Mindset    

Mindset makes a difference! We have some friends that are constantly buying the latest and greatest everything. If you’re familiar with the term, keeping up with the Joneses, these friends truly embody this phrase. From the newest phone to the fancy vacations, they either have it or they are doing it. We just happened to find out that these friends love to borrow money to keep getting and doing all these things. These friends of ours are constantly living right at, and typically just above, their means. That approach has landed them in a ton of debt and has solidified their need to work for the next several decades to be able to cover their spending habits. No thanks!

If you

are going to achieve FIRE, one of the first things you’ll need to do is change your mindset. First, forget about the Joneses. It doesn’t matter what your friends or neighbors are buying or doing. If you have the mindset that you need to keep up or best them with things, FIRE is likely not in your future. For me, the most effective strategy I have found so far is to make saving and investing fun. See, FIRE is not just about saving money and not enjoying things. It’s about finding the right balance that puts you in a much, much healthier relationship with your finances. Let’s look a little closer.

limits

Do not

approach FIRE like a diet. You will lose. I’ve seen so many people go on diets. These diets deprive the body of carbs, sugars, meats, and so many variations thereof. What is the first thing a person does after a week or maybe two on their diet? Splurge! They devour an entire pizza or raid the kid’s candy jar. If you approach achieving FIRE like dieting, you’re going to end up depriving yourself and your family of enjoyable, meaningful, educational, and experiential things. While this might help put some money in the account short term, you’ll likely end up splurging on pricey, unnecessary items after a few weeks or months. As humans, that just seems to be what we do. Deprive and then overcompensate to fill the gap.

My approach is to push expenses down to just above the breaking point while pushing investments up to just below the level where I start to feel uncomfortable. With both of these within a reasonable range (that range will vary by individual), life can be lived and enjoyed while you pursue achieving FIRE. In my opinion, this is the only way someone can build healthy and sustainable habits with money. Once the healthy habits start to stick, the path to FIRE gets a little less bumpy.

I do

want to call out a few key ideas still. The first is, borrowing money can be a good thing. While I discourage borrowing money to keep up with the Joneses, securing a low interest rate car loan to ensure your safe transport to and from your job could be a great idea. Second, developing healthy money habits is much easier to do when you interact with people that are supportive of what you are trying to accomplish. Now, that’s not to say that you have to go around advertising you’re trying to achieve FIRE. This thinking comes into play more along the lines of having friends that enjoy coming over for a good backyard BBQ vs. going to the $75 per plate restaurant every Saturday night.

At the end of the day

it really all comes back to you. Are you willing to make adjustments to the way you think about money – saving, spending, and investing, so that one day in the not too distant future you can be financially independent? If you’re not willing to cook more of your own meals, drive a used car vs. a new car, and take a couple “staycations”, FIRE may be more difficult for you to achieve. That comes with the caveat that if you make several hundreds of thousands of dollars every year, you may have a little more flexibility on your path to FIRE.

Now that you are taking on a new mindset and getting more comfortable with the idea of a healthy balance, let’s take a look at the next step in your path to FIRE. Accountable.

Or, head back to all Six Steps.