How A Bear Market Impacts The FIRE Movement

How A Bear Market Impacts The FIRE Movement

When I started writing about achieving financial independence in 2009, there wasn’t a lot of hoopla. We had people mainly discussing how they were building large enough investment portfolios to sustain their early retirement lifestyles. There was a thorough discussion and analysis of these investment portfolios.

Sure, there were some interesting folks who went to extreme frugality, like living on a boat, to try and retire early. But for the most part, everybody was focused on building enough passive income to genuinely retire before tapping their 401(k), IRA, and Social Security.

By the end of 2021, the definition of FIRE had strayed away from building up a large enough investment portfolio to the definition of FIRE becoming anything and everything. Everybody was FIRE if they just said so.

So on January 2, 2021, I tried to see if I could move the dialogue back to center by writing, Why I Failed At Early Retirement: A Love Story. By declaring myself a failure, perhaps others might feel OK to admit the same. Alas, nobody joined me. I was left for dead like John Snow battling a hundred horsemen.

Besides getting back to FIRE’s origins, in the post I admitted that my passive income would be severely tested in a couple years due to rising health care and child care costs. Further, I discussed the need to boost our wealth to buffer against an impending downturn during the same time period.

Unfortunately, after I published my post on January 2, I did not anticipate how quickly the bear market would arrive. As a result, roughly 20% of my net worth got blitzed. I’ve since increased my equities allocation to 25% of my net worth based on my stock market bottom analysis. But only time will tell if I made the right move.

As the stock market was cratering, I reached out on Twitter to see if anybody would like to share a FIRE confessional. Surprisingly, several people did. Here are their stories. I’ve changed some of the details to protect their identities.

FIRE Confessionals In A Bear Market

Trying To Make Working Moms Proud

As a working mother of two with a stay at home spouse, I was caught up in the FIRE movement because it felt empowering. The people featured in the FIRE movement tended to all be white male engineers. As a breadwinning mom, I wanted to show the world that women could be a part of the FIRE movement and be FIRE too.

I threw my hat in the ring and interviewed with a major media outlet to share my story. It was thrilling! But what I never shared with anybody were our financials. If I had, readers would have thought that I was just another working parent. I didn’t want to let down my fellow breadwinning moms.

Now that the stock market is down a lot, I don’t see myself retiring for maybe another 15 years. It’s too risky for me to retire before my youngest graduates from college. However, I’m still enjoying being a part of the FIRE movement.

Creating An Image That Isn’t A Reality

I presented an image where I was just enjoying life and traveling around America and the world. I liked to tell people that I was a millionaire by 32 because I thought it would help motivate people to do the same if they really wanted to.

The truth is, I was depressed and felt like I had no purpose. I had been chasing money non-stop for 10 years out of college, sacrificing friendships and my love life. I was burned out. I also gained over 60 pounds in these past two years.

Despite putting up a front that I was FIRE, I have been secretly working 50+ hours a week trying to make money online. I even hired a team of five ghostwriters to help me churn out as many money-making affiliate articles as possible. The strategy isn’t working now because search traffic is down. But hopefully things will come back.

At 34, I’m technically no longer a millionaire because the value of my investments has declined. But I plan to make the money back and then some.

A Need To Be Recognized

For years, we’ve been sharing what it’s like living a fabulous early retirement lifestyle. For the most part, life is pretty good. However, my wife has this type of “high school revenge fantasy” where she’s on a mission to show off our lifestyle to prove all her haters wrong.

FIRE is bringing out a side of her I didn’t really know existed.

I want a low key lifestyle, but she just wants to be on TV, podcasts, and write about us in big publications. It’s kind of embarrassing. Every time I try to tell her she’s good enough and doesn’t have to do all this publicity stuff, she snaps back that I’m not being supportive. We’re retired! Why do we need all this attention?!

Sometimes I wish we could just have children to focus our attention inward, not always outward. But we’re a little too old now. I’m working part-time so we can have more space. At least we’re having a lot of heart-to-heart conversations during the lockdown.

Only The Positives Will Be Seen

It feels like everybody in the FIRE community is just faking it. Everybody is putting on a brave face and nobody seems to be hurting.

When the market was going up, I tended to tell people how much I made. Now that the market is down, I highlight how much cash I have. If people ask me about my investments, I just tell them I’m a long-term investor.

I had about a $1.5 million net worth with $1.1 million of it in the stock market, $350,000 in my house, and only $50,000 in cash and bonds. My $1.1 million is now down to about $800,000 and it is making me seriously depressed! I’ve got a couple kids as well.

I pray my stock investments don’t get cut in half. I’m thinking about selling a lot of stock to de-risk in the rebound. But what if I sell and then the stock market continues to recover? This market is driving me nuts!

Never Going To Retire Early Now

I’ve been a member of the FIRE community for about five years, and I’ve grown to find it insufferable because of so many self-righteous people who can’t help but rub their money and freedom in our faces. Then there are those who virtue signal all day long, yet don’t actually do anything themselves.

The FIRE people love to show off their growing net worths each month and I’m glad many of them are getting hammered in this market. There is this one person who recommends everybody be transparent with their finances. But when you ask the person to reveal their finances, they don’t share a thing. Absurd!

I want to have financial freedom too. I’ve lost about $150,000 in the downturn so far. But if I eventually amass enough money to retire early, I’m not going to shout from the rooftop how I’ve got so much money.

Related: The Negatives Of Early Retirement Nobody Likes Talking About

Not FIRE, But Teaching About FIRE

We’re not close to FIRE, but we’ve positioned ourselves as FIRE experts because we don’t look like the typical FIRE person living in the Midwest.

We’re using our likeness to build a business around FIRE – coaching, writing, speaking, etc. My partner just quit her job so we need to make this business work. Unfortunately, the bear market has slowed business way down. There are no more speaking gigs because there are no more conferences. Freelance writing opportunities have also dried up. Nobody wants to spend money on coaching either.

Yeah, it feels a little off positioning ourselves as FIRE experts without being financially independent yet, but you gotta do what you gotta do. We’ll eventually get there, so it’s all good.

I Didn’t Leave My Job On Purpose

I got let go from my job several years ago after 15 years at that damn place. It really wrecked my ego. Thankfully my old employer gave me a decent severance package. So, instead of telling people I got let go, I just tell people that I retired. It makes me feel better, and technically I can say that I am retired since I don’t have a full-time job.

I’m thankful my wife has a job to provide us subsidized health care. We only pay about $600 a month for a family of four. I know my wife would rather work part-time and spend more time with the kids, but after this downturn, it’s best she keep her job until the clouds part.

My Number Was Too Small

I had a goal of retiring at age 35 with $600,000. By saving aggressively coupled with an expected 8-10% rise in the market, I thought I’d get there by the fall of 2021. Unfortunately, my retirement portfolio is now down to about $450,000.

Some have asked how I was planning to live off only $24,000 a year using a 4% withdrawal rate. It’s not that hard when you’re frugal, don’t have cable, take public transportation, and don’t have kids. I also had some freelance opportunities.

The thing is, I also have a partner who will continue to work. We’ll split all the bills and he has a relatively flexible job. A $24,000 lifestyle is only for me. Combined, we’re living closer to a $50,000 a year lifestyle.

So long as my partner keeps his job, I think I’ll be alright. However, if the stock market doesn’t rebound, I’ll probably have to work for three more years. Retiring at 38 is not the end of the world by any means.

We Miss Our Friends

I retired in 2021 with about 70% of my portfolio in VTSAX, the Vanguard Total Stock Market Index Fund. The rest of my investments were in various bond funds. In retrospect, I should have been more conservative. But my portfolio was only down about 18% when the S&P 500 was down 30%, so it’s not so bad.

What I’m realizing now is how much we enjoyed living in New York City. Once I left my job in early 2021, my wife and 8-year-old son decided to go on a road trip for a month. We then decided to rent a home in Jacksonville, Florida given the cost of living was much lower. Unfortunately, we’ve found it difficult for all of us to make friends. We miss the food in New York City, the diversity, the buzz and our friends and relatives.

Don’t get me wrong, we enjoy our freedom. However, maybe I should have kept working for several more years to save more money. I was making about $350,000 a year. I’m going to give early retirement a go for one more year and then reconsider my options.

The FIRE Movement Will Continue

If you are part of the FIRE community, I encourage you to share your failures, overly optimistic assumptions, or missteps. It feels great to get things out there. Nobody is perfect. Even the best plans go awry.

Very few people could have seen the coronavirus coming. Even if you did, I don’t think you would have expected governments to force most businesses to close for an indefinite amount of time. The speed of the downturn was breathtaking, which makes me hopeful that the speed of the upturn will be faster than normal.

The one consistent theme from all these FIRE confessionals is that everybody is keeping the faith. Like me, they are hopeful things will recover. The more time we spend working on our finances now, the more prepared we will be when disaster strikes.

I also expect there will be a lot more humility in the FIRE community after the worst is behind us. It’s easy to confuse brains with a bull market. Not being humble is one way to destroy your finances.

For people who claimed to be FIRE, but simply switched careers to earn money, the lockdowns are particularly difficult. Depending on how badly things get, there could be a winnowing as some people give up their FIRE identities.

Finally, I believe the FIRE movement will continue to grow because millions more people will be looking to improve their finances. When you are caught in a dire situation and survive, you tend to do everything possible to never go back to the way things were.

My plan is to continue encouraging folks to build up their after-tax investments after maxing out their pre-tax accounts if they truly want to FIRE before 60. Having enough investment income to pay for your desired lifestyle is the appropriate definition of FIRE in my book. Once you get there, I promise you will no longer feel like an impostor. You will also feel free to do whatever you want without fear of judgement or ridicule.

Just know that once you get to your target number, you might find that your needs have changed. I never expected to have a second child at age 42. But here she is! I love her to death and I will do everything possible to take care of my family.

Check out the various types of FIRE: Fat FIRE, Lean FIRE, Barista FIRE, and DIRE.

Readers, please feel free to confess some of your financial mistakes as well. I promise you will feel much better if you do! Are there some things about the FIRE movement that irk you? Do you think people will be more humble about their finances going forward?

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