We stumbled onto the concept of FIRE otherwise known as Financial Independence Retire Early in mid 2019. Just over 2 years have passed since then, and in this time we have been actively working towards financial independence as a family of four. I’ll be the first to admit it hasn’t been a smooth pathway, and we’ve done a whole heap of learning by making mistakes along the way.
When we first started our journey there wasn’t a lot of information specific to those who already had children at the time of starting their financial independence journey. I found a lot of people who had reached FIRE who now had kids, but most had already been on a FI journey before they had children. I couldn’t find anyone writing about how challenging investing that first 10k was when you had childcare, school, activities, and a severe lack of spare time (or sleep) to consider.
So we started our FIRE journey by following those whose lives were different to ours, and picked out the bits of FIRE we could apply to our own lives. In the early days this often led to my own personal frustration at not being able to ‘fast track’ our progress like others in the community had: for example we weren’t able to spend $50 or less a week on groceries, or get rid of our second car, or buy a duplex and house hack, and so on. We found having a family presented challenges that made some of the general FIRE advice difficult to follow.
So what are the major challenges to those pursuing FIRE with children?
Having connected with lots of great family FIRE accounts in the last few years I decided to put this question to the community. I wanted to ensure that the challenges we had experienced whilst working towards FI with a family were valid. Also being a family with older kids I wanted to ensure we included challenges that those with younger children were experiencing. I collated the responses and there was quite a lot of consistent challenges experienced by those in the community including:
- Difficulty calculating a FIRE/FI number as there were unknown future costs that were difficult to calculate
- Loss of income to be at pick ups/drop offs or staying home to care for children
- Child Care Fees
- School Fees
- Extra curricular activities
- Needing to own multiple cars
- Less time to read and become financially literate
- Small incidental costs that are often difficult to plan for
- Unpaid sick leave due to caring for children during illness
- Rising cost of living
- Peer pressure
- Working towards multiple financial goals at the same time (debt, retirement, investing, and travel)
- The desire to give our children opportunities that we didn’t have growing up
I’m sure there are many more challenges that could be added to this list (feel free to add to the comments section below).
Review your challenges
If you are reading this post hoping for a way to magically overcome all of the challenges you are experiencing on your pursuit to financial independence you will be disappointed. Instead the message I want to convey is if you are pursuing financial independence then it’s important you understand your challenges, make a plan for those challenges that are within your control of changing, and learn to accept what isn’t within your control.
I recommend getting a pen, paper and spend 5 minutes writing down your own list of challenges. Then against each one determine if these are within your control to do anything about.
For example of a challenge you might be able to change: if you’re struggling with time to learn more about your finances reconsider the way you consume information. This may mean listening to an audiobook with headphones while doing the house cleaning instead of waiting until you have spare time to read a book. Or read 10 pages of a book each day instead of trying to find 30 minutes a day to read.
Then work out which challenges you can’t change.
For example we can’t go without our second car long term. It might reduce our expenses somewhat (under $50 a week), but the trade off is that we would be spending a tonne of extra hours each month in order to do make this work. I would also have to cancel some extra curricular events for the kids as public transport or walking isn’t an option for the location.
Understanding and accepting what we could and couldn’t change helped us deal with our own feelings of comparison early on in our journey. These feelings of comparison were from us comparing our situation with others without realising that our situation was unique to us, and therefore we were going to have to tread a slightly different path.
Find your Tribe
Eventually I connected with similar families on a FIRE/FI journey on Instagram who had similar challenges as us, and they were making progress without the traditional FIRE ‘fast tracking’ that just wasn’t going to work for our family.
Finding our tribe was absolutely fundamental in changing our mindset from focusing on ‘What we couldn’t do‘, and refocusing it on ‘What we could do to reach our goals‘. It helped us find inspiration from other families pursuing financial independence in areas that we could actually put to work in our own journey.
There is more than one way to FIRE
Once we found our tribe we quickly discovered that there was more than one way to pursue FIRE. When I first discovered FIRE I only knew about Traditional FIRE which was quite intimidating for us, however over time I discovered that there are so many other types of FIRE including:
- Traditional or Regular FIRE – Generally those on a regular or traditional FIRE journey aim to invest over 60% of their incomes and retire when their portfolio equals 25 x their annual expenses.
- Lean FIRE – Those aiming for an annual passive income to cover annual expenses of 40k or less. Those aiming for this type are typically frugal and have a minimalistic approach to their lifestyle.
- Fat FIRE – The opposite of Lean FIRE with annual expenses of 100k or more.
- Barista FIRE – For those who have quit their regular 9-5 job, and use part time work to cover expenses. Typically they have enough invested so they can withdraw 4% of their passive income to cover the difference in income (or even work part time).
- Part Time FIRE – Similar to Barista FIRE those pursuing this type of FIRE aim to continue working until traditional retirement age but transition to part time working hours once their passive income is able to supplement the loss of income.
- Flamingo FIRE – You work and invest really hard for a few years and then you semi-retire and work part time. Then you enjoy your new semi-retirement whilst your passive income continues to grow in the background until you are financially independent. To read more about this type of FIRE click here.
- Slow FIRE – As per the name suggests this is a slower and more sustainable financial independence journey. Read more about it here.
- Coast FIRE – Having enough invested so that even if you never invested another cent you would be able to retire at a traditional retirement age. Often Coast FIRE is a very important milestone for all who are aspiring to financial independence.
The types of FIRE above aren’t the only options out there. You may choose to initially aim for one, and then change your mind completely. Or you may choose your own pathway that suits your needs.
Get on the same page
If you are a family pursuing FIRE then it’s vital that you as a couple get on the same page. I advise you to read the Fioneers post named ‘How to pursue financial independence as a couple‘ as this really is the blueprint for designing your ideal FI life as a couple. It has some great tips for overcoming issues like resentfulness and policing, and handy hints for motivating your partner to pursue financial independence (if they aren’t as keen as you).
Continuously adapt your plan to reach your goals
Designing your financial independence plan whether for a family, couple or an individual isn’t something you do once. Your plan to financial independence will continuously be adapted and changed as you do. It’s just as important to review your financial independence plan as it is to review your expenses and budget. If your not hitting your targets then it’s time to take a look at your plan to ensure it sets you up for success. If your plan isn’t setting you up to reach your goals then it’s time to take a look around, see what you can change, or alternatively look at a slower and more sustainable goal.
Gratitude and happiness over comparison and self loathing
I’m sure you’ve heard the very famous quote from Theodore Roosevelt ‘Comparison is the thief of joy‘, but did you know that the reason we compare is evolutionary based. One of the best ways to overcome negative feelings from comparison is to practice gratitude daily (or more if you need it). I have a gratitude diary next to my bed that I complete each day with a minimum of 3 things. I also limit my time on things that may trigger me (e.g. Social Media). For me practicing gratitude has helped me be more content with the many blessings of my life and accept our slower financial independence journey in comparison to others.
I’m confident that we will get to our FI goal at exactly the right time we’re suppose to get there, and I’m sure you will too. Feel free to share your thoughts in the comments below.
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Silly Q.. do you have to record your passive/investment income on tax return when you retire & get tax bill each year?
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Not a silly question at all. Yes we do have to pay tax each year on the income we earn from our holdings. We live in Australia and we own them in joint names so it’s charged at our marginal tax rates (not taking account any franking credits).
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I must say thank you. My husband and I have been on our debt-free/ financial independence journey for a minute. We are a family of 7 on one income and you are telling the truth. There is a lot on F.I.R.E but not enough big families that talk about the journey if they achieved it after having the children.
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Hi Crystal, apologies for not seeing this sooner. I really hope that changes and more people start to post about FIRE with a family (including big families). All the best to you.
Why couldn’t you buy a duplex and house hack? Are there not any big enough for your family?
I’m doing that with a family of four and honestly it’s hard to deny my family a nice big house with more then one bathroom but it’s really paying off.
I believe your comment is in response to my generalisation that most Australian families can’t house hack. This is due to the the fact duplexes are an extremely rare unicorn here (I’ve never seen one on the market where I live).
We however like your family do house hack. We’ve turned our house into a duplex with renovations but I know this isn’t an option for the families I know.
We Airbnb our 1 bed / 1 bath private apartment section of the home whilst we live in our 3 bed / 2 bath section. It’s not a duplex but it’s great because we still get to enjoy our large home and amenities without downsizing. It also helps pays our mortgage.