Better late than never, Financial Independence at any age! If you have been reading FIRE blogs and you didn’t get to retire in your early 30’s, you may feel like you missed the bus. So you came up with lame excuses why you missed it and went on with your life. Well, here is the good news; you can always catch the next bus. You may reach FI (your destination) a little later but you will get there eventually. What matters is that you get on the bus! (Not Jim Collins’ bus from Good to Great, the FI bus!) Don’t make excuses anymore!
When Did I get On The Bus?
I didn’t start my FI journey until I was in my early 40’s and only truly worked diligently on it for the last few years. It helped that I was already frugal so never really indulged myself in expensive things. Also managed to start contributing to an RESP (college fund) for the kids when they were babies (how can anybody not take advantage of the 20% grant from the government), started contributing to my RRSP (401K equivalent) in my late 20’s (not great but could be worse) and bought our first house in our mid 20’s (still not sure if this was a win or a fail). I was doing some of the right things but not all: I wasn’t keeping track of my expenses or setting goals for savings. I was just using whatever leftovers there was, if any.
Move forward a few years (quite a few) and I am now 50, financially independent and could retire if I
wanted had to. My journey is about reaching financial freedom more than it is about financial independence at this point. There is a great post from Physician on FIRE and his take on this topic: Financial independence vs. financial freedom. Once I reach financial freedom I will feel more comfortable leaving the corporate world and the security of a regular pay cheque (and the health benefits).
Also, while it is great for some people to retire very early, I don’t think it would have been for me when I was in my 30’s. I liked my job (most of the time) and the challenges that came with it. Once I reach financial freedom, my plan is to keep working (no RE for me); but I will work whenever I want to, doing whatever I enjoy.
Catching A Later Bus Is Not As Bad As It sounds:
So you didn’t catch the early bus, don’t worry. Maybe the extra time makes you more ready for the journey:
- No more debts (student loans)
- You had kids and got some of the big expenses out-of-the-way such as full-time daycare or college.
- Your salary is higher than it was before, leaving you with more disposable income (more savings)
- Maybe you already bought a house and it is paid for, if not at least you took care of the down payment, one less thing to save for.
- Big purchases are out-of-the-way (moving into a new house, wedding, first car)
- Already indulged yourself with WANTS and not as interested to do it anymore.
- Made the money mistakes you need to make. I know it may sound weird but sometimes you need to learn by making the mistake yourself, even when you are being told it is a mistake. My best examples:
- I always wanted to own a cottage so I went ahead and bought one a few years back. It wasn’t what I expected it would be so I sold it and glad I did (I plan to cover my cottage experience in a future post) but I have no regrets for buying it. And I no longer wonder what it would be like to own a cottage:)
- Years ago, my husband wanted to buy a franchise (coffee shop) so we bought one. It lasted a few years, was a total fiasco and set us back financially but I am glad we tried it.
Getting a regular pay cheque allowed us to try those things and, as far as I am concerned, it was totally worth it. No regrets there.
Whatever you have managed to do in the past, it should allow you to be in a better position to save now. (Yes there are always exceptions) So get on the FI bus now!
What Should You Do Before You Get On The Bus?
- Check that your spouse is ready for the ride too. If your spouse is not on board, it will be a very bumpy ride and you may need to get off the bus before the final destination. If you are single, you may think it will be harder, but sometimes the decisions are easier to make when you are the sole decision maker.
- Start a Net Worth spreadsheet. List all your assets (what you own) followed by all your liabilities (what you owe) and the total is your Net Worth. Add a column for each month or year, depending how often you want to see your progress.
- Gather all your receipts and start tracking your expenses. A simple excel spreadsheet with categories works fine, you don’t need any special tools. Separate all your expenses into two categories: Want vs. Need. If you are looking for ways to save, start slashing that WANT column!
Once you know how much your expenses are, calculate how much money you need to be FI. (You can use the standard 25 times expenses formula). This is now your FI money goal. There is no point in getting on the bus if you don’t know where you are going. It could end up to be a very long ride!
Once On The Bus:
- Pay off your debts.
- Spend less than you make (keeping track of your expenses will help)
- Set a saving goal and automate your saving process
- Invest your savings in dividend paying stock or ETFs (diversify),
- Look into rental property if you think you may enjoy being a landlord.
- Sit back, relax and enjoy the FI ride.
Sometimes you will find the ride to be long, maybe boring and even uneventful. When you feel that way, just get off the bus, take time to appreciate where you are, reflect back on the journey so far and how much you have accomplished, reward yourself and get back on the next bus. Don’t lose sight of your final destination. It will take you a little longer to get there but you will enjoy the ride a lot more.
Before You Get To Your Final Destination:
Think of what you plan to do once you reach FI. The money is just a tool to allow you to be free to do whatever you want but you do need to know what it is you want. Don’t wait until your get there to think about it or you may be disappointed. Just like when you travel, you usually have a few planned activities for when you get to your destination (right?).
My Own Journey:
I could get off the bus now, but I decided to go after Financial Freedom instead of Financial Independence, and it is a longer ride. I don’t mind it because I enjoy being on the bus and I do take breaks along the way. Being Financially independent (assuming the 4% rule) doesn’t leave enough room for all my “what if” scenarios to allow me to sleep tight at night (hence the Financial Freedom goal). But it feels good to know I could get off the bus if I had to.
I started my FI journey later in life but I am on the bus now and doing really well.
How Do I Stay Motivated?
- Read other personal finance blogs. It is very motivating to read other people’s journey and learn from their experience, no matter what stage they are at.
- Update my Net Worth spreadsheet. I go thru phases where I update it often (I have done it weekly! I know it’s crazy) and sometimes I just don’t think about it (usually when the market is down and I don’t want to know). Seeing the progress is very motivating. Once a month seems to be a good average to give me a sense of what is going on with my finances.
- Take breaks along the way. For me the breaks usually involve travel but it can mean a lot of different things to different people. It has to be whatever works for you.
So readers what do you think, where are you at on your FI journey? Are you on or off the FI bus? Did you start early or late? How do you stay motivated?