At the time I’m writing this blog post, the coronavirus Corona Fires has caused massive damage and disruption across the globe. It’s turning worlds upside down everywhere. Uncertainty reigns, and the long bull run that America’s stock market was on has come to a swift and grisly end.
Pain points
Logic — or at least history — tells us that eventually things will return to “normal.” But no one knows when. Nor does anyone know how much damage ultimately will be done and how long-lasting and transformative — for ill or for good — some of it will be.
What is clear is that a lot of people are hurting financially. And the hurt will get much greater before it gets better. Many lives have been and will be upended. Some folks will never fully recover. Others will recover only through measures they’d not planned to take: working longer, taking government benefits, moving in with family or roommates, etc. (Side note: if your life is just financially upended, count your blessings. A lot of people have and will lose their lives from COVID-19). Governments will ultimately spend many trillions of dollars just triaging the situation.
Some people, however, will be able to greatly mitigate the financial world-disrupting damage to them. Others will even be able to look on this period as transformative in a positive way when it comes to their personal finances. Among the ranks of these people will be many of the folks on the FIRE path. I hope to be among this cohort. Tho, to be clear, I will consider the most important and major victory to be my, my family’s, and my friends and loved ones being unharmed by this pandemic once it passes.
For many of us pursuing FIRE, we seek to increase The Spread (between expenses and revenues). Keeping a lifestyle that isn’t just affordable in normal times, but also when the stuff hits the fan is like having a financial shock absorber. The greater the spread, ideally, the more effective the shock absorber. And the harder it should take for world events to cause (lasting) irreparable damage.
Some folks focus mainly or exclusively on cutting expenses to increase The Spread. Others focus on cutting expenses and increasing revenues. Yet a few others, I think, focus mainly or exclusively on increasing revenues. The Missus and I are in the second camp, tho we’ve done better on the cutting expenses front than on generating additional revenues.
I’ve found that some of those focused mainly or exclusively on increasing revenues look down their noses at the expense cutters, and sometimes at those in the cut-expenses-and-increase-revenues camp, too. They’ll say things like, “Don’t waste your time turning the thermostat down a degree or five more than you’d like, or skipping the morning coffee from the coffee shop! Focus instead on finding ways to make money!”
Sounds like reasonable advice. But is it always? As we’re seeing with the effects of the Corona Fires — which, I grant, is an exceptionally rare type of event — many of the world economy’s gears have seized up. Revenue-generating work for many has partially or, in some cases, dried up. I expect that for some people who focused mainly or exclusively on increasing their revenues through side gigs, rental properties, or other means, those income streams are drying up, too. Side note: I’m especially curious to see what happens to to the people who bought and are relying heavily on rental properties and now find that their renters can’t pay the rent.
It’s possible — and maybe probable — that many of these people have room in their budget to cut expenses. Maybe by a lot. But others, maybe not. And I think those folks may now find themselves in a bit of a pickle.
How low can you go?
When your expenses are low, you should be able to better withstand one or all of your revenue-generating activities drying up partially or completely. The lower your expenses, the less revenue you need to meet them.
That’s powerful. Our expenses are not low. But they’re also far from as high as they could be if we lived as high on the hog as we might otherwise if saving and investing (and, for me, FIRE) were not major objectives of ours. So although I don’t know how, or how much, the Corona Fires will impact us financially, we can take a bigger hit than a lot of other people. And, having relatively sizable investments (even if they’ve taken a tremendous battering in recent weeks and likely will be pummeled even further in the coming days, weeks, and months), we have reserves we can dip into if things get really hairy.
In the “best case” scenario (I use that term with some reservation, knowing that the Corona Fires will cause immense pain for many people), we won’t touch our investments and will be able to continue buying equities throughout this period, as we have so far. When the market turns up, we’ll hopefully be able to recoup our losses over time and, ideally, much more.
This is largely a possibility because of our pursuit of FIRE and a focus on the expenses side of the ledger.
Dear Reader, I hope you are able to, at the least, come out of the Corona Fires crisis alive and well, and in no worse financial shape than you are currently. And I’m pulling for you to come out of it in a position that can rocket you at an even faster pace to your FIRE number and allow you to look back at all this as causing but a mere flesh wound.
