II. The first step to freedom trough financial independence: realizing the reality.

There are several reasons people chose to follow the FIRE movement, which stands for financial independence, retire early. Some really want to retire early and tell all future employers to ‘shove it’, others might just want some more free time to pursue their passion and/or spend more time with their family. Undoubtedly there are also those who want the absolute freedom to paint unicorns all day. All of the above are noble pursuits. Regardless of the goal and variation of the type of FIRE method you want (yes, there are many), one usually needs to amass a substantial amount of capital, even if the plan is to live very frugally during retirement. Depending on the country, this can vary from a couple of hundred thousand to even a couple of million, in whatever currency you need. And even then unexpected things such as insane inflation or unforeseen medical costs can eat away your amassed wealth. For this reason it is important to install an alternative source of income, or preferably multiple sources of income to ensure your newly procured freedom stays safe. Let me explain.

Lets start with the most trendy source of income: living of dividends. I will not go too far into the risk of a stock portfolio, bonds, funds (of any kind: pension, index, etc.) or any other kind of financial instrument, since I’m just a random guy on the internet with no credentials and its easier for me to refer you to people who are generally experts in their field and would do a far better job in explaining everything you need to know. If you were to read only one book on finance, I strongly recommend ‘the intelligent investor’ by Benjamin Graham. I don’t have an affiliate link nor a sponsor, its just a great book. Warren Buffet recommends it as well, so that should tell you something.

So let’s assume for one brief moment, for arguments sake, that risk does not exist and that you can indeed save up and amass a certain amount of money which will provide you with the necessary payout, without being susceptible to all the kinds of things that might ruin it such as a pandemic, a depression, a recession, a war, (hyper)inflation, and earth quake, environmental change, aliens invading earth riding on Covid infected resurrected dinosaurs, followed by a meteor shower of Elon Musk’s satellites burning every city to the ground, and so on. Lets assume all of these things don’t exist and will never happen, and you will receive a nice percentage each year of your amassed capital. We still come to a big problem: you still need a big pile of money in order for you to be able to live of it, no matter how frugal you are. Lets say you’ve saved for years and set aside 100.000 dollars/euro’s and earn 10% every year. While saving that amount of money is quite an accomplishment, this will only provide you with a budget of 10.000 dollars/euro’s to live off each year. Again, that is without inflation, wars and resurrected dinosaurs. I didn’t mention the satellites again, since I’m a big fan of Elon and his satellites providing internet to the Ukrainian people being invaded at the moment. #Thanks Elon! [And for those who didn’t realize I was sarcastic before, no they won’t drop and burn down our cities. My lawyer made me put this disclaimer here just to be sure. I’m kidding, I can’t afford a lawyer].

Anyway, all kidding aside. While I am still working waaaay to much these days (6 or 7 days a week) to amass a certain amount of capital, while also living extremely frugally (thanks mom for letting me stay at your house), after 7 years I realize that by the time I’m done, I will not be able to truly enjoy the free time I will have bought by then. So while I still believe it is necessary to built some capital, I now realize that its more important than ever to start doing what I like or love right away. There’s no point in slaving away year after year. To be able to do this, a frugal and minimalist life style are an absolute must, but there are only so many times you can bite a penny in half and so many years before your parents finally kick you out. Alternative sources of income are also necessary. Here’s a further list of reasons, including the ones I’ve already mentioned:

- You need an insane amount of capital before you can live of its dividends.

- By the time you have enough capital, you will most likely be old and grey, or dead.

- Even if you make it, there are still all the possible catastrophes I already mentioned, including the dinosaurs.

-As I’ve cited in my first blog post ‘Why I joined the FIRE movement’, there’s no point in postponing doing a job you love, since its the same as postponing sex for old age. (Here I am paraphrasing Warren Buffet again). Having multiple sources of income might already give you the freedom to completely start a new way of making a living, or at the very least give you the option to no longer work full time at the job you hate.

- If you still want to retire after having saved up a big pot of gold: having multiple sources of income might accelerate your financial goal even faster.

So, in conclusion. For most people, having multiple sources of income combined with a frugal or minimalistic lifestyle will be the most realistic way to achieve FIRE. This might not have been the blog post you wanted to read, but I hope that the aliens and dinosaurs provided you with a more realistic viewpoint. Besides, retiring too early and doing absolutely nothing would most likely make you miserable, so doing different things to generate different sources of income to live your life more freely seems like an honest trade-off don’t ya think? I will explain how to do all this in my next blog post. First, I have to paint some more unicorns.

- Mike