What do the terms financial independence and early retirement mean to you? Do you know that concept has an acronym and is fueling a movement that’s growing in popularity across North America? FIRE, financial independence, retire early promotes the idea of making compromises today to gain financial freedom in the future. This week’s episode of the Maple Money Show was recorded a few weeks ago at FINCON LIVE, from the NEFE stage in Washington DC. NEFE stands for the National Endowment for Financial Education. My distinguished guests are none other than Doug Norman of the Military Guide, Mark Seed of My Own Advisor, and JD Roth from Get Rich Slowly. In this episode we chat about the whole idea of financial independence and retiring early.

Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. The biggest myth about robo-advisors is that they’re all tech and lack the personal touch. If you curious about moving over and have questions, our sponsor Wealthsimple now let’s you book a 15 minute call with an experienced portfolio manager. Head over to maplemoney.com/weathsimplechat and book your appointment today. Are you ready? Let’s join the conversation at FINCON. And here’s a special message from JD Roth…

JD Roth: Welcome to Maple Money. We’re recording live from the NEFE podcasting stage. Thanks to NEFE, the National Endowment for Financial Education, for sponsoring live podcasting here at FINCON 2019.

Tom: Hi guys, welcome to Maple Money Show.

JD: Thanks Tom.

Tom: I just want to run through who we have here. We’re at FINCON and we’re recording. I’m going to ask you guys an intro question and introduce you at the same time. We’ll start with Mark Seed. Can you tell everyone where you’re from and what FIRE means to you?

Mark: My web site is myownadvisor.ca. I’ve been blogging for about nine years. Tom and I have known each other for pretty much most of those nine years. Financial independence, FIRE; I’m a really big fan of the FI part of it, Tom because you can kind of choose what you want to do and when you want to do it, and really work on your own terms.

Tom: Next we’ve got JD. Can you tell people where you’re from and what FIRE means to you?

JD: Sure. My name is JD Roth and I’m from getrichslowly.org where Tom is also half of the team. To me, financial independence, early retirement is really about crafting the life the life you want to live. Financial independence (and the early retirement aspect too) is a tool or a means by which you can get to that life that you really want to live, whatever that is for you. Whether it means travel or raising your family in a comfortable environment or whatever, financial independence is a tool to do that.

Tom: And finally we have Doug. Can you tell people where they can find you and what FIRE means to you?

Doug: Yes, you can find me on The Military Guide. I founded of the militaryguide.com back in 2010 so it’s in all the search engines by now. I wrote the book on U.S. military financial independence. That came out in 2011. I live in Hawaii on the island of Oahu. And to me financial independence means having control your time, having choices, having options. Whether you choose to work for money is up to you and whether you choose to surf all week is also an option.

Tom: We’re doing this show a little different than what everyone’s used to on here. We’re doing as a panel format so feel free to kind of hop in wherever you need to. The first thing I wanted to get to was one of the things that seems to be going on a lot and in the FIRE community. Is FIRE real or is it a bit of a cult? What are your thoughts?

JD: This is interesting because I was just at a lunch just before this and we had a similar conversation about this topic. FIRE is definitely real. The financial independence movement is definitely real. It’s been around a long time. But at the same time, I feel like we’re in a financial independence bubble. We’re in a FIRE bubble and that bubble is a product of the particular environment we’re in right now. We’ve been in a record setting bull market that has really inflated a lot of people’s net worth. And as somebody said at lunch, if that recovery had never happened and we had never been in that bull market we would not be having the current modern FIRE movement. Instead, we’d all be talking about frugality and the same things we were talking about 10 years ago.

Tom: Anyone else?

Doug: I’ve been retired for 17 years and the financial independence movement is real. It does work. After 17 years I think all my friends and all my readers would be able to tell if I’d made a horrible mistake, was making this up or had no idea how to do the math. I’m here to say that although we are in a record bull market which tends to make FIRE very much attainable and very attractive to people, I’ll also point out that I’ve been through several recessions both on the way to financial independence and during and after financial independence. It’s just part of the cycle. Maybe you’re going to have a much better time if you declare your financial independence at the depth of the recession because if you can survive that, you can survive any of the good stuff after it. If you declare financial independence at the peak of the bull market maybe it’s going to be a little difficult. But all the math is designed to handle the market independent of whether you’re in a bull market or a recession. It’s just getting a lot more publicity for us; podcasters, videos, and bloggers than it had 30 years ago when we were doing this with clay tablets and wooden stylists.

Mark: Yeah. I’m a Gen Xer. I’ve seen the dot.com bubble and such and lived through that. We saw the great recession which was about 10 years ago or so now. I think it is a very real thing. It’s very cyclical. It takes many shapes and forms. Whether you follow a certain type of investing; maybe you’re more of a of an income investor in terms of real estate—it takes many manifestations. I think it is a very real movement. I think what’s important that JD kind of alluded to is, you need to carve your own path. It means different things for different people and so you really need to figure out what’s motivating you. I think what’s inspiring for me (at least for the FIRE and the FI part of it as well) is you’re designing your own plan, your own craft. You’re following your own mission but you’re not running away from something. You’re really running towards something. And I think that’s something that people really need to think about. You’re trying to aspire to something that’s better or continuous improvement. If that’s your passion, that’s definitely great. I think you’re following a great path.

JD: I think Mark touched on something very important there. For some people financial independence is like a “carrot and stick” thing. Some people are running away from something and that’s why they want financial independence, and some people are running toward something. From what I’ve read online and from the people I’ve talked to, the people that are running away from something have a much more difficult time (not just with financial independence and early retirement and everything) but with their entire lives. And so I think it’s very important to have some something that you’re moving toward. I think that’s a keen insight Mark had.

Doug: Well, most of my U.S. Military readers are definitely running away from something. Usually it’s career burnout. They’re wondering if they should try to stick around for investing in a pension that takes 20 years before you even meet the requirements for the pension itself. I’m there to tell them that if they’re saving for financial independence, they have choices. They don’t have to stay on active duty for the full 20 years. They can go to the Reserves, the National Guard or they can just get out of the military completely and use that time to change their careers. Yes, they’re running away from a career that has become less than fulfilling. But they can also run towards something else if they have the money to have the choices and use the time. And heaven forbid that they should be able to reach financial independence before they get to the pension point. Maybe they do it with investments in savings, real estate or whatever mechanism they use to get financial independence. The sooner you can declare that independence, the sooner you can design your next lifestyle, the sooner you can come up with a sustainable plan in order to be able to live your life. I’m at the point in my financial independence and my life where some of my friends I went to college with are waking up dead. Having that financial independence to have your life under control instead of trying to hope to save in your 50s and retire in your 60s is very precious to be able to design your own life.

Tom: I find the one thing I like about the FIRE movement in general is its motivation. Most of it—maybe not getting into all the exact calculations of what makes you financially independent but at least the idea of what’s getting you on that journey, is very good general personal finance. If people are being frugal, investing in ETFs and taking all these steps then it’s going to go a long way. What do you guys think are the “cons” to this? Or are there any? What’s the downside?

JD: To me, I think the big downside is (by definition almost) pursuing financial independence requires making compromises today. I think a lot of times we avoid using the word sacrifice when we talk about financial independence because it’s not really a sacrifice. It’s really a choice you’re making; am I pursuing fulfillment today or am I pursuing fulfillment in the future? It’s a balancing act. To me, the biggest downside is if you do decide— especially to go hardcore towards financial independence, then yeah, you do give up some of what you might be able to have today.

Doug: I think the biggest downside is identifying where that line is drawn between frugality for your goal or deprivation in just being over aggressive trying to reach financial independence. You have to figure out where you’re going to draw the line, where you’re still feeling challenged and fulfilled. Where you feel like you’re winning, you’re frugal; your savings rate is growing. There is also the aspect of fear and ignorance; you aren’t sure whether these crazy FIRE people with their blogs grubbing for money with pitches like, “Let me teach you how to reach FIRE. Let me teach you how to become financially independent. Give me $50 dollars…” you wonder if they’re credible. Or even worse, you wonder if they’re horribly deluded and don’t understand the risks of financial independence. I spent a lot of my time trying to work through the fear and ignorance with people who have questions about this because they feel like they might never be able to earn another dollar after they quit their job or change their career field so we work through that. Along with the fear and ignorance, if you’re working a 50, 60, 70 hour a week in a military, you might not have the time to step back, clear your head. Make some choices about your lifestyle and where you’re going in the future. It’s very difficult to step back and do that planning and consideration and having those thoughtful discussions with your spouse and your family on reaching financial independence. So again, I try to give people the bare-bones of what they need to understand where they could go. And once you reach financial independence, you have choices whether it means taking a part time job or earning income on the side. If your choice is to never earn another dollar ever again, I can get you there too.

Mark: Yeah, I think I’m kind of siding with JD on this one little bit. I think it takes some risk. It takes a leap of faith. I think that’s the challenge most people will struggle with a little bit in that maybe it will force you to sell McMansion and downsize. Maybe it’ll force you to think about the job you’re doing pumping out 70 to 80 hours a week at a career that maybe you’re not a huge fan of. Maybe it’s better to try a job you’re really passionate about and work 40 to 50 hours a week for less money than does to strive for something at 70 or 80 hours a week, make more money, burn yourself out and become a hindrance to your family or your kids. I really think it takes a leap of faith. It takes some trust in the process. It’s going to take some time and some patience. Us humans with the lizard brains, we’re kind of wired for instant gratification and satisfying ourselves. You really need to delay gratification and try to take a measured way about it. It kind of goes against our DNA that way. But you really need to take that leap of faith and have faith in the process that things will work out. The biggest challenge, ultimately, is the human side of things. If people can get past some of that stuff I think they’ll be well on their way.

JD: I think it’s an interesting observation that it goes against our DNA. It goes against our human nature. I don’t know if you guys read, Wait But Why. At waitbutwhy.com. It’s not about personal finance at all, although he touches on it sometimes. But he’s just launched a new series and in it he’s got this great analogy about how in our brains there’s something like five or seven levers; which is five or seven things that drive us including food, horniness and all these other things. They just kind of balance each other out. But that’s our animal instinct as humans. I don’t want to go all into that but I think you’re right, financial independence is like saying, “Okay, we’re going to set aside some of these natural instincts we have inside of us and try to do something different that going to be better for us long-term.” But it is it’s very difficult to take that risk because it goes against human nature.

Mark: Speaking from my own experience from last year where we had a larger house we really didn’t need so we decided to downsize. That was a big leap of faith. We were very comfortable in the house we had. We didn’t have to move but we recognized we wanted a smaller footprint. We recognized there are certain lifestyle changes that would come from downsizing and moving into a condo. I recognized I can walk to work. I didn’t have to have a second car. I could jettison that. I didn’t have to spend as much money on gas and insurance. There are all these benefits that come with the financial side of things. But it was really more of a lifestyle and a psychological barrier that I had to overcome. It does take some soul searching and some deeper recognition about what you really want. But I think if people spend a little bit of time on some of their own psychology or behaviors I think they’ll find what they’re looking for.

Doug: Well, you have to find the time and then you have to set those priorities and it’s always complicated to sit back and say, “I don’t know what I want to do but it’s not this and I don’t necessarily have the same priorities I had 10 years ago.”

Tom: You guys talked about the personal aspect of this and Doug mentioned about talking to your spouse about this too. If you wanted to go in the direction of FIRE, how do you get others onboard board if you have a family? How’s that possible?

Doug: Everybody that sees financial independence as the possibility of as they see the whole vista of opportunity opening up in front of them, they become pretty enthusiastic about it . And their families live in fear of that because they’re certain that that person is going to make them live a very frugal lifestyle of deprivation; recycling toilet paper, going and scavenging food from dumpsters, walking everywhere, living a life that is all totally focused on a future and no fun now (because we’re going to defer gratification for 15 years). The most important tactic that we found when talking about that, especially with the skeptical spouse, is the fear that somebody is going be in charge of the budget and they’re going to hand out the budget one penny at a time and it’s going be either begging for money or self-denial. A technique that seems to work very well is giving each spouse part of the budget for their allowance. Whether $50 a month, $250 a month or $1,000 a month, that’s your allowance. You spend it any way you want. The budget category is “your allowance” and your “spouse’s allowance,” and nobody has to justify it. There’s no judging. You spend your $50 on whatever you want and nobody has to question where that money went or what it went for. You don’t even have to spend it. You can keep saving your monthly allowance for a big prize at the end of the year and decide you want to buy the new surfboard or the new technique or whatever you want. But the whole point is that everybody has something in a budget that they can control for themselves without having to feel like they’re begging, sacrificing or disrupting the big goal of financial independence. Give each other an allowance. And of course, if you happen to break something in a house, the consequence is somebody tells you that it is coming out of your allowance.

Tom: Anyone else?

Mark: I’m probably very fortunate. Our conversations are quite easy. I think we come back to stuff around the kitchen table like why is money important to us. How much do we need? How much do we really need? For both of us, we both like a little bit of our slush fund to go out and do want and still have that partnership and trust in it. But at the same time, we know we’re focused on long-term, bigger goals together. Whether that’s for financial independence, work on our own terms; maybe have a part time job at an organization that we still love to work at. Our conversations are pretty easy. But when we get to distilling down what drives both of us in our relationship, it’s more around why is it important and what do we want to do with that. And I think having that ongoing dialogue—it doesn’t have to be an intense, dinner-table conversation with spreadsheets or anything crazy like that. It’s just about why things are important to us next month or next year or what have you. And we just go from there. Again, maybe I’m very fortunate but at the same time, I don’t think folks or couples have to really overcomplicate it.

Tom: One of the things you guys have brought up a couple times has been the retire early portion of this. What are your thoughts on that? Is that completely necessary? Or can you just be happy with the FI portion?

Doug: I can see JD leaning into the mike here so we’ll let him go first.

JD: I have strong opinions. You see me hemming and hawing here because I’m trying to decide how deep to go. I’m not going to go deep. I think it’s a mistake to get caught up on the whole, “What does retirement mean?” thing. Retirement means different things to different people and retirement has meant different things throughout history. There is no one (singular) definition of retirement. I prefer to just talk about financial independence and not even consider the work portion. It’s a red herring to me.

Doug: I think this started in the mid 90s when the financial independence, retire early acronym had this really cool FIRE aspect to it. You could fire your boss. You could fire your old life. It all worked very well. It’s been 25 years so I think we’re ready to move beyond that. And the reason we’re ready to move beyond that is because as financial independence, you’re not necessarily going to retire. You’re not going to sit on a porch and rust. The U.S. military has an issue where you’re encouraged to stay for 20 years and retire from the military. Everybody gets locked into artificial golden handcuffs where maybe if you’re financially dependent you don’t need to stay all the way for a 20 years. Maybe you could go and design your own life at 15 or 16 years of service. In my opinion, it’s time to get rid of the FIRE acronym and start going with financial independence. That gives everybody permission to design their lifestyle around their priorities. And maybe—just maybe you want to work 20 or 30 hours a week at something you’re passionate about. And if it happens to yield money, that’s even better.

Mark: I struggle with the RE part of FIRE. Again, I’m a Gen Xer here. I don’t know of anybody in my cohort that may be financially independent and has full-on retired early. They’re out doing things. They’re writing, doing speaking engagements. They have blogs and such. I think all that stuff is great so I’m really struggling with the RE part. I too, have strong opinions about that. I think what people need to consider here a little bit is the FI part is great but when we think about how we work and live and interact with people, you want to be productive. I think everybody wants to be productive. Whether you have a blog, a small business or whether you have a small corporation or whether you’re helping military personnel—whatever it may be, you want to help other people. Your sense of community, I think, is important in people. Whether you have financial dependents or not, I don’t think this notion of retirement is a static thing. It’s certainly changing and it should change. You want to be a productive member of your community. You want to be able to go out and give back, volunteer and offer services or what have you to folks. I’m glad to see that the whole notion around retirement is very loose and vague. I think it needs to be purposely done that way. I’m a big fan of the FI component but the retire early, I don’t know. You want to be able to keep your mind, your body and other things active for as long as you possibly can and live the best life you possibly can. So this whole notion of being retired early and sitting in a rocking chair and reading books all day, I’m not sure that really resonates with anybody. I don’t think it resonates with anybody in this conference. But I think that’s something that people want to keep in mind; how do you maintain that productivity well into your senior years not because you feel you have to, but you want to do that.

Doug: I feel productive when I’m surfing and trying to nail an awful lot of cutbacks so there is that aspect of your life. But I also feel like we’re going to be productive when you’re traveling, seeing the world, having experiences, broadening your mind, having new inspirations.

Tom: It sounds like none of you really believe in the retire early side.

JD: The thing is, that definition of retirement—the definition we’re talking about here is a just a transitory thing basically from around the early 1960s to mid 1980s. That’s the only time period where that definition of retirement, meant retirement. And yet, people really want to cling to it. Some people really want to cling to it. It’s not a big thing. I think Doug’s right, just focus on the financial independence side.

Tom: Yeah. Even looking at retirement. People are living longer, they want to be social. They might work at Home Depot because they want to talk tools. They may have that financial independence but they just want to get out there and do something and make a little money on the side.

Mark: Yeah, if they can make a little money working at Home Depot or helping out the local shelter—whatever the venue may be, it’s an opportunity to give back. It’s your sense of community. It’s your sense of being productive. I think everybody wants that. And if you can do that well into your senior years, why not? And if you make a little income from it, great. But the whole notion of retirement has certainly changed and rightfully so.

Doug: I’ll hasten to add that as part of financial independence, while you’re welcome to go out there and design your own life and earn money if you want, I also donate all my writing revenue to military friendly charities just to show people that they don’t have to depend on me earning $10,000 or $20,000 a year before I can declare that I’m financially independent. I would rather work, enjoy myself and things that are challenging and fulfilling. If there’s money, great because I’m going to give it away to charities and make it even more fulfilling.

Tom: I know Mark mentioned this idea that there’s all these people in the FIRE community that are blogging, writing books and all that. That’s got to be the vocal minority I would think. There has got to be a lot of people that are still FIRE but they’re just regular folks. Do you find with them, retire early might actually still mean something? Are they doing something else or is it just us influencers that are still able to…

Doug: I have these conversations all the time with people that are retired from the military. They have enough money. They’ve felt like they have served their time so to speak. They’ve done their mission and now they’re ready to enjoy their lives. And you’re right. They’re just normal people. They’re traveling. They’re involved in windsurfing. They really enjoy that lifestyle. They’re coaching. They’re doing work in our communities. They don’t feel the need to blog. They were never the kind of person who wants to talk about it or work out on social media. They just have their small circle of family, friends, and community and they enjoy doing what they’re doing there. And occasionally I’ll hear from them to tell me life is good. Don’t defer your dreams. Don’t go from frugality into deprivation. But this financial independence stuff is wonderful.

Mark: I’m fortunate to interact with a lot of folks though for the blog. They email me after I write an article or something like that. I think it’s a lot bigger—this whole financial independence desire than certainly any of the influencers and people writing about it than they think. Just because you don’t have a blog or you don’t advertise it on Twitter doesn’t mean you’re not passionate about it, striving for it. And there’s not a not a whole group of folks out there that don’t believe in having some sort of sustainable income where they can provide for themselves or their next generation of their family or whatever so I think it’s big. I think the pursuit of it is very worthy. Most people I interact with certainly aren’t retired. They’re doing other things as well.

JD: That’s my experience too. The people who do “retire early” don’t actually retire. There’s always something else to pursue; some other way to try to get fulfillment.

Doug: I will say that when I write, talk with people and when I come to events like this my spouse is really glad that I’ve got the whole internet and financial independence community interact with because she’s a little worried that otherwise I’d focus all that attention on her. So she’s really glad I found all of us in a group to work with.

Tom: So if someone wants to pursue this, could each of you just give one, first-step, tip to help head in this direction?

Doug: Oh yeah. First step; track your spending. Find out where the money is going. Make sure you know where the money’s going. Just track your spending however it works for you.

JD: For me, Doug’s right, track your spending. But one of the biggest things you can do is cut back on the big stuff. The two biggest expenses for the average American are housing and transportation. Cut back on your housing. Cut back on your transportation. These are tough choices to make. Housing especially. If you can reduce your housing expenses, you can almost instantly give yourself this huge boost towards financial independence.

Mark: I have a 1A and 1B. That’s, track your spending, but it’s also making sure that spending aligns with their financial value. Are you spending the money on things that are giving you value in life? Are you throwing it away for things aren’t giving you value? If going out for dinner with your family every Sunday or Friday night for pizza is providing value and you’re spending a little money, don’t sweat it. To JDs point, if you’re spending a lot of money on the McMansion and you have a couple of SUVs in the yard but you’re not getting huge satisfaction with that, you may want to look at some of those big ticket items. Because, honestly, you don’t want to sweat tens of thousand dollars worth of decisions when you really don’t need to. You’ve got to get the big decisions in life right.

JD: But, if you do get value from the McMansion and the two SUVs, fine. But if you want financial independence also and you want to retire early you’ve got to make some other choices. And that’s probably going to mean boosting your income somehow or working some long hours.

Doug: Well, it’s also about not just identifying where your money is going and value but you’ll find fairly clear examples of where you feel you’re wasting your money. Once you start tracking that spending, it’ll become very clear in a few months where you’re wasting your money. So just do less of that stuff. The big wins are easy to get from transportation and housing but as you cut out the waste, the savings rate will grow and then the compounding will start to take off.

Mark: If you get the housing equation and the transportation issue right, you’re well on your way.

Tom: Great. Thanks for being on the show guys.

Doug: Alright Tom. Thanks.

JD: Thanks, Thomas.

Mark: Thanks, Tom.

Thank you Doug, Mark, and JD for sharing your thoughts on financial independence and for not being afraid to tackle the downsides of FIRE. You’ll find the show notes for this episode at maplemoney.com/fincon19. If there is one thing I love it’s getting feedback from the listeners of the show. Recently I received the following items review from Katie Joy, a listener from the US. Katie says. “I’ve been listening to more and more of these episodes. I wanted to leave an awesome review to help you out but found out I already left five stars. I wish I could give six stars. This podcast has become one of my favorites. If you aren’t listening you’re missing out. Thanks for making these. Keep the info coming. I’ve listen to a few of the episodes now. This is a solid podcast. If you’re looking to learn about creating financial freedom, some basic info, some key points, and some bits of savvy mixed in, there’s something for everyone.” That’s great. Thanks Katie. Right now I’m giving away two copies of the bestselling book, I Will Teach You To Be Rich, by Ramit Sethi. I grabbed a couple extra ones at FINCON. To be entered in the giveaway, all you need to do is head to iTunes and leave a review of the show, then head to maplemoney.com/review, enter your username and date you left the review. Any review left before the end of October can qualify for the contest. And past reviewers are welcome to join. Head to maplemoney.com/review for instructions and to enter.

Don’t forget to tune in next week when we’ll get back to a normal one-on-one episode when Palik Mcneilly joins us to discuss how you can be on the same team as your spouse when it comes to managing money. Thanks for listening and we’ll see you next week.