What makes someone working toward FIRE (Financial Independence Retire Early) different from others is that:
We are prepared, or should be.
That we have a plan that is sound, or should.
That we have a community that is supportive, or should be.
That we are strong enough to make difficult decisions when others panic, or should be.
That we are patient when others are anxious, or should be.
That we are proactive, or should be, when others are reactive.
That we are confident, or should be, when others are doubtful.
I get that this current shock to the economy and to our lives, is unusual, and that this time is “different”, but the same was said about the Great Recession in 2008, which I, along with many others in the FIRE community, weathered just fine, though we may not have felt fine at the time. Those who did succeed during that time did so because of the items listed above. They had a plan, stuck to it, and didn’t panic.
Others who may not have fared as well initially, who lost their homes, their life savings, still recovered over the years if they learned to embraced the FIRE tenets above.
Others said the crash of 2000 which consisted of three down years, 2000 the Nasdaq was down 39.29%, 2001 down 21.05%, and 2002 down 31.53%, was different, and yet I and others who had time on their sides, who didn’t panic, and who stuck to their plan, and made difficult decisions, were just fine. Yes, this time is different, and so will next time be different. If there’s one thing we can count on is that each time is very different.
The questions and comments I’m seeing on FIRE forums and groups, about this drop in the markets, about the financial fallout of the pandemic, are showing me that many are forgetting the basic advice that supports the concept of FIRE. These questions are similar to what a scared child would ask about the dark. Are there monsters under my bed (can my investments go to zero), can someone get me while I’m asleep (will there be a run on banks)? These questions and comments don’t come from a place of confidence and well thought out plans, they come from fear.
Instead of wondering if those things can happen (and yes they are real questions I saw) or if this is the bottom or if stocks can fall further, stick with your plan. If your plan was to simply continue contributions in your 401k as usual then do that. If your plan was to deploy saved cash during the next downturn, well, here it is, do that. If your plan was to stop all investing and wait and see what happens, then do that. It’s your plan, and only you can decide if it’s right for you. But if your plan was to figure things out when the time came, or your plan didn’t take into account the possibility of job loss, then you didn’t have a plan at all, and it’s important to recognize that as well.
Don’t get me wrong, I’m not saying that everyone who wants to follow the FIRE path, or who just discovered the potential and power in this endeavor, should be immune to the virus, not Covid-19, but the virus of fear, but I am telling you to listen to your own advice, listen to the things that attracted you to this movement in the first place. Calm, calculated, and deliberate actions when others are panicking.
It is not the plan for the expected outcome that saves you, it is the plan for the unexpected outcome that does.
I understand those just starting on the FIRE journey may not have their emergency fund fully funded, but I’m seeing people who have been around the various FIRE forums and groups for a long time panicking when stocks were falling off the cliff. I’m shocked at how many people who say they’ve been following the FIRE path are already having trouble making rent or mortgage payments, or who are anxious for the government bailout money.
So, let’s talk about the FIRE way to approach this whole pandemic panic. Each of the topics will be a post unto itself in a series I’m calling “Spread the FIRE Virus.”
- Assess your plan and determine if it still works or if you need a new plan
- Balance time and position. How much time do you have to recover and how much position have you lost?
- Determine what surprised you about the way this shock affected you and/or your finances and investments and modify your plan if necessary.
The above issues are just the start. If you have questions or concerns you’d like to see me address, then leave a comment and I’ll add it to the list. Let’s remember why FIRE attracted us, and work to build on that rather than tear it down.