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The Pitfalls Of Early Financial Independence

I hinted in this blog post that the “financial independence, early retirement” (F.I.R.E.) concept has potential pitfalls. This revelation might startle a lot of people, because isn’t super-early retirement a lofty and noble goal to have? Doesn’t it mean that you spend most of your life spending most of your time the way you really want?

Yes…if you are disciplined enough. The sad fact is, however, that most people are not so disciplined at this moment, and – despite their best efforts – many will never be.

I’m going to say something controversial: Some people have no business trying to retire before age fifty-five. Why? To answer that, we need to look at the four big potential pitfalls of being part of the FIRE movement.

Pitfall #1: Overspending.

If you are going to retire super-early, you must be able to keep a keen eye on your accounts. This doesn’t mean you have to live a life of depravity if you quit working at age forty, but it does mean you always have to know the state of your investments and be able to modify your spending accordingly.

Even if you invest using the Ivy or Permanent Portfolio, the two safest ways to invest and still obtain a decent annual return, the value of your assets will drop down at times.

People who have trouble reining in their desire for the latest and greatest thing – or even from making frequent thrift or dollar store purchases – are in danger of ending up homeless if they retire before they hit their fifties, possibly their sixties. This is true especially if they end up living to 100 years of age.

Pitfall #2: Not having extra cushion for emergencies.

In the post where I discuss why Suze Orman despises the FIRE movement (linked in the first line of this post), I argue that the people planning to retire super-early responsibly plan out their finances, including leaving room for emergencies. However, it is a legitimate danger, so I wanted to discuss it for a moment.

A person may get tempted to only grow their nest egg large enough to account for their usual expenses in the current economy, and then quit working. Even if you have health and home insurance, and include these in your expenses, this isn’t wise. First of all, there are insurance deductibles. Second of all, you never know when a catastrophe might befall you that goes beyond what your insurance might cover.

J and I choose not to buy health insurance. We know we have enough of a cushion in our investments to handle large, unexpected expenses. And we know that insurance is much more likely to be more expensive in the long run than paying out of pocket.

Here’s a real life example. In the fall of 2014, I broke my left humerus bone to the tune of a total of $25,000 out-of-pocket expenses, including all the X-rays, surgery, and basic doctor visit fees – not to mention the very expensive screws that now live in my arm forever. It’s now February of 2019, and we haven’t had a medical expense since. If we had been buying health insurance, we would have paid at least $48,000 to the health insurance company by now. We’ve saved at least $23,000 by choosing to pay for medical expenses out of pocket.

And yes, our nest egg is big enough to handle more than $25K at one shot, if necessary.

But if you don’t provide for emergency expenses in your nest egg, you may find yourself looking for a job a few years after you retire.

Pitfall #3: Ignoring inflation.

Supposedly, in thirty years things are going to cost two to three times what they do now. Economists aren’t always accurate, but it’s a safe bet that the cost of living will go up a substantial amount during that time period.

When you figure out what your nest egg needs to be in order to be able to declare financial independence, you need to take future inflation into consideration. If you’re going to be impatient and quit your job with $600,000 because that’s all you need in the current economy, you’re going to be in trouble twenty years from now.

Be patient, or get out of the FIRE.

Pitfall #4: Losing your social network.

This danger isn’t huge in the aspect of financial future risk. However, for many people, their pool of friends comes in large part from their workplace. If you quit your job at a relatively young age, regardless of your intentions you may find yourself growing distant from those friends at a rapid speed. For one thing, you will no longer have the workplace or career in common. For another, social media posts pale in comparison to daily face-to-face contact.

If you’re an extrovert and therefore thrive on having a lot of people around, tread the FIRE waters carefully. You will have to figure out how to replace the social network of your job. If you don’t, you might find you were happier working at a job that didn’t fulfill you than with having hours and hours of free time and no one to share it with.

Pitfall #5: Boredom.

Take it from someone who knows: retiring super-early can get boring. And I write novels, create videos, and juggle two blogs!

Many people out there don’t have any hobbies, or any interests they would turn into a hobby once they had the time by quitting their full-time job. They see financial independence, early retirement as a destination rather than a new path offering different opportunities, different ways to spend their time.

We know this by the studies that have been done about people who retire at the conventional age, then die within ten years – often sooner. According to research, the people to whom this happens are retirees who had no hobbies or volunteer work. They retired to their couch and T.V. remote.

People who have nothing to do and no sense of purpose are unhealthy people.

If you want to be part of the financial independence, retire early crowd, you must have some inkling of how you will spend your time once you are out of the rat race. HINT: sitting around all day playing video games isn’t healthy, either!

If you’re planning to do nothing once you retire, stay at your nine-to-five job. You’ll be happier and live longer.

BONUS Pitfall

Your friends and family may try to talk you out of your goal to join the “financial independence, retire early” group. They may think you’re crazy.

If there is one pitfall to ignore, this would be it. Never let the fears of other people dictate your life.



It’s exhilarating to be able to check off the days until you will be able to tell your boss to take this job and…give it to someone else. However, if you’re serious about FIRE, you need to do your due diligence in avoiding the above pitfalls (though it’s probably impossible to avoid the bonus pitfall).

Want a detailed roadmap about how to achieve super-early retirement? Click here to check out my book Hatching The Nest Egg: Achieve Super-Early Retirement Without Side Gigs, Gambling, Or An Above-Average Income.

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