Balancing Financial Goals with a Happy Life: Embrace the Big CHILL

We often hear about the idea of “early retirement” being promoted on social media, blogs, and podcasts. It’s a concept that has always held appeal, and it’s becoming increasingly popular. According to Google Trends, searches for “retire early” have tripled over the past decade.

At the forefront of this movement is the ‘FIRE’ brigade—an acronym for Financial Independence, Retire Early. This movement gained momentum after the 2008 financial crisis, appealing to many young workers. The premise is simple: spend less than you earn, invest the surplus, and aim for early retirement.

However, while the concept is appealing, it can also lead to extreme measures. Some FIRE enthusiasts advocate for saving up to 70% of their income and investing aggressively, often to the detriment of their current lifestyle. Stories of people retiring in their forties or younger abound online, but it’s essential to consider why there is such a rush to retire early.

The Focusing Illusion

The behavioural bias known as the “focusing illusion,” coined by Nobel prize-winning psychologist Daniel Kahneman, explains this phenomenon. This bias exaggerates the importance of money in achieving happiness. Kahneman’s research suggests that in wealthy countries, higher income has little impact on overall life satisfaction and may even increase anxiety and stress.

Social media can amplify these feelings, making us believe that more money and nicer things equate to a better life. This cognitive bias fuels the FIRE movement, driving people to extreme frugality and obsessive saving.

Mental Health and Financial Dysmorphia

Even those who are not FIRE devotees may become consumed by the need to save excessively for a perceived future nirvana. This can lead to what some in the US call financial dysmorphia—a distorted view of one’s financial situation.

Financial dysmorphia can manifest in two ways: obsessive saving or saving too little. According to Fidelity, only 51% of British workers believe they have saved enough for a comfortable retirement, compared to 68% of Americans and 74% of Danes.

Calculating how much you need for retirement is challenging due to many unknowns, such as future expenses and lifespan. This uncertainty can cause anxiety, leading people to set stringent financial goals, which may become obsessive and overshadow their current life.

A New Approach: The Big CHILL

Given the growing reality of longer lifespans, it’s time to reshape our approach to retirement. Instead of aiming for early retirement at any cost, consider planning your life with flexibility. Invest in flexible accounts like ISAs, allowing you to retrain or take breaks throughout your career, which can make working longer more feasible and enjoyable.

We advocate for a balanced approach we call CHILL: Career Happiness Inspires Longer Lives. Work can provide engagement, social connections, and a sense of purpose. The ideal employment allows you to enjoy these benefits while giving you time to pursue your passions.

Moving Forward Together

We understand the saving crisis. Too few people invest, and many invest too little. Long-term investing can unlock a better future, but it should be done sensibly and without causing undue stress.

Alongside the saving crisis, there’s also a mental health crisis driven by financial dysmorphia. Education and tools like our retirement calculators can help, and financial advice might be worthwhile for those needing extra reassurance.

Ultimately, you may never pinpoint the exact amount to save. Focus on saving what you can and think about extending your working life in a way that brings joy and balance. Join us in embracing the big CHILL.

And if you need help, it makes great sense to work with a professional Financial Planner. Aside from making the calculations for you, a skilled Planner will take lots of time to explore what’s truly important to you, what you want to achieve, and why. Then they will carefully craft a Financial Plan designed to get you there most efficiently. Most importantly, your Planner will stand alongside you on the journey, helping you to keep on track, monitoring your progress, counselling and helping you to make adjustments as you go.

So if you’re on FIRE, maybe your Financial Planner will help you CHILL.

This post was inspired by an article written by Andrew Oxlade for Fidelity: Retire early? Forget ‘FIRE’ and follow ‘CHILL’