This Family's on Fire

#fiveonfire

I started working on this post in (early) November, but given the craziness of this time of year, naturally just got around to finishing it.  Along with the start of the Holiday season, November begins birthday season in our house, with our oldest and my wife celebrate birthdays just before Thanksgiving.  On the same day, in case you weren't aware.  The festivities continue into December with our other two kids celebrating birthdays right in the midst of other holidays taking place.  

This year, November was extra special in our house because it happened to be a "bonus paycheck month", something my wife and I look forward to excitedly considering how much we geek out about personal finance.  Oh, and November was also Movember or No Shave November, which gave me an excuse to be additionally lazy and not shave.  And then subsequently do this to my facial hair.

My sister made a $210 donation to the Movember Foundation
so I could look like this until December 21st. 
Aren't older siblings great!?!

Bonus paycheck month was a phenomenon we became aware of when we started working jobs that provided us steady paychecks (or direct deposits) every two weeks.  Despite being anal retentive when it comes to tracking our finances, we had overlooked the fact that while we typically budget by the month, there are 26 biweekly pay periods in a year (52/2 for those who struggled in math class).  Overlaid over twelve months, which typically just have two paydays, we realized that two months of out every year would actually have three paydays that we neglected to figure into our monthly accounting.  Hence us affectionately titling them as "bonus paycheck months".  At first it felt a little like landing on Free Parking in Monopoly.

When I "retired" more than four years ago, the financial piece of our life puzzle obviously received a lot of review.  Whenever we (likely all of us) question whether we are able to do something that will significantly impact our lives - take a trip, buy a house, quit our jobs etc. - the most common question is if we can afford it, financially speaking.  When I decided to leave my paid employment to stay home with the kids, a number of people pointing out the savings of not having kids in daycare.  Fortunately, I had a financially lucrative enough job where working, even with three kids in daycare, would have been a net positive for our bottom line.  Thus deciding to stay home with the kids made us examine how we could scale back some of our other expenses to make it feasible.

Like probably 101% of the rest of the working world, my wife and I are eagerly looking forward to the day when we can actually retire.  And not in the way that I commonly utilize the term.  Like a number of other working professionals in their mid-30s, we've become increasingly intrigued by the FIRE Movement, which stands for Financial Independence, Retire Early (for those who don't follow the numerous FIRE blogs).  The concept can take on a number of different looks, but the underlying premise is to get to a point, preferably sooner than later, when you have amassed a savings where the annual rate of return would cover your annual living expenses.  This makes you financially independent from paid employment and you can choose to work if you'd like, but aren't dependent on a paycheck to cover your day to day operating budget.  To reach this magic savings number, more or less those numbers people carried around in that ING Commercial, you can increase your earnings, decrease your expenses or a combination of both.  Hit that magic number, and you're considered "on FIRE", just like draining three straight shots in NBA Jam.

While the FIRE Movement has become a more recent phenomenon, and is particularly popular with a certain subset of Millenials (kids these days....), the concept is certainly not novel, and the "FIRE Movement Bible", Your Money or Your Life by Vicki Robin, was originally published in 1992.  In the book, Robin views our relationship with money as ongoing transactions of our life energy.  When we work, we are exchanging our life energy for the compensation that we receive for doing that job (and, as Robin notes, likely not accurately accounting for all of the other things that go into our job that also take our life energy).  When we use the money we are trading the life energy for the product or service that we purchase.

If you find yourself adhering, or attempt to adhere to the FIRE Movement, a natural phenomenon is an intense scrutiny of your finances.  In her book, Robin encourages those interested in reaching an early Financial Independence to track every single cent that goes in and out.  This provides a basis for which you can better understand how much money you earn, where that money all goes, and how you can make the appropriate changes to reach FI (financial independence) as soon as possible.  It's a daunting task, and can seem downright insurmountable if you are in the midst of raising children and continually assaulted by the child-rearing industrial complex that begins during pregnancy, continues from infancy, and exacerbates into emerging adulthood - a development phase that seems to get longer and longer.

Most parents are familiar with the oft-cited statistic that it costs on average north of $250,000 to raise a child from birth to age 18, not including any educational expenses.  In reality, barring any major medical expenses, raising a child can cost as much or as little as you want it to.  But it will certainly cost at least something - that $250k figure is considered basically the essentials; food, shelter, clothing, etc.  Some FIers, like one of my personal favorites who sports facial hair to compliment his financial blog name, suggest waiting to start a family until you reach financial independence.  If you are hoping to raise your kid(s) on the more cost effective side (a polite way of saying cheaply), it will take some intense and constant push back against the normative culture of conspicuous consumption that is constantly among us, and shines particularly bright this time of year.  And not necessarily in a good way.

As a free willed adult, bucking the "earn, spend, repeat" cycle isn't too hard to do, if its something you think will be beneficial to your general well being.  My own personal foray into the world of frugality, voluntary simplicity, minimalism, forced poverty, whatever you want to call it, stemmed heavily from my semester abroad in college.  Having amazing experiences while living out of a backpack, cycling the same few material items on a daily basis, helped me realize that there is much more to life than the acculturation of stuff.  I returned from that semester vowing to avoid owning anything nice enough that someone would want to steal.  As I've transitioned to parenthood, this notion seems in line with the idea of not being able to have nice things because your kids will inevitably break them or color on them with permanent marker - like our middle child just did to the back seat of our van a few weeks ago.

Explaining a radical concept like this to kids though, or trying to help them understand why the adult figures in their life are so obsessed with maximizing the personal value of their expenditures, provides its own unique opportunities and challenges.  Adolescence is essentially defined by comparing yourself to others, and a bulk of those comparisons revolve around socio-economic status.  Even though most kids (and probably a fair number of adults) likely have a hard time defining what "socio-economic status" is, they can certain recognize who wears the brand name clothes, whose parent drives the new car, and who lives in the biggest house, while consequently assigning values of coolness and popularity based on those observations.  The notion of defining your self worth in comparison to others grows with us into adulthood and sets the stage for the struggle of "Keeping up with the Jones" or the Kardashians, or whatever the last name is of the family everyone you know seems to materially aspire to.

The underlying concept of Financial Independence, as per Robin and other FI advocates, is to establish a better relationship with money.  One where your money works for you, as opposed to you working for your money at a job that sucks more of your life energy than you are willing to give.  While the FIRE movement might have the words Retire Early in the acronym, the notion is to really allow us the financial freedom to expend our life energy however we feel most satisfying.  This might be working a traditional job, it might be volunteering, it might be sitting on a beach drinking Mai-Tais if you so choose.  While sitting on a beach enjoying cold beverage sounds like an ideal retirement, and really wouldn't require a lot of savings to sustain, most people would recognize that you can only do that for so long.

For my wife and I, one of our main impetuses for trying to reach an "earlier-than-we-originally-expected" financial independence is to have more flexibility to make memories and build relationships with our kids, each other, and those who are meaningful to us.  While we were certainly not financially independent when I "retired", it was a similar thought process.  Adjusting our financial needs to allow us to live the life we wanted to live, while continuing to plan for the future who hoped to have.  We are incredibly fortunate that my wife's compensation allows us to live a more than comfortable lifestyle while also considering a concept like early financial independence.  We could take a much more aggressive approach to catching FIRE, and we personally know others who have, but we've consciously made decisions to live well within our means while also placing value on what is important to us as a family.  Hopefully hashtags will still be a thing when we finally do get to use the clever one my wife thought up, which serves as the subtitle of this post.  

In striving for financial independence, I hope that we are modeling a healthy relationship with money for our kids.  Helping them to establish an early pattern of saving, and sharing, what they earn (through chores or lost teeth) and consciously thinking about every purchase they make and how it impacts their financial future.  We're not reviewing profit and loss spreadsheets or making them understand the components of compound interest (yet, at least), but we try to be open about our finances, and money in general, as much as we can to hopefully help them understand its finite-ness, as well as the positive and negatives that come along with earning it and spending it.  As challenging as it is for adults to grasp the notion of delayed gratification, especially given that the average American carries approximately $6,000 of credit card debt, I hope our kids develop healthy financial habits early in life that will continue into adulthood - and likely make them less financially dependent on us when they are out our their own.

I recognize that one of the main reasons we as a family can even consider a concept like an "earlier than stereotypical financial independence" is that both my wife and I were blessed to have parents who worked hard to provide for their families, while subsequently modeling healthy financial behavior.  Anyone can achieve financial independence (and hopefully all of us do at some point in our lives), but we certainly started in a much better place than those who struggle to cover the essentials - food, shelter, etc.  Neither of us came from particularly wealthy families, but our parents worked hard to provide what they could, while laying a framework for us to be better off economically than they were if we followed their examples of hard work.  They clipped coupons and patched up our clothes.  They saved for us to pursue educational opportunities that would allow us to find gainful employment. They sacrificed so that we could have the chance at a better life than they did.  This privilege is certainly not lost on us, and it's a particularly salient point for me, as my parents are closing in their own retirement dates at the end of this month after 40+ years of working to provide for my sister and me.

For those who were not provided that same level of privilege during their formative years, the thought of socking a bunch of money into a tax-advantaged investment account with hopes of an early retirement can seem comparable to proposing a trip to Mars.  I believe that our inability as a society as whole to live within our means, and the collective cultural desire to consume more perpetuates the wealth inequality that currently exists and continues to increase.  If we can't identify when we have too much, we likely can't identify when we have enough.  And because we never feel like we have enough, it leaves others trying to scrape by considerably less than enough.  We fail to recognize the needs of others because we are too consumed with the pursuit of getting what we think we need or deserve, based on what the advertisements and social media posts tell us.  This creates the conundrum posited by one of my favorite late 20th century philosophers, Tyler Durdin, "we work jobs we hate so we can buy shit we don't need."

It's not a proposition I'm too interested in entertaining, and not something I would wish upon my kids either.  Nor do I desire that our kids become "entitlemaniacs" that expect toys with every trip to the store, or excessive numbers of presents at every birthday and holiday.  Not that getting your kid a gift for their birthday or Christmas is going to turn them into a self-centered narcissist, but if we want our kids to become caring and empathetic individuals, who are more likely to succeed in life, we at times need to exercise some restraint.  And often the best of intentions can lead to the unintended of consequences.  Sure it can be challenging to ignore the constant whine for something a kid desires, be it a new toy, candy, or more screen time, but if you've ever shuttered inside while observing your child flip through a toy catalog and point out what they want, which happens to be everything in the catalog, there is no time like the present.  It's okay to say no to your kids.  I'm guessing your parents said no to you, a lot.  For some odd reason, this concept often becomes lost on grandparents.  

I recently saw a social media post that chastised parents who bought their kids elaborate gifts from Santa - iPads, ponies, etc.  By doing this, the author of the post argued it created a sense of inadequacy in those kids whose families did not have the means to give those gifts, much less make them seem like they came from "the big fat man with the long white beard".  Hard for a well behaved kid who comes from a family below the poverty line to comprehend not getting the iPad he asked for from St. Nick when his "top tax bracket AGI and in the principal's office every other day" classmate got a new one to replace the one that was in his stocking last year.  Attempting to level the Santa Gift Playing field is a noble endeavor - maybe we should require a $20 gift limit like the office Christmas Party White Elephant gift exchange.  Another option though, would be to raise kids who don't make exorbitant requests to a fictional senior citizen who is supposedly able to deliver gifts to the 1.9 billion good girls and boys of the world.  Of course we could always come clean come clean on the whole Santa business. It may seem a bit cruel, but is it much crueler than Santa "bringing" some kid from the Naughty List a pony and a kid on the Nice list a pair of socks?   

     

Add "Hey Santa, we've been really good this year. 
Can you bring us a 25% return on our the family index fund?"

Now, if you are one of the (few) regular readers of this blog, you might be getting ready to throw out your hypocrisy flag.  Dude, didn't you take your kids on a trip to one of the most expensive countries in the world this past summer.  And aren't your girls involved in one of the more financially committal after school activities.  You are 100% correct, and the dance thing I struggle to rationalize at times.  But trying to become Financially Independent is not about doing everything humanly possible to not spend money.  It's not about dumpster diving or going around to everyone else's table at a restaurant and asking if you can take their leftovers home.  It is about making conscious efforts to reserve your financial resources predominately on what you believe adds value to your life.  It's also about preserving the resources that you have in effort to not be wasteful, while considering how fortunate you are to have basic necessities; food, water, shelter, that others wish for dearly on a daily basis.  

Pursuing financial independence doesn't require extreme deprivation now so you can achieve a certain state of nirvana when you finally catch FIRE.  In fact for Christmas this year, we opted to purchase a family ski pass to our local ski hill as our main present to the kids (and ourselves).  In the end it will undoubtedly be more expensive than purchasing them a variety of toys and clothes, especially factoring in the number of hot chocolates we will inevitably purchase throughout the season.  But it was a purchase we felt comfortable making, knowing that the memories we make as a family will beyond exceed the cost of the pass.  And hopefully not yield any subsequent ER visits.  

My wife and I have commented that not much will likely change with our lifestyle when we reach financial independence, despite our ability to have more time to do those things we really love.  We've already make conscious efforts to integrate those things into our life, and have taken the necessary steps to make them as feasible as possible.  As the adage goes, if you are waiting for retirement to do "all the things", the likelihood of you actually doing them upon retirement are pretty slim.  For this reason, we often conflate what we actually think we might need to reach financial independence and free ourselves from the burdens of needing to work for a paycheck.  Also for this reason, I have zero qualms ponying up $500/kid to take them on a worthwhile family adventure, but might think twice before springing for a new $15 backpack each school year.

You best enjoy that turkey and cheese croissant courtesy of Delta Airlines.
Food in Iceland is expensive.

Like most things, financial independence or actively seeking financial independence isn't for everybody.  Although, I have a hard time believing that statement myself.  I think we would all enjoy having a certain level of financial independence, but fewer than all of us are interested in taking the necessary steps to actually achieve it.  And some of us have gotten so steeped in the conspicuous consumption culture, that we've come to terms with the fact that we will spend the bulk of our living years working to sustain that lifestyle.  The sad irony is making that choice tends to lead to a life filled with an excessive amount of stress.  Stress about never having enough money to cover all of the expenses.  Stress that comes with having too much stuff in your possession which creates too much clutter in your life.  Stress about never having enough time because you are busy working a job to cover the various expenses that come among with those possessions that are likely adding stress and clutter to your life.  I may not get out much these days, but I've never met someone who has consciously decided to live with less who seems on edge about life.     

It's little wonder why this time of year, where we often spend excessive amounts of time fretting over the perfect gift for that special someone or that perfect outfit for that important holiday party, tends to be equally the most wonderful and stressful time of the the year.  Yes, I used that exact phrase before, and will undoubtedly use it again next year in a post.  But we all know that it doesn't have to be that way, and we all know what the true reason for the season is, even if our collective actions tend to indicate otherwise.  Of course a certain amount of stress is to be expected around the holidays, and the concept of overcoming that stress can feel rewarding in its own way.  But if you are stressed out about what to get your kids for Christmas, if you get them anything at all*, consider pondering this question;  "If money wasn't an issue, what would I get them for a gift?"  Sure the answer might be abstract and likely unattainable, but that will guide you in the decision making process.  If money wasn't an issue, I'm guessing a bulk of us wouldn't buy our kids what we will inevitably end up buying them.  It seems crazily counter-intuitive that we would buy these things with a limited budget, just for the sake of them having something to open on Christmas morn.   

If you are looking for gift tips that might skew more to FIRE Mentality, you are welcome to revisit my post from two years ago.  You certainly don't need to get me anything, but if you would like to, you peek at my SAHD Christmas List from a few years ago.  Four years later everything is still very relevant.  But seriously no material gifts necessary.  Peace on earth and goodwill toward women and men is more than enough.

And now my gift for you, as if my meandering preaching wasn't enough.  If you are at all interested in more concrete concepts of FIRE or financial independence, or just interested in trying to simply your life (which typically results in a healthier financial situation), here are a few recommended resources:   

Your Money or Your Life by Vicki Robin - essentially the FIRE Bible, and complementary website to bring it to the 21st Century.  Philosophical and practical advice all wrapped into one

Voluntary Simplicity by Duane Elgin - this book was my personal introduction to the voluntary simplicity/minimalism movement, which is very congruent with a FIRE Mentality.  Pretty heady, but lots of practical advice and nuggets of wisdom from those who have chosen to live with less.

The Minimalists - Two guys who made an award winning documentary, wrote a couple of books, and host a podcast about their journey into Minimalism and advocate for a simpler life.

Meet the Frugalwoods - Another great book (and blog) about a couple's journey to Financial Independence.  The book is a great read with thoughtful and honest insight.

The New Frugality - A book by one of my favorite public radio economics editors.  It provides a very useful overview of how to become smarter with your finances without needing a CPA.

Mr. Money Mustache - A great and humorous blog from a guy (and his family) who achieved early financial independence in somewhat typical FI fashion - well paying job, aggressive savings and investment.  Very candid and explores a number of well thought out topics that can help make sense of FI, how to get there and how to life a good life once you do.  


*Kudos to you if you do a buy nothing Christmas.  We're not there yet, but someday hopefully.  #firegoals