Financial Independence Retirement Early - My thoughts about FIRE and why you should aim for freedom
Hey, friends!
Getting more and more bullish for every day that is passing.
FDV is a meme in a bull run, but when is it not?
According to Jose Macedo (co-founder of Delphi Labs) the single most important factor in comparing FDVs is figuring out what % of a token's FDV is unrealised profits for investors/team. The higher the % the worse for you as a tokenholder.
Very simple example to illustrate this: Token A and Token B both trade at $10b FDV. Token A raised $200m at $1b and has a 30% team allocation. Token B raised $5m at $100m and has a 20% team allocation Token A has $1.8b in unrealised profits from investors + $3b from team.
Almost 50% of the FDV is unrealised profits Token B has $500m in unrealised profits from investors + $2b from team. 25% of the FDV is unrealised profits Token A is a much "heavier" FDV than Token B and you should proceed with care.
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Financial Independence Retirement Early - My thoughts about FIRE and why you should aim for freedom
In 2017 I found myself going down one of those huge rabbit holes that I didn't know how much it would change my life.
It was something called financial independence and early retirement. But, this wasn’t just something you read about once and that you forgot about. In fact, this became my new lifestyle.
I've always been an avid saver and relatively frugal. But this was something new. Never did I think it was possible actually to retire from my 9-5 based on investments. I was one of those kids that weren't coming from a financially savvy family, and therefore I had to learn these things on my own.
One day when I was at the desk of my 9-5 job, I thought to myself:
"How could I continue waking up every morning and be totally unexcited about everything I was going to do?"
This led me to Google:
“How to quit my job forever”.
The websites of Early Retirement Extreme and Mr. Money Mustache are the first pages popping up. I read everything in a couple of days. There was really no way back.
WTF, could I quit my job in a couple of years by investing?
I have always been pretty good at handling money, but earlier on I'd pay down my mortgage faster.
Now I was going all-in on investing. I started saving and earning more money by changing my 9-5 job. I got addicted to investing. It was like a game.
My salary was increasing every month and on top of that, I started earning more online than I did in my 9-5.
Anyway, there’s an entire online community dedicated to FIRE. These people are the ultimate personal finance life hackers. Money is used for freedom at a younger age instead of things or experiences.
I was pretty hooked on this concept from day 1.
FIRE stands for Financial Independence Retire Early. But, what does that really mean?
FI: In general, most people in the FIRE community refer to financial independence in the form of a number like total net worth (e.g. “My net worth is $5M, and I’m now financially independent!”). It means you have enough money to live for the rest of your life without working (if you wanted to never work again). Usually, this means you have passive income streams that will continue to carry you over many years.
RE: Retire early is the literal action of “retiring.” Many of the people in the FIRE community are motivated, intelligent, intentional living, conscious consumers who may retire from the rat race but continue one or a number of side hustles that still bring in income After all, work is better when you don’t need the money. So, retiring early usually means quitting work you don’t enjoy to spend your time doing what you do enjoy. And, sometimes that still involves making money.
I remember I spent a ton of time on Reddit on r/financialindependence just to read about other people who aimed for the same goals. This was very inspiring for me back then.
Why should you strive for financial freedom
Probably self explaining, but let me list some good reasons:
1. Security
Once you reach financial independence, you are safe from several events that would cause a significant income loss.
For instance, if you get fired, if your company goes bankrupt, or if you cannot work anymore, you should not have issues sustaining your lifestyle. All these events are not a big deal for your finances once you reach financial independence. They may still be a big deal for you, of course. But if you are financially independent, you are ready to withstand them without issues.
It is also a security for retirement. In many countries in Europe, retirement is not too bad. But who knows how that will be in 30 years? There may not be any pension or help for retired people. If you are already financially independent, you do not have to worry about that.
2. Freedom of choice
Most people who want to reach FI want to retire early.
However, the ability to retire early is more important than retirement itself. Having the choice to retire is very important.
Maybe you still love your job. But can you say that you’ll still love it in in 10 or 20 years?
Your company can change a lot. Your colleagues can change. Or your boss can change too. You may like your current colleagues and boss. But what if they are replaced by people you do not like? These changes may make a big difference in your job. After some changes, you may not like your job as much as you do now.
You, too, can change. Many people assume they will like the same things in the future. But this is often not the case. People change a lot.
Therefore, choosing to retire or do something else is very important. Once you reach FI, you could retire, start a company, or do anything else. Many people reach FI and do not retire. Some people are continuing some side hustles. You can still pursue FI even though you do not plan to retire.
3. Time is limited (Memento mori)
Time is also a fundamental fact. Time is very limited.
We assume you have 75-85 years of life in total. You do not want to spend 50 years working, and you want to be free for as many as possible of these years. You may still be working to the end, but you may retire or change your habits. And you may also cut your working time. All these things are possible when you are financially independent.
4. Build generational wealth
If you are following a safe withdrawal rate strategy (eg. the 4%-rule = withdraw 4% of your portfolio per year and live of it), you are likely to end up with more money than you need at the end. This money could then go on to the next generations of your family.
Many people like the idea of building generational wealth. Nevertheless, this should not be an excuse for the next generation not to work and rely entirely on this wealth. But this could help them fund their financial independence in due time.
And ideally, you want the next generation to continue passing on this generational wealth, not simply spend it. Therefore, an essential part of this is to give financial literacy to the next generation, and hopefully, they will continue this trend.
My opinion of FIRE
As I mentioned at the start of this post, the whole FIRE concept really appealed to me 7 years ago. I was sucked in and became obsessed with the thought of quitting my job to pursue my passions.
Eventually, I quit my 9-5 job at the start of 2021 with a liquid portfolio just below $600k plus an apartment.
At that point, it felt “safe” to try other opportunities (like investing full-time).
A huge admiration goes out to the degens on CT who quit much earlier than me, or who just pursue trading without any security. I think for me, security was my biggest issue in order to allow myself to quit my 9-5 job. Like if I failed, I could always live on my $600k to give me some time to figure out my next steps. In my head quitting working on something was never a goal. I love working on hobby projects, and luckily for me this Route2FI profile ended up into something great. I’ve met some of the best people on Twitter, and have gotten great network opportunities, investment deals, alpha, job opportunities, and in general just the feeling of being a part of a big family on Twitter with like-minded people. Here I could discuss investing, trading, DeFi and alpha with people who had the same burning obsession that I had. Connections it was hard to find among my IRL friends.
I eventually understood that FIRE or the concept of FIRE was just a starting point. It wasn’t working that I hated, it was working on something I wasn’t passionate about I hated. And as soon as I started working on my own terms, life became so much better. There’s a great freedom in just working on your own knowing that you’re in control of your own destiny. The freedom to take random days off just because you want or to working intensely with projects for a while simply because it is fun.
During 2021 something changed though. I discovered crypto Twitter and found that I enjoyed this culture much more than finance Twitter and FIRE Twitter. In the FIRE community it was this obsessive thing that you should be max frugal in order to save as much as possible from your 9-5. Why? To increase your savings rate and then invest more = retire earlier. However, there wasn’t that much focus on increasing your income. Well, not much more than the classic change your job often and increase your yearly salary from $100k to $115k kind of thing. While this is great (obviously), the risk part wasn’t there. It was all within very safe patterns. Work hard in your 9-5, spend little, do safe investments (index funds) and retire happily. I was very frugal and took this dead serious, but when I think back on it I’d rather prefer going into riskier investments and “live life more”. I mean, this is not a regret really, because I did lots of traveling and fun stuff, but I could probably have given myself more of what I wanted. Okay, so this is one of the things that I parted ways with since FIRE. I don’t track my spending at all anymore. I just spent money, and this had made me so much more happier. I just don’t check my bank account anymore, and tbh this is a great freedom. I just buy stuff, because I know that I am able to make so much more than I spend anyway.
So while I think FIRE is a fantastic way to get into the game of investing and eventually becoming free, there are two major drawbacks (at least for me) that I think might set you back long-term:
Being overly frugal —> it’s not fun, plus spending time among people that aren’t afraid of taking big deals may actually lead you to a bigger wealth compared to if you say no to every opportunity because you’re not willing to invest upfront
Conservative investing strategies —> while passive investing is relatively safe, it’s super boring (like watching paint dry), and if you’re anyway are willing to spend some time educating yourself and networking on Telegram, Twitter and Discord, the opportunities you will get should easily lead you to better gains compared to passive investing. At least this is true for crypto where there are plenty of assymetric opportunities. This is simply a fact because there is no easy way to value how much a coin is worth. On the other hand you can easily calculate the real value of stocks like Amazon, Microsoft etc., and make investing decisions based on that.
That’s it for today!
How far are you on your way to financial freedom?
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