What is the FIRE movement all about?

  1. Assuming it is a young person’s movement. It is popular amongst young people, but it isn’t exclusively for young people.
  2. Assuming it is a radical movement. It isn’t radical for most people, although there are some members who may take spending habits and saving to the extreme
  3. Panicking when markets are down. This is a common mistake new members of fire make. Ultimately, to compound your surplus, you need to be invested in markets. Markets have performed over 200 years in the US. The Dow Jones was air 66 in 1900 and hit 26,800 this year. That is a 10.5% gain. The Nasdaq has produced 12.5% over the last 25 years. However, markets don’t go up or down in a straight line. 10% is just an average. Since 2009 markets have produced much better than 10% just like the 1990s, whilst 2000–2009 was a lost decade.
  4. Trying to time markets. Time in the markets beats timing the markets. If somebody could time markets there would be somebody twice as wealthy as Buffett. Many have gotten lucky before, but that is gambling. Long-term, you can’t time markets for 40–50 years.
  5. Speculating. Countless people get seduced by get rich quick schemes and speculation. Stock picking, sector picking and new fads like Bitcoin are just some of the examples. That doesn’t mean you can’t make money this way. A very small number of stock picking (2% over a 50 year period) do beat the market, but that doesn’t make it rational for you to try as well.
  6. Not staying the course. This is self-explanatory but there may be bad and good years. However, like anything worthwhile, it makes sense to keep on track.
  7. Relationships. You don’t need to be a relationship guru to work out that somebody who wants to keep up with the Jones’ won’t be compatible dating somebody who wants to retire by age 35.
  8. Being too extreme. Ultimately, it is great when people are motivated. However, think about something for a second. How many people last in the gym after signing up on January 1 after Christmas and New Year binge eating and drinking? Hardly any. That is probably because they aren’t enjoying the gym or are trying to go everyday. Being realistic about spending habits will still allow you to retire early, without thinking that the process is like being in a prison. It is still possible to have loads of fun whilst spending sensibly.
  9. Thinking you need a high salary to start. You don’t. Even if you are an 18 year old student earning $100 a week living at home with your parents, it is worthwhile to start small. Then gradually you can save and invest more and more, like a process of compounding. Remember too that every penny saved and invested at 18, is more valuable than the same money will be at 30 or 40
  10. Thinking it is too late. Many people think 40, 45 or 50 is too late to start in this process. But it isn’t always too late at all. Sure you may need to make extra sacrifices and take the process really seriously, to meet your goals and ambitions, but what’s the alternative? Having a part-time job you hate at 75?
  11. Thinking it sounds unrealistic to get wealthy. Ultimately get rich slow or even relatively slower isn’t anywhere near as difficult as get rich quick. Besides, as previously mentioned, you don’t have to be wealthy to retire early. You simple need to have enough money to make the 4% rule work.
  12. I don’t know anything about investing or finance, so how can I start? We all started somewhere. Even Warren Buffett wasn’t knowledgable about investing at age 5! You can always outsource the investment process and there are plenty of good books for beginners.

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Owner at adamfayed.com.

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Adam Fayed

Adam Fayed

Owner at adamfayed.com.

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