Is Your Retirement on FIRE? Financial Independence Retirement Early

Is Your Retirement on FIRE? Financial Independence Retirement Early

This article deals with what FIRE is, what devotees believe, who’s doing this and are there lessons for the more traditional retirement planners that NewRetirement is trying to help.

What is FIRE?  It stands for “Financial Independence / Retiring Early” – in a nutshell it’s about making some significant lifestyle choices immediately to try to achieve financial independence as quickly as possible.  For most followers it’s actually more about mindfulness, frugality and simplicity – not just about money and financial independence.

FIRE -- Financial Independence Retire EarlyFIRE — Financial Independence Retire Early
Most people planning for retirement have been working and savings their whole lives and start their thinking around the question “How much do I need?”  Implicit in that question are a lot of assumptions around their current lifestyle, cost of living, where they will live and what they will do with their time.

My take (so far) on FIRE followers, many of whom are in their 20s and 30s, is that they start their thinking around the question “What’s the shortest path to Financial Independence?”  They are thinking hard about all the assumptions most people make about having a long work career and then retiring.  Instead they are asking themselves questions about what they really want to do with their lives and what do they really need to achieve those goals:

  • What would I do with my time if I didn’t need to work to make money?
  • What do I need vs. want?  
  • How radically can I cut my expenses and simplify my life?  (This is a HUGE lever that they are willing to pull in ways that most people are not.)
  • What can I do to maximize income from work and “side gigs” so that I can save a LOT (in excess of 50% of income)?
  • How can I invest my savings and set up long term passive income streams?  (rental property, dividends, licensing my own work blogs, books, software, etc)
  • How do I learn to manage and measure these assets and income streams?
  • What is my target date for achieving financial independence and how will I track against that goal?

Having read the stories from people who are following the FIRE lifestyle – they are generally living in low cost areas and practice extreme frugality, so that they don’t need to accumulate millions to achieve financial independence.  (Although some of them have turned writing about their story into a good business since the idea of achieving financial independence is appealing to a lot of people.)

So who are some of these FIRE people?

I’ve been reading a lot of blogs from people living the FIRE lifestyle and thought the following list would provide a good overview. – Financially independent by 30. Married, kids and living downtown in a small city (100K people) in Colorado. 2 million monthly visitors pretty much sums it up.  He’s probably got the best mix of engaging writing, living the example, site usability and strong community.  Takes care of his family and lives a great life for < $25,000 per year. – Financially independent by 30.  Married no kids and able to live on $5,000 to $7,000 per year with a networth > 100 years consumption.  A more technical and denser blog written by a person with a lot of intellectual curiosity. – Financially independent but still working since software developers are being paid a lot these days.  Married. Lives in Pittsburgh PA.  Writes and also does Podcasting about FIRE. Newer, more polished and a more commercial presence. – JD Roth – maybe the OG (original) personal finance blogger with a rags to riches story.  He built and sold that to Quinstreet and did well. He’s thoughtful and like many people doing this it’s much more about leading a mindful life than piling up money and achieving financial independence.  Lives in Portland, Oregon. – Married, kid, dog left the city and started a farm in rural Vermont.  It’s clear that living a simple, frugal life can be pretty rich, rewarding and less stressful.  They recognize that they are lucky – they also saved 71% of their income and only spent $13,000 outside of their mortgage in 2014. – He keeps it simple – you have to appreciate the simplicity of his portfolio and his rationale for owning each position. He’s more experienced (older) than other people on this list and it sounds like he had a more traditional trajectory that has served him well.  

What can we learn?  (“we” being more traditional career trajectory people)

What FIRE followers can teach everyone:

  • They have a strong belief, point of view, approach  and commitment to achieving their goal of financial independence
  • They follow a specific method: Low Expenses – Extreme saving – Investing for income – Long term view  
  • They have a lot of very good ideas about being efficient with money everywhere – not just investing
  • It’s about Mindfulness – Frugality – being happier with less
  • They are (wisely) choosing Time & Freedom over Money

What may not work for more traditional people:

  • It’s extreme – they are like the celebrity fitness trainer who people aspire to be, but don’t fully become 
  • If everyone did this and didn’t work in the traditional economy – our overall productivity growth might slow down.  (This is assuming people focused on passive / rent seeking income and didn’t use their human capital to contribute to society as much as they could have – which may not be the case)
  • It requires a lot of time spent thinking about money and how to avoid spending it vs. enjoying today and being in the moment
  • Some of this has sprung up in the past decade alongside a some nice tailwinds in the stock market – many economists believe that future growth and stock returns will be lower.
  • This approach may be easier if you’re younger and have a simpler situation – people who have been following a more traditional path and have more complex lives may find it more difficult to adopt some of these ideas.

Overall – the FIRE movement is pretty compelling and probably going to become more relevant to many people as macro trends like the wave of boomers approaching retirement, automation and globalization put more pressure on the employment market and income from work.  We’ll be looking at applying some of their principles to our own work and lives.  


p.s. My brushes with financial independence

As someone who has lived around Silicon Valley for many years I’ve met a number of people who have achieved temporary financial independence.  There are many people around here who have made million dollar plus paydays from startups – but it’s amazing how quickly the extremely high cost of living here and the willingness to take risk (by speculative investing which is part of the culture here) brings people back into the corporate workforce where in most other places they would remain financially independent.

But I’ve also seen the opposite – a very good friend of mine and I had this conversation several years ago when he was about 30.

  • Friend: “I’m taking off to travel for 10 years”
  • Me: “ha ha”
  • Friend: “I’ve saved $40,000 to do it”
  • Me: “per year? Ha ha ha”
  • Friend: “No – I’m going to travel around SE Asia where I can live well for $4,000 annually”
  • Me: “you can do that?…”

Anyway – he took a freighter to China the next year and did it – which I applaud him for.  He eventually started consulting part time remotely on technology because he wanted to vs. needed to.


p.p.s.  I made a mistake last week – which was not going to FinCon16 a grass roots conference on personal finance.  We just started reaching out to bloggers and key influencers to help get the word out about the DIY Retirement Planning tool we’re building and I was reminded of the conference by people I was talking to with only a couple of days to go.  Anyway – I decided to save money since I didn’t have time to set up meetings and instead try to follow up with participants directly instead.  In retrospect it would have been great to meet many of these people in person.

The good news is I learned a lot about FIRE since many of the most popular bloggers deal with this topic and I had a chance to read many of them.

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