The Dream of Retiring Early

TEXT kAROLINA GUSTAVSSON ILLUSTRATION FILIP ZAwADkA

Do you ever sit in the library hard at work, plowing textbooks, wondering where else you could be right now? Do you ever find yourself loathing the idea of studying 50 hours per week, just to be able to slave away in an office for 40 years before retiring?

Imagine having lots of time for your friends, family and local community. The freedom to take jobs purely based on what you find stimulating. Being able to move long term or travel without worrying about how to pay the bills. Being able to be home with your kids when they are small. In a nutshell, more freedom than you have today. A freedom that most people won’t have until they’re in their 60s. There’s a movement for this, called Financial Independence Retire Early — or FIRE for short. One could even go as far as to describe this as a lifestyle. I decided to investigate this dream and interview my friend Aiman who is pursuing FIRE.

What’s your reason for pursuing FIRE?

- Mainly I want to not have to choose an occupation based on what’s profitable, but instead being able to do what I feel like — stand up, tutoring, cleaning up the ocean from plastic… have time for my future kids. It's about having the freedom to choose. For most of human history retirement wasn’t a thing, we simply didn’t live that long. If you look at how many tens of thousands of years humans have been around, retirement is actually a fairly new concept. During the 19th and 20th century, retirement policies were implemented in industrialized nations as a consequence of economic development and longer lifespans. Let’s fast forward to the ‘90s: many consider the book ‘Your Money Your Life’ by Vicki Robin and Joe Dominguez to be the starting point of the FIRE movement. It gained a cult following since it made a lot of people question their relationship with money and time, as well as provide concrete advice on how to change it. From there FIRE slowly but surely gained momentum and blew up as blogs and podcasts spread the word. Popular names within the community include Mr Money Mustache, Grant Sabatier and Tanja Hester. They are all well known to their followers for showing the way to financial independence through books and blog posts.

For people who are new to this idea, what should they know?

- It’s eye-opening that if you save 10% of your pay you can take a year off every tenth year, if you save 25% you can take a year off every fourth year, and if you save 50% you can take every other year off. Combine this with the concept of compound interest and you will eventually be generating more income passively than you spend. However, to achieve this you have to understand money, and make financially rational decisions. In some ways, you need to operate more as a business than as a person.

Maybe you're asking yourself how to achieve this after graduating as an average student? The key lies in saving a large chunk of your income, investing it and when it reaches a critical mass — let compound interest do the work. In

this regard time is your friend. For instance, if you save 1000 SEK each month for 10 years with an average interest of 7%, the interest alone will earn you 51 000 SEK. If you save 5000 SEK each month for 10 years with 7% interest, interest will earn you 255 000 SEK. You can play around with it by googling ‘compound interest calculator’ and trying different assumptions. People who are pursuing FIRE have to consider inflation and lifestyle creep — that people tend to spend more as they earn more. But do all FIRE lifestyles look the same? No, there are a few different kinds of FIRE — lean, fat and barista. Lean implies a frugal retirement, barista that you continue working part time and fat that you don’t worry about money during retirement. A frugal lifestyle is very modest, only spending on essentials while fat FIRE would entail a more lavish one.

What’s your impression of the community?

- Today it’s pretty hyped, it was more niche a couple of years ago. A common misconception is that it’s all lazy people but my impression is that it’s full of smart people who see a value in frugality and minimalism. Money is not necessarily the way to happiness but should rather be considered a security. And they’ve realized that the most important thing to buy is more time.

The advantages are clear — freedom. This could mean a lot of different things for different people. Maybe it’s being able to provide for yourself without relying on others, being able to switch jobs more often, dedicating your time to nonprofits, escaping the rat race, vagabonding, living with intention, or perhaps creating. But do you have to become financially independent in order to live out your dreams?

What is really stopping you from pursuing your dreams right now? This reminds me of a podcast episode in which Tim Ferriss interviews designer Debbie Millman (Episode #544), when she shares an anecdote about her priorities during her 20s. Back then she considered it her priority to become a writer or artist, but realized that she was lying to herself — her real desire was to live in Manhattan. Millman finishes by saying that she could have easily become an artist living in a less expensive city if that was the real priority. She then finishes the story by concluding that if her biggest priority really had been to become a writer she could have moved in with her parents in order to make it happen. This brings us to the wise words of Richard Feynman, “You must not fool yourself”. What do you actually want out of life? Recently I tried out an exercise, the odyssey plan, in which you ask yourself three questions. Where is my life trajectory going right now? If I could not pursue my current trajectory, what would I do? And what would I do if money and time wasn’t an issue? This didn’t change my life by any means but it did give me some clarity.

FIRE has been criticized for only being accessible to tech bros and rich people. It entails that you actually have disposable income which is beyond reach for a lot of people, especially in countries with large economic disparities and lots of inequality. Furthermore, some common assumptions seem to make the entire thing pretty risky. For instance, what happens if you live much longer than expected? With continuous innovation and research it is not unreasonable to assume that lifespans will be longer than ever before, but it’s difficult to predict how much longer. Another concern is that the first few years of saving and being financially independent are critical to the ‘end result’ because of compound interest. If you happen to find yourself in a major crash at the ‘wrong time’ this could have large implications. But then again this depends on your risk tolerance, the type of FIRE and your assumptions. Another common critique is that having to live frugally for 10-20 years to save up is not worth it even if you get to retire earlier.

What are the biggest disadvantages with this lifestyle?

- You have to rethink a lot of things psychologically — your relationship with spending and saving, and learn about investments. It’s easy to overdo it and feel guilty when you actually spend money. Also I worry about missing out on things because I’m so focused on this goal, I don’t want to waste my youth. You have to be careful about what your actual goal is so you don’t just chase numbers. Cut costs mercilessly on things you don’t love, but spend extravagantly on things you do love.

I’m curious how society would change if more people pursued FIRE. Would our economic growth stagnate or would we see unbound human progress and creativity? While FIRE is not the only option it is thought provoking. Another related alternative is the method highlighted in the book ‘The Four Hour Workweek’ by Tim Ferriss. In brief the concept is to automate as much as possible, make a business which survives with little maintenance and taking mini-sabbaticals. Another option is to become a digital nomad.

Lastly, how do you give life meaning?

- Building strong routines and working on different projects, this creates a reason to get up in the morning. Things that help other people, creating and the moment you succeed with something challenging.

Both FIRE and similar lines of thought bring up a lot of questions, so I will leave you with these: What makes work meaningful? If time and money was not a concern — what would your life look like? What are you so passionate about that you lose track of time?

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