Making solid Financial Independence and Early Retirement (FIRE) plans involves a significant amount of strategy. It’s not really something you can achieve with an improvised approach. On your road toward your goals, you’ll find yourself utilizing FIRE tools like the Rule of 25 to set your targets and the 4% rule to protect your portfolio. However, one element that will influence your path relatively consistently is your career.
On the most basic level, your job gives you core capital with which to make your investments while maintaining your lifestyle. But your career choices could be affecting your FIRE plans in various other areas too. This is why you need to treat your approach to your job as strategically as any other tool you adopt to keep you on course to your early financial independence.
So, let’s take a closer look at the issue. Is your career impacting your FIRE plans and what should you take into consideration?
Investigate Your Current Earning Capability
It may be the case that you’re fully embedded in a career that brings you a significant amount of job satisfaction. However, when it comes to reaching your FIRE goals, you also need to understand how staying with your current employer or in your industry affects your earning potential. After all, the amount of disposable income you are likely to have at different points influences your ability to save and invest.
This will involve some in-depth investigation into the company you’re working for. Look at the potential for paths to progression and how long it generally takes workers to move to different pay grades. Make inquiries about your company’s tendency to pay above the standard market adjustment rates. This is particularly important given the cost of living rises which can reduce the funds you have free to save or invest.
It’s also vital to look into how commission, bonuses, and profit shares factor into your company’s practices. These might be invaluable sources of additional investment capital available to employees that have reached a certain level of seniority. If you have reasonable access to these pathways within a period of time in line with your FIRE goals, you may not need to make any adjustments other than focusing on leveling up within the business. However, if rates are relatively stagnant, it might be worth looking at other roles within your expertise or retraining for a job that can provide a better salary and benefits.
Examine Your Overhead
One of the areas many people overlook when it comes to their careers is the fact that there can be significant overhead involved with staying employed. This is a way in which your job could be impacting your FIRE plans. The outlay you commit to performing your day-to-day work activities can eat into your investment capital or reduce the buffer you have between your living expenses and savings. As such, it’s important to examine where you can make reductions.
Start with some of the basics. If you drive to work, can you save on your fuel, insurance, and maintenance costs by taking public transport instead? If you work in a big city, are there options to work remotely so you can move to a suburban home with lower mortgage or rent costs? A recent report found that each year the average American pays $2,134 for fuel when driving to work, $1,883 on work apparel, and at least $1,250 on lunches. It’s worth considering how you can better direct these funds toward your goals.
It may be the case your career path requires you to frequently pay for additional training, certifications, or professional memberships. Make inquiries with your employer about subsidizing these, or research the potential for other employers that will.
If you’re freelancing or own a business, it’s important to look at where you can minimize unnecessary overhead in your operations. One of the key costs is office rental. Coworking spaces tend to be more cost-effective than a traditional lease and come with various other benefits for startups. Specifically, alongside saving on rental rates you also reduce your utilities, insurance, and potentially traveling expenses. The potential to network with other startup owners can connect you to lucrative business opportunities, too. It’s also worth considering that by maintaining a business with low overhead, you can raise its value. This can provide you with vital capital toward your FIRE goals when the time comes to sell it.
Make Adjustments Cautiously
It may be the case you need to make changes to mitigate any negative effects of your career on your FIRE plans. It’s not uncommon to feel a certain amount of urgency here. After all, you need to make the most of your earning and investing ability between now and your intended retirement date. Nevertheless, it is important to make any adjustments to your career in favor of your FIRE plans with caution.
This is particularly vital if you feel you need to make a move to a new job. You should take time to evaluate your motivations before committing to a career transition and consider the practicality of doing so. There may be financial issues to bear in mind, such as the costs involved to retrain or a temporary drop in income. You have to review whether the initial hardships are likely to push your FIRE plans forward in a significant way. Not to mention it’s important to think about whether you’re going to actually be happy working in a different company or industry.
One helpful approach to making adjustments is to progress slowly with safety nets in place. For instance, if you feel a move to freelancing or starting your own business may be lucrative, avoid diving in with both feet. Test the waters by starting with a side hustle. This means you have a regular income while seeing whether you can sustain an independent career. It also gives you time to build your freelancing reputation and identify any hurdles you need to address. You might find it’s better to simply diversify your financial power with additional passive income sources rather than an entirely new career.
Whatever decisions you make, these should be led by a clear plan of action. Then, create a visual plan of action. Map out each step on your journey to change and identify potential issues to navigate along the way. Build points of assessment into your timeline so you can readjust if necessary.
Your career choice is an integral tool in meeting your FIRE goals. However, there may be aspects of your job that are negatively impacting your ability to save and invest in accordance with your plans. Perform some research into whether your company or role is likely to provide the ongoing income you need to gain your financial independence. Examine where you can reduce your overhead in your current job so you can funnel these funds toward your FIRE plans. If career adjustments need to be made, make sure you do this cautiously and set up strong safety nets. Your early retirement is achievable, but it’s important to understand how to strategize aspects of your working life to better serve your targets.