What is FIRE?

FIRE stands for Financial Independence, Retire Early.

It refers to both a personal lifestyle and a broader financial movement that aims to help people attain financial independence and retire from traditional employment at an early age.

The core idea behind FIRE is to save and invest aggressively during the early years of one's career, often in their 20s and 30s, in order to accumulate enough wealth to sustain a desired lifestyle without the need for traditional employment.

FIRE proponents also question many assumptions that people have about their lives and careers, like:

• Why should I work full-time for someone else until my 60s or 70s before finally giving myself time to enjoy my life?

• How can I live a good life outside of mainstream middle-class consumer culture?

• Can I find a way to use my passions and personal interests to generate income to supplement my savings?

FIRE Fundamentals

The core of the FIRE movement is oriented around two principles:

Financial Independence (FI): Achieving a point where your passive income (income generated from investments, such as dividends, rental properties, or interest) covers your living expenses. Once you reach financial independence, you have the option to retire early.

Retire Early (RE): Choosing to leave traditional employment to pursue other interests or activities. Early retirement in the FIRE movement doesn't necessarily mean not working at all; it often involves pursuing work that aligns with personal passions and interests, even if it doesn't generate substantial income.

To achieve FIRE, individuals typically adapt their lives around these two strategies:

• Saving aggressively: FIRE advocates emphasize saving a large percentage of income, often 50% or more, to build a substantial investment portfolio.

• Living frugally: Minimizing expenses and adopting a frugal lifestyle to save more money and accelerate the path to financial independence.

  

  An infographic from Mr. Money Mustache aka Peter Adeney

Many FIRE fans also focus on investing their savings, finding side hustles, or creating sources of passive income to supplement their income from work.

It's important to note that the FIRE movement is not a one-size-fits-all approach, and FIRE fans have developed different approaches to FIRE.

Some people pursue Lean FIRE, aiming for a basic lifestyle with lower expenses, while others pursue Fat FIRE, aiming for a more comfortable and luxurious lifestyle in retirement.

Millennials on FIRE

The FIRE (Financial Independence, Retire Early) movement gained popularity among millennials during the 2010s for several reasons:

1. Job Insecurity and Gig Economy: Millennials entered the workforce after the 2007-08 financial crisis, and many experienced job insecurity and underemployment during a period that has seen the rise of the gig economy.
   

2. Desire for Work-Life Balance: Millennials often prioritize work-life balance and value experiences over material possessions. The FIRE movement aligns with these values by promoting the idea of retiring early to pursue personal interests, travel, or engage in meaningful activities outside of traditional employment.
   

3. Student Loan Debt and Housing Costs: Achieving financial independence can provide young people with a sense of control over debt and expenses in a world of high housing and education costs.
   

4. Environmental Consciousness: The FIRE movement, with its emphasis on frugality and sustainable living, resonates with those who seek to minimize their ecological footprint.
   

5. Rethinking Traditional Retirement: The FIRE movement offers an alternative narrative to traditional notions of retirement, suggesting that financial independence and early retirement can provide the flexibility to work on passion projects or to contribute to society through volunteering or community service.
   

6. Social Media Influence: Social media has played a significant role in popularizing the FIRE movement. The ideas associated with FIRE spread on forums and subreddits over the past decade, and FIRE success stories are easily found on YouTube and other social media platforms. This visibility has inspired others to consider FIRE as a lifestyle choice.

Rethinking retirement & life after FIRE

Prominent FIRE advocate Peter Adeney, whose Mr. Money Mustache website is home to one of the most popular FIRE forums, has been a major critic of the middle-class consumerist lifestyle that many FIRE fans want to escape.

In one essay, he calls on people to cure themselves of “Tiny Details Exaggeration Syndrome,” which he defines as a human tendency to “zoom in on increasingly irrelevant details as their material wealth increases.” He writes:

He’s also written about the nature of retirement and life after achieving financial independence. In an essay entitled, “Early retirement doesn’t mean you’ll stop working,” he discussed the nature of a meaningful life:

Adeney is also a big advocate of bicycling as a way to save money, help the environment, and get healthy. In one essay, entitled, “What do you mean you don’t have a bike?,” he even calls it an “automatic life balancing machine.”

Some of his fans (who call themselves Mustachians) put together a Mr. Money Mustache greatest hits list.

Even if you haven’t been convinced to stop buying Starbucks and to start saving 80% of your income, Adeney’s blogs are well-worth a read.

ART OF THE DAY

Thank you for reading. Please reply to this email if you have any thoughts or feedback.

Yours,
Dan

FI