FIRE – More Than Just a Number

FIRE – More Than Just a Number

For most people, reaching financial independence means surpassing a certain threshold in terms of net-worth. Although this makes sense for many cases, for me, reaching FIRE is more than just a number.

Let me explain.

Last year, I wrote a post describing why I think FIRE Updates Don’t Make Sense. And I still think they don’t. In the post, I was explaining how sharing percentages and pie charts don’t make neither the readers’ nor the authors’ lives better, but there is an extra layer of complexity I decided to open up about… So get ready for a personal post.

I’ll share a few things that are my FIRE requirements.

Things whose priority is higher than my net-worth, as in: even if I hit my safe-withdrawal target today, I wouldn’t make any drastic changes in my life until these requirements are met.

Let’s start.

1) Recession

Losing an income stream in a recession is bad.

At the same time, it’s the most likely period in which it can happen. And giving it up voluntarily at the worst possible moment makes no sense.

For me, this was a no-brainer since the beginning. As soon as I determined my strategy, learned about the 4% rule and started investing, I knew I didn’t want to retire early into a recession.

This is extremely important for me or anyone pursuing FIRE because of two reasons:

• The first one is self-explanatory. During recessions, severe stock market crashes or long bear markets aren’t uncommon. And relying exclusively on investments to fund a lifestyle in such a period means that the person would be forced to sell low. Not only this would make some withdrawals unprofitable, but would also deplete the investor’s portfolio much faster. In other words: a person may be forced to go back to work after realizing great and unnecessary losses.
• But the second reason is much more important for me. Not only that I could have seen my net-worth decline sharply (which is eventually inevitable if you invest for a multi-decade period), but the fact that I wouldn’t maintain a positive cash-flow to DCA (and then some) during the lowest points of the bear market. And every cent that’s not invested when the market “is low” is a cent that won’t grow with the magic of compounding over the decades. The opportunity cost I’d accumulate would erase all gains I’d have made up to that point.

As an investor, letting a recession go to waste would be a colossal waste. Determine your role in the next big thing by planning upfront.

We covered the why and now it’s time for the how.

Everyone familiar with business cycles expect economic downturns, but nobody knows when exactly. So I decided that the best way of preventing that to happen is by simply waiting for one before I commit. Not timing or guessing when it would happen, but just continuing to live as I do without any expectations.

And I did. The recession has been declared in June. We’re officially in a recession. The peak was in February 2020 and we’re now waiting for the trough (to be declared or to happen).

So yeah, this FIRE prerequisite is in progress. And although I think the future is uncertain given the current economic climate, I’d be way more comfortable to take the leap after the full cycle is made official by NBER.

2) Sabbatical

First thing first, what this isn’t: Under sabbatical, I don’t mean a period where I’ll try to figure out whether “FIRE is for me“, Letter to My Future Self like.

Financial independence is for everyone.

If you have any doubt about it, you might be in a dangerous slave-like-state where you’re getting comfortable in an empty existence while indulging into self-sabotage and have misconceptions about FIRE.

The reason I’d need a multi-month sabbatical before I commit is because it may open a new point of view. A perspective that I may not be aware of. Not that I expect to develop some new, grandiose, transcendental understanding of our world… Actually, I already mentioned my expectations after FIRE in the FIREhub Interview last year:

Life doesn’t start after FIRE, so I already do the majority of the activities I’ll do after I stop being an employee. However, I aim to do them bigger, better, and more.

So why sabbatical then?

Here is a fact: our environment shapes us. The game of accepting arbitrary restrictions and engineering the most optimal compromise is levels below figuring out how to spend your life in total freedom. Many would find the latter scary, actually.

So, I seek a prolonged version of the clarity a 2 week vacation starts to give before the mind goes back into a routine. Refreshed and productive. To understand my needs and wants without even trying.

But hey, maybe I’m wrong! Maybe (and hopefully) I have it all figured out. For example, I live an optimal life – everything that can be automated already is and I have almost no obligations I dislike. However, I’m leaving a tiny amount of room for error in case my mind is not operating at a 100% capacity, just because a proper allocation of my attention is required elsewhere. And being compensated accordingly, I happily sell it.

So, in summary: there may be things I cherish that I’m not aware about. Continuous clarity would allow me to discover if I missed something. But figuring out something new is not a FIRE requirement. Taking a half-year sabbatical is.

Status: still TO-DO. With a prerequisite:

3) EU Citizenship

My third FIRE requirement – EU citizenship.

Yup, as simple as that – I won’t declare myself FIRE without an EU citizenship.

I was asked questions such as “but isn’t it only better for traveling?” by people who maybe took it for granted. But mention this to any non-US/non-EU/non-AU/non-CA citizen and they’ll need no further explanation. They’ll just nod understanding.

I don’t equate FIRE just to “not working”. For me, FIRE is a prerequisite for total freedom – the ultimate goal. And total freedom can’t be achieved without the right environment, safety-net, and opportunities to take risks, time-off, and fallback to a pretty good place even if things go south.

I entertained this idea years ago when I read The 4 Hour Work Week by Tim Ferris. In one of the chapters, he encourages the readers to ask themselves:

“What’s the worst thing that can happen?” (in the context of: why don’t you take the leap and just fall back to what you’re currently doing if you fail?)

Well… 🙂

Just from the top of my head: I’d become an illegal immigrant facing deportation the exact moment I decide to take any risk of that sort.

I’ll add an excerpt from the post 3 Financial Mistakes I Made to illustrate what that means:

I currently invest way more than I could ever earn through employment in my home-country. I also earn more in a month than the average annual salary in my country.

Oh, and when I want to sell or offer something online, I just click a button.

No amount of money would allow me to “reset” and “just” start over if/when things go south.

Of course, things going south is not a scenario I’m anticipating but I can’t ignore the importance of the ability of a non-conditional prolonged stay almost anywhere in the world. My FIRE journey has global focus and a strong passport can do wonders in this department.

Nevertheless, visa-free residence is a blessing. If you’re enjoying it, appreciate it.

For me, this FIRE requirement is currently work in progress.

My FIRE Progress?

So, with all that said, where do I stand?

Assigning percentages to objectives such as those above is a bit more difficult than tracking one’s net-worth. These are just a few that still need to be done, but last year the list had double digit entries in it. Great progress has been made, especially in the items I could directly control (note: the three I covered are somewhat out of my control or depend on waiting).

With all that said, let’s get into the numbers… My FIRE Progress has been rising steadily since I last reported it, with a couple of months of drawbacks.

There are a few more asset classes added, most notably precious metals and real estate – and home-ownership was another prerequisite that is now completed. Also, my asset allocation is much more crypto-heavy than it was before, due to my knowledge and expectations of the field compared to last year. And lastly, I increased my target amount and standards since I last reported my progress, but if I use the old numbers for consistency’s sake, I’m at around 60%. But as you can see, this number itself doesn’t mean much in isolation.

Now you know more. 🙂

Let me know if you enjoyed this format and if you’d like to read more personal stories and posts.

Until then, do you have any non-financial FIRE requirements? I’d love to hear about them!