely you are to achieve it. However, financial independence requires a great deal of discipline—the kind that isn’t associated with those that are financially immature. By the time many people have the proper discipline to start putting more money away for an early retirement, they have to work twice as hard and sacrifice even further from their lifestyle to make it happen.

Finding Balance

We already talked about how FIRE requires you to sacrifice many things now in order to secure a happier and more comfortable future (in the form of early retirement). Are the trade-offs worth it to you? Do you still feel like you have enough balance in life today while you are saving for tomorrow? Will you even enjoy the destination after such a meaningful journey? These are some of the questions you will be faced with at some point along the way.

Making the Change

FIRE requires a change in thinking (and in your actions) as soon as possible. This can be hard for many, and it’s all a matter of prioritization. If early retirement is what’s most important to you, then that needs to be your top priority. If that’s not what’s most important, then a full-blown FIRE plan may not be for you.

A Difficult Transition

Let’s say you put everything you had into your FIRE goals and work very hard for however many years to achieve financial independence and an early retirement. Congratulations! Now you have to learn to adapt to the new life you’ve earned for yourself. Some people do not find this transition easy. It often takes time to adjust to the slower pace of retirement life. Believe it or not, it’s a real challenge faced by many successful FIRE advocates. In many cases, it’s even harder than the financial and life sacrifices made along the way.

It’s important to understand the obstacles you will be dealing with as you work toward financial independence. This is not meant to discourage anyone from embarking on the FIRE journey because it is the right path for many individuals. Understanding the obstacles allows you to confront them head-on and incorporate strategies to overcome them. No matter what, financial independence is a goal we should all be striving to achieve on some level or another. We all need to retire at some point, and some wish to do it earlier than others. In some cases, retirement isn’t a choice, but a necessity. That’s when the FIRE way of thinking is such a difference maker.

The key thing is to make sure you have proper balance in your life & wealth and are certain you are investing in alignment with your values. This will keep you motivated and on track toward your goals. Also, working with a trusted wealth advisor will help put you on the right path. You don’t need to go it alone. Sound wealth planning will allow you to enjoy your life now while investing intelligently in your future.

For more information about our financial life planning services including tax planning, financial independence planning, investment management at Illumination Wealth, schedule a time to talk with us.