FIRE (Financial Independence, Retire Early) Misconceptions

I recently came across FIRE: Financial Independence, Retire Early, got interested and reading about it found some misleads and not-so-true claims, not in the theory but in posts and articles about "success stories", and wanted to dump my thoughts on the subject.

Most definitions (sample) include the two critical pillars that support this movement: savings and investment. FIRE is about earning money, then spending part of it to somehow have passive income source(s), so that you don't need to work. To not actively work at least.

And precisely in the "passive" adjective is where I see the problem, because seems to be either confused or just switched with self-employment (probably to click-bait, because profiting from blog posts or related books is an income source too 😉). Let me showcase two examples:

a) Stock Investing: If you invest passively, you contract an investor, a fund or any similar broker that deals with your assets and generates you income. If you actively choose the stock, what to buy, when to sell, check markets, etc., then that's actual work, it's active work. You became a small stock trader.

b) Real state renting: If you invest passively, you buy a house (or more), then contract someone to handle the management (repairs, finding tenants, etc.) for a fee. If you're the one in charge of any problem/repair, even if it's just calling the insurance company, then it's not passive, it's an active job (a property management services company of one). This is easy to notice if you get more work each property you add, if it's passive shouldn't have any effect other than regarding money.

Yes, I've read there are variants of FIRE in which you keep a part-job, but then that's not early retirement, it's partial retirement.

Until recently I had for a few years a small property that I rented and, while it mostly required low attention, when there were issues it did require time and effort, and sometimes totally understand why there exists services that handle these scenarios and wonder if should have taken that path. I didn't just because overall was easy to handle and near my home.

This is just my subjective interpretation, but few things in life are really free.

Freedom to spend your time while earning income usually has a cost, often in the form of somebody taking care of some assets, ensuring an income and dealing with any issue that might happen.

by Kartones @ 2020-11-01

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