Aren’t you missing out?
Isn’t it a big sacrifice?
Isn’t it a bit miserable living like this? You’re only young once!
All of these, and variations on the same theme, are questions we’ve been asked before. It is to FIRE aficionados what “but what about cheese?” is to vegans. For most people, the concept of deliberately trying to live off less than a third of your monthly income seems a bit boggling. Surely, they believe, it must involve huge levels of comparative deprivation. As one friend said recently, when asked why they needed three holidays in one year, “I’ve got to have fun!”
The question comes up a lot, and it’s very tempting to point out that you do still have fun, but frugally. It’s a response that we often actually give. “Sure, we love a cocktail, but we make it for a seventh of the price at home!”
But to look at it from a different angle, there’s some truth to the premise - we are making sacrifices. The thing is, the sacrifice (which is the visible part of the iceberg) is only part of our story, and to see it as a sacrifice requires you to accept a particular world view.
So we’ll answer those questions a different way today, which is to say, “we’re all making sacrifices, and at the same time none of us are.”
It’s all going Sowell
They’re not the kind of books we’d review on the theme of happiness, but we’ve been enjoying a fair bit of classic economics lately. Sowell and Hazlitt will leave you with two clear principles: everything is a trade off, and it’s easy to focus on visible results while ignoring invisible ones.
Why bring that up? Well, someone spending all their salary each month sees someone spending half their salary and says “they’re missing out, they don’t have [this latest gadget] or they’re not visiting [this fancy bar]. They’ve had to sacrifice that for their savings rate - they aren’t having fun.” When that’s most people’s experience, fair fair. Most people we know live pay-cheque to pay-cheque and don’t see anything wrong with doing so.
But from the opposite perspective, half of that salary is going towards something unseen. We’re buying security, options, lower financial stress, flexibility and ultimately a kind of freedom. From this perspective, the regular person has had to sacrifice that in order to maintain a lifestyle full of treats and the latest gadgets. The picture is obviously different for those for whom there is no room in their monthly salary for anything other than the bare necessities - people for whom everything is stripped right down and there’s still too much month at the end of their money. But those aren’t the people who are asking (and, arguably, judging) us about our spending habits.
Perspectives and standpoints really do have an impact. When you’ve internalised that spending all your monthly salary is normal; that multiple holidays a year are normal; that having the latest, coolest tech bought on credit is normal, then of course you think ‘who the hell can retire at forty-five? Only millionaires, lucky people and lottery winners.’ But outside of those spending paradigms, you can see how a regular person can save a third of their salary and build that up over time. Every two years worked covers the cost of a third year at leisure. By understanding FIRE methods and perspectives, you can understand why people put in the extra effort in their career, or drastically shrink what they spend each month, not to buy the most expensive car they can, but to save 50% of their salary and escape the rat race that little bit earlier. These paradigms and perspectives matter; they have real impact on what is normal behaviour and what is extravagant, peculiar or questionable.
Our grandparents would find our level of consumption, holidays and technology baffling or superfluous. C’s grandfather on one side was an accountant, and his advice was always the fifty-thirty-twenty rule. Fifty percent of your salary goes on essentials, thirty on savings, the remaining twenty is for fun. We’ve just shifted the percentages around a little more.
Neither of these perspectives is necessarily right or wrong, it’s a matter of perspective and priorities. We probably sound like sanctimonious cows right about now, but the thing is, when someone sees us shrinking our spending now, in the current year, they see comparative restriction. What they don’t see is ten years down the line, in the life we’re planning for. And it’s hard to point that out without sounding like you’re judging people. We ain’t judging, but we would like to end the “you’re sacrificing a comfortable life” trope here…
To bring it back to Sowell and Hazlitt, in economics you use money for one purpose or another purpose, but it can’t be used for both things simultaneously. It’s all a trade, and it’s all a trade off.
Or in other words, everyone is making sacrifices, and at the same time, no-one is.