4 lessons I’ve learned on my way to financial independence – Morningstar
By Amy Ouellette
Leaning into the FIRE movement
I’ll be the first to say that the FIRE concept may not be for everyone — “Financial Independence, Retire Early” is an intense personal exercise in restraint, minimalism, and often difficult choices.
I stumbled into the FIRE movement literally by accident — I was unlucky enough to acquire a large amount of debt before I graduated college. That moment opened my eyes to personal finance while simultaneously closing my wallet. As someone who is on the FIRE journey myself, I’ve learned a lot along the way. I’ve made some mistakes, had some wins, and most of all I’ve uncovered that I love sharing my experiences with others.
I’ve tried lots of versions of strict budgeting, loosening the purse strings while living in one of the most expensive cities in the world, and everything in between. It’s important to note that the FIRE movement is not one-size-fits-all, so you should do what feels right to you. As you go through different phases of your life, what feels right may change over time. Be flexible and kind to yourself .
Holistic lifestyle considerations: FIRE aligns well with minimalism and driving down consumerism. It’s not saying you’ll never buy another thing, or have another latte out, but it’s being mindful of the way you truly enjoy spending time over what happiness you expect purchases to bring. Further — consider how social media can drive tendencies to compare and buy into a lifestyle that’s just window dressing.
Join your neighborhood’s local Buy Nothing Facebook page to request items or browse what others are giving away. There are also groups for bartering, or getting help with DIY projects. Consider carefully where you want to spend intentionally on a few higher priced items rather than getting caught in a trap of buying and replacing cheaper items. Choosing where you want to spend also allows you to be frugal in areas less important to you.
Celebrating key moments: Having a minimalist mind-set is a helpful way to avoid spending traps such as gift giving. I’ve never been a fan of defaulting to gifts to celebrate holidays or events. People can get as much joy (or more) from giving and receiving expressions of gratitude and love via written cards or notes, sharing experiences, or offering to cook together.
Consider having discussions with family about not giving physical gifts on the holidays by offering a group activity as a different way to spend that time; and for those with extra funds that do want to give, consider funding college savings plans or other accounts for the next generation in your family.
Plan for retirement: Make the most of your company-sponsored retirement plans — saving directly from your paycheck is the best way to get out of your own way. Use HSAs for longer-term savings (i.e., pay for medical needs today out of pocket, and consider HSAs for tax-favored growth). Maximize your 401(k) — especially with employer match. It truly is free money to help save for your future.
Research whether pretax or Roth contributions are right for you. Did you know you can ladder your Roth conversions in your early FIRE years to help fund your pre-59- 1/2 spending? Read up on these methods , but don’t let research get in the way of just saving early, and often.
Stay flexible in approach: I’ve tried a number of ways to budget, track spending, and determine which goals I’m going after. I find that picking one core goal to go after is best to maintain focus, and it’s helpful to pick up small wins along the way. Find tools and apps that help you on your journey and ditch the ones that distract you — my current favorite is YNAB (You Need A Budget): it helps me hold on to cash for specific reasons (I’m good at finding other ways to use cash, otherwise!). Realize that what you think is important today might not match what is important five years down the line and be willing to pivot.
Acquiring a huge mountain of debt before I even started working was one of the most difficult things that happened to me. But it also ended up being one of the best, as it set me on my pursuit of financial independence. While the FIRE movement may not be for everyone, I believe there are aspects anyone can take and implement into their daily lives. Achieving financial independence is a goal that can be attainable for most with certain lifestyle changes and commitment to making and sticking to a plan.
Amy Ouellette is vice president at Vestwell.
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