The FIRE (Financial Independence, Retire Early) movement has been growing in popularity in recent years. As more people seek to find meaning outside of their work and make time to do the things they love, they are turning to the principles of FIRE to help them learn how to live more frugally, save and invest productively, and live minimally. While early retirement isn’t always the ultimate aim of FIRE, many of its proponents are aiming to stop working full time by the time they are in their late 30s or early 40s.
But is FIRE a viable alternative to the way that we live today? What are the pros and cons of attempting FIRE? Can anyone do it? And how does it add to or subtract from a balanced lifestyle?
What exactly is FIRE
The FIRE movement has been around for a long time, with some of the most popular blogs and online communities on the topic being over 10 years old. The basic principles of FIRE are pretty straightforward: maximise income, minimise expenditure. This means having a job that allows you to save, living a frugal or minimal lifestyle with few luxuries (including holidays or meals out), investing your money, and retiring once you’ve saved around 25 times your current salary.
There are plenty of active online communities dedicated to discussing FIRE, especially on Reddit where there are separate communities for those who want to approach FIRE traditionally, those who want to retire with as much money as possible, and others who are happy to make greater sacrifices and retire with less in order to retire earlier. Whichever method you choose, FIRE will require some sort of sacrifice.
Can anyone do it?
Technically, FIRE should be achievable for anyone, but there are a few caveats to this. First, it helps if you found out about the movement early, preferably in your early 20s, to give you enough time to save more money. Second, the more you earn, technically the more you’re able to save. This means that those in lower-paying roles will take much longer to reach their savings goals than those in high-paying jobs, who are debt free, or who have inherited wealth. Finally, you have to have the right mindset, which may be drastically different from your current one. You’ll have to really get into the movement, and prepare to dedicate a lot of time and research to financial planning.
At the end of the day, FIRE is not a one-size fits all methodology. There’s even a BaristaFIRE for those who only want to save enough so that they can work part-time instead of retiring completely. When deciding whether or not FIRE is right for you, it’s important to pick the right kind of community, and take stock of the pros and cons.
Pros
The first and most obvious pro of the FIRE movement is the ability to retire early! If you finish working full-time in your 30s, that could mean that you have another 50 years to achieve your dreams outside of the traditional working world. That could mean writing your book, pursuing your hobbies full-time, or just sitting back and relaxing. You could even start a successful personal finance blog selling the idea of FIRE to others.
The main reason most advocates of the movement promote it is because FIRE allows people to live intentionally. Very few of the people who pursue FIRE stop working completely. Instead, they are given the time and freedom to choose the type of work they find meaningful, and dedicate themselves to pursuing something out of satisfaction rather than need.
Finally, following FIRE means avoiding debt. As FIRE teaches you principles for avoiding debt traps like lifestyle inflation and materialism, it can be a good way to improve your bank balance in general. Whether or not you intend to see it through to the very end, chances are you’ll be in a better financial position than most of your peers if you follow even half of the advice found in the FIRE community.
Cons
One problem with the FIRE movement is that it promotes a rather tone deaf obsession with finances. It turns saving and investing into an extreme sport, and can be dismissive of those who have pre-existing debt or can’t simply ‘spend less’ to save more.
Also bear in mind, if you’re planning on doing FIRE, be prepared to give up a lot of free time researching it. This can be especially difficult if you have a partner or family to think about when planning your future finances. This may mean that you have to create multiple streams of income when you’re young in order to continue making some sort of passive income when you retire early. This can mean adding a considerable amount of work and stress to your plate in the short to medium term, which is not ideal for everyone!
Whichever FIRE type you choose, all of them will probably involve considerable lifestyle sacrifices, unless you were already living like a monk before you started. You won’t be able to afford the finest things in life, and you can say goodbye to buying the latest iPhone or a brand new car. This is a life-long decision too - it’s not like you’ll be able to buy whatever you want when you retire. If anything, you’ll have to live even more frugally!
Finally, there’s the little-discussed issue of inflation. Most FIRE advocates suggest that you only take out 4% of your portfolio as living expenses per year. But if you account for the fact that inflation increases year-on-year (usually around 2%) and that the purchasing power of money decreases over time, any blip in the stock market (say, a global financial crash) can put a serious dent in your long-term plans. If something goes wrong with your investment portfolio, or you suddenly have an unexpected expense to pay, you may have to go back to work after not being in a job for 10 or 20 years. Even if you manage to find a decent job at that point, how crazy would that be!
Should you try FIRE?
At the end of the day, attempting FIRE is a personal choice, one that should not be taken lightly. If you're someone who likes your daily Starbucks and nights out with your friends, it might not be the right community for you. Also, some people love having a career, and there’s nothing wrong with that! However, that doesn’t mean that you should dismiss the FIRE movement entirely. While some FIRE advocates can be a little extreme in their approaches, there are some lessons proposed by the community that anyone can apply to their lives.
One of the best things we can take away from the FIRE movement is the principle of taking a more active approach to managing your money, and making a solid plan for your retirement. You may not be ready to save 50% of your income a year, but it is always a good idea to start saving as early as possible. It’s also an excellent idea to open up an investment account, whether for retirement or general purposes, for example saving up for a deposit.
Finally, FIRE can encourage us to take a more open-minded approach to our lives, particularly when it comes to work-life balance. You may not be aiming to retire early, but you might want to eventually switch to a career that’s less draining, or turn your passion into your business. By following some guidance from the FIRE community, you may be able to turn these dreams into a reality sooner than you think!