Below is a guest blog post written by a friend of mine who is part of the Financial Independence, Retire Early (FIRE) movement. It was written amid the recent COVID 19 stock market crash.💸📉

Our Net Worth is down £92K this year…😱

… and I am comfortable with that. 

In a funny kind of way, I feel good about it, because I feel good about myself. 

You see, in the good times we do not know ourselves. 

We do financial risk assessments to get an idea of ourselves and how we would react to certain market conditions, but we never really know until we can look at a screen and see reality in pounds and pence. 

Risk assessments suggested that I had a high capacity for risk when it comes to investing, and now I feel good knowing that this is true. 

I am not worried or panicking about the recent stock market crash. 

Quite the opposite, in fact, because of the decisions I have taken since I took a keen interest in personal finance and the FIRE movement.

What following the principles and practices of FIRE does, is give you financial resilience. 

In many ways I prefer the term Financial Resilience.  

There is no playbook that will work for all. 

Each person has a different take on it. 

For me, whilst my investments are ‘adventurous’, I place high value on security and (that word again) resilience. 

That is why for example, we (my wife and I) did the following in the last year (some of which may go against the views of the puritans within the FIRE movement):

• We built an emergency fund of over 1 year of expenses that we hold in Premium Bonds
  
  Many would say this is too much.  Well guess what? We can sleep just great now, safe in the knowledge that if I get furloughed or one of us is made redundant we will be just fine.  We are resilient.   Also, we keep our emergency fund immediately available (effectively) in Cash.  You should never invest your emergency fund (like some are tempted to do).
  
  
  
• We focused on heavily overpaying the mortgage.  Last payment was April 2019.  We are mortgage free and it feels great!
  
  Many would say that you can earn more from the markets and that cash is better invested.  Well again, we value security and in this time of crisis we now have a secure home that enables us to sleep at night knowing it can never be taken away from us.  We are resilient.
  
  
• We updated our wills and setup Lasting Powers of Attorney (LPA’s).
  
  We did this late last year.  We wanted to be secure whatever happened and ensure that our son was taken care of in any scenario.  I am sure glad we were pro-active about this since it now means we don’t have to worry about such matters as this global pandemic takes hold.  We are secure.
  
  
• We setup Income Protection insurance… to add to out existing Life and Critical Illness cover.
  
  Some proponents of FIRE feel that insurance is less necessary.  Well in pure financial terms yes, but since we are only a few years away from lifelong Financial Independence, why risk derailing it for such a modest cost?  We can cancel this when we hit FI, not before.  We want to be Secure and Resilient having done so much of the hard work.

All the above means, that now we are in a position to invest heavily in Pensions* and ISA’s, knowing that we can turn off those investments should we need to and knowing that over the long term (our horizon) the advancement of the market is extremely likely.

I was moved to write this, not to preach and I certainly do not want to make anyone feel bad, but I wrote it because I believe that following the principles of FIRE have helped me become more financially aware, and yes, you guessed it, resilient!

Some commentators have suggested that the recent stock market crash and the inevitable economic impacts will spell the end of the FIRE movement.

Well, I disagree with that. 

Those whom educate themselves and apply the principles in the right way and build a great financial plan will have the Resilience to get through the inevitable vagaries of a financial lifetime. 

* Note, we always invested in pensions.  Always take free money from your employer and the government.