The Financial Independence, Retire Early (FIRE) movement has always been about freedom and choice. During a pandemic, many people feel frustrated and upset because some of the freedoms they might have taken for granted – traveling to see family, interviewing for new jobs, taking classes, etc. — have been taken away. Others may be facing a job loss or pay cut. With so much uncertainty and fear on the horizon, is now really the right time to focus on a goal like FIRE?
For those just graduating into a recession or still paying off thousands of dollars in student loans, it might mean putting any plans of moving out and living independently on hold. For young professionals, it may mean delaying their first house purchase, a wedding, travel plans, or even moving back home to save on costs and to be with family. For more established professionals, the threat of a pay cut along with many fixed costs and responsibilities may bring on debt. Whatever big plans we all had for 2020 have all been put on hold — this is the year to be patient, take measure of your resources, and take care of yourself and your loved ones.
That being said, it’s not impossible to keep working on your long-term financial goals this year. Our journey might just look a little bit different, and financial independence can carry different meanings across age groups, social class, and cultures. There are, however, a few crucial steps you should take whether you have decided to start your FIRE journey this year or are wondering how to keep up with your goals.
Most financial advisors are telling clients to leave their investments alone during times of uncertainty and volatility. They’d be right — if the reasons you were thinking about changing up investments were all emotionally driven. However, it’s good practice to rebalance at least once a year, which is when you sell some holdings and add to others to make sure that your investment portfolio still lines up with your goals and long-term plan.
Additionally, you might have legitimate reasons to be selling assets or preserving cash. Maybe you’re now financially responsible for an adult parent or child, maybe you’re moving and thinking about selling property. Major decisions and changes like these require a thorough overview of your portfolio.
You’ve probably already done this, but it never hurts to keep an eye on your budget. You’re not going to many restaurants and happy hours, but is your take-out budget absorbing all those potential savings? Some expenses are a result of our new circumstances (no one is going to judge you for some loungewear and WFH accessories) but think about how your recent purchases are going to help you in the long run. Are you spending as a way to make yourself feel better or reward yourself? Unfortunately, studies show that retail therapy doesn’t really work long term.
The main reason budgets are a major part of the FIRE movement is because it’s incredibly helpful to trim your budget during ‘normal’ times so that you’re not forced to make drastic changes in desperate circumstances (like a global pandemic). No matter how crazy this year might be, sticking to your budget is a surefire way of staying on track for FIRE during 2020 and after.
Times are tough. They are tough for employees and businesses alike. Even if you haven’t been hit financially yet, you’re likely on a pay freeze or your company has probably announced a no-bonus year. Some people feel guilty asking for a (well-deserved!) raise this year or interviewing for positions with better pay.
In recessions, it’s helpful to have access to multiple revenue streams instead of a single paycheck. The FIRE movement also encourages side-hustles, negotiating for better pay, and overall focusing on your earning potential. Some sources of income like driving for rideshare apps and tutoring may be off-limits during the pandemic, but many new avenues have opened up. The rise of ecommerce and the internet economy means that there are many opportunities for people who can sell physical goods (Etsy stores have witnessed a phenomenal rise), offer digital services (like freelancing or remote work), build social media brands, or create an entirely different income source online.
When people are stressed out, their bodies naturally go into ‘fight-or-flight’ mode. Over many months, this can create tunnel vision and it’s hard to look beyond just the day-to-day stuff. To continue your FIRE journey, you have to take a deep breath and create space in your schedule to review your long-term financial goals. Even if you’re more in debt now than in January 2020 or your income has taken a dive, incorporate this new information into your plans. If you just ignore the situation, you might be doing yourself more harm than good. Years from now, these circumstances will ideally be a small blip on your successful Financial Independence journey.