But ... I wanted to dig deeper. Can FIRE (financial independence retire early) Survive COVID-19?
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| How much of a mess is FIRE right now during COVID-19? Or is it not? |
Now is a good time to re-read our post How To Survive The Next Financial Apocalypse. So the short answer to the question “Can FIRE (Financial Independence Retire Early) Survive COVID-19” ... YES. But the key is (like we mention in How To Survive The Next Financial Apocalypse) safety margins. This post specifically relates to how to survive a financial apocalypse during early retirement without having to tap into your investments (as much) ... but safety margins (depending on which one) can be used even before you reach FIRE. And I think as all or most of have learned from this global pandemic, it is best if ALL of us have some safety margins in place. It is always best to be prepared, no?
In How To Survive The Next Financial Apocalypse, we mention these safety margins: 1) Cash, 2) Be Flexible, 3) Part-Time Work / Side Hustle, 4) Geographic Arbitrage.
1) Ahhh, cash cushion. This has been a hot topic in the FIRE social media groups I am in ... regardless of FIRE, some people have lost their jobs completely, or income is temporarily halted, etc. So how much cash cushion do you have saved up? As we mentioned in our post, we recommend at least 3 - 5 years of cash cushion. But we recommend this based on lowering your investment withdrawal rate... wait, what? Remember, you only need to cover 1% of your expenses for 3 - 5 years, and your investments can cover the other 3%. See our previous post for all the math!
So the question is ... have we tapped into our cash cushion? No, we aren’t fully retired yet. We are both still working FT (I did resign so my income will end mid-year, but we don’t plan on tapping into our cash cushion at this time).
One thought is ... if Erik continues to work due to staying in the Houston area (because of COVID-19), we may put even more into our cash cushion (but we have way beyond 3 - 5 years already saved).
2) Be flexible ... I think COVID-19 is teaching us all to be flexible! ... including those in the FIRE community. Is our plan for FIRE working out exactly as planned? Well, no, probably not... are we being flexible? Yes. We will probably not get our Spain Visas on our timeline (and even if we could ... that may not be the safest thing. Who wants to travel on a fun adventure only to be locked inside your place under quarantine?!).
So depending on the length of our next apartment lease, (6 - 12 months) ... we are probably not going to Spain on Visas for 6 to 12 months. The length of the lease really depends on the cost of the lease also. As we mentioned in our last post, we probably want to move into Houston (versus being in the suburbs now) so the cost difference for 6 to 12 months may be significant. We shall see. We are being flexible!
We’ve talked a little more about backup plans. What if in 6 - 12 months Spain is still not issuing Non-Lucrative Visas? I find that situation unlikely (although it may depend on timing .. more likely in 12 months), but anything is possible at this point!?
Plan A may be ... let’s travel to Spain on our passport (if they allow that), and we can stay for 90 days. The biggest downside to this is we won’t be able to put the kids in school (besides not being able to stay a year), but again - being flexible!
We’ve talked previously about our idea to World School. I thought that was 2 years away, but it may be moved to within the next 12 months! So what does that look like? Well, we are still at the very beginning stages of planning this “backup plan”, but we also talked about the idea of Costa Rica (look at this little gem we found on Airbnb) (especially if Spain is still a mess... we can still immerse in the Spanish language, just in a totally different location). Our (tentative!) idea right now is ... 3 months (remember that 90 day passport rule!) Spain, 3 months elsewhere... (we’ve looked into Croatia!) ... 3 months back in the US to see family and friends (and maybe check out some National Parks?), and 3 months back in Spain (since on a passport you can’t stay more than 90 days). I guess the key is ...like ALL of us are now learning, be flexible.
3) Part-Time Work / Side Hustle...I was already thinking about (before COVID-19 happened) exploring part-time work for my own enjoyment and some side income this summer through some on-line teaching options (maybe art classes on Outschool? Or teach via VIP Kid? Maybe resources on Teachers Pay Teachers? And now the need for teachers on-line and resources has jumped tenfold! As of right now, those are three options I plan on exploring this summer (and probably starting). Remember, you don’t really need to bring in a lot to make a huge difference!
Erik will (most likely) still be working FT, but he also has his side gig he can develop of Financial Consulting.
4) Geographic Arbitrage... This is top of mind right now ... where can we go where our money goes even further (hello, Spain, Croatia, Costa Rica!).... this doesn’t always have to be the case (hello, NYC), but it is good to work the research into our current plans, backup plans, and backup to backup plans!
If anything, we may be set up even better for FIRE or more prepared in various ways because of what we are experiencing during COVID-19. We may be able to put even more aside either into a cash cushion or investments. Our side hustles may not only be researched even more but also implemented sooner than we thought. Backup plans are going to be researched more (and again, may be implemented). And also we had a version of Homeschool and World School on our list... I just didn’t think we would be thrown into unexpected Crisis Learning this school year (but I will be better prepared come “Fall” if I need to Homeschool in Houston). So we are trying to find the positive during a very serious and scary time!
So can FIRE survive COVID-19? Yes. Are safety margins important? Of course! How have your safety margins looked during this global pandemic? How can you be better prepared?
-Tara
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