Misconceptions of FI

This past weekend The Wife and I went to see Crazy Rich Asians, and really enjoyed it! (Featured image credit: Entertainment Weekly) Having been on the FIRE journey for a few years now, it was fun taking in all the over-the-top luxury on the screen. Of course, this wasn't the focus of the movie, but seeing how people think about money on different ends of the wealth spectrum was quite entertaining. It got me thinking about all the different ways people think about, and talk about, money.

Luckily, the Financial Independence community has grown significantly since I discovered it back in 2014, bringing balance to the extreme spenders trying to keep up with their ‘crazy rich' neighbors. There are dozens of new blogs, podcasts, and online resources that didn't exist when I first started my journey. As Brad and Jonathan of ChooseFI like to tease, “The FIRE is spreading”!

The problem is, as the message spreads, so do the misconceptions. I find myself constantly addressing the same misunderstandings and myths with many of my readers, friends, and family just discovering FI, so I wanted to create a resource to debunk many of these myths once and for all. Let's dive in!

Why Live Like I'm… Poor?!

The most popular misconception by far, I usually hear this one worded as follows: “I don't want to live like I'm poor for a decade so I can go on living like I'm poor for the rest of my life!” When faced with change, people often become dismissive. This is usually the first line of defense someone puts up when actually considering what it would take to adjust their lifestyle to create a high savings rate.

Here's the truth, though: You don't have to “live like you're poor” on your journey to FI… it's OK to spend money, it's just that timing is important. When I wrote my ‘Letter to My 22-Year-Old Self‘, I gave an example with designer sunglasses:

“Let’s say you want to buy a $400 pair of designer sunglasses. If you have $100 to your name, that purchase is 400% of your net worth. (Not good, but with a positive net worth, you’re already doing better than half of the U.S. It’s a low bar.) Now, let’s say you wait a few years, work hard and save a large portion of your income, and get your net worth up to $400,000.00. (I know it looks like a large number, but it doesn’t take as long as you’d think to save it.) Now, you buy that same pair of sunglasses. But this time, that $400 purchase is a mere 0.1% of your net worth. A tenth of a percent doesn’t even move the needle. You can comfortably afford it now.”

The key concept here is that timing matters – you can have anything you want, just not initially, and not all at once! It's important to do things in the right order, at the right time during your journey. When you're at the beginning of your FIRE journey, particularly the first five years, you want to do everything you can to get your savings snowball rolling. Large purchases can do significantly more damage in your early years of savings than they can later on. Looking at potential expenses as a percentage of your net worth can help cement this concept and make it clearer.

But… I Like Nice Things!

Who doesn't? Even the great Mr. Money Mustache lusts over iPads and Teslas. The thing to realize is that FI is NOT about deprivation! In fact, when friends challenge me on this point, I explain to them that FI is, in fact, the ultimate luxury purchase! I'm buying a perpetual money making machine that gives me the luxury of complete freedom from the need to work for money. What could be fancier?

As with most luxury purchases, though, you have to be choosy. As Paula Pant from Afford Anything says, you can have anything you want, just not everything. I want my ultimate luxury purchase so much that I'm willing to give up many luxuries that others enjoy on a regular basis, like eating out at fancy restaurants and having multiple cars in their driveway. This isn't deprivation, it's a calculated choice.

And it doesn't need to be permanent, either: last month, The Wife purchased a fancy pants car! It's true: for the first time in five years, we have more than one car in our fleet. What happened?! Won't this throw off our FI plans? Won't this undo all the hard work we've done in the past?

Actually, no. You see, as I described above, the car purchase, which was made in cash, was a small percentage of our net worth. It didn't move the needle. The Wife wanted something she valued, did some math, and after some research, made the purchase. Mr. Money Mustache even admits there comes a time where such purchases are trivial:

“When can you truly afford a fancy car? Well, once you have the cash for it in the bank, your house and all other debts are fully paid off, and you are either retired or very comfortable with delaying your eventual retirement for a year or more to pay for this depreciating piece of luxury property, THEN you can roll into the dealership.”

Check, check, and check. The Wife's purchase is MMM approved! She's not alone: as another example, Mr. 1500 recently purchased a fancy car he'd been eyeing for a few years as well. And like us, he waited until the purchase was such a small percentage of his net worth that it didn't even register as a blip on the radar! See? You can like nice things and still pursue FI just fine.

What if we made this very same purchase a mere three years ago? Shockingly, the purchase would have cost us over 14% of our net worth! Think about this for a second – three years ago, this car would have cost us a small fortune! In fact, based on some back of the napkin math, buying the car three years ago would have set our early retirement date back past the year 2020.  That's crazy, right? Simply pushing large purchases a few years down the road on your journey can literally shave years off your mandatory working career. I knew there was a good use for procrastination!

FI is For The Rich

Another popular misconception is that only those who make six-figure salaries can successfully reach FI. Actually, it's quite the contrary. Everyone can pursue FI, regardless of income or pre-existing wealth. Sure, income is a variable and can add or subtract five years from your journey, but so can training your frugality muscle. What's interesting, and in line with our car conversation above, is that one of the best predictors of your current economic status is actually the way you spend your money!

The poorest Americans in the lower class spend the majority of their money on consumables: think food, clothing, gasoline, electronics, etc. Those in the Middle class spend the majority of their dollars on liabilities, such as cars, boats, and vacation homes. Finally, the wealthiest Americans spend the majority of their dollars on investments and other cash producing assets.

I hear you screaming. “Of course the wealthy spend the majority of their money on investments: they have tons of cash to spare! The poor have no extra dollars to buy investments!” There is some truth here, especially in cases of extreme poverty, but for many of us in the middle class, this thinking reverses the cause and effect relationship: The wealthy don't spend the majority of their dollars on investments because they have lots of free dollars to spare. Instead, the wealthy have lots of dollars to spare BECAUSE they spend the majority of their dollars on investments!

I want you to track where your money went last year. Every dollar. Make a pie chart and take a look. For those of you pursuing FI, and saving more than half your money, I'd predict you are quite wealthy, or if not, you will be soon enough! Take a look at where our dollars went last year:

Can you tell where the majority of our money went last year?
Can you tell where the majority of our money went last year?

For those who have more than half your money going toward liabilities such as cars, personal residences, and their related expenses, I'd predict you are firmly in the middle working class, and will be stuck there for the foreseeable future unless you change your spending. It's the spending (or lack thereof!) that influences your financial trajectory, not the wealth itself. Remember that this works in both directions, too: fortunes have been squandered by people who don't realize this relationship.

So You Have… Infinite Money?

For people who don't understand the psychology of money, they see no irony in the following statement: “If I were rich, I'd buy all my friends and family fancy houses and cars and would be very generous with my money and definitely wouldn't be a cheap-skate!“.

Those with money know-how understand that this kind of spending prevents you from ever becoming wealthy in the first place, and if you happen to inherit a fortune, well, you won't keep it very long. A friend recently pointed me to this outstanding article titled “The Psychology of Money” that really opened my eyes to the right, and very wrong ways people think about money.

When I first quit my job, I wrote about why I tend to keep money matters private around friends and family:

The way I see it: “I have carefully constructed my perpetual money making machine, and can now start enjoying up to 4% annual withdrawals whenever I'm ready. I'll never take out more than that…

The way most people see it: “Wow you've saved so much money that you never have to work again?! That's like infinite money! Why don't you use it to help everyone do everything? What do you mean you won't fly out to visit on a moments notice and bring lavish gifts!?”

When I look at my portfolio, I see a $25k per year annual spend, which, to most people, doesn't seem like a lot of money. But others see $625k sitting there, a literal fortune just waiting to be spent. It's the same amount of money in both cases, just different perspectives leading to very different spending assumptions.

Remember: you don't chop down the tree when you've picked off all the apples – you plant more trees! I will, to the best of my ability, NEVER spend more than 4% of my portfolio and break my perpetual money-making machine. This comes down to short-term thinking vs. long-term thinking and is a significant money misconception.


OK, four down… a hundred more to go? There are SO many misconceptions about Financial Independence. It's impossible to cover them all in a single post, but I think we covered the most popular, based on emails I've received from readers.

Some key takeaways?

  • Timing matters when it comes to large expenses. Delayed gratification is challenging for everyone, but is an essential skill if you want to become wealthy!
  • FI is not about deprivation: It's OK to want nice things, as long as you realize the true cost given your progress on the journey. For example, I realize now, better than ever, how much of a true luxury a second car is, having gone without for five years.
  • If you want to be wealthy, your spending (saving) habits matter more than anything else. As we saw, different perspectives on money lead to some very different assumptions.

Looking back, I've actually already addressed numerous other misconceptions in previous posts right here on the blog, but I'm realizing that (gasp!) new subscribers don't always go back and dig into the older content. So here's a rapid-FIRE list of misconceptions and posts I've written that clear the air! Point friends and family here when they bring up any of the following popular money misconceptions:

There's nothing else I can trim from my budget!

Are you sure? We found over $1,000 per month hidden in ours. Read our post 180 In Depth – Part 2 to see how we turned cutting back our expenses into a game.

I enjoy shopping and won't give that up!

You don't have to stop shopping… you just have to shop smarter! Tricks like the 72-hour rule and cart-free shopping help immensely. Read our post Monthly Savings: Shopping for ideas.

Food is expensive; there's just no way around it.

We thought so too… and then we cut our grocery bill in half. Knowing where to shop and what to buy is key. Read our post Monthly Savings: Food for the tricks we learned, like our $3 rule, and a breakdown of item costs across different stores.

You can make money quicker and easier with real estate!

Quicker? Maybe… easier? Well, before you dive into the real estate world, read about our six-figure losses and our ‘renter from hell' in our posts How Not To Buy A House and Adventures in Real Estate.

I Don't make as much money as you, so I have to work longer.

Surprisingly, the length of your required working career isn't determined by how much you make, but rather, how much you save. The more you flex your frugality muscles, the more you save, and your required number of working years reduces. Want to figure out how many years you have left? Read our posts How Long Will You Work? and Why You Can't Retire.

Investing is too complex for me to do on my own.

That's a popular belief that makes a lot of money for the investment advising industry. Investing doesn't have to be any more complex than opening a bank account and choosing a fund. We walk through this in detail in Investing Can Be Simple.

I have the discipline to take on debt responsibly.

Debt is the Ying to compound interest Yang, a force that accelerates your money into the red. It's surprisingly easy to accumulate and surprisingly hard to get rid of once you're knee-deep. Read The Dark Side of Interest and You're a Hazard To Your Money for more on this.

What if I go too far and become a miserable cheapskate?

Being frugal is different than being cheap. It can actually be a good exercise to push your frugality to the extreme for a few months to test your limits, but there are natural boundaries you'll encounter that should stop you from going too far. For me, it was living with my in-laws, and the experience left me ready to jump out of my skin. Read about it here: Frugality vs. Sanity.

There's no way I can reduce my driving expenses.

This is a hot topic, but in the style of Mustachianism, I don't believe driving is a necessity. As I alluded above, I believe driving is a LUXURY and we can all do more to trim this expense down. Read The Car Problem and FI is Hard for more ideas, including how we spent five years as a one car household.

But… I like my job!

Financial Independence doesn't require early retirement, and isn't an all or nothing concept; It's actually a smooth continuum of increased benefits along the savings journey. Some of our most popular posts, The Power of FU Money, The Milestones of FI, and Are We FI Yet, discuss this in detail!

Why would I put my money in a 401(k) I can't touch until I'm 60?

Contrary to popular belief, the money you put into tax-advantaged accounts is yours to access at any time, and there are numerous ways of doing so fee-free! Read Don't Fear the “Penalty”! to figure out how.

I'm too afraid of <healthcare, recessions, asteroids> to pursue FI.

The best way to face your fears is to better understand them. In Replacing Fear With Flexibility, we discuss these hot topics in great detail.

I'll never get my <significant other> onboard with FI; so why try?

You'd be surprised what people would be willing to try when they wrap their heads around the concept of never having to work for money again. Why not do a ‘trial run' to test the FI saving waters? Check out my Interview With ‘The Wife'! for how my wife and I deal with differing opinions on money.

If FI is so simple, why isn't everyone doing it?

FI may be simple, but it certainly isn't easy. It requires significant financial muscle and is guaranteed to push you out of your comfort zone. Read about how we tackled the ‘big three' expenses in FI is Hard.

That's everything for now! I've also pasted a copy of this helpful index on our Start Here page, so if you enjoyed, feel free to share. Any FI misconceptions I missed? Let me know in the comments and I'll add them to the post!

FI is Hard

A common theme here in the financial independence community is simplicity. Mr. Money Mustache has his classic “Simple Math of Early Retirement” post, which took the FIRE world by storm. Jim Collins wrote “The Simple Path to Wealth”, which has become the de-facto starter kit for people looking to begin their own journey to FI.

The problem is, too many people hear SIMPLE but think EASY. There's nothing easy about FI: it requires hard work. The sacrifices you have to make to increase your savings rate are… hard. Testing out your frugality limits and going full on gazelle is hard too, at least at first, until you get into a good groove. For some, it's harder than others.

I like to use the analogy of getting into really good physical shape. Low body fat, visible muscles, maybe some six pack abs. It's actually quite simple: eat fewer calories than you consume, do about an hour a day of weight training, maybe sprinkle in some cardio a few times a week. For the more advanced you can watch your macros and supplement your protein intake. Simple!

But let me tell you, it's not easy. I've been working on my fitness for six months now, since quitting my job last November. I've put in over an hour a day, six days per week. And I'm still nowhere near the fitness level I want to be! Having discipline over how you spend your calories is HARD. Getting into a solid weight training routine is HARD. If it were easy, everyone would do it! It's simple, but it's still hard work. Reaching FI is no different.

When FI is even HARDER

I often hear feedback along the lines of “Of course YOU were able to retire early. You had no student loan debt. You and your wife had dual income! You have no kids!” And you know what? That's fair criticism! For someone without these advantages, FI is even HARDER. Your journey will take longer, and you'll have to become more of a financial badass than I did to hit FI in a similar amount of time.

Let's measure this badassity with something called the ‘frugality muscle', a term coined by Mr. Money Mustache that measures how hard you're willing to work to raise your savings rate. Before our Financial 180, The Wife and I were on track for a 40+ year working career, despite our above average household income, because of our poor spending habits and weak frugality muscles. Once we discovered how to strengthen these muscles, however, our journey shortened to under five years.

Anyone can improve their frugality muscles, regardless of income, but those who earn less are still at a disadvantage. If two different people have equally strong frugality muscles, the time to FI can still vary based on their income level. But didn't we learn that the length of the journey depends entirely on savings rate, not income?

The discrepancy is that you might need to work harder and apply more frugality muscle to achieve the same savings rate as someone with a higher income than you. This is compounded by the fact that at severely low-income levels, a significant percentage of your income goes to essential purchases like food and shelter. Because this concept of ‘frugality muscle' is still a bit vague, let's look at three concrete examples of how the wife and I strengthened ours.

A One Car Household

After the car accident that kickstarted our Financial 180, we decided to become a one-car household. Many of our friends and coworkers thought we were crazy – how can two adults working at two different companies get by with only a single car?

It wasn't easy. We would have to coordinate everything. Every day we'd need to plan out our agendas. “What off-campus meetings do you have today? I need the car for an errand at lunchtime. Can we do a car swap at 3pm for my after work activities? Oh, you need to work late? I guess I'll work late too. Can Jim give you a ride home today?”

There were some days where our schedules would line up, and things worked out nicely. But more often than not, our shared car arrangement was a pain in the behind. I was stuck at home some days with no car. Or The Wife had to stay at work a few hours later than she would have liked. This was hard, but we flexed our frugality muscles and stuck with it.

As I wrote about in my Car Problem post, the majority of drivers severely underestimate the cost of their cars. I estimate in the five years we've been a one-car household, we've saved around $30,000 in depreciation, insurance, registration and fuel-related expenses that we'd incur with a second car. And that's just over five years. In perpetuity, accounting for average market return on the difference, our savings would be closer to $200,000! By simply eliminating the second car, we were able to shave years off our journey to FI.

What if we earned less but still wanted to reach FI in the same amount of time? We would have needed to push our frugality muscles even harder to reach the same savings rate. We could have started biking to work. We could have carpooled with friends and split the gas. We could have moved within walking distance of the office. Some of these options are harder than others, but the financial reward is usually proportional to the effort.

House Hacking FTW?

As I wrote about in my Frugality vs. Sanity post, we house hacked by living with family for a few years to help us pay off our mortgage. We were able to simultaneously live rent free and rent out our previous home for a few years (albeit it still at a loss). This was frugal, but also tested our sanity and pushed our frugality muscles almost past their breaking point.

It's not easy living with family, especially when your lifestyles don't line up well. Navigating the murky waters of family favors, guilt, and indebtedness is painful, particularly if you're a bit of a control freak like me. Saying it was hard is an understatement. I bit my tongue so much I'm surprised it didn't fall off! It wasn't without its reward, however.

I estimate our four-year arrangement saved us around $50,000, and jump-started the savings snowball that led to our mortgage payoff. The accelerated timeline and larger up-front investments we were able to fund as a result are worth even more.

We could have saved even more if we had trained our frugality muscles harder. Instead of moving into a new single-family home after our house hacking journey, we could have moved into a small apartment with roommates. We could have bought a modest duplex and lived in one side and rented out the other. We could have AirBnB'd our guest room. The harder you work, the more your frugality muscles grow, and the shorter your time to FI.

Learning to Cook is… Hard

For years, The Wife and I ate most of our meals at restaurants before our Financial 180. This was one of our particular problem areas, and in 2012 we spent over $12,000 eating out! We knew we needed to start cooking at home to save money, but it was hard because we were bad at it, and didn't like our own cooking.

We spent the better part of a year learning to actually cook well. I'm going to be a complainy-pants for a minute and tell you – this process was the worst. There were so many secret shame pizzas ordered to cope with our many failures. But practice makes perfect, and through the hard work of persistence, we started to improve. Eventually, we got to a point where we preferred our own cooking to our favorite restaurants. We even optimized our grocery shopping, learning how to plan meals for the week in advance, and where to shop for the best prices.

When all is said and done, I estimate our frugality muscle saved us over $40,000 in food expenses over the past five years. In perpetuity, we've shaved well over $200,000 off our final FI number. And there's plenty we could have done to push this even further: we don't clip coupons, we don't have a big chest freezer to stock up on deals when they happen, and we don't even have a Costco membership!

How extreme you push in the savings direction is entirely up to you. If you're happy with your current lifestyle and savings rate and have a good work-life balance, there's really no need to go crazy. The stress associated with achieving extremely high savings rates can be daunting and throw you off course. However, if you want to accelerate your timeline, you can always push harder, as I've shown in the examples above. Work together with your family to figure out where your balance is, and tailor the journey to meet your needs.

No Pain, No Gain

Hard work is rewarding, and indeed, Mr. Money Mustache claims it's one of the secret ingredients to true happiness. But it isn't always fun, especially in the beginning. Everyone has different pain points and different levels of comfort. And some people just want all the things.

I miss having unlimited cell phone data. I secretly envy my friends with Amazon Prime and Hulu and Spotify premium. I intentionally avoid looking at the new iPhones to keep the desire to upgrade at bay! But these choices, while uncomfortable, added up to well over a thousand dollars per month! This is what it means to work your frugality muscles.

Becoming comfortable with being uncomfortable is one of the keys to our success. But instead, what do many people do when they discover something is hard? They make excuses! There are SO many articles like this popular one from The Outline that make it seem like only those with high incomes (in this case, the Frugalwoods) can reach financial independence.

Articles like these get me so fired up because they just aren't true! They seem to be some sort defense mechanism against the FI movement; in fact, this isn't even the first time I've written about this. Check out my “Why You Can't Retire” post for my a rebuttal against a similarly voiced New York Times piece.

Everyone wants a reason to believe that their inefficient, expensive lifestyles are justified. That way they don’t have to change anything. Because FI is hard! Reducing your expenses dramatically isn’t easy. Saving money requires work. You HAVE to get out of comfort zone. Just doing what's comfortable is what everyone else does. And living like everyone else doesn't make you wealthy.

The ironic thing about the above Outline article is that the Frugalwoods are actually some of the most transparent in the FI community. They fully acknowledge all the good fortune and privilege they’ve had thus far. But because the article only focuses on the income variable, they completely discount this concept of frugality as a muscle.

Increasing your frugality muscle is extremely effective at shaving years off your working timeline, in most cases significantly more so than simply raising your income. In fact, If you look at our annual spending vs. asset growth below, you can see how quickly a change in frugality muscle can turn around your finances. If this doesn't show the power of good financial habits, I don't know what will!

We drastically cut our spending
We drastically cut our spending
...and started a dramatic financial 180!
…and started a dramatic financial 180!

How Strong Are Your Muscles?

So, based on the potential savings we've discussed so far, the literal million dollar question is: what are you willing to do that most people will NOT? Where can you go to get out of your comfort zone and save money? Here's a sampling of some of the areas we've chosen to flex our frugality muscle thus far:

  • We stopped eating out every day, because, money
  • We worked really hard to get better at cooking
  • We did a TON of reading – probably 2+ hours per day – on FI
  • We moved in with family for a few years even though it sucked
  • We went down to one car even though it was inconvenient
  • We canceled a lot of fun stuff. We don't even have Amazon Prime
  • We moved closer to work to reduce our commute and fuel costs
  • We broke out of our unlimited mobile data addiction
  • We got used to warmer house temperatures in summer
  • We resisted the urge to upgrade our phones, electronics, cars, etc.
  • We dramatically reduced frivolous traveling, shopping, etc.
  • We said no to friends who wanted to do expensive things all the time
  • We installed low flow heads in all of our showers and sinks
  • We drove a small Honda instead of a larger SUV or Truck
  • We altered our schedules to avoid traffic
  • We reduced our meat consumption
  • We avoid expensive insurance options in favor of high deductible plans
  • We mitigate our driving risk by driving slower and less frequently

There's plenty of other ideas that our frugality muscles are still too weak for: renting out spare bedrooms, downsizing to tiny house, moving in with roommates, subletting out of someone else's spare basement, renting a place in walking distance to work, couch surfing, whole house pet sitting… and so many more. I met Scott Trench from Bigger Pockets at CampFI earlier this year, and he wrote an excellent book called “Set For Life” that really dives into some of these items in detail.

Most of these will really test the strength of your frugality muscles. Some of them may work better than others for your family's specific situation, but if you put in the hard work, your frugality muscles will grow. We're actually relaxing some of these now that we've made it to our FI point, which means we may have pushed harder than what was sustainable for the long term. But we did put in the work, and the results were truly dramatic.


The Wife and I hit FI in less than five years, and it was hard. Having only one car was inconvenient. Living with in-laws for a few years was unsettling. Learning to cook well was arduous. Giving up my unlimited data plan wasn't easy.

We still had it easier than others, however. We were able to avoid some of the more extreme savings scenarios because of our dual income. We didn't need roommates*, we didn't need to downsize into a tiny house, and we didn't even need to eat macaroni and cheese in the dark**!

Mr. Money Mustache often tailors his content to people like my wife and I. With our relatively high middle-class income, if we had chosen a ten-year period for our Financial 180, we could have done it with significantly less effort. Not EASY, but perhaps quite a bit more comfortable. But we chose a five-year turnaround, which made things much more challenging. We chose to go outside of our comfort zone to attack the heavy hitters in our budget: transportation, housing, and food.

Yes, we had a pretty good income***, and I'm so thankful we were able to turn things around as quickly as we did. I realize that others might have to work harder and for longer to accomplish the same thing. But given a good income, would you still be willing to make the choices we made? Would you still be willing to do what others won't to maximize your savings rate? Dave Ramsey has a quote that's always stuck with me: “If you will live like no one else, later you can live like no one else.”

What are you and your family doing to work your frugality muscles??


*But we still had a roommate last summer! And it was an awesome experience I plan on writing about in a future post. Spoilers: Our roommate was also on the path to FI! 

**This is an expression I use when describing someone who might be pushing so hard to reach that FI finish line that they are no longer enjoying life. Don't actually do this.

***At least according to east coast, low cost of living standards. For transparency, if you average our annual household income across our working career, it comes out to about $150k a year.


So hopefully this post helps inspire you to go out there and start saving! If you haven't already, the very first step is to determine your current savings rate, and compare it with your desired FI timeline. Then, start tracking all your spending and investments so you can follow your progress against the Milestones of FI.