The first draft of this post was about the financial challenges my wife and I face while raising our family of six on a single income. But something about that draft didn’t feel quite right. I was taking the same approach so many others do when discussing this topic. I focused too much on money and not enough on the other sacrifices that get made.
In the world of FIRE and early retirement is that "what" and financial independence is the "how." Simply stated: no FI, no ER.
Financial independence, or FI for short, is when you're investments generate enough cash to cover your expenses. That's the holy grail because it means that money is no longer an object. You're financially free!
Not Everyone Should Pursue Early Retirement
Not Everyone Should Pursue Early Retirement, but EVERYONE should absolutely strive to become financially independent.
When you're financially independent, you've got options. You can go to work or quit. Take a vacation or lie on the couch all day. What you do doesn't matter because you're financially free.
The Best Thing Money Can Buy
The best thing you can buy with your money isn't more stuff - it's freedom. When you no longer have to trade your time for a paycheck, then suddenly you can do whatever you want with your time. You're free! And that's what financial independence is all about.
Achieving FIRE is something many people aspire to achieve – but these goals require a lot of hard work. It can be difficult to retire early when you simply work for someone else throughout your life, so many early retirees guarantee their independence through investments and by starting their own businesses.
The question – what happens to your investments in the next recession – has been on my mind a lot lately.
We’ve all heard the conventional wisdom on investing: Invest only using index mutual funds. 90% of professional mutual fund managers fail to beat their benchmark. What chance does an individual investor have?
Surprisingly, when it comes to stock picking, small investors do have a huge advantage over professional money managers. The main reason is size. Mutual fund managers, if they are successful, end up with a lot of money to invest – billions of dollars, in fact. If they are good stock pickers, they might very well be able to pick more winners than losers. If they were provided with a million dollars, they could come out ahead of their benchmarks.
Personal Finance is Personal
You’re ready to up your money game, so you start searching for financial advice. You begin looking online and find thousands of articles to choose from. Or you turn to Amazon and your local library for books to improve your financial knowledge. But you quickly notice some articles and books tell you to do precisely the opposite of others.
The more you read, the more confused you get.
Because even if the financial advice conflicts, you can see how each argument makes sense. They’re backed up with numbers, and some include real-life examples. Analysis paralysis sets in. So instead of taking action on what you are trying to do – fix your finances – you sit back perplexed and don’t make any noticeable progress on your money matters.