The 13 Biggest Financial Independence Mistakes (That Delay FIRE by Years)

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2:19Mindy Jensen:That's biggerpocketsmoney.com slash F-I-P-R-O. Mindy and I are so grateful for the following sponsors who make BiggerPockets money possible. If you're chasing financial independence, you've probably optimized your savings rate, cut your expenses, and invested consistently. But one of the biggest things standing between you and financial independence isn't your income, it's your mistakes.

2:49Mindy Jensen:Hello, hello, hello, and welcome to the BiggerPocketsMoney podcast. My name is Mindy Jensen, and with me as always is my has-never-made-an-investing-mistake co-host, Scott Trench. Thanks, Mindy. Is selling a bunch of stocks to buy real estate right before the market goes up 10 % in a given year count as a mistake? If so, I think I've made plenty of mistakes and some big ones here. We're going to break down the five biggest mistakes that many people make on their way to financial independence today. The ones that quietly cost you years of freedom, hundreds of thousands of dollars, and a whole lot of stress.

3:18Before we get into those mistakes, I'll let you know that we're breaking these out into five very obvious ones. These will be no surprise. You've heard them before. Then we're going to talk about eight more subtle mistakes that I think are largely ignored, debatable, or really, you know, more kind of under the surface, more insidious than the ones that are most obvious to the fire community. So without further ado, Mindy, do you want to kick us off with the biggest mistake?

3:44Mindy Jensen:Waiting too long to start. Scott, you've heard about financial independence and you're like, oh, yeah, that sounds like a good idea. And then a few months or a few years go by. You hear it again and you think, oh, I'm going to do that down the road. Start. Start today. Yeah. I mean, starting early just is such a it's such a basic building block of personal finance discussions. The compounding journey makes such a difference. You've all seen the math or heard the math, I'm sure, from anybody who's been around in the finance space for a long time talking about the huge advantages that someone who starts investing even small amounts in their early 20s or even before can have over the course of a lifetime.

4:19And it's not really even just there. The compounding journey begins in your career at an early age. It begins in high school with the grades you get, college, whatever those first jobs, what you do in your free time. All that stuff makes such an enormous compounding difference. and the game can be very easy, relatively speaking, for young people who get a big jump out the gate and benefit from that from the rest of their lives. And it can be conversely really hard to catch up later in life. The second biggest mistake is not tracking your spending and net worth. This is a game, right? This is a competition in a relative sense to your best life.

4:53And you can't play a game if you don't have a scoreboard set up, right? This is how much I make, how much I'm spending and how my asset and portfolio is growing. Am I moving towards that number that represents financial independence for me?

5:06Mindy Jensen:Yes. And this is something that continues throughout your journey. You don't just track your spending at the beginning and say, oh, I'm set. You need to know how much you're spending because as your life progresses, as we just go further down the calendar years, things get more expensive. You don't want to make the mistake of thinking that you're spending$36 ,000 a year and that's how you calculate your fine number. And then you get to retirement and you think, oh, I'm actually spending 60 or you realize you're actually spending 60. Your retirement number is going to change. Keep an idea of what you are spending is, what your net worth is.

5:45Mindy Jensen:And this doesn't have to be an every minute thing, but you want to have this in your mind so that you are progressing down the actual path that you need, not the path that you think you're on. Absolutely. By the way, you can track these numbers in a spreadsheet. You can track them in a free app, or you can go with the BiggerPockets monies partner, Monarch.com, which is what Mindy and I use to track our spending and net worth. And that is, we have a deal with Monarch where if you are listening to the show and you use the code Pockets, P-O-C-K-E-T-S, you will get 50 % off your first year, which I think is$99 or$100.

6:18So go check that out at Monarch.com. That's the tool that I use with my wife, Virginia, and Mindy, you and Carl use to manage your finances. All right. The third mistake is going to be buying too much house or too much car too early. This is the real liquidity killer. Everyone talks about, oh, don't buy a cup of coffee or whatever, how much that habit can cost you over the course of decades. And that's real. There is a very real dynamic component in the context of aggregation of marginal gains and not overspending on the day-to-day items. But really, the liquidity killer is going to be how much you're paying for rent, what your mortgage or fixed housing costs are, what your car payment is, or how much you shell out on that car.

7:00If you can keep those expenses controlled, the game gets so much easier to build wealth. I mean, it just fixes those costs at very low levels and allows all of that to go towards either discretionary spending or investing. You might even be able to live a higher quality of life in a relative sense in terms of the little enjoyments that bring you true pleasure every day and build more wealth if you keep your housing and vehicle costs under control.

7:25Mindy Jensen:Scott, let's play a little game. When I met you, you were working at Bigger Pockets and you owned a duplex and you rented out half of the duplex and lived in the other half. What was your mortgage payment for the entire duplex? I believe the mortgage payment was$1 ,550. The other side rented for$11.50 and I had a roommate paying$5.50. So there was a very, very low housing outlay there. I wasn't for free because those costs didn't account for maintenance and utilities and those types of things that came up, but it was pretty close. That particular property was in an up and coming neighborhood, not in a amazing neighborhood.

8:02Mindy Jensen:If you were going to go rent an apartment back then, you could have very easily paid $1 ,500 for the rent on an apartment. a decent apartment, not an amazing apartment. Would you say that's fair? Well, before that, I lived in an apartment for$1 ,200 before I bought the duplex, right? And I had a roommate. So that made it fairly cheap. Ah, you did have a roommate. So your choice to purchase a property instead of continuing to live in a property with a roommate changed a lot of your finances because essentially your rent, your housing expenses every month were almost zero or actually zero, not including maintenance and all of that.

8:44Mindy Jensen:But you don't have maintenance every single month. The house hack is an ideal way to do this in many situations. It's harder now in 2026 than it was in 2014 to find those opportunities, right? This was not a very popularized term, the house hack in 2014. So I was relatively limited in my competition. You could buy a duplex and pretty much make it work or come pretty close with, you know, 5 % down. And I think it's a much harder dynamic in 2026. But still, the question is, how do I keep my housing costs low, right? And I think that if you're asking that question and making the most reasonable choice in your context, that is going to be make a much bigger difference than almost everything else.

9:22And the same thing goes for your vehicle.

9:25Mindy Jensen:Yes. And it's not about just house hacking. You can be the tenant in somebody else's house hack. That's a way to keep your housing costs lower than if you have your own apartment and you're paying the entire rent yourself. Just because housing costs have gone up since Scott did this in 2015 doesn't mean that's the only way to keep your housing costs low. Have a roommate, live with your parents, live with somebody else's parents. Is it fun having a roommate? Yeah, sometimes and sometimes not. But keeping your housing costs low and taking that money and investing it, getting started today is going to be your best bet.

10:00Yeah, I'll tell you this. I don't think that privacy in my 20s would have been worth the incredible reward that that choice and others like it compounded into here in my 30s.

10:10Mindy Jensen:And, you know, tagging off of that, Scott, is lifestyle creep before you reach financial independence and even after you reach financial independence. Lifestyle creep is described as as your income grows, your spending grows to your lifestyle could have creeped up by graduating from college and saying, I don't want to have roommates anymore. I have my first real job as an adult. I deserve to have my own place. And I deserve to have a place that has a doorman and a pool and a hot tub and a gym inside and happy hours on Friday night and free breakfast every morning. It's not free. You're paying for that in exchange for the amount of rent that you're paying.

10:49Mindy Jensen:So your lifestyle didn't creep up when you were in your 20s. And And frankly, mine didn't either, but it was because I wasn't making any money. I think that with lifestyle creep, there's two dynamics to it, right? One is when I was 23, like I was a fool to think that my lifestyle was not going to increase if I wanted as I did. And we eventually got married and started a family. But of course, that's a different dynamic than when you're a single man leaving college, right? And biking around town. But I also think that if you can fix your spending at any point, once you kind of got settled into that more permanent lifestyle, that is the big catalyst for FI.

11:24Even if it's fairly high in that initial baseline, because career progressions, because some components of that spending might be fixed, like your home mortgage payment, for example. If you can just stop moving the goalposts, you can make FI that much more realistic and achievable. I'll also say that after you reach FI, there is a switch that needs to be flipped to some degree, which is you probably do need to spend more, right? A lifetime of pursuing wealth to achieve financial independence can wire your brain to be overly frugal and not spend the wealth that you have amassed on there. And so I think that Mindy, this is something that you struggled with to switch over to a spender.

12:02You haven't moved the goalposts and you probably should move them now that you are fine. Your portfolio withdrawals can support a much, much greater spending level of spending than you have in your life. I will say that this has not been a problem for me in the same way as many in the FI community. So trench household is free and clear from this particular concern.

12:19Mindy Jensen:It has been difficult to flip the switch on the spending. One of the things is me asking myself, how can I use my wealth to make my life better? The last obvious mistake, I think, is going to be confusing income growth with progress, right? This is not obvious to a very novice personal student of personal finance, but it's obvious to anyone in the FIRE community who's listened to more than a handful of podcasts, right? Wealth accumulation is a function of your savings rate. And if your income is going up, but your savings rate is not, you're not accelerating your progress towards financial independence in any meaningful way, right?

12:55So income growth matters in the context of personal finance because it allows us to increase our savings rate if we keep our spending relatively constant or at least see a fat rise slower than our income growth.

13:07Mindy Jensen:Yeah, that's a really good point, Scott, that I don't think a lot of people really take into consideration. OK, let's look at some of the more subtle FI mistakes, those sneaky ones that kind of creep up on you while you're not paying attention to everything. Number one, building a plan that requires you to be rational forever. And clearly, this is something that you wrote down, Scott. Explain rational forever. I've been going crazy in the last few weeks and building this like super app. It's not ready for publication yet. That like that talks about how retirement withdrawals and early retirement all map to keeping a low income tax bracket and optimizing for ACA subsidies and those types of things.

13:46We've talked to Cody Garrett and Sean Mullaney, authors of tax planning to and through early retirement. We've talked about decumulation strategies and portfolios with Frank Vasquez. And so as I put all this together, I'm realizing there's an optimal path to withdrawing from a$2.5 million, for example, FIRE portfolio to sustain your spending. And it's ludicrous. It's there. You can do it. It's not insane to say that this can't be executed for a year or three. But to have your plan hinge on optimal decumulation across decades in a changing tax landscape and health care landscape is ludicrous. It's not a good plan to say I'm going to be this tax optimized genius for 30 years until I get the traditional retirement.

14:33And I think that's the failure of a lot of FI discussions out there is we're talking about this idealized state and not the practical, messy reality that actually maps to the vast majority of people's portfolios. So this is not a mistake for the small handful of people who are truly able to execute an elite level forever and DIY a lot of it. But I think it is too much to ask of me, for example, on here. And I've put the 10 ,000 hours into studying this subject in already. So that's what I mean by building a plan to be rational forever. There needs to be more margin of safety. There needs to be more flexibility built into the plan than these assumptions around perfect withdrawals.

15:09Mindy Jensen:Oh, perfect withdrawals. Yeah, there is no such thing as perfect. Another sneaky FI mistake is treating health care like a generic expense. Oh, health care is going to be X. Health care isn't going to be X. Health care is going to change every single year. Scott, did your health care go up this year? Mine did. I think on average, 26 % health care costs increased. And that's just the premiums. That's not the actual going to the doctor and your co-pays and your prescriptions and all of the everything else. Health care needs to be a real thought in your mind as you are progressing down your FI journey.

15:47And I hate to be a party pooper on the fire movement kind of best practices and core assumptions here. But I think that the health care discussion is a very real threat to a significant portion of the fire community's baseline spending plans. I think that it implicitly relies on receiving low income tax credits for health care subsidies for decades, which I think is a bad political bet to rely on. It's not bad to take those subsidies. It's bad to rely on that as your foundational assumption that that's going to carry you through an early retirement. And then I think that a lot of people don't understand the basic reality that today, forget inflation, forget health care inflation.

16:26This is not an argument that health care inflation is going to outpace CPI. You can have that argument with somebody else. This is just a fact. If I was going to go and get a health care plan on the Obamacare exchange, the Affordable Care Act exchange right now for my family, I would pay almost double if I just changed my age in the input field to 60. That's not a inflation thing. That's a today's price for that same healthcare plan. And that I think is not factored into people's plans. It is not a generic expense. You cannot say that your spending is$40 ,000 a year or$100 ,000 a year. And healthcare is 17 ,000 of that unsubsidized and we'll stay there.

17:04It will go up, it will go up to 35 or perhaps$40 ,000 for a household like mine in Colorado by the time I retire without assuming any excess healthcare inflation. So that's a real subtle mistake that's made in the fire community. And you must, I think, internalize that or understand how to model those out if you want a safe or realistic plan for your family. Absolutely. All right. Next up, we have blind faith in the 4 % rule without spending certainty. There's a lot of debate. I think there's like levels of like understanding of the 4 % rule in the finance world, right? The first level is, I heard somebody say that's an answer to like how much you need to retire early.

17:41The second is, wait a second, the 4 % rule is not 100 % secure. It does not survive all the scenarios in history. And in fact, 4 % of scenarios, it ran out of money, which is the point. The point of the 4 % rule is here's a scenario that resulted in not running out of money over any 30-year period. The next level is, wait a second, early retirement is longer than 30 years. I should probably think about that in the context of the 4 % rule, which was designed for a 30-year portfolio. So the next level beyond that, now we're starting to get into more expert territory is, oh, right, the 4 % rule does have these drawbacks, and it also doesn't account for the flexibility that is in practice common in many FIRE scenarios, like the ability to earn some kind of part-time income, the ability to reduce spending targets, and those types of things.

18:25But I think there's a level beyond that level of understanding that is still eluding the FIRE community at large and needs to be addressed. The risk in the 4 % rule is not around investment portfolios, which is a known variable if you're relying on the 4 % rule. The risk is around spending. It assumes that your spending is going to be constant relative to inflation, and it won't be, at least in the context of healthcare, for an early retiree. That changes once you get past traditional age. Spending does begin to drop over time after a traditional retirement age. The risk is, in many cases, in some aspects of your spending, you will see periodic boosts or declines depending on where you are in life.

19:07Are you sending little kids to daycare? Are they going to public school? Are they going to college? What's your healthcare costs going to look like? That is something you have to lock in. You need to know your spending if you're going to use the 4 % rule. And you need to be confident not only that you are able to project it for your family, but that it's going to not be very volatile. Volatile spending also kills the 4 % rule. Those are the real risks, the real subtle risks that can blow up a FI journey and make a mistake in your plan. And that is what I want to, again, I'm a big proponent of financial independence and FIRE.

19:37Believe it can be achieved. These are not killers. These are things, mistakes that people make that can have real life consequences over time. There's a certain set of challenges that come after the financial ones are mostly solved. Questions about what comes next, how to think about the life you're building around your wealth, not just the wealth itself. Most people find that they don't have anyone to talk to about that part. James Keefe spent 20 years in pharmaceuticals building toward that stage. When he found Long Angle's community, something specific resonated. Here's what he said. It's a community of primarily first-generation wealth builders.

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