(FIRE= Financially Independent Retire Early) For my newbie readers…
Once upon a time there where two men in the same village that took two different paths in life. They both graduated from college and had no debt. They both wanted to retire in their 50’s and they both wanted families. They also both don’t want to dedicate their entire lives to work, but want a balanced middle class lifestyle working 40 hours a week, with at least a month of leave/ vacation time each year. Balanced work/ life was the key to what these men where looking for and an early retirement.
The first man got married young and had children young. He got a nice middle class job making $60,000 a year, and his wife stayed home to raise the children until they were all school aged. Once the kids where all in school she would also work during the school hours to help out. After 12 years of staying home with the three kids, she got a job and their combined income of $110,000 would go on until retirement. This couple planned to work for 30 years total with the man’s starting time out of college, and 5-15 years for the wife once the kids got to school age. They saved 20- 25% of the man’s salary and all of the wife’s salary in a debt free lifestyle from day one.
Man two also got married young, but decided with his wife to hold off having children until they both reached age 30, giving them a solid 7-8 years of combined income totaling $110,000 a year during the first 7-8 years. They also lived on one income and saved $60,000 a year. At age 30 the wife would stop working to have children and they would live on the one salary until the children are all school age again. The man also planned to work for 30 years and the wife for 8-15 years depending on how things are going with the children and finances. They also are living a debt free life on one salary from day one.
Now the question is….which way is better? Do you work early allowing compound interest to do its job early on? Or do you save more at the end allowing you to catch up? When is the best time to have children? When you are struggling early on or once you are set up with a nice nest egg from years of saving diligently. The answer is they are both the right way to go!
Man one has no debt, a decent job, and is able to still live like he is in college saving 20% of a single income while having kids. Once the second income from his wife kicks in that is just extra sugar on the cake. They are also young with more energy to chase the kids, and they get the added benefits of being younger grandparents who don’t work later in life!
Man two also has no debt, two decent jobs (counting the wife’s), and is saving like a mad man from the beginning! This will allow over the long haul for compound interest to work magic in his accounts. He will be richer and more financially stable sooner with this plan, but the wife has to stop mid career, and they might have to lower some lifestyle choices if they don’t keep the spending in check in the first 7-8 years. They will also have teenagers or college aged children later into their 50’s at the same time they want to retire early making the decision harder to retire knowing their kids are still some what dependent on them.
But again both these men are debt free and saving a huge percentage of their paychecks.
They will both be millionaires, able to retire early, when the double salary is in play with their wives they both have to be careful of lifestyle inflation. They both get to have children and bring them up in a comfortable environment, and they both had college educations to begin their working lives with no student loans. They are both going to be great!
This parable is here to show that there is more than one way to FIRE, but they all start with being debt free, having an education, and having a plan. Man two might be richer in the end if the compound interest works in his favor, but man one may have an earlier retirement by raising his family sooner. There are always trade offs to any plan and having the plan and the discipline to stick to the plan is the key to FIRE.
This was the discussion my wife and I had to make in our first year of marriage at age 22 and 21. I am man one and man two in this scenario. I have chosen the path of man one because I enjoy children and I want them in my life for longer. I also want to be the young grandfather, so I can watch the grand children grow longer into their lives. I knew I was giving up the power of long term monetary growth, but I felt the trade off of family was greater than the money. I also, knew that if I had a plan, then I would be a millionaire and FIRE no matter what. It was all about having the plan and execution of the plan. The plan is in year 15 now, and 15 more years to go. I feel we are still on track, and in some areas we are even ahead of where I thought we would be (some areas we need to catch up some too).
So get a plan together even if you are 50 and begin to execute your plan. If you are young and haven’t talked with a spouse yet on a life plan, then now is the time to have that talk and then execute the plan. You will make mistakes, take out a car loan accidentally, but you will recover and get back on track. Keep the focus and follow your dreams and goals. The plan can change or modify as time goes on, but always have a plan; have a goal and aim for it in all your decisions to stay on track.