The FIRE Movement, From Extreme Thrift To Financial Independence
A guide to the financial philosophy
For decades the classic career path was to get an education, find a well-paying job and finally retire in your golden years with a sufficient pension.
But today, an increasing number of young people are giving the middle finger to this trajectory. In a world where many countries keep pushing back the retirement age, these rebels chose to do the opposite. Enter the FIRE movement.
The roots of FIRE
Standing for "Financial Independence / Retire Early," the FIRE movement has gained popularity in the United States over the past decade. Its goal is simple: save enough money to enable retirement before the typical retirement age (60 years old in most industrialized countries).
The idea of retiring early isn't exactly novel; it surfaced in the early 1990s. Authors Vicky Robins and Joe Dominguez published in 1992 a personal finance book titled "Your money or your life." This book prompted readers to reflect on their relationship with money and how to strike a healthy work-life balance.
In Your money or your life, Robins and Dominguez argued that a simple lifestyle and well-invested savings could generate enough income to live on and retire early. Robins's ideas struck a chord with many readers, and the book became a bestseller. Many re-editions would follow.
The early retirement concept was soon echoed by other writers, such as Jacob Lund Fisker in his work "Living retirement extreme." Years later, blogger Mr. Money Mustache sparked interest when he announced his retirement at age 30. The writer's blog then detailed how he achieved this incredible feat: through a highly frugal lifestyle.
Mr. Money Mustache's tale inspired droves of readers, and the "frugalism" movement was born. From there, many thrift tendencies ensued, among them FIRE.
What is FIRE?
The primary goal of the Financial Independence, Retire Early (FIRE) movement is to reclaim control of time and pursue one's passions through careful money management.
In other words, FIRE adepts have realized that time is fleeting, so why waste life working endlessly if it doesn't make you happy?
Regaining one's freedom years before the traditional retirement age is a concept that especially resonates with millennials. They want to escape the employment rat race for a paycheck and start living their dreams now rather than wait.
Popular press tends to confuse FIRE with minimalism and frugality, yet these are distinct concepts. FIRE is centered on reaching financial autonomy to retire early while being frugal is just a means to this end.
At the base of FIRE is a simple precept: the thriftier you are, the less money you need to live. Likewise, the less money you need, the easier it is to save enough to live without having to work.
Besides, retiring early doesn't mean a life of idleness. On the contrary, financial independence allows you to devote time to hobbies and passions instead of meaningless work.
In the wake of the 2008 financial crisis and social media rise, FIRE exploded in popularity. So it moved from print to digital media.
Although the movement's theories have been around for some time, online communities have allowed them to spread. In these fora, young members worldwide discuss the sparing philosophy.
How much does it cost to be financially self-sufficient?
FIRE is not just a movement; it's a lifestyle. To attain the set goals, an adept must cut back on regular spending to boost savings rates.
First and foremost, you will need to answer two fundamental questions: How much money do you spend monthly? And how early do you want to retire? Answering these questions will help you determine whether or not your objective is achievable.
Thanks to apps, keeping track of monthly spending is a breeze. However, once you've evaluated your needs, you will need to significantly reduce living costs, entertainment, transportation, etc.
It also demands the introduction of a savvy investment strategy, such as the purchase of crypto-currencies.
The variations of the FIRE movement
There are many FIRE versions, each with specific traits. For instance, maximizing your savings rate in anticipation of retirement is at the heart of the traditional FIRE strategy.
On the other hand, the goal of Fat FIRE is to make retirement more luxurious than the traditional "retirement" model. This idea, however, calls for extreme, ongoing effort and a commitment to make passive income.
Similarly, there are other iterations of FIRE, including:
- Barista FIRE: The term "semi-retirement" comes to mind. It entails adhering to the beliefs of the FIRE movement while maintaining a part-time occupation (for example). The adept gains free time while still covering living expenses.
- Coast FIRE: a financial strategy for amassing a comfortable retirement nest egg as quickly as possible.
FIRE and criticism
Along with followers, the FIRE movement has also drawn negative attention. Skeptics have questioned the lofty savings goals of its devotees. Some planning advisers have noted that while the trend has excellent lessons in financial planning, it seems extreme and unsuitable for all.
Whether or not you can retire in your thirties or forties on a certain amount of money is another contentious component of the FIRE movement. FIRE proponents are accused of grossly underestimating the amount of money they will need to retire comfortably.
Their saving estimation doesn't also consider the ever-rising cost of living and inflation. Despite the critics, FIRE adepts are not deterred. They will continue their thrifty journey until they no longer need to work.