A few years ago I read every major book in the FIRE canon. JL Collins on index funds. Mr Money Mustache on early retirement. Vicki Robin's original framework from Your Money or Your Life. Bill Perkins on Die With Zero. I read them because I had left a C-level role, had more time than I had had in twenty years, and wanted to understand what financial independence actually meant outside of a corporate salary.
The ideas are good. The context they assume is not universal.
FIRE — Financial Independence, Retire Early — was built in and for the American economy. Stable currency. Low inflation for decades. Easy access to low-cost index funds. A stock market that has, over long enough periods, reliably gone up. If you are a software engineer in San Francisco earning $200,000 a year and living on $60,000, the maths of FIRE is genuinely straightforward. Save aggressively, invest in broad index funds, wait long enough, stop working when your portfolio covers your expenses.
Now try doing that from a country with 60% annual inflation. Or with a currency that lost 80% of its value in five years. Or in a region where a war next door is reshuffling energy prices, supply chains, and economic assumptions that were supposed to be stable. The FIRE spreadsheet does not have a column for that.
· · ·
I spent three years trying to make trading work. Not day trading in the manic sense — just active management of a portfolio, reading charts, following macro signals, trying to be smarter than the market. I was not. Nobody consistently is. What I learned from those three years is worth more than anything I made or lost: the market is not a problem to be solved with intelligence. It is a mirror that reflects your psychology back at you. And my psychology, it turned out, had a greed problem I had not fully acknowledged.
Not greed in the cartoon sense. The quieter version. The version that makes you hold a winning position too long because you want a little more. The version that makes you buy something because it has already gone up and you are afraid of missing it. The version that convinces you that this time you have spotted something others have not. Three years of that taught me what the data already shows: most active traders underperform a simple index fund over time. The intelligence is not the edge. The discipline is.
|
"The stock market is a device for transferring money from the impatient to the patient." — Warren Buffett |
JL Collins is right about the index fund. He is also writing from a specific place in a specific economy. The honest version for the rest of the world is: yes, invest in broad, low-cost index funds where you can access them. But first understand what currency your life actually runs on. Understand what inflation does to your purchasing power over ten years. Understand that "the market always goes up in the long run" is a statement about the American market over the last century — not a universal law of physics.
· · ·
Here is what I think FIRE gets right, underneath the American assumptions.
The goal is not retirement. It is optionality. The freedom to not need the income — not because you want to stop working, but because you want to choose whether you work and what you work on. That distinction matters enormously. Most people who chase FIRE are not chasing leisure. They are chasing the feeling of not being trapped. That feeling is real. It is worth building toward. And you do not need to fully achieve financial independence to start experiencing it — every month you reduce the gap between what you earn and what you need is a month you are slightly less trapped than before.
Bill Perkins in Die With Zero made the point that most people optimise for the wrong end of life — they save obsessively in their fifties and sixties for a retirement they may not have the health or energy to enjoy. The insight is not "spend everything now." It is: think about when in your life you can actually use what money can buy. A trip with your children when they are young is worth more than the same trip when they are adults and you are elderly. Experiences depreciate differently than assets.
|
"The goal is to die with zero — to use up all your money before you die, ideally just barely." — Bill Perkins, Die With Zero (2020) |
I do not fully agree with Perkins — in a world of genuine economic uncertainty, a buffer matters more than he acknowledges. But the underlying question he is asking is the right one: what is the money actually for? If you cannot answer that, you will either save it compulsively without enjoying it or spend it anxiously without feeling secure. The number in the account is not the point. What it enables is the point.
· · ·
The most useful framework I found — simpler than any of the books — is this: financial independence is a diet and exercise problem, not an investment problem. Most people approach it the wrong way around. They start with the investment question — what should I buy? — before they have solved the behaviour question — why do I spend what I spend, and what would I need to live well on less?
You do not start exercising to lose weight and then fix your diet later. You fix the diet first, because the diet is the foundation. The exercise builds on top. In money terms: you understand your actual costs first, reduce the unnecessary ones without reducing your quality of life, build the gap between income and spending, and then invest the gap. In that order. Not the reverse.
The greed problem — the one that cost me three years of trading — is also a behaviour problem. It does not respond to more information or better analysis. It responds to structure. Automatic investing. Rules you set in advance and do not override in the moment. Taking the decision out of your hands in the exact situations where your psychology is most likely to betray you.
FIRE is not for everyone. The maths does not work in every economy. The "retire early" framing is wrong for most people who actually try it — they do not want to stop, they want to choose. And the psychological work required is harder than the financial work, which is why most people who know exactly what to do with money still do not do it.
But the core idea — that the relationship between what you earn and what you need is the most important financial number in your life, and that closing that gap gives you a kind of freedom that no salary increase can — that part is true everywhere. In every currency. In every economic climate. Including the uncertain, complicated, geopolitically unstable one most of the world actually lives in.
|
This week's insight Financial independence is not a number. It is a gap — the distance between what you need and what you have. Every decision that widens that gap is a decision for freedom. Every decision that narrows it is a decision for dependence. The investment question — what to buy — comes last. The behaviour question — what do I actually need to live well — comes first. Most people never ask the second question, which is why the first one never gets answered either. |