When I first started blogging, I used to lament that I didn’t learn about FIRE when I was 20 years old. I was very frugal and retired from my engineering career with a large retirement fund. The earlier you start saving, the more your investment can compound. However, I have had a change of heart recently. I’ve been reading the FIRE subreddit and the young 20 year olds are very stressed about FIRE.
A few days ago, I saw a post by a 22-year-old boy. You earn $70,000 a year and have savings. He lives with his parents and intends to retire early with 12 million dollars. He seems stressed about the conflict of going it alone and investing more money to retire early. If he gets a place to live, he won’t be able to save that much money and it will take a long time to reach his goal.
As a 50 year old guy, this seems crazy to me. It will take years to raise $12 million. So many things can change along the way. There is no need to stress so much about early retirement at the age of 22. FIRE is like going to a destination. You try to go in the right direction most of the time and adjust your course as needed. There is no straight road from $70,000 to $12 million unless you get lucky with an inheritance.
Young people
When I was 22, I wasn’t interested in retirement at all. I was busy with work, going out, making friends, dating, growing, and traveling a lot. I was learning to be an adult. That time was the best time of my life. I have many happy memories of those days. Life was very good at that time. Everything was new and exciting. Life was good in my 30s and 40s too. But it was very slippery. When you have a family, you focus on that. Things went on and on for years. It was then that I worked to achieve financial independence.
Fortunately, I was already frugal and started saving at the age of 22. I contributed 10% of my salary to a 401k and increased it every year. After several years, I cashed out my 401k contribution, Roth IRA, and invested more in my exchange account. It worked very well and I retired from my engineering career at the age of 38.
Now, I’m glad I spent money recklessly and made some mistakes when I was 22. You learn from your mistakes and you grow. Those years helped me become a confident adult. After college, Mrs. RB40 joined the Peace Corp. He went to see the world for 3 years. He saw a big difference in maturity when he came to see me. I would not have grown so much if I had stayed at home and saved every penny.
Top 3 things to focus on
Young people in their 20s should not stress about retirement. FIRE is a marathon, not a sprint. They should focus on the present and enjoy it. Place the FIRE base and place it on the back burner. You need to learn good financial habits first. Here are my recommendations for the top 3 things to focus on.
- 1. Start saving
Start by saving 10% of your salary. Contribute to your 401k and Roth IRA. Once you have raised them, then invest in a good index fund in a broker account. The goal is to increase your savings rate to 50%. Once you reach 50%, you will be well on your way to financial independence. Meanwhile, learn about investing and FIRE in your spare time. Don’t worry too much about it.
- 2. Find the right partner
Finding the right partner is the most important part of your FIRE journey. your journey will be much easier if you find someone who has the same financial goal. On the other hand, the wrong partner can make FIRE impossible. Mrs RB40 and I are both frugal. We value financial independence. We wouldn’t have reached this level if we didn’t have the same goals.
Unfortunately, I don’t have specific advice on how to find the right partner. Dating seems to be crazy these days with all the apps.
Take a guess. I was insecure when I was in college. I was a brilliant engineering student and I had no money. After college, I got a job and lived on my own. I had to find a place to live, learn to cook, pay bills, find a dentist, buy furniture and all kinds of mundane things. That’s when I got old. Those few years gave me a lot of confidence. Money also helped. I could buy what I wanted and take girls out to nice places. It was much better than being a poor college student.
Living with your parent can save a lot of money, but I don’t think it’s the right choice for most young people. You better learn to be independent and take care of yourself. Besides, it can be difficult to attract a partner if you live at home. IMO…
Do you want to join my parent’s house? Uh, no thanks…
Finish it
Okay, I have more, but I don’t want to bore you too much. People in their 20s should enjoy life and be happy. Learn how to be an adult and build confidence to face the world. They should not stress about retirement yet. If you have a family, life will go well. At that time, you can focus on FIRE and invest more.
WHAT DO YOU THINK? Should young people save more or put out the FIRE until later? I think there are more important things than FIRE when you’re 22.
Photo credit: Tetbirt Salim
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A minimum wage is the key to early retirement. This year, Joe is investing in real estate with CrowdStreet. They have many projects all over the USA so check them out!
Joe also highly recommends Personal Capital for DIY investors. They have many useful tools to help you achieve financial independence.
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