FERN not FIRE: Long Term Financial Security (Without Getting Burned)

It’s burning hot. Financial “independence” is wicked hot. Not sure what it means but it sounds hot. And the way they rock that extreme frugality? That monthly budget is smokin’! OMG and that automated broad market index ETF investing strategy is on FIRE!

Sun Shines Through Ferns

There are some real issues with FIRE (financial independence, retire early) and with its lofty goals and commonly touted strategy. There’s the practical realities of life and that most people cannot even consider taking this approach. But there are also some fundamental flaws with FIRE that will potentially undermine even the most enthusiastic follower of this approach.

And there is an alternative to this idea of financial life management. It’s not as brandable, and it still requires discipline and a focus on long term goals. But this alternate strategy dispenses with the fabled notion of independence and aims, instead, for financial endurance. It also acknowledges a reality we all live in but few want to admit: most of us will never retire.

Path to Financial Security

So, you are tired of ‘working for the man’ and slaving for a paycheck. You want your freedom, and your idea of independence is not having a job. You’re not alone and it seems that you have found your motivation. But even people that earn income from their own business have a job; that’s why it’s called self-employed.

The fact is, the path to financial security and success in life is long and winding and crosses hills and valleys. And you won’t be done with the journey when you’ve quit your job. For many people, that is just the beginning.

To really achieve long term success, one must accept that opportunities (for wealth, career advancement, personal growth) derive from the economy and the world around us. Independence, then, is a confusing idea when what we really need to do is embrace (our job, business, life pursuits). In practical terms, the only freedom we should strive for is freedom from stress and worry about our future.

A Persistent, Prosperous Survivor

Which brings us to the main theme of this article and idea. In many circles (not just FIRE), there is much talk about getting high returns and ‘making your money work for you’. This is, of course, a key function of successful portfolio management for most people. But there is often not enough attention paid to risk management.

Assuming that dividends and rental income, or sales revenue from a business, etc will always be there is a critical gap in most financial planning or investment strategies. Even less focus is given to preservation of capital as a distinct function of risk management. And this realization prompted reflection on a humble and unassuming little neighbor that shares our planet.

It is one of the most ancient plant species on earth. Despite its delicate appearance, it has survived, adapted and prospered through multiple extinction events and the ever-shifting tectonic movement of the continents. We are talking about the fern.

Small, Careful Steps Towards Long Term Goals

Some folks are always looking for shortcuts with all-in gambles or ‘get rich quick’ schemes. This is reckless and risky, and rarely leads to success. Ambitious goals, big objectives and making big money are possible, but always require work and usually come over time and through a series of many small steps. It’s been said (and it’s true) that overnight success takes years to achieve.

Considering our smaller, daily actions in the context of these larger goals, and staying ever-alert to the associated risks (individually and in aggregate) is the best way to ensure long-term progress and success in whatever you do. And with every person and goal there are different needs and factors to consider.

So, following a simplistic, cookie-cutter plan and expecting it will fit your needs and life, or lead to financial success is also risky. The FIRE philosophy puts a heavy emphasis on diligently keeping to a well-planned budget. And good budgeting is critical to a successful and happy  life. It also promotes automatic, recurring investing into the stock market, and equity investing is an important part of any financial growth strategy. But these are just two pieces to the larger puzzle of life planning.

There’s no express bus on the road to financial security. Getting to your destination requires careful planning, constant vigilance and ongoing effort. And everyone’s route to happiness is different, so true success also requires taking responsibility and owning outcomes.

Play With FIRE and You Get Burned

There are things to love about the original FIRE concept. The idea of not slaving away in a 9-5 job is easy for anyone to get behind. But most of the underlying principles are not new, and the so-called “FIRE movement” also has some fatal flaws.

Person Holding Fern Leaf

It sounds simple enough. Work hard, live a frugal life and save 50% of your income. Then redirect this excess income into the stock market so a consistent 7% annual return grows it into your all-important retirement fund. Once you have 25X your annual living expenses then financial freedom and independence is yours! Easy!! But no, it’s really not easy at all. And for most people it’s not even practical.

A Brief History of FIRE

Most people attribute the origins of FIRE to the 1992 book called Your Money or Your Life, by Vicki Robin and Joe Dominguez. Joe Dominguez worked a Wall Street job that he left at 31 and never looked back. I’ve spent much of my professional life working in the finance industry so I can imagine how he felt. The typically brutal hours would make anyone want to break free from the time-for-money grind and run for the hills.

Joe and Vicki also focused a lot on rethinking our consumerist culture and promoted the virtues of simple living. These are undeniably positive principles to incorporate into one’s life and are often discussed in FIRE circles. But some adherents don’t just exclude luxury products and eating out in restaurants from their budget. Some view a car or even a mortgage as unnecessary expenses, and seek a truly minimalist (and low cost) lifestyle. But for most people, extreme budget austerity is neither practical nor desirable.

Where the strategy really starts to break down, however, is with the concept of financial “independence”. Most of us dislike our job and trading our precious time for money. But a strategy that draws so heavily on investment returns from the stock market or rental income can actually make a person more dependent.

If your financial success assumes a stable, predictable economy and a stock market that always goes up, then you are assuming too much. And if you have chosen to “retire” and pursue mai tais on the beach (or whatever your equivalent) instead of continued personal and professional growth, then you have only traded one dependency for another. You may now have more time freedom, but you have not achieved true independence (whatever your definition).

No Financial Independence in a Global Market

This has been the case since before 1992, when the book was first published, but it is an inescapable reality, now more than ever. There is no way to be “financially independent” in a globally interconnected world. Perhaps if you are literally running for the hills and want to go completely off the grid, then you can mostly disconnect, go solar and grow your own vegetables. There are other sites out there that could help you with that.

But the FIRE movement typically promotes the idea of grinding away through your youth and pumping all your spare dollars into index funds or rental real estate. Then, if you push hard enough you can live off the dividend or rental income (assuming your cost of living doesn’t change along the way).

Unfortunately, major downturns in the market or economy are inevitable. There are always unexpected or unplanned-for events that can have a significant impact on that income or the underlying investment principle.

If you depend on a single source of income (of any kind) and don’t diversify across multiple, uncorrelated income streams you are asking for trouble. This becomes obvious when one puts risk management at the center of financial and investment planning (as well as one’s life). Yet, it often seems overlooked among firelings.

Retire Early is Risky Business

The FIRE movement invariably conjures images of digital nomads wandering freely around the world; living off ‘passive’ income. But if you go down any road long enough you will hit potholes and detours; usually sooner than later. And there is a critical risk management gap in how FIRE is often implemented these days. It’s right there in its name.

Plant Burning Fire Danger

Imagine if you could start young and fully commit to the ‘path of FIRE’, you could grind away and live a truly minimalist lifestyle for years and perhaps you were lucky enough to catch the longest bull market in history. Now you are atop your mountain of retirement money and can withdraw 4% a year and live happily ever after. That 4% is theoretically equal to your cost of living, and you better hope it buys you the retirement lifestyle you wanted (when you were 25).

You better also hope it lasts as long as you do. How much longer will you live?

And you better hope no unforeseen medical expenses arise. What will the state of the healthcare system be in the future?

And hope a natural disaster doesn’t suddenly devastate your home. Did buying a home ever fit into your budget?

And hope that macroeconomic forces have left your city or country in a relatively livable state. Would you be able to relocate and restart somewhere else if you had to?

Would coping with any or all of these things fit into your well-planned (4% per year) retirement budget?

The truth is that the traditional concept of “retirement” is no longer viable. Most of us grow more experienced and productive the older we get. To stop working and generating income is unrealistic for most, but it also would mean ‘quitting’ just as our market value is greatest.

So, seeking to retire (early or ever) is simply not practical for an ever-growing number of people globally. And, even if you could, it would only add risk to your life portfolio.

FERNs Survive and Thrive

So, simple living, budget discipline and investing excess funds are all virtuous goals and good habits. But these are not new ideas, and what’s missing from FIRE is more critical than what is included. Which brings us back to the humble, little fern.

The fern traces back to ancient times, from Earth’s earliest epochs. Through multiple cycles of cataclysm, recovery and renewal it remains largely unchanged and has proven itself a survivor. Like the fern, we can draw on who and what came before us. Indeed, in most matters of money, business and life, there is no secret formula or treasure map, and no need to reinvent the wheel.

The timeless principles of budgeting, investing, building wealth and compounding are just as true and applicable today as ever. And the most successful entrepreneurs and investors of the past understood this and learned from the wisdom and lessons of their predecessors. Like the fern, they grew out of what preceded them and adapted to what came next.

The unassuming fern has endured. Even today, these slow-growing plants are typically the first to recover after forest fires, natural disasters or in highly polluted areas. Their persistence is truly astounding. And this ability to survive and thrive over the long term is what prompted this article.

Taking a risk-adjusted, ‘preservation first’ approach to tried-and-true investment principles is the best way to assure long term success, whatever your goals. The slow and steady fern reflects these basic ideas.

Financial Endurance Retire Never

FERN offers a counterpoint to the appealing yet incomplete ideas reflected in FIRE. Let’s reconsider traditional best practices and maybe incorporate some additional factors into our life portfolio strategy.

Man Walking Among Ferns

The notion of independence is ambiguous at best, and impractical since we are never fully independent of the economic realities of the world. Those realities bring all manner of risk.

Concepts like “freedom” and “independence” are all well and good. But maximizing one’s life and enduring through the good times and bad is the true goal. This means making risk management a centerpiece of one’s strategy.

Another of those realities is that few of us will have the ability to retire (or should retire, even if we could). So, dispensing with the idea of retirement and embracing good works and productivity throughout our life is both necessary and empowering.

Hence, financial endurance, retire never (FERN). It may not sound as sexy as fire but, over the long term, fires burn out and ferns survive and thrive.

Defense is the New Offense

Our friend the fern grows slowly. But after so many other species lost the evolutionary long game, it remains. When making an investment (of time, energy or money) we must always consider the risks and potential downside; not just the potential for loss but even catastrophe. Indeed, what we can learn from a fern is not so different from what a successful trader might tell us: capital preservation is key.

It’s a core principle of successful institutional investors that the best way to make money in the long term is to not lose it in the short term. This is even more true for regular folks managing their family budget and savings. And keeping a defensive stance and assessing risk doesn’t have to be complicated.

Start with the big, long term goals. Then take those targets and map the smaller steps required to get there. This can be a detailed process with a spreadsheet or just a quick mental exercise, depending on the goal.

Each step requires an investment or resource, whether it is your time and effort or actual capital. And the desired outcome of each step can be weighed against that investment in terms of cost, likelihood of success and real value. And when we clarify both the effort/cost/investment and the potential reward it becomes much easier to assess the risk.

In the professional money management and institutional trading space this has always been the foundation of a successful, long term financial strategy. Risk management is huge. It underlies everything the fund manager does and after a new trade or investment idea is conceived, risk management remains a key part of the investment process throughout.

The basic principle is just as meaningful and actionable for individuals and families. So, if we accept the interconnectedness of the world then with every investment and major life decision we make we should consider the downside risk, and not just the upside opportunity. Limiting risk of loss and preserving capital (and all other forms of value we gain in the course of life) is key to the idea of financial endurance.

Reinvesting in Your Most Valuable Asset

If you take nothing else away from this article then, at least, dispense with the faulty and unrealistic notion of retirement. And realize that this is a good thing. Planning on continued work and productivity for the duration is something to embrace.

Path Through Ferns

We are not simply talking about working a part time job in your 70s. Of course, in many economies (including the US) this is actually commonplace and many older people have these jobs, often out of choice and not necessity. And income streams of any kind may have their place, depending on one’s circumstances.

But the idea behind ‘retire never’ derives from a more basic concept: our time (and energy) is our original investment capital. This is the seed capital that we were all born with. This makes us, each individual, our own income-generating asset.

By extension, then, anything productive that we do with our time and energy should be considered as returns on that asset. Therefore, any activity including time-based activities (like a minimum wage, hourly job) could be viewed as a return on investment. The question should be whether you are deploying that “original capital” into the right investments. As we grow older and more experienced, we should seek to maximize those returns (whether measured in dollar terms or otherwise).

And we should treat other selves (the asset) the way we manage the rest of our portfolio, seeking continual growth. Long term, your financial security and life success depends on regularly reinvesting in your first and most important income-generating asset: you. And staying productive (most of us call it “working”) is a key part of continued growth and enrichment. To retire is to mismanage our most precious asset, when its value could be greatest.

Adapt, Abound and Endure

Ultimately, the point here is not to disparage the FIRE movement or the people that follow it. It promotes some good habits and best practices. But it is an incomplete approach, and there is no one-size-fits-all strategy for financial security and success.

Above all, risk management must be applied to both short and long term financial, business and life planning. An essential step towards doing that is acknowledging the world we live in brings both good and bad; opportunities for gain and risk of loss. Another key to success is in the importance of taking responsibility, and plotting your own roadmap into the future.

Needs and desires, and financial and life objectives are different for everyone. But the central goal that applies to everyone is to maximize one’s life and endure through whatever life throws at us. As such, the story of the fern is not just about survival, it’s about adapting and excelling. And, when we do, success abounds.

by Jason Paul Hendricks

Jason’s experience ranges from bootstrapped solo startups to corporate roles with publicly traded Fortune 500 companies. On Digital Downshift he shares what he has learned over three decades of entrepreneurship and career-hood, both his mistakes and successes. With an obsession for business building and continuous learning, Jason seeks to apply these lessons (and help others do the same) to achieve more happiness and security.

Hey Shifter!

Join for free to get actionable tips and insightful ideas on learning, earning and investing sent straight to your inbox.

We promise we’ll never spam or share your email...ever!
Take a look at our Privacy Policy for more info.

Similar Posts