Most people pursuing FIRE have knowingly or unknowingly defined a strategy.
The strategy often have a few quantitative and qualitative goals such as:
- I will retire when I am 35 with $1,000,000 in the bank
- I will retire when I am 35 to spend more time with my kids
Most people calculate their financial independence number as a strategic goal.
The strategy to reach the goal is often defined as a few initiatives coming in many shapes and forms:
- I will save 50% of my income for the next 10 year
- I will increase my income by 10% each year
- I will start spending time on things that really matter and cut down on things that don’t give my energy
Now, having a strategy with clear goals is great, but…
Your FIRE strategy is not going to work
I’m 100% sure your FIRE strategy won’t work.
How do I know this? I make strategies for Fortune 500 companies for a living.
Here’s the truth: I have never seen a strategy and its goals come 100% true.
This is why I am 100% sure your strategy will not work.
Why your FIRE strategy will not work
The reasons why strategies don’t work for companies is that:
- The economy is changing constantly
- The political landscape is changing constantly
- Consumers’ preferences are changing constantly
- Shareholders’ preferences are changing constantly
- The Earth is changing constantly
With so many things changing all the time, how can companies realistically create a strategy for the next five or even ten years that will not change?
It’s the same for people like you and I who have a FIRE strategy:
- The markets and the returns we rely on are changing
- Our jobs are changing (for better or worse, to being fired, hired or headhunted)
- Our families are changing (growing or shrinking)
- Our passions and hobbies are changing
- We grow smarter and our priorities are changing (yesterday hanging out with friends was most important, now raising a family is more important)
You see? The world is not as static as our FIRE strategies make them.
You don’t need to find the perfect savings rate of 43.28% or safe withdrawal rate of 3.28%. You don’t need to include future expected tax rate changes. You don’t need to (and you can’t) forecast the markets other than using historic averages. You don’t need to precisely forecast your future expected spending. Why? Because you can’t and it is a waste of time.
You just need approximate numbers to set a goal. Don’t spend too much time on it. Set the goal and update it yearly.
Big Fortune 500 companies understand this when we create the strategy at the C-level. Eventually though, the finance department will turn those calculations into a 100,000 row Excel document.
You will not make this mistake. Make sure your FIRE strategy goal is dynamic and understand you can’t forecast it precisely.
If you don’t do this, you end up being precisely wrong rather than approximately right. You also end up wasting a lot of life energy that could be used on something better.
Why you still need a strategy
Even though your FIRE strategy won’t work, you still need one.
My clients always understand this. I always tell them when we develop the strategy that it will not work. At least not every part of it. That is the point of a strategy.
A strategy is perfect for understanding how to get from A to B.
You still need a quantitative and qualitative goal.
You still need to define initiatives for how to reach the goal.
You just need to understand that it will not be straight line from A to B.
Just as the world around you, the direction of that line will be non-linear and change many times. Even the goals will change.
As long as you have an idea about the direction and how it can change, you will end up in a good place. Even though it will be different than what you initially expected. As someone wise once said: “Shoot for the moon. Even if you miss, you’ll land among the stars”.
Let’s raise our glasses to dynamic strategies based on always changing approximate goals and flexible initiatives.