What is The FIRE Movement?
Although I don’t usually advocate for Wikipedia definitions, they have a perfectly acceptable one for defining Financial independence (FI) so I am going to make an exception. Financial independence is the status of having enough income (from investments) to pay one's living expenses for the rest of one's life without having to be employed or dependent on others.
When someone achieves FI, they then have the option to retire early (RE), and that’s where the term comes from Financial Independence Retire Early or commonly known as FIRE.
However, Achieving FI does not necessarily mean that someone decides to or wants to retire earlier than the traditional retirement age. The FIRE movement is all about having the option to choose what you want to do with your time, whether that’s continuing working as usual, reducing your hours, or stop working all together. Once you have reached FI, money is no longer the defining factor of how you spend your days.
Where Did This Concept Start?
Back in 1992 a book called ‘Your Money or Your Life’ was written by Joe Dominguez and Vicki Robin which provided a road map to financial independent thinking. This idea or movement did not take off however until the 2000s, and in the last decade it has picked up speed as people are looking for ways to get out of the race and spend more time doing what they love.
What Steps Do People Take to Achieve FIRE?
When someone is trying to achieve FIRE they usually follow a few guidelines in order to achieve this goal. These can include having a high savings rate, as much as 30-70% of their income, being conscious spenders and sticking to a budget, or in some cases choosing a frugal lifestyle, and lastly investing in low-cost index funds. Depending on the type of FIRE they wish to achieve (lean, fat, coast or barista – I will do a separate blog post on this) and how quickly they wish to achieve it, the aggressiveness of these strategies will vary greatly.
What if I Can’t Save That Much of My Income?
Not only are the steps you take to achieve financial independence very unique to each person, so is the actual amount of money you need (your investment pot) to officially achieve financial independence. For one person, they may need a final investment pot of £200,000, whereas others may need a pot of £1 million. This will inevitably impact how much money you need to save and invest in total. Generally speaking, people on lower incomes also have lower lifestyle costs. And the same vice versa, higher earners generally have higher lifestyle costs, and so it is all relative. Whether your income is low, medium or high, aiming for FIRE will require sacrifices along the way. You do need to be consistent with your saving and investing strategy, and therefore it must become a permanent factor within your budget.
What Are The Pros and Cons of FIRE?
Now, I want to give you what I consider some pros and cons to the FIRE movement for you to consider. Let’s start with the positives:
Increased Financial Literacy
We are all very aware that the vast majority of the population do not have sufficient financial literacy and that’s no fault of our own. We simply aren’t taught it. The fantastic thing about the FIRE movement is that if you want to pursue it, it requires you to increase your financial literacy. You need to know all about debt, budgeting, saving, investing, tax optimisation, reducing lifestyle costs and overall getting the best bang for your buck (or pound) in every situation. This information and knowledge which seemed to only be privy to the rich for centuries is now becoming more and more accessible to the everyday person.
The goal with FIRE is to get your debt to zero and to have a very healthy financial cushion underneath you. Being on this journey allows you to make saving and investing a priority and money worries naturally decrease as you are on the journey and your buffer gets larger.
The ultimate goal of obtaining a huge pot of money is to give you full control of your time. To give you the option to do what you want. Realistically, you probably are not going to want to sit on the couch all day everyday and do nothing, but you would have the choice to do whatever it is your heart desires, whether it earns you money or not.
Breaking The Mould
We are a part of a capitalist society where you study during your childhood to gain the skills and education to work throughout your adulthood, to then have complete time freedom (aka retire) in your latter years. When you really sit back to think about it, it is pretty twisted. The FIRE way of thinking requires a mindset shift from the traditional system and makes you consider ways to make a change according to what you want for your life.
Now, let’s discuss some negatives of the FIRE movement:
For me personally, I don’t like frugality very much as I am a big advocate of enjoying life and not depriving oneself of the here and now. I do, however, believe you can be a conscious spender whilst enjoying life and not necessarily resorting to frugality. One way I achieve this is by priortising what is most important to me. I am more than willing spend a decent amount of money in the areas of my life that are most important to me, such as travel, but I balance this by spending less in areas that do not matter as much to me, such as expensive clothes and shoes.
FIRE Definition Snobs
Unfortunately, some people feel superior than others because they know more terms or they have been on this journey longer. It’s all BS, everyone starts somewhere. As there are many ways of achieving FI, some people will comment on the way you’re doing it versus how they chose to do it, and why your way is wrong or needs tweaking. Honestly, these people are sad and need to get a life. Just remember, the FIRE movement promotes a very unique and personal journey that suits your life, your needs, and your wants. You are absolutely free to define it how you want!
Not going to lie, when your eyes are first opened to FIRE, it is addictive because it’s like you’re unlocking a huge secret to life. But, it’s very important to not let the journey dictate your life so much that you do not enjoy the here and now.
“I really want to go on holiday with my family this year BUT if I do it’ll set me back by 5 months on my FIRE journey”.
If you are so obsessed with it that you don’t allow yourself to enjoy life, you’ll become miserable and will either end up resenting the journey or completely be unable to sustain it long-term.
Dilemma of a FI person
One interesting thing I have heard people say that have achieved FI is that people just don’t get it. They don’t get how they got there; how can they possibly afford to live life without ever having to work again? It also can be an awkward conversation (as I can imagine) if you’re in your early 40s and someone asks what you do for living and you respond that you’re retired. Imagine that! I say all this, but ultimately just because other people don’t understand it at first, it doesn’t mean that they won’t want to try to understand it. It also doesn’t mean other people don’t want to do it themselves. And others may find it complete nonsense all together. But regardless, it sounds like a wonderful dilemma to have on the grand scheme of things.
I hope you’ve enjoyed my first blog post on FIRE. If you want to hear more or learn more about the movement, I have lots of videos on my YouTube channel talking about multiple aspects of FIRE, so do check it out if you’ve not had enough yet!
29-year old actively working towards achieving Financial Independence (FI). Sharing all the tips and tricks I am learning along the way!