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Early Retirement

A Big Savings Rate is Not Required to Retire Early

Can't Save Money

Saving a large percentage of your income, like more than 50% of it, is often preached as a requirement necessary to reach financial independence and retire early.

That’s Nonsense. FIRE is for everyone, regardless of income.

You can save a small percentage of your income (relative to the huge percentages saved by some FIRE seekers) and still retire a decade or more earlier than traditional retirees.

Here’s the truth: saving a smaller percentage of your income means it will take you longer to reach FIRE, but it doesn’t mean you’ll never reach your goal.  You might not be able to retire in your 20’s or 30’s, but maybe you can retire in your 40s or 50’s and that beats the hell out of working into your 60’s or 70’s!

What Is FIRE?

First of all, FIRE is just a couple of math equations, but it has a different meaning to everyone.

  • The amount of money you need to be financially independent is unique to you.
  • Your “early retirement” age is unique to you.
  • Some people don’t even retire in the traditional sense when they reach financial independence. Your “retirement” is unique to you.

Because FIRE is so subjective, comparing your financial journey to mine is pointless. So is comparing your savings rate to someone else, so don’t get discouraged if you can’t save a huge percentage of your money.  It doesn’t matter anyway, it just changes the math a bit.

Why You Can’t Save Money Matters

Like most things in personal finance, saving more money isn’t complicated, but that doesn’t mean it’s easy.  There are some obvious reasons why you just can’t save money right now, and that *why* could be more important than how much you’re saving.

  • Low Income.  If you don’t earn a lot of money, then most of what you make goes to housing, food, clothing and transportation. There simply isn’t enough money left over for you to save.
  • High Expenses.  If you’ve got a lot of bills and expenses, especially unexpected expenses like hospital bills, alimony or child support, then even if you make decent money you’re probably unable to save much of it.
  • Low Income + High Expenses. This combo is probably near rock bottom, financially speaking.  Having a lot of expenses and little income is a terrible financial situation to be in. If this is where you’re at, you’re probably taking things one day at a time and saving money isn’t even on your radar.
  • Personal Choice. Perhaps you make decent money and your expenses are in check, but you enjoy spending your money on things like entertainment, travel, dining out, etc. etc.  For people in this group, it’s not that they can’t save money, it’s that saving money isn’t a priority.

Regardless of the situation you’re in, nothing is permanent (that’s why your reason for not saving a lot right now might not be as big a deal as you think it is). Just because you’re not saving a lot now doesn’t mean that it will always be the case.  For some of us, it takes a bit longer to thrive financially.

What If You Just Can’t Save Money?

So what are you supposed to do if can’t save money?  You do what you can with what you have with where you’re at in your life. Nothing more – that’s all you can do.

If you’re in a position where you can save 5% of your income, then save 5% of your income and don’t feel bad about it because some anonymous blogger on the internet says they are saving 70% of theirs.  Maybe today all you can save is 5% (or less), but nothing is permanent; perhaps next year you’ll be able to save more.

Especially if you’re continually working to improve your financial situation.

How NOT to Save More Money

It can be incredibly frustrating to discover FIRE, become consumed by it, then realize that it’s going to take you longer than you’d like to reach financial independence.  It’s easy to get frustrated when progress seems slow. The waiting game is one of the hardest parts about pursuing FIRE and it’s temping to go to extremes to speed up the process.

But that can be a big mistake.

  • Cutting back too much can suck all of the enjoyment out of your life. That’s not worth it just to save a bit more.
  • Working nonstop to earn a bigger paycheck makes you one dimensional and negatively impacts your relationships.
  • Selling all of your early possessions to generate extra cash, especially if those possessions have sentimental value to you and your family is something you’ll probably regret.

Saving and earning money at any cost isn’t a great strategy – sometimes the cost is just too high.

#Saving a large percentage of your #income is often preached as a requirement to reach #FinancialIndependence and #RetireEarly. Nonsense. Sometimes you just #CantSaveMoney and that's fine - you can still reach #FIRE

Reaching FIRE On a Low Savings Rate

A low savings rate isn’t a death sentence for your FIRE goal.  At its worst, it just means that you’ll reach FIRE later than you’d hoped.  At its best, a low savings rate is just a temporary obstacle that you’ll overcome as you progress.

Either way, it’s better to take a little bit longer to reach FIRE and lead a happy life. Besides, there are six layers of financial independence – make sure you’re enjoying each phase. Don’t arrive at your financial finish line as some crusty, miserable old soul that’s wasted your life chasing money.

By Ty Roberts

Ty Roberts is the founder of Camp FIRE Finance, and a husband and father of four living in the Seattle area. He's a fan of the 4% rule, 80s movies and music, dad jokes and cast iron cooking.

2 replies on “A Big Savings Rate is Not Required to Retire Early”

This is the way I view FIRE. Of course, it would be GREAT if my husband and I could reach financial independence and retire within the next few years, but that’s just not realistic. At this point, we are thinking by the time he turns 50–which is still 15 years early! That’s an awesome achievement, if we can do it.
As far as monthly savings rate goes (in regards to your paycheck), I try to remember that we often come across money throughout the year as well. Work bonuses, gifts, tax returns, etc. So maybe we are only saving 30% of our monthly pay, but once you average it out over the year it could be more if you count all the “found money”. That way I don’t get too down about not being able to save 50-70% of our income every month.

I’m all for remembering to enjoy the journey, you only live once. But this report that you shouldn’t sweat having a low savings rate, is the kind of thing that underachievers will latch on to. I’m blunt but I’m shelling out the truth based on 5 decades of living.

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