If it were easy to achieve FIRE (Financial Independence / Retiring Early), then practically everyone would do it! The fact is that many people would love to FIRE, but only a small percentage will actually reach this goal. Why is that?

We’ll be the first to admit that there’s some luck involved. As Malcolm Gladwell eloquently explains in his book Outliers, many of the world’s best and brightest were successful due to their culture, their family, when they were born, and their upbringing.

Of course you can’t control those factors, but you can work on the skills and traits needed to achieve your goals. For those interested in getting to FIRE, we’ll break down what we feel helped us the most in achieving FIRE in our early 40’s.

Some of these mannerisms may come easy to you, but others may be more difficult for you to attain. It may sound like a cliche, but start slowly and do the best you can. If you can improve in each of these areas over time, you’ll be well on your way to the wonderful world of FIRE.

To organize these characteristics, let’s put them in three categories: earning, saving, and investing.

 

Earning

This involves maximizing the earning potential in your job or career, as well as finding opportunities to earn money outside of that job with side hustles.

 

1. Hard-Working

Let’s be honest. It’s going to be difficult to FIRE if you’re afraid of hard work. The good news is that this is something anybody can improve. It doesn’t require any special skills to work hard - you just have to put your mind to it. You may have to work extra hours and sacrifice time with your family or friends, so be careful that you don’t go to extremes.

The harder you work, typically the more money you’ll make. People such as Warren Buffett and Mark Cuban weren’t handed billions of dollars. They were hustling and finding ways to earn money since they were kids. Buffet sold pinball machines when he was a teenager, and Cuban earned money selling garbage bags.

 

2. Deliberate

If you want to earn more money in your career, then you need to be deliberate and make good choices along the way. You have to plan your career path and take steps along the way to get noticed by the higher-ups, earn that promotion, and make the most of your opportunities.

The same thing holds for your side hustles. You need to be meticulous about how you plan to earn money on the side, otherwise you’ll be spinning your wheels. I had a lucrative side business for about five years during my working career that brought in a third income for us. 

I leveraged marketing skills I had learned from my day job, I looked for opportunities in spaces that not a lot of people were working in, and I organized my work through complicated spreadsheets (it must be why I love tracking our net worth through Google Sheets to this day!).

 

3. Open-Minded

Sometimes earning opportunities arise from unexpected places. When I got my first “dot-com” job in 1998, I knew very little about the Internet, but I was willing to give it a shot. Fortunately, that first job turned into a very lucrative career over the next 17 years.

Late last year, we were approached by a book publisher about writing about FIRE. We hesitated because we were about to leave the country for 2.5 months, so we weren’t sure we would have the bandwidth to write 25,000 words. Fast forward twelve months later, and we have now written two books: Start Your FIRE and Investing For Kids.

You don’t want to say “yes” to every opportunity that comes your way, but don’t be afraid to consider things that may not be sexy or the norm. When you’re starting out, you have time to take a few chances. If they don’t pan out, move on to a better opportunity.

 

4. Resourceful

Allison and I found many ways to earn money over the years. For example, in 2006 we sold our loft in San Francisco’s Mission district and bought a 3-unit Victorian in the Castro neighborhood. It cost $1.6 million, which was A LOT back then [Editor’s note: it still is today!] for a couple of 30-somethings. 

However, we knew that we could live in one unit and rent the other two. We used the rental income to pay for half the mortgage, and we self-managed the two rentals to keep our costs low. This helped us pay down our loan much faster (and build up a large amount of equity in the home).

Think of ways you can earn extra money outside the normal avenues. What assets can you rent to others, what items can sell, or what services could you provide?

 

Saving

If you want to FIRE, then you are going to have to get serious about saving money. That will likely mean putting away 50% or more of your earnings and embracing a frugal lifestyle for a while.

 

5. Goal-oriented

How do you save 50% or more of your income? It helps if you can set challenging but realistic short-term and long-term goals. Figure out where you want to end up, and work your way backwards from there. Successful goal makers make their goals achievable by making sure they are SMART: Specific, Measurable, Achievable, Realistic, and Timely. 

For example, say that you want to end up with $1.5 million in your nest egg in 10 years. Calculate how much you need to save each year and put together a budget. We know that budgets are no fun, but it’s hard to reach a goal if you don’t know the details of how to get there. Put all your expenses into a monthly and yearly budget spreadsheet. 

You can use YNAB, Mint, or just Google docs like we do. Put all your expenses in there, and if necessary, look for ways to reduce your big costs.

 

6. Creative

You may be wondering how to reduce your costs. This is why it’s helpful to be creative. 

I’ll give you just a few examples of how we’ve been able to cut expenses over the years. We get all of our clothes for free from clothing swaps, we buy groceries in bulk, we acquire big ticket items second-hand (from a used car to furniture), and we do things on our own to save money.

Think about your biggest expenses, like housing. Maybe you can save a lot of money by down-sizing to a smaller home or utilizing geo-arbitrage to move to a lower cost of living area. We were able to FIRE nine years ahead of schedule by moving from San Francisco to Oakland.

 

7. Self-Disciplined

Like hard work, self-discipline is something anyone can improve without requiring any special skills. It’s a “skill” that many people lack, especially in modern society with fast and easy access to everything you might need.

However, if you work on this trait, it can really help you with your path to FIRE. It’s natural to get frustrated with things you can’t control like the stock market, political elections, or even the weather. Rather than getting frustrated, if you have self-discipline you can put blinders on and continuously work toward your goals.

That’s what we did during big downturns like the 2008-09 Great Recession. We never stopped contributing to our retirement funds, and that discipline helped us build a significant nest egg just a few years later.

 

8. Positive-thinker

You don’t have to be a pollyanna, but being a more positive person will usually get you much farther in life than being a curmudgeon. Positive thinkers don’t let bad news or evil people get them down.

Sure you may have a bad day here and there, but if you’re a positive person then you’ll get right back on your horse after you fall down. I’ve always been pretty positive, but I think I gained even more perspective on life after my near-death experience. Something like that helps you understand what’s really important in life.

 

Investing

Once you’ve earned your money and started saving, the next big step to get to FIRE is to invest that money. Investing isn’t for the faint of heart, but if you do it right, it’ll catapult you to your goal.

 

9. Willing to Learn

When it comes to investing, there’s a lot to learn, and unfortunately they don’t teach you about it in school. When we first started investing in  our company 401(k)s, we had no idea where or how to allocate our investments. 

For us, we learned through trial and error; for example, we would invest in mutual funds with high volatility because the returns were so attractive but we would overlook expense ratios. Over the years we also picked up quite a bit from books, blogs, podcasts, and talking to folks in the investing and FIRE communities.

It’s important to be hungry for investing knowledge and to soak up as much as you can from reputable sources. Once you have the fundamentals in place, you can start building out your investment strategies and tweak them over time.

 

10. Analytical

Getting started with your investments is usually the hard part; however, that’s just the beginning of the process. Eventually you’ll want to analyze your risk tolerance, your asset allocation (stocks vs. bonds vs. other investments), taxable vs. retirement accounts, expense ratios, etc. 

It helps if you have a logical mind and can visualize how all of these decisions impact your overall financial game plan. However, not everyone is naturally analytical. Personally, I love to build spreadsheets and examine all the useful data I can get my hands on. If that’s not you, then either keep your plans simple or get some help (e.g. your partner, a financial planner, or other trusted person). 

 

11. Fearless

Being “fearless” doesn’t mean being reckless or haphazard. What it means is that you’re able to absorb the ups and downs of the markets without losing sleep or going into a panic. When you see your investments plummeting, you need nerves of steel to make the right decision (which is usually to wait things out).

At the same time we were watching our retirement portfolios drop by 50% in 2008, we had also made the mistake of buying a new condo before selling our Castro multi-unit home. That meant we ended up with two properties (valued at a combined $3 million) during one of the worst downturns in history. What did we do? We hunkered down, worked longer hours at our jobs, continued investing, found good tenants, and eventually got through it all.

 

12. Patient

The cousin of fearlessness is patience. Bad things are going to happen, because life is unpredictable and messy. To achieve FIRE, you need to be patient and ride out those bad times. 

You also need patience to allow your nest egg to grow. Don’t make the mistake of trying to FIRE too quickly before you’ve accumulated at least 25x (preferably 30x) of your yearly expenses. You may dislike your job, hate your commute, or dream of sipping pina coladas on the beach, but it’s better to practice some restraint and make sure you have everything lined up properly. 

 

Conclusion

You don’t necessarily need an MBA or software engineer salary to FIRE (obviously, it doesn’t hurt). You just need perseverance and persistence. Not all of these traits may come naturally to you; however, if you put your mind to it, you can make improvements in each area. 

We always say that achieving FIRE is not rocket science. It’s certainly not easy, but if you work on it and combine the traits we went over, you can definitely get there. It can happen sooner than you think!