Early Retirement: is it all it’s cracked up to be?

Early Retirement Cons Downsides FIRE Financial Independence http://jessicacoaches.com/2017/08/early-retirement-downsides/
Early Retirement Cons Downsides FIRE Financial Independence http://jessicacoaches.com/2017/08/early-retirement-downsides/

Early Retirement.  No doubt, you’ve seen the pictures with people doing leisurely activities, kicking back their alcoholic beverage of choice,

a gorgeous view of a Caribbean beach,

or even more simplistic, a person looking like they don’t have a care in the world.  

Ahh retirement, I want that now!

Why yes, I’m tired of trading my time for money!

Of course! I do want to spend more time with my loved ones!

Less stress and more time to nurture myself? Sign me up!

 

You might be delving into this world on the internet.  Everyone is talking about this, it even has a catchy acronym!  FIRE! After a quick search, you find endless blogs.  So many people are doing this.  I can too.  I just have to put my nose to the grindstone for a few years, and it can happen.

Related:  What is Your Financial Mindset? Are you FIREd up?

The Reality of Working to Retire Early.

But what does that look like?  Everything has cons.  If it were easy everyone would be retired right?  Is everyone not doing this just because they do not have the information?

Not to mention that if you are motivated enough to bust hump to retire early, it is unlikely all your days will be spent relaxing sipping pina coladas post retirement.  Likely you will just work on a different passion project.

It can be a marriage/relationship ruiner:

So you talk to your significant other about early retirement, they could be instantly wanting to know more, or they might just think you’re crazy.

Let’s spend close to nothing, get rid of everything we do not need, invest over 50% of our income for a few years so we can have freedom then.

Who wouldn’t be on board?

In fact, plenty of people do not want the intensity of early retirement.

They might have no desire to scrimp and save.

Their desire for consumer goods may just be greater than their desire for freedom.

Or perhaps, they just like their job and have no problems with working that to 65 or beyond.  They worked for a long time to get their position and have no desire to give it up.

Money is the biggest area of discord in relationships.  At the same time, working towards early retirement can be one of the most drastic monetary changes you can make in your life.  Those two things can spell trouble.

 

How much it changes your life depends on what your mindset and situation were like before starting on the path.

 

Even in the better outcomes, when you are both on the same page, it can be stressful on your relationship.  You tend to work a great deal more to achieve these things, doing side hustles, overtime at work, and financial research.  This means less time for your partner, and if you do not take care of your relationship, it can fall apart.

See:  Six Rules for a Successful Relationship

You can end up living for TOMORROW instead of today.

You know the old saying “Take time to smell the roses!” people who are working on early retirement sometimes have a hard time achieving this.

Things you want to spend time doing will fall by the wayside to be filled with all things money, figuring out how to save more, make more, and get the best return on investment.  Side hustles can become huge time-consuming endeavors.

This is all time you will not be spending on other things.  Many people while striving for early retirement decide to put their health or other things on the backburner because they plan to focus on it fully as soon as they are free and without a job.

When you have this big goal line ahead of you, sometimes you can put all our focus into getting there.  With early retirement, there is this shiny opulent goal of doing whatever I want.  If I just forgo eating out today or going on a trip this weekend it will get me closer to where I want to be.

 

Getting to Retirement can take a lot longer than you expect.

Unfortunately, the path to financial freedom can be a longer path than some blogs are advertising.  I have seen some boasting it only took them 3 years or headlines on how to have enough income to quit your job in a year.  Which can be done if you already are in a great starting place or you take some huge risks.

If you already have a great deal of debt that is not solvable by selling an asset, or if you are starting off with a low income earning potential.   It could take a lot longer.

For me, this is the 6th year of stressing myself out for the cause.   While we have taken some time to smell the roses, it has been to far and few between.  These years have taken a toll on us, and we go through periods of being utterly wiped out.  I just recently had a three-month turtle shell regrouping.  We are however close to that finish line.

See: I never have to pay into my retirement again!

 

Are you working on early retirement?  What have you had the hardest time with?

What you need to know before you buy a home!

What you need to know before you buy a home, financial freedom, money, real estate, Tucson, AZ http://jessicacoaches.com/2017/03/what-you-need-to-know-before-you-buy-a-home/

Here is the honest truth about renting versus buying.  The popular line is you are just throwing your money away renting when you could be paying yourself! Right? I know all the investing books I read seemed to tout that line.  It, however, is so much more complicated than that.  So here it is the nitty gritty, no slanted views, pros and cons to owning versus renting.

Renting:

Pros:

You have more freedom.  Leases can somewhat limit this, but you are not tied down.  You don’t have to be in a good seller’s market to leave quickly.  If you get a new job and the commute is far, just move.  Want to take a three-month sabbatical traveling?  Just plan it between moves for no at home costs.

-Simplicity.  You get to pay one lump sum for many housing needs. Maintenance? That isn’t you.  Property Tax? Included! Sometimes even your utilities are included.  Does something need a repair? Just call! No stress for you, one less thing to think about.

-Amenities.  If you are renting an apartment, you get access to many luxuries through communal space.  Pools, Gyms, Lounges, and more. Houses with those amenities can increase price drastically.

-Low upfront costs. An application fee, a security deposit. These can be very small compared to the upfront fees of purchasing a house.

Related:  How to Buy a Property With No or Low Money Down!

 

Cons:

-You have no control.  A landlord can choose not to renew their lease with you, and you will have to find someplace new.

-Your rent will increase.  Your rent should keep pace with market conditions and likely will go up unless the property is in disrepair.

-Does not build net wealth. You are building someone else’s net wealth not your own.

moving boxes financial freedom minimalism real estate renting vs buying

Buying

Pros:

-You have control. While HOAs (Homeowners associations) if you are in one, lenders, and the government has some say on your property it is relatively minimal.  You can change things in your home.  No one can kick you out unless you are seriously delinquent and do not catch up in time.

-The mortgage does not increase. When you buy your house, if you chose a fixed rate mortgage, your mortgage payment is set at the market values when you purchased your home.  This means that your debt will become less significant as inflation increases.  Property taxes and Insurance which are lumped into your payment, however, can and will increase.

-You build net wealth.  Yes, you can build net wealth in your home, but you will also be giving a lot of other entities a cut. There is money lost to fees of buying and selling, and of course, the interest which is front loaded into those first years.  It takes a long time! The longer you hold the home the better.  I would suggest not buying a home, if you do not plan 100% on owning it for the next five years, even then you are gambling on the market to have been stable or good to be able to get out without financial harm so try to plan for ten years.

-You get options. You could rent out your home and make money.  In a tough spot (While generally not advised it is better than credit cards if done correctly.) you can take out equity from your home.  Paid off your home? You could Seller Finance out to get a nice high predictable rate of return that is secured by a property you know better than the buyer.

 

Cons:

-If you are not careful, it can end up a financial trap.  If markets dip as they have done before home value can go down and you could end up stuck in your house for a very long time.  My methods of protections are never buying a home that if rented the price fetched would not cover the mortgage, insurances, and taxes and still leave some wiggle room.

-You cannot control everything.  A methadone clinic could move in close to your house.  A large employer could go belly up.  Your neighbor could let their house go to pot.  All of these can tank the value and your ability to sell your home.  Bye, bye equity.

-It can be an expensive hassle.  Insurance, taxes, maintenance, repairs.  These are all things you have to plan for and come out of your pocket.  Unseen, non-mortgage costs can sneak up on you in a house. Doubling your electricity bill, all those tools and stuff you end up buying, that urgent repair that comes up and costs three thousand dollars.