FIRE and other movements aim for fast retirement through extreme financial sacrifice, but is there a better way?
While principles of frugality and savvy money management should be embraced, many investors and experts believe that life is meant to be lived and enjoyed.
This is why choosing to live by design, which is an approach that builds towards the life you want through smart and sustainable property investing without having to live off beans and rice today, is embraced by KnowHow’s Bushy Martin and many others.
James Millard shares a similar approach to financial freedom through his concept, sufficient funds.
James is a renowned financial advisor, business owner of Sufficient Funds, and author of the newly published book Insufficient Funds: Make the Right Money Decisions to Bring Your Big Plans to Life.
On the Get Invested podcast, James joined Bushy to talk about why investors should shift their focus from achieving early retirement through significant sacrifice, to living life by design.
What is ‘sufficient funds’?
Sufficient funds is a concept about people understanding their goals and establishing set guidelines, therefore allowing them to confidently make financial decisions and avoid into the comparison trap.
“An ideal lifestyle for me is ultimately about choice, and that’s part of our definition of sufficient funds. It’s about being super clear on these things, but also knowing what you’re not chasing so that when you see the person driving by in the Ferrari, you’re not comparing yourself. You’ve got your guiding lights, you know what you want and what you want to achieve,” James said.
“This isn’t about chasing something that someone else is chasing. This is about you. You’re really clear on what you want to achieve, you’ve aligned your money decisions, and you’ve also ticked off some really important foundational pieces. But ultimately, sufficient funds for us is when everything’s flowing for you. You know you’re on track, you’re making decisions, and you’re doing it confidently. You’ve been armed with the tools, and you feel you’ve educated yourself, and that might be seeking the help of a professional if you needed it. So it’s just bringing that all together and moving forward. And really importantly, it’s not retirement.”
What is ‘insufficient funds’?
Insufficient funds is based on the concept that a person’s money and life are not in sync.
“It’s not that you’ve got zero funds. Now no offence, but you’re all in insufficient funds until you figure it out. So out there, this shows up in symptoms like analysis paralysis – that idea of just constantly overthinking things and not being sure which way to go, or you’re making decisions but you’re tired of it. It’s decision fatigue and that idea of lots to do, moving the money around left, right and centre. That wears you down and it might not be that helpful. Or in many clients cases coming to us and they’re just purely overwhelmed with options. So that’s insufficient funds from our perspective,” James said.
Why should investors consider living by design instead of the FIRE movement?
James explained that the Financial Independence, Retire Early (FIRE) movement can bring extreme levels of sacrifice, while achieving financial freedom through sufficient funds will instead allow investors to still live by design.
“The idea of FIRE as as a concept, at its absolute core, is the idea that you’re trying to get out of work, you’re working in a vocation that you don’t enjoy, and you’re chasing as hard as you possibly can to get out of there. And look, to be honest, that is actually a really cool idea. Financial independence is an amazing goal to have, and that part I can’t take a lot of like, I can’t challenge that. But when it comes to retiring early, if you’re working in a soul sucking job, chasing this magical number in a spreadsheet, which is how it goes down generally, then what are you doing? Even if it takes you ten years, that’s ten years you’re going to waste,” he said.
“And so look, if you subscribe to this movement, I don’t disagree with most of it. But the extreme view is that you’re incredibly frugal and you’re saving as much as you possibly can, 70% or 80% even of what you’re bringing in, for this magical day when you can finally retire. What I do see, and we get lots of people come and talk to us, who are chasing the FIRE idea but in their own version. And often it’s, hey, we’re actually speaking the same language here. All you want to do is get some flexibility and some options in place and you’re saving money and you’re not burning it on things you don’t care about. That’s actually very admirable. It’s just about how you go about it and make sure you’re still actually enjoying yourself along the way.”
Bushy added: “It’s not about deprivation and the total sacrifice so that you’re actually deferring life, actually, in the hope that you’re going to get there, because there’s a lot of dynamics in life that might get in the way. If you’ve totally put life on pause while you’re scrimping and saving and living on nothing in the hope that you’re going to get there if something doesn’t happen in the world that’s going to shipwreck that, then that doesn’t sound like a lot of fun to me”.
Listen to the full interview here.
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