Re-framing Financial Independence on My Terms
I thought I had it figured out. There were dozens of spreadsheets, financial models, and projections. But it all came crashing down and I am now faced with an identity crisis.
In October 2022, at the age of 47, I announced we were Financially Independent. At a minimum, I wanted a gap year while I figured out what to do next. I hoped to not work for as long as possible.
We were still in Dubai but were out of touch with the cost of living outside of the UAE.
Six months in and there’s been a significant re-think.
When you burn your life down, you can’t help but change. There was:
- A job loss in Dubai
- A difficult relocation from the UAE to Mexico
- Significant culture shock
- A new remote role working in a field I care about
There were hard lessons about:
- Inflation. In Mexico, inflation is reported at 10%, but live here awhile and you’ll see that it’s much higher.
- Purchasing power: The Canadian dollar is weak which means our money does not go very far.
- Cost of living: The true cost of living in Mexico is 32% higher than what we expected.
If I’m honest, the clues were everywhere, but experience, as always, is the ultimate teacher.
The move to Playa
We have been living in Playa del Carmen (PDC) since December 2022.
PDC is full of people like us fleeing North America and Europe for a different life. Ask around and everyone’s got the same story: Inflation, tax, politics, war, cost of living, and quality of life.
In the last 18 months, geo arbitrage, though still a great strategy, is a lot more expensive.
It’s not only Mexico but everywhere experiencing this. And at least in Mexico, your money goes further than in the West.
A breathtaking four-month unraveling.
I lost my job in October 2022. By the middle of October, we launched our blog www.mindfulfirelife.com. I pushed out a ton of content in those early days. My truth, as I knew it at the time, poured out of me.
By the beginning of November, a company that I’d been eyeing reached out to offer me a role, which I accepted.
We left the UAE at the end of November, and after a 10-day detour to Canada, arrived in Mexico in early December.
By mid-December, I noticed our spending was in freefall.
I started tracking our spending and within a few weeks realized that our spending was on par with Dubai. The $2,500 USD budget I’d read about online was a sham.
In January, Steve left for Saudi Arabia for a 2-month contract. I started my new role which turned out to be a saving grace. In hindsight, though I thought I wanted a gap year, in truth, it was the wrong time.
As I settled into my new role, I used writing as a tool to help me make sense of what was happening. Writing is what helped me process our new reality and define a new path forward and truth for FI.
It’s all about the journey.
In the FIRE journey, there are predictable stages.
Stage 1: The FI lead-up.
99% of people who seek early FI, fixate on their FI number as a target. This was definitely true in our case. If you have a certain degree of work misery, that fixation becomes your salvation.
Though salaries and lifestyle quality are very high in the UAE, the work culture is dreadful.
But living in the UAE was the single largest accelerant to our savings in our lives. That was the trade-off.
Stage 2: Hitting FI.
We hit our FI number in May of 2022. This came as a surprise due to the growth in our real estate and investment portfolio.
Your FI number is of course driven in part by your expected annual budget. Based on my research, I thought CAD 50K would be a luxurious budget to live off of in Mexico.
I was wrong.
A perfect storm of peak demand, high inflation, and a weak CAD dollar decimated our budget. Health insurance was double what I expected. There are two senior pets and annual travel to Canada.
When we take possession of our condo in early 2024, we won’t have any more housing costs. This will bring our costs down which is a good thing.
But no matter how you slice it, we hit every early retiree’s worst nightmare: Not having enough money.
Stage 3: Adjusting to circumstances.
I recently read Bill Perkin’s book ‘Die with Zero’. He uses an interesting calculation that’s based on your life expectancy. Using that formula, I increased our FI target. This should be easy to hit by leaving our money to grow on its own.
Stage 4: Changing Goal Posts.
In the FI community, there is talk about a common issue that comes up for people. That issue is changing your goalposts.
In my case, yes, the goalposts shifted. We increased our FI target.
But I wasn’t the one who shifted them. Life shifted them for me and everyone on the planet who was thinking of retiring in 2022.
Though it was a very confusing time, I realized that it wasn’t only me who was struggling with FI. Many others were also in the same boat. Like us, some have pushed their date out by several years. Others have had to un-retire to earn more money.
Stage 5: Reframing FI.
FIRE has been reframed and we’ve dropped the RE.
We will focus on earning and growing our investments until the dust settles.
Prepare for turbulence
Through this tilting and shifting, I have to admit I was very angry. I was angry at the FIRE movement, and I was angry at myself. There was a feeling of betrayal, personal failure, and embarrassment.
Now that I’ve had a chance to process and redefine FIRE, I’m over that.
The beauty of FI is that there are so many models that you can try: Lean, fat, coast, and barista.
For the next year, we are juggling all four.
Though I thought we could survive on CAD 50K and retire early, that target seems too lean in the current market. As well, we are living within a budget and saving anything left over for our final condo payment due in early 2024. Given the currency fluctuations, it’s better to save. I don’t want to end up needing a loan to cover the exchange.
Though I’ve increased our target FI number, we should be able to achieve that by leaving our portfolio to grow. There are a few wildcards, but those are outside of my control. This is the coast part for us.
Though I’m currently working 35 hours a week, in the next year, I should be able to reduce my hours. Once we take possession of our condo, we’ll live off our passive income and start drawing down our savings. I plan to continue working to boost our budget and lifestyle.
Under the current reality, I’d rather have a more robust budget. I don’t want to worry about markets and safe withdrawal rates. Using Barista FIRE, we’ll have more budget padding.
It’s now been almost six months, and I cannot believe how much has changed. My initial bitterness has evolved into acceptance, and I’ve found solace in the FI community.
My biggest learning has been that there’s always a way to adjust and adapt. Along with frustration, there has also been adventure and learning. Ultimately though, when you have independence and autonomy over where and how you live and work, there is freedom. Hitting your FI number is an important part of the equation, but freedom is the true sweet spot.