Catching FIRE: Can You Really Retire with Less?Submitted by Bernhardt Wealth Management on November 5th, 2018
The “Financial Independence, Retire Early” (FIRE) movement has been gaining notoriety lately, often for the way its proponents claim to debunk the assumptions of certain high-profile financial planning gurus. For example, Vicki Robin, one of the movement’s guiding lights and author of the bestselling book, Your Money or Your Life, recently contributed an opinion piece countering a harsh critique of the movement issued by financial writer Suze Orman. She states, among other things, that Suze Orman, who recently came back out of retirement, missed the point of retiring early as embraced by devotees of the FIRE philosophy.
So what, exactly, is the FIRE philosophy? Really, when you boil it down, it consists mainly of a few points that are based on financial common sense.
The three basic principles of FIRE, according to author Liz Thames, are 1) time, 2) expenses, and 3) income. Sounds familiar so far, right? What practitioners of the FIRE philosophy seek to do is to make arrangements and choices in their lives so that less time is required for obtaining the amount of income needed to meet required expenses. For some, that may mean downsizing or making other major lifestyle alterations. For others, it may involve developing a new attitude toward budgeting and defining what is and isn’t necessary. Thames, who espouses a regimen of simple living, says, “Frugality is not a question of deprivation. I don’t miss out on anything in my life [by] being frugal. I spend money on things that are important to me. There’s just not a lot that I need to buy [in order] to live a very fulfilling life.” Or, as FIRE blogger “Mr. Money Mustache” explains it, “I’m not telling low-income people that they can retire in five years. I am telling them that they can make their lives better, right now, by spending less money on certain things that don’t improve any of our lives.”
FIRE proponents also assert that the “early retirement” part of their ideal is not necessarily about cessation of work. Rather, it’s about the freedom to spend your time working at things that give you the most meaning. That might be starting a business with some like-minded friends, or it might mean launching yourself into the motivational speaking career that you’ve always dreamed of but never had time to pursue.
An important tenet of the FIRE movement is that money isn’t what makes you happy. Rather, happiness is a by-product of having the time to pursue what you consider most important in life. While some accurately assert that money gives you choices, FIRE believers would counter that money really allows you to avoid certain choices. Instead, they claim, you can make choices that reduce the size of your requirement for money, thus gaining the freedom to make more choices with how you spend the one resource that we all have the same amount of: time.