But I Can't Wait That Long!!
So you’ve crunched your FIRE budget numbers and worked out your cash-flows to come up with your passive income requirements. You’ve calculated the investment pot value you need based on your own risk tolerance and how long it’s going to take you to save that, coming up with your proposed FIRE age.
At this point you are either beaming happily in surprise at quickly this is all going to happen for you. Or more likely you’re feeling a little dismayed at the thought of waiting that long.
And it’s at this point we get to the crux of the FIRE Triangle. Like life – everything is a balance. You can’t eat twenty mars bars a day and expect to be in top physical shape without balancing them out by running a marathon. Probably a little difficult to do whilst cramming gooey chocolate into your mouth but you get the picture.
The FIRE Triangle is no different. Each of our three FIRE Triangle elements can be adjusted – but only by accepting the consequences to the others.
Balancing Your FIRE Triangle
And now you can see how the Fire & Wide logo came about. Getting your FIRE number right for you is a balancing act, based on decisions that only you can make.
There are no right or wrong answers here – whatever is most important to you is how you should look to balance up the scales. The only thing you have to accept – like any good project manager – is that you can’t have all three.
For example, if retiring as early as possible is your driver – then you have two choices. You can either accept the impact on your life-scope, thereby planning on living on very little cashflow per year post-FIRE. Or you look to grow the money side of the scales – this would be maximising your income streams as much as possible, through higher risk investments and multiple side-gigs etc.
Another example might be that you firmly believe there’s no point in being FIRE’d if you don’t have enough cash for all the things you want to do and have. In this case it’s your life scope that is fixed and so you are going to have to adjust either your FIRE timescale out to longer or again up the growth of your passive income streams.
Everyone will choose to balance their FIRE Triangle scales differently and that’s good. But not all levers are created equally and it’s worth now spending some time understanding this further.
Pulling Your Biggest Financial Levers
First up – what do I even mean by a ‘financial lever’?
Is this some kind of gold bar shaped like a gear-stick?
Sadly nothing as entertaining as that.
What I mean by financial levers are your ability to increase and decrease each of the FIRE Triangle elements, Time, Money and Life Scope.
It’s a classic move a lot of people make – to focus on the lever they are most comfortable with – rather than the one that will have the most impact.
Whilst it may feel like you have more control over the levers most familiar to you – it usually also goes hand in hand that by learning more about the other levers, you will be able to make more impact.
Let’s start with our old pal, life-scope from part I.
Adjusting Your Life Scope Lever
It’s probably a little harsh to have our pal quite so sad at the ‘Need’ end of the scale but you get the idea.
Now you may have planned out a lavish post-FIRE life style and have a high number here – only to find it’s going to take you 50 years to create enough passive income to fund it. At this point when balancing up your FIRE scales, you may decide just one beach house is fine so long as you’ve got your city pads and country mansions etc. Extreme example (for most!) but a good way to illustrate that someone who has aimed high here has a lot more financial lever to pull than someone who has their post-FIRE number way down near their ‘Need’ number.
If you are already planning on living lean – there’s less value to be gained from focusing on how to cut that further. There’s a natural base floor to living costs that you just can’t get below.
However – it can be an incredibly worthwhile time to challenge yourself on just how close to that base you really are and what you are and are not willing to change. For example, anyone living in a high cost of living area has a huge advantage of being able to move somewhere lower cost post-FIRE. It can also be surprising to find life simply costs less when you have time to do things yourself, instead of paying others. Likewise the lure of shiny things and status symbols tend to lose their allure as you get older and figure out you really don’t need to impress anybody else after all.
Some people may find this kind of challenge discouraging – as if you are trying to remove everything ‘fun’. I’d personally say the complete opposite – understanding what truly brings you value is a huge part of a contented, happy life. The question we’d look to ask ourselves when figuring out our post-FIRE budget was this;
Is having or doing this particular thing worth x years of FI to us?
A surprisingly simple, yet effective question. By quantifying in time how long we’d need to work for something, it quickly became apparent which we valued more. The particular thing or experience in question or our time.
Oh yes, this lunch was so worth it.
One of favourite vineyards in Franschhoek in South Africa, La Bri.
Some things just have to be tried. And tried again.
Just to make sure.
So yes, some things we’d say absolutely, they were worth it. And a lot of things just weren’t. As ever, this is something only you can judge for yourself. The point is to develop a thinking process of being able to assess what really matters to you the most.
To sum it up in a nut-shell – what you are looking to do here is to keep your expenses at the minimum level without making your life miserable. Delayed gratification, absolutely. Go too far below that level for too long and I pretty much guarantee you won’t last the course.
By getting this balance right you will able to maximise your savings ratio – and still enjoy your journey to FIRE. Remember, it’s not a race – this is your life we’re talking about. When you approach FIRE with this kind of mindset your choices soon start to add up.
Now that we’re maxed out our life-scope lever, lets look at our next one – money.
Shifting Your Money Financial Lever
When it comes to examining your options for shifting your money financial lever – you have two main choices open to you.
The first is determining the level of risk you are comfortable with in your investment portfolio. The second is maximising your own personal earnings rate. Let’s take a look at risk first.
Risk - Otherwise Known As 'Nothing Comes For Free'
Yeah, another no magic unicorns moment which will be of no surprise to anyone. If you want your money to grow – you have to take some risks. Even just leaving it under the proverbial mattress comes with risk – house-fire, burglary – and that’s before you even get started on the impact of inflation.
Risk is….having no name in a horror movie and still going through this door after hearing a chainsaw.
Why do it?
No. You turn around and go home and put the kettle on.
There are two things you need to know when talking about risk. One – understand what risks you are taking with your money. Two – understand your own risk tolerance.
Keeping this short for now. Understanding the risks in your investment is crucial. Higher return investments pay more for a reason – you are taking on more risk. If you don’t think you are – that usually means you just don’t know what risks you are taking. Whilst market volatility is probably the most well-known financial risk – there are many others. Credit, liquidity, regulatory, technology, disruptors. The list goes on. And yeah, I worked in trading risk management for a fair while. It still shows eh.
This all leads neatly onto the second piece of the puzzle – your own personal risk tolerance. Once you understand the risks associated with a particular investment type – you then need to decide if they are right for you. It’s a lot easier to handle wild market swings in your early investing days than once you’ve quit your job and are expecting to withdraw a steady income, for example.
So when it comes to looking to maximise the impact of your money financial lever – it may be tempting to whack up your risk level in anticipation of juicy returns and shortening your FIRE journey. And that might be absolutely right – for you. But don’t do it because so-and-so blog or news story said it was a sure thing.. just take a moment to make sure you really understand the risks involved and that it’s the right pace for you. If you’re more of the slow & steady but sleep well at night folk – that’s just fine too.
Max Your Income - Selling To The Highest Bidder
Talking of sleep leads neatly into the other half of the money lever – how to maximise the value of your time.
First up – regardless of how much of a super human you are – everybody has a physical limit on how much time they have to sell. We all need to sleep and eat else we die. I’d argue a few other things are pretty essential too but it’s where we start to get into the grey area of how you value your time.
Don’t sell yourself ‘cheep’ (groan..)
When exchanging your time for money – it makes sense to max what you make.
No, I have no idea why whoever took this picture thought this chick would like lettuce either.
You have two main options when looking to maximise the value of selling your time. One – how much of it you sell and two – how much you sell it for. Seems obvious right – but it’s worth checking you really are maxing your value here.
When I say ‘How much time you sell’ – what I’m talking about here is literally that. Running some kind of side-line gig or business alongside your main career is a well-known route to speeding up FIRE.
Basically you are choosing to front-load your work. More effort now – more freedom later.
There’s a limit though. Someone who is already spending every waking hour on some kind of income-earning job or side-gig has little capacity to take on more work. They’ve maxed out their physical capacity to move this lever anymore.
This is when you need to look at the second half of the equation – are you selling your time to the highest bidder? By this I mean you need to think about your time as a commodity to sell. Try and make sure you are focusing on those areas where you get the maximum return for your time.
It’s a common debate – do you do something you love or something that pays well? Rarely do the two coincide.
Again, it’s all personal choice as to what matters most to you. Spending ten hours a day playing with puppies may be awesome fun – but you have to accept it will push your FIRE date further out. And that might be the right choice for you. Just make it with an awareness of the impact.
How could you resist.
But do you choose to enjoy it now and accept the financial hit?
Or instead plan a whole lot of puppy love once you’ve FIRE’d?
For myself, I stuck with a career that I didn’t find meaningful and it didn’t give me purpose. But it did pay very well, bringing our FIRE date in by a good chunk of years. My compromise was going part-time – splitting the extra time between our property side-gigs and actually enjoying life. It’s all a balancing act of what works for you. Which leads surprisingly neatly on to the last lever – time.
Time - The Final Balancing Act
The last lever in the FIRE Triangle is Time. This one’s all about how you choose to balance your journey. Are you looking to get to FIRE as soon as possible – willing to sacrifice a lot now to achieve it quicker? Or are you happier to take your time and let compounding returns do more of the heavy lifting for you.
FIRE is a marathon, not a sprint.
Enjoying the journey. It’s important.
If you can look as cheery as this guy on your path – you’re probably doing ok.
As ever, neither is right or wrong – it’s what works for you. The younger you are, the more you (likely) have years to play with. The older you are, the more likely you already have a head start in earning potential/investments.
Play around with the three different levers until you have the balance right for you. By making your own plan – you can understand the impact of your choices and decide accordingly what balance works for you. You can then translate this into clear targets, making them real, actionable, measureable. All those good things you read about in S.M.A.R.T. goal setting.
The big upside to having a clear plan is that it lets you monitor your progress and adjust it as needed. Which leads us neatly on to the whole review cycle section.
The 'Life Happens' Review Cycle
A plan is just a plan. Yep, you make it as well as you can, after all, what goes in is what comes out and all that. But if you are expecting it to roll out exactly how your spreadsheet tells you – well, it’s about the one time I’m almost 100% sure it won’t. I’m an ex-risk manager – it’s impossible for me to say 100% 😉
Yeah – shi…I mean stuff happens.
Be prepared to adapt.
Especially during a global shortage of loo roll.
I mean, why loo roll?
You need to expect your plan to change. More than that – you actually need to plan for it to change. Life happens. You change. Other people change. Government policies change. Financial markets change. A lot. Especially over the kind of time-frames FIRE usually takes.
You can’t control everything – but you can control how you respond.
Just that – don’t expect to control everything. But don’t just be a bystander and simply react, often unhelpfully, as the changes roll in. Think ahead for likely events and what your best course of action would be if that happens.
In a similar vein – hold regular reviews of your life aims as much as your financial goals. Annually was good enough for us on this. Challenge yourself if you are still happy with your chosen balance? Does it still work for you and those with you on your journey. Do you need to adjust your pace?
I can’t underline enough how important it is to understand how your new lifestyle will work for you. Having faith in your contingency plans is a big part of having the confidence to pull the trigger when the time finally comes.
So what did we learn on our own journey through this framework?
Played The FIRE Triangle - What Did We Learn?
First – congratulations on making it this far! We’ve covered a lot of ground over this Playing The FIRE Triangle mini-series. Doubtlessly at some point I will add more posts going further into some of the areas we’ve touched on. But for now – I figured it would be useful to wrap up with a few thoughts on what parts of this framework made the most impact on our journey to FIRE.
- First up, planning ahead for expected lifestyle cost increases. Thinking ahead about our expected life scope costs has really paid off. We planned for a lot more travel – and having spent 6 months on the road last year – it was totally worth waiting that bit longer for. It’s also a natural contingency plan, knowing we have a lot of headroom to cut back down if needed. Getting your post-FIRE number ‘right’ makes a huge difference to your enjoyment of FIRE.
- Understanding that the FIRE journey is a balancing act. The FIRE Triangle framework is simply our way of explaining every choice has a consequence – but that you are in control of those options. Slow and steady or sprint to the finish – there’s no point comparing to others. It’s all about what works for you. We choose a middle ground, enjoying our time on the way whilst still retiring early enough to enjoy our physical health.
- It’s worth taking the time to make your own plan. Things like the 25x rule and SWR are great tools – but only as rule of thumb guides. We had a vague idea of FIRE from our thirties. It only became real once we sat down and put together our own financial plan. At that point we had measurable targets which translated into years left. It all became very real – and ultimately a large part of having the confidence to actually pull the trigger.
And that’s it! Hopefully this mini-series has given you a decent high-level view of how you can play the FIRE Triangle to create your own path to Financial Independence – and whatever you choose to do with your time once there.
It’s your life – your path – your choices. I hope this guide has helped you along your way.