Sorry to have to be the one to tell you this; but if you have embarked on the journey to FIRE – it’s going to be a bumpy road.
I know that all the Youtube/Instragram finfluencers have promised us something else; a straight line to freedom. But in most cases this is not going to happen.
For the majority of us, the journey will be long. It will be hard at times, and some times (most of the time, really) it will seem like an impossible endeavor.
You will undoubtedly have seen one or two finfluencers (or many!) at one point map their journey to freedom, in a graph that looks similar to the one depicted above (on the left). – Including myself. Guilty as charged!
It is a lot easier for us (humans) to imagine a process being linear. To reach our end goal we simply extrapolate the historic average return of the stock market, and extend it as a straight line into the future. Financial Independence is juuuuust up there at the end of that straight arrow.
Then reality sets in. And the reality of the stock market is: It’s never average!
The S&P500 index has had 15 periods of recessions in the past 95 years. That means that on average there has been a recession every 6.3 years since 1928. But notice that there are many big drops in the index even when there is no recession.
A recession is a significant, widespread, and prolonged downturn in economic activity. A common rule of thumb is that two consecutive quarters of negative gross domestic product (GDP) growth mean recession, although more complex formulas are also used. – Investopedia
I count at least 12 major non-recession related downturns in the graph above (you’ll probably find a lot more if we zoom in). According to SeekingAlpha: Market declines of 10 percent or greater (corrections) occur roughly 0.5 times per year. Market declines of 20 percent or greater (bear markets), occur on average about every seven years. So the amount of bear markets roughly equates to the average we calculated above, based on the number of recessions.
If the average FIRE-journey is around 15-20 years (my best guesstimate – feel free to leave a comment below if you disagree on this estimate! 😛 ) that means that you’ll on average experience 30-40 smaller corrections and 2-3 major corrections.
As with many parts of life, it can be hard to learn from other peoples mistakes or bad experiences. You can’t learn or grow without feeling some pain or anguish yourself. Much like happiness, the feeling of pain and anguish are often fleeting though. For myself the previous year (still in recent memory) felt a lot more painful than it did happy. It’s when reality meets expectations that our world view gets shattered. Then I was reminded about this quote:
We over-estimate what we can achieve in one year but radically under-estimate what we can achieve in ten. – Bill Gates
My journey – and probably most of my peers’ – has been rough for the past year. But if I “zoom out” a bit, and look back at the past 4-5 years instead (of which a lot has been documented on this blog), I think it’s quite clear that I’ve (we) had a pretty good run.
It’s important to remind ourselves to enjoy the journey. It’s very difficult to enjoy losing money though! 😛
I’ve had to remind myself many times in the past year, why I’m on this path. It’s also important to remember, that the money we “put to work” in the stock market is not lost, until the loss is realized (if you sell when it’s down).
I also realized something else recently; happiness comes from the contrast of un-happiness. In order to be happy, you must first know and experience the feeling of being unhappy. I’ve also come to understand that fulfillment comes from completing (perceived) difficult tasks.
When you do hard or difficult things on a regular basis – with full intent – life in general becomes more easy. – John Savill
I should add that I have in no way learned to master the art of actually practicing this! Far from it. Complacency is my nemesis. I thrive in laziness. But I’ve come to realize that complacency often leads to unhappiness. Because as I said, happiness comes from completing seemingly difficult tasks. When doing (completing) nothing I quickly start to feel unfulfilled.
So what can you do to put yourself on a path to regular fulfillment? Well, I made a small list on my phone one day of “tasks” that one can do to make life a little harder – so as to make yourself a little more happy (that makes no sense!?), and it was at that point that I realized why so many people are doing marathons etc. 😛
Here is my list:
- Take the stairs instead of the elevator
- Eat healthy instead of eating junk food
- Take cold showers
- Exercise regularly
- Climb mountains / hiking
- Run a marathon
- Do an Iron Man
- Survive 40 Danish winters
- Seek to FIRE
At that point I stopped writing more tasks and realized that in that moment, I was already feeling pretty happy about myself…
How would your list look like?
Thanks for reading this far, and good luck on your journey – where ever you’re going 😉