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We can’t work forever
While you may think of investments as something done by the rich or financially-oriented, you yourself are likely an investor. All it takes is for you to have a pension fund.
Many countries actually require residents to deposit part of their salary into a pension fund, which serves a dual purpose. First, it forces people to save part of their income, which they would otherwise spend. Second, it preserves the value of that money against inflation by investing it in different channels.
Hence, a pension fund is your country’s way of ensuring you’d save enough money to cover your living costs between the official age of retirement and the moment you die*.
Taking investments a step further
Some people see greater potential in investments, as a way to grow the amount of money available to them before the official age of retirement. These people fall into two general categories.
First are those looking to get rich and live a luxurious life. Personally, I’m not very interested in luxury, and don’t believe that common investments are the way to get there. It’s nearly impossible to generate a high income through monetary investments alone; rather, people become rich through entrepreneurship, business deals and hard work.
Then there’s the other kind of investors – those seeking “FIRE”: Financial Independence and Retiring Early. Their goal is to generate enough passive income through investments to cover their living expenses, so that they wouldn’t have to work. It’s like putting your pension fund on steroids in order to enjoy retired life as soon as possible.
FIRE isn’t about making money
Don’t get me wrong: FIRE seekers aren’t lazy, nor do they expect money to fall on them from the sky – they still have to work for it. Making money is simply not their goal, but a means to an end.
It’s a life philosophy that has little to do with money and work, and a lot to do with freedom and leisure. It’s about not being dependent on your boss or customers. It’s about seizing life when you’re still young, and having more time for friends and family, hobbies and personal projects.
I started investing at an early age, but it wasn’t until many years later that I realised why I was doing it, and learned what it’s called. I’m a FIRE seeker.
…and it’s not for everyone
Anyone seeking early retirement has to face a simple truth: It’s not enough to earn more; the key is to spend less. This is true whether you’re still working and saving up money, or already “retired” and have to limit your expenses to less than what you make from investments. If you’re unwilling to compromise on any “quality of life” expense – FIRE isn’t the right mentality for you.
That being said, you can start investing even if you don’t plan to leave your job. The extra cash can be used as spending money, or to allow extra flexibility: You’ll be able to work less, or be more selective about the projects you take. It doesn’t have to be an “all or nothing” scenario.
If you do seek financial independence – educate yourself a bit about how to spend less. My blog won’t go into depth about this subject: First, because I don’t feel qualified to tell others how to manage their expenses, and second, because it’s not very interesting. Google the term savings rate financial independence and you’ll know as much as I do. Bottom line: Save as much as you can without feeling too bad.
Investments and Colminey
Investments are among the core topics of this blog, as well as my path towards financial independence.
Remember: There’s no smoke without FIRE!
* The concept of pension funds is considered increasingly problematic due to the elongation in life expectancy. Sooner or later, everyone would have to either work until an older age or invest more aggressively to generate enough money to last through their long lifespans.