When do you reach financial independence? It depends on your financial goals, but below is a quick breakdown of the movement, its pros, cons, and why similar to democracy, FIRE may be the best worst form of financial independence to pursue, except for all of the alternatives.
Some people won’t recognize what financial independence looks like because initially, it looks a lot like work. Recently (or always?), it’s popular to comment — typically negatively — on the FIRE movement. I’ve only been a casual observer, so I have no dog in the FIRE fight. For me, it’s like watching the NFL’s NFC East. I don’t really care who wins. The results don’t impact my daily life, but that won’t stop me from enjoying when the Giants, Skins, or Eagles lose, amirite?
As an auditor by trade, I root for the FIRE movement on an evidence-based criterion. I don’t believe anyone should spend their entire lives working in a career they hate just so they can have the privilege of stagnant wages and struggling from one paycheck to the next. I’ll support any logical movement that attempts to end that nonsense.
Related: D.E.B.T. Free: A 4-week Starter Kit – Our 4-step course is based on our popular book, Debt Free or Die Trying: How I Buried Myself in $30,000 in Debt and Dug My Way Out.
Hello, I’m new here. Please Excuse me, but…WTF IS FI/RE?
Financial Independence, Retire Early (FIRE) is a movement dedicated to a program of extreme savings and investing that allows proponents to retire far earlier than traditional budgets and retirement plans allow.
Although it might be an added bonus, for most who actually reach financial nirvana independence isn’t realized through early retirement. Financial Independence comes from taking back control of the choice to work rather than having the demand to work imposed on you. Given that 70% of millennials would rather work independently than be employed within a traditional organizational structure, and almost 70% of all American workers hate (or are disengaged from) their job, once you have a self-sustaining F.U. Fund, you can tell any employer where you are not happy to work to go f…ind themselves another employee.
As The Early Retirement Dude who retired at age 36 (PB82: Financial Independence ft The Early Retirement Dude) explains, the FIRE movement has actually been around since at least the 12th century. However, the internet and the media aren’t going to let a pesky thing like facts get in the way of leaping off a retirement cliff onto a bed of preconceived notions. They firmly believe that the day they discover something is also the day it was born. Christopher Columbus had a similar theory. So why are so many people talking about FIRE now? Well actually, people have been talking about escaping indentured servitude through FIRE for centuries. Perhaps you’re referencing the most recent flare-up?
Suze Orman Hates FIRE, Except When She Doesn’t
Like most public figures who make ill-informed comments on subjects they loosely understand at best — and after a FIRE uproar caught flame and spread across social media after getting wind of her comments — Suze tried to extinguish the burn of her original statements less than a week later: What I Hate and Love About Fire. She cited the usual celebrity suspects: she was misunderstood; there were misconceptions; and my personal favorite, are you going to believe your lying ears on the podcast recording that anyone can listen to for themselves or her written apology that she was totally taken out of context? I’ll leave the merits of her justifications for our collective misunderstanding up to you.
Suze, whose personal finance book (P&B Review: The Dos and Donts of Money by Suze Orman) I reviewed and liked, honestly didn’t appear to know what she was talking about when it came to FIRE. To be fair, nobody can be an expert on all things. The main takeaways from her public gaffe are: 1) it’s hard to have a civil debate about any topic when you open the discussion with “I hate”; and 2) as guest Damon Young (PB60: “Overnight Success” ft. Damon Young of Very Smart Brothas) eloquently prophesied with his paraphrased advice for our listeners: being quiet is always an option.
In my professional life, I like to call this a vow of solicited opinions. Nowadays too many people exclusively specialize in the offering of their un-solicited opinions. The market is thoroughly oversaturated with this talent. A vow of solicited opinions is similar to a vow of silence. Rather than volunteering your opinion on everything under the sun even when you are ill-informed or un-informed of the facts, you dig deeper to locate the inner discipline within yourself to remain humble in your ignorance by accepting the limits of your own expertise. Differing yourself from the crowd, you choose only to speak when spoken to or when specifically asked for your opinion. Equally important, rather than offer an uninformed opinion on any subject when you don’t know your ass from your elbow about the topic, you simply say “I don’t know.” After all, it is better to be thought of as an idiot, than to speak idiotically and remove all opportunities for reasonable doubt. Even better, if known, you reference a source more qualified or underrepresented than yourself to answer the question. Maintaining humbleness when hubris is the viral credit card of choice is a lost art in the dawn of social media.
If you want to know about money management, Suze Orman is a reasonable subject matter expert. If you want to know about FIRE, she is not. This isn’t a slight at Mrs. Orman. It is merely a recognition that no one person can know all things about everything. Your personal finances are no different. If I’m slighting anyone, which I’m not, it is the limits of the human brain. But, to her credit unlike most public figures, at least Suze did recognize her misunderstanding of FIRE. That should count for something.
FIRE Experts Exists All Over the Internet
“I thought I needed to be a wealthy white male tech-bro to be a part of the FIRE community?” you might mistakenly believe.
You don’t have to be any sex, race, or creed to qualify to start saving your own money. People have saved money and reaped the benefits of compound interest for hundreds of years. They will likely keep doing it for hundreds more. Further, in my nearly four decades on Earth, no bank has ever refused to accept my money. In fact, most banks like holding my money so much that they charge me a fee just to give my own money back to me!
As far as catchy acronyms go, you can call your system whatever you want. All you really have to do in this world of sin is pay taxes, live and die. Besides, most individuals who reach financial independence don’t stop working. They just stop working at jobs they don’t like. If the acronym is the only thing keeping you from starting your FIRE journey, then try applying this friendly remix: Financially Independent / Remain Employed.
I do not consider myself a FIRE expert, nor is it a topic I’m trying to master. True to my principles, I remain humble in the limits of my knowledge and respect the equally impressive gulf of my ignorance. To expand my own understanding of FIRE and related topics, I am reading and reviewing 15 personal finance and investing books written by the experts. If you want to kindle the flames of your own expertise, here is a quick breakdown of who you should follow today:
- Meet The Women Of The Financial Independence Movement
- African American Personal Finance Bloggers
- The Best FIRE Blogs You Shouldn’t Miss
- Mr. Money Mustache with the Heat Check and FIRE response to Suze Orman
What’s My FIRE number?
There are several very simple ways to quickly estimate your FIRE number. We discussed the application of the “4% Rule” with Robert Farrington of CollegeInvestor.com (PB73: Financial Independence and Early Retirement ft. Robert Farrington). Subsequently, we created a free 3-part FIRE, budget, and debt free starter planner tool. Among many options, two simple ways to calculate your FIRE numbers are:
- 25x your annual income; or
- Your annual expenses divided by 4% (that’s .04, folks)
“I live paycheck-to-paycheck. I don’t make enough money to save any money any month,” you feistily protest.
I’ll admit I don’t know any easy, get rich quick schemes. I only know really long, extremely protracted get rich slowly but eventually schemes. I do know that about 70% of Americans live paycheck-to-paycheck despite somehow still managing to find $600 a year to spend on lottery tickets, which might be one reasonable money leak to cut back on. Change the limits of your thinking account and you can expand the limits of your checking account. The Millionaire Next Door is my favorite book on this topic. But, if you aint got time for all that and you make at least $30,000 in gross income, you can start with our How to Save 1x Your Income piece. It gives a month-to-month money map of what you need to save to fund your financial freedom starting on a median salary or less. It also covers our favorite tools to help you find extra money and where to invest your extra money once you find it. “Extra money” is a figure of speech. No matter our income, we all believe we need every dollar of it to live (PB47: Barely Making It on $500,000). How you spend each dollar beyond your basic life necessities is a choice. It may be a difficult choice, but it is still a choice nonetheless.
Contrary to popular opinion memes, failure is always an option and a great teacher if you use it as a learning tool. You can fail your way to success, or you can remain content with complacency and never take any risks. The failure to make difficult choices is itself a choice. The best advice I can offer for the person that fails 99 times? Try for the 100th. Life is uniquely difficult for each and every one of us, yet it rarely gets easier for anyone who chooses to repeat the same habits tomorrow that didn’t work yesterday. In its purest form, FIRE challenges us to take one step today to improve our financial circumstances tomorrow, then repeat until we’re financially free. I choose to support that, but the choice is yours.
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